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October 2018 | n° 87 | mag.wcoomd.org WCO news

Council 2018 Blockchain Free Zones …

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WCO news N° 87 October 2018

Content

04 Flash Info 37 75 10 Dossier Reviewing the OECD method Addressing challenges 37 Panorama to assess facilitation related to Customs controls policies in free zones 50 Focus

72 Point of View 78 Events 60 68 CADENA, a blockchain enabled solution for the Going beyond the national implementation of MRAs Single Window

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M DOSSIER: COUNCIL 2018 FOCUS: BLOCKCHAIN POINT OF VIEW Y

CM 12 The Secretary General of 52 Blockchain: mapping new 72 Why governments and MY the WCO shares his thoughts on trade routes to trust Customs continue to need their what the WCO has done, what it own classification system for CY 56 Digitization of ATA will be doing, and what will impact CMY Carnets: how the blockchain on its work in the coming months K could enhance trust 75 Addressing challenges related 16 Latest developments to Customs controls in free 60 CADENA, a blockchain in WCO areas of work: zones enabled solution for the compliance; facilitation; capacity implementation of MRAs building; and and trade affairs 64 TradeLens: helping Customs to facilitate trade and increase 35 Other highlights: election compliance results; winner of the photo competition; signing of MoUs 68 Going beyond the national Single Window

Editor-in-Chief Advertising Editorial note Copyright © World Customs Organization Grant Busby WCO News is distributed free of charge in English All rights reserved. Requests and enquiries concerning and in French to Customs administrations, international translation, reproduction and adaptation rights should be Writer / Editor organizations, non-governmental organizations, the addressed to [email protected]. Laure Tempier Bernard Bessis business community and other interested readers. Opinions [email protected] expressed in WCO News are those of the contributors and Acknowledgements: The Editorial Team wishes to express its Editorial Assistant do not necessarily reflect the official views of the World sincere thanks to all who contributed to this publication. Sylvie Degryse Publisher Customs Organization. Contributions in English or World Customs Organization French are welcome but should be submitted no later than Illustrations: Our thanks also extend to all who provided Online subscriptions Rue du Marché, 30 15 December 2018 for consideration. The WCO reserves photos, logos and drawings to illustrate this issue. http://www.wcoomd.org/en/media/wco- B-1210 Brussels the right to publish, not to publish, or to edit articles to news-magazine/subscriptions.aspx ensure their conformity with the magazine’s editorial policy Photo cover: © Customs and style. The WCO Communications is available Tel.: +32 (0)2 209 94 41 to answer all requests for subscriptions, submission of Design: www.inextremis.be - mp5887 Fax: +32 (0)2 209 92 62 contributions, and any other enquiries relating to WCO [email protected] News. Please email [email protected]. www.wcoomd.org

3 FLASH INFO

Rules of Origin Facilitator: a new tool to help MSMEs benefit from tariff preferences

THERE ARE CURRENTLY over 400 origin certification, cumulation, the When a or a preferential agreements and preferential trade audit trail, shipment and invoicing, trade arrangement exists between arrangements in place worldwide, which in addition to indicating which selected countries, the tool shows basic establish lower rates of Customs duties documentation is required (for example, information, such as the difference for certain goods provided that specified a certificate of origin), and where to find between the preferential and the most origin criteria are met. However, many information on national authorities’ favoured nation (MFN) duty rates as well companies ignore the fact that they can websites. as other information, such as the date of claim tariff preferences, or, if they do entry into force of the scheme and the know that such schemes exist, they do It currently covers more than 70 trade parties involved. not understand how to verify that the agreements applied by 85 countries as goods they buy or sell are eligible for well as the non-preferential regimes of Users can access further details on preferential treatment. the , the the agreements covered by the tool, and Switzerland. The ITC is continuously including the exact wording of the rules As a result, many potential beneficiaries increasing the tool’s coverage – the of origin, the cumulation provisions pay the tariff that applies to goods objective being that it will eventually and possible shipment requirements as originating in countries that are not part encompass all existing trade agreements. well as information related to the origin of the agreement, losing the comparative certificate, such as the details of the advantage vis-à-vis their competitors, Using the tool issuing authority and the validity period. with many exporters losing business The tool’s homepage shows a search opportunities too. Micro-, small- and engine. Users must select a country, As several exporting countries can be medium-sized enterprises (MSMEs) or several countries, of and a selected, the tool allows requirements are especially impacted. According country of import, and then search using across agreements to be compared. to a survey on non-tariff measures the Harmonized System (HS) Customs Information icons also appear next to undertaken by the classification code of the product of each category of provisions, providing Centre (ITC) in over 60 countries, interest. If the user does not know the users with a definition of the terms used rules of origin and related certification HS code of the product he wishes to sell as well as examples of how they can be requirements are among the most or buy, he can enter the product name applied. frequently cited trade obstacles by this (shoes, for example) and the tool will category of companies. display several classification possibilities. Multiple benefits A link to the “product nomenclatures” With this new tool, the WCO and the About the tool search engine maintained on the ITC’s ITC hope to improve the transparency of To make it easy for traders to navigate the Access Map also shows on the trade rules and to facilitate the work of complex landscape of trade agreements, homepage. MSMEs. Ultimately, the tool is expected the ITC and the WCO have developed an to contribute to a reduction in trade online tool called the “Rules of Origin The result page shows all available obstacles associated with rules of origin, Facilitator” (findrulesoforigin.org), which trade agreements corresponding to the and increasing utilization of preferences acts as a gateway to such agreements. selected parameters. The tool allows under trade agreements. The tool enables users to determine filtering between agreements already whether a specific product is covered by in force and those that are still to be The tool is very easy to use. Try it and a preferential scheme and find the rules implemented. It also allows the filtering let us know what you think by using the of origin that must be complied with in out of agreements where detailed rules tool’s feedback function. relation to a particular scheme. of origin are not yet available (i.e. agreements already in force but not yet More information Besides product-specific rules of origin, covered by the tool). http://findrulesoforigin.org the tool also highlights provisions on

4 WCO news N° 87 October 2018

If the searched product is entitled to preferential treatment, the tool compares the MFN and preferential duty rates

On the home page, a user selects the export country, destination market and HS product code or the product name

Filter buttons allow users to fine-tune results

The tool contains a glossary, in case users are not familiar with origin related terms

5 FLASH INFO

New version of the TRS Guide

While the three phases of the TRS are maintained, namely (I) preparation of a study, (II) collection and recording of © JeffHuffman data and (III) analysis of data and the conclusion, Version 3 of the TRS Guide adds an additional phase, phase IV, which covers monitoring and evaluation. Phase IV lays the groundwork for countries to conclude and evaluate one TRS cycle before preparing to move to the next.

Additionally, the new TRS Guide introduces the concept of physical release, which is defined as the step in the clearance process when the goods are physically placed at the disposal of the importer or exporter or his/her legal representative for home consumption THE WCO HAS released a new edition of the well as the periodic monitoring and or export, or for any other Customs “Guide to Measure the Time Required measuring of the outcomes of the procedure. In the case of export or for the Release of Goods,” known as implementation of specific measures and international transit, this is the stage the Time Release Study (TRS) Guide. associated policies and programmes. when the goods are considered to have An update of the TRS software and its left the . User Manual will follow in the coming The WCO Secretariat and Customs months. administrations worked in close Furthermore, this new version of the consultation with other international Guide provides detailed information The WCO Time Release Study is an organizations involved in cross-border on the use of modern technologies in internationally accepted strategic tool policies in updating the latest edition the collection, collation and analysis of to measure the actual time taken for of the TRS Guide, based on new and data in order to improve the TRS process the release and/or clearance of goods emerging strategic and business needs. (e.g., electronic processing systems, the – from the time of arrival until the Single Window, smartphones, RFID physical release of cargo – as well as the In Version 3 of the Guide, the WCO seals and GPS-enabled track and trace). effectiveness and efficiency of border strongly advocates that Customs The idea here is to leverage the growing procedures relating to imports, administrations conduct a TRS in a use of information and communication and transit movements of goods. It helps periodic manner, in close collaboration technologies (ICT) by Customs, other in identifying associated bottlenecks with other relevant government agencies government agencies and private sector objectively, and in addressing them in and private sector stakeholders, with stakeholders. an efficient and effective manner. Customs being the lead agency in the planning, design, analysis, and further The new version also includes guidance Article 7.6.1 of the World Trade implementation of the TRS cycle. on business process planning and Organization’s (WTO) proposes a method for conducting a joint Agreement (TFA) stipulates that Version 3, for the first time, provides TRS in a bilateral or multilateral context, “Members are encouraged to measure detailed information on the use of a as well as practical guidance on carrying and publish their average release time TRS in the implementation, monitoring out a TRS for performance measurement of goods periodically and in a consistent and evaluation of the TFA provisions. It along specific regional trade corridors. manner, using tools such as, inter alia, highlights the different key approaches the Time Release Study of the World to conducting a TRS and introduces a Finally, the Guide provides key Customs Organization.” “simplified TRS,” which focuses only on principles and processes for conducting that part of the clearance process that a TRS in the context of international Moreover, the TRS Guide is considered directly relates to Customs, as well as transit, especially its use in specific trade by the WCO, its development partners other more complex forms of a TRS such corridors in respect of the movement/ and the donor community to be a as consecutive or simultaneous TRS’s transit of consignments, as well as on the useful instrument when undertaking at identified border points, involving carrying out of a joint TRS at common a comprehensive assessment of trade other relevant government agencies and border points involving neighbouring facilitation needs and priorities, as stakeholders. countries.

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WCO news N° 87 October 2018 STEERING YOUR CUSTOMS, SECURITY

Thanks to inputs and suggestions provided by AND COMMERCIAL DATA Members and stakeholders of the WCO, all processes and methods are supplemented by updated information on WCO Members’ experiences and best practices, practical perspectives, lessons learned and innovative solutions employed in carrying out a TRS.

More information [email protected]

Historical SOFTWARE background

The development of the TRS dates back to the early ELECTRONIC 1990s where and the United States agreed on a methodology and jointly conducted a study. C EXCHANGES The first TRS was conducted in February 1991 in M

the wake of the discussions under the framework J of the Japan-US Structural Impediment Initiative (SII), with a view to examining the existence of, CM and degree of bottlenecks against the smooth flow MJ

of goods in trade, and to stimulating efforts to CJ

improve the efficiency and effectiveness of border CMJ procedures*. The SII came about as a result of a large trade imbalance between the two countries N B2G in favour of Japan, which, despite many efforts, the United States and Japan had been unable to COLLABORATION reduce.

Based on these countries’ experiences, in 1994, the WCO developed a Handbook on TRS, focusing on Customs processes only, with the aim of providing a standardized method. The focus and methodology of the TRS were reviewed in 2001, leading to the development of the “Guide TRAINING to Measure the Time Required for the Release of Goods.” In 2005, a TRS software was jointly developed by the WCO and the World Bank. The software enables questionnaires to be created and then distributed to all survey participants and, once the responses have been collected and the data inputted, the automatic calculation of the average time, standard deviation and largest deviation in any pre-designed patterns for each step in the process of releasing goods.

*https://www.carecprogram.org/uploads/Day2- JPN-Customs-TRS-Experience.pdf

7 FLASH INFO

Latest © UNMEER accessions to WCO instruments

Revised Kyoto Convention

Kiribati Date of accession: 11 June 2018 114th Contracting Party

Vanuatu Date of accession: 30 June 2018 115th Contracting Party

Istanbul Convention

Armenia Support for humanitarian aid: Date of accession: 3 July 2018 th WCO successfully concludes the 70 Contracting Party Harmonized System innovative C-RED project Convention

Vanuatu BACK IN 2016, thanks to financial support and national disaster response and Date of accession: 28 March 2018 provided by the , the WCO coordination agencies). 157th Contracting Party launched a capacity building project entitled “Customs for Relief against All those present welcomed the work More information Epidemic Diseases” (C-RED) aimed undertaken by the WCO in cooperation [email protected] at providing support to six Customs with the project’s institutional partners, administrations in West African which included the Office countries affected by the Ebola virus for the Coordination of Humanitarian disease (EVD) epidemic. Affairs (OCHA) and the Commission of the Economic Community of West One of the main achievements of the African States (ECOWAS). C-RED project was that it allowed various stakeholders – including Customs Although responsibility for the measures services, other agencies involved in launched under the project has been border management and humanitarian handed over to the beneficiary countries players – to sit down together at the same and the ECOWAS Commission, the table and work on draft procedures, latter has called for continued support which factored in the rules followed by from the WCO. the various governmental departments and the constraints to which they were The WCO would, therefore, welcome subject (see the June 2018 edition of the further partnership for a C-RED+ magazine for a comprehensive overview project, which would allow the of the project). implementation of broader-scale measures in three of the C-RED The project ran for two and a half years countries, as well as the inclusion of new and came to a close in early October, countries at high risk of natural disasters after a third and final sub-regional or epidemics. workshop attended by representatives of the beneficiary countries (Customs More information administrations, Ministries of Health, [email protected]

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Council 2018

DIRECTORS GENERAL OF Customs gathered at WCO Headquarters from 28 to 30 June 2018 to endorse the work done by the Organization covering the period July 2017 to June 2018, and to chart the way forward in the months ahead.

This dossier touches on the WCO's main areas of work – compliance, facilitation, tariff and trade affairs, and capacity building – and presents the progress made and initiatives taken in each of these areas over the 12 month period. It also reports interesting events that occurred during the Council.

10 WCO news N° 87 October 2018

11 DOSSIER © WCO

Reflections on the areas of work identified by WCO Members as a priority

By Kunio Mikuriya, SECRETARY GENERAL, WORLD CUSTOMS technical assistance under its Mercator technical agenda, such as a Time Release ORGANIZATION Programme to assist countries in Study or risk management. implementing the provisions of the AT THE 2017 Council Sessions, Members Agreement and related WCO standards To monitor progress, a “maturity model” endorsed six priorities that the WCO and tools. During the 2017/2018 period, assessment tool related to the TFA Secretariat would focus on: trade 150 TFA-related missions had taken has been developed, and all Mercator facilitation, e-commerce, security, place. Programme recipients have been asked Customs- cooperation, illicit to conclude a first assessment round to financial flows, and performance There are two “relationship models” enable the Secretariat to issue a report measurement. At the June 2018 session, with beneficiary Members under the by the end of 2018 on the progress of the they reviewed the progress related to Mercator Programme. The first model is Mercator Programme to date. this work programme and charted the the “My Mercator Programme,” where a way forward. While doing so, they also dedicated Mercator Programme Advisor In terms of engagement with the WTO, discussed possible new areas of work and is assigned to work with the Secretariat the WCO Secretariat continues to work established a new priority: the revision in developing a multi-year plan that closely with the WTO Secretariat by, for of the WCO’s revised Kyoto Convention. addresses not only the technical example, discussing and reporting on In this article, I take up each of these aspects and requirements, but also the support delivery to ensure coordination topics in turn. enabling conditions for implementation with other international organizations. and moving forward with a reform Since May 2018, the WCO is also Trade facilitation agenda. The second model focuses on invited to attend the WTO Trade Following the entry into force of the the delivery of specific and targeted Facilitation Committee (TFC) meetings, ’s (WTO’s) demands by Members, normally as a contributing to the discussions on Trade Facilitation Agreement (TFA), training initiative or a workshop, the implementation of the TFA alongside the WCO is providing tailor-made greater majority of which are related to a the other “Annex D” organizations,

12 WCO news N° 87 October 2018

Among the important tools adopted by the WCO Council in June 2018 is the Framework of Standards on namely the IMF, OECD, UNCTAD and Organizations are also contemplating the . Cross-Border E-Commerce, the organization of a joint high-level which will assist WCO conference to mobilize all actors around The WCO also continues to develop the issue and to get a strong commitment tools supporting TFA implementation, Members in developing for change from decision makers. the latest one being the Guidelines on strategic and operational Customs Brokers and the FAQ document Although the core Framework of on the linkages between authorized frameworks for e-commerce. Standards has been developed, quite a economic operators (AEOs) as defined in In order to ensure the lot of work still needs to be done. This led the WCO SAFE Framework of Standards to the WCO Council agreeing to extend and Article 7.7 of the TFA. Of critical expeditious and harmonized the mandate of the Working Group importance also is the Time Release implementation of the on E-commerce (WGEC), in order to Study Guide, which has been updated, further enrich the Framework, primarily notably to make it more responsive to Standards, cohesive capacity through the completion of technical TFA requirements. building support will be specifications, addressing issues such as identity management for example, and RKC review provided. other items such as definitions, data Besides activities conducted under elements, revenue collection models, the Mercator Programme, another and case studies. major effort in the coming months, and years, will be the review of the The WCO Secretariat is developing a revised International Convention on global implementation strategy and the Simplification and Harmonization a capacity building mechanism to of Customs Procedures (Revised Kyoto further help its Members with the Convention or RKC). The RKC, which implementation of the Framework of was adopted in 1999 and entered The Framework places emphasis on Standards in close cooperation with into force in 2006, currently has 115 advance electronic data for pre-arrival other relevant government agencies and Contracting Parties. Although this risk assessment. For the past 20 years, e-commerce stakeholders. In order to number is significant, acceptance of the the WCO has been advocating for a ensure the expeditious and harmonized RKC’s Specific Annexes remains low. move towards a paperless environment implementation of the Standards in for traditional trade. The same should a phased manner based on national While recognizing that the RKC apply to e-commerce. Express carriers priorities, specificities and resource Guidelines have been updated on a are largely providing advance electronic availability, cohesive capacity building continual basis and that several new data as recommended in the Framework support will be provided. WCO tools and initiatives have been of Standards, enabling Customs to developed to complement the revised conduct risk assessments in advance. The WCO’s work and the Framework Convention, WCO Members have However, postal operators are lagging are focused on cross-border e-commerce decided that there is a need to update behind, although progress has been and physical goods. They complement the instrument, nearly 20 years after made in some countries with leading and support the WTO’s Work its adoption. In this regard, the WCO support being provided by the WCO Programme on E-Commerce, moving Council has just approved the creation and the Universal Postal Union (UPU). forward. Additionally, the WCO is of a working group to undertake the actively collaborating with other review, and its work will start in the The WCO and the UPU have already international organizations to support autumn of 2018. developed the relevant harmonized their respective work in the area of international standards, and have been e-commerce from a wider facilitation E-commerce encouraging the implementation of and compliance perspective. These Among the important tools adopted electronic systems at the national level. organizations include the Organisation by the WCO Council in June 2018 is The data elements that may be further for Economic Co-operation and the Framework of Standards on Cross- required to address the challenges Development (OECD), the International Border E-Commerce, which will assist and risks associated with cross-border Civil Aviation Organization (ICAO) WCO Members in developing strategic e-commerce are being developed. Both and the UPU, as well as the Secretariats and operational frameworks for Organizations are further engaged with of the Convention on Biological e-commerce. The Framework will be the development of additional guidance Diversity (CBD), the International Plant equally useful for Members seeking to on the exchange of advance electronic Protection Convention (IPPC) and the enhance existing frameworks, in order data, including data capture and data Convention on International Trade in to effectively meet the requirements of quality, as well as the associated legal Endangered Species of Wild Fauna and new and evolving business models. and operational frameworks. The two Flora (CITES).

13 DOSSIER

Security (e.g. passenger name records or PNR of Customs, in order to achieve further As a result of the December 2015 Punta data), notably to explore the possible recognition of Customs’ non-fiscal role. Cana Resolution, which highlights the standardization of PNR data for global Customs community's position maritime passengers and to involve In order to review its revenue- in relation to fighting terrorism, the relevant stakeholders, such as the focused position, the IMF needed WCO launched a Security Programme International Maritime Organization access to specific datasets, hence that focuses on five streams of work: (IMO), in their deliberations. the idea to develop a specific survey passenger controls; the fight against tool for the collection of data chemicals and components that could be Furthermore, the WCO Council called the International Survey on used in the manufacture of improvised adopted the 2018 edition of the Customs Administrations (ISOCA). explosive devices (IEDs); strategic trade SAFE Framework of Standards to Participation in the survey will Controls; the fight against trafficking in Secure and Facilitate Global Trade. be voluntary, and no external small arms and light weapons (SALW); Following a three-year review cycle, measurement, ranking or scoring and terrorist financing. this year’s Framework offers new system is envisaged. Benefits that the opportunities for Customs, relevant survey will provide to WCO Members Some of these work areas are quite government agencies and economic include the following: advanced, such as Programme Global operators to work towards a common Shield (PGS) that focuses on IEDs and goal: enhancing supply chain security • reducing Members’ administrative which is referred to in several United and efficiency, based on mutual burden by avoiding duplication of Nations (UN) resolutions, encouraging trust and transparency. The 2018 questionnaires from the WCO and States to support PGS, or the Strategic version augments the objectives of the IMF; Trade Control Enforcement (STCE) the SAFE Framework with respect to Programme that focuses on preventing strengthening cooperation between • providing a single, unified survey the illicit trafficking of strategic and among Customs administrations, on an annual basis, using common commodities (e.g., weapons of mass for example through the exchange questions, terminology and destruction, conventional weapons, and of information, mutual recognition definitions, fully based on WCO related items). of controls, mutual recognition standards, tools and instruments; of authorized economic operators The WCO now has two regional projects, (AEOs), and mutual administrative • establishing a baseline for better which aim to build the capacities of assistance. planning and tailor-made technical Customs administrations to counter assistance and capacity building; terrorist-related and trafficking In addition, the SAFE Framework calls through better control of the movement for enhanced Customs cooperation • building support, and ensuring of goods and people, both projects with government agencies entrusted complementarity of expertise and financially supported by the Government with regulatory authority over certain synergy on any assistance provided; of Japan: the Asia/Pacific Security goods (e.g., weapons and hazardous Project (APSP), which commenced in materials) and passengers, as well as • enabling progress to be assessed, March 2017 with activities currently at with entities responsible for postal while serving as a useful tool to full speed; and the West and Central issues. More notably, it now includes obtain Ministerial support for Africa Security Project (WCA-SP), a comprehensive list of AEO benefits Customs reform and the allocation which began in April 2018. with certain minimum assured of resources; benefits. During the recent session of the WCO • acting as a means to explore the Council and at other forums, some Customs-tax cooperation capacities of both institutions. countries highlighted the need to The WCO Council and Policy further address the security topic, in Commission have discussed the concept To establish a framework for the particular the potential implications of cooperation between the International instrument, a Memorandum of for Customs and other border agencies Monetary Fund (IMF) and the WCO for Understanding (MOU) with the IMF of the growing cruise ship industry. In a while now. As the IMF is often asked has been drafted. At the request of some response, the WCO agreed to convene by Ministries of Finance to provide WCO Members, more time has been a group of Brussels-based Attachés advice on Customs policy, the WCO allotted to enable them to contribute to to look into issues around the format has engaged with the Fund to expand its the text of the MOU, which is expected and transmission of advance data perspective beyond the fiscal functions to be signed in December 2018.

14 WCO news N° 87 October 2018

During the recent session of the WCO Council and at other forums, some countries highlighted the need to further address the requested to produce by the G20 leaders, The WBG team in charge of preparing security topic, in particular has been adopted by the WCO Council. the report agreed to seek input from the potential implications for The fruit of a long collaboration between Customs by sending its survey to the WCO Secretariat, Members of the all administrations in addition to Customs and other border WCO, academia and other international trade service providers, thus giving agencies of the growing organizations, the Report focuses on Customs the opportunity to engage concrete actions to combat IFFs. in the process. Ninety-six countries cruise ship industry. In completed surveys and the Bank plans response, the WCO agreed It lists a number of recommendations to publish this year’s survey, including inviting countries, in particular, to Customs’ inputs, in October 2018. A to convene a group of ensure that Customs has a sufficient representative from the Bank will Brussels-based Attachés to mandate and the necessary resources also explain its work in relation to the to tackle trade mis-invoicing, has “Doing Business” survey at the Policy look into issues around the access to the right information and Commission session in December format and transmission of technology, and cooperates with Tax 2018. Authorities, Financial Intelligence Units advance data. and other relevant agencies. Following Moreover, a new WCO Working Group its adoption, the WCO Secretariat has on Performance Measurement has been engaged with the current Presidency established to examine the possible The WCO also continues to develop tools of the G20 – – and with development of a comprehensive WCO and to share best practices with respect other G20 Members to garner support performance measurement tool, which to enhancing Customs-tax cooperation for the Study Report and ensure that would cover all Customs work areas. at the national level. Based on a it is conveyed to the appropriate G20 The Working Group has also been concept paper on Customs’ role in the working bodies. tasked with analysing the outcomes of collection of indirect on imported the WBG survey and possible means of goods, in July 2017 the WCO Policy Based on the WCO Action Plan on improving it. The WCO Private Sector Commission tasked the Organization’s Customs and the Fight against IFFs, Consultative Group has been invited to Permanent Technical Committee to the Secretariat has continued to provide join the Working Group. develop guidance. The development of technical assistance to Customs this guidance is currently underway administrations, encouraging them Going forward and the Secretariat continues to collect at the same time to secure a mandate Let me remind you that the list of Members’ practices, as well as engage to investigate IFFs and/or seek a priority areas will be adjusted in the relevant international organizations, formal cooperation framework with coming months with discussions on the such as the OECD, in this regard. In the relevant authorities. In addition, WCO Strategic Plan for the 2019-2022 addition, research is being conducted to regional workshops on IFFs, focusing on period starting at the Policy Commission examine various working models and bulk cash flows and trade-based money session in December 2018. The Plan will associated processes and requirements. laundering, were organized for countries then be presented for endorsement at The draft guidance is expected to be in East and Southern Africa and South next year’s Council Sessions. finalized by December 2018. East Asia. Enforcement operations targeting bulk cash smuggling will also Focusing on the current priority areas, Moreover, a few new areas are being take place in late 2018. I have highlighted only a few of the explored for future work that include activities carried out and results achieved cooperation opportunities in the areas Performance measurement over the last months. Additional WCO of tax and transparency (including the Many WCO Members have expressed activities are summarized in the articles exchange of information), e-commerce, concerns about the performance which follow, under the name of each and special Customs zones, as well as measurement initiatives of other specific WCO Directorate. the use of blockchain technology in institutions, such as the World improving business processes, revenue Bank Group (WBG) with its I trust that you will enjoy reading about collection, and tackling fraud and crime. “Doing Business” report. Following what the WCO has done and what it will discussions at the December 2016 be doing in the months ahead, and that Illicit financial flows Policy Commission session, the you will equally appreciate the other The Study Report on Illicit Financial Secretariat initiated a dialogue on the articles that were selected for this edition Flows (IFFs), which the WCO was subject with the WBG. of the magazine.

15 DOSSIER

Tariff and Trade Affairs

Cross-cutting activities HS Contracting Parties and status of in relation to sampling and testing WCO Revenue Package and advance the implementation of HS 2017 procedures were collected from the rulings The number of Contracting Parties to Customs laboratories of 22 WCO The WCO continued to assist its the HS Convention has reached 157, Members and then distilled into a Members in the implementation with the accession of Vanuatu (March new Appendix IV to the Guide. The of the Revenue Package, which 2018). The sixth edition of the HS, HS Guide was also updated to include provides guidance and best practices 2017, entered into force on 1 January more information on the regional for improving the efficiency and 2017. At present, 118 Contracting Customs laboratories as well as effectiveness of revenue collection, as Parties have notified the WCO that contact information, links to relevant well as in the implementation of an they had implemented HS 2017, and information, and the “Procedures advance ruling system for classification nine Contracting Parties have advised and Requirements for Establishing a and origin, as required under the Trade that they would be implementing it in Regional Customs Laboratory.” Facilitation Agreement (TFA) of the the course of 2018. World Trade Organization (WTO). Technical assistance Speeding up the HS decision-making HS-related capacity building , , , Lao People's process assistance to WCO Members is Democratic Republic, , , An objection was received to the delivered in the form of national and Palestine and Papua New Council Recommendation of 6 July 2017 regional seminars and workshops received technical assistance on these regarding the Amendment to Article 8 of on the implementation and uniform topics during national seminars. the HS Convention to limit the number application of the HS, on the Diagnostic missions in Côte d’Ivoire of reservations in respect of HS decisions modernization of Customs laboratories and Guinea were conducted to assess to two. However, at the June 2018 WCO and their analysis methodology, and their tariff classification and Customs Council Sessions, the concerns were on the implementation of advance valuation control systems as they are resolved and the Recommendation was ruling systems for classification. The planning to bring Customs functions re-adopted, subject to clear affirmation WCO Secretariat also provides, on that had been outsourced to a private of certain parameters. request from Members, advice on the sector inspection company back classification of commodities. in-house. Classification decisions and amendments to HS publications Technical assistance focusing on the HS Workshops on the development At its 60th and 61st Sessions, the WCO and related matters, including Customs of advance ruling systems for HS Committee took 343 classification laboratory infrastructure and analysis classification were held in the decisions, including 251 classifications methodology, was provided to officials Bahamas, within the framework of of international nonproprietary name from , , , the agreement between the WCO and (INN) pharmaceutical products Cambodia, , , , Customs and Excise linked to the WTO Agreement on and . Department, funded by the Inter- Trade in Pharmaceutical Products. American Development Bank (IADB), The HS Committee also adopted 12 Assistance was also provided to and in , funded by the amendments to the HS Nomenclature, on the modernization of its Customs Swedish International Development 25 amendments to the HS Explanatory Laboratory, with a particular focus Cooperation Agency (SIDA). Notes, 48 new Classification Opinions on the classification of products from and deleted 1 existing Classification Chapter 27, including waste mineral Nomenclature and classification Opinion. With the exception of those for oils and practical case studies on mineral The WCO continued to carry out its which reservations have been entered, oils, and to Mongolia, with a particular work on the uniform application of the decisions and amendments are focus on textiles, pharmaceutical the Harmonized System (HS), with the available on the WCO website and via products and vitamins. adoption of numerous classification the WCO bookstore. decisions and intensified capacity A Regional Workshop on Capacity building efforts devoted to the Customs Laboratories Guide Building of Customs Laboratories that implementation of HS 2017, including The Guide has been updated as part of was funded by the Korea Customs the harmonization and enhancement of the outcomes of the Revenue Package Service was held for countries of the the analytical methods used by Customs Phase III Action Plan. To enhance its WCO Asia/Pacific region to share laboratories as well as the work on the value as a practical handbook for the expertise and good practices on implementation of advance ruling establishment and improvement of chemical analysis and enhance regional systems mentioned earlier. Customs laboratories, best practices cooperation among laboratories.

16 WCO news N° 87 October 2018

Examination of Customs valuation questions The examination of a question on “related party transactions as they pertain to the Agreement and transfer pricing” led to the adoption of Case Study 14.2, which illustrates a specific scenario, where Customs took into account transfer pricing information in the course of verifying the Customs value.

As the WCO Technical Committee on Customs Valuation (TCCV) could not reach consensus, one question was placed in Part III of the Conspectus of Technical Valuation Questions, i.e. questions raised, but not being considered by the TCCV at present. The question relates to the circumstances surrounding a sale under the provisions of Article 1.2 (a) – goods produced in different countries.

Regarding the above-mentioned question, the issue to be examined deals with whether, when examining the circumstances surrounding the sale to determine if the relationship has influenced the price, the examination of the transfer pricing report should Experienced Customs chemists and A Regional Accreditation Workshop be carried out based on a single classification officers from Bosnia and for expert trainers on the HS in the sale transaction conducted between Herzegovina, Indonesia, Malaysia, , Asia/Pacific region was conducted unrelated parties in countries other than Philippines and participated in Kashiwa, Japan. It was hosted by those being examined or by looking at in the Customs Laboratory Programme, the WCO Regional Training Centre the particular situation in the global which was funded by Japan Customs. (RTC). Representatives from , market. Participants spent one week studying , Cambodia, , Japan, WCO HS tools at the WCO Secretariat Lao People's Democratic Republic, The TCCV continued and will continue before going to Japan for six weeks’ Mongolia, Myanmar, and examining questions concerning: practical training on chemical analysis Thailand took part in the Workshop. methods. • the valuation of imported goods During the 2017/2018 financial year, purchased in “flash sales”; WCO experts also attended two events 122 classification advice responses were aimed at exchanging experiences and provided to Members by the WCO • the use of transfer pricing challenges around chemical analytical Secretariat. documentation to examine related methods used by Customs Laboratories: party transactions, according to a Workshop on Customs Detection Valuation Article 1.2 (a) of the Agreement; Technologies organized in The WCO continued its efforts in under the European Union (EU) assisting its Members with the uniform • the sale for export to the country of “Customs 2020” programme, and the application of the WTO Agreement on importation under Article 1. VII International Scientific and Practical Customs Valuation (the Agreement), in Conference on the Problems of Expert particular, by providing guidance on the Activities held in . management of Customs valuation.

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New publications Also under the Revenue Package Phase control system and assessment of related Under the Revenue Package Phase III, III, updated versions of the WCO Guide expertise were carried out in Cambodia, a new publication entitled “Practical to Customs Valuation and Transfer Haiti, and Mongolia. Implementation of the WTO Valuation Pricing and Practical Guidelines for Agreement: A Brief Guide for Least Valuation Control have been produced. As part of a series of joint regional Developed Countries (LDCs)” provides workshops conducted by the WCO advice to LDCs, which typically face Technical assistance and the Organisation for Economic particular challenges in implementing National workshops on valuation issues Co-operation and Development (OECD) the WTO Valuation Agreement. took place in Indonesia, Mongolia and on Customs valuation and transfer Examples are also provided on the . Regional workshops were pricing, a workshop was organized control programmes of national organized for the Members of the Asia/ for countries from the and administrations, including those which Pacific and the North of Africa, Near Caribbean region. Additionally, a joint utilize a valuation database, such as the and Middle East (MENA) regions, WTO-WCO Workshop on Customs system developed by the United Nations while sub-regional workshops were held Valuation was organized in Conference on Trade and Development for officials from countries of the East for participants from the public and (UNCTAD) to be used in conjunction African Community and the Southern private sectors. with ASYCUDAWorld. African . In addition, diagnostic missions on the valuation For the 2017/2018 financial year, the WCO Secretariat responded to nine requests for advice received from WCO Members in relation to Customs valuation.

Expert accreditation To further develop the technical pool of expert trainers on Customs valuation with a view to increasing the capacity of the WCO to deliver technical assistance programmes, the WCO organized accreditation workshops for valuation specialists from the Customs administrations of the (selected experts from the JICA Master Trainers Programme) and the WCO Europe region.

Rules of origin The WCO continued to support its Members with their understanding, management and implementation of rules of origin amid the ongoing proliferation of regional trade agreements.

Technical assistance Capacity building activities included the organization of workshops in Albania, the Bahamas and on rules of origin, and in on the development of an advance rulings unit. Moreover, a diagnostic mission on origin and valuation infrastructure was delivered in Cambodia. WCO experts also participated in a session of the Committee on Trade, Customs and Immigration of the Pan- African Parliament that was held in Johannesburg, .

18 WCO news N° 87 October 2018

Expert accreditation the Decision, the WCO developed In response to the growing demand for the “Practical Guide to the Nairobi technical assistance linked to the building Ministerial Decision on Rules of Origin up of infrastructure for the application for LDCs,” which provides information of advance rulings, the WCO stepped up on how to qualify for preferential its efforts concerning the accreditation of treatment as well as detailed explanations origin experts by organizing two regional of the elements in the Decision. accreditation workshops: one for French speaking trainers in the West and Central E-learning Africa (WCA) region, and one for the Five e-learning modules – Origin Asia/Pacific region. Criteria, Cumulation, Rules, Origin Certification and Origin New publication Verification – have been developed, At the 2015 WTO Ministerial and the existing e-learning modules Conference held in Nairobi, , – Introduction and Preferential WTO Members adopted a Ministerial Agreements – have been reviewed. Decision on Preferential Rules of Origin for LDCs, which establishes More information rules applicable to imports from LDCs [email protected] under non-reciprocal preferential trade [email protected] arrangements. To help LDCs benefit [email protected] to the maximum extent possible from

Centre for Customs and Excise Studies | Charles Sturt University | Port Macquarie Campus

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Procedures and Facilitation

New publications Framework of SAFE Framework IT Guide for Standards on of Standards Executives Guidance on Data Cross-Border Analytics E-Commerce 2018 edition 2018 edition

Immediate Time Release AEO Guidelines on Release Study Compendium Customs Guidelines Brokers Version 3.0 2018 edition 2018 edition

Integrated Supply Chain Advance Cargo Management Customs-Police MRA Strategy Information (ACI) (ISCM) Cooperation Guide Implementation Guidelines Handbook Guidance 2018 edition

WCO UPU Postal FAQ on linkages WCO Guidelines Customs Guide between the SAFE AEO Validator on trader AEO programme Guide identification 2018 edition and article 7.7 of number (TIN) the TFA

WTO Trade Facilitation Agreement the capacity to undertake a Time Release • facilitated a scoping mission in South (TFA) Study (TRS): the Bahamas, Bangladesh, Africa aimed at reviewing current The TFA entered into force on 22 , Burkina Faso, , , legislation to ensure that it met the February 2017. Since its launch in June Kenya, Malawi, , Myanmar, requirements of the TFA; 2014, the Mercator Programme has been , , , , the WCO’s strategic initiative aimed at Ukraine, Vanuatu and . • supported Namibian Customs assisting governments worldwide in Assistance in drafting a national TRS by sponsoring a Workshop on implementing the TFA in a uniform report was also provided to Burundi, Stakeholder Engagement that was manner by applying WCO instruments and Chile. attended by participants from and tools, as the TFA’s provisions relate, government, trade and the private to a large extent, to Customs procedures. WCO experts also: sector;

During the 2017/2018 financial year, • supported Burundi in undertaking a • conducted a Workshop on many TFA-related missions have been gap analysis as part of the country’s Coordinated Border Management carried out by the WCO. Many of them process towards accession to the in Samoa; consisted of providing countries with Revised Kyoto Convention (RKC);

20 WCO news N° 87 October 2018

• undertook an evaluation and diagnostic mission in ;

• delivered a national Workshop on Non-intrusive Inspection (NII) Technologies in Guatemala.

Details on activities undertaken in other areas, such as authorized economic operator (AEO) programmes, transit and the Single Window, appear later in this article.

Besides national focused assistance, the WCO held two meetings of the WCO Working Group on the TFA (TFAWG) with various technical topics being discussed, such as the importance of coordinated border management, public- private sector dialogue, and enhanced coordination with other governmental agencies, such as sanitary authorities, for the purposes of TFA implementation as well as the coordination of priorities relating to technical assistance and capacity building.

SAFE Framework of Standards The 2018 edition augments the objectives of the SAFE Framework with respect to strengthening cooperation between and among Customs administrations, for example Article 7.7 of the WTO TFA Authorized necessary to negotiate them, was through exchange of information, Operator Scheme, the WCO developed organized for countries in the WCO mutual recognition of controls, mutual a document in the form of ‘Frequently Americas and the Caribbean region as recognition of AEOs, and mutual Asked Questions’ (FAQ) that clarified well as for the EAC. Another workshop administrative assistance. some concepts while providing practical on AEOs and MRAs gathered countries guidance to better align the obligations from the WCO Asia/Pacific region. In addition, the 2018 edition calls for stipulated under both initiatives. enhanced Customs cooperation with Trader Identification Number government agencies entrusted with The WCO also supported the (TIN) regulatory authority over certain goods implementation of AEO programmes A standardized and globally unique (e.g., weapons, hazardous materials, in Azerbaijan, , Iran, Nigeria, TIN format and associated guidelines etc.) and passengers, as well as with , Papua New Guinea, Samoa, and recommendation have been entities responsible for postal issues. A Sri Lanka and Tonga, and provided developed. The TIN aims primarily at comprehensive list of AEO benefits with assistance to Panama and the Former enabling effective implementation of certain minimum assured benefits has Yugoslav Republic of Macedonia as well MRAs by facilitating the identification also been added. as the East African Community (EAC) of MRA partners’ AEOs, but could on how to enhance their AEO validation also be applied in the context of Authorized Economic Operators process. any cross-border exchange of an (AEOs) economic operator’s data for other In order to assist WCO Members in A practical Workshop on Mutual business processes, including mutual gaining a clearer understanding of the Recognition Arrangements/ recognition of controls and authorized similarities and differences between Agreements (MRAs), focusing on operators/trusted traders as well as the WCO SAFE AEO Programme and their preparation as well as the skills enforcement related issues.

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Transit and the International Air Transport WCO Data Model (DM) Regional workshops on transit Association (IATA), the WCO continues Seventy-four countries reported that were held for the WCO’s East and to develop, maintain and promote the their information systems conform to Southern Africa, West and Central API/PNR Guidelines, including its the WCO DM, and around 55 countries Africa, and the Americas and the technical annex that contains, among have active DM implementation projects Caribbean regions, with the objective other things, the API PAXLST and underway. Version 3.7.0 of the WCO of promoting the implementation PNRGOV related standards. The latest DM has been released. The new version of the WCO Transit Guidelines and work in this area includes the release of includes an enhancement of the “My collecting national and regional best version 17.1 of the PNRGOV standards, Information Package (MIP)” as well practices in the area of transit. as well as updates to the PNRGOV as new data elements. A spreadsheet Principles document and the PNRGOV is now being used to publish the new Representatives from Customs EDIFACT message. A survey showed Information Packages in place of the administrations, industry associations, that the majority of governments and previous Word document, making it national guarantors and shippers’ air carriers implement version 11.1 of more convenient for users in mapping councils, other private sector entities, the PNRGOV EDIFACT. their data requirement to the DM. regional economic communities (RECs) and development partners A version of the API PAXLST Regarding technical assistance, WCO attended the workshops. By the end of standard in XML format is still under experts delivered national workshops in the 2018/2019 financial year, all WCO development and will be available soon. the Bahamas, Cuba and El Salvador, and regions would have benefitted from It comes as an addition to the existing a regional workshop for the countries such events. EDIFACT standard for API, which is the of the Americas and the Caribbean preferred method to transmit API data region. They also continued to assist Assistance was also provided to Belarus to governments. IT experts from Burkina Faso, Côte to review its existing transit procedure d'Ivoire, , , Togo and against WCO guidelines. Moreover, in The WCO is also promoting its in the development of datasets and the order to enable information technology “Guidance for Customs administrations electronic message format, based on the (IT) systems connectivity when it comes to use PNR/API,” which aims to provide WCO DM, as they relate to the transit to transit, the WCO is planning to insight on how WCO Members can process, as part of a project to enable the develop a harmonized and standardized effectively utilize passenger information interconnection of computer systems to transit dataset based on the WCO Data for passenger profiling and risk manage transit operations. In addition, Model. assessment, and its “Guidance on How a regional workshop on the WCO Data to Build an API/PNR System.” National Model was held in Lima, Peru back to Advance Passenger Information workshops have been organized in back with the WCO IT Conference (API) and Passenger Name Record Armenia and with the aim of and Exhibition, with the objective of (PNR) providing these countries with know- raising awareness as well as the sharing In collaboration with the International how on the establishment of API/PNR of experience on the implementation of Civil Aviation Organization (ICAO) systems. the WCO DM in the region.

22 WCO news N° 87 October 2018

Single Window (SW) Phase 2 development tested through a article of Section I of the TFA. This WCO experts participated in different pilot project involving several Customs analysis captures the relevant references, international forums, supported administrations. provides additional commentaries activities relating to the implementation for some of the articles, aims at of SW solutions, and promoted the use eATA Carnet Project exploring strategic considerations of WCO standards and tools, such as the The eATA Carnet Working Group, on how Digital Customs can further WCO DM and the RKC ICT Guidelines. which comprises WCO Member support the implementation of specific Their activities included: administrations and International TFA measures, and complements the Chamber of Commerce/World Guidelines to Chapter 7 of the RKC, i.e. • assisting Customs administrations Chambers Federation representatives, the Kyoto ICT Guidelines. in Argentina, Burundi, , developed a Globally Networked , Malawi, , Samoa Customs Utility Block for the eATA, Postal traffic and with projects aimed at and a pilot project to test the issuance The WCO is closely working with the establishing or enhancing national and circulation of the electronic carnet Universal Postal Union (UPU) on a SW environments; is in preparation. number of issues of mutual concern, which, in particular, include the • participating in or conducting Digital Customs implementation of advance electronic several workshops for countries The WCO, under its Mercator exchange of data between Posts and of the Asia-Pacific Economic Programme, is organizing regional Customs, postal supply chain safety Cooperation (APEC) bloc, for workshops on Digital Customs and and security, e-commerce, and the members of the Organization of the e-commerce for each of the WCO quality of data in CN 22 and CN 23 Black Sea Economic Cooperation, regions. These Workshops are aimed at declarations. and for countries of the West and improving knowledge and strengthening Central, and East and Southern the capabilities of Customs The two organizations continued to Africa regions. administrations on issues concerning provide support to Armenia Customs the use of modern technologies. Two and HayPost (Armenia’s postal operator) Non-intrusive inspection (NII) workshops have been held: one for the as well as to Indonesia Customs and Members of the Technical Experts Americas and the Caribbean region, Indonesia Post on the implementation Group on Non-Intrusive Inspection and the other for the East and Southern of the Customs Declaration System Equipment (TEG-NII) continued Africa region. (CDS) that was developed by the UPU’s to work on the development of a Postal Technology Centre. CDS allows standard NII data format, called In addition, the WCO has carried customers to enter data about an item the Unified file format (UFF). The out an analysis of the potential use online, and enables Posts to supply project is currently in Phase 2 with of information and communications Customs with advance data about a NII suppliers developing the core technology (ICT), and its possible postal item. It also enables Customs to architecture of the UFF and setting implications for information inform Posts about the action to be taken up a testing infrastructure to have the management with respect to each with respect to any given item.

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The WCO and the UPU also organized DM. The workshop gathered officials cross-border e-Commerce. It contains 15 a workshop for the Caribbean countries from over 20 postal operators and Standards that are concise, progressive in to strengthen existing three Customs administrations from and focused on the e-commerce cooperative relationships between the Arab World. environment, with a view to providing Customs and postal operators at the pragmatic, fair and innovative solutions, national level, and improve the exchange Furthermore, the WCO and the UPU whilst taking into account the diverse of advance electronic information have published the 2018 edition of the expectations and concerns of WCO between the two entities. joint WCO UPU Postal Customs Guide Members and other stakeholders. that is aimed at providing detailed In addition, the WCO also participated information on relevant WCO and Going forward, the Framework will in one of the “Operational Readiness UPU instruments and tools, and lays be further enriched with technical for E-Commerce Project Workshops” down a common basis for dialogue and specifications and guidelines for its organized by the UPU to discuss discussion between Customs and postal expeditious and effective implementation logistics enhancement and to examine operators at the national level. in a harmonized manner. various ways in which advance electronic exchange of information E-commerce In addition, the WCO Immediate (pre-loading/pre-arrival) can be The WCO Council adopted the Release Guidelines were recently implemented between Posts and “Framework of Standards on Cross- updated to provide specific guidance to Customs by using the CDS and/or any Border E-Commerce” together with both Customs and the trade community other customized solution based on the a Resolution for its harmonized on expediting the release/clearance of joint WCO/UPU Customs-Post EDI implementation. The Framework increasing volumes of low-value and messaging standards and the WCO sets out baseline global standards on small e-commerce shipments/parcels.

Efficient centralization and standardization of your entire customs tariff and export control classification – globally

Correct customs tariff & export control classification of parts MIC‘s Central Classification System CCS helps companies is a crucial yet often very difficult task in international trade. It precisely classify parts to conform to multi-national customs is an essential part of corporate compliance and the key factor tariff schedules as well as export control lists while reducing in the calculation of customs duties and the correct application costs and workload. Our software permits clear and easy of rules of origin. control of the entire product classification process e.g. via a full workflow management with the ability to manage multiple One of the most common errors found in a customs audit is the teams on a global basis. You want to know more about MIC use of inconsistent classifications for the same part – an easy CCS? Please contact us: win for the authorities, and an often expensive black mark for the company involved. MIC Tel.: +43(0)732-778496 [email protected]

24 www.mic-cust.com WCO news N° 87 October 2018

The WCO will be supporting its Members with the implementation of the E-Commerce Framework and its associated tools through a comprehensive capacity building programme. Five regional workshops have already been planned for the 2018/2019 financial year to promote and support the implementation of the Framework. The first event for WCO Members in the Asia/Pacific region took place from 16 to 17 July 2018.

Role of Customs in natural disaster relief The Customs for Relief of Epidemic Diseases (C-RED) Project, which is funded by the Dutch Ministry of Foreign Affairs, has been completed. Under the Project, support was provided to Customs administrations in West Africa that were affected by the Ebola epidemic (i.e. Guinea, , Mali, Nigeria, Senegal and ) to better prepare them in handling future epidemic disease outbreaks and natural disasters. A review of the activities that were undertaken under the C-RED Project was published in the June 2018 edition of the WCO News magazine.

Future of Customs – Study Report on Disruptive Technologies The Virtual Working Group on the Future of Customs has in the last year been focusing on disruptive technologies. The April 2018 meeting of the WCO Permanent Technical Committee (PTC) devoted a whole day to this topic and strongly welcomed the development of a Study Report, the objective of which is to raise awareness within the Customs community of the latest technologies and their potential, especially the benefits and risks, as well as the pilots, lessons learned Efficient centralization and standardization of your entire and recommendations for the future. The Study Report will be further developed customs tariff and export control classification – globally during the inter-session and revisited by Correct customs tariff & export control classification of parts MIC‘s Central Classification System CCS helps companies the PTC at its meeting in the Spring of is a crucial yet often very difficult task in international trade. It precisely classify parts to conform to multi-national customs 2019. is an essential part of corporate compliance and the key factor tariff schedules as well as export control lists while reducing in the calculation of customs duties and the correct application costs and workload. Our software permits clear and easy More information of rules of origin. control of the entire product classification process e.g. via a [email protected] full workflow management with the ability to manage multiple One of the most common errors found in a customs audit is the teams on a global basis. You want to know more about MIC use of inconsistent classifications for the same part – an easy CCS? Please contact us: win for the authorities, and an often expensive black mark for the company involved. MIC Tel.: +43(0)732-778496 [email protected]

25 www.mic-cust.com DOSSIER

Capacity building

Strategic advisory support and of performance indicators. During the Resource Management Diagnostic, an delivery 2017/2018 period, the WCO conducted Institutional Assessment (enforcement Strategic advisory support and delivery 31 such missions. capability), Trade Facilitation entail needs-assessments through Agreement Scoping, and other specific scoping and gap analysis missions, the Key WCO capacity building tools to organizational analysis tools. development of comprehensive strategic support these missions and actions plans, the implementation of WCO include the Diagnostic Framework, a WCO Mercator Programme standards, and the regular monitoring Risk Management Diagnostic, a Human activities Since its launch in June 2014, the WCO has been promoting the Mercator Programme as a strategic initiative aimed at assisting governments worldwide in implementing the Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO) in a uniform manner by applying WCO instruments and tools, as the TFA provisions relate, to a large extent, to Customs procedures.

From July 2017 to June 2018, under the Mercator Programme just over 140 national capacity building, technical assistance, and training activities have been delivered. Further, the WCO attended or hosted 60 global forums, 60 regional and 35 sub-regional forums dealing with TFA implementation. Thirty-six WCO Members are now engaged in the Programme on a medium to long-term basis, and they have received support in the form of a scoping/diagnostic mission and/or strategic and implementation planning.

To manage the implementation of these plans as well as further requests from its Members for TFA-related capacity building support, the WCO created a new pool of strategic advisors – Mercator Programme Advisors (MPAs). New accreditation workshops have been held over the last 12 months, and the WCO now has a total of 58 fully accredited MPAs.

Human resource development (HRD) WCO e-learning platform: CLiKC! CLiKC! (Customs Learning and Knowledge Community) continues to

26 WCO news N° 87 October 2018

develop the support offered to capacity administrations, and the 7th Session Azerbaijan, Bangladesh, Burkina Faso, building activities, with specific areas in March 2018 had 34 participating Cuba, Indonesia, , Nigeria, devoted to enhancing preparation and Customs officials from 25 Member Sudan, Thailand, and Timor-Leste – communication between participants administrations. worked at the Secretariat on a number during specific events, such as training of projects and activities. workshops or accreditations. The VCOA’s main objective is to provide newly recruited Customs officials Leadership and Management Twenty-five e-learning courses on with knowledge of core Customs Development Programme (LMDP) various Customs topics are now available competencies, the concepts of clearance Fifteen LMD workshops were conducted via the platform. A new Single Window procedures and practices, international during the 2017/2018 period. An e-learning package has been released in standards and conventions, and how additional five have been delivered English as well as a revamped course to apply them in the workplace. Upon as part of the Fellowship and Career on rules of origin, which includes more completion of the activities, and after Development Programmes. Taken detailed modules than the previous one. being evaluated, 45 successful Customs together, these workshops have officers were awarded certificates. provided around 360 executive, senior Moreover, a mobile application and promising middle-level Customs presenting the major changes made to Fellowship Programme Managers with a better understanding the 2017 version of the Harmonized Three sessions held during the 2017/2018 of modern management approaches and System (HS) is now available on both period, for English, French and Spanish their own personal leadership attitude Android and Apple mobile devices. This speakers respectively, brought together and behaviour, based on improved mobile application can be downloaded 38 officers over a six week period. The self-knowledge and self-awareness. In by any interested party, and provides Fellowship Programme is associated addition, one Customs administration additional features for Customs officers with the WCO Leadership and benefited from a “Top Executive Retreat,” with a CLiKC! account. Management Development Programme, which is aimed at strengthening the and aims to develop middle managers’ capacity of senior management to lead WCO Academy abilities, skills and knowledge to ensure and drive reform and modernization A brand new WCO e-learning portal that they can actively participate in the agendas. aimed at building the Customs skills reform and modernization processes of of trade professionals is now live at their home administrations. New tools and instruments https://academy.wcoomd.org. Courses currently address the following topics: Scholarship Programme Update of the People Development HS (five sector-specific courses), WCO Ten officers participated in the Public Diagnostic Tool (PDDT) Data Model (two courses), and Customs Finance Programme at the National The PDDT, which is intended to enable Valuation (two courses). More courses Graduate Institute for Policy Studies administrations to gauge where they will be added in the coming months. (GRIPS) in Tokyo, Japan, and 10 stand in the context of HR standards Even though the courses are currently officers participated in the Strategic and best practices, has been updated, available in English and French only, Management and Intellectual Property especially its section on Gender Equality more languages will be available in the Rights (IPR) Programme at Aoyama and Diversity. Diagnostic questions, future. Gakuin University (AGU), which is also information on common weaknesses and located in Tokyo. potential solutions, and improvement Virtual Customs Orientation options have been added. Academy (VCOA) Career Development Programme The WCO VCOA initiative, comprising (CDP) Update of the Project Management four highly interactive modules The CDP is an initiative supported chapter of the Capacity Building supplemented by online tutoring and by Japan Customs that provides an Compendium two optional modules on the CLiKC! opportunity for selected candidates from Chapter 5 of the Capacity Building Platform, took place in September developing Member administrations to Development Compendium was 2017 and March 2018. The 6th Session undertake work at the WCO Secretariat updated to provide a Customs-specific of the VCOA in September 2017 had for 10 months as Professional Associates. project management context, based 33 participating Customs officials, Within the framework of the 2017/2018 on international best practices. The representing 27 WCO Member Programme, 10 Customs officials – from chapter addresses the specific nature of

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Customs projects, taking into account • an integrity assessment mission in El Development (OECD) in March 2018, as the multidisciplinary nature of such Salvador (September 2017); a panellist on the session on “Integrity & projects throughout the initiation, Trade: No Need to Grease the Wheels,” planning, implementation and • a support mission for integrity providing the WCO’s perspective on evaluation phases. strategy implementation in Rwanda trade performance, trade facilitation, (September 2017); and integrity. Update of the Donor Coordination chapter of the Capacity Building • a Workshop on Integrity and Anti- Gender Equality and Diversity Compendium Corruption in Customs in Angola With the objective to gather examples of The update of the Donor Coordination (December 2017); good practices and exchange information chapter has been designed to take into on Members’ respective work in this account the entry into force of the TFA • a consultation on the WCO Arusha area, the WCO has established a Virtual and to inform Customs administrations Declaration and the development of a Working Group on Gender Equality and about the international donor and comprehensive integrity programme Diversity with a dedicated section on the development context after the TFA’s mission for that was CLiKC! platform. Around 20 countries entry into force. It provides high-level held in New Delhi, (April have participated in the meetings held strategic advice for engaging with 2018); so far, and various documents, including the complexities of donor funding, presentations and gender equality action taking into account experiences from • an integrity support mission in plans, have been uploaded in a shared other Members. More specifically, to assist in further folder on CLiKC!. the chapter addresses questions of improving their Integrity Strategy Customs’ positioning in the context of in Customs (May 2018); In addition, the WCO Secretariat has the United Nations (UN) Sustainable organized bilateral conversations with Development Goals (SDGs), the Paris • an integrity support mission in a number of the Organization’s Members Declaration on Aid Effectiveness and , which focused on integrity to further discuss their work in this the Accra Agenda for Action, as well as testing (June 2018). area. The ultimate objective of this the special and differential treatment exchange is to develop a compendium (SDT) provisions of the TFA. In December 2017, at the invitation of the of good practices that can be used as Agency of the Republic of a complement to the WCO Gender Guide to implement a competency- for Public Service Affairs and Anti- Equality Organizational Assessment based HR management system Corruption, the WCO participated in Tool (GEOAT). Based on the increasing number of the “Research to Practice Conference: requests in the area of HRM, the Modern Anti-Corruption Standards and Under the framework of the - WCO, in the framework of the WCO- International Cooperation” that was held ESA Programme II, the WCO has WACAM Project funded by Sweden, in Astana. The WCO was also invited by started developing a blended learning developed the Guide to Implement a the International Monetary Fund (IMF) package on gender equality and its links Competency-Based HRM System in to present the Arusha Declaration, the to Customs reform and modernization. a Customs Environment. The Guide WCO integrity guidelines and current This package will include two tracks: is aimed at Customs administrations’ initiatives in countering corruption a one-week training event targeting Top Management, Modernization in Customs at the Regional Seminar middle- and senior managers, focusing Units/Teams, and HRM Senior AFRITAC West2 that took place in The on HRM and gender mainstreaming; Managers. Gambia. and a broader e-learning module, focusing on raising general awareness on Integrity Moreover, the WCO participated gender equality, targeting all Customs The WCO held the 17th Session of the in several meetings organized in officers. The one-week training has been Integrity Sub-Committee in Brussels Vienna, by the UN Office on tested and finalized, while the e-learning from 1 to 2 March 2018 during the Drugs and Crime (UNODC), which module is expected to be available by the “Capacity Building Week.” focused on the implementation of the end of 2018. UN Convention against Corruption. Different types of missions were The WCO also participated in the More information organized during the 2017/2018 period Global Anti-Corruption and Integrity [email protected] to respond to specific requests made by Forum, organized by the Organisation www.wcoomd.org/en/topics/capacity- WCO Members: for Economic Co-operation and building/resources.aspx

28 WE PARTNER WITH CUSTOMS WORLDWIDE TO ENSURE A MORE EFFICIENT AND SECURE CROSS-BORDER TRADE Our field proven solutions have helped governments tackle illicit trade and protect their revenues since 1974. [email protected] cotecna.com DOSSIER

Compliance and Enforcement

Security Programme In addition, in order to measure the In the area of terrorist financing, during impact of the STCE Programme, the the first quarter of 2018, the WCO Main streams of work WCO organized Operation COSMO 2 conducted workshops in Southern and Under the Strategic Trade Controls in April 2018 with the participation of East Africa and in South East Asia that Enforcement (STCE) Programme, a 104 countries and many international focused on anti-money laundering, curriculum and modules for training organizations. counter-terrorism financing and illicit purposes have been developed to assist finance. in the evaluation of standard operating Regarding small arms and light procedures (SOPs) and work practices weapons (SALW), the WCO has put Regionally focused security projects dealing with strategic goods. The STCE together a training curriculum and The WCO has two regionally focused training curriculum is being adopted by started developing a pool of trainers in security projects financially supported many Customs administrations across July 2018. The WCO has been working by the Government of Japan: the Asia/ the globe, and to ensure its continued with the United Nations Office for Pacific Security Project (APSP) that adoption, since July 2017 the WCO has Disarmament Affairs (UNODA), the UN commenced in March 2017, and the organized the following training events: Office on Drugs and Crime (UNODC) West and Central Africa Security Project and INTERPOL, using the Small Arms (WCA-SP) that began in April 2018. • Nine STCE national workshops, Survey to develop training material and Both projects aim to build the capacity of gathering 237 attendees from participate in joint training in relation Customs in the area of border security. nine different countries as well to the detection of SALW by Customs. An article providing an overview of the as representatives from the WCO activities undertaken in this area in the Regional Intelligence Liaison Office Under Programme Global Shield WCO Asia/Pacific region was published (RILO) Network. (PGS), an initiative aimed at building in the June edition of the WCO News capacity to counter the illicit trafficking magazine. • Three train-the-trainer workshops, and diversion of explosive precursor gathering a total of 52 experts, chemicals and other components of Revenue Programme aimed at officials interested in being improvised explosive devices (IEDs), accredited as STCE Expert Trainers. an operation was conducted with Post-clearance audit (PCA) 34 countries from the WCO MENA The WCO PCA guidelines have been To date, 12 countries have informed region participating. The operation updated and will continue to form the WCO that their accredited trainers resulted in the seizure of several tons the conceptual basis for any PCA- are delivering STCE events in their of IED precursor chemicals and other related assistance for the next several countries, whilst a further five countries components. A train-the-trainer years. National workshops were held have licensed the STCE training material workshop was also held in March 2018 in Bhutan, , from the WCO for use in their national for experts from the WCO Asia/Pacific Iran, Malaysia and Sudan to help these training academies or programmes. region. countries develop their PCA capacities.

New Risk Post-Clearance Management publications Customs-Police Commercial Audit Guidelines Compendium Cooperation Fraud Typologies Handbook Summary 2018 edition Four new modules

30 WCO news N° 87 October 2018

Diagnostic missions were also delivered in Cameroon, Jordan, and Palestine.

Additionally, a joint PCA and risk management diagnostic mission was conducted for Armenia, the first of this kind. Based on the successful results from this mission, similar joint activities are being considered in the future. The WCO also participated in a PCA training event organized by the Netherlands Customs for representatives from China Customs.

In order to continue expanding the existing pool of experts capable of delivering capacity building activities, an accreditation workshop for PCA Technical and Operational Advisors from countries in the WCO MENA region was organized. Three experts have been pre-accredited and will now have to participate in a field mission to become fully accredited.

Operations Operation Leatherback focused on fraud in the petroleum industry, with the goal of identifying the nature and extent of revenue evasion relating to the petroleum Project Shot The Protocol will enter into force on 25 trade. The operation resulted in the In response to the growing danger September 2018 and the WCO stands seizure of 1,198,797 litres of petroleum posed by the illicit trade in alcohol, a ready to support the work of Customs products and identified cases of mis- global monitoring project for analysing in the implementation of this key described petroleum importations that the global trends in alcohol fraud has international instrument. resulted in the recovery of 935,118 US been established. Initially, the project dollars. was foreseen for the first half of 2017 Drugs and Precursors Programme but was later extended to cover the Operation Fox focused on the illicit whole of 2017, and will continue to Project AIRCOP tobacco trade and, more especially, on run in 2018. Twenty-two Joint Airport Interdiction the shipment of containers containing Task Forces (JAITFs) are currently cigarettes as they transited through Free Entry into force of the WHO operational under Project AIRCOP, a Trade Zones (FTZs). More than 100 Protocol to Eliminate Illicit Trade in project managed in conjunction with suspicious containers were monitored Tobacco the UNODC and INTERPOL, which during the exercise, resulting in the During the Council Sessions, the aims at strengthening the capacities seizure of 163 million cigarettes and the WCO welcomed the imminent entry of international airports to detect identification of FTZs that were being into force of the WHO Protocol to and intercept drugs and other illicit exploited by criminals. Eliminate Illicit Trade in Tobacco. goods as well as to detect high-risk

31 DOSSIER

passengers, including foreign terrorist communication platform for the fighters. exchange of information and intelligence has been established, and is open to all JAIFTs are located in airports across WCO Members. The CCP air cargo African, Latin American, Caribbean segment also benefits from cooperation and Middle Eastern countries. In the with the International Civil Aviation framework of the Project, Operation Organization (ICAO). COCAIR VI was organized to bring together the JAITFS and other airport PCU and Air Cargo Control Units units to test their risk analysis capacity, (ACCU) are regularly trained to further and to promote the exchange of develop their skills in risk profiling information using CENcomm, the and their knowledge on specific issues WCO’s secure communication tool. relating to global illicit trade. Regular assessments are also made to measure UNODC-WCO Container Control the progress made by these units. Within Programme (CCP) the scope of the CCP, since 1 July 2017, The CCP is a joint initiative between the the WCO has implemented or planned UNODC and the WCO. Port Control about 170 training activities on different Units (PCUs) established under the CCP types of techniques to enhance law are, at present, fully operational at more enforcement agencies’ capacities in the saw 54 countries participate in the than 70 ports (including dry ports) in 50 maritime and air cargo domains. initiative. countries, with 4 new countries having joined the CCP over the past few months. IPR, Health and Safety Programme In addition, the WCO actively supported An integral and essential element of the Capacity building activities in this area the annual global operation against illicit CCP is to facilitate networking among have been conducted in 56 countries, medicines, known as Pangea, which is the PCUs at a national, regional and taking the form of regional or national led by INTERPOL. international level. seminars and diagnostic missions. WCO experts also provided support to national Environment Programme The WCO ContainerCOMM system or international organizations, like the provides the necessary infrastructure American Patent Office (USPTO) and the INAMA Project for the swift and secure exchange Organization for Animal Health (OiE), Launched in October 2014, the INAMA of information and intelligence in their work against counterfeiting, Project, undertaken in conjunction electronically. Currently, the system by participating in their workshops or with the WCO Secretariat’s Capacity can be accessed by more than 100 conferences. Two regional operations Building Directorate, aims to strengthen administrations with more than were coordinated by the WCO: the enforcement capacity of targeted 1,000 individual users, and is moving Customs administrations in Sub- towards becoming a secure global • Operation ACIM 2 (Action against Saharan Africa, while focusing on the port-to-port communication platform. Counterfeit and Illicit Medicines), illegal trade in wildlife, particularly WCO Members wishing to join which took place over a nine-day endangered species listed in the ContainerCOMM are invited to contact period in 18 African countries during Convention on International Trade in the WCO Secretariat. June 2017, led to the interception of Endangered Species of Wild Fauna and around 259 million substandard or Flora (CITES). Given the success of the CCP, a separate fake products, the vast majority of joint programme on air cargo control which related to pharmaceuticals; In 2017, two illegal wildlife trade has been established, with specialized enforcement operations were held in units to target suspicious shipments in • Operation GOALKEEPER, Africa, one for Anglophone countries this transport segment already operating initiated by the Russian Federal and one for Francophone countries. in 11 countries. Six new countries Customs Service and targeting the The operations were code-named have joined the segment in the past counterfeiting of Officially Licensed SAVE/SAUVER REP, REP being the months. A specific “AirCargoComm” Products for the FIFA World Cup, initials of the three species targeted:

32 WCO news N° 87 October 2018

Rhino, Elephant and Pangolin. As a Throughout 2017, scoping missions were Partnership, which is funded by the U.S. result, various illegally traded wildlife conducted in Burkina Faso, Cameroon, Agency for International Development products, including worked and raw Kenya, , Tanzania and (USAID). The WCO participated in four ivory, pangolin scales and live tortoises to assess their enforcement assessment missions conducted in Qatar, were seized. capacity when it comes to species Kenya, Malaysia and South Africa. covered by the CITES, based on the Furthermore, three train-the-trainer WCO Institutional Assessment Tool on Risk Management and Intelligence workshops were conducted, two in CITES Enforcement. Programme Africa and one in Asia. The objectives Considering the increasing need to were to build the technical skills and As a result, diagnostic reports define a common approach that enables knowledge of officials in relation to the with detailed recommendations Customs administrations across the CITES, to develop their trainer skills, were developed, along with Work globe to speak the same language and to evaluate their administrations’ Plans to implement the findings about the methodology they utilize to current national training framework, of the diagnostics. The beneficiary both identify and treat potential risks, in particular when dealing with the administrations also hosted “Subject WCO developed the Customs Risk illegal trade in wildlife. Participants Matter Experts missions” during which Management Compendium. identified as potential trainers will support was provided at various levels. continue with the second phase of the Support activities will continue to be New content has been added to the accreditation process, and will join the deployed until the end of 2018. These Compendium lately: rail cargo risk pool of WCO CITES Expert Trainers. activities are funded by Sweden. indicators and manuals related to the These workshops will be followed up by pre-arrival, arrival and post-arrival regional enforcement training events, Airport wildlife trafficking phases, and Post Seizure Analysis which will be attended by both Customs assessments Guidelines. and police officers and funded by the US The International Air Transport Department of State. Association (IATA) and the WCO With regards to capacity building jointly developed a tool to help airports activities, the WCO has supported Assistance was also provided at a assess the security measures in place to 20 of its Members to enhance the national level to seven Customs counter the transport of illicit wildlife application of risk management in administrations in Sub-Saharan Africa products, with support from the their respective administrations identified as priority countries according Reducing Opportunities for Unlawful and has organized train the trainer to the INAMA Project’s methodology. Transport of Endangered Species workshops.

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CENcomm remains a popular tool. During the 2017/2018 period, the communication platform was used during 80 operations as well as in the framework of several projects. A modernized version of the CENcomm application has been developed and will become available in the coming months to support operational activities.

WCO Cargo Targeting System (CTS) The WCO CTS enables user countries to capture advance electronic cargo manifest information, and to perform risk assessment, profiling and targeting. To date, the CTS' maritime cargo Cultural Heritage Programme archaeological pieces and sculptures capability has been deployed in 11 In partnership with various were seized during this operation. countries: Bahamas, Chile, Georgia, stakeholders, the WCO developed Jamaica, Kenya, Maldives, Panama, a unique Training Handbook for Moreover, the WCO Programme Philippines, , Sri Lanka and frontline Customs officers dedicated Manager partnered with the WCO Ukraine. In addition, the CTS’ air to countering the illicit trafficking in Research Unit to conduct a gap analysis cargo capability has been finalized and cultural objects. It includes general workshop for countries in West and deployed in these same countries. analysis of this form of illegal trade, Central Africa to discuss national sources of information and access to practices and policies regarding Customs Operational Practices for different databases, risk management security, terrorism, and cultural heritage Enforcement and Seizures (COPES) and a number of operational techniques protection. Based on this analysis, Programme as well as case studies. Additional customized training in this area of COPES has become a full-fledged modules covering region-specific enforcement will be developed. programme since 1 January 2017 and threats or areas of work, investigations is intended to be deployed in the six and inter-agency models are also being WCO tools WCO regions. It covers issues of border developed. The Training Handbook security, collection of evidence, seizures, will soon be available in French, and The CEN suite investigations, and prosecutions. translation into additional languages The CEN suite includes three stand- Although not all customs administrations is also envisaged. alone applications, namely the have judicial investigation powers, they Customs Enforcement Network are intended to be beneficiaries of the The WCO started conducting training (CEN), the National CEN (nCEN) and programme as an integral part of the in September 2017, starting with 13 the CEN communication platform Customs criminal chain. Customs administrations of the WCO (CENcomm), which are compatible MENA region. Training was also and complementary in nature – The COPES compendium, developed delivered in Jordan to members of the each supporting Customs with the some years ago, is a component of a Container Control Programme's Port digitalization of operational processes much broader project that itself has Control Units. In addition, the WCO in the enforcement field. different objectives: raising enforcement participated in several inter-agency policymakers' awareness of security issues workshops for Western Balkan and During the 2017/2018 period, the nCEN and judicial procedures; developing a Central Asian countries organized by was deployed in the Republic of the pool of COPES trainers; and raising the UNESCO and the OSCE. Congo, Sri Lanka, Sudan and Palestine. professional standards of border officials in Besides these four new deployments, collecting evidence, designing operations, Besides developing training modules, the following 25 countries use the supporting field officers during operations, the WCO, in conjunction with nCEN to support their analytical and improving inter-agency cooperation and INTERPOL and with the support of risk management processes: Angola, carrying out assessments. Europol, organized the first global joint , Burundi, Comoros, Fiji, Customs/Police enforcement operation Georgia, Guinea, Haiti, Kenya, , Over the 2017/2018 period, new training codenamed “ATHENA,” with more than Malawi, Maldives, Mali, , courses have been created: a specific one 80 countries participating. Over 41,000 Mozambique, , Philippines, for the training of trainers, one dedicated objects including coins, furniture, , Sierra Leone, Swaziland, to enforcement activities for field agents, paintings, musical instruments, Tanzania, Uganda, Ukraine, Vanuatu another for executives, and one dedicated and Zimbabwe. to investigations. Two regional seminars,

34 WCO news N° 87 October 2018

six trainers' training courses and five national workshops, one of which was aimed specifically at preparing an operation, were organized. benefited from training tailored to the country’s needs. The enforcement operation that was organized resulted in many cases, some of which have been judicialized.

The programme works in synergy with other WCO programmes. Under the CCP for example, COPES training was provided to officers assigned to Port Control Units in Malaysia. Under Council Chairperson and the MADAO Project, COPES experts supported Guinea Customs on operation Secretary General re-elected planning and implementation. Under the INAMA Project, training was provided to for new terms participants attending train-the-trainer workshops in Burkina Faso, Malaysia and Zambia. Election highs of the sessions included the re-election of Enrique Canon, the Director General of Uruguay Customs, as Chairperson of the Council, More information and the re-election of Kunio Mikuriya, the incumbent Secretary General [email protected] of the WCO, for a further five-year term at the helm of the Organization, effective 1 January 2019.

Mr. Canon expressed his gratitude for the ongoing confidence placed in him by the Council, and Dr. Mikuriya said that he was deeply honoured by the confidence that the Council has in his ability to lead the Secretariat and that he will continue working to achieve the Organization’s goals and realize its vision of modernization and connectivity.

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Signing ceremonies

The WCO signed several Memoranda of Understanding (MoU):

• with Korea Customs on the establishment of a WCO • with Tunisia Customs on the establishment of a WCO Regional Customs Laboratory; Regional Training Centre (RTC);

• with Hungary Customs on the setting up of a WCO • with Customs on the creation of a WCO Regional Regional Dog Training Centre (RDTC); Dog Training Centre (RDTC).

More information www.wcoomd.org/en/about-us/partners/mou-new.aspx

2018 WCO Photo Competition

“FACILITATING TRADE, PROTECTING our people, building our country” is the caption of this year’s winning entry from Jamaica Customs. The photo shows officers getting on with different jobs in an efficient and friendly way. It illustrates the core values of Customer Service, Accountability, Professionalism, Integrity and Transparency (CAPIT), and the Agency’s motto “Country Above Self.”

36 PANORAMA WCO news N° 87 October 2018 © Franck / Unsplash V.

Reviewing the OECD method to assess trade facilitation policies

By Xiaoping Jiang, DIRECTOR, Re-code, an independent Chinese research institute and Zhuojian Zhou, PROJECT MANAGER, RE-CODE TRADE SECURITY focusing on issues related to Customs and trade, shares AND FACILITATION RESEARCH CENTER, CHINA its thoughts in this article on the OECD method to assess trade facilitation policies, explains why it decided to evaluate the performance of China using the indicators constructed by the OECD, but not the same scoring methodology, and what the exercise revealed.

SEVERAL INTERNATIONAL ORGANIZATIONS OECD assessment method have developed methods to assess the The OECD developed indicators to efficiency of countries in facilitating assess the extent to which countries trade flows. Among them are the have introduced and implemented World Bank with the Doing Business trade facilitation measures as well as project and the Logistics Performance their performance relative to others. Index, the World Economic Forum who The measures that were selected are publishes the Global Trade Enabling specific or “narrow,” focusing on public Report and the Global Competitiveness prerogatives, and drawn from the World Report, and the Organisation Trade Organization’s (WTO) Trade for Economic Co-operation and Facilitation Agreement. Development (OECD) with its set of Trade Facilitation Indicators. This last There are 11 first-level indicators method forms the focus of this article. related to the import/export

37 PANORAMA

procedure, each of which is subdivided (https://sim.oecd.org/Simulator. • the procedures and the requirements into further indicators: 115 in total. ashx?lang=En&ds=TFI). to issue a ruling are not standardized The methodology is by no means or unified across the country. complicated: the score for each first- China's trade facilitation policies level indicator is the average of the The OECD conducted assessments on Another example is the score attributed scores obtained for each of the second- China’s trade facilitation policies in to the three indicators falling under level indicators (i.e. the subdivisions), 2012, 2015 and 2017. The results are “Formalities,” which seemed to be while global trade facilitation shown in table 1. undervalued. It is widely recognized performance is the average of the that China has made tremendous scores of the first-level indicators. Experts agreed that, in general, the progress when it comes to formalities: above evaluation results fairly reflected documentation requirements and There are two methods to calculate the the level of trade facilitation in China. Customs procedures have been score of the second-level indicators: However, a great many trade experts also simplified to a great extent and thought that several of the indicators information technology (IT) systems • “Direct scoring” – Indicators were not assessed well enough and, have been improved, allowing for far are scored from 0 to 2 (0 for therefore, deviated from the reality on more automation. While this progress poor performance, 1 for average the ground. has been recognized by the trade performance, and 2 for good community in China, it is not reflected performance) on the basis of An example is the assessment done in the assessment conducted by the the results of an investigation. in 2017, in particular the indicator OECD. Investigators may rely on publicly referring to the pre-entry advance available sources of information ruling programme, which allows China The scores of the two indicators related to (Customs websites, official Customs to provide decisions on the “Border Agency Cooperation” also do not publications such as Customs codes, classification, origin and valuation of seem to conform to reality. Over the past etc.), and on questionnaires replied commodities prior to their importation few years, China Customs has spared no to by the relevant administrations or exportation. Re-code believes that the efforts to promote cooperation with staff and by carriers with a worldwide performance of China in this respect is of the Chinese General Administration presence. not deemed to be as good as the OECD’s of Quality Supervision, Inspection and estimate indicates. The score obtained Quarantine (AQSIQ)1. In addition, • “Indirect scoring” – Data is extracted seemed too high for two reasons: an “inter-agency licence verification from existing international reports, network” has been developed with other databases or other sources, and is • provisions regulating advance authorities. Cooperation with foreign translated into corresponding scores rulings in classification, valuation counterparts has also improved, with based on specific rules. and origin of commodities are not Chinese agencies being very proactive well harmonized with other relevant in this domain. For example, China For more details about each indicator, regulations; Customs has initiated a number of joint the data sources and the method of control programmes with the Customs calculation, see the online tool “Trade administrations of several neighbouring Facilitation Indicators Simulator” countries. These efforts are not properly reflected in the OECD assessment. Table 1: TFIs in China Causes of deviation Indicator Year Re-code believes that there are three 2012 2015 2017 major reasons for the deviations observed on some indicators. Information Availability 1.56 1.80 1.52 Involvement of the Trade Community 1.50 1.75 1.43 The first has to do with data sources. Advance Rulings 1.50 1.43 1.67 Many second-level indicators are Appeal Procedures 1.71 1.13 1.33 calculated using the indirect scoring Fees and Charges 2.00 1.75 1.69 method, i.e. data from reports or Formalities - documents 1.17 0.83 1.33 databases of other parties. The problem Formalities - automation 1.75 1.75 1.15 is that this data is sometimes defective. Formalities - procedures 1.29 1.50 1.32 Let’s take the figure related to “Clearance Border Agency Cooperation (internal) 1.00 1.00 1.00 Time,” a subcategory indicator under Border Agency Cooperation (external) 1.00 0.80 “Formalities - Procedures,” as an Governance and Impartiality 1.86 1.57 1.67 example. The OECD uses a clearance

1 In March 2018, the AQSIQ was dismantled under a government restructuring programme, and its entry-exit inspection and quarantine duties and work- force have been integrated into China Customs.

38 WCO news N° 87 October 2018

time without physical inspection and the The evolution of the clearance time as importance of the indicators as well as clearance time with physical inspection reported in the LPI over the years is their possible correlations (correlation published in the World Bank’s Logistics shown in Figure 1. between variables could be interpreted Performance Index (LPI) to determine as double counting) is not optimal. the value of this indicator. The figures Another issue is that the scoring obtained from the 2014 and 2016 reports method does not sometimes allow Reviewing the OECD methodology show no real progress in this regard. progress made to be appreciated. Let’s Re-code has made relevant adjustments Average clearance times are 2.07 and once again take the clearance time as and improvements to tackle the 2.10 days respectively. an example which is scored following deficiencies mentioned above. Instead of a binary methodology, with a range relying on publicly available data as well However, China has taken many of 0 to 2, with thresholds based on as reports and databases developed by measures to optimize clearance the above/below average method. other international organizations, the formalities, with trade-related border The indicator is scored 0 when the Research Center decided to set up a agencies working together to expedite country's “average clearance time” pool of experts, and asked them to score procedures and inspections. Progress in the LPI ranks among the lowest each second-level indicator. To ensure was reflected in several Time Release scores obtained by 30% of the assessed the impartiality of the results, Re-code Studies that Re-code conducted in China economies, 1 when it ranks among set some conditions when hiring the since 2014 (see the report on the study the scores obtained by 40% of the experts. They had to be engaged in the undertaken in 2015 published at the following economies, and 2 when it business of trade, had to have more than end of this article in the digital edition falls under the highest scores obtained five years of trade-related experience, of the magazine). In addition, the figures by the remaining 30% of economies. and had to be interested in trade on clearance times, extracted from the If the ranking of an economy stays facilitation in China as well as willing Customs clearance management system in the same demarcated range, even to take part in the assessment. to which Re-code had access in 2016, are though there is a big jump in ranking much lower than those reported in the compared with the previous report, its In 2017, 21 experienced experts from LPI. OECD’s score will remain unchanged. governmental agencies (including China Customs and the Chinese General Thus, there are reasons to doubt that Finally, the OECD uses unweighted Administration of Quality Supervision, the data in the LPI reflected clearance formulas to calculate the scores of the Inspection and Quarantine), from time properly in 2014 and 2016. Since 11 first-level indicators. In this respect, the trade community, and from the OECD published its latest TFIs Re-code believes that conducting the independent research institutes were in 2017, the World Bank released its assessment simply by calculating an invited to participate in the survey. 2018 LPI which does reflect great average without setting weights and improvement in the clearance time. taking into account the difference in Customs Clearance Time of China in LPI Reports Figure 1: China’s Customs clearance time in LPI reports

4.00 days Customs Clearance Time ith physical inspection 3.38 days Average

3.00 days 3.00 days ithout physical inspection

2.34 days 2.07 days 2.10 days 2.00 days 1.85 days 1.40 days 2.00 days 2.00 days 2.00 days 1.70 days 1.03 days

1.00 day

17.0 9.0 10.0 Physical inspection 7.0 7.0 3.0 LPI LPI LPI LPI LPI LPI 2007 2010 2012 2014 2016 2018 Sources: orld Bank LPI Report 2007, 2010, 2012, 2014, 2016, 2018

39 PANORAMA

Table 2: Weights of the 11 first-level indicators This CBP beagle isn’t your typical canine

Indicator Weight Indicator Weight Information Availability 0.11 Formalities - automation 0.08 Involvement of the Trade Community 0.11 Formalities - procedures 0.09 IMAGINE BEING LESS than two feet tall Border Agency Cooperation Advance Rulings 0.09 0.09 and having to navigate the luggage (internal) carousel at one of the busiest airports Border Agency Cooperation Appeal Procedures 0.10 0.07 in America. This could be a daunting (external) and intimidating task, but every day a Fees and Charges 0.09 Governance and Impartiality 0.08 non-intimidating canine battles through Formalities - documents 0.09 the large crowds sniffing backpacks and luggage looking for food. Figure 2: Comparing the scores obtained by the OECD and by Re-code

Information Availability Frodo, a beagle, is a U.S. Customs and

Involvement of Governance Border Protection (CBP) agricultural Trade Community and Impartiality 1.52 Scores by OECD products detection dog. He has Scores by Re-Code 1.67 1.48 1.43 been working at Chicago’s O’Hare 1.53 1.30 Advance Rulings International Airport since 2011, and Border Agency 1.41 Cooperation (external) according to Jessica Anderson, a CBP 1.67 0.80 1.24 Agricultural Specialist, Frodo loves his job. “This is a beagle’s dream job. They 1.36 1.41 1.00 1.33 Appeal Procedures Border Agency are very food driven. If they know where Cooperation (internal) 1.32 food is, they will find it.” 1.15 1.65 1.33 1.65 1.55 When people think of law enforcement Formalities - procedures Fees and Charges canines, beagles are probably one of the 1.55 1.60 last breeds someone would envision. Formalities - automation Formalities - documents Anderson believes the programme to start using beagles began in the 80s. “We wanted to create public awareness of the Weights were assigned to indicators encouraged to send their feedback agricultural programme. Beagles are during the aggregation process on the research findings. cute and cuddly and not intimidating, in order to reflect the specific even though Frodo has scared some importance of some indicators On the positive side, some found people.” and to reduce the impact of the that Re-code’s research provided potential correlations among some a more accurate assessment of the Frodo’s specialty is finding apples, of them. Re-code asked the three actual trade facilitation performance citrus, mangoes, beef and pork. As the most senior experts to evaluate of China than the one done by luggage carousel turns, Frodo is hard the importance of each first-level the OECD, and that the progress at work, standing on his hind legs to and second-level indicator and to made in China when it comes to sniff the backpacks people are wearing then set a corresponding weight formalities and international/ and walking among the lines of people according to the results of their national cooperation was better collecting their bags. evaluations. The weights of the first- reflected. level indicators are listed in Table 2. Frodo is trained to provide a passive On the other hand, some deficiencies response to target odours. If he finds With the above adjustments and of the Chinese government were also something, he will sit down, alerting improvements, a new set of scores exposed, especially in relation to Anderson that he is on to an odour. on the 11 first-level indicators was the management of advance rulings As soon as this happens, Anderson developed, which are compared with and consultations involving the intervenes and asks the passenger if the conclusions of the 2017 TFIs trade community when introducing they have any food items in their bag. assessment by the OECD in Figure 2. or amending trade related laws, “This is usually the time the passenger regulations and administrative remembers they do have something,” Research results rulings of general application. Anderson explained. The results of the research were published in Re-code’s “Annual More information While Frodo looks like a dog you want Report on Trade Facilitation of Recode reports can be down- to pet and snuggle up with, when he China 2017,” with readers being loaded at https://pan.baidu.com/ is working, petting him can be a s/14Urcz5vKDhSp7S9lRBs4CQ distraction and is not allowed. Most

40 WCO news N° 87 October 2018

This CBP beagle isn’t your typical canine

of the agricultural canines are rescue dogs, sourced from a shelter. Rescue beagles are usually between one and three years old when procured by the academy for this programme. “The retirement age for beagles is usually nine years, but because they are rescue dogs we don’t know their exact age,” said Anderson.

“As long as the beagle has a high food drive, wants food more than anything else in the world, and is between the ages of one and three, we may rescue and train them. The age requirement is in place because we want the most productive years from the dog during service,” stated Anderson. Just some of the many agricultural products sniffed out by Frodo (Photo: CBP Chicago) Beagles are one of the healthiest breeds, with an average lifespan of 15 years. Additionally, they are smaller dogs that eat less than larger breeds, and because they are rescue dogs, CBP does not have to rely on breeders.

Each beagle goes through a training period of 10 weeks with the paired handler. During the training, handlers become familiar with the dog before they are put to work at their respective port of entry. Each pup can find various plants, meats, fruits and vegetables, in addition to the training odours of apples, citrus, mangoes, beef and pork.

“I believe there was a survey and these training odours were the five most commonly found items,” Anderson said. “This data allowed us to hone in Frodo hard at work as his handler Jessica Anderson looks on (Photo: CBP Chicago) and train the dogs in what to search for.” The training doesn’t stop once they are certified. These canines and Though Frodo doesn’t work a 9-5 job, their handlers have to recertify every he works an hour-on/hour-off schedule, year. and sometimes that may vary given operational volumes. This is because Frodo isn’t just looking for his five main “dogs aren’t machines,” as Anderson food groups. He has found a commercial remarked. Frodo is between seven and shipment of dog bones, packed in nine years old, so he probably has about suitcases, elephant hair bracelets, bird’s one more year on the job; after that, he nest soup from Vietnam, and other will be retired. extravagant items. To date, Frodo is responsible for seizures amounting to More information almost 100,000 US dollars. www.cbp.gov

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Brazil’s unique export declaration: modernization inspired by international standards

By Eliza Helena Delgado de Oliveira, Hermano Felipe Campos Ferro and Debora Teles Toscano, CUSTOMS OFFICERS, FEDERAL REVENUE SERVICE, BRAZIL

THE BRAZILIAN GOVERNMENT has recently such as those relating to sanitary 2,200 US dollars per container. These centralized its export procedures and issues, security, fauna and flora, figures placed Brazil 124th in the developed a new online platform to nuclear matters and tariff quotas. Doing Business trading across borders process export operations in order ranking. to make them more efficient and, When necessary, a licence or ultimately, boost the economy. The certificate also had to be obtained and Although Brazil’s “old model” was an new “unified export system” is the added to the export documentation. innovation at the time when it was first application developed as part These documents were issued either created, this export model was clearly of Brazil’s Single Window project as paper forms or via independent no longer able to efficiently meet the that started in 2014 and which aims electronic systems. This meant that the needs of the country’s private actors to integrate all existing information concerned agency had to first issue the and government agencies, especially technology (IT) processes currently documents requested by the trader on in light of increasing , used by border agencies to manage the basis of the supplied information, which has led to a more intense flow trade flows, thus enabling enhanced and later check whether the documents of modern world trade. coordination and better controls while they had issued adequately supported facilitating data reporting for traders. the export request. Single Window for exports To solve many of the problems Old model Once this step had been completed, identified and to rationalize the In order to export, a company had only then could the exporter actually procedures, a “Single Window” to register with the Department submit an export declaration together platform (www.siscomex.gov.br) was of Federal Revenue (RFB). The with any other necessary documents designed in line with the approach registration provided access to the to the RFB to initiate the Customs advocated by the United Nations Foreign Trade Integrated System clearance. Among the documents to Centre for Trade Facilitation and (Siscomex), an IT platform that was be presented were the commercial Electronic Business (UN/CEFACT), developed in the 90's as part of the invoice (containing information about which considers the Single Window RFB’s effort to implement computer- the actual business transaction), the environment as a key facilitation based procedures and controls. packing list (containing the number measure, as well as with the WCO of packages and their contents), and guidelines and its recommendation Under the old system, the exporter, or the bill of lading (the transportation on dematerialization of supporting the Customs broker, had to initially contract issued by a carrier). documents. The objectives of Brazil’s submit, via Siscomex, an “export Single Window export portal are to: register.” This document enabled According to the Doing Business study the relevant government control conducted by the World Bank, an • eliminate redundancy in agencies to each evaluate compliance export of containerized goods in Brazil information and ensure data with regulations which they were took, on average, 13 days to complete, integrity (for example, data specifically responsible for enforcing, with average costs in the order of submitted during the registration

42 WCO news N° 87 October 2018 © A. Davey

Prior to implementing the new system, an exporter had to report 88 pieces of data. Under the new process, the number of pieces of export data has fallen by around 60% and the exporter now needs to provide only 36 pieces of data.

of the commercial invoice can documents may be added. It is based relevant feature here is that the system be used to complete the export on the WCO Data Model and must has a validation module that allows the declaration); be completed by the exporter or by exporter to train himself/herself on the person responsible for submitting the new export process before actually • centralize procedures for all kinds of the declaration, based on information exporting, thereby minimizing errors exports and modal transport; contained in the commercial invoice that when registering the real declaration. also has to be uploaded onto the system. • rationalize and coordinate the Prior to implementing the new system, actions of all stakeholders involved The commercial invoice in Brazil is a an exporter had to report 88 pieces of in the export logistics process, document for internal tax purposes, data (50 on the export register and 38 on including all national agencies which which establishes the transfer the Customs export declaration). Under regulate exports; of ownership of a property. The the new process, the number of pieces centralization of these two documents of export data has fallen by around 60% • reduce or eliminate parallel controls; on the same platform enables better and the exporter now needs to provide controls, especially when it comes to only 36 pieces of data. • improve tax collection by fiscal evasion as it allows access to automatically notifying the revenue information on goods actually exported The Portal also aims to increase authority every time an export and the internal taxes related to the transparency by allowing companies to declaration is received; process. monitor the progress of their operations in detail over the Internet. In addition, • facilitate exports by allowing the Obtaining licences, authorizations, the analysis of the operations processed national postal operator and courier certificates and other documents that through the DU-E until now shows that companies to act as export agents. must support an export also occurs in the average time between the registration a different way in the new system. They of the declaration and the shipment of Besides building the platform per se, the can be requested directly through the the goods has been reduced by 54%, export procedures have been streamlined portal, and issuing agencies can control exceeding the initial target set early in to bring real benefits to exporters, meet their use and the conformity of an export the project. The reduction in time taken the needs of stakeholders, and reduce the without interfering with the continuity to export goods has a direct impact on times and processes of such operations. of the logistics flow. transaction costs, and increases the At the core of the new system is the competitiveness of Brazilian companies Declaração Única de Exportação (DU- The export procedure can be initiated in the global market. E), or Unique Export Declaration. without the above documents and the exporter may obtain them over time, as Moreover, during the whole process, The DU-E is essentially an online long as they are ready before shipping. most goods awaiting export would be document for the registration of an This has enabled the exportation of held in port or terminal premises. The export declaration to which additional regulated products to be facilitated. A fact that export clearances now take

43 PANORAMA

less time means that ports can process • = the exporter’s and effective in all phases of the project, shipments quicker and increase the flow identification, which may contain 8 from the mapping of the old processes, of goods they process. In a country where or 11 digits; the identification of the main problems, a lack of port infrastructure is regularly critical points, redundancies and pointed out, such increases in port • = the decade of the year bottlenecks in the flow to the recognition operations, without any expenditure on in which the UCR is assigned by of stakeholders' needs. the actual infrastructure itself, is great Siscomex to a given export through news. the DU-E (for example, "1" if Way ahead allocated in 2017, "2" if allocated in The implementation of the DU-E began Risk analysis 2020, etc.); in March 2017 and progressed gradually From a Customs point of view, the until reaching completion in July 2018. process reengineering aimed especially • = a unique string of Initially, only the basic functionalities at enabling transaction based risk characters that can be assigned by for cargo requiring Customs supervision analysis 24/7, following international the exporter/declarant or, if he does and sent by air became operational, best practices. Previously, declarations not do so, by the system. followed by the later incorporation of were analysed in batches, only on sea and land operations. Thereafter, working days, creating gaps that further The use of the UCR in foreign operations supported by the Special increased the time needed to process trade operations meets the WCO Drawback Regime were added, and, export operations. Recommendation. In addition, the fact finally, operations subject to other that the different data forms used in governmental controls, in all modalities. Under the new system, each declaration the system were developed according The idea was to allow the various is analysed separately, periodically, and, to the WCO Data Model will make the players to migrate to new concepts and as a result, more rapidly. The control exchange of information with other functionalities with tranquility as well as process is improved, and the time Customs administrations also using the legal and operational security. required to manage the flow of exports Model much easier. considerably reduced. The perception of the benefits generated Last but not least, the system allows for the by the implementation of the new export The system still gives every export insertion of additional details about the process is gradual and growing, with the transaction a “Unique Consignment nature of products being exported. This actors becoming more and more familiar Reference,” or UCR, which allows for feature aims at fixing a common problem, with the system and perfecting their own the aggregation of several invoices into i.e. requests for more detailed specifications processes. Moreover, given the efforts a single cargo consignment, and will by Customs in the country of import. Since made to simplify procedures, reduce be used to track shipments through all information about products was dispersed duplication in reporting, make control stages of the export process. The UCR among several documents, it was common transparent, reduce costs associated is made up of a number and characters, to see merchandise identified by its NCM with exportation and increase the indicating in a coded format the (Nomenclatura Comun do MERCOSUL) predictability of commercial operations, following information: code, by a written description, and by some Brazil hopes to increase the country’s other code used internally by the Brazilian trading performance and see itself better • = the year in which the Customs or tax authorities. The system has placed in the ranking made by the World UCR is allocated by Siscomex to a been designed to coordinate and centralize Bank or the Organisation for Economic given export through the DU-E (for all descriptions in a single place. Co-operation and Development example, "7" if allocated in 2017, "8" (OECD). if allocated in 2018, etc.); Consultation Although the project was led by the More information • = the country where the RFB and the Foreign Trade Secretariat [email protected] UCR was assigned ("BR" in the case (SECEX), private sector participation [email protected] of Brazil); in the construction of the new and [email protected] improved export process was essential

44 WCO news N° 87 October 2018

Dubai Customs launches iDeclare

DUBAI CUSTOMS LAUNCHED a smart mobile streamline passenger traffic into Dubai . These measures will app enabling passengers arriving in International Airport, which received enable better protection of the economy Dubai to securely submit Customs 88.2 million passengers in 2017, topping and enhance security. declarations electronically, thus all airports worldwide for the 4th year bypassing the current traditional in a row. Clearance waiting time will The new initiative by Dubai Customs paper forms. The online application, be reduced by more than 60% from 45 further reinforces the administration’s called iDeclare, simplifies the Customs minutes to only 5 minutes. Inspectors progressive adoption of digital clearance process for passengers by just have to scan the “bar code” transformation and technology-enabled enabling self-declaration of their must- generated by the app on the passenger’s automation of Customs processes and declare commercial goods, personal smartphone. procedures. A smart solution for the effects or cash either pre or post arrival smooth and efficient movement of air at the airport, saving them both time Moreover, iDeclare enables travellers to passengers, iDeclare is geared to make and effort. be better informed of the regulations Dubai way ahead in terms of its readiness applying to goods, and Customs to host Expo 2020 (www.expo2020dubai. With the launch of iDeclare, Dubai inspectors no longer have to waste com), which takes place in two years. Customs becomes the first Customs time filling in declarations on behalf administration in the Middle East to of passengers. Dubai Customs’ latest More information implement smart mobile declarations tech innovation is designed to enhance www.dubaicustoms.gov.ae for passengers. Through this smart the passenger experience and increase app, the administration aims to further customer satisfaction, whilst optimizing

iDeclare

NO

YES Arrival Something Immigration Baggage Airport exit to declare office claim

iDeclare If the inspector suspects a passenger at the gate,

iDeclare will guide the passenger to the inspection area

The average Inspection The Inspector will scan Full inspection A receipt is given to the waiting time is if reuired the bar code on the process: average passenger if any restricted 2-5 mins. time is 7-10 mins. goods are found passenger’s phone A declaration is done if (for iDeclare users) Customs duty needs to be collected

45 PANORAMA © Melbourne Streets Avant-garde

Bahamas Customs takes the Mercator Programme to a new level

By Andrea Hampton, to the WTO, and the BCED has a crucial the administration throughout this WCO-BAHAMAS TRAINING PROGRAMME MANAGER role in preparing the country to do so. process. In the case of The Bahamas, EARLIER THIS YEAR, the WCO and an MPA from US Customs and Border the Bahamas Customs and Excise Implementation plan Protection has been assigned. Department (BCED) embarked on an The WCO Mercator Programme exciting partnership to employ a new was designed to assist governments After a scoping mission in March 2018, model for Customs capacity building in implementing the Customs trade the MPA and other WCO experts and technical assistance. For the first facilitation measures outlined in the worked with the BCED to determine time, a national multi-year WCO TFA. The Bahamas is the first country key areas for improvement. The product Mercator Programme Implementation to take advantage of the Mercator of this work is intended to assist the Plan has been combined with an Programme prior to accession to the administration in better aligning itself intensive training delivery programme WTO. This clearly demonstrates its with trade facilitation best practices and aimed at achieving specific results over commitment to adopt the WTO’s international standards such as the WCO the course of approximately 18 months. multilateral trade rules and standards, Revised Kyoto Convention (RKC), which while recognizing that the benefits will assist with TFA compliance. In June The initiative is funded from a loan to generated by the Programme can and 2018, these findings were addressed in a The Bahamas Government by the Inter- do reach beyond WTO membership. detailed Mercator Implementation Plan American Development Bank, and that: benefits from the strong commitment Under the Mercator Programme, of the Comptroller of Customs, capacity building is provided on the basis • explains the specific steps needed Dr. Geannine Moss. She desires to of a comprehensive needs assessment to be taken by the BCED in order to bring the skills of her staff up to higher and development plan. Once gaps align itself with TFA standards; standards by implementing modern related to meeting the commitments processes and practices that would under the TFA have been identified, • identifies strategic links for each contribute to facilitating trade, whilst multi-year action plans are developed set of activities, including desired ensuring compliance with the provisions to serve as roadmaps and mechanisms outputs and overall outcomes; of the World Trade Organization’s by which progress can be monitored. A (WTO’s) Trade Facilitation Agreement WCO-accredited Mercator Programme • specifies indicators that can be used (TFA). The Bahamas intends to accede Advisor (MPA) is assigned to support to monitor implementation progress;

46 WCO news N° 87 October 2018

• assigns individual responsibilities In addition, the WCO’s e-learning What makes the approach to BCED executives, thus ensuring platform CLiKC! will also be used. accountability and ownership; adopted in The Bahamas Much has already been achieved in unique, is the fact that, • provides a timeline by which actions only a few months. The programme of are to be taken; work has been intensive, with over 100 thanks to a Training BCED officers having received training Agreement with the WCO, • directs the BCED towards relevant and technical assistance from the WCO WCO resources and tools to support covering 10 different areas to date. the scale of technical each of the actions, drawing on Among other core Customs TFA-related assistance that will be the WCO’s TFA Implementation support: Guidance. delivered is unprecedented. • training on rules of origin was The training programme Training Agreement delivered to 25 participants, and a As is the case in all countries benefiting number of potential BCED trainers consists of 26 technical from the Mercator Programme, this work have been identified; assistance and capacity was done in parallel with identifying critical areas for training needs within • risk management, advance rulings, building missions delivered the Customs administration. What and performance measurement by WCO experts. makes the approach adopted in The legislation, policies, procedures and Bahamas unique, is the fact that, thanks capabilities have been evaluated; to a Training Agreement with the WCO, the scale of technical assistance that will • the WCO supported the creation of be delivered is unprecedented. a Time Release Study framework, plan and working group, which The training programme consists of will be responsible for designing 26 technical assistance and capacity benchmarks to compare clearance building missions delivered by WCO performance before and after experts. All themes covered during implementation of the ESW; the missions support the attainment of specific objectives under the Mercator • 12 Superintendents and 12 Chief Programme and are relatable to articles Customs Officers have benefited of the TFA. They include core Customs from the WCO’s intensive Leadership functions such as risk management, Management and Development valuation, classification, and rules of training course; origin. • BCED staff members benefited Focus is being directed towards measures from training on the WCO Data contributing to a more predictable Model, and have since started and transparent trading environment. mapping their data requirements to Initiatives include advance rulings and the Model in preparation for ESW the review and appeals procedures, as implementation. well as arrangements aimed at enhancing coordinated border management. Conclusion By pioneering this unique approach, Assistance in the area of organizational which combines the Mercator development is also being provided. Programme’s focus on results with The aim is to support the BCED’s intensive delivery of WCO technical institutional capacity to deliver the assistance and capacity building necessary changes to meet the demands missions that include the sharing of of traders and capture the full benefits expertise, The Bahamas has become a expected from the imminent roll-out of showcase for the Caribbean sub-region. an Electronic Single Window (ESW). Its dynamic partnership with the WCO is a clear demonstration of the efficacy Emphasis has also been placed on of the WCO’s wider Capacity Building sustainability. A number of BCED Strategy. officers meeting the WCO pre-requisite profile will be trained as instructors so More information that they can, in turn, teach their peers. [email protected]

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Building technology-driven organizations: China Customs shares its experience

By Mr. Wang Lingjun, VICE MINISTER, GENERAL ADMINISTRATION OF developing completely new clearance Second challenge CUSTOMS, PEOPLE’S REPUBLIC OF CHINA procedures and information technology How to the national gateway. (IT) systems. Only by integrating the IT The new China Customs shoulders A new Customs agency platforms of the two agencies can we greater responsibilities in terms of In March 2018, the Chinese government stimulate a “chemical reaction” that border security and risk prevention in decided to integrate China’s entry- truly transforms China Customs, and areas such as revenue collection, public exit inspection and quarantine duties bring about the “1+1=2” result. health, bio-security, food safety, illegal and workforce into China Customs. items, and goods in general. Since 20 April, the previous entry-exit Procedures were simplified, inspection and quarantine officers in international standards adopted, and Third challenge 306 ports nationwide have started to the IT database structure reconstructed How to achieve a comprehensive work as Customs officers. This marks and optimized, according to different opening-up and better management the birth of the new China Customs. business models. The costs associated of e-commerce transactions. In recent However, the reform has brought us not with preparing documentation years, the trade volume of cross-border only opportunities, but also challenges. incurred by traders, and the costs e-commerce in China has been soaring. associated with the administrative For example, in 2017, China Customs First challenge supervision borne by Customs have handled 1.89 billion inward and outward How to achieve the full integration of been reduced simultaneously, ending parcels. Customs and inspection and quarantine in a "win-win" situation for both services. Such an endeavour requires traders and Customs. © China Customs

48 WCO news N° 87 October 2018

The new Customs information system has On 11 November, the most popular Digitalization shopping day in China, also known been built to integrate and An integrated platform merges the as “Double Eleven,” our Customs analyse “Big Data” – i.e. functionalities of both a Customs Clearance System for Cross-Border information website and a Single E-Commerce processed a total of 16.19 data aggregated from Window, providing almost all services million overseas shopping manifests. various sources and in related to Customs and port procedures online. In 2017, 50% of trade documents New solutions for new challenges multiple forms. A Big Data were processed through the Single With limited resources, we turned to Application Centre and Window, a figure which is predicted to technology to improve efficiency and reach 70% by the end of this year. We save human resources, thus bringing a Big Data Platform have also fully opened access to Customs’ about technology-driven changes. We thus been established. We operational data, which allows have already made some progress over enterprises to follow the declaration the last five years. Some of them are have gradually shaped an process via the Internet, mobile presented below. operating mechanism, which applications and even social network systems. Increased non-intrusive inspection combines expert risk analysis capacities and machine intelligence Furthermore, a Customs Targeting In 2017, we explored the use of Artificial Centre and a Supervision Centre Intelligence (AI) in equipment inspection assistance in our law for Revenue Collection have been image systems such as X-ray, Back enforcement activities. established, each developing its own risk Scatter and Millimeter-Wave screening analysis processes separately. Wherever technology. Pilot projects were carried they are located, enterprises can now out in some Customs districts to test the enjoy a standardized Customs service. machines’ auto-detection capabilities. With these initiatives, the Customs clearance time of imports and exports in The technology seems promising as process. We are also exploring how 2017 was reduced by one third compared we managed to find prohibited and robots could assist our inspection and to 2016. restricted items utilizing an automatic radiation detection work. detection application. As a result, the Going forward technology will now be deployed to More accurate targeting We believe that, to improve control some of the inspection equipment, The new Customs information system mechanisms, our IT environment which will be connected to the Customs has been built to integrate and analyse must reach international standards and information systems as well to a bank of “Big Data” – i.e. data aggregated from evolve continuously. The exploration and scanned images. various sources and in multiple forms. implementation of new technologies is A Big Data Application Centre and an ongoing process that will never end. As some passengers enter the country a Big Data Platform have thus been with goods below the quantity and established. We have gradually shaped Our resources are now being focused on value threshold that could otherwise an operating mechanism, which exploring how Blockchain technology attract duties and taxes, we used Facial combines expert risk analysis and can help us develop trusted, safe and Recognition (FR) technology to build a machine intelligence assistance in our efficient trade chains by collecting facial database of frequently incoming law enforcement activities. and sharing data covering all stages and outgoing passengers. of domestic and overseas production, Through accurate data analysis, we can processing, storage and usage. Officers are now able to more easily effectively balance the relatively limited locate suspects in the passenger human resources and the growing Last but not least, we are also looking at inspection channel and conduct a non- supervision workload. For example, Virtual Reality (VR) and the possibility intrusive examination using Millimeter- experts have transformed thousands of of using it to train officers to handle Wave (MMW) body scan equipment. successful cases into algorithm models. terrorist attacks, deliver epidemic Our efforts in this regard have greatly Hundreds of smuggling cases have control or manage vessel inspections. deterred illegal concealments and been cracked down upon, with a value Pilot projects in this regard are currently smuggling activities. of over 16 billion renminbi. China being promoted at various Customs Customs has also deployed CCTV to units. In addition, robots have been deployed to enable real-time monitoring of over answer passengers’ questions and guide 1,900 sites where Customs operations More information them through the Customs clearance are undertaken. www.customs.gov.cn

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Blockchain: unveiling its potential for Customs and trade

50 WCO news N° 87 October 2018 © Igor Stevanovic / Science Photo IST The big advantage of Blockchain technology is that it creates an environment of “trust” between and among unknown parties to transact business and exchange information without an intermediary, whilst ensuring data integrity and providing a full audit trail.

THIS SECTION OF the magazine gathers merely an accident, the participant • The interface project built as part of several articles on the “Blockchain,” would be re-admitted. In contrast, Mercury II, the system used in the a term which refers to a type of data in the case of a deliberate attempt to context of the dematerialization of structure that identifies and tracks commit fraud, the operators would the ATA carnet, which reproduces transactions digitally and shares this work with the relevant authorities to the paper procedures of the carnet. information across a distributed network take appropriate action. of computers. Blockchain is one type of • Tradelens, jointly launched by distributed ledger: distributed ledgers use The big advantage of Blockchain MAERSK and IBM, which allows independent computers – referred to as technology is that it creates an all organizations involved in an nodes – to record, share and synchronize environment of “trust” between and international shipment to exchange transactions, instead of keeping data among unknown parties to transact information about events and centralized as is the case with a traditional business and exchange information transport documents in real time. ledger. without an intermediary, whilst ensuring data integrity and providing a • Cadena, which enables The Blockchain organizes data into full audit trail. Although the technology information-sharing on blocks, which are chained together in an was initially developed from a financial authorized economic operators append-only mode. It has the capability services perspective, it can serve as a (AEOs) among the Customs to move any kind of data swiftly and basis for many other useful applications, administrations in Costa Rica, securely and, at the same time, make including information management, far Mexico and Peru, to ensure the a record of that change, movement, beyond monetary transactions. efficient implementation of Mutual or transaction instantly available, in a Recognition Arrangements/ trusted and immutable manner, to the This technology could equally be Agreements (MRAs). participants in a Blockchain network. applied within the Customs and trade In addition, the use of “smart contracts,” environments, where participants • Global Trade Connectivity Network a set of rules that are written down and in a transaction need to exchange (GTCN), a global information executed automatically, enables the information. Use of the Blockchain highway with a global vocation, avoidance of intermediaries, which act enables the same copy of a ledger to but limited for the moment to the as arbiters of money and information. be instantly available to all parties at exchange of information on trade different nodes in an updated, trusted, finance between the Singapore In terms of governance, Blockchain secure, and immutable manner. It and its Hong technology is decentralized. There is, also obviates the need for each party Kong counterpart. however, an operator function that sets to maintain separate ledgers, as is the rules for everyone in the network, currently the case. Readers are also invited to consult the along with regulators and government documents developed by the WCO agencies. If the network detects that The articles that follow this introduction on this technology, such as the Study something “untoward” may be going present some of the different platforms Report on Disruptive Technologies on, the associated individual participant that have been developed to enhance and the WCO Research Paper No. 45 would be frozen out of the network. the logistics chain based on Blockchain entitled “Unveiling the Potential of However, if the untoward activity was technology: Blockchain for Customs.”

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Blockchain: mapping new trade routes to trust

By Jorien Kerstens that 90% of declarations involve a broker agencies and governments. That’s where and James Canham, and 75% of traders use third-party blockchain comes in as a potential ‘game ACCENTURE logistics providers. changer’ for international trade. The THE BORDER IS a national asset. To boost technology’s three key characteristics – national competitiveness, facilitating Governments have a key role to play in distributed (shared dataset), consensus- legitimate cross-border trade must be reducing cross-border trade friction, yet based and secure – all build trust. high on every government’s agenda. government-to-government initiatives The World Trade Organization (WTO) experience similar complexity. Bilateral In short, if stakeholders can collectively estimates that ratification of the Trade and multilateral agreements take use blockchain to overcome the Facilitation Agreement could boost global considerable time to negotiate. For fundamental lack of trust, the trade trade by up to 1 trillion US dollars and example, the Comprehensive Economic ecosystem will become more efficient, reduce total trade costs by 13% for upper- and Trade Agreement between the secure and adaptable for the future. middle income countries. Put simply, European Union (EU) and Canada That will be good news for traders, making cross-border trade more efficient took almost 10 years. Adding to this governments and citizens as it will drive offers a sizeable pay-off for governments complexity is the various and boost trade. and citizens. agencies with interests at the border. Today, clearing a single shipment across a Blockchain: a new perspective for International trade is complex and border can involve on average 15 agencies cross-border trade typically plagued by inefficiency. Despite and sometimes as many as 40! Two years ago, blockchain was still digital advances, most cross-border trade largely a buzzword. Today, it’s high on procedures remain largely paper-based It all boils down to trust the agenda of most leading Customs and and involve a multitude of stakeholders. At the heart of this complexity is an trade organizations. Rather than asking The majority of trade transactions involve inherent lack of trust between buyers, whether blockchain should be applied, intermediaries: recent research indicates sellers, supply chain participants, the question is when and where. With so

52 WCO news N° 87 October 2018

nor are likely to meet. How can you Asset transfer trust that the person on the other end In essence, a cross-border trade of the transaction is who they say they transaction is the same as a simple © Hayden Walker / Unsplash are? Once a purchase is made, goods transaction, such as buying a loaf of may not arrive, they may not be as bread, which involves the seller handing specified, or may be otherwise deficient over the bread and the buyer the in quality or safety standards. The seller currency – a change of ownership and looks legitimate, but there’s no way of risk is effected. But distance, time and confirming this – trust is based on faith a lack of trust make international trade rather than any hard evidence. A digital far more complex. Goods change hands identity based on blockchain technology physically, but there’s also a transfer could eradicate such misgivings for both of accountability and responsibility large trading companies and individual between multiple stakeholders. In the consumers. best-case scenario, the seller is paid immediately after the goods reach their Such digital identities would be destination. But it often takes much beneficial for traders, goods, containers longer, and naturally trust plays an or even documents as their ‘identity’ important role. would need to be proven at various points along the supply chain. By using The key to solving this issue is to identify blockchain, relevant entities in a trade the ‘triggers’ – key events that should supply chain would have a secure and prompt follow-up actions. For example, verifiable identity, parts of which could the arrival of goods at their destination be shared where required, based upon should ideally trigger payment. the traditional handshake principle – Blockchain enables this business logic ultimately guaranteeing veracity. to be built into ‘smart contracts’ that automatically and legitimately trigger Blockchain technology can also help the right action. As an illustration, look much buzz about potential applications of to bridge the trust gap that often arises at the mandatory fines airlines operating blockchain technology, it’s easy to see how between trading countries, and help in the EU are required to pay when Customs agencies may feel overwhelmed. to revolutionize multilateral trading delays exceed a certain number of hours. The temptation is to lead with blockchain agreements. A benefit of blockchain Building this logic into a blockchain as the solution, and then go in search of a is that trading related documentation could automatically trigger a payment, suitable problem. does not need to physically travel with rather than requiring the passenger the goods or be exchanged between to file an often time-consuming and The reality is that the opposite approach parties, which decreases the paper-trail, laborious claim. generates better outcomes. By creating reduces the opportunity for trade fraud, a framework comprising four key and ultimately helps ease cross-border Using blockchain to manage asset areas affecting trade activities – proof trade friction. transfer would also help in combatting of identity, asset transfer, pathfinder cross-border fraud. Trade and border collaboration, Accenture Blockchain can also play an important finance, financial instruments developed is providing a new way to assess role in proving where goods have to assist the flow of goods between blockchain’s potential based on the originated from. Establishing the countries, is required notably to cover challenges that Customs agencies and origin of imported diamonds, for the risk and cost associated with goods traders need to foster greater trust, reduce example, is essential to ensure that being damaged, lost or stolen. The WTO complexity, and secure economic growth. they are ethically sourced. In Dubai, estimates that 80 to 90% of global trade is Essentially, this is about using the right an initiative named “Operation reliant on it. But the risk of trade finance technology in the right way to solve the Kimberley” is using blockchain fraud is unfortunately quite significant. inherent problem and create flexibility for technology to enhance the verification Tampering with documents remains the the future. It is not about the widespread process of diamond sources. most common type of fraud; either to information technology (IT)-driven legitimize a fraudulent transaction or to implementation of a single technology Tracing the origins or provenance of use bogus information to raise funding. that will provide all the answers. goods is also critical to addressing global health, disease and contamination Blockchain has the potential to tighten Proof of identity – what you see is challenges in a timely way. It took more the net on trade finance fraud, and what you get than two months to identify the original potentially result in huge cost-savings The era of e-commerce has exposed farm source of contaminated papayas for the private sector. Not surprisingly, many people to buying something which caused a salmonella outbreak in most commercial banks are exploring from a person they have never met, the United States (US) during 2017. the use of blockchain for payments.

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A much less explored, but no less important, area for blockchain is its potential to facilitate collaboration between governments and Singapore are working or between government Given access to relevant blockchains, on a cross-border blockchain solution Customs agencies can see exactly to facilitate trade and combat trade agencies. This technology what is in each container and whether finance fraud. Once up and running, could enable governments anything has been added to or removed the model can easily be scaled to more from it during its journey. This could countries. to share data and maintain help officials identify fraud and security accurate sight of the usage threats early, and enable timely risk Pathfinder – taking ‘track and assessment and planning of controls. trace’ to a new level of certificates and licences, Such segmentation allows compliant As goods travel from origin to without revealing intelligence shipments from trustworthy traders destination, they change hands to pass the border smoothly, leaving frequently. This requires considerable or sensitive information. border agencies to focus their resources, processing and exchange of documents time and attention on questionable and data. A pathfinder ledger built on packages. blockchain could act as a pipeline of goods information throughout their Legitimate traders are usually very journey, building up an entire record of willing to share data, especially if doing every supply chain movement of entities, truck drivers do not transport illegal so reduces friction at the border. For goods, packages or containers. It would goods or people. EU trusted traders, the UCC caters for ensure accurate information about the “Entry into Declarant’s Records” (EIDR), condition of goods at every point in Data submission along the supply chain which means the data of the Customs time, taking ‘track and trace’ to a whole can be rationalized. For example, goods declaration is at the disposal of Customs new level. in transit today require the frequent and authorities in the declarant's IT system. voluminous exchange of documents and A pathfinder providing government Container integrity could be improved. data. These processes are duplicative access would offer an effective technical Maintaining an accurate record of and inefficient. By using blockchain, solution – and crucially without the goods in a container is crucial for workflows and data can be truthfully and governments having to build their own addressing theft, which according to efficiently shared between stakeholders solution. estimates from the Federal Bureau of in the ecosystem. A proof-of-concept Investigation (FBI) results in annual (PoC) undertaken by Accenture as part Cross-border collaboration losses of approximately 30 billion US of a supply chain industry consortium A much less explored, but no less dollars in the US alone each year. In found that up to 70% of shipping important, area for blockchain is its effect, these costs are passed on to documents can be populated using potential to facilitate collaboration consumers who pay a higher price for existing data. between governments or between their goods. And addressing theft is a government agencies. This technology significant part of why the United Parcel Take, for example, the bill of lading, the could enable governments to share data Service (UPS) is investing in blockchain document issued by a carrier (or their and maintain accurate sight of the usage as a member of the Blockchain in agent) to acknowledge receipt of cargo of certificates and licences, without Transport Alliance, a forum for the for shipment. Today, this document is revealing intelligence or sensitive development of blockchain technology usually submitted by the carrier, who information. standards and education for the freight manually collates the data from others sector. in the supply chain. This is enormously A Customs agency could flag a certain time-consuming, leads to poor data trader or case as malicious via the By using blockchain in combination with quality, and raises questions about relevant blockchain, alerting other Internet of Things (IoT) technologies, accountability. Another example is collaborating countries. Different relevant data such as temperature, the security declaration, provided in government agencies perform risk location or whether a container has been advance of the arrival of goods. The analysis controls based on their own opened (and even for how long) can be Union Customs Code (UCC) – the confidential risk rules. Using blockchain recorded and maintained with complete EU’s new Customs legislation – already to share the control decisions and results integrity. For food or perishable goods, allows for various stakeholders along the would benefit partners and contribute keeping track of conditions such as shipping journey to provide a subset of to a more holistic and accurate risk temperature or humidity is critical. data at different points in time (multiple assessment. Various countries already Transport companies need to know filing of “Entry Summary Declaration” have agreements in place in this area, when and why a container is opened to data), but a supply chain blockchain such as the “Single Declaration” or the preserve perishable goods and to ensure could facilitate this even more efficiently. WCO’s “My Exit, Your Entry.”

54 WCO news N° 87 October 2018

The “Single Window” has been high on the agendas of border agencies for decades, with various degrees of success. The main obstacles are reluctance to share data, political sensitivities, and the inability of different agencies to agree on a governance model. Here, too, blockchain has a clear role to play. For example, take agricultural licences. These are usually granted by the Ministry of Agriculture and controlled by health authorities or veterinarians at points of entry. The corresponding import declaration is supervised by Customs, and its approval might require writing-off the permitted quantity specified by the certificate. Storing this information on a blockchain provides an integral view of usage, allowing for accurate write-off and avoiding double usage.

To facilitate cross-border trade and combat fraud, countries increasingly need to collaborate, either through bilateral/multilateral agreements, regional trade blocs, the WCO or the WTO. Today’s collaboration and data-sharing efforts are often expensive and inefficient. Political sensitivities mean that, in practice, countries deploy their own data and Scanning the barcode >>> exchange messages via an agreed-upon protocol. converting into a database >>> One example is the temporary admission of goods, whereby goods, such as paintings for an exhibition, mobile printing! enter countries on a duty free basis regulated by multilateral agreements. Using a blockchain to track their movements and share information would jetStamp graphic 970 eradicate the need for paper-based processes and costly data exchange.

Conclusion Possible integration into: NEW Rather than taking a technology-first approach to blockchain adoption, Customs agencies and • Goods-management systems governments should identify specific problems • Barcode-label software that this technology can help them to solve, such as • Windows-based software applications fraud or inefficiency. For many agencies a first-step may be the undertaking of a pilot project to gauge • Prints barcodes, number, date, time, effectiveness and to better understand the potential graphics, text continually costs of rolling-out the technology across their Mobile. Practical. Easy. organization. Regardless of project size, by focusing on the four areas already outlined above, agencies can start to build a robust business case for blockchain’s use. Ultimately, it all comes down to trust. Blockchain could be the game changer to lower trust barriers for everyone involved in today’s complex cross-border trade ecosystem.

More information Jorien Kerstens [email protected] www.accenture.com/ie-en/service-accenture-border- service

To the 55 application clip www.reiner.de/970pwc FOCUS

Digitization of ATA Carnets: © James Baldwin / Unsplash how the Blockchain

could enhance trust THE MOVEMENT OF goods and means of transport from, across or to, the European Union (EU) involves many By Zahouani Saadaoui, actors in the supply chain who must ELECTRONIC CUSTOMS HEAD OF SECTOR, DIRECTORATE-GENERAL FOR TAXATION AND exchange information and comply with CUSTOMS UNION, EUROPEAN COMMISSION several pieces of EU legislation and, in particular, with Customs, transport, environmental protection, safety, and security regulations. This renders the process of cross-border operations highly complex.

Over the past 20 years, digital technologies have reshaped the way industries and governments alike operate. International trade has been no exception, and the efficiency, reliability and cost-effectiveness of operations have been closely linked to the ongoing process of digitization.

At both national and European Community level, several initiatives have been targeting the digitization of reporting procedures in order to facilitate information exchange and foster better cooperation between competent authorities across different sectors. Among available technologies, blockchain technology is seen as especially promising, as it would enable the development of new paradigms for supply chain digitization, and opens up areas of potential change in the way in which citizens, economic operators and public authorities interact.

At its core, the blockchain is a decentralized, distributed ledger that stores information in blocks which are linked in a secure manner and disseminated through peer-to-peer technology to all the nodes, each of which contains a full copy of the information. The blockchain transactions are validated through a mechanism known as a consensus protocol, which is used to determine the blocks of data or transactions that will be successively added to the end of the chain as agreed among the stakeholders concerned.

56 WCO news N° 87 October 2018

Figure 1. Blockchain basis: Basic architectural components Blocks

Store data (e.g. transactions) and are linked in a chain. Since early 2017, the Directorate- General for Taxation and Customs Blockchain network Union (DG TAXUD), responsible for shaping policies and developing operational systems for the European Customs Union in collaboration with EU Member States, has been engaged in an exploratory activity to study the potential applicability of blockchain technology in both the Customs and taxation domains. In the field of Customs, this exploration has focused on the “notarization service” whereby a blockchain platform could be used as a third party for holding information generated by supply chain stakeholders. P2P network where each node has a copy of the blockchain. One document of particular interest is the ATA Carnet (ATA is an acronym Consensus mechanism of the French and English terms “Admission Temporaire/Temporary Admission”), an international Customs document used in 87 countries and territories that mainly permits the duty free temporary admission of most goods for up to one year normally. The ATA Carnet eliminates the need for a Customs declaration at border points and the lodging of a guarantee, bond or cash deposit in the country of temporary importation. It can be used for a trip covering more than one country and include numerous exits and re-entries in the country of origin during the period Mechanism for deciding what blocks are accepted. of validity of the document.

Each country in the system has a single guaranteeing body approved by national Customs authorities and the for ATA Carnets began several years is currently implementing a system International Chamber of Commerce ago between Customs administrations which replicates the paper ATA Carnet World Chambers Federation (ICC WCF). and ICC WCF, which manages the ATA procedures using a digital solution A national guaranteeing association Carnet system. The eATA project aims to called “Mercury II.” The solution, (NGA) is entitled to issue Carnets and digitize the temporary admission process based on “traditional” technology to authorize local chambers on the by providing worldwide electronic with a centralized database, is hosted national territory to deliver them on its data exchange between countries or by ICC in Paris, , and will be behalf. Processing fees apply as well as a Customs unions (ATA partners) using mainly used to register the Carnets and surety bond which will be returned if the the document. their movements as they are certified Carnet has been used correctly. by Customs offices along the goods’ The EU is supporting the project as part journey. In the second half of 2018, ICC Discussions about the possibility of of DG TAXUD’s electronic Customs will launch a pilot to test the application. moving towards a paperless environment multiannual strategic plan. ICC WCF

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Figure 2: Notarisation of carnets and transaction

New eATA carnet Transaction (import, export)

eATA 1 Carnet 2 Transaction notarisation notarisation

Private blockchain

Blockchain Anchoring Steps of the digital process can be add-on described as follows: Public blockchain 1) Using the “National Issuing and Claims Systems” (NICS) or Mercury II, a person orders a Carnet online, or, if a Carnet is already held, Figure 3: Blockchain basis: Cryptographic hash additional certificates if more trips are planned than originally anticipated. A cryptographic hash is code assigned to data by algorithm: “Data” Algorithm “e1b367a702680e20e8894a00c2d32” 2) The “holder” then downloads the Carnet into a safe wallet, stored in a smartphone, and can share it with his/her representative. The Carnet Impossible to recover the input data is encrypted and exchanged over secured communication channels. Different data have different hashes...... which can be 3) When crossing a border, the holder, used to detect or his/her representative, unlocks “Data1” “8a33f09340f7d52” changes to data the wallet and shows the QRcode to “Data2” “ab2f490bd3849e” a Customs officer.

4) The Customs officer scans the QRcode, examines the general list of goods covered by the Carnet, an application based on the blockchain platform combined with periodic and then reports whether the goods could interface with ICC’s Mercury II anchoring on a through an anchoring entered or exited the country under solution in order to add an extra layer of mechanism public blockchain, effectively a temporary importation, transit or trust to the process. achieving independent notarization temporary exportation procedure. as shown in Figure 2. The distinction Key requirements that would justify the between public and private blockchain 5) The transaction is recorded and the use of blockchain technology are met: is related to who is allowed to participate holder or the representative receives multiple stakeholders need to have access in the network, execute the “consensus a confirmation message through his/ to the same data, and there is mistrust protocol” and maintain the shared ledger. her smartphone. between those stakeholders in using each other’s data. Hash functions are a fundamental part of 6) Customs can issue claims through blockchain technology. In a blockchain, the system and manage them with The PoC project reached a successful documents or data are hashed, which the NGAs. conclusion in mid-2018, and has means that their content is summarized demonstrated that distributed ledger and represented as a unique 64-character In June 2017, a partnership between DG technology (the Ethereum test network string. The hashed value of the previous TAXUD and ICC WCF was established in this case) could be used to ensure the block is used to calculate the hashed whereby DG TAXUD launched a proof- integrity and traceability of Carnets and value of the current block, thus creating of-concept (PoC) project to see whether transactions on a private blockchain a link between the blocks.

58 WCO news N° 87 October 2018

Figure 4: Automation of consistency checks The combination of private and public Transaction (import, export) blockchains for the notarization process allows the benefit of a private blockchain (in particular to lower the costs of writing information on the blockchain) to be 1 2 maximized whilst benefitting from the Transaction Alert in case of notarisation potential claim / strength of a public blockchain (such as fraud Bitcoin), which has a very large number of nodes.

Anchoring

Under the PoC project, a hash of the (such as Bitcoin), which has a very large actual data related to the Carnet or a number of nodes. Writing on the public transaction is stored on the blockchain, blockchain has a cost – as a result, during guaranteeing the true version of a the PoC project only periodic anchoring document at any given time and on the public blockchain of the latest providing a digital fingerprint of a hash stored on the private blockchain document or transaction. Obtained by took place (only hash of information is an algorithm which prevents reverse stored on the public blockchain, hence engineering of the original document there are no data confidentiality issues). from the fingerprint, the hash ensures This was a win-win scenario with an that even a single comma change in optimal approach that benefitted from a document would result in a totally harnessing the public blockchain at a different fingerprint. reasonable cost.

The blockchain test network that Although DG TAXUD does not intend was built as part of the PoC project to make the PoC project operational, stores only the hash of the Carnets or lessons learned during the project transactions plus a few metadata, thus will benefit the stakeholders who are allowing automated consistency checks involved in the digitization of the ATA of ATA Carnet movements to be carried Carnet procedure. Several Customs out (as shown in Figure 4). Ethereum authorities interested in the digitization smart contract blockchain technology of the ATA Carnet procedure expressed was used to make such checks possible a lack of trust in a solution such as in this business context Mercury during meetings of the WCO eATA Steering Committee and the The combination of private and public project shows that the use of blockchain blockchains for the notarization process technology could offer a potential allows the benefit of a private blockchain solution, including the strengthening of (in particular to lower the costs of stakeholders’ trust in the system. writing information on the blockchain) to be maximized whilst benefitting More information from the strength of a public blockchain [email protected]

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CADENA, a blockchain enabled solution for © Bryson Hammer / Unsplash the implementation of Mutual Recognition Arrangements/Agreements

By Sandra Corcuera Santamaria, INTER-AMERICAN DEVELOPMENT BANK

The Inter-American Development Bank (IADB) has been countries are also actively engaged in AEO regional initiatives (the East supporting the development of a blockchain solution African Community, for example) and/ or negotiating multilateral MRAs (the to enable automated, secure and efficient information Greater Tumen Initiative, in Northeast Asia). sharing on Authorized Economic Operators (AEOs) Challenges among the Customs administrations of Mexico, Peru The deployment of AEO programmes and the propagation of MRAs around and Costa Rica to ensure the efficient implementation of the world are positive developments as they contribute to securing the Mutual Recognition Arrangements/Agreements (MRAs). international trade supply chain, whilst enhancing trade facilitation. However, can MRAs be effectively implemented Almost 80 countries have developed Alliance trade bloc, the most recent and offer traders the benefits they were AEO programmes worldwide, and some initiative in Latin promised? of them have signed or are in the process America. of signing MRAs. To date, a record In theory, when Customs number of 60 MRAs have been signed In the Latin American and Caribbean administrations sign an MRA, AEO and up to 40 more are currently being region, three more multilateral MRAs certified companies receive benefits in negotiated. are being negotiated among Central all the countries which are parties to American countries (Costa Rica, El the MRA. These benefits are listed in Besides “traditional” bilateral Salvador, Guatemala and Panama, the MRA and can take the form of a agreements, multilateral or plurilateral with as an observer), the reduction in physical and documentary agreements have also emerged. The most countries (, Customs inspections as the Customs recent MRA of this nature was concluded Colombia, and Peru), and risk management system of a Customs in 2018 by the Customs administrations the countries of the trade administration recognizes the shipment of Colombia, Chile, Mexico and Peru, bloc (Argentina, Brazil, Paraguay and as AEO certified from another Customs the four countries which form the Pacific Uruguay). In other regions of the world, administration or that it should be given

60 WCO news N° 87 October 2018

CADENA enables Customs administrations, which engage in an MRA, to share a single view of the status of an AEO certificate in real time while ensuring that the highest standards of security, traceability, and confidentiality are applied to the data. It also enables the private sector to access information about its certificate, increasing trust and transparency and, ultimately, the active participation of the private sector.

priority treatment if it is selected for This raises several problems: the development. In this case, this inspection. These measures, which are situation poses a security risk since not exhaustive, have a positive impact • The current method to exchange the firm has ceased to be reliable on commercial profits as they reduce data entails risks. When you send and trusted, but will still be treated the time and costs needed to complete an email, the message leaves your as if it was. This may have a negative a transaction. email provider’s server and effect on trust and security in the across the Internet. You have no idea supply chain, which is shared by the In practice, however, implementing how many servers the message will countries participating in the MRA. such measures in a secure manner is pass through between the moment still problematic – a situation which you send it and the moment the Blockchain as a solution limits the capacity to provide benefits recipient actually receives it, and To solve these issues and set up a in a secure and timely manner. The you don’t know who has access to secure data exchange mechanism, AEO MRAs are premised on the principle of those servers. While you can encrypt programme officers and information seamless exchange of information on your email server connection and technology (IT) specialists from Mexico, AEO certified companies among the use encryption protocols to send Peru and Costa Rica Customs have countries participating in the MRA, in it, it’s not always possible to ensure been working together with Microsoft order for them to be able to identify each that the recipient has the same set of and the IADB to develop the business other’s AEO certified companies and security practices in place. In other functionalities and the technological extend mutually agreed benefits. words, you might have securely sent architecture of an application called your documents, but that does not CADENA, which is based on blockchain To inform each other, designated mean they were delivered securely. technology. Currently, the three Customs Customs officers in each administration The AEO programme is all about the administrations are in the validation send, by email, an excel file containing the security of the supply chain. Records phase and the solution is being tested data elements that the countries agreed and data related to these companies before going into production. to exchange on their respective AEOs. should be exchanged risk free. Customs administrations engaged in an A blockchain solution offers concrete MRA also determine the period during • As data is not exchanged in real time, advantages for the management of which data should be exchanged, which but monthly or periodically, benefits the AEO certification process and the is usually monthly. These data elements cannot be granted immediately. implementation of MRAs, making it are incorporated by each of the officers Firms can lose profits during a possible to record and share transactions, into their risk management system so monthly cycle depending on when according to an agreed protocol among a that import operations associated with a they are granted AEO certification group of parties, with each transaction foreign AEO from a country with which and when the exchange of data being secured and protected by an an MRA has been signed are graded is conducted between Customs immutable audit trail. more trustworthy in the Customs risk administrations participating in the management system. MRA. CADENA enables Customs administrations, which engage in an There are, at this time, very few • The ability to react to a suspension, MRA, to share a single view of the status mechanisms enabling the conduct of cancellation or withdrawal of an of an AEO certificate in real time while an automated, secure and real time AEO status is reduced for the same ensuring that the highest standards of exchange of data on AEO certificates. reason given above. There could be a security, traceability, and confidentiality Although some initiatives have been delay between the actual cancellation are applied to the data. CADENA also undertaken to automate the exchange of of the AEO certificate and the enables the private sector to access AEO master data, many countries still actual communication advising the information about its certificate, use emails. other Customs administration of increasing trust and transparency and,

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ultimately, the active participation of • CADENA guarantees traders that Among other things, it could be the private sector. Further, it facilitates they will be able to enjoy MRA expanded to automate and manage automated validation of AEOs under an benefits from the moment they the whole AEO certification process, MRA, using smart contracts. receive their certification. promoting both efficiency and auditing traceability. It could also be integrated The key imperative in an MRA process • CADENA promotes transparency by with other Customs systems, such as is to assign a unique number to each allowing firms to access information risk management applications, thereby AEO that can be used across the supply related to their certificate, as well alleviating a range of inefficiencies while chain and which is recognized by all as the list of other AEO certified spurring change and modernization the MRA’s partners. CADENA makes companies in the countries which within Customs. use of WCO standards and the globally are part of the MRA. unique Trader Identification Number CADENA can be scaled for other (TIN) format, and its underlying AEO • CADENA strengthens the overall countries to join and can also master data which provides a complete security of supply chains by ensuring interoperate with other blockchains and set of information relating to the AEO. that information on suspensions and entities, making it possible to leverage cancellations executed by a Customs the single version of truth about AEO Preliminary results obtained during administration and withdrawals by certified operators for insurance, tax and the validation phase point to important companies is registered and shared trade finance purposes, for example. benefits for Customs administrations, in real time. which will translate into advantages These are just some of the new and and/or benefits for the private sector as The road ahead exciting additional functionalities that follows: CADENA was developed thanks to the could be added to the solution. Based on innovative drive of the Mexico, Peru and the blockchain technology, CADENA • CADENA brings efficiency and Costa Rica Customs administrations, aligns smartly with the principles of the C

effectiveness to MRA management. supported by the IADB and Microsoft. AEO programme. Both were brought to M Customs administrations now have It illustrates how a transformative life as innovations in the 21st century, Customs Excise duties J ExportExport ControlControl Douane Accises a digitalized, automated, secured, technology can help to improve Customs and are addressing the much-needed CM reliable mechanism for sharing and border management. component of trust in the international information on AEO certificates. trade supply chain. MJ Although it addresses a specific challenge, CJ RODASCEetrouvez lesoffers formations 3 types ofcontinues continuous ODASCE training : :

• CADENA guarantees the integrity namely MRA implementation, CADENA More information CMJ of the data and enables access to demonstrated during the proof of concept [email protected] N the data to be managed by granting phase that is could have many other different roles and permissions to functionalities which are now being users. considered for further development.

IADB and the AEO programme À la carte #compétencecompetency In the last decade, the Inter-American Development Bank has supported Latin American and Caribbean (LAC) countries in the design and implementation of AEO programmes and has been facilitating the negotiations of a significant Intra-entreprisesIntra-Companies Inter-CompaniesInterentreprises CertifyingParcours Course number of MRAs in the region.

In addition, the IADB has conducted research studies on the impact of the AEO programme on trade and exports, and has also developed virtual training products, including a “Massive Open Online Course (MOOC)” to strengthen knowledge on AEOs among Customs officials and other government border agencies as well as among the firms and companies interested in being certified as an AEO. L’Expert des By supporting the development of CADENA and actively promoting the use of Is your company an innovative technology to manage AEO programmes, the IADB’s AEO related entreprises qui assistance reaches a new dimension. ready to cross passent les 62 www.odasce.asso.frwww.odasce.asso.fr Insert ODASCE_WCO_octobre 2018.pdf 2 02/10/2018 16:11:20

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www.odasce.asso.frwww.odasce.asso.fr FOCUS © Christian Fregnan / Unsplash

TradeLens uses blockchain to help Customs authorities facilitate trade and increase compliance

By Stewart Jeacocke, GLOBAL CUSTOMS EXPERT, IBM, and Norbert Kouwenhoven, TRADELENS AUTHORITIES LEAD, IBM “Did you pack this bag yourself?” It’s a question many of us are used to being asked when checking in at an airport. For a shipping container, the situation is more complex. Most organizations never communicate directly with the party that stuffed the container. Underpinned by blockchain technology, the TradeLens platform lays the foundation for global, digital supply chains. It connects all parties in the supply chain to drive true information sharing, foster collaboration and trust, and spur industry- wide innovation. Governments who embrace the opportunities offered by TradeLens place themselves in an ideal position to contribute positively towards a new era of global trade that is both frictionless and compliant.

64 WCO news N° 87 October 2018

TradeLens members can connect to the platform using standard approaches such as web application programming interfaces (APIs). Or, they can use the platform’s out-of-the-box user interfaces. A Customs authority can establish a connection in a few days,

Data inconsistencies are rife in with a small team, rather technology used by TradeLens international trade than requiring its staff to shares some characteristics with the A buyer cannot be certain what is in anonymous blockchain that underpins the container until it arrives and is first invest in becoming Bitcoin. However, in many important unpacked. An ocean carrier never sees blockchain experts. ways, it is different. Six features of the the contents of a container and relies on blockchain used by TradeLens are documentation provided by the shipper particularly crucial to its success: or forwarder. Customs authorities can a significant step in its evolution. It struggle to determine the buyer for has already secured commitments to • Shared replicated ledger: Each certain imports. A study found that a track approximately 20% of global organization that participates single shipment of avocados from Kenya ocean container traffic. With more directly in the blockchain network to the Netherlands involved 30 different than 90 organizations having agreed operates a blockchain node. These organizations, over 100 people, and to participate on the platform, nodes each maintain a copy of the 200 individual information exchanges. including three shipping lines – Pacific blockchain. When data is added to Each information exchange risks the International Lines (PIL), Hamburg Süd the blockchain each node’s copy is introduction of data inconsistencies. and Maersk Line – and the Customs automatically updated. TradeLens reduces these uncertainties authorities in Australia, the Netherlands, and inconsistencies by providing Peru, and Singapore, • Immutability: The blockchain authorized parties with access to Tradelens’ data is growing at a rate of network is append-only. Once data is the original data; in this case, the close to one million events per day. published to the blockchain it cannot actual information provided by the be changed. If there was an error in organization that stuffed the container A global data pipeline the data, then a new version must be in Kenya. TradeLens realizes the ‘data pipeline’ added, with both old and new visible concept developed by respected career in the blockchain. One million shipping events are Customs officers, Frank Heijmann and added to TradeLens every day David Hesketh, and others, which • Permissioned: The parties can TradeLens is a collaboration between was explored in various European be identified and only the parties Maersk and IBM. It is a global, Union (EU) research projects, such participating in a specific shipment blockchain powered platform that as ITaide, Cassandra, and Integrity. can view, submit or approve related follows the flow of cargo from source to Collaboration on TradeLens started data. This is very different from the destination, and connects the various in June 2016 and was known as blockchain network that lies at the parties involved in a shipment. It is Global Trade Digitization (GTD). The heart of Bitcoin where all parties are also an open, neutral platform that platform was used by CORE, an EU completely anonymous. enables all organizations involved in an funded security project that included international shipment to simply and the Customs Administration of the • Channels: Divides the blockchain securely exchange shipment events and Netherlands, US Customs and Border network into separate sub-networks. documents in real time, increasing the Protection, and the US Department Data in any given channel is only visibility that shippers have about the of Homeland Security’s Science and distributed to nodes that are part of status, location, and contents of their Technology Directorate. that channel. consignment. In addition, platform participants can create additional apps Blockchain changes the game • Selective endorsement: The that leverage the platform’s ecosystem Blockchain enables participants to reason that the TradeLens network and make them available through the trust TradeLens’ data, safe in the will never suffer from the power TradeLens marketplace. knowledge that it is impossible for any consumption requirements that single organization or individual to plague Bitcoin. Bitcoin must verify This year, a ‘limited availability’ alter the information on the platform’s transactions whilst maintaining release of the platform was launched; blockchain network. The blockchain anonymity and uses a proof-of-work

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mechanism to do this. It is this Truth is upstream at the source A global network of local proof-of-work mechanism that is Today, the primary player in most communities the source of Bitcoin’s huge power Customs procedures is the importer. In many countries, initiatives such as requirements. TradeLens members They, or their agent, are responsible national electronic Single Windows are not anonymous, so a much for filing a Customs declaration. They and port community systems have more efficient selective endorsement use the information provided by the been successful in improving the approach can be used to verify exporter to do this, but generally have efficiency and coordination of border transactions. no opportunity to verify the physical processes. TradeLens can integrate contents of a shipment before making with and complement these initiatives, • Smart contracts: Pieces of software the declaration. The party best placed providing access to its global network code embedded in the blockchain to provide accurate information about of members. network. They encode the business a shipment is the exporter. After all, it rules for a particular transaction and is generally the exporter who “packed TradeLens can also accelerate the can be used to implement automated the bag.” emerging trend of connecting Single processes that span national and Windows or port community systems organizational boundaries. Platforms like TradeLens allow Customs in order to create regional networks, by and other government agencies to enabling these different communities to The benefits of platforms like TradeLens piggyback their supervision processes on share data on a global scale. are wide-ranging. top of existing commercial information exchanges. As soon as a container is Towards paperless trade Private sector visibility stuffed in the exporting country, the Since the 1970s, people have been In many countries, it is still difficult for importing country’s Customs agency boldly predicting the paperless office. a trader to find a consolidated cross- could pull the purchase order and Forty years on, paper documents agency view of the release status of a packing list from TradeLens and use remain prevalent in international trade. shipment. By publishing key events and them to perform a risk assessment on Bills of lading, certificates of origin, information to TradeLens, Customs the shipment. Access to earlier, more phytosanitary certificates… the list goes and other government agencies can complete, immutable data improves on. Blockchain platforms like TradeLens improve the visibility that traders have the effectiveness of targeting processes, provide the ideal mechanism for about the status of their shipments. facilitating legitimate trade, increasing digitizing these documents. Channels, This helps the private sector to better compliance and improving Customs’ permissions, and encryption ensure that plan its activities, saving both time and efficiency. even the most sensitive information can money. be kept safe from prying eyes.

Smart contracts allow the creation of Tradelens Blockchain Business Network automated processes that cross national A secure source of truth and organizational boundaries. For example, a paperless end-to-end process for phytosanitary certificates; from issuance in the exporting country through to verification in the importing Packing list Purchase country. In such a process, the approval and other order of the certificate in the exporting documents and other country is visible in real time in the documents importing country, and the blockchain technology ensures that no one can alter Port National Port National the certificate. community single community single system window system window

Country of export Country of import

Seller Agents Buyer Agents and and brokers brokers

66 WCO news N° 87 October 2018

Platforms simplify blockchain To further simplify adoption, TradeLens governments who embrace the adoption is committed to the promotion of opportunities that the platform offers. Nodes, channels, smart contracts, industry standards and interoperability Together, we are shaping its future and consensus… Implementing your of platforms. It is continuing to align ushering in a new era of global trade that first blockchain solution can require with relevant standards bodies such is both frictionless and compliant. the learning of a whole host of new as UN/CEFACT as well as exploring terminology and technology. It doesn’t blockchain specific interoperability More information have to be like that. Platforms like mechanisms. [email protected] TradeLens package the blockchain [email protected] technology and benefits into an easily Customs can realize immediate www.tradelens.com consumable form. benefits By joining TradeLens, Customs TradeLens members can connect to the authorities and other government platform using standard approaches agencies can immediately access more such as web application programming timely, accurate and verifiable data, interfaces (APIs). Or, they can use the and use it to improve their targeting platform’s out-of-the-box user interfaces. and selection processes. This can A Customs authority can establish a facilitate legitimate trade and increase connection in a few days, with a small compliance. team, rather than requiring its staff to first invest in becoming blockchain The team behind TradeLens looks experts. forward to continuing to work with

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Going beyond the national

© Mathew Schwart / Unsplash Single Window

By Singapore Customs The Monetary Authority of Singapore signed a Memorandum of Understanding with its Hong Kong counterpart in November 2017 to jointly develop a cross-border distributed ledger technology (DLT) based infrastructure that will link up digital trade platforms and the growing number of trade-related DLT platforms and communities around the world. In this article, Singapore Customs presents this new initiative called the ‘Global Trade Connectivity Network,’ which is expected to be operational in 2019 as well as the new trade information management ecosystem called the ‘Networked Trade Platform,’ which was officially launched in September 2018, and explains how the two systems play complementary roles in stitching up the global trade ecosystem, empowered by both DLT and non-DLT based technologies.

68 WCO news N° 87 October 2018

Figure 1: NTP's inclusive trade ecosystem

Connect to the wider trade ecosystem via the NTP

Foreign Importers and Exporters Singapore Importers and Government Exporters Services

In December 2017, Singapore’s Logistics Service Networked Trade Platform (NTP) Providers (including Banks became operational. A new one- freight forwarders and stop trade information management warehouse operators) NTP platform, the NTP will connect digital Insurance islands across the entire trade ecosystem Developers Providers from traders’ enterprise resource planning systems and other proprietary systems to freight forwarders and freight Singapore-based Overseas Governments Platform Operators (e.g. eCO exchange) management systems, to last mile delivery and tracking services. Overseas Business The new Platform will incorporate Partners services currently provided through two systems: TradeNet®, Singapore’s National Single Window (NSW) that One City.” Today, the concept of a NSW development category on the NTP, caters for Business-to-Government is well understood. In 2007, another and in 2017 it won the World Summit (B2G) and Government-to-Government chapter was written when TradeXchange Information Society (WSIS) Prize in (G2G) connectivity, and TradeXchange®, was launched as part of an effort to unify the e-business category. The latter a 10-year old information technology the B2B trade ecosystem. recognizes outstanding digital projects (IT) platform that enables the exchange worldwide, which foster socio-economic of both Business-to-Business (B2B) and Fast forward to 2018 and the NTP. development. B2G information. It will enable the exchange of digital from source, across various During the intervening decades, the Services from TradeXchange have B2B and B2G transactions along the concept of the Single Window has also since been migrated to the NTP. The entire lifecycle of trade: ranging from evolved – from the Customs automation new NTP introduced a suite of user purchase orders and invoices, permits era, to trade information exchanges, friendly features and value-added and shipping instructions to trade limited Single Windows connecting services to help the trade and logistics finance applications, payments and traders with a single regulator (e.g. communities. Since then, the user base reconciliation. Today, a single trade Customs, port, etc.), to nation-wide of the NTP has more than doubled can involve over 25 parties, generating NSWs that allow all parties to submit compared to TradeXchange. In June 30-40 documents, and about 60-70% of standardized information only once to 2018, Singapore Customs began the the information is manually re-entered fulfil all regulatory requirements1 progressive migration of B2G trade at least once. services, currently available through Trade is to a large extent today cross- TradeNet, onto the NTP. The potential value of stitching disparate border. Digital connectivity for the NTP digital islands together is immense. In must, therefore, go beyond our little red “If it ain’t broke, why fix it?” addition to productivity, efficiency and dot and interoperate with other trade TradeNet is almost 30 years old. accuracy gains, there is a multitude of communities and platforms, regardless Launched in 1989, when the Internet opportunities for innovation as data of geography or technology. was still the domain of academics and becomes connected. researchers, it was well ahead of its Singapore is not the only country time and its successful implementation These bold steps have not gone embarking on a trade digitalization captured the imagination of many – unnoticed – in 2016, International Data journey. All around the world, there most aptly in the 1990 Harvard Business Corporation conferred the Smart City have been hives of activity around trade Review case study “TradeNet: A Tale of Asia/Pacific Award in the economic digitalization fuelled by a combination of

1 United Nations Economic Commission for Europe (UNECE) Trade Facilitation Implementation Guide, Single Window Evolution. [Accessed online on 19 Aug 2018, http://tfig.unece.org/contents/single-window-evolution.htm].

69 FOCUS

The GTCN marks the first attempt to integrate digital platforms starting with Singapore and Hong Kong, and aims to address and provide digital solutions to challenges prevalent in pressing business needs and pain points, of allowing mutually mistrusting entities combined with new possibilities and international trade, where to exchange financial value and interact disruptions from emerging technologies. differing trade regulations without relying on a trusted third party.”2 There is now a growing willingness and documentation among businesses across the globe to standards predominate. In the world of cross-border trade, where digitalize, and like-minded governments different regulators such as Customs and Customs authorities to ensure open authorities, central banks and monetary and around the world. With authorities, food and health regulators, this, Singapore is now taking another and security agencies, interact with a bold leap into the digital trade world. myriad of business (logistics, ocean and product (MVP) is funded by monetary air freight, warehousing and trucking, From island to island, locally and authorities. banks, and traders of every imaginable across borders: the NTP and the form), one can easily imagine the GTCN The GTCN marks the first attempt to potential of the technology. In November 2017, one month before the integrate digital platforms starting NTP became operational, the Monetary with Singapore and Hong Kong, and DLT is useful where there is no Authority of Singapore (MAS) signed a aims to address and provide digital central authority and the community Memorandum of Understanding with solutions to challenges prevalent in self-orchestrates and self-organizes. its Hong Kong counterpart to jointly international trade, where differing Information is only written into the develop a cross-border distributed trade regulations and documentation distributed ledger, timestamped and ledger technology (DLT) based utility standards predominate. In addition, the digitally signed, after consensus has been infrastructure that will link up digital GTCN would help lay the foundation for reached between the parties involved. trade platforms and the growing number a regional digitalized trade and supply Any change thereafter is a new entry to of trade-related DLT platforms and chain platform in Asia. The end outcome the ledger. This feature of DLT provides communities around the world. The is to enhance supply chain transparency, for protected data storage and provides seeds of what was to become the Global integrity and security. a sense of transparency, enforcing Trade Connectivity Network (GTCN) accountability where there is no central were sown, and the GTCN is expected The power of the whole is always greater authority. to be operational in 2019. than the sum of its parts. Just as the benefits to the economy are far greater Kurt and Gervais list three conditions The GTCN is envisioned as an industry- than the sum of individual firms’ where DLT will make sense. First, where neutral, service-agnostic, cross-border bottom-line and top-line gains. The NTP there are multiple mistrusting entities, utility infrastructure that does not aim and the GTCN play complementary roles and there is no agreement on who is an to control or dominate partner networks. to stitch up the global trade ecosystem, online trusted third party. Second, there For a start, it will provide a common empowered by both DLT and non-DLT are multiple writers of data and there is view for trade finance applications based technologies. The GTCN will data to be stored. Finally, the multiple between Singapore and Hong Kong, technically enable different stakeholders mistrusting entities must want to empowering participating banks to to connect through DLT platforms and interact and change the state of a system. share immutable and auditable ledger automatically exchange information across the border, while maintaining between parties, according to specific Linking up digital trade ecosystems, like data privacy and confidentiality through protocols, as shown in Figure 2. any collaboration, can only succeed when a distributed network. This allows the the diverse needs, interests and concerns various stakeholders to retain control As Karl Wust and Arthur Gervais aptly of all stakeholders are satisfactorily of their own commercial and financial sum it up, “Blockchain is being praised as addressed. Because needs and interests destinies. However, the GTCN will a technological innovation, which allows are often different and evolve differently be larger than Singapore-Hong Kong (us) to revolutionize how society for stakeholders over time, all parties find and will go beyond trade finance, even and interacts. This reputation is, in it challenging to entrust the control of any though the initial minimum viable particular, attributable to its properties shared platform to any single party.

2 Wust, Karl, Gervais, Arthur, Do you need a Blockchain? International Association of Cryptologic Research (IACR) ePrint Archive, 2017.

70 WCO news N° 87 October 2018

Figure 2: Overview of GTCN and its participants

GTCN vision

Commercial Validation Track and Others applications services trace

Jurisdiction trade cross-border digital trade connectivity, platform there is still a critical role for regulators Other to play, by, for example, providing data commercial Ports governance and standardization to platforms ensure interoperability. Perhaps it is Govt agencies Corporates more important than ever before for Other Trade Singapore’s Functionalities Govt agencies regulators to do so. platforms GTCN NTP

Corporates Functionalities With the technology capabilities in place Freight with the advent of DLT, it is perhaps Banks Forwarders Other timely that regulators get together, commercial Carriers Insurers step up and lead efforts to harness and blockchains e.g. Jurisdiction harvest the potential that this new diamond, dairy trade blockchains technology offers, as well as lead efforts platform to digitally connect trade end-to-end, across industries and across borders.

DLT emerges as the technology with of a shared platform without a single, More information features that are a good fit for the GTCN. central authority. https://www.ntp.gov.sg The ‘connect once, connect to all’ model [email protected] of the GTCN allows all participants to Conclusion quickly scale their own connectivity The GTCN’s vision to connect different to a wide spectrum of national Single trade platforms without intervening in Windows operated by governments and each platform's rules and processes is digital platforms in the B2B space, which ambitious, but probably not new3. While cater to a wide spectrum of business and the GTCN’s success is not dependent transaction needs. on DLT per se, the characteristics of DLT have removed some long standing Here, the need to manage interests stumbling blocks when a large number not only traverses countries, but also of parties, often unknown to each other, various industries and companies, with come together to interact and transact. each of these interests intersecting and interacting with their own countries’ One critical success factor remains – regulators and authorities. willing actors. As Adam Green writing for the Financial Times notes, while Taken together, the distributed authority the technology might be tamper- and immutable characteristics of DLT proof and collaboration-friendly, “the has made it possible for the GTCN to same is not always true of its users.”4 address not just the functional needs Despite uncertainties with DLT, such as of integrating digital trade across the scalability, many acknowledge that, in trade ecosystem, across borders, but also cross-border trade, at least, participants the underlying challenges of marrying would benefit from DLT. various stakeholders’ interests and associated trade-offs that would have to Despite the vast potential of DLT be agreed upon before the possibilities to address the stumbling blocks of

3 Trade Point Portals were envisioned as gateways to global electronic networks with National Trade Points interconnected in a worldwide electronic net- work. Source: United Nations Economic Commission for Europe, Trade Facilitation Guide, ‘Single Window Evolution’. [accessed online on 19 Aug 2018, http://tfig.unece.org/contents/single-window-evolution.htm]. 4 Green, Adam, Will blockchain accelerate trade flows? Financial Times, 11 Nov 2017. [Accessed online at https://www.ft.com/content/a36399fa-a927-11e7- ab66-21cc87a2edde ].

71 POINT OF VIEW

Why governments and Customs continue to need their own classification system for goods

By Gael Grooby, DEPUTY DIRECTOR, TARIFF AND TRADE AFFAIRS codes. The multitude of systems are range of policies. Regardless of whether DIRECTORATE, WCO testimony to the usefulness and ubiquity the policy relates to revenue, trade, THE WCO’S HARMONIZED System, or HS, of classification. security, public health, environment, is a vital element of Customs. But industry or any other aspect of classification systems are common, Some of these systems are regulatory government, if the import or export of so what makes a specialized Customs in nature: they exist in order to apply goods is part of it, then the HS comes classification system so important that conditions. Some are commercial: they into play in its implementation. From Customs administrations continue to exist to facilitate marketing, inventory duties to support revenue or give effect to put much work and time into having or other aspects of commerce. Others trade agreements through to identifying their own classification system? The HS are statistical: their entire purpose is to imports and exports of restricted or does not just classify goods based on provide data for analysis. With so many monitored goods, the HS has a direct what they are; it classifies goods to meet systems, what makes the HS special for and intrinsic role in many governmental the needs of governments and Customs Customs administrations? The answer programmes. alike. is clear: it is created by, and exists for, Customs. It is also the instrument for most There are a multitude of classification trade agreements, ensuring a common systems in use: SITC, CPC, CPA, Purpose and evolution understanding of goods among the NAPCS, NICE, GPC, GHS, and ATC. The purpose of the HS is to be a parties to an agreement. Through its Between international, national and practical tool for the implementation provision of data for statistical analysis, private classification systems, any of governmental policy. While it has it has an indirect, but essential role acronym you can think of is likely to been increasingly used by industry and in many more policy areas. Some HS be a classification system for goods academia due to its role in collecting updates are specifically made to assist somewhere. Any particular good may trade data, it is built and maintained industry, but again this is in line with be classified in multiple systems, and so that governments can know what is the role of governments in developing will have numerous codes to represent crossing borders. That information is policy for economic development and this from part numbers to disposal used to implement an incredibly wide industry assistance. Its priority is policy, © Ricardo Gome Angel / Unsplash

72 WCO news N° 87 October 2018

not commerce. In particular, it enables level of detail of many commercial trade agreements and other measures Customs administrations to carry out classifications would be beyond the affected and how many reporting systems their functions. If they have to monitor, ability of people outside a particular need to be changed, assessing the impact report, regulate, stop, inspect or collect industry to competently and consistently and getting ready to implement it may revenue on any subset of goods, the HS, identify and use. So, in deciding whether take considerable time. Therefore, it is and the domestic tariff subheading added to make a classification because of its important that sufficient notice be given on to it, are used. Customs controls the usefulness to industry, or indeed in to those that may be affected. update and evolution of the HS so that it making any classification, a Customs continues to serve this purpose. nomenclature takes into consideration From a government and administration the capability of administrations to viewpoint, this is even more important. Scope apply or enforce a classification. In any country, creating legislative Some classification systems do not amendments is generally a long and need to cover all goods, such as The other aspect in regard to the scope complicated process. This is not those targeting a specific sector (e.g., is the handling of residual provisions. something done, or taken, lightly. regulatory classification systems for In any classification system, there Even with a two year lead cycle from chemicals or pharmaceuticals), and will be the largely invisible goods, confirmation of HS changes to the others are only interested in goods with i.e. goods classified as ‘other’ or ‘not required implementation date, some certain attributes (e.g., dangerous goods elsewhere specified or included.’ The countries struggle to implement on time. or parts). Moreover, some classification number, location and wording of such Another factor is the body of case law systems are linked to another system; provisions are important in determining that generally evolves in each jurisdiction being only for goods using that scheme, if regulations will be applied to all applying the HS. So, it is also important and are not universal, such as the Global appropriate products. For example, that there is as much consistency as Product Classification system (GPC) for the requirements for the import or possible between new provisions and the types of products that are assigned export of non-specified vessels, medical existing provisions in how they are Global Product Identifiers (GTIN). devices, live plants and meats for human worded and their underlying principles: consumption are significantly different. this enables established precedents and For Customs however, if a good arrives acquired knowledge to be used as a at a border as part of a legitimate trade A blanket residual 9999.99 style guide, ensuring correct implementation transaction, even if it is a brand new classification is not appropriate to a and reducing disputes. invention, never seen before, Customs regulatory classification system that must be able to classify it so that they covers such a broad range of goods. Robustness can apply proper legal treatment for Taking vessels, a single ‘other vessels not Commercial classification systems are the good, including, if required, the elsewhere specified or included’ is not generally only for the benefit of their collection of duty and indirect tax. For appropriate for a Customs nomenclature users. There is little incentive or benefit this reason, the HS is designed to cover as the import/export requirements to misclassifying or trying to construe all traded goods, including those not around passenger and cargo vessels, a classification to mean something yet known. In addition to how wide for example, are generally different other than intended. Unfortunately for the coverage is, the level of granularity from those for recreational vessels. A regulatory classification systems, they is also an important aspect related to Customs nomenclature needs far more are often linked to measures that users the purpose of the nomenclature. For time spent considering how to treat would prefer to avoid. For the HS, these a commercial nomenclature, it may unknown or low trade goods than most measures may include the application be very important to have different other nomenclatures. of duties, indirect taxes, dumping and classifications for “branded outerwear countervailing measures, import or aimed at the 18 to 24 year old female Stability and predictability export restrictions, and requirements market” and “branded outerwear aimed The HS is intended as a legal instrument for examinations or documents. While at the 55 to 64 year old female market,” to be implemented in the individual the majority of traders simply accept that but a Customs nomenclature is very legal systems of its Contracting Parties. this is part of the legal requirements, unlikely to need such a distinction. Laws are not optional. Therefore, it there is that minority who will work is vital that changes to the HS are the very hard to confound any intent not in Customs nomenclatures may include result of comprehensive consideration their favour. some divisions that are not of particular and are known well in advance. A new interest to Customs, but are wanted by HS edition is a major event for affected In other words, in a commercial industry or statisticians. However, the industries. Depending on the range of classification system, users are usually

73 POINT OF VIEW

quite happy to classify an apple as an regulatory systems is of great benefit: Given their different roles, apple, but in a regulatory classification particularly for manufacturers system, they may go to great lengths and traders who can increase their multiple classification to prove that an apple is classified as understanding of their products’ systems are necessary in the a pear. This means that a regulatory positioning in a system like the HS classification system like the HS, needs through their places in the more trade world. The HS is not to have classifications that can withstand familiar and industry-specific systems going to give you sufficient challenge and misuse, even when they work with. For a trade regulation translated into different languages and system like the HS, one of the largest information to do something under varied jurisdictions. benefits is increased knowledge of what like classifying your parts is important in the industry sectors As a result, the wording of regulatory and how the differences between goods inventory so that customers classification systems may seem somewhat are defined. As one of the goals of can locate the right part, strange in comparison to the more governments is to support trade, the natural language of some commercial goal of the HS, within the practical and and, as discussed earlier systems. Their structure can look too regulatory constraints on governments in this article, commercial complex, and the number of rules and administrations, is to assist industry and conditions can seem ridiculous. in both facilitation and statistical classification systems are Sometimes it can feel as if they are being information. not designed for regulatory deliberately difficult. The reality is that this formality, complexity and pedantic Growing through adversity purposes. In addition, usually wording is just an unfortunate outcome Having introduced a few of the issues and they are far too specific and of the litigious nature of classification. It problems that the HS faces, it is hoped is harder to argue in court that you were that readers will appreciate more why detailed for officers trying to legally correct in importing a ‘Panthera the HS is so remarkable, and why it is effect the timely facilitation of Tigris Altaica’ under a provision for an absolutely essential tool for Customs ‘Felis Catus’ than it is to argue that a administrations to do their work. And cargo. Siberian tiger is classified as a cat. yet within the congratulations, a note of caution needs to be sounded. Trade Working together is changing: distributed manufacturing Given their different roles, multiple and global value chains, integrated classification systems are necessary in products, faster innovation, and product the trade world. The HS is not going development time. In many ways trade to give you sufficient information to has outstripped the ability of regulatory do something like classifying your systems, including the HS, to keep up. parts inventory so that customers can locate the right part, and, as discussed Furthermore, as a system ages the earlier in this article, commercial attacks on its integrity generally grow in classification systems are not designed sophistication and variety. The number for regulatory purposes. In addition, of contradictory legal judgements on usually they are far too specific and the same provisions shows some of detailed for officers trying to effect the the ambiguities in the system that are timely facilitation of cargo. Generally, vulnerable to exploitation. So, just Customs administrations are not overly because it has been a good system for concerned if your shovels are round many years, this does not mean the HS is points or square points and they are immune from the need for improvement certainly not in a position, at the wharf and rejuvenation. Rather, the Customs side, to make a determination whether community simply needs to ensure that butter is ‘organic fair-trade.’ it keeps the purpose and strengths of the HS in focus during any review. However, having system administrators working together creates a better trade More information environment. Creating correlations [email protected] between major commercial and

74 WCO news N° 87 October 2018

Addressing challenges related to Customs controls in free zones

By Mariya Polner, What characterizes all these free special economic zones, which include SENIOR POLICY ADVISOR, and Satoko Kagawa, zones is the incentives they provide to multi-sectoral approaches to economic TECHNICAL OFFICER, COMPLIANCE AND economic operators. Free zones serve activities and focus on both domestic FACILITATION DIRECTORATE, WCO as “growth poles” for national and and foreign markets; and industrial regional economies by encouraging zones, which host specific economic TRADE HAS ALWAYS been one of the foreign direct investment (FDI), in activities (e.g., manifestations of freedom and power. particular by offering less regulation or textiles). The International Labour The idea of a “free port” can be traced and governmental “red tape.” Today, Organization (ILO)4 offers a more back to 167 BC, when the Roman Senate over 3,000 active free zones exist (in one detailed classification that, apart from made a decision to turn the then Roman form or another) in 135 countries2. They the aforementioned types, includes island Delos into a free port1. City-States have become a global phenomenon and free ports, enterprise zones, financial in the early Middle Ages, such as Venice, an integral part of the global supply and services zones and science zones. operated in a way that could nowadays value chains within a timespan of just be defined as free ports or free zones. The over 50 years. The same characteristics that make free cities of Hamburg and Bremen, being key zones attractive to legitimate business players in the in the Throughout these years, the concept also lure fraudsters and criminals. North and Baltic seas in the 13th century itself has evolved substantially as They can forge documents and use free were another manifestation of this well. The Organisation for Economic zones to repackage or relabel goods, phenomenon. However, it is commonly Co-operation and Development (OECD)3 or manufacture and assemble new agreed that the oldest free zone in its identifies the following four categories of goods in these zones. The transit and modern sense dates back to Shannon in free zones: free trade zones, focused at transshipment of goods pose the highest Ireland, where the first Free Trade Zone, pure re-export of traded goods; export risk because it is easier for criminals to the most commonly referred to type of processing zones, designed to export disguise the origin and final destination free zone, was established in 1959. goods with a significant value add; of goods. This masking can be done by

1 Zarmakoupi, Mantha (2013), “The City of Late Hellenistic Delos and the Integration of Economic Activities in the Domestic Sphere”, CHS Research Bul- letin 1, no. 2. 2 Gokhan Akinci and James Crittle (2008), “Special economic zones: performance, lessons learned, and implication for zone development”, Foreign Invest- ment Advisory Service (FIAS) occasional paper, Washington, DC: World Bank. 3 OECD (2009), “Free Zones: Benefits and Costs”, OECD Observer No. 275, November 2009. 4 International Labour Organization (2003), “Employment and social policy in respect of export processing zones (EPZs)”, GB 286/ESP/3, March 2003, Geneva.

75 POINT OF VIEW

switching bills of lading once goods of Customs procedures and controls in Customs control over goods introduced arrive in the free zone, switching free zones. and the economic operations carried containers and their contents, or out in the zones, vary considerably simply by shipping goods to a different Revised Kyoto Convention from one country to another. From this destination than the stated one. Such Overall, the RKC, which is a blueprint perspective, Standard 4 of Specific Annex practices pose risks in terms of revenue for modern Customs procedures, is D is important because it stipulates that collection and public health, as well as aimed at developing predictable and Customs “shall have the right to carry out security. transparent Customs procedures based checks at any time on the goods stored in on the use of information technologies, a free zone.” Its Recommended Practice So far, evidence has been anecdotal, and risk management, a coordinated stipulates Customs controls on free zone no systematic research was conducted up approach to controls along with goods and operations on the grounds of until this year, when the OECD and the other governmental agencies, and public morality, public security, public European Union Intellectual Property partnerships with trade, among other hygiene or health, and veterinary or Office (EUIPO) published a study things. The RKC consists of three phytosanitary considerations. If these entitled Trade in Counterfeit Goods and parts: the text, a General Annex controls are exercised by another agency Free Trade Zones: Evidence from Recent with ten Chapters, and ten Specific on behalf of Customs, they should not Trends 5, which examines the use of free Annexes. The entire General Annex is be neglected. trade zones in the counterfeit goods binding on Contracting Parties and no trade. In 2018, another organization, reservations are possible with respect Standard 4 is to be interpreted together the Intelligence Unit, issued to its implementation. Specific Annexes with Standard 3, which states that The Global Illicit Trade Environment of the RKC consist of Standards and “the Customs shall lay down the Index6, which also focuses on free zone Recommended Practices regarding arrangements for Customs control, governance. Supported by research and other aspects of Customs procedures. including appropriate requirements as case studies related to five major free Contracting Parties may accept one or regards the suitability, construction and zones, the Index, along with the OECD/ more of the Specific Annexes as well as layout of free zones.” The engagement EUIPO study, fuelled a much needed submit reservations to Recommended of Customs authorities from the early debate and brought the issue to the Practices to the WCO. stages in developing the free zone attention of policymakers across the concept is necessary to ensure safety and globe. Chapter 2 of Specific Annex D to the security within the zone. RKC lists 21 standards covering a wide Nowadays, the reputation of industries range of Customs procedures related to Customs controls in free zones are and countries depends on the way free zone operations. In this Chapter, more flexible than those exercised their free zones are managed. And not free zones are defined as ”a part of the under, for example, Customs only the reputation, but the security of territory of a Contracting Party where warehousing procedures, and are the whole supply chain is at stake. In any goods introduced are generally principally concerned with the relevant times of increasing transparency and regarded, insofar as import duties and documentation in order to check that civil responsibility, there is a critical taxes are concerned, as being outside persons introducing goods into the need to ensure that the operational the Customs territory.” For Customs zone keep proper accounts of the goods environment of free zones is safe and purposes, the free zone denomination (by using either special registers, secure, procedures are efficient and pertains exclusively to the status of relevant declarations or electronic transparent, operators are law abiding, goods, i.e. the tax or duty exemption. systems), so that the circulation of and commodities going through the free A wider implication of this definition goods in and outside the free zone zones are legal. is that all non-tariff Customs activities, can be controlled. Nevertheless, such as border control functions, Customs has the right to carry out Within the current framework, the including inspections and seizures, spot checks on goods at any time to adoption and implementation of the should be preserved and enforced. ensure that they are being accounted Specific Annex D, Chapter 2 of the However, different interpretations of for satisfactorily, are being subjected International Convention on the this definition exist as some countries to authorized operations only, and Simplification and Harmonization of interpret it as “being outside the that no unauthorized goods have been Customs Procedures (as amended), Customs territory” altogether. introduced or removed. For efficiency, more commonly referred to as the Customs controls should be based on Revised Kyoto Convention7 (RKC), is Depending on the institutional setup of a risk management system as provided the first step to ensure adequate levels the free zone, the scope and degree of for in the RKC.

5 OECD/EUIPO (2018), Trade in Counterfeit Goods and Free Trade Zones: Evidence from Recent Trends, OECD Publishing, Paris/EUIPO, accessed on 17 September, available at http://www.oecd.org/governance/trade-in-counterfeit-goods-and-free-trade-zones-9789264289550-en.htm 6 The Economist Intelligence Unit (2018), The Global Illicit Trade Environment Index, accessed on 17 September, available at https://www.eiuperspectives. economist.com/sites/default/files/Illicit%20Trade%20WHITEPAPER%20(19%20June%202018).pdf 7 WCO (2006), International Convention on the Simplification and Harmonization of Customs Procedures (as amended), accessed on 18 September, avail- able at http://www3.wcoomd.org/Kyoto_New/Content/content.html

76 WCO news N° 87 October 2018

Specific Annex D has to be considered have expressed adherence to Specific online survey. Additional research will together with other provisions of the Annex D. There are also a small number also be undertaken, including fieldwork RKC related to the origin of goods and of countries that have not ratified the in the free zones in different regions. Customs regimes, such as transit and Convention, but are compliant with its transshipment, which are frequently Standards and Recommended Practices, This review process will offer a used by smugglers and criminal including, sometimes, those listed in the real opportunity for Customs organizations to their advantage. Origin Specific Annex. There are also countries administrations and other stakeholders (the RKC’s Specific Annex K) is used that deny Customs jurisdiction over to explore modern and efficient not only to calculate duty rates and goods in free zones, leading to the Customs procedures and control quotas, but also as a risk indicator for erosion of Customs procedures and mechanisms through the deployment Customs authorities. Thus, origin shift, control functions, and opening ways for of information technology (IT) particularly due to the proliferation of illegal trade. solutions and inspection technologies bilateral and regional trade agreements to fill existing gaps in free zone control and their relation to free zone regimes, Moving forward operations. Active participation of becomes another challenge for Customs. As more and more Customs Customs administrations and other In-transit and transshipment regimes administrations are ready for a stakeholders in this process will enable (addressed in the RKC’s Specific Annex constructive dialogue on this difficult the development of a cooperative and E) pose a high risk, particularly because topic, it became evident that there was sustainable policy framework that will be these procedures can be used to disguise a need to conduct intensive discussion supported and implemented by everyone the country of origin or to enter goods to find the solutions based on WCO involved in the design, governance and into Customs territories where border Members’ practices, and to perhaps operation of free zones. enforcement for transshipped or transit review existing WCO instruments or goods might be weak. develop new ones. Feedback and best More information practices from Members will be gathered [email protected] As of today, there are 115 Contracting during discussions in the relevant WCO Parties to the RKC, but very few of them bodies and workshops, and through an

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Valuation What’s new in 2019? Notas explicativas SA 2017

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Sexta edición - Notas explicativas en español del Sistema armonizado (SA) 2017

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Calendar of Events

November 5 - 8 Permanent Technical Committee, 221st/222nd Sessions 12 - 13 Revised Kyoto Convention Management Committee, 19th Meeting 14 - 16 WCO/UPU Contact Committee 19 - 30 Harmonized System Review Sub-Committee, 55th Session 21 - 23 Working Group on Revenue Compliance and Fraud, 5th Meeting

December 3 - 4 API/PNR Contact Committee, 12th Meeting 5 API/PNR Contact Committee (Members only) 3 - 5 Policy Commission, 80th Session, Mumbai (India) 6 - 7 WCO Counterfeiting and Piracy Group, 15th Meeting 10 - 12 Revised Kyoto Convention Working Group, 2nd Meeting 13 - 14 Technical Experts Group on Non-Intrusive Inspection

January

14 - 18 Data Model Project Team 22 - 25 Scientific Sub-Committee, 34th Session 29 - 30 Global RILO, 25th Meeting 31 - 1 Feb CEN Management Team, 17th Meeting

February 4 - 5 Technical Committee on Rules of Origin, 37th Session 6 - 8 Revised Kyoto Convention Working Group, 3rd Meeting 11 - 12 Audit Committee, 13th Meeting 18 - 22 Working Group on E-Commerce, 5th Meeting 25 - 26 Administrative Committee for the Customs Convention on Containers, 1972, 17th Meeting 27 - 28 ATA/Istanbul Administrative Committee

It should be noted that WCO meetings are mentioned for information purposes and are not all open to the public. Unless otherwise indicated, all meetings are held in Brussels. Please note that these dates are indicative only and may be subject to change. The WCO meetings schedule is regularly updated on the WCO website.

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