June 2018 | n° 86 | mag.wcoomd.org WCO news

The Harmonized System from every angle

World Customs Organization Harmonized System

Nomenclature and Classification of Goods Special OFFER on Pack Option PACK OPTION HS 2017

CONTENT OF PACK PUBLIC PRICE MEMBER PRICE 1,520 € 955 € ü Nomenclature 1,690 € 1,060 € ü Amendments to the Nomenclature ü HS Classification Handbook BENEFITS ü Explanatory Notes + Updates ü Compendium of Classification Opinions + Updates - 10 % 1 YEAR ü Alphabetical Index on the prices of free access to the the publications HS Database

ONLINE OPTION

HS 2017 ONLINE DATABASE BENEFITS

SUBSCRIPTION SUBSCRIPTION ü All HS contents 2017/2012/2007 ü Updated 2 times/year ü 24/7 access 1 5 ü Multilingual YEAR YEARS ü Creation of favourites ü Personal notes

SALES DESK (BRUSSELS) ONLINE BOOKSHOP (ground floor) www.wcoomdpublications.org Monday, Tuesday, Thursday: 9.30 – 12.30 / 14.30 – 17.00 Accessible 24/7 Wednesday, Friday: 9.30 – 12.00 Shipping within 48 hours anywhere in the world Immediate Delivery (subject to stock) Secure online payment by: Visa, Payment on spot only in cash (€) Mastercard or bank transfer

WORLD CUSTOMS ORGANIZATION Rue du Marché 30, BE-1210 Brussels – Belgium Tel. +32 (0) 2 209 95 05 E-mail : [email protected] Bookshop : www.wcoomdpublications.org WCO news N° 86 June 2018 Harmonized System Content Nomenclature and Classification 04 Flash Info of Goods Special 50 08 Dossier 46 OFFER WCO C-RED Project: 37 Panorama Brazil’s new integrated risk developing a more effective on Pack Option management solutions response to epidemics 69 Interview OPTION HS 2017 PACK 74 Focus 89 Events 65 CONTENT OF PACK PUBLIC PRICE MEMBER PRICE 57 1,520 € 955 € E-commerce: Korea tests ü Nomenclature 1,690 € 1,060 € Assessing the clearance new analytical tools to root Amendments to the Nomenclature ü process: India’s experience out fraud ü HS Classification Handbook BENEFITS ü Explanatory Notes + Updates DOSSIER: HARMONIZED SYSTEM FOCUS: ILLICIT FINANCIAL FLOWS INTERVIEW ü Compendium of Classification Opinions + Updates - 10 % 1 YEAR ü Alphabetical Index on the prices of free access to the 09 Introduction by the WCO 75 Wrap-up of the WCO 69 Storage and destruction of the publications HS Database Secretary General Conference on Illicit Financial counterfeit goods: the safety Flows and Trade Mis-Invoicing and environmental challenges 14 Personal reflections from an HS expert 78 Overview of German Customs’ fight against illicit 17 Is the HS still fit for purpose? ONLINE OPTION financial flows 22 Ghana’s experience in 82 Trade in minerals: Ghana, building a classification Liberia and Sierra Leone launch infrastructure a Customs verification portal HS 2017 ONLINE DATABASE BENEFITS 26 The HS and the UN 2030 86 Burkina Faso: the problem of Agenda for Sustainable gold smuggling Development SUBSCRIPTION SUBSCRIPTION ü All HS contents 2017/2012/2007 ü Updated 2 times/year 29 Thoughts from the International Federation of ü 24/7 access Customs Brokers Associations 1 5 ü Multilingual YEAR YEARS 32 How the HS adapts to ü Creation of favourites product developments ü Personal notes 35 How industry engages on classification matters at the WCO

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 SALES DESK (BRUSSELS) ONLINE BOOKSHOP [email protected] expressed in WCO News are those of the contributors and Acknowledgements: The Editorial Team wishes to express its (ground floor) www.wcoomdpublications.org 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 Monday, Tuesday, Thursday: 9.30 – 12.30 / 14.30 – 17.00 Accessible 24/7 World Customs Organization French are welcome but should be submitted no later than Illustrations: Our thanks also extend to all who provided Online subscriptions Wednesday, Friday: 9.30 – 12.00 Shipping within 48 hours anywhere in the world Rue du Marché, 30 15 August 2018 for consideration. The WCO reserves the photos, logos and drawings to illustrate this issue. http://www.wcoomd.org/en/media/wco- B-1210 Brussels right to publish, not to publish, or to edit articles to ensure Immediate Delivery (subject to stock) Secure online payment by: Visa, news-magazine/subscriptions.aspx Belgium their conformity with the magazine’s editorial policy Photo cover: © Yi chang / Imagine China and style. The WCO Communications Service is available Payment on spot only in cash (€) Mastercard or bank transfer Tel.: +32 (0)2 209 94 41 to answer all requests for subscriptions, submission of Design: www.inextremis.be - mp5817 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 WORLD CUSTOMS ORGANIZATION Rue du Marché 30, BE-1210 Brussels – Belgium Tel. +32 (0) 2 209 95 05 E-mail : [email protected] Bookshop : www.wcoomdpublications.org 3 FLASH INFO

More WCO tools to assist revenue collection to be launched soon

THE WCO’S REVENUE PACKAGE (RP) is nearing An understanding of trade facilitation the completion of its third phase, which measures is also a key consideration. will see the launch in June 2018 of a Facilitating the trade of compliant number of new tools and material for businesses is in fact compatible with Customs administrations. the goal of effective revenue collection. By using risk management techniques The motto of the RP is “fair and efficient to determine the compliance levels of revenue collection,” the objective being individual businesses, Customs is able to strengthen the capacity of Customs to allocate its resources more effectively administrations to identify and collect all to targeting low compliant operators revenue that is legally due. This requires and reducing checks on those with a Customs, and the business community, high compliance record, thus facilitating to have deep technical knowledge of the legitimate trade. building blocks for establishing duty liability – namely, Customs valuation, In respect of Customs valuation, classification, and preferential origin. emphasis is placed on developing These classic Customs work areas control programmes and strengthening should be supported by dynamic risk infrastructure. One new document – management and post-clearance audit Practical Implementation of the WTO programmes. Valuation Agreement: A Brief Guide for Least Developed Countries (LDCs) – provides advice to LDCs which typically face particular challenges in implementing the WTO Valuation Agreement. Examples are also provided About the of the control programmes of national administrations, including those which Revenue utilize a valuation database, such as the system developed by UNCTAD to be used Package in conjunction with ASYCUDAWorld. A valuation database can be a very useful tool for developing countries who have The Revenue Package was initiated yet to fully develop their post-clearance on how to qualify for preferential in 2009 as a response to WCO audit function. However, it is essential treatment and detailed explanations Members’ concerns over declining that the database is used in line with of the elements in the Decision. In revenue returns in the context of WCO recommendations, which stress addition, five new e-learning modules the global financial crisis of 2008, that database prices are to be used only have been developed on the topics of and falling duty rates in general. In for comparison and risk assessment certification, cumulation, origin criteria, Phases I and II (finalized in 2012 and purposes – they may not be used as direct transportation, and verification. 2015 respectively), a series of tools substitute Customs values. and material was developed on a full In the area of classification, the Customs range of revenue-related topics. All New origin tools have been developed, Laboratories Guide has been updated. A the material is available to Customs including the Practical Guide to the new appendix adds contact information administrations via the WCO 2015 Nairobi Ministerial Decision on for the Regional Customs Laboratories website (Phase III material will be Rules of Origin for LDCs, which will (RCLs) and links to relevant information. released following the meeting of contribute to facilitating preferential RCLs play a vital role in enhancing the WCO Policy Commission in market access for these countries. The regional capabilities by providing June 2018). Guide provides practical information information and training. Appendix V

4 WCO news N° 86 June 2018

Global Montreal Protocol Award

APPLICATIONS FOR THE Global Montreal require import/export licences for Protocol Award are now being HCFC shipments; accepted. • HFCs contribute to global Eligible nominees include Customs warming. They will be controlled and enforcement officers or their and gradually phased down by the respective organizations. Parties to the Montreal Protocol once the Kigali Amendment Nominees must have successfully enters into force for them. prevented illegal or unwanted National legislation might already trade in hydrochlorofluorocarbons require import/export licences for (HCFCs) and hydrofluorocarbons HFC shipments, which are already (HFCs) as well as equipment or restricted in the EU. products containing or relying on the use of these chemicals. Deadline for applications: 31 December 2018. Both groups of chemicals are widely used as refrigerants and foam Visit the UN Environment blowing agents: OzonAction website for more details on the award and the application • HCFCs contribute to ozone layer process. depletion and global warming. They will gradually be phased out More information by 2030, and are already banned http://web.unep.org/ozonaction/ in the European Union (EU). news/launch-global-montreal-proto- Traders in HCFCs are subject to col-award-customs-and-enforcement- annual import/export quotas and officers

Save the date! also contains the “Procedures and Requirements for Establishing a WCO PICARD Conference Regional Customs Laboratory,” which Malatya, Turkey is intended to assist WCO Members 9 to 11 October 2018 that are considering whether they are in a position to join the network of RCLs. A Call for Papers was disseminated in February 2018 inviting practitioners, academics and anyone with a keen interest in Customs Last but not least, a number of tools to submit any research that has been done on one of the following topics: developed under earlier phases of the securing the business environment; data analysis; trade facilitation; RP have been updated under Phase III cross-border e-commerce; connectivity in Customs; and Customs and and supplemented by new country case the fourth industrial revolution. The research work selected by the WCO studies. will be presented at the Conference.

More information More information [email protected] http://etouches.com/picard2018

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WCO steps up efforts to promote gender equality and diversity

By Johanna Törnström, To further strengthen its efforts, the PROJECT COORDINATOR, CAPACITY BUILDING DIRECTORATE, WCO WCO Secretariat has started gathering examples of good practices from ACCORDING TO A WCO survey from 2016, several Customs administrations with gathering approximately 60 responses the long-term objective of developing from WCO Members, on average around a compendium that will complement 36% of officers employed by Customs the GEOAT. These practices touch administrations are women, with figures on developing Gender Equality and varying from 8% to 60% depending on Diversity Action Plans (Finland, the country. Moreover, the statistics Sweden, United States), establishing showed that on average around 30% Women’s rights and gender equality of senior management positions are through focused committees or held by women. These figures indicate departments (Ethiopia, Vietnam), that in terms of equal representation in recruiting dedicated gender equality Customs administrations, there is still officers (Germany, Guatemala), and on room for improvement. specific measures such as preventing sexual harassment (India, Swaziland) or Promoting gender equality and job advertisements are formulated, at the promoting work-life balance (Indonesia). diversity within Customs is not just facilities provided, and the requirements a question of fundamental rights, but set for different positions. However, In addition, the Secretariat has started also a prerequisite for achieving efficient promoting gender equality goes beyond developing a training package for WCO administrations adaptable to the fast- the issue of equal representation. To Members, which is structured into two moving challenges that globalization enable sustainable change, organizations tracks: the first is a one week workshop and modern society bring. The WCO need to proactively and continuously targeting middle and senior managers, recognizes this and has stepped up engage in such matters to ensure that and focuses on how to implement gender its efforts to promote gender equality gender equality is considered in everyday equality in overall management; and the and diversity among its Members by policies, from communication to human second is an e-learning module targeting launching various initiatives in 2017. resources and in relations with external all Customs officers, and focuses on stakeholders. raising general awareness on gender Gender equality within equality and how to integrate the gender administrations To promote deeper engagement, the perspective into everyday practices. The To encourage gender equality, Customs WCO launched, in 2017, the Virtual development of the training package can play an active role, for instance, Working Group on Gender Equality and is funded under the Finland East and by promoting equal opportunities in Diversity, which is currently composed Southern Africa (ESA) Programme II, recruitment, in career development of representatives from around 20 primarily targeting countries in that and by improving work-life balance Customs administrations. Using the region. However, once fully developed, through offering more flexible working WCO CLiKC! Platform, members of the training package will be available hours. Although many administrations the Working Group share experiences, to all Members while the e-learning have already made significant documents and presentations, and gather module will be accessible via the CLiKC! progress in achieving a more balanced examples of good practices. They also Platform. representation, women still tend to work discuss how to use and implement the more frequently in certain professional WCO Gender Equality Organizational Maximizing the potential of women roles, such as administrative support or Assessment Tool (GEOAT), which traders office based work, while men are more was launched in 2013 and provides According to a report by the International frequently employed in management guidance on how to assess policies and Trade Centre (ITC) from 2015, based positions and in functions related to practices from a gender perspective. The on data from 20 developing countries, enforcement and field-based work. meetings organized so far have provided women-owned businesses are more an opportunity for WCO Members likely to face different kinds of barriers This situation can be improved by to tackle topics related to the GEOAT, to trade. The challenges include a lack assessing the recruitment process and including human resource issues, career of access to finance, to formal business working conditions from a gender development, work-life balance, and networks and to market information, perspective, looking, for instance, at how stakeholder relations. as well as the higher probability of

6 WCO news N° 86 June 2018

being exposed to non-tariff measures1. trade, and to remove trade barriers for increased focus on gender equality Another report from the World Bank women. echoes its theme for 2018, “A secure from 2011, presenting survey results business environment for economic from the Great Lakes region in Africa, Customs can play an important role development,” which encourages WCO shows that women traders more in supporting women’s economic Members to build an environment for frequently lack information about their empowerment, thereby generating a traders that is enabling, safe, fair and rights, as well as information on trade positive impact on the economy as sustainable, all wrapped into one. regulations and procedures. Moreover, a whole. By consulting with a broad they often face additional difficulties: for range of external stakeholders including Join the discussion example, having to deal with corruption women’s business associations, taking When the WCO Secretariat presented its and sexual harassment2. their needs related to safety, for instance, latest initiatives on gender equality and into particular consideration – and diversity at the WCO Capacity Building It is also worth noting that, in December by providing clear and transparent Committee in March 2018, participants 2017, a Joint Declaration on Trade and information on Customs procedures, showed a big interest in this issue. The Women’s Economic Empowerment was administrations can constructively Secretariat would, therefore, like to endorsed by 118 member states of the facilitate women’s involvement in encourage administrations to implement World Trade Organization (WTO). This international trade. the GEOAT and to closely follow or WTO Declaration acknowledges the participate in the work of the Virtual importance of adopting gender sensitive This issue is also addressed in the Working Group on Gender Equality and inclusive trade policies as a means GEOAT, which provides concrete and Diversity. to achieve sustainable development. In examples of how Customs can improve addition, it addresses the importance of their procedures, paying particular More information promoting female entrepreneurship and consideration to the needs of women [email protected] traders. In this regard, the WCO’s

1 http://www.intracen.org/uploadedFiles/intracenorg/Content/Publications/women_in_trade_web(1).pdf 2 http://documents.worldbank.org/curated/en/358501468192868232/pdf/629920ESW0P1180al0Report0210June011.pdf

WCO launches its online academy for the trade community

THE BRAND NEW WCO e-learning portal • Customs Valuation (two courses) aimed at building the Customs skills of -- Valuation concepts and trade professionals is now live. transaction value Moreover, companies wishing to -- Advanced valuation methods upskill the knowledge of more than Courses currently address the one of their workers, or Universities following topics: More courses will be added in the wishing to offer access to the courses coming months. Even though the to their students, can benefit from • Harmonized System (five sector courses are currently available in customized solutions. specific courses) English and French only, more -- Agriculture & Agrifood languages will be available in the Last but not least, professionals -- Chemicals future. interested in contributing to the -- Industry & Construction development of the courses by -- Textiles Learners can either take standalone providing feedback can join the WCO -- Art & Jewellery online courses, or purchase complete Academy’s Test Group. They will be solutions (bundles), which include given free access to courses now under • WCO Data Model (two courses) access to the online courses on their development and discount coupons for -- Managers topics of interest, the purchase of future purchases. -- Practitioners corresponding publications, and access to online tools such as the Harmonized More information System Database. [email protected]

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Dossier: The Harmonized System from every angle

8 WCO news N° 86 June 2018 © Yi chang / Imagine China

The Harmonized System, 30 years old and still going strong!

By Kunio Mikuriya, SECRETARY GENERAL, WCO how it can be improved and whether a structural revision is now necessary. In THE HARMONIZED COMMODITY Description this article, I briefly introduce the history and Coding System, generally referred of the HS, as well as its maintenance to as "Harmonized System" or simply system, achievements, and challenges, the "HS", is seldom mentioned in the which I hope will be enlightening. pages of this magazine. It is, however, one of the WCO’s flagship instruments. History One can even say that it is the backbone The concept of a nomenclature for of the WCO. Being a nomenclature of goods is the outcome of a long process transportable goods, it has become rooted in the ancient world. According over the years a universal language for to Professor Hironori Asakura of Japan, identifying and coding merchandise the first Customs tariff known to us was being traded internationally, with established by the Customs authorities almost all the world’s economies using of the Roman Empire. Roman senators it as a basis for their Customs tariffs and in the oasis city of Palmyra in the Syrian for the collection of trade statistics. desert invented a system of Customs tariffication, which listed different Governments use it to assess duties merchandise with different rates of duty, and taxes, and for the application known as the Customs tariff of Palmyra. of Customs laws and regulations. Businesses use it to manage their trade In his book, World History of the regulatory obligations, and to oversee Customs and Tariff, Professor Asakura their supply chains. Trade negotiators says that, “although Customs duties use it when formulating multilateral and had certainly existed before the time regional trade agreements. International of Rome, for example, in ancient Egypt organizations working on topics as and ancient Greece, they had generally diverse as food security, environmental been levied at a single rate applied across protection, and even world security the board to all kinds of merchandise.” depend on HS coded data to report Where a single rate is applied, there is progress in achieving goals or to monitor no need for a Customs tariff in which trade in goods that are regulated or different kinds of merchandise are prohibited. assigned different rates of duty.

Although the HS is a technical subject The Customs tariff of Palmyra as well that readers may find difficult to grasp as almost all the nomenclatures in the at first, it is a fascinating one. As the HS West that were drawn up before the 18th celebrates its 30th anniversary this year, Century were alphabetical. But in the we decided to gather together a number 19th Century, some countries switched of articles explaining how the HS is to a nomenclature based on systematic managed and used, and questioning classification. The French Customs

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tariff of 1822, for example, grouped gave a set of four-digit headings for account the evolution of technology goods mainly according to their nature international use, but the need for more and changes in consumer habits, there (live animals, flours, stone, earth and granularity led many actors to go beyond is a serious risk of having difficulties, other minerals, etc.). Thus, the basis the four digits in light of the fact that, in if not disputes, when classifying of the international Customs tariff some instances, a commodity could be products. Only Contracting Parties nomenclature, developed at a later date, designated up to 17 times in the course can take part in the administration was born. of a single trade transaction from the and maintenance of the HS and moment it left the manufacturer to its its related materials and propose The post-World War I period marked arrival at the importer’s destination. amendments to the nomenclature. Let the opening of the age of international The HS, which defined goods at six-digit me quickly explain how this is done. cooperation in respect of Customs and level, solved this problem. tariffs. A need for the simplification and To ensure the relevancy of the HS, unification of tariff nomenclatures was Birth of the HS since 2002 it has been revised every seen as essential to improve revenue Early in 1970, it was agreed five years to take into account changes collection, facilitate trade, and improve internationally that the Customs in technology and in patterns of trade statistics. The first international Co-operation Council (now known as international trade. This has served the Customs tariff nomenclature, known the WCO) should conduct exploratory WCO well, and HS users even more so. as the Geneva Nomenclature, was studies around the issue of a new Headings and subheadings for which developed under the League of Nations, nomenclature. The preparatory work there is a low trade volume would and incorporated the structure of carried out since 1973 resulted, some generally be deleted (Gramophones certain 19th Century tariffs, including, 13 years later, in the completion of are just one example), but exceptions in particular, the French tariff. the HS, and the establishment of a do occur (records seemed to be on new international convention for its their way out, but the tide seems to Later, the drive for economic implementation. The WCO Council, the be turning as consumers find a new reconstruction and the desire for Organization’s highest decision-making interest in collecting them once greater freedom of trade following body, adopted the HS Convention in again). In addition, newly developed World War II created favourable June 1983, and its Explanatory Notes in products that cannot be identified conditions for the standardization of June 1985. in the structured nomenclature are Customs tariffs, and the need for an also added, as their trade has to be internationally recognized common On 22 September 1987, 26 countries monitored too. goods nomenclature. This resulted in participated in the signing ceremony, the adoption of the Convention on including the European Economic After being amended six times, the Nomenclature for the Classification Community (EEC), the forerunner to seventh amendment of the HS is of Goods in Customs Tariffs in 1950, today’s European Union (EU). The HS currently underway, and will enter which was strongly influenced by the finally came into force on 1 January 1988 into force on 1 January 2022. In this basic structure of the French tariff and with 37 Contracting Parties. The number regard, the WCO is extremely busy that would also shape various other of countries using the HS has continued with its preparations for HS 2022, tariff and/or statistical nomenclatures, to grow. Today, it counts 157 Contracting preparations that not only include a such as the United Nation’s Standard Parties and, if we add the countries and revised nomenclature, but also the International Trade Classification, as Customs and/or economic unions using revision of all its “help” instruments well as those that would follow. the HS while not having ratified the such as the Explanatory Notes among Convention, one can with certainty say others. This is no easy task, but I am Finally entering into force in 1959, that it truly is an instrument of global proud to say that the WCO soldiers the text of the 1950 Convention was application. on in its usual focused fashion with a initially known as the Brussels Tariff view to producing a nomenclature that Nomenclature (BTN), but later renamed Maintenance and updates can serve international trade until the the Customs Co-operation Council When a nomenclature remains next revision cycle. Nomenclature (CCCN). The CCCN unchanged, i.e. not taking into

• Mainly editorial • 374 sets of • 225 sets of amendments amendments amendments • 5018 HS Codes • 5224 HS Codes • 5205 HS Codes

1988 1992 1996 2002 2007 2012 2017 2022

• HS Implementation • 393 sets of • 354 sets of • 233 sets of • 5019 HS Codes amendments amendments amendments • 5113 HS Codes • 5052 HS Codes • 5387HS Codes

10 WCO news N° 86 June 2018 © David Plas

Having accurate HS codes means having reliable information on what is traded internationally. Not only do they inform policy areas as diverse as economics, security, health and wellbeing, political stability and environment and resource management, they are also crucial to risk management.

Harmonized decisions made, and 906 • The Compendium of Classification System Classification Opinions adopted Opinions includes a list of the Committee to ensure uniform application of most significant and/or difficult goods classification at a global level. classification decisions taken by the HSC and adopted by the WCO Review Scientific • 54 meetings of the Review Sub- Council. Working Sub- Sub- Committee (RSC) have contributed Party Committee Committee to maintaining and updating the HS • The Alphabetical Index lists all the to keep it responsive and relevant to products cited in the Nomenclature current needs. and the Explanatory Notes in Achievements alphabetical order, and includes the A lot of work has been done over the • 33 meetings of the Scientific Sub- legal notes to the section, chapter or past 30 years within the different Committee (SSC) supported HS subheading in which the product committees involved in managing work mainly in the chemistry area is cited, and the relevant pages of this global tool. The undermentioned and in Customs laboratory work. the Explanatory Notes where the statistics don’t only speak for itself, product is mentioned. they clearly demonstrate the amount Moreover, tools and instruments have of work that goes into maintaining and been developed to assist Customs An online HS Database groups all reviewing the HS: administrations and traders with the these tools, and allows users to access classification of commodities in the HS. information contained therein in an easy • 61 meetings of the HS Committee Another body of work that demonstrates and “friendly” way, thereby assisting the (HSC) and of its preparatory the complexities of the HS and what is classification of goods tremendously. body the HS Working Party have needed to make it continuously work been held (each of a two-week successfully: Joining the conversation length, which is a record high for During meetings of the various HS an international meeting), 4,224 • The Explanatory Notes contain committees, delegates represent their agenda items discussed, 10 WCO technical descriptions of goods countries and advocate their countries’ Council Recommendations on the and practical indications for the views, but I would like to share a remark application of the HS Convention classification and identification of that one former delegate made to me produced, 2,555 classification products. recently. He said that the committees

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were also a place to get ideas, and that hazardous chemicals controlled under Group on HS Matters, but the meetings it was important not only to share one’s the Rotterdam Convention and for of the Group yielded no fruitful results. thoughts, but also to learn, listen, sit back certain persistent organic pollutants and try to understand how others think. (POPs) controlled under the Stockholm With a view to speeding up the decision- He mentioned that good conversations Convention. making process for the HSC by limiting that took place during these meetings the number of reservations in respect of helped one to become better at what one Furthermore, at the request of the its decisions, the WCO Council adopted, did, which in turn made one a better asset International Narcotics Control Board in July 2017, a Recommendation back home. Indeed, sometimes it even (INCB), new subheadings have been concerning the amendment of made one change one’s point of view. introduced for the monitoring and Article 8 of the HS Convention. One control of pharmaceutical preparations WCO Member, however, entered a Delegations attending the HSC range containing ephedrine, pseudoephedrine reservation and discussions in this from those that are active to those or norephedrine, and for alpha- regard are continuing. If accepted, this that are far less active. Some delegates phenylacetoacetonitrile (APAAN), a Recommendation will go a long way in may feel that they do not have enough pre-precursor for drugs. facilitating the work of the Committee. expertise to take the floor. To build their capacity, the WCO provides Most of the recent changes have been Another issue is the consideration of technical assistance to countries, while broached by the Food and Agriculture whether the structure of the HS could encouraging them to attend the HSC and Organization of the United Nations be simplified and rendered more user- actively participate in its deliberations. A (FAO), and the HS now covers more fish friendly for the business community. sense of pride is instilled when delegates and fishery products as well as forestry On this, I invite you to read the article who have benefited from WCO training products in more detail, enabling the by the WCO Secretariat that is included activities take the floor and express their FAO to monitor developments in the area in this dossier. It looks at the structure views with confidence. So while they of food security and the sustainability of of the HS, its changing uses, whether it would have generally remained "silent" forest exploitation for example. I invite is still a sufficient solution, how it can prior to the training, now they feel better you to read the article by the FAO on the be improved, and whether a structural equipped and more knowledgeable important role that the HS plays for the revision is now necessary. to take part in the conversation at the organization. committee level. Ensuring compliance when it comes to The International Chamber of Commerce the HS is equally important. Having a Cooperation (ICC) and the International Federation modern classification infrastructure Representatives of intergovernmental or of Customs Brokers Associations also and accurate HS codes means having other international organizations and contributed to this edition, highlighting reliable information on what is traded experts from the business world whose the challenges emanating from the internationally. Not only do they inform participation is considered desirable uniform application of the HS, best policy areas as diverse as economics, can attend meetings of the HSC ad the practices to enhance compliance, security, health and wellbeing, political RSC as observers. These stakeholders and the way industry can engage on stability and environment and resource have helped us to take the HS forward, classification matters at the WCO. management, they are also crucial to risk ensuring that it remains useful and Let me stress here that HSC decisions management. relevant, and that it meets the needs and are based on technical information, expectations of the broader Customs and including crucial information provided Moreover, with the help of information trade community. by manufacturers, but that commercial technology (IT), we should be able to interest is not taken into consideration. analyse and use data and information Security considerations also recently with a scope and sophistication that led to changes in the HS. For example, Challenges and perspectives has never before been matched. And new subheadings for specific chemicals The HS is a “living” document. Unlike yet the usefulness of that information is controlled under the Chemical Weapons many international instruments, it has dependent on the quantity and quality Convention (CWC) in order to facilitate a clear and relatively simple process of data we feed into the process. the collection and comparison of data for amendment to keep it up-to-date on the international movement of these and relevant. This type of incremental One of the key measures for a modern substances were introduced into HS 2017 improvement will, of course, continue. Customs administration is to implement at the request of the Organisation for Yet, the expectations of the international a programme for binding pre-entry the Prohibition of Chemical Weapons trading community remain high for a classification information to enable the (OPCW). speedier decision-making process and administration to issue advance rulings. binding HS decisions to give answers and Advance rulings are used to enhance In addition, with environmental issues certainty to business. These two points the predictability and transparency of now being of major global concern, were examined by the HS Contracting the Customs clearance process, and HS 2017 provides new codes for Parties through the High-Level Working are instrumental in the success of an

12 WCO news N° 86 June 2018

Nuts and bolts of the HS effective, informed Customs compliance programme. The HS is a structured nomenclature comprising a series of Through advance rulings, the trader four-digit headings, most of which are further subdivided benefits from greater certainty with into five- and six-digit subheadings. It was developed as a respect to Customs requirements and any core system so that countries and organizations adopting it duty liabilities, as well as a greater chance could make further national subdivisions according to their of less Customs intervention. Customs, particular needs. on the other hand, receives advance information of anticipated transactions The HS provides a legal and logical structure within which, that can be fed into its risk management in terms of the 2017 version, a total of 1,222 4-digit headings, engine. subdivided into 5,387 6-digit subheadings, are grouped into 97 chapters, the latter themselves arranged in 21 sections. While advance rulings have been on the WCO’s agenda for many years, the Each heading of the system is identified by a four-digit World Trade Organization’s (WTOs) heading code, the first two digits of which indicate the Agreement on Trade Facilitation (ATF) chapter wherein the heading appears, while the latter two puts a new emphasis on the procedure by digits indicate the position of the heading in the chapter. The introducing an obligation on its Members following examples illustrate the logical structure of the HS: to issue binding advance rulings on the classification of goods. • the HS code for natural honey is 0409.00, which indicates that heading 04.09 has not been subdivided (fifth and In wrapping up, I would like to sincerely sixth digits = 0); thank all the contributors to this dossier, as well as all the other contributors to the • the HS code for buckwheat is 1008.10, which means that magazine who took the time to share with it is included in the first one-dash subheading (fifth digit us their experiences on various Customs = 1) of heading 10.08 and that this subheading has not and trade related issues. It has been our been further subdivided (sixth digit = 0); pleasure to produce another edition of the WCO’s magazine, and we trust that • the HS code for potato starch is 1108.13, which means you will enjoy reading all the insightful that it falls in the third two-dash subheading (sixth articles. digit = 3) of the first one-dash subheading (fifth digit = 1) of heading 11.08. © Joshua Rawson Harris / Unsplash

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An HS expert shares some personal reflections

By Jørn Hindsdal, DENMARK WHILE THE HARMONIZED System, or HS, celebrates its 30th anniversary this year, it is, in fact, much older because it was developed over several years starting in

the 1970s. Having worked on HS matters © Gemma Evans / Unsplash for at least 40 years, both within Danish Customs and at the WCO Secretariat, I have been in the fortunate position to have closely followed its development, implementation, maintenance and use for a long time, up until my official retirement in 2017. This article provides me with an opportunity to share some personal reflections on the HS.

Development of the HS The HS Nomenclature replaced the Customs Co-operation Council Nomenclature (CCCN) in 1988. This previous nomenclature as well as several national Customs tariffs served as the statistical nomenclature of the countries updated. During the training sessions, starting point for the work of the many where they import and export goods. I often told the audience that the HS Customs administrations who gathered The European Union (EU), which up was “old wine in new bottles; perhaps in Brussels over the course of numerous until 1988 applied a separate Customs magnum bottles.” meetings to comment on proposed texts nomenclature (the Common Customs or to assist in the drafting of alternative Tariff) and a separate statistical In some countries the implementation texts, with the support of the WCO nomenclature (NIMEXE), merged the of the HS Nomenclature was more Secretariat. two into one single instrument, called complicated. One of those countries the “Combined Nomenclature” (CN). was the former Soviet Union, where Once the HS Nomenclature was I had the pleasure of being part of an finalized, several years were then spent At the time, I was attending joint EU team that assisted the Soviet’s with on the development of its corresponding Customs and statistical meetings the implementation of the HS. This Explanatory Notes, a tedious, but very in Luxembourg, where EU Member assistance enabled us to travel to several important task. The thousands of pages States had to decide which statistical parts of this vast country, culminating that are stored in the WCO Secretariat’s subdivisions should be retained in in a three-hour prime time presentation Documentation Centre testify to the the CN from 1 January 1988. One of on state television. It must have been a fact that an enormous body of work my battles, together with my Danish nightmare for television viewers! lay behind the development of the HS. statistical colleague, was to ensure that All those pages were prepared using the subdivision for “Christmas trees,” Work of the HS Committee typewriters and, ironically, heading which was important to Denmark, was The HS Committee (HSC) plays an 84.69 for “typewriters” disappeared retained; this we managed to do, and it important role in interpreting the from the HS with effect from 1 January still appears in the CN today. HS legal texts to secure the uniform 2017! classification of goods, including the In the lead up to implementation, I also settlement of classification disputes The HS at national level conducted, together with a colleague, between Contracting Parties to the The HS forms the basis for Customs several HS training sessions in Denmark HS Convention. To that end, the tariffs and statistical nomenclatures for my Customs colleagues, as well as HSC has classified more than 1,000 around the world. This means that in for our traders and Customs brokers. specific commodities since 1988 and, most countries the HS is, more likely Switching to the HS was not too together with the WCO Scientific than not, unknown because traders complicated, although our information Sub-Committee, has determined the apply the national Customs tariff and technology (IT) systems had to be classification of several thousand

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international nonproprietary names delegations, we managed to come to for cooking – not a best-seller in rainy (INN) for pharmaceuticals linked to the an “agreement.” After that incident, I Denmark! In this case, the HSC had Agreement on Trade in Pharmaceutical considered handing over the reading of to apply GIR 4 (“most akin”), and it Products (concluded by the World Trade the report to the Vice-Chairperson at the subsequently decided to amend the Organization) and the Programme on next meeting if discussions went on too HS Nomenclature to facilitate the INN for Pharmaceutical Substances long, but this did not happen and from classification of “solar barbecues” - (administered by the World Health then on readings went smoothly. heading 73.21; Organization). Based on proposals by Customs administrations or the WCO Classification issues • “Roller shoes” with uppers of Secretariat, the Committee also amends HS classifications are governed by leather and outer soles of rubber, the HS Explanatory Notes to facilitate General Interpretative Rules (GIRs) 1 incorporating two permanently the interpretation of the legal texts. to 6, but, before classifying a product, it attached, retractable wheels that fit is important to apply what I call GIR 0, into special cavities in the outer sole, I had the pleasure of attending more than that is the “what is it” or the “wii” rule. thus providing the option of using 50 sessions of the HSC, four of which To provide some perspective, here the footwear as in-line skates (roller as Chairperson. In general, there has is an example from real life where a blades) when the wheels are pulled out always been a very good working spirit consignment was accompanied by three - heading 95.06; in the Committee. Since one of its tasks documents, each of which described the is to settle disputes between two or more product in question slightly differently: • a “chemical product,” consisting of a Contracting Parties, delegates often solution of glycerine and flavouring have to argue their different viewpoints • Document 1 – “Labels”. substances, saturated within the pores strongly, sometimes resulting in • Document 2 – “Printed labels”. of natural mineral stones (“Shisha- proceedings becoming somewhat tense • Document 3 – “RFID bag tag labels”. Steam-Stones”) via a pressure before voting takes place. Fortunately, injection method. The product is free most of Committee’s decisions are When examining the consignment, it of nicotine, and the stones are used in followed by administrations; if not, turned out to be labels (“tags”) used in a a water pipe, which heats the stones a reservation will be filed. In fact, I “radio-frequency identification” (RFID) and boils the solution to produce a clearly remember a case many years system. Based on the descriptions in vapour steam that is inhaled by the ago, where a country “lost” the vote and Documents 1 and 2, classification could user of the water pipe - heading 38.24; the delegate immediately stated that his easily have ended up in heading 48.21 administration would enter a reservation (paper or paperboard labels of all kinds, • a “rug made of a whole grizzly bear – some delegates did not appreciate this whether or not printed), instead of furskin, with head, tail and paws,” action, and as an outcome, it was later heading 85.23 (discs, tapes, solid-state fixed to an underlay of textile agreed that reservations should not be non-volatile storage devices, “smart materials. The head is taxidermy entered before the meeting had been cards” and other media for the recording mounted, and its eyes and tongue concluded. of sound or of other phenomena, whether had been replaced by artificial ones - or not recorded, including matrices and heading 43.03; At the end of each meeting, HSC masters for the production of discs, but delegates “read” the draft report of the excluding products of Chapter 37), as • a “woman’s shoe, with a textile upper meeting before approving it and, in most correctly indicated by the exporter in and an outer sole of plastic, a portion cases, this is a smooth process, mainly Document 3. of which is covered with flocking.” resulting in minor changes to statements The surface area of the outer sole in by various delegations. However, I can The HSC has classified many different contact with the ground (excluding recall a situation when I was chairing products and, in my view, some of the the separately attached heel) is my first HSC meeting. The reading went products have been rather peculiar. approximately 67.5 percent textile well at the beginning, but on a specific Below are a small selection of some of material and 32.5 percent plastics. issue there were suddenly different the more peculiar products: However, the textile material was views on the statements made by some considered to be an accessory or delegations. After some discussion, I • a “domestic barbecue” of stainless reinforcement and was therefore not had to call a break and after 45 minutes steel, operating by means of steel taken into account in determining of “negotiations” with the involved mirrors and using only solar energy the constituent material of the outer

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There are no duty rates in the HS, but they do sole having the greatest surface area stands for office desks mounted with an in contact with the ground - heading appear in national Customs actuator (lifting/lowering mechanism). 64.05; tariffs. Of course, traders, The stands were imported without the table tops, which were purchased from • a “motorcycle, specially modified in particular importers, are a local company. Customs did not agree and equipped with fire-fighting always interested in paying with the importer’s decision to classify equipment,” such as two the goods as “parts for furniture” interconnected 25 litre tanks for a low duty rate and, as a because they could be used for a number premixed water and foam, a 6.8 litre result, may classify goods of purposes, as imported. After the tank filled to 300 bars pressure for classification rules had been explained, delivering compressed air, a 30 metre incorrectly or adjust the including GIR 2, which motivated hose, a hose reel, nozzles and a lance goods to that end. the decision of Customs, the importer attachment, and emergency lights and started importing the stands together sirens - heading 87.11; with a similar number of “cheap” table tops, declaring the product as • a “laundry ball,” with a diameter of “unassembled office desks” that attracted approximately 10 cm, consisting of two various motifs, such as the name of a a “zero” duty rate. After importation, the perforated casings of plastics which sports club, logos, slogans ("Go team!" “cheap” table tops were replaced by those are joined together and containing or "Goal!") and advertisements. The manufactured locally. two magnets and four types of small sticks are normally used at sporting ceramic “pellets” (beads), intended to events, where the spectators use them for The future be used in a washing machine of the waving or bang them together to make The HS is still relatively young. Although household-type to clean clothes by a a noise. it has been challenged every now and physical process - heading 69.12; then, it has always “survived.” Customs Tariff engineering and traders are now familiar with the • a “non-woven adhesive article,” cut There are no duty rates in the HS, but they system and want to retain it. Of course, to a specific shape and intended to do appear in national Customs tariffs. Of updating the HS is crucial, and this is be stuck onto the skin after removal course, traders, in particular importers, an ongoing task that falls mainly on of a protective piece of paper, to fit are always interested in paying a low duty the shoulders of the HS Review Sub- perfectly round the lower part of the rate and, as a result, may classify goods Committee (RSC). The Sub-Committee breast like the cup of a brassiere - incorrectly or adjust the goods to that is currently busy finalizing the 2022 heading 63.07. end. While incorrect classification by an edition’s amendments, and has to deal importer could sometimes occur, wilful with a whole host of topics. At the national level, I have also come misclassification should be regarded as across many interesting products. an attempt to commit fraud. Many classification issues arise from One in particular was “flour made multi-function machines/apparatus, and of crickets” (an insect) to be used as Motor vehicles for the transport of the development of such products is on protein enrichment in various food more than 10 persons are classified in the increase all over the world. I firmly preparations. Could it be regarded as heading 87.02 and usually attract lower believe that it might be a good idea to edible flour of meat? Danish Customs Customs duty rates, including, more create new headings or subheadings for came to the conclusion that “crickets” often than not, other specific taxes such such products, e.g., products used in the did not have any “meat” and ruled out as registration and road taxes among IT area. In addition, the classification of heading 02.10 (meat and edible meat others, compared to passenger vehicles. novelty food products (e.g., “functional offal, salted, in brine, dried or smoked; To avoid paying such costs, in some foods” and “veggie” preparations), edible flours and meals of meat or meat countries a “normal” passenger vehicle prepared meals, and food supplements offal). Instead, we opted to classify it is modified before importation to appear is also often disputed, so clarification in heading 04.14 (edible products of as if it is able to accommodate 10 persons around these products would definitely animal origin, not elsewhere classified or more, and is then later transformed be desirable. or included). back into a passenger vehicle after importation and payment of taxes! With these reflections, I wish the HS all Another interesting product was Fortunately, the HSC has developed the best in the future and hope that it “bang sticks,” classified under heading guidelines to deal with such issues, will continue to serve the Customs and 39.26 as per an EU decision. These are which are set out in the HS Explanatory trade community according to their inflatable sticks of plastic sheeting of Notes to Chapter 87. expectations. various lengths, for example 60 cm, incorporating a plastic straw to inflate Some years ago, I had a meeting with an More information the sticks. They may be printed with importer who was importing adjustable [email protected]

16 WCO news N° 86 June 2018 © Building Concept

Is the HS still fit for purpose?

By Gael Grooby, under which goods can be classified. So, DEPUTY DIRECTOR, TARIFF AND TRADE AFFAIRS DIRECTORATE, WCO what does this mean? th As the WCO celebrates the 30 anniversary, in 2018, of The group of ‘things that are traded’ is vast and chaotic – treated as individual the Harmonized Commodity Description and Coding items and given common names they would overwhelm our ability to know System, more popularly known as the Harmonized what goods are crossing national borders, or how they should be treated. System or the HS, the question may be asked whether Is a crown something that goes on your head or on your tooth? Or, maybe it is the time has come to contemplate a major overhaul of a part for a hat, or an old British coin? the system. This article looks at the structure of the HS, As a taxonomic hierarchy, the HS creates an ordered system for the classification its changing uses, whether it is still a sufficient solution, of goods, where more general classes of goods contain more specific classes of how it can be improved, and whether a structural goods. Let’s look at a pair of 30 denier (a unit of measurement used to identify revision is now necessary. the fibre thickness of individual threads in cloth) nylon pantyhose. The hierarchy What is the HS purpose of the HS. In reality, the HS is a of classes for these goods in the HS is as The HS is a list of duties, right? Wrong! taxonomic system for goods: it provides follows: In many people’s minds, the HS is so a taxonomic hierarchy (the arrangement closely tied to duties that it colours their of various categories in successive levels • Articles of apparel and clothing perception of what is the fundamental of classification) and a nomenclature accessories, knitted or crocheted

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-- Pantyhose, tights, stockings, • revenue collection – the assigning of Such data is also used for other purposes socks and other hosiery, including duties and taxes; such as modelling and forecasting, price graduated compression hosiery (for indices, business cycle analysis, market example, stockings for varicose • support measures – allowing certain identification, export performance, veins) and footwear without applied needed inputs, essential supplies commodity performance, market share soles, knitted or crocheted or other goods to come in without calculations, and the identification of the usual duties or taxes, or with a trade patterns that might indicate illicit -- Other pantyhose and tights facilitated clearance; activity such as duty evasion, money (i.e. other than graduated laundering and the importation of compression hosiery) • restrictions – putting controls or illegal goods. To list the full range of uses requirements on goods, including that trade data can be put to is beyond -- Of synthetic fibres, measuring health and safety, security and the scope of this article. However, its per single yarn less than 67 environmental controls; numerous uses need accurate data on decitex what is being traded – i.e. accurate • trade protection – the application of classification. This is what the HS was To specify the group of the descriptive dumping or countervailing duties, designed to deliver. words above would make for very quotas or other measures to protect long reports. So, the ‘nomenclature’ domestic industry; Is the current HS still a sufficient part comes into play and the above- solution? mentioned categories are given numbers • trade agreements – agreed favourable This is a complex question to answer. as names: treatment of goods of particular The HS works. This is demonstrated by classifications; its success. It is used in more than 200 • Chapter 61 economies and has provided a level of -- 61.15 • trade sanctions – preventing the knowledge of trade that has enabled good -- 6115.2 movement of certain classes of goods outcomes for Customs administrations -- 6115.21 to or from a particular place; and sophisticated trade analysis. As such, the HS is truly invaluable. The HS classified the commodity into • assessing the level of transformation of a group and gave it a name. A product a good as it changes classification – this However, there are two principal named ‘6115.21,’ assuming correct is a common method of determining aspects which indicate that its current classification, will be pantyhose or the origin of a good. format should be deeply revised. One tights, not being graduated compression is the ability to achieve consistency of hosiery, which are made of synthetic The second outcome, the collection decisions, and the other is adaptability fibres with a yarn weight less than 67 of data, is just as important. For those to changing needs. In fact, the HS is a decitex. countries with low levels of revenue difficult system under which to achieve collection, it can be even more consistent classification, particularly The changing uses of the HS important. with the increasing complexity of The HS causes individual goods to be products. Thomas Reuters and KPGM put into classes so that administrations Trade data is used by governmental International have undertaken annual can decide what to do about these goods agencies, non-government organizations, surveys of trade professionals for the last as a group: charge a particular rate of intergovernmental organizations, three years. In their 2016 survey, 91% of duty, require an import permit, check for businesses, journalists, academics, their respondents found classification insect contamination, or whatever else researchers, the media, politicians, and a challenge, and this remained true in is appropriate. It also provides a range anyone else who has an interest in trade. 2017 too.1 of data on the trade in these groups, It is used as an input into the compilation which can be turned into highly useful of balance of payments statistics and Misclassification undermines the information. The uses of the HS stem national accounts, and in the formation effectiveness of border controls, from these two outcomes. of trade and economic policy (including reduces the reliability of statistics, and fiscal, monetary, structural and sectoral often results in incorrect duty and tax The first outcome, the actual grouping policies) as well as in multilateral and payments. This is a problem that is not (i.e. the classification of goods), allows bilateral negotiations. restricted to under resourced developing for differential treatment, and is countries: misclassification has been a particularly used for: challenging problem to address globally.

1 Managing Global Trade: A Look Beyond the Surface, retrieved on 22 February 2018 from the online version at https://assets.kpmg.com/content/dam/ kpmg/xx/pdf/2018/02/trade-survey-02132018.pdf

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Misclassification undermines For example, in 2010, the Auditor the effectiveness of border The HS also mixes types of criteria. General of Canada reported that controls, reduces the So, faced with the classification of an “According to studies undertaken since imported “container,” one has multiple 2005, it is estimated that importers reliability of statistics, and headings to consider each based on (…) have misclassified between 17 and often results in incorrect different factors or combinations 30 percent of releases.”2 By the 2017 of factors: constituent material, report, the Auditor General reported duty and tax payments. capacity, function, fitted equipment, that “Over the last 15 years, the [Canada This is a problem that is not sphere of use (e.g., household or not), Border Services] Agency’s compliance associated industry/activity, ability to verifications on specific goods revealed restricted to under resourced be fitted to different types of vehicles, that importers misclassified imported developing countries: ornamentation, status as a part or goods more than 20 percent of the accessory, and so on. Some of these time.”3 Audit results show it can be misclassification has been choices are resolved by the HS Notes, substantially higher for problematic a challenging problem to others are guided by the applicable GIRs, classifications, and it appears that this but many require outside help from is similar to results in other countries. address globally. extrinsic aids.

This problem is partly unavoidable, Systems like this tend to rely heavily on given the range and complexity of the extrinsic aids and previous decisions. world’s products. Yet it is worsened by In the case of the HS, this includes its the HS’s chain of development from the Explanatory Notes and its Compendium Geneva Nomenclature, itself derived of Classification Opinions compiled by from national tariffs, through to the the WCO, various other explanatory Brussels Nomenclature, and into the materials and rulings from national current HS. At each step, most of the any material (other than compressed administrations, and review or judicial previously existing product definitions, or liquefied gas), of iron or steel, of a rulings from tribunals and courts. The grouping, structure and set-up were capacity not exceeding 300 l, whether or end result of complex criteria and the inherited. not lined or heat-insulated, but not fitted heavy reliance on explanatory material is with mechanical or thermal equipment.” that the level of accuracy and consistency For simplicity and consistency, a achieved in classification tends to be classification system would ideally The terms “of iron or steel” and “of a relatively low. have clear criteria for deciding on capacity not exceeding 300 l” are simple the membership of a group that yes/no criteria, while the terms “for In terms of product definitions/ resolves down to, as far as possible, any material (other than compressed groupings, many were developed during yes/no questions on easily observable or liquefied gas)” and “whether or not the first half of the last century. This characteristics. This is particularly so lined or heat-insulated” clarify scope leaves us with dated terminology (e.g., for a system, like the HS, that is used in a simple manner. The terms “Tanks, “automatic data processing machines” by a vast number of private users, with casks, drums, cans, boxes and similar rather than “computers”), and a slant different languages, backgrounds, and containers” and “but not fitted with towards basic commodities and finished capabilities. mechanical or thermal equipment” manufactured products. This makes it however, require identification against difficult to integrate both intermediate Instead, the HS relies heavily on a name, or the assessment of similarity. manufactures and multifunctional, classification by name, type or similarity. While this type of requirement is not composite goods that have become It adds another layer of definition and unusual for complex, real world goods increasingly important in world trade direction through legally binding classification, it does reduce the ability to over the last 20 years. Notes, and then wraps it in a set of ensure that the same decision will always General Interpretive Rules (GIRs) that be made. So, for example, questions like Goods such as ready prepared meals, use subjective considerations such as “is a biscuit tin a similar container” or “is medicalized foods (e.g., spreads with specificity and essential character. But, a tap considered mechanical equipment” added cholesterol lowering phytosterols), what does this mean? Take the example may be answered differently by different wearable electronics, sub assemblies for of heading 73.10: “Tanks, casks, drums, people. global value chain manufacturing, and cans, boxes and similar containers, for electronic devices such as smartphones,

2 Auditor General of Canada 2010, ‘Report of the Auditor General of Canada – Fall 2010: Chapter 8, Facilitating the Flow of Imported Commercial Goods – Canada Border Services Agency’ 3 Auditor General of Canada 2017, ‘2017 Spring Reports of the Auditor General of Canada to the Parliament of Canada: Report 2—Customs Duties’

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which combine multiple functions are all to develop a better classification system improves its operation. In the same way, examples of goods that do not fit easily by both international statistical bodies we can modernize the HS by making it into the old headings. Developing good and national governments. Thus, we simpler to use, and able to better handle structures for such complex goods will have new models to study, which can the changing trade environment. always be difficult. Fitting new groupings give new insights into different ways for these types of goods into the existing of seeking to solve the same problem: Should we consider a structural structure greatly increases that difficulty. categorizing trade. revision of the HS? Not only must the grouping be defined, The current HS has been in place for it must also be differentiated from It is possible to revise the structure and three decades. Simply because it has flaws existing groupings that work on the basis some design elements of the HS while does not automatically mean that it is of different criteria. still retaining the value and integrity necessary, or even desirable, to undertake of the system. The current HS is like a major changes. It is deeply embedded Can we improve the HS? penny farthing bicycle, one can argue into systems and procedures globally. Yes. After 30 years of negotiating it has a certain elegance, but it is still The work in changing laws, software, harmonization and working to adapt not the ideal solution for the cycling documentation, databases, and training the HS for different uses, we have a commuter today. A modern bicycle may would be immense and disruptive. far clearer idea of where the system look different from the penny farthing, is under pressure. In the intervening but the important design revolutions, Think of the replacement of imperial years between the launch of the HS and such as a seat, wheels, peddles and measurements with the metric system. today, there have been other attempts handlebars, are still all there: it simply Few would disagree that it is simpler to

Efficient centralization and standardization of your entire export control management – globally The management of export control is burdensome. It provides a broad spectrum of functionalities, e.g. the Exporters have to stick to a lot of complex and regularly screening of numerous sanction lists, integration into various changing export control regulations covering denied party list ERP systems, continuous updates of the lists, identification screening, license determination, export control classification of licensable goods and corresponding audit trails. MIC ECM and many more. Traders struggle to effectively fulfill all those simply reduces risks and costs associated with global trade and requirements without having the right tools in place. it supports tracking of the entire process to ensure maximum efficiency. MIC’s Export Control Management Software ECM covers all of this. You want to know more about MIC ECM? Please contact us: MIC ECM helps the compliance professional to automate MIC and monitor the complicated export compliance functions Tel.: +43(0)732-778496 and processes. [email protected]

20 www.mic-cust.com WCO news N° 86 June 2018

use a standard decimal system across all be one of the most important global general rules of specificity or essential measurements than having, for example, reforms to trade in decades. As it character often have little meaning in 1,760 yards to the mile and 16 ounces to affects the everyday reality for traders this context. Over the various revisions the pound. But, while simpler, changing and Customs administrations globally, of the HS, ‘add-on’ changes have been is difficult and expensive, and requires increased ease of use of the HS would made to prioritize one heading over people to ‘relearn’ parts of their basic have a major impact on their operations. others for various specific chemicals or skill set. In fact, it is so difficult that groups of chemicals, but it still causes seven countries have not yet officially To achieve major reform would require confusion for the trading community. switched to the metric system. input from user groups. While the WCO’s HS Review Sub-Committee and The underlying assumptions about the The situation is similar for product HS Committee are excellent at looking role of parts and accessories is also classification. While there may be better at issues around specific classifications worthy of re-examination. In the context ways to categorize electric toothbrushes or products, they only meet twice a of global supply chains and multi-use than as “Electro-mechanical domestic year respectively, and are not a forum components, a lot of work and effort appliances, with self-contained electric in which a major holistic review can goes into determining the future goods motor, other than vacuum cleaners of be realistically undertaken. Such an something may be part of, or used with, heading 85.08: Other,” that category undertaking would require a working rather than what it is when actually is in our laws, in our databases, and group, with varied representation, crossing the border. in the memories of classifiers: current to examine the fundamentals of the classification terminology is entrenched. system. This was the approach with the There is also the future question of Therefore, the question of whether the original development of the structure goods whose value and identity is in gains would be sufficient for the global and content of the HS. the embedded information, and how community to accept the cost and to provide parity of treatment between disruption is not an easy one. One potentially valuable starting virtual and physical delivery. Does a point would be the consideration novel have a truly different identity It is also important to remember that of commodity groups or HS areas depending on whether it is presented while a revised system may be an where the resolution of classification as a printed copy or an electronic copy? improvement, no system is perfect and disagreements between Contracting What about the difference between an it would not suit everyone or solve all Parties is frequently prolonged or imported sculpture and the same piece problems. Under the HS Convention, requires legal changes. Chapter 29 of downloaded as a single use file and 3D changes require acceptance by all the HS is an example of this. There are printed by the buyer? Contracting Parties to the Convention, over seven million organic compounds so to make major changes would not be to classify, and a compound can have We know the difficulties that people an easy path. Close cooperation between multiple plausible classifications. The face with the HS and believe that we Customs administrations, other users current structure of the chemical would be able to make it more user- and the WCO Secretariat would be vital chapters uses diverse methods on which friendly. Changes ranging from the to achieving an acceptable outcome. to base headings, such as: simple, such as grouping notes that Based on past experience, the possibility have nomenclature wide application, is high that after much work, acceptance • common functional groups; to the fundamental, such as a glossary would still not be gained for the whole • constituents or chemical classes; with agreed language translations Efficient centralization and standardization of your entire export package. • carbon range numbers; for terminology along the lines of • chain-length categories; the International Electrotechnical control management – globally Despite all of this, we should give serious • common precursors and/or Commission’s ‘Electropedia’ could be consideration to initiating such a project. breakdown products, via physical or considered. The management of export control is burdensome. It provides a broad spectrum of functionalities, e.g. the The world has had the HS for 30 years biological processes (e.g., acid/ester/ Exporters have to stick to a lot of complex and regularly screening of numerous sanction lists, integration into various and yet, it remains difficult to use and salt); It is time to consider adapting the HS for changing export control regulations covering denied party list ERP systems, continuous updates of the lists, identification the source of continued contention • the activity/function of a compound. the 21st Century. screening, license determination, export control classification of licensable goods and corresponding audit trails. MIC ECM for traders, administrations, courts and many more. Traders struggle to effectively fulfill all those simply reduces risks and costs associated with global trade and and countries. A deep and innovative So, a single compound may fit into the More information requirements without having the right tools in place. it supports tracking of the entire process to ensure maximum revision that succeeded in making a terms of different headings based on [email protected] efficiency. MIC’s Export Control Management Software ECM covers all generational change to the HS would different aspects of its identity and the of this. You want to know more about MIC ECM? Please contact us: MIC ECM helps the compliance professional to automate MIC and monitor the complicated export compliance functions Tel.: +43(0)732-778496 and processes. [email protected]

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Building a classification infrastructure: the Ghanaian experience

By Ena Blege, HEAD OF CLASSIFICATION, TECHNICAL SERVICES BUREAU, GHANA CUSTOMS In January 2018, the Ghanaian government notified the WCO Secretariat that it had accepted seven Harmonized System (HS)-related WCO Council Recommendations, testimony to its strong commitment to implement objective, predictable and transparent classification practices as well as facilitate the collection of international trade statistics and the monitoring of global trade. This article presents the path that the Customs Division of the Ghana Revenue Authority has charted over the years in its quest to create a functional and workable classification infrastructure, touching on, among others, advance rulings, training challenges and capacity building needs, and more education to enhance the appeals process.

22 © Samuel Zeller / Unsplash WCO news N° 86 June 2018

Key among the recommendations proposed by the WCO experts was From 1970 to 2000, Ghana used a ‘pre- the need to implement a • periodically update the Common shipment inspection (PSI)’ regime for External Tariff (CET) of the goods being imported into the country. programme for binding Economic Community of West Classification was done primarily pre-entry classification African States (ECOWAS), of which by accredited testing agencies in the Ghana is a member country; country of export before the goods information. Since tariff arrived in Ghana. However, problems classification is quite • publish binding tariff information related to PSI activities became more for use by the trading community; and more pronounced over the years, technical in nature and forcing the authorities to begin licensing required a fair amount of • serve as a link between the WCO and local companies from the year 2000 to its HS Committee, and implement undertake a ‘destination inspection time to be spent in analysing the Committee’s decisions; (DI)’ regime instead. These companies technical literature, including were mandated to classify all goods that • discuss classification issues with the arrived in the country. asking for inputs from the Central Customs Laboratory, which Customs laboratory where also maintains a system of mobile Teams of Customs officers were laboratories; subsequently assigned to these DI necessary, it is important companies on a regular basis to offer to be able to issue advance • coordinate HS activities with them technical assistance. However, Customs’ Training Branch. the DI system also had its drawbacks. rulings. Therefore, in compliance with WCO Advance rulings Council Recommendations, Ghana The objective of the WCO experts who Customs decided in September 2015 to supported Ghana Customs during that set up a Harmonized System (HS) Unit to period was also to raise the awareness take over the work of these DI companies • assess the risks that Customs may of the administration of the need for a and assume the task of classification face in executing the takeover from modern classification infrastructure itself. This decision was preceded by a the DI companies. as the bedrock for an efficient and WCO National Workshop in Accra, effective Customs administration. Such Ghana in June 2015 during which HS At the time of the effective takeover an infrastructure would enable the experts from the WCO Secretariat were in September 2015, a new facility that accurate collection of revenue, facilitate subsequently tasked to: would subsequently be known as the trade, assist in the combating of fraud Customs Technical Services Bureau and malfeasance, and make the accurate • review Customs’ current was already in place at Customs compilation of trade statistics possible. classification infrastructure; Headquarters, and, within it, a National Classification Centre. There was also a Key among the recommendations • evaluate the local classification pool of experienced officers to man proposed by the WCO experts was the environment; this classification unit. The aims and need for Ghana Customs to implement objectives of officers working at the a programme for binding pre-entry • evaluate the totality of Customs and Centre were to: classification information. They made its processes; it clear that since tariff classification • ensure the implementation and was quite technical in nature and • help Customs develop a strategic correct application of the HS; required a fair amount of time to be plan with a view to executing the spent in analysing technical literature, planned transition from the DI • establish and manage classification including asking for inputs from the companies to a fully Customs- policy to ensure the uniform Customs laboratory where necessary, controlled operation; classification of all goods being it was important to adopt the WCO imported; Recommendation on Advanced Tariff • compare Customs’ classification Rulings in order to minimize delays methods with international best • issue classification rulings for and facilitate international trade and practice; uniform application throughout the investment. Thus, an effective pre- country; binding classification programme would • quantify the expected gains or help Ghana Customs to: benefits that will arise from Customs • examine classification questions assuming full responsibility for its referred by regional and local • ensure the uniform classification of classification processes; Customs offices; goods;

23 DOSSIER © Ghana Customs • minimize revenue loss; • coordinate all classification decisions within the administration; • reduce Customs clearance delays; • minimize classification disputes; • reduce unnecessary costs in doing business.

Fortunately for Ghana, work had already started, in 2013, on laying the foundation of the legislative framework for the institution of a programme for binding A view of Ghana’s National Classification Centre pre-entry classification information. The new law (Act No. 891) was assented to on 18 May 2015. Excerpts on Customs this section as confidential, unless the HS. Such issues include how to advance rulings from Section 12 of the the parties agree otherwise. improve classification infrastructure, Act appear below: the role of the Customs laboratory It is interesting to note that the law does and its relationship with classification (1) The Commissioner General may not give a timeline on binding tariff work, and the use of various WCO issue a written ruling applying the rulings. Section 12 (Subsection 9) of tools (i.e. publications and Council Customs law to a particular set of the Act specifies that such pre-binding Recommendations) that are related to facts submitted by an interested classification rulings may be overturned capacity building and classification. party. at any time by the Commissioner General. A Tariff and Classification Committee (2) An interested party in this section has been set up at Headquarters level. includes a person, or authorized The law enjoins the Commissioner It meets once a week to review the work agent of a person, who has a General to "treat information that is done at the National Classification demonstrable interest in the submitted under this section [Section Centre. However, Ghana Customs questions presented in the request, 12 (Subsection 13) of the Act] as still encounters difficulties in trying and an importer or exporter […]. confidential, unless the parties agree to achieve a good classification work otherwise." So, although Ghana Customs model. Key among these challenges is (5) The request for a Customs ruling could publish binding tariff information, the lack of optimum resources required shall be in writing and include a no trader has yet given it permission to for Customs’ capacity building efforts. statement of all relevant facts, the do so. However, Customs is actively Not having enough competent personnel names and addresses of interested encouraging local traders to allow such who are well schooled in the HS has been parties, the name of the port where information to be published. a perennial problem. the goods are expected to arrive or depart, and a description of the Moreover, it is worth mentioning that Not enough resources have been transaction in sufficient detail to classification rulings are discussed with committed to enable officers to be allow the application of the Customs the regions in order to ensure that there trained in undertaking detailed analysis laws […]. is conformity with the work that is done of all chapters of the HS and the CET, in at the National Classification Centre. developing case studies on classification, (9) A Customs advance ruling is binding Issues related to classification that in taking on board HS Committee until the ruling is overturned by the emanate from the regions are relayed to decisions, and in managing classification Commissioner General […]. the Centre for resolution as well. rulings as well as in identifying possible areas of classification fraud. Also, not (12) An interested party may request Training challenges and capacity enough specialized training on the HS a review of the Customs advance building needs has been organized for officers to address ruling by the Commissioner Ghana Customs has undertaken several specific sections that are of importance General within thirty days of the training and capacity building activities to Ghana, such as the machinery and publication or notification of the for its officers over the years. They have chemical chapters. ruling; or a judicial review of the undergone training on ECOWAS’ Customs advance ruling made by CET, the structure of the HS, and the Another challenge facing Ghana the Commissioner General within principles of classification. Customs is the slow pace of work on thirty days. the implementation of the programme Experts from the WCO have also for binding pre-entry classification (13) The Commissioner General shall helped Ghana Customs to tackle information. The administration is treat information submitted under and resolve various issues relating to still at the beginning of a national

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WCO news N° 86 June 2018 STEERING YOUR CUSTOMS, SECURITY sensitization effort, aimed at educating the public and the officer corps about AND COMMERCIAL DATA this very important instrument. So, as is to be expected, not many traders have been able to avail themselves of this dispensation thus far.

More education to enhance the appeals process The appeal process has also not been as effective as Ghana Customs would want it to be. But, as indicated earlier, the law governing advanced tariff rulings allows any trader the right of appeal against any classification decision by the administration. At present, a SOFTWARE trader is provided with the reasons for the administration’s decision in the shortest possible time. The decision is communicated during a formal meeting ELECTRONIC between the Appeal Committee and the trader. C EXCHANGES M

However, the problem facing Ghana J Customs is that the volume of disputes CM with traders is way too high. There has been a gradual attempt to raise awareness MJ among traders and other stakeholders on CJ the importance of classification and how CMJ it impacts their business activities. In N B2G addition, Ghana Customs has engaged its stakeholders, traders and clearing agents COLLABORATION in various sensitization programmes at the start of every HS review cycle.

However, more education is needed on © Asian Development Bank the part of Customs to school traders on the rules governing classification in order to minimize disputes. Conclusion TRAINING The Ghanaian experience is an indicator of the likely pitfalls and difficulties that could be encountered by a Customs administration that has resolved to revamp and restructure its classification infrastructure. Therefore, with the HS celebrating its 30th anniversary this year, Ghana Customs hopes that its experience will help other administrations that may be considering assessing their capacity, while inspiring them to reform their process if needed.

More information [email protected] www.gra.gov.gh

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Role of the HS in the United Nations’ 2030 Agenda for Sustainable Development

By the Food and Agriculture Organization of the United Agenda is fully owned by countries, and The Food and Agriculture Organization Nations* provides a comprehensive framework (FAO) is fully engaged in this process as tackling all the multiple challenges the specialized agency of the UN that APPROPRIATE POLICIES AND sound legal and faced by our planet, promoting a global leads international efforts to defeat regulatory frameworks are necessary and long term vision of sustainable hunger and malnutrition, ensuring the conditions to make international trade development that encompasses, among sustainable use of natural resources, a virtuous engine to eradicate poverty all, the ending of poverty, hunger and and as the custodian agency for 21 SDG and hunger, and to promote prosperity malnutrition, climate change, inclusive indicators4. and sustainable development. growth, building resilient communities, and sustainable management of The SDG framework encompasses a On 25 September 2015, the 193 Member resources. Data on the monitoring of wide range of actions for more inclusive States of the United Nations (UN) the 2030 Agenda and progress towards and sustainable trade across 10 goals adopted the 2030 Agenda for Sustainable the SDGs is disseminated by the UN and 21 targets that include increasing Development1 that includes 17 through the SDG Indicators Global the quantity and quality of exports in Sustainable Development Goals (SDGs), Database3. all countries5; widening the positive 169 targets, and 2322 indicators. The 2030 impact of natural resource exports6;

1 https://www.un.org/sustainabledevelopment/sustainable-development-goals. 2 As of today, 50 organizations are responsible for the 232 indicators that compose the SDGs global indicator framework, which is coordinated by the Inter- agency and Expert Group on SDG Indicators (IAEG-SDGs) that was created at the 46th Session of the United Nations Statistical Commission (UNSC). 3 https://unstats.un.org/sdgs/indicators/database. 4 http://www.fao.org/sustainable-development-goals/indicators/en. 5 3.b, 8.a, 9.1, 10.a, 17.1, 17.3, 17.10, 17.11, 17.12. 6 2.b, 2.c, 9.b, 14.4, 14.6, 14.b. © Asian Development Bank

26 WCO news N° 86 June 2018

exporting high-value locally made goods of the agricultural sector in HS 2012, The FAO is the custodian agency and services and promoting sustainable HS 2017, and more recently HS 2022 – of 21 SDG indicators that measure: tourism7; and addressing illegal and currently underway. This has resulted in the prevalence of undernourishment informal trade8. a substantial increase in the number of and the state of food insecurity (2.1.1, sub-headings in the HS for agriculture, 2.1.2), income and productivity Concerning food and agriculture, and fisheries and forestry, which has of small-scale food producers five FAO indicators heavily rely on translated into significant improvements (2.3.1, 2.3.2), the sustainability of international trade data in food and in the availability and quality of detailed agricultural production (2.4.1), agriculture commodities for their trade data since 2012. the biodiversity of plants and calculation. These indicators are aimed animals (2.5.1, 2.5.2), investment at monitoring hunger9, price volatility10, Statistics are a core function of the in agriculture (2.a.1), food price illegal, unreported and unregulated FAO, with statistics on trade in food volatility (2.c.1), women’s access fishing (IUU)11, the value-add of and agriculture, and on fisheries and to agricultural land ownership sustainable fisheries12, and access rights forest products being disseminated for (5.a.1, 5.a.2), water use efficiency for small-scale fisheries13. An additional over 50 years in 245 countries, regions and water stress (6.4.1, 6.4.2), indicator related to agriculture and and territories, and on over 2000 food loss and waste (12.3.1), fish international trade is coordinated by the commodities. The increased detail in HS stocks, sustainable fisheries, illegal World Trade Organization (WTO) and 2012 and HS 2017 has allowed the FAO fishing and access rights for small- concerns agricultural export subsidies14. to improve monitoring in the following scale fishers (14.4.1, 14.6.1, 14.7.1, SDGs-related areas work: 14.b.1), and sustainable forests and Quantitative data is key to measuring mountains (15.1.1, 15.2.1 and 15.4.2). and reporting the progress made by • Food security, by way of producing countries against the Sustainable better estimates of food available for Development Goals framework. Without consumption at country, region and quality trade data, it is not possible to global level, and to calculate their monitor trade flows worldwide, and to related nutritional intake thanks to food commodity worldwide with support international trade policies for a better correspondence between developing countries representing sustainable development. Not only data production (by species and product more than half of the global fish trade. in terms of value (monetary terms) is forms) and its trade. These figures The increased detail in the HS on fish important in this framework: data on are produced by the FAO through species supports, with data evidence, quantities also – and sometimes mainly Food Balance Sheets15 (FBS), which the effective management of fisheries – provides critical information. However, are based on quantity data compiled resources, and also guides actions challenges remain, particularly when it at single commodity level. The FBS for the recovery of overexploited or comes to detailed data on goods that are are then used as a source for the depleted resources. traded in the international market. calculation of the SDG indicators for hunger monitoring under SDG 2. • Sustainability of forest exploitation, Therefore, a vital role has to be played through the improved representation in the 2030 Agenda by the WCO’s • Endangered species, thanks to the of wood and non-wood forest products. Harmonized System (HS) – as the more accurate identification of The review of HS 2017 and the current backbone of international trade statistics animals, fish, tree species and derived review of HS 2022 has – and will – and by Customs administrations – as products, including those that are at even more in the future – improve the key HS users and data providers on risk of overexploitation and the object the analysis of forest exploitation international trade in goods worldwide. of illegal trade. impacts on ecosystems, and of the effects of trade on deforestation and The FAO and the WCO have a long • Sustainability of fish stocks, allowed habitats; a more accurate calculation established partnership in the review of by the more precise identification of of the economic value generated from the HS. Over the past 10 years, the FAO detailed species traded as live, and in forests, and improved estimates of has contributed to the revision of the HS the form of processed commodities. wood energy balances and carbon with the aim of improving the coverage Fish are among the most traded sinks/emissions.

7 8.9, 12.b, 14.7, 14.b, 15.c. 8 15.7, 15.c, 16.4. 9 2.1.1 Prevalence of undernourishment. 10 2.c.1 Indicator of food price anomalies. 11 14.6.1 Progress by countries in the degree of implementation of international instruments aiming to combat illegal, unreported and unregulated fishing. 12 14.7.1 Sustainable fisheries as a proportion of GDP in Small Island developing states, least developed countries, and all countries. 13 14.b.1 Progress by countries in the degree of application of a legal/regulatory/policy/institutional framework, which recognizes and protects access rights for small-scale fisheries. 14 2.b.1 Agricultural export subsidies. 15 http://www.fao.org/faostat/en/#data/FBS.

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• Value chain analysis, detail in the resulted in improved data reconciliation Quantitative data is key to HS according to the different degree across international trade, production measuring and reporting the of processing, supports statistical and consumption statistics. and economic analysis on how much progress made by countries agricultural, forestry and fisheries Some practical implications of this against the Sustainable commodities are traded in the form important achievement are experienced of raw materials, processed or semi- again in the compilation of the Development Goals processed products, or as by-products. FBS, where the three dimensions – framework. Without quality For this reason, and even if trade international trade, production and volumes may be lower that the set consumption – are integrated into a trade data, it is not possible threshold of 50 million US dollars, single framework. The current versions to monitor trade flows the FAO recommends the retention of the three classifications allow for more of these codes as they are used in the balanced data – thus more accurate worldwide, and to support Organization as an important source estimation of the food that is produced, international trade policies for of information that risks being lost traded and eventually available at otherwise. country level for food consumption. sustainable development.

• Prices, and in particular the Despite all these significant monitoring of commodity prices and improvement, however, challenges are trade distortion, including export still being faced. As already mentioned, subsidies and price anomalies. quantity data along with monetary values are of great importance for Additional considerations concern the work of the FAO, as the basis of the role of the HS in the context of food statistics and the compilation of international statistical classifications. physical accounts. Yet availability and Indeed, because it provides the backbone quality of data remain an issue for of international trade statistics, the HS many commodities in many countries, stands at the centre of the international thus hampering the compilation of classification system, and cannot be international trade statistics. In addition, considered as a standalone standard. the harmonization of the HS beyond six digits is a critical challenge to the work Also of particular importance to of statisticians compiling international international statistics is the UN Central trade data, as significant differences exist Product Classification (CPC Ver.2 and in national nomenclatures beyond the Ver.2.116), whose primary purpose is to six-digit level, which imply substantial classify the goods and services that are efforts from statisticians to map codes the result of production in any economy, across national versions. and the UN Classification of Individual Consumption According to Purpose As a final remark, National Statistical (COICOP 201817), which aims to classify Offices (NSOs) are key institutions at and analyse individual consumption the national level in compiling and expenditures incurred by households, disseminating trade statistics and the non-profit institutions serving coordinator body of data reporting on households and general government SDGs. It is, therefore, imperative to according to their purpose. emphasize the need for continued and strengthened cooperation between For this reason, besides collaborating Custom administrations and NSOs as with the WCO in the review of the HS, crucial partners in the maintenance of the FAO has been working intensively the HS, and in the production of quality with the UN – as the coordinator of trade data for the monitoring of SDGs. international classification work – to review the classifications of products More information and of individual expenditures in the [email protected] www.fao.org/sustainable-development-goals field of food and agriculture, including [email protected] www.fao.org/sustainable-development-goals/indicators fisheries and forestry. This effort has now www.fao.org/statistics

16 https://unstats.un.org/unsd/cr/registry/cpc-21.asp. 17 Endorsed at the UN Statistical Commission in March 2018, https://unstats.un.org/unsd/ statcom/49th-session/documents/#documentation.

28 WCO news N° 86 June 2018

The importance of the HS to tariff classification: thoughts from the IFCBA

By the International Federation of Customs Brokers Interpretation challenges impact on compliance and revenue Associations We know that there can be differences collection, governments around the of opinion about tariff classification not globe have introduced various ways to THE WCO WEBSITE tells us that tariff only internationally, but at the national provide guidance on the interpretation classification using the Harmonized level too. There are numerous examples of the HS. The WCO itself established System (HS) Nomenclature “allows a of legal cases where the different Standard 9.9 of the General Annex to world of many languages to speak with interpretation of the HS nationally the Revised Kyoto Convention on the one.” As we mark the 30th anniversary led to interesting appeals of the HS simplification and harmonization of of the official adoption of the HS in classification. Customs procedures, providing for 1988, few could argue against the advance rulings, so that importers have value of this universal language that Given the complexities involved with confidence in the tariff classification of has brought great clarity to the world HS classification and the potential goods prior to their importation. of trade. With 157 Contracting Parties to the HS Convention basing their domestic Customs tariffs on the HS, and dozens more using it despite not being signatories, the HS truly is the language of international trade. It is currently used by more than 200 countries that comprise approximately 98% of world

trade. © Bernard Hermant / Unsplash

Since its implementation 30 years ago, the HS has become not only the basis for identifying goods, assessing duties and taxes, and compiling trade statistics, but is also used by other government agencies, international organizations and the private sector for a variety of purposes. This logical, systematic, universal language is used for developing trade policies, monitoring controlled goods, developing specific rules of origin, determining freight rates, analysing transportation statistics, monitoring pricing and controlling quotas, as well as for general economic research and analysis.

We know that the intention of this universal language is to bring clarity, but what happens when language between countries has national variations such as differences in the application of the HS? It is true that we have tools such as the General Interpretive Rules (GIRs) for the HS (perhaps we can consider these as grammar rules), but what happens when Customs administrations, importers, Customs brokers, and lawyers share the same language, but their interpretation is different?

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Some Customs administrations also regime for incorrect tariff classification. Conversion is a significant cost for issue directives on the classification From a private sector perspective, when governments and the private sector alike. of certain goods, and others publish there is a penalty regime in place, there A single change to the HS can result a list of items that will be subject to must be clear parameters to ensure that in thousands of changes to product post-clearance audit or compliance requirements and obligations are clearly databases, especially for Customs verification, highlighting issues of understood, and that there is a redress or brokers with hundreds of clients common misclassification. By publishing appeal procedure in place. For instance, importing a wide variety of products. this list, importers are provided with a did the importer or the Customs broker One tariff item may be split into two means to support their own compliance know that an incorrect HS code was or more new tariff items, requiring the and, if required, make a correction used? Did they ignore a ruling? Penalties manual reclassification of all products before an audit occurs. Awareness of can be devastating, considering the from the old to the new. Our experience this list of audit priorities can initiate penalty amount assessed, plus possible is that most changes are from one HS a conversation between the importer, additional duties and taxes, which can number to three or four, but there is at the Customs broker and the Customs result in an additional payment that the least one example where a single tariff administration about enhanced overall importer did not consider when pricing item in 2016 expanded to ten in 2017! compliance, contributing to fairness and the imported goods for sale. All of their transparency. profits, and more, may be lost. Looking ahead to 2022 and the implementation of the next set of HS In addition, the WCO publishes the It is critical to measure the impact changes, we encourage WCO Members Explanatory Notes that provide users of a penalty system on classification to be responsive to the needs of business with the official WCO interpretation compliance. It is reasonable to suggest as they adapt the WCO’s changes to of the HS. Although the Explanatory that if one is penalized financially for national priorities, and finalize national Notes are not binding in all countries, making an error in tariff classification, tariff schedules. We need adequate time they are widely and practically used to the same error is not likely to recur. to convert existing databases. enhance the uniform understanding and However, it is also reasonable to application of the HS worldwide. suggest that Customs administrations We also need Customs administrations issue penalties for incorrect tariff and other related government We can’t forget the Legal Notes, which classification only after careful scrutiny, departments to leverage technology are legally binding. Without these, how within clear parameters, and that the in order to enable seamless automated would one know that the expression mechanism to appeal a penalty should downloads of information. For example, “babies' garments and clothing be simple and timely, with input from if HS codes can be downloaded into a accessories” means articles for young all parties. Penalties should not be seen Customs brokers’ database, goods children of a body height not exceeding as the only way to promote compliance subject to anti-dumping duty or to 86 cm (heading 61.11), or that Chapter 10 and deter non-compliance: countries another government department’s does not cover grains, which have been should constantly strive to find the regulations can be easily identified on a hulled or otherwise worked, but that best possible mechanisms to resolve timely basis. rice, husked, milled, polished, glazed, differences of opinion and to educate parboiled or broken remains classified all who have responsibility for HS In addition, we need to respect sensitive in heading 10.06? classification, both inside and outside commercial information and be clear Customs administrations. about commitments to trade compliance The WCO’s HS Committee (and the HS in both government and the private Review Sub-Committee), in addition to Managing the HS review sector. Even though information about overseeing the five-year cycle of changes The HS has not remained static and it their clients’ goods might be sensitive or to update the HS, is tasked with the must continue to evolve. What happens proprietary, Customs brokers must make settling of interpretation disputes and when changes are made to the HS, and it clear to importers that, in order to be providing classification opinions for what are the impacts for business and compliant, certain information must the Compendium of Classification for national Customs administrations? be provided in order to determine the Opinions. It also provides classification We have just completed a review correct HS code. opinions and recommendations on new cycle, with the next one scheduled for technologies, such as 3D printers and 2022. Changes to the HS affect trade Alternative nomenclatures drones. agreements, requirements of other In this time of ‘big data’ and data government agencies, sourcing decisions analytics, what is the future of the Penalty regimes by business, and changes to education HS? There are ideas around the HS Implementation of the HS by national programmes, information technology itself, including broad access to readily Customs administrations is often (IT) systems, and communication tools available and reliable country-specific accompanied by a comprehensive penalty and websites. information, and the use of generic

30 WCO news N° 86 June 2018

HS categories for the classification of must congratulate the WCO on this goods for revenue collection. There universal language that has contributed The International Federation of are also discussions about alternative to better efficiencies, improved revenue Customs Brokers Associations nomenclature systems that could management, and provided greater (IFCBA) works to promote the supplement or replace the HS by clarity for business and related service value and use of Customs brokers providing additional information about providers. We acknowledge the worldwide, bringing about goods to various parties. For example, we outstanding contribution of HS experts improvements in Customs policies know of one country that is considering at the WCO’s Headquarters in Brussels and practices on a global basis that the use of GS1 standards in order to and the tariff specialists in WCO Member benefit both Customs brokers and enhance the HS code to better identify administrations in making the HS the their clients, as well as keeping them imported goods. Watching all of these success that it is, and we look forward to at the centre of the international developments, we must guard against celebrating the next HS milestone. trading system. increased costs, unnecessary complexity, possible duplication, and the potential More information for errors. [email protected] www.ifcba.org Positive reflections As the global trade community reflects on the first 30 years of the HS, we

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The HS lights the way for traders

By Beth Jenior, to solve a specific problem, or may lamps to the public. In 1892, the Edison ATTORNEY-ADVISOR, OFFICE OF TRADE, U.S. request a tariff classification decision General Electric Company merged CUSTOMS AND BORDER PROTECTION which ultimately reveals a challenge best with its main competitor, the Thomas- addressed by amending the legal text. Houston Company, to form the General As industry continues Electric Company. The companies’ At the beginning of every HS review directors agreed that they could advance to innovate, the work on cycle, the U.S. International Trade lighting technology faster if they worked Commission (USITC), which is together. By 1904, engineers at General amending the Harmonized charged with maintaining updates to Electric had developed a tungsten the Harmonized Tariff Schedule of filament lamp, which lasted longer and System is never complete. the United States, publishes a request shone brighter than the original carbon for amendment proposals in the filament lamps. This article looks at the Federal Register. The Federal Register is a daily publication of proposed and In 1939, engineers from General origin and evolution of final administrative regulations of Electric and Westinghouse introduced U.S. federal agencies. In addition, U.S. fluorescent lamps at both the New LED products to illustrate Customs and Border Protection (CBP) York World's Fair and the Golden publishes its own weekly bulletin, which Gate Exposition in San Francisco. The how the System can adapt contains agency rulings, domestic court need for efficient lighting in World decisions on trade, and the agenda for War II factories resulted in the rapid to product developments the HS Committee. This is one of the expansion of fluorescent technology. ways in which the U.S. Administration In 1962, researchers at General Electric over time, lighting the communicates with its domestic invented the first visible-spectrum LED industry about particular agenda items in the form of red diodes. LEDs are way for traders and before the WCO working bodies, or semiconductor devices which emit light identifies areas where the HS may be when electric current passes through guaranteeing the flow of improved. them. Pale yellow and green diodes were invented next. As companies continued legitimate trade across Developments and history to improve red diodes and their The U.S. lighting industry reached out manufacturing, they began appearing as international borders. to CBP and USITC when light emitting indicator lights and calculator displays diode (LED) products appeared on the in the 1970s. The international Harmonized HS Committee agenda in 2012. Over the Commodity Description and Coding course of the next several years, we had As the lighting industry expanded its System, also known as the Harmonized regular meetings with representatives development of LED products, their System or HS, is a powerful instrument of the lighting industry to further our applications remained limited. Before the of trade. Every five years after the understanding of the development of advent of the blue LED, manufacturers conclusion of the WCO’s review cycle, LED technology, which informed our were unable to produce white light. each Contracting Party to the HS approach to these products in the context In the early 1990s, approximately 100 Convention implements amendments of the upcoming HS amendments. The years after Edison’s patent, Professors to the System. These amendments origin and evolution of LED products Isamu Akasaki and Hiroshi Amano of are the result of meetings of both the provide the perfect example of how the Nagoya University, and Shuji Nakamura WCO’s HS Committee and the HS HS can adapt to product developments of Nichia Corporation, concurrently Review Subcommittee. HS Contracting over time. discovered that gallium nitride was the Parties may submit a draft amendment key ingredient in producing blue LEDs. for consideration to these two working In order to understand LED products, it Now, blue LEDs are easily altered to bodies. Proposals to amend the is helpful to understand the history and provide white light. These three Japanese HS often arise when the domestic evolution of electric lights. On 14 October scientists won the 2014 Nobel Prize in industry raises an issue with its home 1878, American inventor Thomas Edison Physics for their discovery. Customs administration. The industry filed his first patent application for an representatives may specifically request electric filament lamp, or light bulb. By The invention of blue LEDs led to an an amendment to the HS Nomenclature 1880, Edison’s company was selling its explosion in breakthroughs using

32 WCO news N° 86 June 2018 © David McEachan / Pexels

LED technology. Blue, red and green pertaining to these products. The EU lamps were of paramount economic LEDs can now be combined to make delegate noted that lamps were generally and ecological importance. any colour of light. This has led to the classified under heading 85.39, which development of screens for cell phones, provided for "Electric filament or Noting the short time frame left to computers, televisions, tablets, and many discharge lamps, including sealed beam finalize amendments for the 2017 other electronic devices in today’s world. lamp units and ultraviolet or infra-red version of the HS (the HS Committee lamps; arc lamps." needed to finalize these amendments In addition to coloured light by March 2014), the majority of the advancements, LEDs are also more The EU delegate pointed out that the delegates expressed the view that LED energy efficient than traditional lighting. text of heading 85.39 did not cover lamps should be provided for in the A modern white LED lamp converts lamps incorporating LED technology. Nomenclature as soon as possible. more than 50% of the electricity it uses Consequently, most WCO Members Therefore, the Committee decided to into light. By contrast, a traditional were classifying LED lamps under send the draft amendment to the HS filament lamp only has a 4% conversion heading 85.43, a basket provision, which Review Subcommittee for discussion rate. LED lamps last up to 100,000 provides for “Electrical machines and while the Committee continued to hours, compared to 10,000 hours for apparatus, having individual functions, examine the classification of the LED fluorescent lights and 1,000 hours for not specified or included elsewhere in lamps under the 2012 HS text. filament lamps. As consumers switch this chapter.” to LED lamps, global consumption of At the 43rd Session of the HS Review electricity and materials for lighting will Given the growing use of LED lamps, Subcommittee in April 2012, the reduce dramatically. the EU delegate stated that it would be Subcommittee examined two proposals useful to classify them together with for LED lamps. The EU proposal involved Classification journey the other lamps covered by heading adding the term “semiconductor lamps, As technology advanced, the HS also 85.39. The lamps of heading 85.39 including light-emitting diode (LED) progressed through the hard work of were being replaced by LED lamps lamps,” to heading 85.39, as well as WCO Members. For the 49th Session at an astonishing pace. Indeed, the subheadings for “LED lamps” and of the HS Committee in March 2012, manufacture and sale of filament “other” semiconductor lamps. The the European Union (EU) submitted a lamps were reduced substantially in proposal submitted by Korea was to add request for the Committee to classify the EU following the coming into the term “light-emitting diode (LED) certain LED lamps, which in the U.S. force of legislation that was applicable lamps” to heading 85.39, and to add one are referred to as “light bulbs.” They throughout the European Community. new subheading, which provided for the also introduced a draft amendment Finally, the delegate noted that LED same.

33 DOSSIER

The EU delegate explained that their proposal How industry engages on classification matters was worded broadly in order to cover products such as organic light-emitting diodes (OLED), or phosphorescent organic light-emitting at the WCO diodes (PHOLED), which may not be covered by the term “LED lamps.” Some delegates By the International Chamber of agreed with the EU delegate’s observation. The Commerce delegate of Korea stated that the term “LED lamps” could be read broadly to cover goods How does a specific such as OLED and PHOLED products. Several delegates agreed with this interpretation. product become the subject At the 44th Session of the HS Review of a global classification Subcommittee in November 2012, the Subcommittee agreed to proceed with decision at the WCO? Korea’s proposal. Several delegates noted that the HS Explanatory Notes could clarify What information that the term “LED lamps” also covers similar LED technologies such as OLED and is considered when PHOLED. The Explanatory Notes are the official interpretation of the HS. The Review amendments are made to Subcommittee sent the proposal to the HS Committee, which provisionally adopted the the Harmonized System amendment for inclusion in the 2017 version of the HS. (HS) nomenclature? And Continuing innovation and the future how can a company or However, as industry continues to innovate, the work on amending the HS is never complete. industry sector engage Given that LED products are manufactured in a wide array of configurations, the HS Review at the WCO to support Subcommittee is working on additional amendments to clarify their classification for classification decisions and the 2022 version of the HS. In consultation with their domestic lighting industries, the HS amendments? U.S., the EU and Japan have all submitted draft amendments to the HS Nomenclature. These amendments cover the following Involvement and information products: LED modules, or lamps equipped from industry is critical in making with electrical connectors other than a cap, classification decisions for complex of heading 85.39, assemblies of individual commodities and keeping the HS up to light-emitting diodes of heading 85.41, and date with technological developments luminaires and lighting fittings designed for and changes in trade flows. Because sole use with LEDs of heading 94.05. it moves parts and finished goods around the globe, the private sector This illustrates the beauty and challenge of the has a vested interest in the global HS review cycle. Very soon, these new LED classification decisions made by the technologies will have a home in the text of WCO’s Harmonized System Committee the HS Nomenclature. As a living, breathing (HSC). document, Contracting Parties to the HS can continuously update the nomenclature The HSC is composed of Customs to cover new products and advancements in officials of Contracting Parties to the HS technology. And the global Customs and trade Convention, who provide much needed community can rely upon its text to guarantee stability and predictability in Customs that legitimate trade continues to flow across classification. Committee decisions, international borders. often accompanied by a classification opinion, provide guidance to Customs More information administrations as well as importers and www.cbp.gov exporters.

34 WCO news N° 86 June 2018

How industry engages on classification matters at the WCO

A commodity gets identified for the Customs officials may invite multicomponent integrated circuits and classification when a new product technical representatives from tablet computers, among others. starts being traded globally and is not industry to the HSC meeting to clearly identified in the HS, if there is a answer questions and/or give a brief Collaborative approach classification dispute between countries, presentation. Thus, the private sector has two or if there are cases of a lack of uniformity established ways to express its views in the classification. Amendments to the • The second option is for industry to and be part of a collaborative approach legal text of the HS nomenclature take contact the International Chamber to a successful outcome on classification place during five-year review cycles. of Commerce (ICC) either directly or matters, a collaborative approach The 2017 edition of the nomenclature is through an ICC national committee. which is vigorously championed by currently in effect with the next edition Through a Memorandum of both the WCO and ICC, and one that scheduled for implementation in January Understanding (MOU) with the has benefitted industry and Customs 2022. WCO, ICC participates as an administrations alike. observer during meetings of the Options for industry engagement HSC and its Review Sub-Committee. More information There are two primary methods for ICC provides reference information Rachel Dignam industry to support the classification of and non-papers in response to ICC Commission on Customs and Trade commodities and amendments to the HS requests from the WCO Secretariat, Facilitation nomenclature: and also coordinates presentations Tel: +33 1 49 53 28 95 and demonstrations to support [email protected] • The first option is for a company or the classification of goods or industry organization to directly amendments to the nomenclature. engage their home Customs administration on the classification ICC recently provided a non-paper ICC is the world business matter. A list of HS officials in on additive manufacturing (3D organization, helping businesses national administrations can printing), which was the basis for of all sizes and in all countries be found on the WCO website. an HS amendment proposal for this to operate both internationally Technical and reference information new technology. In addition, ICC and responsibly. It has a global can be provided to the Customs has coordinated presentations and network which includes over six officials for inclusion in the working demonstrations for classification issues million members in more than 100 documents that support the involving smartphones, smartwatches, countries. classification decision. In addition, drones, large screen monitors,

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Serbia’s valiant efforts to protect cultural heritage

By Serbian Customs Capacity building Regional Bureau for Science and Culture IT IS A known fact that sites across Serbia Serbia is either the country of origin in Europe, as well as by the Italian police. are being dug over and destroyed by of smuggled cultural property, arts treasure hunters and antique traders, and antiques, or a transit country, but Cooperation and that valuable cultural artefacts generally not the final destination. At the national level, the Customs are ending up in auctions or antique Indeed, art smugglers are constantly Administration of Serbia cooperates fairs in the West, where they sell for looking for passages and routes to specific with the Ministry of Culture and amounts which, although very high, European countries, where they can find Information, the Institute for the far reflect their actual cultural value a market for these sorts of goods. Protection of Cultural Monuments, and significance. This phenomenon the National Library, as well as with is not limited to Serbia. Smuggling of Serbia Customs started building its several services within the Ministry artworks and antiques is estimated to capacity to protect cultural property of the Interior, especially the Service be among the most lucrative forms of a while back. In 2006, it developed for Combating Organized Crime. smuggling, and seizures of cultural “Guidelines for Identifying and Through the Ministry of the Interior, goods are growing all over the world, Assessing Antiques and Rarities,” a Serbia Customs also maintains good which could indicate an increase in publication which contains detailed cooperation with the Public Prosecutor’s this phenomenon. content and rich photographic material. Office and the Special Prosecutor for This handbook offers basic guidelines Organized Crime, as well as with the Given the importance of cultural for establishing the approximate values European Police Office (EUROPOL) and heritage to societies and the economies of antiques and rarities, and describes INTERPOL. of countries, as well as the fact that several methods used to move them a portion of the proceeds obtained illegally across borders. It covers The Customs Administration has also illegally through the trafficking of paper antiques, old books, engravings, established cooperation mechanisms stolen and smuggled artworks and geographic antiques, antique furniture, with other Customs authorities, which If your job was this easy, you wouldn’t need us. antiques is often used to finance jewellery and precious decorative are implemented on the basis of signed international organized crime objects, gemstones, clocks and watches, agreements. As part of Serbia Customs’ and even terrorism, the Customs coins, paintings, antique icons, and cooperation agenda, it has also actively Administration of Serbia is putting up various other antiques. participated in regional or international a strong fight against this criminally- operations targeting cultural goods, linked phenomenon. Serbia’s efforts Moreover, Serbian Customs officers such as ODYSSEUS, AUREUS and in this regard are particularly regularly participate in training PANDORA. WITH OUR RANGE OF DETECTION SOLUTIONS, CONTRABAND AND THREATS MAY AS WELL WEAR A SIGN. relevant in 2018, being the European exercises and workshops on a variety From scanning vehicles to screening densely loaded cargo, the OSI Systems family of security companies offers proven products, Year of Cultural Heritage. The of topics related to the fight against In terms of regular international innovative technology, and unrivaled expertise to help you uncover trade fraud and smuggling. Whether you need a standalone European Union, who chooses every the illicit trafficking of cultural data exchange, a substantial amount system or a fully managed, turn-key operation, we can help design, implement, and support a solution tailored to your mission. year to address a subject in order to property, as well as on issues such as of information is received from encourage debate and dialogue within the restitution or return of cultural INTERPOL on objects of significance and between member states, wish to objects, preventative measures, and to cultural heritage. Along with basic encourage more people to discover and risk mitigation. In November 2017, information on the items, the Customs engage with Europe's cultural heritage, such a workshop was organized by the Administration also receives photos and to reinforce a sense of belonging to United Nations Educational, Scientific of the objects, which allows for easier a common European space. and Cultural Organization’s (UNESCO) identification. Such information is

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received by the Customs Intelligence drivers, giving them goods to be en route to Western Europe, thus Department and then passed on to transported, or persons travelling preventing these precious religious all Customs offices, including the frequently to Western European objects from being lost to these lands Administration’s Anti-Smuggling countries. and the communities that treasure them. Department. For instance, in 2017, two gospel books Challenges Last but not least, information on from the XVII and XVIII century were The Customs Administration of Serbia seizures of cultural goods is shared found in the luggage of a bus passenger is the last line of defence against this with other Customs services through (picture 1), and earlier this year, Customs drain of precious cultural heritage, the ARCHEO platform, the WCO’s officers at Gradina border crossing point and has become a mighty obstacle real-time communication tool for found coins and parchment scrolls in for smugglers of all sorts, including the exchange of information and Arabic script while scanning the spare those trying to profit from smuggling cooperation in the protection of cultural tyre of a vehicle (picture 2). antiques. However, to further enhance heritage. Information reported on the Serbia Customs’ capacity to protect platform enables enforcement officers More antique coins packed in old cultural heritage, the Administration to learn about new smuggling methods, newspaper and plastic bags, as well as a has determined that there is a need to: and cases seen as most interesting are bronze bust of a Roman legionnaire and shared with all Customs employees. a metal-cast figurine of a bull, were also • establish a common action mechanism It is, therefore, of utmost importance found hidden under the driver’s seat, in detailing the role and procedures of all that all Customs authorities share such the armrest, and behind the backseat authorities and institutions (Ministry information via the platform in order to of the vehicle (picture 3) in a car at the of Culture and Information, Ministry enhance their risk analysis capabilities. Batrovci border crossing point. of the Interior, Ministry of Finance – Customs Administration, Ministry Results There were also attempts at smuggling of Justice and the Public Prosecutor’s Based on information to hand, it can icons of particular significance to the office) on all levels (local, regional, be said that smugglers mostly use their Eastern Orthodox Church. For instance, national and international), as well own vehicles for smuggling artworks at Gradina border crossing point in as the information-exchange scheme and antiques, with such vehicles often early 2015, Customs officers uncovered and contact points within each of these converted and modified to meet the two Orthodox icons (picture 4) hidden services; smugglers’ needs. They also use bus among luggage in the trailer of a vehicle • establish permanent inter-sectoral government working groups that would discuss and propose efficient solutions on issues of relevance to the protection of cultural heritage (from drafting an action plan, through © Serbian Customs amendments to legal regulations and the introduction of a database, to coordination and assistance in cases of theft, counterfeiting, illicit traffic, damage and destruction of cultural property);

• establish departments dedicated to Picture 1 national cultural heritage within the Ministry of Culture and Information, and, within those, inspection services for the protection of national cultural heritage with all

© Serbian Customs the necessary competencies;

Picture 2

38 WCO news N° 86 June 2018

• develop a digital national cultural © Serbian Customs property database and to digitally catalogue church-owned cultural property (in addition to data on the item and its digital photographs, detailed information on how and where the items are kept should be provided);

• develop a digital field map, with geographic coordinates of sites and detailed data on the distribution and concentration of immovable and movable cultural heritage, which could be available to the public, to a certain extent – such a map would have multiple benefits, especially in assessing the risks of natural disasters and other incidents, and in creating plans for the evacuation of cultural property in such situations;

• authorize museum employees to offer expert assistance to Customs and police officers at border crossing points for identifying and assessing items suspected of being the subject of illicit trafficking of cultural property.

Continuing action Given the fact that cultural heritage has a universal value for all, whether as individuals, communities or Picture 3 societies, and in recognizing the importance of preserving this heritage for future generations, the Customs Administration of Serbia is determined to continue acting as a strong barrier to smugglers. © Serbian Customs

Its continuing enforcement action, complemented by other national efforts to protect cultural property, will surely result in further successes in denting this illicit trade.

More information [email protected]

Picture 4

39 PANORAMA

Rethinking training: a visit to the Netherlands Customs National Training Centre

NOWADAYS, MOST CUSTOMS administrations facilities. Kees realized that his dream have a school which teaches Customs of creating such a body in Rotterdam staff. Some have a training centre devoted could become reality. The Directorate to the continuous practical training of General subscribed to the idea, and the officers throughout their careers. And Rotterdam Regional Training Centre it is one of these centres and its crucial was established in 2006. role that is examined in this article, the purpose of which is to provide food for Trainers are recruited from serving thought about training and the future Customs officers according to their prospects offered by technology. motivation and ability to communicate and to use their imagination and The courses run by the Customs school innovate, as well as qualities such as make it possible to acquire the knowledge their dynamism, common sense, and required to exercise the profession and to consideration for others. Playing out explore the theoretical aspects of various real-life situations is an essential part subjects to be mastered. However, their of the training, and trainers have to practical and operational aspects can be develop role-plays and practical exercises explored to only a very limited degree. in which they themselves take part. • a 850 square metre area replicating According to Kees Visscher, the The recently established centre has a container park where all kinds Manager of the Netherlands Customs a computer training area. Outside, a of training take place, from port National Training Centre responsible row of containers is used for various checks and the physical inspection for the maritime and land sector, there exercises, but the climate is harsh in the of containers and their contents to is a real challenge when it comes to Netherlands. Kees is, therefore, starting fumigation exercises; building skills, that is to say the ability to think about building a new structure to act effectively in a defined situation, which would make it possible not only • a warehouse which makes it possible an ability which draws on knowledge, to train Customs officers whatever the to test the ability of Customs officers but is not reduced to it. weather conditions, day or night, but also to check inventories and identify to school them in an environment which suspect goods, non-regulation Kees speaks from experience. Before reproduces real working conditions as packaging, etc.; taking over the Rotterdam training closely as possible. They could also be centre, he had held various managerial filmed during the exercises developed • a 500 square metre area dedicated to posts, including being responsible for by the team of trainers to make the the searching of vehicles which has a training and coaching management post-training evaluation sessions more store of cars of all ranges and sizes, staff working at the port. The years spent interesting and effective. to which a bus will soon be added; training staff led him to conclude that Customs officers in the Netherlands A detailed analysis of the plan has • an entire space which reproduces display very varied levels of skill. Whilst been drawn up and submitted to the the various “rooms” of a vessel: crew some exhibit great abilities, others lack Directorate General. Work begins in quarters, a Customs store, a captain’s know-how, which clearly affects the 2014 and, although there is a little left to meeting room, and an engine room. quality of their daily work. be done, the first training programmes have been under way since the end of The various rooms are equipped with Beginnings 2017. video cameras and a sound system, Early on, Kees came up with the idea of which make it possible to create a setting up a training centre which would A unique centre realistic sound atmosphere. In the engine make it possible to transfer operational The centre is a large building of 2,000 room, in addition to the engine noises, know-how and assess officers’ skills and square metres divided into several areas. the temperature can rise to 30 degrees. conduct. In 2004, a colleague returning The section dedicated to the training The cameras make it possible to follow from a visit to the Halifax training centre of Customs officers in the strict sense the training from the control room, in Canada described the centre and its includes: study the behaviour of the participants

40 WCO news N° 86 June 2018

as closely as possible and, once the Customs declarations for exports to The various rooms are exercise is over, show them the images, Britain will increase by 4.2 million if necessary, during the debriefing. and import declarations by 752,000. equipped with video cameras Netherlands Customs intends to recruit and a sound system, which The trainers, who must constantly and train new officers, some of which keep up to date with methods of will pass through the training centre in make it possible to create a concealment and operating procedures the coming months. realistic sound atmosphere. in order to develop credible scenarios, have a workshop where the equipment In addition to these new recruits, all In the engine room, in necessary for the training is made: the Customs field officers and technical addition to the engine noises, hiding places, labels, and reproductions experts working in a port environment of objects or at least their shape. A 3D will have to undergo four days of the temperature can rise to printer is amongst the recent purchases. training at the centre every year. The 30 degrees. It will make it possible to reproduce centre will also be able to welcome objects that are difficult to obtain, foreign delegations and continue to such as, for example, the skull of an collaborate with the WCO, as part of the endangered species of monkey which Container Control Programme jointly could be placed in the crew quarters. run by the United Nations Office on Drugs and Crime (UNODC) and the Part of the building is reserved for the WCO, for example. Dog Handling Training Centre, which has a huge outdoor area as well as an Virtual and augmented reality indoor area for substance detection Kees is now considering using virtual training, and a room reproducing the reality and augmented reality. These inside of a house to teach the dogs how two technologies are different. Whilst to move around in such an environment. virtual reality creates total-immersion simulation, augmented reality New recruits superimposes on the real world 3D The departure of the United Kingdom images, captions and other elements from the European Union will have which improve the user’s perception of effects on the Customs activities of his/her environment. the Netherlands. It is estimated that

41 © Dutch Training Center 42 of Customs officers responsible for responsible officers of Customs for agroup training some defensive gun organized Kees idea, of the relevance To there. fauna the and demonstrate flora the to discover to Madagascar or even terminal, or aport warehouse to a transported to be enough be would A computer, ahelmet and some sensors catheters. of Foley insertion or the resuscitation cardiopulmonary as such procedures in practitioners to guide technology this use Hospitals rigs. onoperate oil employees to their to train technology this to use have started companies Oil industries. oil and health the as such industries for certain amajorbe asset proved has to technology reality Virtual PANORAMA a private company in collaboration with with collaboration in company a private by developed simulation degree of a360 aid the with out searches house carrying any bullets. any to buy no need is there and arise, issues no safety training, of gun case the in Moreover, environments. and scenarios of a multitude developing and desired, as often as them replaying for analysis, again images the of viewing possibility the offers technology The exercise. the during of adrenaline felt rushes they properly trained, already are they Although realistic. and very effective very training the found officers The Customs Research. Scientific Applied for Organization Netherlands the and of Defence Ministry Netherlands the is its cost. Virtual reality devices are devices reality Virtual cost. its is technology to this obstacles One of the [email protected] information More him. to contact urged strongly is endeavours his in participating in interested or organization administration Any apilot. as serve would that game reality virtual to develop asmall necessary funds the to find case a business together on putting working currently of tomorrow. He is training the role in play a major will reality augmented and reality of virtual technologies the that persuaded is Kees people, many Like future of the Training gesture. ahand removed with and angles all from visualized be can vehicle of the part Each more easily. inspection, vehicle as such tasks, certain officers for to train possible it is reality, augmented regards As devices. reality virtual using after nauseous may feel slightly who users disorientate can devices the and force of touch and feedback, sense the reproducing of difficulty the faces still technology The concerns. other also are There itself. in expensive is system training reality avirtual developing more, is What cards. graphic powerful of computers with installation and use the require and expensive relatively still L3 PLATINUM SPONSOR BOOTH 6&7 WCO IT CONFERENCE & EXHIBITION JUNE 6 – 8, LIMA, PERU

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Participants attending the Workshop on Small Arms and Light Weapons visit the Australian Border Force's international mail clearance facility in Melbourne WCO Asia Pacific Security Project: activity update

IN LIGHT OF the spate of terror attacks in • Programme Global Shield (PGS), an WCO Asia Pacific Security Project various regions around the world, on initiative to monitor the trade in 14 in action 10 December 2015, the WCO Policy chemicals that could be diverted for Thanks to financial support from Commission issued the Punta Cana use in the illegal manufacture of the Government of Japan, a specific Resolution, which emphasizes the key improvised explosive devices (IEDs) project was developed for Customs role that Customs administrations play in as well as in the trade of detonators administrations in South East Asia and tackling illicit cross-border movements and transmitters; the Pacific Islands to strengthen their of goods that could ultimately support capacity in three of the five areas of terrorism and terrorist financing. • the Small Arms and Light Weapons the WCO Security Programme: items (SALW) Project, which is aimed at monitored under the PGS, SALW, and The WCO Resolution, which was countering arms smuggling; passenger controls through the use API closely aligned with other international and PNR. declarations issued by the G20 Group • the utilization of advance passenger and the United Nations Security information (API) and passenger To manage the project, a dedicated Council condemning terrorist attacks, name record (PNR) data to enhance team has been established at the WCO’s urged Members of the WCO to passenger controls; Headquarters. Moreover, experts with re-concentrate their efforts to prevent technical expertise in the three areas of such attacks. • the Strategic Trade Controls work that the project focuses on were Enforcement (STCE) Programme, hired. They work from Thailand thanks WCO Security Programme in a which aims at building the capacity to the generous support provided by nutshell of Customs administrations in Thai Customs to facilitate the delivery Besides raising awareness among dealing with strategic goods, of training in the region. Customs administrations on the issue, which are defined as weapons of the WCO then developed a Security mass destruction (WMD) and Awareness-raising Programme to support those of its conventional weapons and related The official project launch event was held Members who needed assistance in items involved in the development, in Bangkok, Thailand in March 2017. building or enhancing their border production or use of such weapons This was followed by several other events security capacity. The programme is and their delivery systems; including an “Introductory Workshop divided into five streams of work: on the WCO Security Project” in • the fight against terrorist financing Jakarta, Indonesia in April 2017, and a and illicit trade flows in general. “WCO Asia/Pacific Regional Workshop

44 WCO news N° 86 June 2018

As with other projects, the United Nations Office on Drugs and among Customs administrations in the Crime (UNODC) being consulted. region. An operation targeting products a train-thetrainer monitored under PGS and another approach was Capacity building activities focusing on SALW is scheduled to be As with other projects, a train-the- held. adopted to ensure that trainer approach was adopted to ensure administrations are that administrations are equipped with To support PGS related operations, skills and knowledge to conduct their the WCO will make its Global Shield equipped with skills and own national training, guaranteeing Application available – the application knowledge to conduct the sustainability of the project. Train- is a secure communications platform the-trainer courses gather representative dedicated to PGS. Moreover, to further their own national from all participating countries. The first enhance the capability of Customs training, guaranteeing training event took place in March 2018 administrations in the region, field in the Philippines as part of PGS, where officers will be provided with modern the sustainability of the participants deemed to have potential portable inspection devices for the project. were identified. detection and identification of explosives and related items, together with training These identified officials will have to in their use. take part in a capacity building mission with an expert, during which their The deployment of a standardized API training skills will be evaluated once and PNR system in one administration more. Participants from Bangladesh as a pilot test is ongoing. The API-PNR have already delivered training on PGS system will collect passenger data and related matters to their peers in Dhaka have a number of search, targeting on SALW” in Melbourne, Australia in in April 2018 with the assistance of and sorting functionalities designed to July 2017. the project’s PGS expert. A train-the- identify persons representing a risk from trainer event on SALW will be held in pre-tested standard profiles. It will also A further awareness-raising event Cambodia soon. compare passenger data collected with was held in Bangkok in October 2017 data from national or international focusing on the threat posed by IEDs When it comes to passenger controls, processing systems concerning people in the region, the benefits of PGS, and workshops will be organized in the who are known or wanted, and stolen strengthened passenger controls to coming months for Customs and other or lost documents. mitigate the threat of cross-border border agencies as well as stakeholders movement of foreign terrorist fighters. in the region to discuss effective risk Developments assessment and targeting techniques In view of the progress achieved as part Scoping missions through the use of, among other things, of the WCO Asia Pacific Security Project, Scoping missions were conducted pre-arrival risk assessment based on API the Government of Japan decided to to determine the needs of Customs and PNR, as well as the dissemination fund a similar programme for countries administrations in the region. The of WCO guidance on building API and in West and Central Africa. This new project team has completed missions to PNR systems, and information on other security initiative was launched in Bangladesh, Cambodia, Indonesia, the relevant WCO tools and instruments Guinea in April 2018. During the launch, Lao People's Democratic Republic, the aimed at enhancing risk assessment the heads of Customs administrations in Maldives, Myanmar, the Philippines, capacities. the region discussed ways to strengthen Thailand and Vietnam in order to further border control as a means of enhancing discuss national needs for technical In addition, national workshops focusing security and safety, and fully welcomed assistance and capacity building, as more in depth on risk assessment related the new project. well as to gain an understanding of practices and inspection techniques on country-specific security threats and air passengers will be held. Each of these To learn more about these initiatives and circumstances. events will be customized, according to discuss what Customs administrations to the needs of each country and to have done to address security threats and Training material the prevailing situation as regards the what more should be done, three years The training material already developed level of risk and the type of illicit trade on from the Punta Cana Resolution, you as part of PGS was updated and training confronting it. are invited to attend the WCO Global material on passenger controls has been Security Conference that is scheduled completed. As for the development Operational activities and equipment to be held at WCO’s Headquarters in of material related to SALW, it is still Organizing enforcement operations Brussels from 2 to 4 October 2018. ongoing with a number of Customs is planned in the near future, and administrations and a range of coordination groups are to be More information stakeholders, including INTERPOL and established to facilitate communication [email protected]

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Brazil’s new integrated risk management solutions

By Gustavo Lacerda Coutinho, TECHNICAL MANAGER OF THE CUSTOMS IT DEVELOPMENT TEAM, and Jorge Eduardo de Schoucair Jambeiro Filho, HEAD OF ARTIFICIAL INTELLIGENCE FOR CUSTOMS SYSTEMS, DEPARTMENT OF FEDERAL REVENUE OF BRAZIL

IN 1993, THE Department of Federal Revenue for “Customs Selection System through that defines the production activity of Brazil (RFB), which has under its Machine Learning” in English. This of a company); umbrella both the Customs service and computerized tool has been in use • the nomenclature codes of the the internal revenue service, launched since August 2014 to evaluate the risk goods being imported; Brazil’s Integrated International Trade posed by importations. It runs 24/7 in • the countries involved in the System (Siscomex) as part of its efforts to one of the Brazilian government’s data production; implement computer-based procedures centres. The AI tool “learns” from the • the commercialization and and controls. The System, which history of import declarations, both transportation of the goods; allows economic operators to register through supervised and unsupervised • the Customs broker that registered merchandise transactions at import and learning – two ways in which machines the declaration; export, feeds a huge database. (algorithms) can be set loose on a data • a tariff concession request; set and expected to learn something • the manufacturers and suppliers of Before Siscomex was put into place, not useful from it. the goods. having data in electronic format was a problem. Today’s challenge, however, With supervised learning, the Import declarations that were cleared is the fact that data sets which are now expected output of the algorithm is without being inspected are used for collected are too large and spread across already known and the algorithm is unsupervised learning, and lead to the many systems. To assist its officers in “taught” from a training data set that identification of typical patterns and extracting knowledge from the data in contains all the correct answers. For atypical ones. The main example of a timely manner and enable them to this “training,” import declarations this outlier detection process involves take appropriate action, the RFB recently that have been inspected by Customs incompatibilities among the natural developed three intelligence tools that officers are used to identify direct language description of goods and work together harmoniously: a tool correlations between the presence or their declared nomenclature codes. based on machine learning, a desktop absence of errors and the patterns Goods that are “unexpected” for a information gatherer software, and a real composed by the attributes of the company with a certain economic time risk monitoring system. declaration, such as: activity code and goods that are bought from suppliers or manufacturers that Machine learning • the importer's identifier; do not usually sell the same goods to The artificial intelligence (AI) tool is • the importer's national economic other Brazilian importers also call called SISAM, a Portuguese acronym activity classification (the code attention.

46 WCO news N° 86 June 2018

and evaluates the consequences of these avoids being induced by an importer to values for taxes and administrative the conclusion that a certain behaviour requirements. With this, SISAM is correct just because it is recurrent. calculates the return expectation of every possible inspection during the Customs Moreover, SISAM has the resources to clearance process. These expectations handle “mutant classes,” i.e. target classes are later used to “feed” the decision and whose definitions can change, which is game theories, both of which support atypical for supervised learning systems, SISAM’s selection mechanism. but is necessary since the rules for the classification of goods are often changed. SISAM's supervised and unsupervised SISAM has the ability to explain, in If, for example, one nomenclature code learning capabilities are not actually “natural language” (the name used is split into two, for some time, data on separated. They both emerge from to refer to human language in the AI the newly created codes will be scarce. the same probabilistic models and field), the reasons behind the selection SISAM can use the old and plentiful share the same knowledge base, which of a cargo consignment, and provide data to separate two new nomenclature contains data associated with 8.5 billion details on how it calculated the risk codes from the other 10,000 codes in different patterns. For the data related probabilities. These explanations the nomenclature table, and use much to an individual product (item) of every enable Customs officers to assess the less data to separate the two codes from registered import declaration, SISAM system analysis and either ignore its each other, thereby achieving good estimates the probability of about 30 recommendation or follow through on it. performance faster. types of errors. Although officers take the final decision to inspect or not, they benefit from the When analysing any import declaration These errors include false descriptions of system’s capacity to find infractions that has just been registered, SISAM goods, errors in the nomenclature codes, that would certainly be lost among the considers the fact that behaviour errors in the declared countries of origin, thousands of import declarations. patterns change with time. The system missing import licences, non-applicable is also often required to analyse old tax regimes, wrong preferential tariff In addition, SISAM's knowledge base import declarations, since they can be and “ex-tariff” claims (a scheme that can be updated incrementally, allowing reviewed after Customs clearance. Any enables Brazilian companies to reduce it to learn from new import declarations import declaration analysis is done their tax burden when importing every day without being retrained. The with consideration being given to the machinery, equipment or parts where learning process can also be distributed tendencies that were prevalent on its domestic production is unable to replace to several machines, and the resulting exact registration date. them), and simply the use of wrong rates knowledge bases can all be added for the calculation of import duty, the together later. SISAM's knowledge base During the first presentations of tax on manufactured products, social even allows information to be split from SISAM to Customs officers, which contributions and anti-dumping duties. other information: for example, the took place when the system was still evaluation of an importer’s behaviour under development, they raised more For every attribute value that could be against all information in the base resistance than excitement although the wrong on an item, SISAM estimates except for information provided by tests that were conducted had already the probability of all alternative values, the importer itself. In this way, SISAM proved its efficiency. But, the attitude

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of officers changed once they started risk of an import declaration, Customs with electronic access to data for all receiving feedback from the system, officers had to access at least seven exports and imports among them, explaining the reasoning behind its different systems, including Siscomex. cross-checking the data from each selection suggestions. Each of these systems provided different foreign export declaration against the data: for example, companies’ licences Brazilian import declaration. ANIITA is, After being given suitable training, to trade internationally, their trade therefore, able to find inconsistencies in officers welcomed the system, and today history, their internal revenue profile the declarations: for example, it can find their decision to check a transaction is (containing measures such as gross that the classification of goods declared at based on SISAM's suggestions 30% of income and number of employees), export does not match the classification the time. More detailed descriptions of and information provided by foreign of goods declared at import. Taking a the technical innovations that enabled Customs administrations. step aside, this is a concrete example of SISAM's development, including how Brazil implemented the Globally statistical results demonstrating the What ANIITA does is to extract data Networked Customs (GNC) concept that accuracy of its predictions and examples from multiple systems and show the was developed by the WCO. of the natural language explanations it most important information for the generates, are available online1,2. Customs clearance and risk assessment ANIITA spread to almost all Customs process on a single screen. It also offers units in Brazil by spontaneous Leveraging officers’ knowledge user-friendly navigation from its central adoption, and eventually became a Not all the knowledge of Brazilian frame to detailed screens where all data corporate system, the use of which Customs officers can be inferred usually necessary for clearance and became mandatory for all officers automatically from Siscomex databases. risk assessment is available. This saves with responsibility for deciding Several other databases can affect users a lot of time, as they do not have to which goods need to be inspected. It officers' decisions to various degrees manually browse many systems. was primarily designed to deal with of relevance. These professionals import declarations, but, with its accumulate knowledge by seeing, ANIITA can also process data and agile development structure, was soon touching and even smelling goods, as identify inconsistencies and known expanded to handle express couriers, well as by mentally associating their threats by crossing data from different postal consignments, and export observations to electronically available databases and applying heuristic declarations. ANIITA now also offers data. They also speak to importers, read methods to the data. It also allows different levels of privilege to users, detailed documentation and technical users to create rules based on their own allowing some of them to create rules reports about goods, and search the knowledge of risks, and thus became that have to be nationally applied internet regularly to obtain extra an “expert system.” Officers can enter immediately. information. new rules according to the risk profiles of companies, people, goods, and a Additional monitoring system However, as there is no way to directly complex combination of attributes. PATROA stands for “Real Time Customs access the human brain in order to ANIITA is a desktop application, but the Operations Monitoring System” and was guarantee that all this knowledge will be database where the data and the rules launched in December 2017, completing available when and where it is required, to be applied are stored is centralized. the current Brazilian information Brazil developed a system that tries This enables the data and rules to be technology (IT) ecosystem dedicated to approach the idea. This software is shared across the organization, and an to Customs risk management. Just like called ANIITA, a Portuguese acronym individual’s knowledge can be spread ANIITA, it accepts human created for “Intelligent and Integrated Customs throughout the entire Customs risk rules, but instead of acting only under Transactions Analyzer” in English. management community. user demand, PATROA runs server side and applies the rules to transactions The development of ANIITA started Moreover, ANIITA makes use of the as soon as they are registered, thereby in 2011 at the Uruguaiana border data available in the Indira system, identifying risk profiles in real time. checkpoint. By that time, to assess the which provides MERCOSUR countries

1 Jambeiro Filho, Jorge. Artificial Intelligence in the Customs Selection System through Machine Learning (SISAM). Prêmio de Criatividade e Inovação da RFB, 2015. 2 Jambeiro Filho, Jorge; Jacques Wainer. HPB: A model for handling BN nodes with high cardinality parents. Journal of Machine Learning Research (JMLR), 9:2141–2170, 2008.

48 WCO news N° 86 June 2018

External Users

Other Systems Syscomex SISAM PATROA

Transactions

Inspection Results

ANIITA

OFFICER

In addition, PATROA can invoke interface well with internal revenue ANIITA and SISAM to get their detailed intelligence systems, which are also analysis of a transaction, and then mainly developed internally and whose decide if an officer should be emailed development teams work closely with or receive an instant message on his or Customs teams. her cell phone. The officer can respond and stop the transaction right away if The RFB also applies data mining convenient. PATROA can also decide techniques to offline data regularly, and not to call an officer immediately, but is investing in a huge data lake solution to start saving extra information about to consolidate all information related to connected transactions, and produce a both the Customs and internal revenue report that is only sent later to a human. services, two services that already share These reports can, for example, describe the same IT environment. In this way, non-complying behaviour from an the RFB is advancing toward a highly authorized economic operator (AEO). technological and integrated national risk management environment within Conclusion which the three presented systems play This article described three online an important role. They will be even Customs systems developed by the RFB, more critical should the world-wide and how they interact and complement systems of Customs administrations each other to provide a robust risk become more integrated and connected. management solution for the country. All three are in constant evolution to More information gain precision and handle more types [email protected] of transactions and infractions. They [email protected]

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WCO C-RED Project: unprecedented cooperation between Customs administrations and humanitarian organizations to develop a more effective response to epidemics

By Eve Gerard, The United Nations Office for the (RKC) and, where applicable, urges WCO C-RED PROJECT MANAGER Coordination of Humanitarian Affairs countries to sign the Model Agreement DURING A NATURAL catastrophe or (OCHA) believes that climate change to expedite the import of relief epidemic, it is essential for Customs will increase the risks of droughts, consignments and possessions of relief administrations to facilitate or flooding, storms and related phenomena personnel in the event of disasters even speed up the delivery of relief such as outbreaks of epidemic diseases. and emergencies – a document drawn consignments to victims, thereby It is, therefore, more urgent than ever up jointly by the WCO and OCHA, helping to reduce the number of possible for Customs and their partners to be which lists all the measures set out in deaths. In fact, it would be unacceptable prepared to respond to these tragic various international instruments, or in should this number increase as a result events so as to minimize the associated instruments recognized as effective in of ‘red tape.’ human and economic costs. practice.

In practice, when a humanitarian In 2011, when submitting the ‘Resolution Following the adoption of the Resolution, emergency is declared, Customs on the Role of Customs in Natural the WCO Secretariat co-organized four administrations are often ill-prepared Disaster Relief’1 for approval by its regional seminars with OCHA and the to process relief consignments which Members, the WCO Secretariat wished International Federation of Red Cross arrive en masse in a very short period of to encourage them to take adequate and Red Crescent Societies (IFRC). time. Import formalities are frequently measures, allowing effective border These regional seminars brought too lengthy, particularly if another procedures to be put in place. together representatives of Customs administration is involved in the administrations and humanitarian Customs clearance, such as when a The Resolution particularly advocates organizations to share experiences certificate or authorization is required, the implementation of the measures set and perspectives on the future needs for example. out in Chapter 5 of Specific Annex J to and constraints facing Customs when the WCO Revised Kyoto Convention managing natural disasters.

1 http://www.wcoomd.org/-/media/wco/public/fr/pdf/about-us/legal-instruments/resolutions/resolution_f.pdf.

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The first component of the project involves the provision C-RED Project of self-protection equipment National support Technical assistance gained new to the most seriously affected With respect to the second component momentum in 2016 when a capacity of the project, the WCO offers support building project was launched for Customs administrations. The to each country as follows: Customs administrations in West WCO has also published African countries that had been affected • support for the development or by the Ebola epidemic, which broke out 1,000 brochures (in English updating of standard operating in south-east Guinea in December 2013. and French), which detail procedures (SOPs) relating to the According to William Vannier, Supply delivery of relief goods in the event Chain Director with Médecins Sans how to use this equipment of an emergency; Frontières, “the Ebola response was not correctly in the event of a primarily a medical response, but more • support for the implementation of about logistics and supplies. Doctors crisis. these SOPs, particularly through were not the main need in Liberia during the production of training material its peak.” and the provision of assistance to Customs in carrying out simulation Once the humanitarian response had exercises; been set in motion, problems arose, in particular, with respect to the • optimize procedures for releasing • the strengthening or development of importation of relief consignments: relief consignments based on cooperation between bodies present warehouse space at ports and airports international best practices and at borders to ensure coordinated was inadequate, inventory capabilities ensure that they are understood and border management. were chaotic, and the contents of implemented on the ground – such containers were not specified or were support is individualized according More notably, the WCO has provided indicated in an unknown foreign to the needs of countries and existing very active support within a limited language. facilitation procedures. period of time to five out of the six target countries: Nigeria, Guinea, Mali, Sierra Equipped with the findings of the The WCO is cooperating closely with Leone, and Liberia. analysis of shortcomings during the OCHA to implement this project. crisis, the WCO and the Dutch Ministry Both organizations also continue to Nigeria of Foreign Affairs took the initiative to further their cooperation with other Three WCO/OCHA missions were launch an innovative project on the role international organizations, such as carried out in Nigeria between July of Customs in natural disaster relief, the World Food Programme (WFP), 2017 and March 2018. These missions under the title C-RED – an acronym the IFRC, and the World Health enabled bottlenecks during the Customs for ‘Customs for Relief of Epidemic Organization (WHO). The combined clearance of relief goods to be identified Diseases.’ Six Customs administrations participation of this network of and SOPs to be developed in response. in West African countries that had been international organizations makes it Recommendations regarding the directly affected by the Ebola crisis – possible to channel efforts and boost Customs clearance of relief goods will Guinea, Liberia, Mali, Nigeri2a, Senegal the effectiveness of action taken in the represent a roadmap for future action. and Sierra Leone – are the beneficiaries. countries concerned. The aim is to ensure that they are better The WCO hopes to ensure that SOPs prepared to combat the consequences of Self-protection equipment will soon be validated at governmental epidemic diseases and natural disasters The first component of the project level, and that the recommendations will in their country or region. To do this, the involves the provision of self-protection be followed up within the time limits project seeks to: equipment to the most seriously established by the Nigerian authorities. affected Customs administrations. The Nigeria Customs Service has • ensure that administrations provide This equipment, which was selected reiterated the need for all stakeholders border authority staff in Guinea, and delivered by the WCO’s partner, involved in the Customs clearance Liberia and Sierra Leone with the United Nations Humanitarian procedure to take part in C-RED self-protection equipment – this Response Depot (UNHRD), is now meetings to ensure effective border equipment, which is ready to be stored in the UNHRD centre in Accra, coordination with other supply chain distributed in the event of new risks awaiting delivery to the three beneficiary stakeholders and other government of epidemics, will allow staff to countries: Guinea, Liberia and Sierra agencies. protect themselves against the risks Leone. The WCO has also published of transmitting the virus, while 1,000 brochures (in English and French), Guinea remaining operational during the which detail how to use this equipment Two missions were organized in Guinea period of the crisis. correctly in the event of a crisis. in July and October 2017, when meetings

2 https://successfulsocieties.princeton.edu/sites/successfulsocieties/files/DP_Supplies_Final_April%202017_0.pdf.

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Participants in the May 2018 regional workshop

were held between public and private mission together, and now monitors the The first workshop in Freetown, Sierra stakeholders, in parallel with talks on adoption and implementation of the Leone was held in November 2016 and the difficulties that arose during the recommendations. focused on the creation of a regional Ebola crisis and the bottlenecks that network of contact points and the had been identified by humanitarian Sierra Leone identification of each beneficiary aid workers. The first diagnostic mission took place country’s specific needs. The second in Sierra Leone in late October 2017, and workshop, held in Senegal in May 2018, The Customs administration gave a the project to draw up SOPs was begun, brought together more participants (over presentation to other authorities on its with recommendations to improve 60 people), where they consolidated crucial role in controlling passengers and current national procedures having the lessons learned and examined the baggage at borders, highlighting occasions already been drafted. follow-up to this innovative project. A when cumbersome administrative third workshop is planned to be held in procedures can lead to blockages that Liberia Guinea before the end of the project. slow down the entry and distribution of A diagnostic mission was held very relief goods. Lack of regulation will, in recently in Liberia in May 2018, when Conclusion contrast, lead to poor quality action and the SOPs in force in this country were Customs administrations, other border uncoordinated efforts. revised. The project will conclude in management agencies and humanitarian October 2018. During its final months, aid stakeholders had already worked The WCO missions resulted in the efforts will focus on training the together on other capacity building drafting of a national guide that managerial personnel of Customs and projects led by the WCO and its partners. humanitarian aid stakeholders and other ministries to enable them to pass The C-RED project, however, established the various Customs administrations on the knowledge they have acquired an unprecedented and exceptional new concerned can refer to. As in Nigeria, to their staff and to representatives of level of cooperation, allowing the joint SOPs and recommendations were also humanitarian organizations so that all drafting of procedures which take drawn up with the various agencies and parties are familiar with the SOPs. the constraints and regulations of the their implementation was monitored in various government stakeholders into 2018. Regional dimension account. A new synergy has arisen in Workshops are organized on a the target countries that will allow them Mali regional basis to bring together all the to ensure a more effective response to In Mali, which had hosted a diagnostic representatives of various government future crises. mission in September 2017, the Customs agencies of beneficiary countries and administration decided to enhance regional partners, such as the WCO More information its SOPs on its own initiative, and to Regional Office for Capacity Building for www.wcoomd.org ensure that they were approved by all the West and Central Africa (ROCB WCA) relevant parties. The WCO subsequently and the Secretariat of the Economic funded the organization of a seminar Community of West African States bringing those involved in the diagnostic (ECOWAS).

52 WCO news N° 86 June 2018

Natural catastrophe management: international standards

• Chapter 5 on relief consignments in Specific • Other appropriate measures to speed up Annex J to the revised WCO International the delivery of humanitarian assistance Convention on the Simplification and may also make provision for eliminating the Harmonization of Customs Procedures requirement to provide certificates of origin, (Revised Kyoto Convention) lists several consular invoices and fumigation certificates facilitation measures, such as authorizing or dispensing with import/export licences. the lodging of a simplified or incomplete goods declaration subject to completion of These provisions and measures have been the declaration within a specified period. brought together and set out in the ‘Customs Model Agreement to expedite the import • Annex B9 to the WCO Convention on of relief consignments and possessions of Temporary Admission (Istanbul Convention) relief personnel in the event of disasters and stipulates that temporary admission can be emergencies,’ drawn up jointly by OCHA and granted without a Customs document or the WCO. security being required and that the Customs authorities may require only a simple inventory of the goods, together with an undertaking to re-export them. UNMEER/Martine Perret

Two ambulances, dozens of motorbikes, incinerators, and other urgently needed material and equipment being unloaded from a freight plane in Freetown, Sierra Leone. The motorbikes, donated by the German Government, were used to transport blood samples to laboratories as well as for contact tracing and social mobilization purposes

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Women in Customs: spotlight on the career of Emilienne Pambo Bouassa

4 APRIL 2018 was a special day in the life of Senegal Customs just seemed like an and Beijing. Gabon and Senegal enjoy Emilienne Pambo Bouassa. Emilienne, impossible dream,” she explained to any strong diplomatic relations: since the a Customs officer from Gabon, was well-wishers at the ceremony. 1970s, many Senegalese nationals have attending the festivities in Dakar, held settled in Gabon. by Senegal Customs in the presence of Emilienne joined the Regional the country’s Minister for the Budget, in Intelligence Liaison Office (RILO) for Emilienne knew Senegal well because commemoration of the anniversary of West Africa, based in Dakar at Senegal her husband had been living there for the country’s independence. Customs offices, back in September two years by the time she was appointed 2002 as an intelligence analyst. “The to the RILO, and she had already Her beige uniform stood out from among Director General of Gabonese Customs visited Senegal Customs to study the the sea of blue uniforms worn by the at the time believed in me and thought Administration’s Customs valuation Senegalese Customs officers. Then came that I was up to the challenge of dealing practices, among other subject areas. the decoration ceremony for deserving with Customs at an international level, So, her subsequent arrival in Senegal Customs officers. On hearing her name working both as a Customs attaché and passed relatively smoothly. She knew she called by the Minister, Emilienne stood as an intelligence analyst. Subsequent was embarking on uncharted territory, before approaching him to receive the Directors General also supported and but she also knew she could rely on her Senegal Customs medal of honour for encouraged me in their own individual family. services to the Administration. way. My efforts certainly didn’t go unnoticed!” Although the Gabonese Customs A few minutes later, she pinned to her Administration she joined in 1988 as uniform the medal of honour awarded At the time of her appointment, Gabon an Inspector-Auditor had long been to her back in January 2018 by her own had no network of Customs attachés accustomed to women (the first woman Administration following 30 years of to speak of, and so Emilienne was the joined Gabonese Customs in 1980), service. “Gabonese Customs seeing fit first Customs officer to take up this when she first joined Senegal Customs, to bestow a medal of honour on me is position. Others would be appointed by contrast, she found no women at one thing, but to have one awarded by later in Brussels, Paris, Washington all among its ranks. The law provided

54 WCO news N° 86 June 2018

that only male Senegalese nationals Uncertain about how a RILO should Three years after her arrival, were permitted to join the ranks of the operate, Emilienne turned to the one young female student Senegalese Customs Administration. WCO, which suggested that she join However, the Director General sought the Scholarship Programme and from the École Nationale change, and Emilienne’s arrival would complete her traineeship at the RILO d’Administration opted to join allow him to achieve that very aim. for Western Europe. On her return to Dakar, Emilienne, together with her the Customs section, soon to She soon felt welcome in Senegal: Senegalese colleague and the newly be followed by another, then she was invited to present the WCO appointed head of the RILO, drew up Information and Intelligence Strategy an action plan setting out objectives another. Emilienne recalls to the various steering committees, to and priorities. how she “looked on proudly be involved annually in International Customs Day, and was encouraged to One of the RILO’s tasks is to produce at these young women give addresses whenever necessary. On analyses. For such purposes, all coming into the Customs meeting the Minister for the Budget, administrations in the region must who asked her what it was like to be be aware of the intelligence in their Administration, as if I were a woman working in Customs, she possession and input their data into backstage at a major event, replied, “In my 15-year career, I have the database of the WCO Customs never found myself in a situation which Enforcement Network (CEN). One of witnessing a watershed made me regret being a woman.” the first objectives of the team would, moment in a country’s therefore, be to secure the approval of Three years after her arrival, one young the Directors General for establishing a history.” female student from the École Nationale framework instruction on intelligence d’Administration (the national civil within the administrations. servant training institution) opted to join the Customs section, soon to To that end, the Directors General were be followed by another, then another. first required to familiarize themselves Gradually, women began joining with the RILO and its functions. The Senegal Customs, even though the team requested that an item on the law prohibiting their entering the RILOs be included on the agenda of Administration had not yet been the annual Conference of Directors repealed, as is now the case. Today, General of Customs of the West and women occupy positions at all levels of Central Africa region. The draft the Administration. Emilienne recalls framework instruction was presented how she “looked on proudly at these and agreed at that conference. The young women coming into the Customs Directors General undertook to set up, Administration, as if I were backstage in their respective administrations, a at a major event, witnessing a watershed structure responsible for intelligence, moment in a country’s history.” and thus for gathering information on fraud and forwarding it to the RILO. On joining the RILO for West Africa, one of Emilienne’s specific tasks Once the national structures were in was to reactivate the RILO for the place, their members were invited to Central Africa region, the idea being Dakar to receive training in the use of initially to manage the two offices the CEN, and to familiarize themselves from Dakar. However, the structure with the relevant WCO tools. However, that she joined was disjointed and since travel expenses were not included, had only one operative, namely a none of the countries invited took up the Senegalese public servant seconded invitation. The RILO team successfully to the structure, but also having a requested financial assistance from the number of responsibilities at national Director General of Senegal Customs. level, dealing, for instance, with The inaugural meeting of the RILO matters connected to the Senegalese team and its national counterparts was Intelligence Office. subsequently held.

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Emilienne receiving the Senegal Customs Medal of Honour for services to the Administration from the Minister for the Budget

Consequently, through hard work, the and its partners, the RILO has also of the WCO’s revised International RILO for Central Africa was reactivated, independently organized a regional Convention on the Simplification and and a regional fund providing financial operation to combat pharmaceutical Harmonization of Customs Procedures support for the activities of the two crime (Operation CRIPHARM), which, (Revised Kyoto Convention), and is offices was established. The principle for its part, is now in its third edition. currently undergoing accreditation in was to ensure that all administrations risk management. contributed equally to the funding, in Emilienne believes that regional efforts particular, visits to administrations for to combat fraud have evolved over the As regards the place of women in the purposes of training and raising past 15 years. The organization of the Customs, Emilienne feels there is awareness with regard to the fight services and the officers’ attitudes have still some way to go. She explains that against illegal trafficking. improved. Evidence of this progress can “Growing up and studying in Gabon, be seen in the quantity and quality of the I never imagined that doors would be The team was soon capable of conducting data on seizures reported by countries closed to me because I am a woman. But, its own trend analyses. In fact, it was one as well as in the exchanges between when you look at their responsibilities of their own analyses bringing to light the national teams and the two RILOs and their promotion within a structure cocaine seizures in Europe on flights which, albeit now set up in different like Gabonese Customs, the progression from West Africa that would result in countries, still operate in a coordinated of women still poses a challenge. I am the very first operation touching on manner. one of those women who have had the this area to be organized by the WCO: opportunity to progress.” Operation COCAIR, which has since Emilienne is personally committed to continued to a sixth edition. As well continuous learning and has become a More information as being involved in virtually all anti- seasoned trainer. She is, for that matter, [email protected] fraud operations organized by the WCO a WCO-accredited expert in the field

56 WCO news N° 86 June 2018

Assessing the clearance process: India shares its experience

By Vijay Singh Chauhan, COMMISSIONER OF CUSTOMS, JAWAHARLAL NEHRU CUSTOM HOUSE, INDIA

The importance of the Time Release Study (TRS) has long been Aron Visuals / Unsplash emphasized by the WCO as a useful tool for Customs administrations across the world to assess their performance in terms of the clearance process. Jawaharlal Nehru Custom House, catering to Jawaharlal Nehru Port Trust (JNPT), India’s biggest containerized port, has been conducting such studies1 since 2013 as per the WCO’s guidelines. This article presents the results drawn from the latest study, highlighting the impact of facilitation schemes on goods release times.

1 These studies can be accessed athttp://www.jawaharcustoms.gov.in/pdf/TRS2018-Jan-June.pdf

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THE LARGEST CUSTOMS house in the country, are relatively more time-consuming, included in the study, and the efforts of Jawaharlal Nehru Custom House with a view to suggesting measures their staff were duly recognized along (JNCH), accounting for about 21% of to improve time releases relating with those of the Customs officers. national Customs revenue, has been at thereto; the forefront of implementing various In addition, a small sample of bills of trade facilitation measures defined by • improve coordinated border entry and shipping bills (import and the Central Board of Indirect Taxes and management by seeking to estimate export Customs declarations) were Customs (CBIC) as well as attempting release times associated with tracked “live” through the concerned innovative local initiatives to improve different partner agencies; Customs brokers. In fact, the results the ease of doing business. of the exports TRS are based on such • assess the impact of statutory and “live” tracking, given that the time- It is worth reminding readers here administrative changes on trade stamps in the Customs IT system do not of India’s trade facilitation agenda. behaviour over time; appropriately capture the export process. The country aims not only to meet the requirements of the World Trade • present a first set of time release data Methodology for imports Organization’s Trade Facilitation for export cargo through the JNCH; The study analyzed all 14,973 bills of Agreement (TFA) which entered into and entry (import declarations) lodged force in 2017, but also to become a global during the sample period, viz. from 1 manufacturing hub by improving the • build the capacity of officers. to 7 January 2018, and tracked them till ease of doing business. Many of the 7 February 2018. The standard WCO goals listed in India’s National Trade One major decision was to conduct the definition of time release is the time Facilitation Action Plan (NTFAP), study in-house, with the cooperation of taken from arrival of the goods at the drawn up to fulfil national commitments all stakeholders, including importers, port to its eventual release by Customs. under the TFA, go beyond the TFA Customs brokers, and other government For this study, the arrival time is provisions. The idea is to bring down agencies. In a break from the earlier approximated by the grant of entry the overall cargo release time for imports TRS’s, which were based on ex-post inwards of the vessel, and the release and exports as follows: statistical analysis, TRS 2018 was time by the grant of out of charge by conducted as a “live” sensitization- Customs. This release time includes the • for imports – within three days for cum-learning exercise under the “Best time taken by all government agencies, sea cargo, within two days for air Foot Forward” slogan. Emphasis was including Customs. cargo and inland container depots, placed on doing things efficiently, and on the same day for land without compromising due diligence, However, the study also quantified the Customs stations. as expected of Customs and other time from berthing of the vessel at the regulatory agencies. JNPT to the grant of entry inwards • for exports – within two days for sea by correlating data from the terminal cargo, and on the same day for air It could be argued that conducting operating system and the Customs cargo, inland container depots, and a “live” TRS might impact actual system in respect of all 46 vessels that land Customs stations. performance. We did recognise the berthed at the port. It showed that the concerns posed by this mechanism, average time was 31 minutes. Further, The JNCH has been undertaking Time however, guided by the substantive comparing the data from the Customs Release Studies (TRS) since 2013, an benefit in terms of sensitization of system with that from five CFSs, the exercise which is recommended in clause various stakeholders, we went ahead time taken from “out of charge” given by 6 of Article 7 of the TFA. In 2018, a new with the same, confident that our results Customs to “gate out” by the importers study was carried out in order to assess do not suffer from any bias. was found to be 35.4 hours. the impact of various measures and for drawing-up an evidence based roadmap In terms of data sources, the study relied The standard time release analysis is, to achieve the new target release times of primarily on the time stamps in the however, based on the time taken from cargo. The main objectives were to: Customs information technology (IT) entry inwards to out of charge. Moreover, system, as in earlier studies. However, 216 bills of entry (1.4%) were excluded • spread awareness about time release for the first time, other data sources for three sets of reasons: (i) in 57 cases, among all stakeholders, and their from the port terminals, container goods had not yet arrived by 7 February role in its reduction; freight stations (CFSs), participating 2018; (ii) 134 cases were pending at government agencies (PGAs), such various stages of clearance; and (iii) 25 • measure the distance to the target as the Food Safety and Standards bills of entry were filed more than 60 release times set out in the NTFAP; Authority, the Drug Controller, the days after the arrival of the goods. Textiles Committee and the Chemical • identify categories of bills of Laboratory, were also utilized. These The import release time was calculated entry (Customs declarations), agencies were happy to participate in in respect of various categories of bills commodities and sub-processes that the study. Their recommendations were of entry, with the intention to highlight

58 2018 2017 29% of BE cleared in 72hrs

21% of BE cleared in 72 hrs

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0

A R WCO news N° 86 June 2018

246,06 250 34 (126.54) various aspects of clearance processes, facilitation benefits, the average226,36 release data for auto component20 (74.12) imports from and to test various hypotheses formed time for207 DPD advance facilitated bills of South Korea was19 used (69.36) to highlight the 16 (60.30) on the basis of day-to-day working 200entry was 65.36 hours. benefits of various facilitation measures activities at the JNCH. Some of the 163,18 as the “path to promptness,”13 (58.12) as can be major categories are discussed below. 150The study identified six categories seen in figure 2. of commodities based on specific Advance The all-in-one average release time for requirements associated with them to The issues pertainingFacilitated Bills to other 100 90,36 bills of entry was found to have declined highlight their impact on the release regulatory agenciesof Entryparticipating in the from 181 hours in January 2017 to 144 time. As part of this exercise, the release Single Window initiative of the CBIC hours in 2018. It shows that the distance time50 for auto components was computed were highlighted by presenting the to the NTFAP target of 72 hours is still for comparison with the data presented disaggregatedTotal Bills releaseof Entry 34 time (126.54) in respect Advance Bills of Entry 20 (74.12) significant. The “essence of the effort” by0 the World Bank in its Ease of Doing of bills of entry processed by these Advance Bills of Entry 19 (69.36) is captured in the fact that a higher BusinessAQ index.Controller Although PQ FSSAI the WorldWCCB agenciesAdvance (see FacilitatedFigure 3DPD on Bills page of Entry60). of drugs number of consignments, i.e. 29% as Bank study found that the release time This has16 (60.30)highlighted the importance of against 21% in 2017, were cleared in less for auto components imported from streamlining2018Advance theFacilitated processes DPD Billsassociated of Entry - than 72 hours, and very few took longer South Korea was 267 hours, this is more with theAEO clearance13 (58.12) of these goods 2017Advance Facilitated Bills of Entry than 400 hours. than double the release time of 126.54 from the point elease of timeview in of ors non-revenue 29% of BE hours under TRS 2018. The release time regulations. clearedThe in bill of entry with a minimum release 72hrstime of 11.01 hours was identified, highlighting the four features that Figure 1: Release times, according to the category of bills of entry form the core of the drive to reach the NTFAP target, namely (a) a higher share 250 6000 of advance bills of entry to enable pre- Release Time in Hours 5645 Number of Bills of Entry 221,24 h 5000 arrival processing, (b) a greater level 200 21%of of facilitation, BE (c) more authorized clearedeconomic in operator (AEO) enrolment, 4000 72 hrsand (d) higher direct port delivery (DPD) 150 156,42 h 157,3 h clearances. The DPD scheme allows 3236 3000 importers/consignees to take delivery of 2858 3018 100 containers directly from port terminals 2000 91,06 h Number of Bills of Entry Release Time in Hours Release Time in Hours

and haul them to factories without first Number of Bills Entry having to take them to CFSs. 50 1000 0.0 100.0 The study200. 0captured the30 0improvement.0 40 in0 .0 500.0 600.0 700.0 800.0 the share of pre-arrival processing and 0 0 Non facilitated Non facilitated Facilitated Facilitated facilitation levels in 2018 over 2017. The (Normal) 19% (Advance) 20% (Normal) 19% (Advance) 19% disaggregated and stratified release time data in this regard, as presentedA in figure R Category of Bills of Entry Release Time in Hours (Percentage of total in brackets) 1, is being utilised to drive home the Number of Bills of Entry outreach message that despite the fact Figure 2: Release time data for auto component imports from South Korea for a that advance bills of entry have about total of 34 bills of entry falling under different and cumulative schemes 40% lower release time, 40% of the bills of entry were not filed in advance.

AEO and DPD are two categories of 246,06 250 clients who are accorded preferred 34 (126.54) treatment in the226,36 cargo clearance process. 20 (74.12) 207 In order to highlight the benefits to them Total Bills of Entry 19 (69.36) Advance Bills of Entry in terms facilitation and/or release time, 16 (60.30) 200 Advance Facilitated Bills of disaggregated release times in respect Entry 163,18of these bills of entry were presented. 13 (58.12) Advance Facilitated DPD They showed that 84.6% of bills of entry Bills of Entry Advance Facilitated DPD 150 submitted by AEOs enjoyed higher full Bills of Entry - AEO facilitation benefits while only 60.2% of ( ) Release time in Hours the overall bills of entry did, and that Advance the average release time was 103.06 Facilitated Bills 100 90,36 hours vis-à-vis an overall average of 144 of Entry hours. With 75.1% of DPDs enjoying full

50 59 Total Bills of Entry 34 (126.54) Advance Bills of Entry 20 (74.12) 0 Advance Bills of Entry 19 (69.36) AQ Controller PQ FSSAI WCCB Advance Facilitated DPD Bills of Entry of drugs 16 (60.30) Advance Facilitated DPD Bills of Entry - AEO 13 (58.12) Advance Facilitated Bills of Entry elease time in ors

250 6000 5645 221,24 h 5000 200

4000 150 156,42 h 157,3 h

3236 3000 2858 3018 100 91,06 h 2000 Release Time in Hours Number of Bills Entry

50 1000

0 0 Non facilitated Non facilitated Facilitated Facilitated (Normal) 19% (Advance) 20% (Normal) 19% (Advance) 19%

Category of Bills of Entry Release Time in Hours (Percentage of total in brackets) Number of Bills of Entry 2018 2017 29% of BE cleared in 72hrs

21% of BE cleared in 72 hrs

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 2018 2017 A R 29% of BE cleared in 72hrs

246,06 250 34 (126.54) 226,36 20 (74.12) 207 19 (69.36) 21% of BE 16 (60.30) 200 cleared in 163,18 72 hrs 13 (58.12) 150 Advance 90,36 Facilitated Bills 100 of Entry

50 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 Total Bills of Entry 34 (126.54) Advance Bills of Entry 20 (74.12) 0 Advance Bills of Entry 19 (69.36) AQ Controller PQ FSSAI WCCB Advance Facilitated DPD Bills of Entry of drugs A R 16 (60.30) Advance Facilitated DPD Bills of Entry - PANORAMA AEO 13 (58.12) Advance Facilitated Bills of Entry elease time in ors

246,06 250 34 (126.54) 226,36 20 (74.12) 207 250 600019 (69.36) 16 (60.30) 200 5645 221,24 h 5000 200 163,18 13 (58.12) 150 4000 150 156,42 h 157,3 h Advance 323690,36 Facilitated3000 Bills 100 2858 3018 of Entry 100 91,06 h 2000 Release Time in Hours 50 Figure 3: Release time dataNumber of Bills Entry according to the agency involved 50 in the clearance1000 process – Animal Quarantine (AQ), Plant QuarantineTotal Bills (PQ), of Entry Food 34 Safety(126.54) and Standards Authority Advance Bills of Entry 20 (74.12) 0 of India (FSSAI), and the Wildlife Crime Control Bureau 0 Advance Bills0 of Entry 19 (69.36) Non facilitated Non facilitated Facilitated (WCCB)Facilitated AQ Controller PQ FSSAI WCCB Advance Facilitated DPD Bills of Entry (Normal) 19% of drugs(Advance) 20% (Normal) 19% (Advance) 19% 16 (60.30) Category of Bills of Entry ReleaseAdvance Time in Hours Facilitated DPD Bills of Entry - (Percentage of total in brackets) NumberAEO of Bills 13 of Entry(58.12) Advance Facilitated Bills of Entry Figure 4: Time spent in the different areas of the port at export elease time in ors

In parking plaza Arrival in terminal to loading 10% 3% 1% 40% 46% Parking plaza to terminal gate Loading to departure At the terminal gate 84.1 Hours 250 6000 5645 221,24 h 5000 The200 study also enabled the responses of frozen fish, (iii) pharmaceuticals, (iv) Conclusions and challenges importers to three specific measures to automobile parts, (v) two and three The study has enabled the CBIC to reduce release times to be analysed. It wheelers (bikes, auto rickshaws), and make many short term and long term 4000 was found that during the period from (vi) electrical machinery (falling under suggestions and recommendations to January150 2017 to January 2018: (a) the 156,42chapter h 85 of the Harmonized157,3 h System further reduce release times, which calls share of advance filing of bills of entry, nomenclature). This was3236 computed, for actions on the part of3000 all stakeholders, allowing for pre-arrival2858 processing, based3018 on a sample survey among the and entails process improvements, increased100 from 53.3 to 58.7%; (b) five top exporters in respect of each of outreach, and the upgrading of physical prompt filing of normal bills of entry, as the six categories. infrastructure.91,06 h 2000 Release Time in Hours

measured by those filing normal bills of Number of Bills Entry entry within 48 hours of entry inwards, The gross average export release time The conduct of TRS 2018 was a challenge 50 increased from 48 to 79%; and (c) was found to be 108 hours and the net given the new grounds1000 that were prompt payment of duty, as measured by average export release time was 84.1 traversed and the large number of people, those paying duty within 48 hours of the hours. This is broadly in line with the representing various stakeholders, who assessment,0 increased from 42 to 46%. World Bank’s Ease of Doing Business worked as part of the team.0 Regarding These findingsNon revealed facilitated a significant Non Reportfacilitated 2018 findingFacilitated of an export exportsFacilitated especially, the rate and quality compliance gap(Normal) that has 19% been taken up(Advance) release 20% time of about(Normal) 85 hours. 19% There of(Advance) the responses 19% provided by the targeted for further analysis. is significant variation in the average exporters to the sample surveys were exportCategory release of time,Bills ofaccording Entry to the notRelease very Timeencouraging. in Hours But, the study (Percentage of total in brackets) Methodology for exports type of commodity being exported, with hasNumber been ofa learningBills of Entry experience, and is The gross export release time, measured a net average export release time of 53.4 expected to contribute to an even better from the time of departure of cargo from hours for frozen meat and 99.7 hours study next year. the factory premises to the departure of for electrical machinery. The stage-wise the vessel and net export release time by analysis of the export process, as shown More information excluding the domestic transport time, in figure 4, highlighted that a large share [email protected] were presented in respect of six major of time is taken after cargo enters the [email protected] categories of goods: (i) frozen meat, (ii) terminal premises.

60 WCO news N° 86 June 2018 ©Hans Roggen©Hans

Terracotta figures, discovered by Customs, turn out to be fake

Cultural goods: insight from the Netherlands on the value of collaboration

By Marja van Heese, SENIOR INSPECTOR, CULTURAL HERITAGE underwater, that are affected; it also UNESCO, is the 1970 Convention on INSPECTORATE, THE NETHERLANDS impacts museums, religious buildings, the Means of Prohibiting and Preventing archives, libraries, private owners, and the Illicit Import, Export and Transfer DESTRUCTION, ILLEGAL EXCAVATIONS, theft, collectors. of Ownership of Cultural Property. plundering and the illicit export of This Convention calls on State Parties legally-protected cultural heritage can The Netherlands is committed to to take preventive measures, establish rob a country of its national treasures, combating illicit trade in cultural goods restitution provisions, and collaborate and can often cause irreparable damage and has taken a range of measures internationally in areas such as import to a country’s history and cultural to achieve this over the years. Such and export controls. These preventive identity. measures include building a partnership measures involve, for example, between Dutch Customs and the evaluating and registering national The illicit trade in cultural objects is a Cultural Heritage Inspectorate (CHI), heritage, establishing a system of export worldwide problem that is not confined an institution that is part of the Ministry licences, and monitoring legal and illegal by national borders. Although numerous of Education, Culture and Science, and trade flows. studies have been published on illicit which is responsible for supervising trade, there are very few statistics that compliance in relation to the import, The 1970 UNESCO Convention marked properly quantify the extent of the export and transfer of ownership of an important milestone in awareness of problem. What is known is that there cultural property. How this partnership the need to protect cultural objects and are numerous illegal excavations across came about and what it involves is of the cross-border traffic in objects. It the world and a thriving trade in cultural described in more detail below. was followed by other conventions and objects. Areas of conflict and countries regulations in this area, developed by in Africa, Asia and Latin America are Regulation various authorities such as the Council particularly vulnerable. It is not only The first global tool for combating illicit of Europe, the International Institute archaeological sites, including those imports and exports, developed by for the Unification of Private Law

61 PANORAMA

In relative terms, the Netherlands is a small country and there are strong lines of communication between the various ministries involved, which makes collaboration easier. (UNIDROIT) and the European Union As every country is organized training programme for Cultural Goods (EU). The United Nations Security Officers was developed by the Customs Council has also passed resolutions to differently, this exact model Academy in close collaboration with protect cultural heritage, including for may not be replicated easily, the CHI. It comprises knowledge of law Iraq and Syria.1 and legislation, risk management, and but what matters most is for applying instructions and procedures. There is no standard definition of what cooperation mechanisms legally-protected cultural heritage is. The training and education system is an It varies from country to country and to be in place that suit a ongoing one: in addition to an intensive depends on such factors as history and country's structures. module, Cultural Goods Officers meet cultural and economic development. once or twice annually to focus on a The 1970 UNESCO Convention defines specific theme, such as cultural heritage “cultural property” as property which, implementation of relevant cultural in Iraq, Mali or Syria, or a vulnerable on religious or secular grounds, is of legislation, and how any infringements area of heritage, such as archives. These importance for archaeology, prehistory, are dealt with. Moreover, the exchange of training sessions generally take place history, literature, art or science, and information between Customs and the in a museum repository or at another which belongs to one of the categories CHI is detailed in one of the annexes and heritage institution, enabling officers to specifically listed in the Convention. is compliant with the new EU General experience cultural objects in situ and This definition has been adopted in Data Protection Regulation 2016/679 become acquainted with experts at these national legislation by many countries, (GDPR), which regulates the use of institutions. including the Netherlands. personal data relating to individuals in the EU. Customs officers must be able to Partnership recognize cultural goods. They are The collaboration between Dutch Customs training not expected to be experts, since this Customs and the CHI came about more Training is an important area of focus. would be impossible in view of the than 20 years ago, when European As part of the general Customs training diversity of the heritage field. However, cultural legislation took effect in 1993 programme, every Customs officer is it is important that officers should know with the elimination of the EU’s internal given instruction on matters relating when alarm bells should start ringing: border controls and the introduction of to art and culture. The cultural module are there signs of recent fractures, are a complementary system that aimed to in the training programme focuses there stickers on the back of a painting protect cultural goods within the EU on issues such as recognizing cultural that refer to a specific collection, or are and at its external borders.2 goods, knowledge about cultural there any inventory numbers or other legislation and relevant developments, marks of interest on a cultural object? This collaboration is enshrined in a and information on how a cultural Customs cannot take samples when it covenant between the Ministry of object should be described (according comes to this category of goods and will, Finance and the Ministry of Education, to the standard identification method: therefore, have to halt an entire shipment Culture and Science, which deals with Object ID3), photographed, and safely until it is clear whether it can be released policy and implementation matters. handled and stored. or not. At policy level, issues addressed in the covenant include the exchange of Customs officers are trained using Identification information, planning of activities, the blended learning approach, i.e. When a Customs officer finds something financial resources, and control partly through computer training and in a shipment and there are doubts as to procedures. partly in the classroom. In addition, its legitimacy, the Cultural Goods Officer Dutch Customs has designated special is consulted. If the officer confirms the The annexes to the covenant establish Cultural Goods Officers (Vraagbaken Customs officer’s suspicions, he/she will the duties and powers of Customs and Cultuurgoederen) who liaise between enlist the services of the CHI. Initially, the CHI, the procedures regarding the Customs officers and the CHI. The the CHI assesses the photographs and

1 UNSC Resolution Numbers S/RES/1483 (2003), S/RES/ 2199 (2015), S/RES/2347 (2017). 2 Directive 2014/60/EU on the return of cultural objects unlawfully removed from the territory of a Member State; Council Regulation (EC) No. 116/2009 on the export of cultural goods. 3 See for example: http://icom.museum/programmes/fighting-illicit-traffic/object-id/.

62 WCO news N° 86 June 2018 ©Hans Roggen©Hans

enforcement operations targeting cultural goods, such as Operations Colosseum (2012) and Odysseus (2014), two joint Customs operations, and Operation Athena (2017), a global Customs-police operation led by the WCO and INTERPOL and which was complemented by Operation Pandora II, a regional initiative led by the Spanish Items waiting to be cleared by Customs in the warehouse of a postal operator Guardia Civil and Europol.5 Participants object descriptions submitted, together Alongside managing legal trade flows, share a lot of data during these with the circumstances surrounding the the main focus is on combating illicit operations, which is analysed to identify shipment and, if necessary, will enlist trade. A risk analysis system is used for modus operandi, trends and patterns, as the services of experts from museums this purpose. For this analysis, the CHI well as to refine risk indicators. or universities. provides Customs with risk indicators, which relate, for example, to the origin of Export licences In some cases, the CHI will assess the the shipment or the flight (war zones or The system of export licences is the same shipment in situ, possibly together with countries affected by natural disasters), across the EU and is based on Council an expert. If there are reasonable grounds or the type of goods declared. Regulation (EC) No. 116/2009. Cultural for suspecting that an object has been goods are divided into 15 categories, illegally exported from a country that is Such goods are archaeological and and an export licence must be applied party to the 1970 UNESCO Convention, ethnological objects, archives and for when goods are above a specified or from Iraq or Syria, and imported religious artefacts of particular value and age.6 The model form for an into the Netherlands, the object will importance, or goods listed in UNESCO EU export licence is similar to the Model be seized for further investigation and alerts, INTERPOL’s database, research Export Certificate for cultural objects processing by the CHI. The police or studies, and the Red Lists developed by designed by UNESCO and the WCO.7 Public Prosecutor’s Office may also be the International Council of Museums called in to assist. (ICOM). These so-called Red Lists are In the Netherlands, an export licence designed to help Customs officials, can be obtained free of charge from Customs controls police officers and heritage professionals the Tax Department/Customs Central Dutch Customs conducts physical to identify the categories of objects most Office for Import and Export (CDIU). and administrative inspections on targeted by illicit traffic, and which trade Applications are made electronically. items brought into the EU and leaving and exportation is prohibited. Since The CHI verifies the data reported the EU. The strategic goal in this 2000, ICOM has developed 17 Red Lists, in the application and authorizes or important process is 100% supervision most of them for Latin America and the rejects the licence. Checks are made to in monitoring the flow of goods. Middle East.4 ascertain whether an object has legal protection, including in other countries, Customs and the CHI work on the basis Thanks to the risk analysis in place, whether it may be stolen, and whether of a Cultural Goods Implementation Plan Dutch Customs regularly comes across all reported data matches the object (Uitvoeringsplan Cultuurgoederen), cultural goods that require further to be exported. Once an application is which indicates, for example, how investigation. In several cases, controls approved by the CHI, the CDIU finalizes many inspections are to be conducted have resulted in the seizure and/or return the administrative procedures. in each Customs process (e.g. passenger of objects to their country of origin. controls, cargo inspections) and location Of utmost importance is the verification (e.g. airports, sea ports) on an annual In addition to routine inspection of the provenance information. Research basis. work, authorities also engage in global in this area is becoming increasingly

4 http://icom.museum/programmes/fighting-illicit-traffic/red-list/. 5 https://illicittrade.com/reports/downloads/OMD_ITR_Complete_LR_2016_12_04.pdf; http://www.wcoomd.org/en/media/newsroom/2018/february/ over-41-000-artefacts-seized-in-global-operation-targeting-trafficking-of-cultural-goods.aspx?p=1. 6 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:039:0001:0007:en:PDF. 7 http://www.unesco.org/new/en/culture/themes/illicit-traffic-of-cultural-property/legal-and-practical-instruments/unesco-wco-model-export-certificate/.

63 PANORAMA

crucial. As part of the Customs 2020 programme, an EU cooperation programme that provides national Customs administrations with the possibility to create and exchange information and expertise, a study focusing on the concept of provenance and on Customs controls on cultural goods has been launched at the initiative of the Netherlands and Belgium. The aim of the study is to develop a more standardized working method to be applied by culture and Customs authorities within the EU. The results are expected to be published at the start of 2019.

To conclude Stopping the illicit exportation and importation of cultural objects at the border contributes towards protecting not only Dutch cultural heritage, but also that of other countries. Efficient export control also prevents potentially expensive return procedures. The Dutch model of collaboration has been developed over the years, and has proven itself to be efficient. It is notably worthwhile for cultural institutions to invest in training courses for Customs; they help to reinforce national collaboration and the sharing of knowledge and information.

In relative terms, the Netherlands is a small country and there are strong lines of communication between the various ministries involved (including the Ministry of Justice and Security, and the Ministry of Foreign Affairs), which makes collaboration easier. As every country is organized differently, this exact model may not be replicated easily, but what matters most is for cooperation mechanisms to be in place that suit a country's structures. Ultimately, all national services share the goal of protecting cultural heritage, a goal which reaches far beyond national borders.

More information [email protected] www.erfgoedinspectie.nl

64 WCO news N° 86 June 2018

© Markus Spiske / Unsplash Clearance of express cargo and postal items: Korea tests new analytical tools to root out fraud

By Taeil Kang, and simplified Customs procedures in DIRECTOR GENERAL, KOREA CUSTOMS SERVICE place for “low-value goods,” and there CUSTOMS ADMINISTRATIONS COLLATE a is reason to believe, for example, that significant volume of data on a daily basis. criminals sneak in smaller quantities of For instance, the Korea Customs Service goods in separate consignments to avoid (KCS) accumulates 45 GB of structured reaching the de minimis thresholds, data and 30 GB of unstructured data in above which duties and/or taxes become its database every day. However, most payable. Customs administrations were until now not able to leverage such data due But so far, Customs has failed to to a lack of information technology (IT) effectively respond to this form of infrastructure and knowledge about crime using conventional methods data analytics techniques. due to difficulties in analysing the 200 million pieces of data that have been Things changed, however, with generated just over the past 10 years. the development of modern IT It is worth mentioning here that, in infrastructure as well as Big Data open Korea, express couriers send requested source analytics solutions to manage clearance information electronically, and analyse data. Tools such as Hadoop in order to permit the pre-advice and and R, a language and environment possible pre-clearance of items. Korea for statistical computing and graphics, Post also send some information on have made it possible to create “values” parcels electronically. from the huge amounts of data that are received each day.

In 2017, the KCS set up a Roadmap for Big Data Analysis, and commenced a six month-long training programme to nurture talents and experts in data analysis. This year, the Service established its own infrastructure to initiate in-house data analysis. Moreover, it is planning to raise 300 experts (7% of the total Customs workforce) in Big Data Figure 1: A word cloud created by analysis over the next five years. analysing the descriptions of goods bought online by a single trader This article presents an experiment that the KCS has been undertaking to see whether new analytical tools could To address this challenge, the KCS help in testing a hypothesis related to decided to boost its data analysis capacity commercial fraud via express cargo and by bringing together Customs officers postal items, and identify potential illicit trained in data mining and Customs transactions. experts dealing with the clearance of express cargo and postal items. Based The challenge on the outcomes of their discussions, With the exponential growth in IT experts from the private sector who e-commerce, the number of small have been working with Customs’ IT parcels to be cleared by Customs has systems for years then reviewed the skyrocketed, stretching the limits actual analysis tools and methods, and of Customs enforcement capacities. trained officers conducted a two month- Korea has a tax-exemption system long projects.

65 PANORAMA

De minimis thresholds in Korea are used in different ways:

• as a “value” threshold below which duties and taxes are not collected and no Customs declaration is required: Figure 2: Geographic coordinates for postal operators the threshold is 150 US dollars using showing different people reporting the FOB price; and for couriers the threshold is 150 US the same phone numbers on different dollars using the FOB price, or 200 US dollars for goods occasions originating in the US, under the terms of the Free Trade Agreement signed between Korea and the US;

• as a “reporting” threshold for goods in respect of which a full Customs declaration must be submitted: for express cargo, a “list clearance” procedure allows a trader to receive goods and, providing their value is below the de minimis threshold, clear them by submitting 24 pieces of information, such as the trader’s name and address, the consignee’s name and address, and the type and price of the goods; as for goods entering via the international mail channel, they are cleared on-the-spot.

66 WCO news N° 86 June 2018

international phone numbers as well as blank spaces in addresses. Data collection and refinement was the process where unexpected difficulties were experienced the most, and which took the longest time.

Lessons learned “Garbage in, garbage out" is a well- known maxim relating to the need for “good” information for meaningful data analysis. The expression emphasizes that the quality of output is determined by the quality of input. The KCS has learned through experience that Customs officers tend to be nonchalant to the importance Figure 3: A visualization of the different addresses used by suspicious importers of the quality of data in Customs as much showing that a specific region of Seoul is more frequently reported as to the quantity of it. In light of this, the Service plans to conduct automatic data cleansing at the time when data Hypothesis reported the same seven phone numbers is recorded in its database by adopting Based on their experience, the on different occasions when importing artificial intelligence technologies. hypothesis formulated by risk analysts goods destined for 60 different addresses. was that operators (in an effort to avoid Another lesson learned is the paying duties/taxes) were importing By inputting information such as phone importance of “domain knowledge.” items in a multiple of small parcels, numbers, descriptions of goods and the During the project, one IT expert from using a number of different addresses exporting country into the visualization the private sector said that a task which and contact numbers. In other words, programme, analysts were able to took one week to complete by Customs compliant importers use one name, one identify importers’ different addresses. officials would have taken one month by phone number, and one address for all Data on seven suspicious importers a “lay” person. In other words, domain their operations, while non-compliant showed that they were using a specific knowledge matters a lot when analysing importers use a complex series of names, region of Seoul, Korea’s capital, as their data. Therefore, Big Data analysis of phone numbers, and addresses. address, which indicated that they might Customs related topics should remain be importing items in a multiple of small within the purview of Customs. To confirm the hypothesis, records of parcels with false destination addresses importations that were transported across this region. Future plans via express and postal services were This project was a short-term pilot extracted for a three-year period. Then, Issues and solutions project aimed at testing how data search tools were used to mine the data When the KCS first mapped the project, analytics could enhance risk analysis. It in order to identify specific information the team wanted to analyse data reported was applied to express cargo and postal such as phone numbers and addresses. in all simplified and general declarations. items to identify commercial fraud, Datasets containing the refined data, However, many of the declarations but the KCS believes that the same including the consignee’s name, address contained omitted or incomplete methodology could be applied to other and phone number, were then created for information on the consignor, the areas. For example, criminals trying to analysis purposes. consignee, the goods description, and import high-risk cargo, such as narcotics the phone number. As a result, the and weaponry, tend to file an import Results scope of the analysis was scaled down to declaration with a false address in order Among the suspicious cases that came include only general import declarations to hide their identity. out of the analysis was an importer of goods containing relatively complete who had reported 123 different phone and accurate information. The KCS plans to invite a larger number numbers and 127 different addresses. To of IT experts to enhance the tools used facilitate data-reading, the analysis team Even when data was complete, it had to be during the project in order to make converted the addresses into geographic refined. In many cases, the same address them fit the Service’s analytical needs. coordinates. Several visualization would be written in a different way or use These solutions will be integrated into techniques were used. For example, different spellings. The data cleansing KCS’s system for utilization in actual the datasets were analysed using ORA, process took a long time and was rather investigations. a network analysis tool, to examine burdensome. It involved replacing the correlations and relationships. As can country code with a country name, More information be seen in figure 2, 83 different people and removing special characters in [email protected]

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[email protected] cotecna.com INTERVIEW WCO news N° 86 June 2018

Storage and destruction of counterfeit goods: the safety and environmental challenges

Interview with Ms Louise van WE PARTNER WITH Greunen with applicable environmental and What must be taken into account before DIRECTOR, BUILDING RESPECT FOR IP DIVISION, public health legislation. Depending storing IP-infringing goods, and who is WORLD INTELLECTUAL PROPERTY ORGANIZATION on the nature of the goods involved, liable for storage costs? CUSTOMS WORLDWIDE (WIPO), this can be a costly and technically and Dr Martin Guard complex undertaking, and minimizing Dr Martin Guard: Storage of CHARTERED ENVIRONMENTALIST AND HAZARDOUS WASTE SPECIALIST the environmental impact of the IP-infringing goods can be both TO ENSURE MORE disposal requires specialized facilities, complex and expensive. Firstly, THE STORAGE OF goods suspected of expertise, and high levels of stakeholder IP-infringing goods need to be stored infringing intellectual property (IP) collaboration. in secure Customs or private bonded EFFICIENT AND SECURE rights, and their sound disposal, once warehouses, secondly, the litigation the infringement has been confirmed, To shed more light on this contentious process in relation to such goods is involves costs and represents major and often problematic issue, WCO often protracted and therefore costly, CROSS-BORDER TRADE logistical challenges. Goods may remain News interviewed two experts on the and thirdly, when large amounts of in storage during the entire litigation storage and destruction of counterfeit goods are confiscated, such as during process, and even longer, if there is goods, which it hopes will provide seizure operations, storage space can Our field proven solutions have helped a need to analyse them in order to Customs administrations with more rapidly become limiting, especially in determine their composition or hazard. solid information on how to handle such more remote locations with little storage Governments tackle illicit trade and goods or how to improve their current capacity. protect their revenues since 1974. As for the disposal or destruction of these disposal regime, including their legal goods, it must be done in an appropriate, framework. Moreover, in respect of hazardous environmentally safe manner in line IP-infringing goods, such as counterfeit © Idonesian Customs

[email protected] cotecna.com 69 INTERVIEW

chemicals and pesticides, storage must be other importation acts of IP-infringing done in a way that ensures incompatible goods constitute criminal offences, and substances are separated, so as to prevent the legal liability clearly rests with the the potential for fire, explosion or release infringer. of toxic fumes. More often than not this is not done effectively, and emergency Have you identified best practices equipment to help in the event of an for reducing storage costs, especially incident is often lacking. in light of the length of time that a litigation process can take? In respect of who is responsible for paying the costs for the storage of Ms Louise van Greunen: The question of IP-infringing goods, what is evident is storage and the possibility of subsequent a lack of harmonization both from one disposal or destruction of IP-infringing country to another, and further across goods derive from the international legal legal proceedings (e.g. Customs, civil, framework for enforcement of IP rights criminal). established under the TRIPS Agreement. Potentially infringing goods may be While Article 45 of the Agreement on suspended from release by Customs Trade-related Aspects of Intellectual authorities in line with the special Property Rights (TRIPS agreement) provisions on border measures, i.e. obliges Members of the World Trade Articles 51-60 of the TRIPS Agreement. Organization (WTO) to make it possible for right holders to be awarded Article 59 specifically refers to Article damages and expenses to be covered by 46, which establishes as a basic civil or the infringer, in reality the infringers or administrative remedy the possibility of protecting the interests of the owner or criminal groups either disappear or the disposing of or destroying IP-infringing importer of the goods. importing company is liquidated shortly goods in a way that precludes them from after the event, ultimately leaving the bill entering the channels of commerce. This In addition, samples of the goods are to be paid by right holders or tax payers. remedy is also available in criminal collected and retained by the Customs procedures following Article 61 of the authorities prior to the destruction. These situations have ultimately TRIPS Agreement. In the absence of litigation, simplified led some right holders to request procedures allow for the swift Customs administrations not to seize While so-called “simplified procedures” destruction and disposal of goods, and their products or at least not until a for the disposal of infringing goods are thereby reduce storage costs. Examples certain threshold of volume has been not explicitly mandated by the TRIPS of the effective operation of such encountered, and it is an area that needs Agreement, they align with the general measures can be observed, inter alia, to be improved. obligations stipulated under Article in the Philippines and in the European 41 thereof that WTO Members shall Union (EU) where simplified procedures Ms Louise van Greunen: The complexity provide for effective and expeditious were established through a regulation and costs associated with the storage enforcement procedures and remedies. concerning Customs enforcement of IP of IP-infringing goods, as mentioned Simplified procedures are in place in rights. by Dr Guard, are important issues to many WIPO Member States, and act as consider in this context. The applicable an effective mechanism for containing Dr Martin Guard: Beside the wider use legal framework in the country where storage costs. of simplified administrative procedures infringing goods are to be stored is and administrative remedies to reduce another factor that may also have a In essence, such procedures allow complex legal litigation in dealing bearing on the question of liability for Customs authorities, under certain with some IP-infringing goods, some costs. conditions and with the agreement of potential areas where the burden for the affected right holder, to destroy or the cost of storage may be reduced or For instance, some countries qualify dispose of goods that the importer has covered include: certain acts of importing IP-infringing agreed – or is deemed to have agreed – to goods as administrative violations abandon even before an infringement of • the introduction of a mechanism and right holders may be liable for the an IP right has been established through similar to the United States’ costs of storage. In Italy, this is the court proceedings. As in the case of Treasury Forfeiture Fund, whereby case in relation to small consignments standard procedures, the right holder confiscated proceeds of crime transported by express courier and may be required to provide security and specifically those related postal services. At the same time, as a means of preventing abuse and to counterfeiting could provide

70 WCO news N° 86 June 2018

© Sri Lanka Customs Often in financially constrained countries with poor waste management infrastructure, ideal disposal solutions may be difficult to implement. Under these circumstances, encapsulation, crushing with plant machinery or broken with sledge hammers may offer a cheaper alternative disposal solution for infringing goods.

funding support for national With regard to destruction or disposal, escape of toxic leachates, potentially enforcement activities in relation which practices have you seen that are polluting waterways and groundwater. to IP-infringing goods. Such a not appropriate? When such landfills are heavily mechanism would send a clear scavenged, individuals can be exposed message to criminal gangs that all Dr Martin Guard: Probably the most to potentially harmful material, and if assets will be seized following a inappropriate destruction method, not fully destroyed prior to disposal proven IP crime; ironically often used for “showcase some goods may re-enter channels of events” after seizure operations, is commerce. • the possible introduction of a open burning. These IP-infringing requirement, at the earliest stage goods, often burnt with their plastic Can you give some examples of best of proceedings, that the infringer packaging at low temperatures, practices in the area of destruction or shall pay a financial warranty release large volumes of toxic fumes disposal? based on prima facie evidence of and smoke composed primarily of infringement to cover storage and dioxans and furans that are persistent Dr Martin Guard: Improved destruction costs; organic pollutants (POPs) resistant methods for disposal or destruction to environmental degradation, and of IP-infringing goods include proper • the availability of specialized which can lead to extensive pollution incineration in “fit for purpose” judiciary to be used in cases of adjacent soils. commercial incinerators, shredding or specifically relating to IP-infringing crushing of the goods, or encapsulation, goods; Exposure to the smoke can cause a which entails encasing the infringing wide range of respiratory ailments in goods (e.g. pharmaceuticals) in a sand, • the increased use and acceptance humans, and the pollutants are also gravel, cement mix to form solid inert of admissibility of representative considered carcinogenic. Furthermore, blocks that can then be dumped into a samples and photographic evidence plants or crops that are grown in these landfill site. as an alternative to physical goods polluted areas can uptake the pollutants needing to be stored over long and when harvested or are grazed by Obviously, some goods such as periods; domestic animals can result in their counterfeit electronics could be bioaccumulation and bio-magnification recycled as they often contain valuable • the introduction of prescribed further up the food chain. metals. However, it is important that timeframes for litigation concerning any recycling is conducted in a formal IP-infringing goods, so as to limit Disposal into non-sanitary landfills regulated system to prevent pollution the storage period and the costs can also result in environmental and and worker health impacts, and that the related thereto. potential health impacts through the first step should be to remove the goods’

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functionality to ensure that they cannot cement kilns or other industrial furnaces and which particularly emphasize re-enter the marketplace. of which there is normally at least one in ways to achieve environmentally sound most countries. Efforts should be made management (ESM) for storage and What about the financial responsibility to contact such facilities to discuss their disposal activities. of the infringer, can you shed some light potential to dispose of these goods as on this issue? long as they are suitable for incineration Ms Louise van Greunen: At WIPO, we (e.g. do not contain metals). have long recognized the importance of Ms Louise van Greunen: The ultimate raising awareness and building capacities liability for the storage and disposal What sort of guidance is available to in relation to the environmentally of IP-infringing goods rests with countries, and what kind of assistance safe disposal and destruction of the infringer. Civil, criminal and do you offer to those that wish to review IP-infringing goods. We introduced this administrative measures should, their current practices? topic at the highest policy level almost therefore, provide relief for the 10 years ago by placing it on the agenda associated costs where the infringer can Dr Martin Guard: Challenges for of the WIPO Advisory Committee on be identified. In this respect, efficient the environmentally safe storage and Enforcement (ACE), which considers IP litigation processes can contribute destruction or disposal of IP-infringing enforcement in the context of broader towards ensuring that right holders and goods are numerous. Inappropriate societal interests and development- governments are compensated for their destruction and disposal of these oriented concerns. costs. In practice, however, this is still a goods frequently results from poor challenge. technical capacity or environmental Since then, the topic has remained of awareness, lack of disposal or recycling interest and importance to our Member Dr Martin Guard: Many of the same infrastructure, weak legislation, or a lack States. WIPO has also commissioned two issues apply for the cost of storage and of financial resources. comprehensive studies – one on methods the cost of final destruction. While, as of disposal and destruction of counterfeit Ms Van Greunen explained, the infringer The storage and destruction or disposal and pirated goods within the Asia Pacific is ultimately liable, they often remove of IP-infringing goods are processes region prepared by David Blakemore, themselves quickly from the process authorized, overseen and conducted IPR Business Partnership’s Executive such that the burden again falls on the by many parties (e.g., IP enforcement Director for Asia Pacific, and another by right holder and/or the government. agencies, environmental agencies, right Dr Guard, on the environmentally safe holders, and private contractors). This disposal and destruction of IP-infringing Although some methods of disposal as increases the difficulty of coordination goods, which he presented at last year’s mentioned above can be relatively low and cooperation, resulting in a process session of the ACE. cost, it will also depend on the amount that may be disorganized and fail to of IP-infringing goods to be disposed of function properly. Some WIPO Member States have also and whether they are hazardous or not. come forward to share their experiences For counterfeit pesticides where the true To ensure that technical capacity and with issues surrounding disposal and composition of the infringing good is awareness of the environmentally safe destruction operations. Ronald Brohm, unknown, expensive testing will be storage and disposal of IP-infringing the Managing Director of REACT, required to determine the best method goods are improved in the future, the association fighting the trade in for disposal, which may also require an new training initiatives are required counterfeit goods, has also presented expensive disposal treatment to be used. together with the provision of adequate information on environmentally technologies and tools, and appropriate friendly recycling facilities, and on What are the options for countries that financial support. REACT’s efforts to reduce the costs of do not have the proper facilities to safely enforcement. destroy or recycle goods? New training and awareness modules could be developed by the WCO’s Recognizing the importance of Dr Martin Guard: Often in financially Customs Learning and Knowledge coordinating action and expertise on constrained countries with poor waste Community (CLiKC) and INTERPOL’s these issues, WIPO has also collaborated management infrastructure, ideal International IP Crime Investigators with UN Environment in organizing disposal solutions may be difficult to College, and other technical support and several dedicated workshops for implement. Under these circumstances, guidance is available from the United enforcement authorities and other encapsulation, crushing with plant Nations Environment Programme relevant actors in the Asia Pacific machinery or broken with sledge (UN Environment) and the Basel Region that addressed the disposal of hammers may offer a cheaper alternative Convention’s Regional and Coordinating IP-infringing goods from both the IP disposal solution for infringing goods. Centres. and environmental perspective.

Moreover, for particularly hazardous This could be through direct support or At WIPO, the topic of environmentally IP-infringing goods (e.g. counterfeit using the specific disposal and recycling friendly disposal and destruction pesticides), they may be destroyed in guidelines that have been developed, forms an integral part of our capacity

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building activities with enforcement How can right holders provide Dr Martin Guard: Rights holders can authorities, in particular with judges assistance with respect to the disposal indeed provide assistance in two ways. and prosecutors, in WIPO Member or destruction process? Firstly, these companies are often States. We also highly valued the developing effective and innovative opportunity to introduce this topic to Ms Louise van Greunen: Right holders techniques for improved recycling and the WCO Enforcement Committee play an important role at all stages of waste disposal as part of their extended earlier this year, and look forward to IP enforcement operations, including producer responsibility schemes, and it future collaboration between WIPO and with respect to the disposal and would be beneficial if such knowledge, the WCO in this area. destruction process. Their cooperation techniques and lessons learned could be and input is necessary in identifying shared with the relevant parties involved Finally, at WIPO, we also seek to IP-infringing goods, in initiating with the destruction of IP-infringing draw attention to the importance of enforcement proceedings, and in using goods to better guide these activities. environmental considerations in the simplified procedures for the disposal Secondly, where necessary to provide disposal and destruction of IP-infringing and destruction of goods, if such both financial and logistical support to goods through a spotlight item on this procedures are in place. Right holders ensure the safe disposal of infringing issue on the WIPO “Building Respect also have the potential to contribute goods contravening their brand. for IP” webpage as well as through a towards environmentally friendly dedicated publication on the challenges disposal and destruction operations More information associated with the disposal of through knowledge-sharing, assistance, www.wipo.int counterfeit goods that appeared in the and cooperation with enforcement WIPO Magazine in November 2012. authorities.

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© Jimi Filipovski Wrap-up of the WCO Conference on Illicit Financial Flows and Trade Mis- Invoicing

ILLICIT FINANCIAL FLOWS (IFFs) have been an issue of increasing concern over the past two decades, with many discussions, raising questions on what IFFs include, what we know about them, and how they can be measured.

Estimates of the scale of the phenomenon have played a key role in attracting attention and building political momentum. For example, Global Financial Integrity, a non- governmental organization (NGO), which was created “with the aim of quantifying and studying the flow of illegal money while promoting public policy solutions to curtail it,” published figures estimating that annual IFFs from developing countries were in the order of one trillion US dollars.

The NGO defines an IFF simply as “funds [that] are illegally earned, transferred, Focus: and/or utilized.” The Organisation for Economic Co-operation and Illicit Financial Development (OECD) defines an IFF as any financial flows ”generated by Flows methods, practices and crimes aiming to transfer financial capital out of a country in contravention of national or This section of the magazine gathers international laws.” Other organizations several articles addressing the topic of have their own definitions as well. While illicit financial flows (IFFs), including there is a fair degree of convergence its links to the smuggling of minerals between these definitions, some such as gold. The first article gives an fuzziness does remain. overview of the discussions which took place during the WCO Conference on Delegates attending the Conference on Illicit Financial Flows and Trade Mis- Illicit Financial Flows and Trade Mis- Invoicing that was held in May 2018. A Invoicing that was organized by the second article introduces the German WCO on 23 May 2018 did not discuss the Customs organizational structure and definition of an IFF and figures related to work processes to detect IFFs and fight the scale of the phenomenon at length. the concealment of the proceeds of fraud They mainly examined how to better and crime. The third article describes how identify illegal transfer mechanisms of a joint portal for Customs verification of money via commercial transactions, minerals will contribute to fighting the deliberated on the organizational and smuggling of minerals, in particular operational aspects of the Customs gold, and related IFFs. Last but not least, a response to the issue, and looked at the fourth article explains how the production potential offered by technologies such as and trade in gold is organized in Burkina blockchains. Faso and the challenges faced in fighting gold smuggling.

74 WCO news N° 86 June 2018

Wrap-up of the WCO Conference on Illicit Financial Flows and Trade Mis- Invoicing

Trade mis-invoicing thanks to funding provided by the Korea PCM and PFM Trade mis-invoicing is a form of Customs Customs Service. As IFFs via trade mis-invoicing are and/or tax fraud involving exporters and concealed across countless trade importers deliberately misreporting the The Report discusses the two methods transactions, it is impossible to directly value, quantity, or nature of goods or that could be used to effectively detect measure the magnitude of them. services in a commercial transaction. trade transactions presenting a risk, Different methods have been developed The motive governing such transfers highlights recommended practices, by researchers to estimate the volume ranges from: and introduces specific mechanisms of the trade transactions, chief amongst developed by some administrations, them are the Partner Country Method • the evasion of taxes and tariffs; notably those from Italy, China, Korea (PCM), which compares the trade value • the payment of bribes and kick-backs; and Norway, some aspects of which of one country to the corresponding • the avoidance of trade regulations; will be presented later in this article. In trade value of a partner country (i.e. the • the exploitation of trade incentives; addition, the Report lists a number of comparison of bilateral trade data), and • the evasion of capital controls. recommendations inviting countries in the Price Filter Method (PFM), which particular to: uses price filters to detect suspicious Trade mis-invoicing can be related transactions with abnormal prices. to, but does not precisely correspond • ensure that Customs has a sufficient to, trade-based money laundering mandate and the resources necessary Three researchers presented the (TBML). Rather, trade mis-invoicing is to tackle not only under-invoiced work carried out to demonstrate the a mechanism that can be used to engage imports, but also over-invoiced usefulness of the PCM and PFM in in TBML. imports, under-invoiced exports, managing trade mis-invoicing risks. and over-invoiced exports; Matthew Salomon, Senior Economist at The principle areas where trade mis- Global Financial Integrity, presented a invoicing, as a channel for IFFs, have • allow Customs to access foreign case study where data on importations been observed include the over-invoicing exchange transaction databases, from South Africa from 2010 to 2015 of imports intended to disguise capital and equip Customs with a mandate was used. The objective of the study flight, the under-invoicing of exports to examine whether financial was to examine how the PCM and PFM intended to conceal trade profit abroad transactions between traders compare in identifying potential import (in a third-party country such as correspond to the declared value of under-invoicing. The principal findings tax havens), and the over-invoicing traded goods; of the study were that the PCM and PFM of exports intended to bring illicit yielded very different estimates of the (concealed) proceeds into the domestic • facilitate inter-agency cooperation magnitude of trade mis-invoicing (which legal financial system. among Customs authorities, Tax is not surprising as the data and metrics authorities, Financial Intelligence were different), but largely identified the WCO Study Report Units and other agencies same risks of potential under-invoicing The Conference provided the WCO availing of information-sharing, of South African imports. with an ideal opportunity to present to joint investigation teams, joint participants the main findings of the intelligence centres, secondments Philipp Hong from Central Michigan WCO Study Report on Illicit Financial and co-location of personnel, and University and Simon Pak from Flows via Trade Mis-invoicing, which joint training programmes. Pennsylvania State University, in their the Organization was commissioned to research presentation, compared both undertake by the G20 leaders. The Report is a “living” document that methods using data on United States will be shared with Members of the imports and exports in 2016. Their This Study Report, which is the WCO for their comments and input, findings show that the two methods culmination of many months of before being considered for approval by estimate quite different magnitudes empirical analysis and collaboration the WCO Council, the Organization’s of trade mis-invoicing, and identify between Customs administrations, the highest decision-making body, in a different list of potential high-risk WCO Secretariat and other experts, June 2018. An excerpt of the Report transactions. provided a narrative background to the will be presented to the G20 for their Conference, and the WCO was pleased consideration too. Yeon Soo Choi from the WCO Research to welcome many of the co-authors of Unit presented research where datasets the Report to present their research, of three countries were examined. As

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demonstrated by other research, the cross-referencing Customs declaration Last but not least, the speaker gave researchers found that estimates of data (on transferring of goods) and FX examples of cases of overpricing, trade mis-invoicing were very different transaction data (on payment for goods). highlighting the critical need for access according to the method used, but to financial transaction information that cross-referencing both methods – Moreover, in 2013, the speaker added, the to efficiently tackle mis-invoicing and i.e. using both methods and selecting Korean Customs Act had been revised to related IFFs. transactions flagged by both for criminalize the manipulation of prices further investigation – can be one of of goods, irrespective of whether the Some participants then took the floor. the useful mechanisms to manage the evasion of taxes was involved. Indeed, A representative of Brazil explained risk associated with suspicious trade as Customs duty has dramatically that a Joint Task Force to study IFFs had transactions. decreased around the world, criminal identified that the main conduit of IFFs traders have less incentive to declare is the under-invoicing of exports, the Practices undervalued prices of traded goods to magnitude of which, according to the Moving from the academic realm to the Customs, and instead have sought to representative, is huge. Money flows, practitioner’s perspective, the second overvalue imported goods in order to in particular, to countries offering high session of the Conference showcased best evade corporate income tax or embezzle banking secrecy or tax havens, where practices with engaging presentations government subsidies. under-invoicing is used by companies featuring representatives from the to shift profits and reduce their tax Korea Customs Service (KCS) and the Mr Joo continued by outlining the liabilities in Brazil. Nigeria Customs Service (NCS), who structure of his administration, which advocated for a shift in the focus from established financial investigation She then called on the WCO to encourage undervaluation to overvaluation. units dedicated to fighting illicit FX multilateral cooperation and the transactions in 2000. Today, there automatic exchange of transaction-level Adewale Adeniyi from the NCS is one unit housed within Customs’ trade data, an exchange which is already highlighted the pressure that his Headquarters and three units in local in place among Mercosur countries, as it administration is put under to reach Customs houses, with a total number of is a key measure that enables real-time unrealistic revenue targets as well as the 80 financial investigators. Beside trade risk management models to counter IFFs high level of non-compliance existing and FX transaction data, they also through mis-invoicing. in the country, with 20% of trade receive reports from the Tax Service estimated to be compliant. Recently, and the Immigration Bureau, as well as A representative from the Russian the NCS had started working more on suspicious transaction reports (STRs) Federation reminded participants data analysis, with patterns suggesting and currency transaction reports that copies of two important model the emergence of a high degree of mis- (CTRs) related to cross-border trade agreements developed by Russia to invoicing. Transactions of low duty from Korea’s Financial Intelligence Unit formalize cooperation with foreign items were found to present some risk that includes Customs officers among its countries had been made available: the of over-invoicing, while transactions staff. agreement on information cooperation of high duty items were found to be undervalued.

He also pointed out the need for more awareness about over-invoicing, the adoption of a “data culture” and of efficient reporting procedures on inspection results to enhance risk management, and the development of analysis capacity among officers as well as the use of analytical tools.

Matthew Joo from the KCS started his intervention by stating that Customs is in the right position to address IFFs as it was able to monitor trade and financial transactions at the same time. He explained that his Administration had acquired investigative authority on foreign exchange (FX) transactions related to cross-border trade in 1999. In practice, KCS investigators initiate investigations through

76 WCO news N° 86 June 2018

during cross-border transportation by agencies operate in silos. Inter-agency Jeffrey Owens from the Institute for individuals of cash and/or monetary cooperation is the subject of an entire Austrian and International Tax Law instruments; and the agreement on chapter of the WCO Study Report, at Vienna University of Economics preventing, detecting and suppressing and its chief recommendation in this and Business acknowledged that the the commitment of suspicious financial respect is that inter-agency cooperation WCO was one of the only international transactions by participants in foreign is paramount in the fight against IFFs. organizations seriously examining economic activities. blockchains, and presented an Ms Dejong also highlighted the work overview of the principle features of the He then stated that his country is being done under the OECD Global technology; the fact that it allows for particularly confronted with the Forum on Transparency and Exchange the creation of immutable records and overvaluation of high-tech goods that of Information for Tax Purposes to make the decentralization and distribution were exempt from duty. Exchange of available information on companies and of ledgers, in addition to a potential information between countries was, beneficial ownership. 150 jurisdictions increase in transparency, would make therefore, critical in order to check have committed to implementing the it a very attractive option for Customs, import declarations and the existence of international standard on exchange of particularly those wishing to engage in destination companies, or just the fact information on request (EOIR), and information-sharing with other agencies that it is a registered importer. In one over 100 countries and jurisdictions such as tax authorities. case alone, the price declared was 900 have committed to implementing the times higher than the “normal price.” new standard on automatic exchange of Yao-Hua Tan from Delft University financial account information including of Technology outlined the principle The panel discussing recommended the official owner of the accounts. The features and benefits of a pilot project practices also included speakers from latter will enable recipients to receive undertaken in the Netherlands by the Financial Action Task Force (FATF) real-time information that they may not Maersk and IBM with the cooperation and the Organisation for Economic have requested, and uncover facts that of Dutch Customs; an example of Co-operation and Development they were unaware of. cooperation and collaboration across (OECD). Derek Leist from the FATF industries and agencies, which enabled outlined practical policies that Blockchain all stakeholders to leverage knowledge Customs could implement in order to The WCO Study Report also advocates from the supply chain. facilitate the sharing of information, for Customs to take full advantage of the such as standardizing data formats and potential offered by new technologies, All panellists of this last session agreed centralizing data for operational use, such as blockchains, to prevent any on the importance for the WCO and while Melissa Dejong from the OECD fraudulent manipulation of trade Customs to keep abreast of the changes spoke about the necessity to adopt a transactions, and to allow the sharing in a rapidly-evolving technological realm. whole-of-government approach in of relevant information in a trusted and order to develop a coherent strategy secure manner. More information and to avoid a scenario whereby [email protected] © Barta IV

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Overview of German Customs’ fight against illicit financial flows

By the German Central Customs Authority centre, which is why Switzerland (which associated with money laundering tops the list and therefore takes the worst or the financing of terrorism. Monitoring and combating position), the United States (in second place) and Germany (in seventh place) The ZKA coordinates and manages illicit financial flows (IFFs) are ranked much higher than “classic” the investigations carried out by tax havens like Panama, whose criminal, eight regional Customs investigation represent a substantial banking, tax and commercial laws offices and, in special and significant generally facilitate tax avoidance and cases, can carry out investigations challenge to all countries. tax evasion. itself. In addition, 16 Joint Financial Investigation Groups (Gemeinsame This is particularly true for Among European Union (EU) Member Finanzermittlungsgruppen) composed States, Luxembourg, Malta and the of police and Customs investigation Germany with its growing Netherlands are also ranked high officers also deal with cases in this up in the Financial Secrecy Index. area. In cooperation with these 16 joint significance as a financial “Maintaining strict levels of secrecy, groups, the Customs investigation offices Switzerland remains the undisputed in particular process: centre. This article leader,” the report says. Germany’s neighbour was assessed a secrecy score • analytical reports submitted by the introduces the German of approximately 76, Germany scored FIU and other relevant information, 59, Austria 56, France 51, Italy 49, and as well as related reports of suspected Customs organizational Belgium only 49 points. money laundering; structure and work Organizational structure • information gathered by Customs Germany’s authorities and, in particular, officers within the framework of processes to detect IFFs the German Customs administration, controlling cash and currencies, are taking up the challenge: the fight if there is reason to believe that and fight the concealment against IFFs that make use of the facilities cash or its equivalent means of provided by financial regulations, payment are transported in cross- of the proceeds of fraud and the offshore secrecy system. In border movements for the purposes Germany, IFFs include various criminal of money laundering or terrorist and crime. activities, comprising money laundering financing or the like; and terrorist financing as well as other offences related to the cross-border • information with regard to postal THE FINANCIAL SECRECY Index1 that was movement of cash and currencies. shipments, if such shipments contain first issued in 2018 ranks jurisdictions, cash or an equivalent means of according to their secrecy and the scale The German Customs administration payment, which are entered into, of their offshore financial activities. It is a very large entity with two main transported through or out of the assesses the ways in which legislation services involved in the fight against IFF country, and where the means of enables the origin of legal and illegal related activities: payment are related to committed funds and the persons actually entitled or intended crimes or offences; to them to be concealed. In addition, • the Customs Criminological Office, it assesses the ways in which illegal Zollkriminalamt or ZKA, whose • cases of trade-based mis-invoicing, funds can be fed into the legal, financial main task is the prosecution and including those related to money and economic system, i.e. the level of prevention of minor, serious and laundering. efficiency of state measures in specific organized Customs crime; countries such as information exchange Before June 2017, the German FIU between authorities and law enforcement • the Financial Intelligence Unit acted under the umbrella of the BKA, measures. (FIU), which receives and evaluates the Federal Criminal Police Office. It suspicious transaction reports was restructured and moved under The indicators are weighted according to (STRs) dealing with financial the umbrella of the German Customs the importance of a country as a financial transactions that are potentially administration in June 2017 following

1 https://netzwerk-steuergerechtigkeit.de/fsi2018/

78 WCO news N° 86 June 2018

the transposition into German law of the field of combating money laundering or transport such amounts through or out EU’s Fourth Anti-Money Laundering asset recovery. of the country, are obliged to inform Directive. The FIU was re-established officers that they are carrying this as an administrative authority within As for the FIU, it applies a amount or more when they are subject the Customs administration. multidisciplinary approach with regard to an inspection. to recruitment and human resources. One of the core duties performed by Analysts are drawn from different In addition, since 15 June 2007 and the FIU is to analyse incoming alerts professional backgrounds that are the entry into force of a specific EU on suspicious financial transactions, relevant to the analysis of financial flows regulation, every traveller entering or pursuant to the Anti-Money and transactions in the context of money leaving the EU must declare in writing Laundering Act and the Fiscal Code. laundering and terrorist financing. any amount equalling or exceeding To this end, the German FIU makes FIU staff are, for example, drawn from 10,000 euro in cash to Customs. use of goAML software, which was Customs, police, supervisory authorities Customs control units perform risk- developed especially for FIUs by the and the tax administration, as well as sensitive checks and random checks at United Nations Office on Drugs and from the private sector, in particular borders as well as within Germany’s Crime (UNODC), and which is used banks and auditing and consulting national territory. When performing by more than 50 FIUs worldwide. firms. their controls, Customs officers have at their disposal several tools such as Training Cross-border movement of cash and mobile x-ray equipment and sniffer dogs. Customs investigation officers need currencies to undertake specific training courses People who carry cash or an equivalent Any infringement of the obligation to to prepare them for tasks that require means of payment amounting to 10,000 report and declare will be deemed an specialist know-how, for example in the euro or more into Germany, or who administrative offence, which may also © Alexandre© Dulaunoy

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give rise to the suspicion that money transmitted to the Customs investigation crimes, tax offences, bankruptcy crimes, laundering may be taking place. Such service who will check whether a etc.), it disseminates its analysis and administrative offences may be punished criminal suspicion can be substantiated the relevant information to concerned by a fine of up to one million euros. Once and, if necessary, forward the facts to the agencies for further investigation if control units discover the suspicious public prosecutor for the initiation of a needed, including to the ZKA. movement of cash, they transfer the judicial investigation. case to the ZKA / Customs investigation In addition to the above-mentioned offices for investigation. FIU operations operational analysis related to individual The active participation of individuals cases, the FIU also prepares strategic The Customs investigation authorities and companies plays an important role analysis across the different cases in order are also authorized to confiscate an in the process of combating money to be able to identify any current risks object in order to avert a present threat. laundering and terrorist financing. in the field of IFFs from case patterns Confiscating cash to avert a threat may The “obliged entities” are subject to and trends. Among other things, the be considered, in particular, if the cash is money laundering related monitoring findings are then incorporated into the intended to be used for the commission and reporting obligations, which, in operational analyses. of an offence. particular, include the submission of STRs whenever there are indications To ensure that the operational analysis Furthermore, a judge can independently that illegal financial transactions are is effective, the FIU was granted a broad order the confiscation of objects that are being executed. Not only banks and range of rights to obtain information and the result of illegal activities and which insurance companies, but also parties data from law enforcement agencies, and were confiscated within the framework from the non-financial sector, such as financial and administrative authorities. of proceedings on the suspicion of estate agents and traders, are subject to However, this is not a “one-way-street.” an offence, even if the party affected these obligations. Conversely, if relevant information is cannot be prosecuted or convicted on available, the FIU also provides this the criminal offence, if the court is The FIU may suspend the execution of information to competent authorities. convinced that the funds cannot have transactions for a period of up to one been obtained legally. If confiscation of month if there is reason to assume that In addition to the exchange of the object is ordered, ownership of the the transactions are related to money information on a case-by-case basis, object or the right of final decision will laundering or the financing of terrorism. the FIU also maintains constant pass to the State. This power is applied in order to prevent exchanges of information with national incriminated funds from being fed into and international authorities. Among Trade-based mis-invoicing the (legal) flow of money while the FIU other things, findings from strategic While processing cross-border trade concludes its analysis. Subsequently, law evaluations are made available to national transactions or in the course of enforcement agencies and prosecutors and international partners as required. undertaking tax audits, Customs officials can apply measures on the basis of the repeatedly detect cases of trade-based provisions of the criminal procedural At the international level, the participation mis-invoicing, which are primarily law to freeze funds. in meetings of the Egmont Group and the cases of under-invoicing used to avoid Financial Action Task Force (FATF) are import duties. If it is found that the mis- Depending on the results of the analysis, also noteworthy. More than 150 FIUs are invoicing scheme put in place is being data is forwarded to the competent part of the Egmont Group, which aims, used for money laundering or terrorist prosecution authorities. By forwarding inter alia, at setting uniform standards financing purposes, the Customs only relevant information, the FIU fulfils for a global approach to the fight against administration must notify the FIU its function as a “filter.” This reduces the money laundering and terrorist financing, and the ZKA; the Customs investigation burden on prosecution authorities in and in shaping information exchange in offices will also be involved. favour of investigating and prosecuting this field as intensively and effectively as IFFs. To summarize, once the FIU possible. Moreover, since the start of its Moreover, analysing STRs for under- or identifies transactions that may be operations in the summer of 2017, the overvaluation is a standard procedure connected to money laundering, terrorist German FIU has cooperated with more in the FIU. Suspicious cases will be financing activities, or other crimes (drug than 80 FIUs worldwide.

80 WCO news N° 86 June 2018

One of the main benefits of the new structure is that the FIU has the power to “filter” the increasing volume of STRs. It disseminates only cases that provide added- value for further investigation At the national level, the close working working day. Depending on the urgency, by law enforcement relationship with the regulatory priority and importance of an underlying authorities of the obliged entities is case, it is analysed more or less quickly agencies. This new approach worth highlighting. At the same time, and, if relevant, disseminated to the enables the burden on law the intensive exchange with national law appropriate authorities. enforcement agencies and prosecutors enforcement and prosecution plays an essential role. This of course The high number of filings poses a authorities to be reduced. As includes the two-way communication challenge to the new FIU, which only between the FIU and the German commenced its operations in mid- a consequence, resources Customs administration, in particular 2017. Nevertheless, since the start of may be shifted from the with regard to criminal Customs its operations, all the STRs that have investigations. been submitted to the unit have been processing of STRs to the reviewed and prioritized upon their investigation and prosecution The vast majority of STRs that are filed receipt. To date, analysis of more than originate from financial sector entities. 50% of the cases has been finalized, and of IFFs. The FIU and the supervisory authorities approximately one third of them have cooperate closely to raise awareness been disseminated to law enforcement among entities belonging to the non- agencies and prosecutors. In about 20% financial sector on their obligations of the cases, the FIU has decided not by, inter alia, organizing information to disseminate the information yet, sessions. because the underlying facts were not sufficiently linked to money laundering, Performance terrorist financing, or other crimes. As in many other jurisdictions, the All STRs are monitored for a period volume of STRs has been growing of three to five years after being filed, considerably over the last 10 years. This i. e. key information about the cases is is probably due to increasing awareness matched. on anti-money laundering and the prevention of terrorist financing issues One of the main benefits of the new by the financial sector, as well as to the structure is that the FIU has the power active policy of the supervisory authority to “filter” the increasing volume of STRs. in this sector. In 2006, the number of It disseminates only cases that provide STRs had reached 7,600, while this added-value for further investigation number had grown to around 46,000 by law enforcement agencies. This new in 2016, and, in 2017, some 60,000 were approach enables the burden on law filed. enforcement and prosecution authorities to be reduced. As a consequence, Upon receipt, all reports are subject to resources may be shifted from the a preliminary review and assessment by processing of STRs to the investigation the FIU within one, or at most the next, and prosecution of IFFs.

More information www.zoll.de/EN/Businesses/Movement-of-goods/Import/Restrictions/Goods/Cash/ cash_node.html www.zoll.de/EN/Private-individuals/Travel/Travel-within-the-EU/Restrictions/Cash/ cash_node.html www.zoll.de/DE/Der-Zoll/FIU/fiu_node.html

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Trade in minerals: Ghana, Liberia and Sierra Leone launch a Customs verification portal

By Aasmund Andersen, REVENUE DEVELOPMENT FOUNDATION, and the new framework for financing Janne Kaiser-Tedesco, and implementing sustainable GERMAN DEVELOPMENT AGENCY (GIZ), development – the Addis Ababa Action and Louis Marechal, Agenda. Among other things, the Action ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Agenda commits countries to redouble efforts to substantially reduce illicit Three West African countries announced the publication financial flows (IFFs) by 2030, with a view to eliminating them over time. of a joint portal for Customs verification of minerals at A scalable solution this year’s Organisation for Economic Co-operation and Forged documents typically contain falsified signatures, stamps no longer in Development (OECD) Forum for Responsible Mineral use, and permit codes that are not valid. While the manual verification of these 1 Supply Chains . The portal allows Customs officers documents has often been successful in uncovering fraud, it is inefficient and has around the world to look up and verify mineral export limited scalability. Customs officers need to sign up to multiple exporting country permits issued by Ghana, Liberia and Sierra Leone. With systems and to contact mineral agency staff who have to invest substantial resources in more countries set to join, the portal will become an answering up to five verification requests per day on average, and who are only essential tool in addressing the smuggling of minerals available during office hours.

such as gold and related illicit financial flows. What the Customs verification portal does is draw data directly from a Mineral trade and illicit financial to take decisions based on incomplete system called the Mining Cadastre flows information. Administration System (MCAS) COUNTRIES IN AFRICA that export minerals currently used by nine African countries generate a substantial part of their To remedy the situation, the German for their licensing management, national revenue from this trade. But Federal Ministry for Economic including the issue of mineral export the smuggling or false declaration of Cooperation and Development (BMZ) permits. This portal provides all the such commodities poses a major threat through the German Development information needed to verify an export to domestic resource mobilization Agency (GIZ) decided to fund a web- permit against information directly in resource-rich African countries. based portal designed to serve Customs from the exporting country’s system. The export of minerals requires a officers’ need to verify export licences Simply put, if it is not in the portal, it is specific permit to be issued by an swiftly, and to replace a time-consuming not legitimate. The information on the authority in the exporting country. and often delay-prone system of enquiry portal is no older than a day, and the When making an enquiry about a via email. The project falls within the portal is meant for Customs officers who suspicious transaction, Customs Ministry’s Marshall Plan with Africa want to verify a specific export permit, officers trying to verify an exporter’s developed in 2017, in which it commits to look up the permit’s code, or check documents at the point of import have itself to support African countries in the exporter’s name. Other users, such to wait for the relevant information implementing the United Nations 2030 as companies and buyers, may access to reach them, or are sometimes left Agenda for Sustainable Development similar information through their

1 http://mneguidelines.oecd.org/forum-responsible-mineral-supply-chains.htm

82 WCO news N° 86 June 2018 © Sasha Lezhnev

respective national online repository countries. It has matured and proven has gathered all mineral supply chain portals, linked to the Ministry’s websites. its positive impact on governance stakeholders, defining guidelines2 for by changing public administration companies to have in place systems The governments of Ghana, Liberia processes around licences and permits. that allow them to identify the risks and Sierra Leone, as early adopters of Using information technology (IT) of contributing to conflict financing, the portal, are driving the pilot phase systems to reduce discretionary serious abuses of human rights, money of the project. Other MCAS countries behaviour works, and efficient laundering, and corruption. These are expected to join the portal. As for processes become permanent. guidelines are applicable to all mineral developing countries not using the extracting industries, and cover MCAS yet, a specific version of the As for the Customs verification portal, gold, tin, tantalum, tungsten, and system is in the making, which will when the RDF presented it at the OECD increasingly precious stones, cobalt, allow them to issue export permits and Forum on Responsible Mineral Supply coal and mica. join the portal without costs. Chains in April 2018, representatives from the Governments of Ghana and From a company’s perspective, Impact Sierra Leone explained how valuable carrying out due diligence implies The MCAS system and the Customs the portal is, and how instrumental the collection of relevant and verified verification portal have been developed it has been in decreasing the number information on the provenance and by the Revenue Development Foundation of verification enquiries they receive legality of an exported commodity. (RDF) – an international non-profit every day. In this regard, the MCAS and its consultancy. System implementations associated portals can, and for some are mostly funded by donors (Australia, Current discussions companies already do, play a key Germany, the European Union Consumers and buyers around the role in supporting private sector and the United Nations). Each new world are putting pressure on jewellery due diligence, and in enhancing the implementation project contributes to stores and gold refineries to certify that transparency and integrity of global improving the system, and new releases their gold is sourced responsibly. As a mineral supply chains. For some gold are provided without cost to developing minimum, such certification should refineries, consulting national online countries. prove that no forced labour, child repository portals, which draw data labour or human rights violations from the MCAS system, is already an The MCAS system has been in use are taking place in the mine it is instrumental part of their verification for over a decade in some developing extracted from. Since 2009, the OECD process to implement OECD guidance.

2 OECD (2016), OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas: Third Edition, OECD Publishing, Paris

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One of the issues that came up during the OECD Forum was how to follow up on confiscated gold, for example gold that is exported without a valid permit. A specific provision of Sierra Leone’s law which says that “anyone who identifies illicitly traded gold is entitled to 40% of the value when returning it to the government,” triggered much discussion. In addition, some participants felt that African exporting countries may want importing countries to return the value of confiscated gold. This would enable developing countries to get additional revenue, which could be spent on strengthening their enforcement capacities.

Figure 1: Customs verification portal country selection start page (left) Going Forward and look-up of valid export permit page (right) The Customs verification portal and the underlying MCAS system, like all systems from RDF, are continuously being improved, based on stakeholder feedback. The feedback provided duringC

the OECD Forum was, for example,M extremely useful. It helped to inform a new release of the MCAS system,Y which will include a stronger dueCM

diligence process and more detailedMY licence ownership details. In addition, a functionality will enable mine inspectorsCY using MCAS mobile devices in the fieldCMY

to inform users whether any violationK has been identified.

To increase awareness of the portal, the RDF and the three governments who are currently piloting the project are planning to send letters to Customs administrations as well as to the biggest MORE THAN Figure 2: Sierra Leone Government’s Online Repository, showing search refineries. We hope that this article will results for active exporters of minerals: https://sierraleone.revenuedev.org also play its part and trigger the interest of the global Customs community. SCREENING Should any Customs administration need more information about the Customs verification portal, they are invited to email either Aasmund ENABLING Andersen or Janne Kaiser, whose contact details appear below. EFFICIENT More information [email protected] [email protected] [email protected] EFFECTIVE https://Customs.revenuedev.org NUCTECH COMPANY LIMITED SMART BEIJING · CHINA DETECTION Tel: +8610 50980999 Fax: +8610 62788896 E-mail: [email protected] Follow us on: twitter.com/NuctechColtd

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ENABLING EFFICIENT EFFECTIVE NUCTECH COMPANY LIMITED SMART BEIJING · CHINA DETECTION Tel: +8610 50980999 Fax: +8610 62788896 E-mail: [email protected] Follow us on: twitter.com/NuctechColtd FOCUS

Burkina Faso: the problem of gold smuggling

By Évariste Somda, HEAD OF PCA, BURKINA FASO CUSTOMS et de la Géologie, or BUMIGEB]; as of 2015, there were 74 such trading houses. ALTHOUGH BURKINA FASO has long been regarded as a land lacking in natural The overwhelming majority of the gold resources, over the space of just a few mined in Burkina Faso is exported. years, the country has been transformed In 2017, 41.4 of the 46 tonnes of gold into a mining player specializing in produced was sent abroad (estimates the production of gold. Among the by the General Directorate of Mining). reasons for this growth in the country’s According to official data, 45.582 tonnes extractive industries are the tax breaks of gold – or in other words 99.09% of granted to investors and the arsenal of the country’s total production – was legal provisions put in place to make extracted by the 12 industrial mines mining investment projects predictable alone. and safer in the “Land of Incorruptible People.” Mining output has an impact on budgets at both state and local authority level. Endeavour Mining's Houndé gold mine, located 250 km southwest of Ouagadougou, the capital of Burkina Faso According to a report published in In 2017, 226 billion1 CFA francs (344 2014 by the Canadian Fraser Institute, million euros) was raised through exporter’s home bank (which must hold Burkina Faso is currently the sixth most various related channels (levies, a licence in Burkina Faso). attractive location in Africa for mining Customs duties, and other taxes). investors, beaten only by Botswana, This document provides the Burkina Ghana, Morocco, Namibia and Zambia. Exports of gold are subject to a Faso authorities with information on “proportional gold mining royalty,” the recipient of the goods, the nature of The country’s mining legislation provides which is a tax collected by the Directorate the goods, and the arrangements for the for the extraction of minerals via three General of the Treasury and Public payment of export charges (in addition to different routes: artisanal mining, semi- Accounting. The level of this royalty Switzerland, the leading destinations for mechanized mining, and industrial varies depending on whether the gold is artisanal-mined gold include Belgium, mining. According to the Minister for being exported by an industrial mine or France, Dubai, and the United States). Mines, a total of 12 industrial mines, a trading house for the purchase, sale or Trading houses are obliged to repatriate 200 officially recognized artisanal export of gold; in the case of industrial funds from the home bank within a mining sites, and around 800 illegal gold mines, it is charged at a rate of 3% of deadline of one month from the date on panning sites were operating in Burkina turnover if the price per ounce for the which payment is due, and to forward Faso in 2017. gold extracted is less than or equal to supporting documents within a deadline 1,000 US dollars, 4% if the price per of 45 days. This document, therefore, Gold exports ounce is between 1,000 and 1,300 US serves as a means of repatriating The gold exported by the industrial dollars, and 5% if the price per ounce currency flows that originate from mines is sold to Metalor Technologies is above 1,300 US dollars. The trading commercial operations. International, a Switzerland-based houses are subject to a uniform rate of limited company, which specializes in 5% and benefit from tax relief of 100 CFA Gold trafficking the refining of precious metals. Artisanal francs per gram of raw gold. In parallel to these lawful export miners, individual gold panners and channels, and prompted by a desire to holders of artisanal production permits Exports of gold are allowed to leave the avoid the associated fees and obligations, are obliged to hand their gold over to an country freely, and Customs duties are gold trafficking circuits have emerged approved trading house for the purchase, charged at 1.75% of the London Bullion in recent years, which deprive Burkina sale and export of gold, which must keep Market Association (LMBA) value of the Faso of several billion CFA francs in a ledger of all sales and purchases, smelt product plus the cost of assays by the government revenues per annum. the gold into pieces, ingots or bars, and state laboratory at 0.2%. The exporter have it officially assayed by the Office of must also obtain an export document Most of this gold is exported illegally in Mines and Geology [Bureau des Mines from the Chamber of Commerce and travellers’ luggage. In November 2014, Industry, signed by Customs and the for example, three people carrying

1 1 euro (EUR) = 655.957 CFA francs (XOF).

86 WCO news N° 86 June 2018 © Pep Bonet Noor Keystone © Sasha Lezhnev

Endeavour Mining's Houndé gold mine, located 250 km southwest of Ouagadougou, the capital of Burkina Faso

77 kg of gold in their luggage were of gold from Togo in 2014 despite the can benefit from a preferential rate for intercepted by the Special Customs fact that there are no gold mines in the the proportional gold mining royalty. Brigade based at Ouagadougou Airport. country; this gold was traced back to Upon questioning, the gold seller found artisanal mines in Burkina Faso. Many On the ground, the National Anti-Fraud to be involved admitted that an average tonnes of gold produced by these mines Brigade for Gold [Brigade Nationale of two illegal export operations had been (located mainly in the north and west Anti-Fraude de l’Or, or BNAF] has been carried out each month for some time, of the country) are imported unlawfully specially tasked with investigating, with the traffickers carrying amounts into Togo each year, and this trafficking identifying and prosecuting offences of gold varying between 6 and 30 kg. circuit alone deprives Burkina Faso of relating to the marketing of gold and He also admitted casting gold, which an estimated 3.5 billion CFA francs in other precious substances extracted by had been previously purchased from tax revenues. artisanal and semi-industrial mines. a number of gold panning sites (both This cross-agency body brings together approved and illegal). Analysts also believe that some gold officials from various services, including traffickers wish to place currency Customs, and takes responsibility for Gold traffickers also include individuals abroad without paying export taxes, or pursuing any court cases relating to acting independently: in 2017, the to purchase goods abroad, which can be gold, regardless of the authority which Special Customs Brigade seized gold on imported at a lower face value or brought seized the trafficked goods. three occasions (250g, 1,666g and 400g in as contraband in order to be sold in respectively) from travellers intending to Burkina Faso (thus minimizing Customs The level of insecurity affecting Burkina resell it in Colombia and Turkey. duties or avoiding them entirely). Claims Faso as a whole means that the BNAF of this kind are difficult to substantiate, cannot gain access to individual mining Some of the trafficking circuits are more however. sites, and so, for the time being, it can organized in nature. On 23 February only monitor the trading houses which 2016, the Mobile Brigade stationed in Anti-smuggling actions and operate in towns. Its scope of action is Tenkodogo (a town in central eastern challenges further limited by a lack of funds to pay Burkina Faso, which is a hub for With a view to preventing the trafficking informants for valuable information significant trade flows to and from Togo) in mined minerals, Burkina Faso in the fight against gold-related fraud. seized 16.55 kg of gold that a trafficker recently established a National Agency Nevertheless, the country remains had hidden in the doors of his vehicle for the Supervision of Artisanal determined to do what it can to prevent with the aim of exporting it illegally to and Semi-Mechanized Mining gold smuggling, thereby preventing the Togo. [Agence Nationale d’Encadrement des loss of much needed state revenue. Exploitations Minières Artisanales et According to Public Eye, a non- Semi-mécanisées, or ANEEMAS], one More information governmental organization (NGO), of its aims of which is to organize gold [email protected] Switzerland imported at least 7 tonnes panners into cooperatives so that they

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EVENTS WCO news N° 86 June 2018

President Yoweri Kaguta Museveni delivers his opening address

Highlights from the 4th WCO Global AEO Conference

By James Barungi, Secure Global Trade,” two important • Involving other government agencies UGANDA REVENUE AUTHORITY, documents were signed: a MRA Action in the AEO certification process C and Asha Menon, Plan between the Korea Customs Service should be something to work WCO M (KCS) and the Members of the East towards, especially as it will enable

Y THE SOUND OF African drums and dances African Community (EAC), a first of its more benefits to be provided. welcomed participants as they arrived kind in Africa; and a MRA between the CM at the 4th WCO Global AEO Conference Customs administrations of Peru and In addition, other issues were identified, MY that begun in Kampala, Uganda on 14 Uruguay. such as: CY March 2018. They were addressed by the

CMY President of Uganda, H.E. Mr Yoweri More than 1,100 participants from • the need to build trust not only Kaguta Museveni, who gave an inspiring over 95 countries saw presentations on between Customs and private sector K message on the importance of regional the implementation of AEO national companies, but also among Customs collaboration among East African programmes in EAC Member countries authorities; countries, and the need for ongoing and on the AEO regional programme cooperation among all the continent’s that these countries have established, as • the important role technology countries that would ultimately broaden well as on the different ways to involve solutions have to play; the scope for more investment in Africa. the private sector in the discussions, and how to consolidate the partnership • the difficulty in identifying tangible Throughout the three-day event, 125 between Customs and other government benefits for AEOs; speakers shared their knowledge, agencies. expertise and experience on a wide range • the relevance of the programme in of topics, broadly related to authorized The following conclusions were drawn: countries where compliance levels of economic operator (AEO) programmes. the private sector are low; Among other things, participants • There is a need to standardize and discussed challenges related to the harmonize AEO programmes • the threat to AEO programmes and provision of tangible benefits, a recurrent around the world. MRAs as a result of the high levels of theme, and examined initiatives aimed trade facilitation that traders already at improving coordinated border • Attracting small and medium size enjoy. management and at ensuring mutual enterprises (SMEs) to join AEO recognition of AEOs between countries. programmes is key to the success of The next AEO Conference will take place such programmes. in Dubai in 2020. At present, 77 AEO programmes have been implemented worldwide and 56 • Intermediaries should be given the More information mutual recognition agreements (MRAs) opportunity to become AEOs. [email protected] have been signed with another 37 under [email protected] negotiation. Under the banner of the • The AEO concept is moving to Conference’s theme “Promoting Mutual another level with buy-in from Recognition of AEOs to Strengthen and different stakeholders increasing.

89 EVENTS

Calendar of Events

July 2 - 7 Knowledge Academy for Customs and Trade

September 5 - 7 Revised Kyoto Convention Working Group, 1st Meeting 13 - 14 Harmonized System Committee, Working Party 17 - 28 Harmonized System Committee, 62nd Session

October

2 - 4 Global Security Conference 1 - 5 Data Model Project Team 8 - 12 Working Group on E-Commerce, 4th Meeting 9 - 11 Annual PICARD Conference, Malatya (Turkey) 15 - 16 Private Sector Consultative Group 17 - 19 SAFE Working Group, 20th Meeting 22 - 23 Trade Facilitation Agreement Working Group, 10th Meeting 22 - 26 Technical Committee on Customs Valuation, 47th Session 29 - 30 Information Management Sub-Committee, 75th Meeting

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 - 5 API/PNR Contact Committee (Members only), 12th Meeting 3 - 5 Policy Commission, 80th Session 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

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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