Report of a Diagnostic Workshop Conducted with the Customs Administration of The Republic of Armenia Barents Group Prepared on April 7, 2000 by: Alan Morley, Team Leader Manuel Henriques Michael Lane TABLE OF CONTENTS ACKNOWLEDGEMENTS 1 SECTION 1: INTRODUCTION 1.1 Background 2 1.2 Methodology 2 1.3 Perspective on Armenian Customs 4 1.4 Importance of Customs 4 SECTION 2: CURRENT STATUS OF THE CUSTOMS ADMINISTRATION 2.1 History 6 2.2 Organizational Structure 6 2.3 Geography 6 2.4 Number of Staff by Location and Division 7 2.5 Salary Structure 7 2.6 Other Points Interest 8 SECTION 3: RESULTS FROM INTERVIEWS FROM THE FIRST WEEK'S ENTRY MISSION 10 SECTION 4: ARMENIAN CUSTOMS PROBLEMS AND THEIR CONSEQUENCES 4.1 Lack of a Uniform, Simplified, Well-Defined and Well-Documented Import and Export Process for Customs and Business to Follow 14 4.2 Lack of Customs Wide Information Framework and Inadequate Information Technology Support 15 4.3 Lack of Necessary Equipment and facilities to Increase Compliance and Improve Facilitation 15 4.4 Lack of Training and Training Materials for Customs Officials and the Trading Community 15 4.5 Lack of Compliance with Customs Laws Both by Customs Officers and by the Business Community and the Public, Coupled by a Wide Spread Perception by the Public of Corruption in Customs 16 SECTION 5: SOLUTIONS DERIVED FROM THE DIAGNOSTIC WORKSHOP 5.1 Provision of a Uniform, Simplified, Well-Defined and Well-Documented Import and Export Process for Customs and Business to Follow 17 5.2 Provision of Customs Wide Information Framework and adequate Information Technology Support 18 5.3 Provision of Necessary Equipment and facilities to increase Compliance and Improve Facilitation 20 5.4 Provision of Training and Training Materials for Customs Officials and the Trading Community 23 5.5 Promotion of Compliance with Customs Laws Both by Customs Officers and by the Business Community and the Public, to Counteract a Wide Spread Perception by the Public of Corruption in Customs 26 5.6 Broader or Multi-Level Recommendations 31 SECTION 6: IMPLEMENTATION PLAN 6.1 Accountability for Action and Assignment of Priorities 35 6.2 Monitoring and Coordination 35 6.3 Measurement Criteria 36 6.4 Use of Existing Resources 36 6.5 Implementation Schedule 36 APPENDICES (following page 43) 1 Names of Workshop Participants 2 Workshop Schedule 3 Current Organizational Structure of the Ministry of State Revenues 4 Map of Armenia Showing Existing Customs Sites 5 List of People Interviewed During the Entry Mission Preparatory to the Workshop 6 Flowcharts of Existing Import and Export Processes, Comments on Potential Areas for Improvement, and Proposed Flowcharts Outlining Improved Processes 7 Proposal to USAID for the Networking Tax and Customs Sites Using Land Lines 8 List Developed by Workshop Participants of Computer Equipment Requirements for Customs Sites 9 Proposal prepared by Customs in 1999 for the Development of Customs Application Software and for the Networking of Customs Sited Using Satellite Communication 10 List Developed by Workshop Participants of Examination and Enforcement Equipment Requirements for Customs Sites 1 1 List of Equipment Requirements Developed in Connection with the Yerevan Risk Assessment Pilot Project 12 Proposal Developed During the Workshop of Training Center Requirements 13 Risk Assessment Project Statistics Acknowledgements The team members would like to extend their appreciation to all those who participated directly or indirectly in the Customs Diagnostic Workshop, Without their dedication and professionalism, the Workshop could not have been as successful as it was. The Workshop facilitators would like to note the tremendous work over the four weeks by Mr. Arthur Dunlop of the British Know How Fund. Without his outstanding dedication and assistance, the Workshop could not have taken place. Similarly, we are indebted to the Head of Customs, Mr. Grigor Melkumyan, for his support, generosity and facilitation of the Workshop. Mr. Melkumyan also graciously provided the facilities at the training center for the Workshop and made key staff members available to the facilitators: Mr. Ara Avetissyan, Mr. Martun Minasyan, Mr. Grigor Avetissyan, Mr. Tigran Sargissian, Mr. David Davtian and Mr. Gevorg Saghoyan, who prepared the flow charts and analyses presented in Section 5.1 of this report. To Mr. Bill Gardner and the team from Barents Group, LLC. in Yerevan, for their ground support, advice and use of their facilities. To all those who gave of their time for our interviews and consultations, without which we could not have developed an extensive two-week Workshop program. The facilitators would also like to personally thank Khosrov Harutunyan, Mariam Movsissyan, Vladimir Hairapetyan and Lucine Mkhitaryan for their tireless interpretation and translation services. Finally, the facilitators would like to thank Mr. Fred Clapps from USAID for his support and guidance throughout this mission. Section 1: Diagnostic Workshop on the Customs Administration of the Republic of Armenia, Conducted from March 20 to March 31, 2000. 1.1 Background On March 20, 2000, a team of international Customs experts on contract with the United States Agency for International Development (USAID) convened a two week Diagnostic Workshop on the performance of the Customs Administration of the Republic of Armenia. The team consisted of: - Alan Morley, Team 'Leader and Former Senior Official of Canadian Customs - Manuel Henriques, Senior Official of Canadian Customs - Michael Lane, Former Senior Official of United States Customs An integral member of the Workshop was Mr. Arthur Dunlop, long-term advisor to the Armenian Customs Administration from the British Know How Fund. Mr. Dunlop was an invaluable resource to the team over the four weeks: scheduling and participating in fact-finding interviews in advance of the Workshop, and contributing extensively during the Workshop itself. In many instances Mr. Dunlop was able to put into perspective the specific issues that the Customs Administration of the Republic of Armenia must deal with. The purpose of this Diagnostic Workshop was to: - Determine the expectations of the Government of Armenia from Armenian Customs - Identify issues, problems, and challenges in meeting those expectations - Develop a work plan with Customs buy-in that will identify solutions, costs, and timeframes to improve the performance of Armenian Customs - Ensure that the plan is consistent with all international Customs standards. 1.2 Methodology During the week preceding the Workshop, the team conducted fact finding interviews with numerous officials and organizations both in and out of government who are familiar with Customs and have a stake in the performance of Customs. Included in these meetings and interviews were the following: - Importers - Exporters - Customs Brokers, Freight Forwarders and Carriers - Airport Authority - Other Government Agencies and officials including the Ministries of State Revenues, Finance, Agriculture, Industry and Trade, and Standards Institute - Non Governmental Organizations - United Nations Conference on Trade and Development - Business Organizations - Senior Customs Officials in Headquarters, at Customs Houses and at Entry Points. 2 The team also reviewed Customs operations at Zvartnots airport and the Customs examining warehouse in Yerevan, the land border crossing at Bagratashen and the rail crossing at Ayrum and other Customs operations in Shirak, Gyumri and Vanadzor- The Workshop was opened by Head of Customs Grigor Melkumyan who emphasized the importance of the Workshop to Customs and the nation and encouraged active participation of all attendees. This was followed by comments from Alan Morley, the USAID team leader who explained the purpose of the Workshop, outlined the schedule, and discussed the methodology. Mr. Morley echoed Mr. Melkumyan's comments and emphasized that this was Customs' Workshop and that the team of facilitators were not here to instruct or propose solutions but to support the participants in their efforts to improve the administration of Customs in Armenia. The Workshop was attended by senior officials of Customs from Headquarters, the Customs Houses, and Entry Points throughout the nation. Senior officials from other departments of the Ministry of State Revenues such as Training, Anti Smuggling, Investigations, Information Technology, and Statistics also actively participated. A complete list of Workshop participants is provided in Appendix 1 - The Workshop itself was conducted in two parts (a schedule is attached as Appendix 2). Week one was devoted exclusively to an analysis of the current state of Customs. There were detailed discussions of problems from the perspective of industry, other agencies that Customs works with in the import/export process, and high government officials with an interest in trade and investment in Armenia. There was a frank and open discussion of those problems and issues, as well as other problems identified by the Customs representatives themselves. In order to encourage participation of all Workshop attendees there was extensive use of breakout groups to identify, discuss, categorize, and find the root causes and impact of problems. one problem of major significance emerged from all discussions by participants as well as the pre conference interviews with industry and government stockholders. This was the lack of transparency and uniformity and the absence of a defined and documented import/export process. This was identified