Posts by Mike Poverello

I have spent the best part of 28 years in the service of South African Customs, and a further 5 years as a free-lance consultant to the customs industry as well as an advisor on several customs systems modernisation programmes with international ICT and consulting firms between 1998 and 2002. Like many of my peers and numerous colleagues worldwide, "customs" is not another government department, but an institution which has as much a 'corporate identity' as it is an arm of government. Perhaps, I'm guilty of nostalgia at times gone by, but it nevertheless concerns me what is happening to so many customs administrations. First, many have by government decree merged into what is otherwise known as a 'Revenue Authority', with some success - as is the case with Customs in South Africa. A more recent development sees the customs being removed from its traditional 'treasury' base into 'Border Security Agencies'. Some fortunate administrations appear to have retained their independance which makes the organisational mandate and objectives more focussed and attainable. Through this 'blog' I wish to share my experiences and encourage those of you of like mind to collaborate.

WCO – COVID-19 Update

Counterfeit medical supplies and introduction of export controls on personal protective equipment

The WCO reminds the general public to exercise extreme caution when purchasing critical medical supplies from unknown sources, particularly online. The use of these goods may cost lives. 

While the world is gripped by the fight against COVID-19, criminals have turned this into an opportunity for fraudulent activity. There have been an alarming number of reports quoting seizures of counterfeit critical medical supplies, such as face masks and hand sanitizers in particular. 

Customs and law enforcement agencies in China, Germany, Indonesia, Uganda, Ukraine, United Kingdom, United States and Vietnam, to name but a few, have reported such seizures in the past three weeks. 

Moreover, there was a significant increase in seizures of counterfeit and unauthorized face masks and hand sanitizers during Operation Pangea XIII, a collaborative enforcement effort by the WCO, Interpol, Europol, Customs administrations, Police forces and other law enforcement agencies. This Operation, held from 3 to 10 March 2020, resulted in the seizure of 37,258 counterfeit medical devices, of which 34,137 were surgical masks. 

Online retailers have also announced a surge in sales of counterfeit goods. In particular, a US company reported the removal from its marketplace of a million products claiming to cure or prevent COVID-19. Tens of thousands of listings were removed because of price hiking, particularly for products in high demand such as masks. In one operation, US Customs and Border Protection seized counterfeit COVID-19 test kitswhich had arrived at Los Angeles International Airport (LAX) by mail from the United Kingdom. This seizure triggered a joint investigation by the City of London Police’s Intellectual Property Crimes Unit (PIPCO), the Medicines and Healthcare products Regulatory Agency (MHRA) and the United States Food and Drug Administration (FDA), resulting in one arrest and the seizure of 300 more kits and 20 litres of chemicals for the production of such kits. 

Given the shortages and the activities of market speculators, another important trend is the introduction of export licences for certain categories of critical medical supplies, such as face masks, gloves and protective gear. In particular, on 11 March 2020 Vietnam adopted Decision 868/QD-BYT by the Ministry of Health, introducing export permits for medical masks. The European Union (EU) introduced a temporary export licensing scheme for personal protective equipment as of 14 March 2020 (see Commission implementing Regulation 2020/402). Other countries, such as Brazil, India, Russia, Serbia and Ukraine, have also followed suit. 

The EU’s dual-use export control regime will also continue to be applied to more sophisticated items such as full face masks, protective gear, gloves and shoes, specifically designed for dealing with ‘biological agents’. The full list of such items can be found in Annex I to EU Regulation 428/2009, as amended.  

The WCO urges its Member Customs administrations to remain vigilant in these difficult times.

Please consult the relevant section of the WCO’s website regarding COVID-19 information, including changes in legislation, new trends and patterns, and initiatives by partners and Member administrations. 

The WCO stands ready to continue working with all its partners to disrupt the supply chains of counterfeit products that put the lives of millions of people at risk.

Source: WCO Website, 23 March 2020

WCO – Global Customs community mobilizes efforts to mitigate the effects of the COVID-19

Following previous communications from the WCO in relation to the Coronavirus disease (COVID-19), the WCO Secretariat has published a dedicated webpage to update Members and the general public about WCO’s tools, instruments, recommendations, as well as an HS Classification reference document for COVID-19 medical supplies among others. WCO Secretary General Dr. Kunio Mikuriya also communicated with all WCO Members to provide guidance and extend a request for strong coordinated action during these challenging times. 

“During this time of crisis, the global Customs community is invited to continue advocating for and realize the facilitation of not just relief supplies but of all goods being traded in order to minimize the impact of the COVID-19 pandemic,” said Dr. Mikuriya. He further added that “We are witnessing an unprecedented situation, but I am confident that by acting together, in a spirit of solidarity, we can mitigate the effects of the COVID-19 pandemic on our societies and economies.”

The dedicated webpage will be updated regularly with further guidance material, Members’ best practices and a database of Customs administrations’ contact points, the latter accessible for Members only

In his communication to Members on 17 March 2020, Dr. Mikuriya reiterated the appeal to facilitate the smooth movement of relief consignments, as well as relief personnel and their possessions, while applying appropriate risk management. Members were also invited to share challenges and best practices to prevent and/or fight the spread of the infection, as well as to nominate contact persons who can handle inquiries regarding the applicable procedures for the import, export and transit of relief consignments and equipment for humanitarian purposes via air, land and sea modes of transport.

In less than 48 hours, the Secretariat received an overwhelming number of replies from Customs administrations around the world. 

The WCO will continue to proactively communicate with its Members and partners, not only on measures to facilitate the movement of relief consignments, but on action to safeguard supply chain continuity.

Source: WCO, 20 March 2020

Top Wildlife Detective Shot in Cold Blood

Recent good news reports indicating a decrease in rhino poaching have been marred by the sudden death of one of law enforcements top detectives.

Colleagues and friends of Lieutenant Colonel Leroy Bruwer are in shock after the leading rhino-poaching detective was gunned down in an apparent assassination.

Leroy (49), commander of the Hawks in Mbombela (formerly Nelspruit), was shot dead in his car on Tuesday morning while on his way to work.

The investigation is ongoing but according to a police statement, he was shot with a heavy-calibre weapon.

Pieter Smit, commander of the Mbombela police’s quick-response unit, says his heart broke when he arrived on the scene and saw his colleague and friend’s lifeless body.

“Hate, sadness and tears with mixed feelings,” Pieter, who was one of the first people to arrive on the scene, wrote on Facebook.

Leroy’s body had been unrecognisably mutilated by the AK-47 gunfire, Pieter continued his Facebook post. He says the only way he knew it was Leroy is because he called his friend’s number and saw the cellphone ringing in the car.

“It breaks the heart of a grown man. Leroy, you were an honest policeman and worthy officer. You didn’t deserve this.

“I salute you. Rest in peace, colleague and friend.” 

Brigadier Hangwani Malaudzi, Hawks spokesman, says a specialised task team has been formed to investigate the murder. “We’re hoping for a breakthrough soon.”

He adds Leroy was a formidable detective and made many breakthroughs in the fight against rhino poaching.

“All the evidence points to Leroy having been the target. It looks like an assassination,” Malaudzi says.

Police are following up on all leads to find the suspects.

Source: Picture and article by Jacques Myburgh, News24, 19 March 2020

National Treasury – calls for written comments on proposal on export taxes on scrap metal

Following the announcement made by the Minister of Finance in the 2020 Budget Review regarding the introduction of export taxes on scrap metal, the National Treasury today publishes for consultation the basic approach for such tax. This proposal is related to the phasing out of the current price preference system for scrap steel, and follows the recommendations from a feasibility study conducted by the International Trade Administration Commission (ITAC).   

Given the need to consult all stakeholders, including possible winners and losers, the consultation will take place in two phases.  The first phase will be a shorter and broader public comment process on the objective, implementation, functioning and economic and financial impact of such an export tax, including the level of rates and base for such a tax. Comments on the impact to current firms and industries, and the implications for the tax and trade system will also be welcome, as well as comments on strengthening the administrative capacity of SARS to implement such export taxes.  

The first phase will be followed by a more intensive second phase of public comment, on the proposed legislative provisions to give effect to specific export taxes on scrap metal, to be included in the 2020 draft Taxation Laws Amendment Bill (TLAB).  The first phase will commence immediately and run up to the end of April 2020, while the second phase will commence with the publication of the Taxation Laws Amendment Bill in mid-July and run up to the end of August/September 2020. 

As recommended by ITAC, the proposed export taxes to apply to scrap metal are as follows

Scrap metal category Equivalent specific tax (Rand per tonne) Ferrous metals (including stainless steel) R1000.00 per tonne Aluminium R3000.00 per tonne Red Metals R8426.00 per tonne Other (waste and scrap metals) R1000.00 per tonne  

Written comments on the proposal on export taxes on scrap metal must be submitted by no later than 9 April 2020.    

Upon receipt of the comments and submissions on the proposal on export taxes on scrap metal, the National Treasury (working with the Department of Trade, Industry and Competition and other governmental stakeholders) will engage directly with stakeholders until the end of April through technical workshops to discuss the comments received.  Thereafter, the proposed provisions on the export taxes on scrap metal will be developed for inclusion in the TLAB, which will be published in mid-July 2020 for public comment. 

Further, as part of the TLAB consultation process, National Treasury will also engage with stakeholders through the usual workshops held after the receipt of written comments on the draft Bill.  The Standing and Select Committees on Finance in Parliament are expected to make a similar call for public comment, and convene public hearings on the TLAB before the formal introduction of the Bill in Parliament. Thereafter, a response document on the comments received will be presented at the parliamentary committee hearings, after which the 2020 draft Taxation Laws Amendment Bill will then be revised, taking into account public comments and recommendations made during committee hearings, before the Bill is tabled formally in Parliament for consideration.  

The proposal on export taxes on scrap metal is included in Chapter 4 of the 2020 Budget Review, which can be found on the National Treasury (www.treasury.gov.za) website.   

Due date for written comments: 9 April 2020  

Source: National Treasury website, 10 March 2020

Indonesian Customs – IBM’s Blockchain Supply Chain Platform

The IBM development is unarguably one of the leading bodies driving global adoption, with the development of a blockchain platform built with flexibility and ability to run on any cloudThe blockchain platform allows upcoming projects to build, operate, govern and grow blockchain solutions across any computing environment through its blockchain technological advancement.

IBM successfully introduced its TradeLens platform in partnership with the Danish transport giant, Maersk in 2018. TradeLens has recorded huge success, partnering with major organizations and government agencies across the world due to its ability to deliver services such as cross border goods shipping at a faster rate.

Blockchain taking the Centre Stage

With blockchain gaining more followers and the adoption race picking up pace, many organizations, countries, agencies, and more seem to be jumping on the blockchain train before they get left behind with IBM blockchain technology in the forefront of delivering products that are needed by upcoming blockchain projects to strive. Recent news coming from Indonesia, revealed that after several months of working towards implementing a new partner on its platforms, the Indonesian Customs and Excise Department have announced that it would make use of IBM TradeLens technology.

Indonesia’s customs department is set to be the 11th government agency to be part of the TradeLens consortium after the realization of the benefit and advantage of making use of the TradeLens platform, other countries whose custom departments have partnered with TradeLens includes Thailand, Canada, Azerbaijan, among others.

The effects of customs agency deploying IBM TradeLens technology

The company’s stated goal is to facilitate faster trade and to eliminate altogether paper-based verification processes thereby paving the way for quicker trade and customs validation

By digitizing the supply chain industry using blockchain, the country stands to boost its production potential by around fifteen percent (15%), which is a substantial figure in an industry driven by extremely thin margins

The president/director of IBM Indonesia, Tan Wijaya is optimistic that the partnership with Indonesia’s custom departments will be beneficial to all stakeholders in the entire logistics ecosystem and it will encourage the overall modernization of trade.

The company’s stated goal is to facilitate faster trade and customs verification and eliminate paper-based processes which are in line with Indonesia’s custom and excise service.

TradeLens growth

As TradeLens continues to onboard new projects and partnership with other organizations, its platforms which allows supply chain data to be immutably tracked and broadcasted using a permissioned blockchain. The company’s highlighted objectives are to facilitate faster trade and customs verification and also to eliminate completely the strenuous paper-based procedures. Other constraints include the inability to provide a comprehensive risk assessment, complex promotion, inefficient and expensive stakeholder communication, and lack of transparency. 

IBM initially launched TradeLens in partnership with Danish transport conglomerate Maersk during August, 2018. Earlier this month, Maersk estimated that approximately 10 million supply chain events are being tracked on TradeLens each week which points to how successful the platform is turning out to become.

Early February, The United States Federal Maritime Commission granted an antitrust exemption to five US-based members of the TradeLens consortium to be able to share data in regards to American supply chain events with the agreements between the five (5) parties coming into effect on 6th February,2020.

Regulators from Indonesia embrace Blockchain 

 It is worth noting that TradeLens Partnership with Indonesian custom authorities is not the first venture of the country’s positive nature towards the adoption of blockchain and its technologies.

The recent partnership announcements between TradeLens and Indonesia customs departments comes three weeks after Indonesia’s oldest cryptocurrency exchange, Indodax formerly known as bitcoin.co.id, received full license from the country’s Commodity Futures Trading Regulatory Agency (BAPPEBTI) to operate in the country.

This and other partnerships of blockchain projects in Indonesia shows that the country is primed and set to grow along with the new blockchain technologies.

Source: Alo Kingsley, Business Blockchain HQ, 7 March 2020

Unpacking ICC's Digital Initiatives for global trade

ICC is partnering with government, business and other stakeholders to create digital solutions that will advance economic prosperity for all.

In line with ICC’s Declaration for the Next Century of Global Business, we are committed to maximising the benefits of the digital economy through establishing key partnerships to unify, simplify, and transform trade processes for all.

Here are seven ICC digital initiatives that will prepare business for the future of global trade:

1). TradeTrust facilitating ICC TradeFlow

During the World Economic Forum Annual Meeting in Davos, ICC joined the Singapore Government and major firms from key industries to launch TradeTrust, a public-private partnership that uses blockchain technology to digitalize global trade. The TradeTrust framework allows for interoperability across different trade platforms for the exchange of trade documents on a public blockchain.

ICC TradeFlow, a blockchain platform developed by ICC and Perlin to simplify the trade documentation process for all, was the first project built on the TradeTrust network. The platform, launched by ICC, DBS Bank, Trafigura, Infocomm Media Development Authority (IMDA), Enterprise Singapore, and Perlin, enables businesses to visually map out trade flows, issue instructions to partners, and analyse trade actions in real time.

2). Digital Trade Standards Initiative

The ICC Banking Commission has announced the creation of the Digital Trade Standards Initiative (DSI) to establish open technology standards that will promote interoperability among existing blockchain and technology platforms.

3). Digitalisation in Trade Finance Working Group

ICC’s Digitalisation in Trade Finance Working Group coordinates the ICC Banking Commission’s work related to the digitalisation of global trade, including the Internet of Things (IoT), artificial intelligence, and blockchain.

Formed in 2017, the Working Group evaluated all existing ICC rules for electronic compatibility, leading to the release of the eUCP version 2.0 and eURC version 1.0. In addition, the Working Group conducted a legal survey to understand the rights of third parties under e-Bills of Landing and developed a Digital Trade Roadmap, a communication tool for policymakers engaged in digital trade work.

4). Partnership with Perlin

In May 2019, ICC Secretary General John W.H. Denton AO announced the formation of a technology partnership between ICC and Perlin, a Singapore-based blockchain technology company. As part of this partnership, ICC and Perlin will work in close association to develop innovative blockchain products that will simplify and transform global trade for all.

AirCarbon, Perlin, and ICC at COP25

In recognition of the significant environmental impact of commercial air traffic, ICC, Perlin, and AirCarbon, formed a partnership on the side-lines of COP25 to facilitate carbon credit schemes to reduce worldwide aviation emissions. ICC will work with its global network to pursue adoption of the AirCarbon Exchange, the world’s first blockchain backed trading network for CORSIA compliant carbon credits. CORSIA, International Civil Aviation Organization’s Carbon Offset and Reduction Scheme for International Aviation, was signed in Montreal in 2016 by 191 countries.

Chambers Climate Coalition

The Chambers Climate Coalition is an initiative launched by ICC to mobilise chambers of commerce to take climate action, aligned with limiting global temperature rise to 1.5°C above pre-industrial levels and reaching net-zero emissions by no later than 2050. The Coalition, which was recognised as part of the landmark Climate Ambition Alliance at COP25, aims to reduce the greenhouse footprint from chamber service activities without delay.

Chambers of commerce can use Perlin’s blockchain technology to trace their value chains and implement a more sustainable model for their services to local businesses.

ICC Centre of Future Trade

ICC, Perlin, and Enterprise Singapore, established the ICC Centre for Future Trade in Singapore, an innovation hub for the creation and development of blockchain solutions for business. From the Centre for Future Trade, ICC and Perlin will work together to accelerate the commercial adoption of blockchain technologies for business.

International E-Registry of Ships (IERS)

In collaboration with Perlin and the Singapore Shipping Association, ICC has announced the creation of the International E-Registry of Ships, the world’s first blockchain-backed digital ship registration system. IERS will standardise the international shipping registration and renewal system through the use of digital technology.

Perlin Clarify

ICC’s partnership with Perlin enables ICC’s global membership network with access to Perlin Clarify, a blockchain solution that enables businesses to trace their value chains. Perlin Clarify allows businesses to track their compliance with government regulations, environmental standards, and other industry indicators.

The Incoterms® rules and smart contacts

ICC with support from Perlin is piloting customisable, self-executing digital sales agreements, that incorporate the latest edition of the Incoterms® rules into contracts. The creation of these blockchain-backed Incoterms® rules with smart contracts will help facilitate trade by reducing costs faced by importers and exporters worldwide.

The project was announced by Mr Denton, Dorjee Sun, CEO and co-founder of Perlin, and Satvinder Singh, Assistant CEO for Enterprise Singapore at an event in Singapore in August 2019.

5). Partnership with GIST Advisory

On the side-lines of the World Economic Forum Annual Meeting in Davos, Mr Denton joined Pavan Sukhdev, CEO of GIST and President of the World Wildlife Foundation, to launch two digital platforms that track the environmental impact of business operations for companies of all sizes. The platforms, I360X and SME360X, utilise analytics and global databases to measure the environmental impacts of market goods and services.

With the analytical information provided by these platforms, companies can transition their operations toward a more sustainable model for the future.

6). eATA Carnet

In November 2019, ICC successfully piloted the first ever digital ATA Carnet, a customs document allowing duty- and tax-free movement of goods for up to one year. The project, known as the Mercury II pilot, was initially launched by ICC in 2018 as part of the organisation’s commitment to using digital technology to simplify the trade documentation process.

Over the next six months, the project will enter a testing phase with six participating pilot countries, including Belgium, China, Russia, Switzerland, the United Kingdom and the United States. The European Union Directorate-General for Taxation and Customs Union actively supports the implementation of the eAta Carnet.

7). Digital platforms with the World Trade Organization (WTO)

Global Dialogue on Trade

In October 2018, Mr Denton and World Trade Organization Director-General Roberto Azevedo launched the Global Dialogue on Trade digital platform to gather input from policymakers, business leaders, and academia on the future of global trade.

The first series of debates, which concluded in March 2019, resulted in a set of concrete policy recommendations to provide guidance to stakeholders for strengthening multilateral trade.

Trade Dialogues

At the request of the WTO and B20, ICC is responsible for hosting Trade Dialogues, a digital platform connecting stakeholders from around the world to spark discussions among WTO members on critical business issues.

Source: ICC Website, February 2020

Digital Trade Standards Initiative launches under the umbrella of ICC

ICC has launched the Digital Trade Standards Initiative (DSI) – a collaborative cross-industry effort to enable the standardisation of digital trade.

The ICC Digital Trade Standards Initiative (DSI) will build on work done by various likeminded initiatives, many of which aim to digitise trade, notably through the development of open trade and technology standards to promote interoperability.

The ICC DSI will promote greater economic inclusion through the development of open trade standards. This will facilitate technical interoperability among the variety of blockchain-based networks and technology platforms that have entered the trade space over the past two years.

“Universal standards will connect existing digital islands and enable market forces to improve customer experience,” said ICC Secretary General John W.H. Denton AO. “As a leading and neutral voice in the industry, it made sense to bring this project under the umbrella of ICC. This will allow the ICC DSI to lead and coordinate efforts in developing standards and protocols to digitise trade.”

The ICC DSI is unique among trade digitisation initiatives due to its collective nature. Too often, digitisation is enacted through bilateral agreements between institutions that require members to run on the same platform. This has resulted in siloed data and bespoke trade and trade finance processes.

“The ICC DSI seeks to coordinate all parties in the standardisation of data formats and processes, rather than duplicate existing efforts. In turn, membership will be open to all organisations across industries and geographies supporting the project’s core mandate, including existing industry associations and initiatives,” explained Steven Beck, Head of Trade Finance at the Asian Development Bank.

The ICC DSI will be supported by seed-funding committed by the Asian Development Bank and the Government of Singapore, in addition to ICC’s support. The ICC DSI will be run as an independent entity out of the recently-established ICC Centre for Future Trade.

“We have seen the tremendous impact of technology in growing businesses and facilitating international trade,” said Gina Lim, Director of Financing Ecosystem Development at Enterprise Singapore. “The ICC DSI will promote greater adoption of technology within the trade ecosystem and facilitate greater inclusiveness for small businesses. We are excited for the establishment of the ICC DSI office in Singapore and look forward to working with our global partners across geographies and sectors.”

ICC anticipates the implementation of a full-time management team, and a global and diverse steering committee to provide guidance and set priorities for the project’s development.

ICC has opened the recruitment process to hire a managing director to lead operations within the ICC DSI, with an official launch event to follow once this first process completed.

Source: ICC webpage, 4 March 2020

AfCFTA – an uphill struggle in quest for regional trade on the continent

Picture : Bloomberg.com

The following article was published by Bloomberg and sketches the day-to-day hardship for cross border trucking through Africa. In a sense it asks the very questions and challenges which the average African asks in regard to the highly anticipated free trade area. While rules of origin and tariffs form the basis of trade across borders, together with freedom of movement of people, these will mean nothing if African people receive no benefit. As globalisation appears to falter across Europe and the West, it begs the question whether this is in fact is the solution for Africa; particularly for the reason that many believe globalisation itself is an extension of capitalism which some of the African states are at loggerheads with. Moreover, how many of these countries can forego the much need Customs revenue to sustain their economies, let alone losing political autonomy – only time will tell.

Nyoni Nsukuzimbi drives his 40-ton Freightliner for just over half a day from Johannesburg to the Beitbridge border post with Zimbabwe. At the frontier town—little more than a gas station and a KFC—he sits in a line for two to three days, in temperatures reaching 104F, waiting for his documents to be processed.

That’s only the start of a journey Nsukuzimbi makes maybe twice a month. Driving 550 miles farther north gets him to the Chirundu border post on the Zambian frontier. There, starting at a bridge across the Zambezi River, trucks snake back miles into the bush. “There’s no water, there’s no toilets, there are lions,” says the 40-year-old Zimbabwean. He leans out of the Freightliner’s cab over the hot asphalt, wearing a white T-shirt and a weary expression. “It’s terrible.”

By the time he gets his load of tiny plastic beads—the kind used in many manufacturing processes—to a factory on the outskirts of Zambia’s capital, Lusaka, he’s been on the road for as many as 10 days to traverse just 1,000 miles. Nsukuzimbi’s trials are typical of truck drivers across Africa, where border bureaucracy, corrupt officials seeking bribes, and a myriad of regulations that vary from country to country have stymied attempts to boost intra-African trade.

The continent’s leaders say they’re acting to change all that. Fifty-three of its 54 nations have signed up to join only Eritrea, which rivals North Korea in its isolation from the outside world, hasn’t. The African Union-led agreement is designed to establish the world’s biggest free-trade zone by area, encompassing a combined economy of $2.5 trillion and a market of 1.2 billion people. Agreed in May 2019, the pact is meant to take effect in July and be fully operational by 2030. “The AfCFTA,” South African President Cyril Ramaphosa said in his Oct. 7 weekly letter to the nation, “will be a game-changer, both for South Africa and the rest of the continent.”

It has to be if African economies are ever going to achieve their potential. Africa lags behind other regions in terms of internal trade, with intracontinental commerce accounting for only 15% of total trade, compared with 58% in Asia and more than 70% in Europe. As a result, supermarket shelves in cities such as Luanda, Angola, and Abidjan, Ivory Coast, are lined with goods imported from the countries that once colonized them, Portugal and France.

By lowering or eliminating cross-border tariffs on 90% of African-produced goods, the new regulations are supposed to facilitate the movement of capital and people and create a liberalized market for services. “We haven’t seen as much institutional will for a large African Union project before,” says Kobi Annan, an analyst at Songhai Advisory in Ghana. “The time frame is a little ambitious, but we will get there.”

President Nana Akufo-Addo of Ghana and other heads of state joined Ramaphosa in hailing the agreement, but a number of the businesspeople who are supposed to benefit from it are skeptical. “Many of these governments depend on that duty income. I don’t see how that’s ever going to disappear,” says Tertius Carstens, the chief executive officer of Pioneer Foods Group Ltd., a South African maker of fruit juices and cereal that’s being acquired by PepsiCo Inc. for about $1.7 billion. “Politically it sounds good; practically it’s going to be a nightmare to implement, and I expect resistance.”

Under the rules, small countries such as Malawi, whose central government gets 7.7% of its revenue from taxes on international trade and transactions, will forgo much-needed income, at least initially. By contrast, relatively industrialized nations like Egypt, Kenya, and South Africa will benefit from the outset. “AfCFTA will require huge trade-offs from political leaders,” says Ronak Gopaldas, a London-based director at Signal Risk, which advises companies in Africa. “They will need to think beyond short-term election cycles and sovereignty in policymaking.”

Taking those disparities into account, the AfCFTA may allow poorer countries such as Ethiopia 15 years to comply with the trade regime, whereas South Africa and other more developed nations must do so within five. To further soften the effects on weaker economies, Africa could follow the lead of the European Union, says Axel Pougin de La Maissoneuve, deputy head of the trade and private sector unit in the European Commission’s Directorate General for Development and International Cooperation. The EU adopted a redistribution model to offset potential losses by Greece, Portugal, and other countries.

There may be structural impediments to the AfCFTA’s ambitions. Iron ore, oil, and other raw materials headed for markets such as China make up about half of the continent’s exports. “African countries don’t produce the goods that are demanded by consumers and businesses in other African countries,” says Trudi Hartzenberg, executive director of the Tralac Trade Law Center in Stellenbosch, South Africa.

Trust and tension over illicit activity are also obstacles. Beginning in August, Nigeria shut its land borders to halt a surge in the smuggling of rice and other foodstuffs. In September, South Africa drew continentwide opprobrium after a recurrence of the anti-immigrant riots that have periodically rocked the nation. This could hinder the AfCFTA’s provisions for the free movement of people.

Considering all of these roadblocks, a skeptic would be forgiven for giving the AfCFTA little chance of success. And yet there are already at least eight trade communities up and running on the continent. While these are mostly regional groupings, some countries belong to more than one bloc, creating overlap. The AfCFTA won’t immediately replace these regional blocs; rather, it’s designed to harmonize standards and rules, easing trade between them, and to eventually consolidate the smaller associations under the continent­wide agreement.

The benefits of the comprehensive agreement are plain to see. It could, for example, limit the sort of unilateral stumbling blocks Pioneer Foods’ Carstens had to deal with in 2019: Zimbabwe insisted that all duties be paid in U.S. dollars; Ghana and Kenya demanded that shippers purchase special stickers from government officials to affix to all packaging to prevent smuggling.

The African Export-Import Bank estimates intra-African trade could increase by 52% during the first year after the pact is implemented and more than double during the first decade. The AfCFTA represents a “new pan-Africanism” and is “a pragmatic realization” that African countries need to unite to achieve better deals with trading partners, says Carlos Lopes, the former executive secretary of the United Nations Economic Commission for Africa and one of the architects of the agreement.

From his closer-to-the-ground vantage point, Olisaemeka Anieze also sees possible benefits. He’s relocating from South Africa, where he sold secondhand clothes, to his home country of Nigeria, where he wants to farm fish and possibly export them to neighboring countries. “God willing,” he says, “if the free-trade agreement comes through, Africa can hold its own.”

In the meantime, there are those roads. About 80% of African trade travels over them, according to Tralac. The World Bank estimates the poor state of highways and other infrastructure cuts productivity by as much as 40%.

If the AfCFTA can trim the red tape, at least driving the roads will be more bearable, says David Myende, 38, a South African trucker resting after crossing the border post into South Africa on the way back from delivering a load to the Zambian mining town of Ndola. “The trip is short, the borders are long,” he says. “They’re really long when you’re laden, and customs officers can keep you waiting up to four or five days to clear your goods.” 

Source: article by Anthony Sguazzin, Prinesha Naidoo and Brian Latham, Bloomberg, 30 January 2020

WCO News – February 2020

This edition’s “Dossier” focuses on how Customs can foster sustainability for people, prosperity and the planet, the WCO’s theme for 2020, and includes a selection of articles on the implementation of Multilateral Environmental Agreements, the role of the Harmonized System, the trade in illegal timber, and tools for logistics planning and supply chain optimization.

The “Panorama” section covers various topics such as internal communication, cultural goods, partnership with express couriers to fight illicit trade, management of e-commerce transactions via blockchains, and measurement of the time required to process imports in order to boost logistic service providers’ efficiency.

You can also read an insightful “Point of View” article on how machine learning can automate the determination of the valuation of goods, as well as an “Events” article containing highlights from the WCO Communication Strategies Conference held in October 2019.

Source: WCO, WCO News, February 2020

SA Parliament adopts report on Border Management Authority Bill

Several media reports have recently published misleading information in regard to the South African Revenue Service and the Border Management Authority Bill. The following statement by Parliamentary Communication Services offers context in the matter –

Parliament adopts report on Border Management Authority Bill

Border Management Authority bill takes another step towards becoming law

The Portfolio Committee on Home Affairs adopted a report on the Border Management Authority Bill [B9B-2016] and will recommend to the house to adopt and pass the Bill into an Act of Parliament.

The adoption follows the recommendations and amendments made by the Select Committee on Security and Justice while processing the Bill. The committee agreed that the amendments are valid and strengthen the Bill to ensure that it delivers on its mandate.

An important amendment made by the National Council of Provinces is to highlight the consensus reached between the Minister of Finance and Minister of Home Affairs, which removes the South African Revenue Services from the application of the Act. “We appreciate that the two departments have reached a consensus on how to handle the custom-related issues at port of entries, which has been a major sticking point impeding the completion of the Bill,” said Advocate Bongani Bongo, the Chairperson of the committee.

The committee welcomes the fact that as a result of this consensus, the Bill commits both the Department of Home Affairs and National Treasury to agree on an implementation protocol to enable seamless functioning and co-ordination of border management areas within six months of the implementation of the Act.

The committee is of the considered view that the passing of the BMA Bill is a step in the right direction to secure our borders and end fragmentation within this environment. The committee will table its report before the National Assembly and recommend that the Bill be passed and sent to the President for assent into law.

Regarding the performance of the department in quarter three and four, the committee notes the piloting of an e-visa in Kenya. While the committee is aware that this pilot phase should have been rolled out to six missions across the world, it nonetheless welcomes the announcement that the pilot will be extended to India, Nigeria and China in the course of this quarter. The committee has urged the department to fix teething problems identified and to conclude the piloting stage with the aim of introducing the programme.

The fight against corruption is an important pillar in strengthening accountability and good governance. In line with this, the committee welcomes the announcement that 86.6% of the department’s fraud and corruption cases are finalised within 90 days. The committee continues to emphasise the need for the speedy finalisation of corruption cases and the sanctioning of departmental employees.

The committee will continue to monitor the implementation of the Annual Performance Plan to ensure delivery of services to the people.

For media enquiries or interviews with the Chairperson:

Committee’s Media Officer
Malatswa Molepo 
Parliamentary Communication Services

18 February 2020

Third anniversary of WTO Trade Facilitation Agreement

Three years since the Trade Facilitation Agreement (TFA) entered into force on 22 February 2017, WTO members have continued to make steady progress in its implementation. Director-General Roberto Azevêdo, on the occasion of the TFA’s third anniversary, welcomed members’ efforts to ensure traders can reap the full benefits of the Agreement.

The TFA, the first multilateral deal concluded in the 25-year history of the WTO, contains members’ commitments to expedite the movement, release and clearance of goods across borders. As of the TFA’s third anniversary, 91% of the membership have already ratified the Agreement. It entered into force three years ago when the WTO obtained the two-thirds acceptance of the Agreement from its 164 members.

The Agreement is unique in that it allows developing countries and least-developed countries (LDCs) to set their own timetables for implementing the TFA depending on their capacities to do so. They can self-designate which provisions they will implement either immediately (Category A), after a transition period (Category B), or upon receiving assistance and support for capacity building (Category C). 

As of 22 February 2020, over 90 per cent of developing countries and LDCs have notified which provisions they are able to implement after a transition period, and the ones for which they will need capacity-building support to achieve full implementation of the Agreement. Developed countries committed to immediately implement the Agreement when it entered into force.

Based on members’ notifications of commitments, 65 per cent of TFA provisions are being implemented today compared to the 59 per cent implementation rate recorded on the Agreement’s first anniversary. Broken down, the latest figure equates to a 100 per cent implementation rate for developed members and 64 per cent for developing members. As for least-developed countries, the improvement in the implementation rate is particularly notable at 31 per cent today versus the 2 per cent recorded a year after the Agreement entered into force. The implementation rate for each WTO member can be viewed here

The Agreement has the potential, upon full implementation, to slash members’ trade costs by an average of 14.3 per cent, with developing countries and LDCs having the most to gain, according to a 2015 study carried out by WTO economists. It is also expected to reduce the time needed to import and export goods by 47 per cent and 91 per cent respectively over the current average.

Source: World Trade Organisation, 22 February 2020

WCO supports SARS with AEO programme implementation

Under the framework of the Southern African Customs Union (SACU) Customs Modernization Programme, funded by the United Kingdom Foreign and Commonwealth Office, WCO experts were invited to lead an AEO Validation Workshop for the South African Revenue Service (SARS). The Workshop was held from 10 to 14 February 2020 in Pretoria, South Africa. Mrs. Rae Vivier who is the Group Executive responsible for AEO in SARS opened the workshop and welcomed the WCO and SACU representatives with a key note address to all attendees. She gave assurance to the audience that AEO is taken seriously by SARS and is one of the organization’s key deliverables. 

During the five day Workshop, the SARS AEO validation team was given an introduction to the WCO SAFE Framework of Standards (FoS), including all its Pillars, core elements, and AEO criteria etc. This was followed by a discussion on the essential elements of the AEO Validation Guidance, the sequential steps of the AEO validation procedures and the skills required by AEO validators. 

The participants, comprised of Customs auditors, legal experts and client relationship managers, were given an opportunity to share their views on the similarities and differences between AEO validation and post-clearance audit. The core values of Customs-Business partnerships were highlighted as an important aspect towards achieving AEO programme implementation. Auditors with a Customs compliance mindset were given security validation knowledge and taught how to hold discussions with business on coordinating and enhancing international supply chain security and safety. Another important element underscored during the training was that validation of the applicant is central to accreditation, and that the applicant’s supply chain may not be tested. Accordingly, the applicant is responsible for securing its own supply chain. 

The Workshop entailed extensive discussions on the self-assessment questionnaire prepared by SARS for potential AEOs taking part in the country’s AEO pilot. While referring to the WCO self-assessment template, the WCO experts also shared questionnaires by other Customs administrations. The participants and experts discussed how to enhance the questions posed, making it simpler for business to understand and answer them. A number of recommendations were made, including adding explanatory notes to the self-assessment questionnaire to help clients provide accurate information about their security and safety protocols.

A further aim of the Workshop was to include practical sessions, such as the mock validation process held at BMW’s South African plant in Rosslyn. Participants were told how BMW guarantees supply chain safety and security. Equipped with this information, the Workshop participants were given a walk-through of BMW South Africa’s processes for receiving goods. The lessons learned were shared among the Workshop participants and SARS management during the post-validation assessment. During that session, several Mutual Recognition Arrangements/Agreements (MRAs) signed between different Customs administrations were also referenced, so as to enhance learning and information sharing. 

SARS embarked on its Preferred Traders Programme (PTP) in May 2017. The initial number of 28 accredited traders (importers/exporters) has grown to reach 119 as of 14 February 2020. Under the SARS Strategic Plan for 2023, the priority will be to focus on improving voluntary compliance and supply chain security through implementation of the standardized WCO SAFE/AEO programme. At the same time, SACU wishes to roll out PTPs for all its Members, while moving towards a full-fledged AEO programme in phases. To this end, the WCO experts discussed and shared views on the PTP compatibility assessment tool aimed at ensuring mutual recognition of Preferred Traders among SACU Members.

Source: WCO, 19 February 2020

Guide: Goods and Conveyance Reporting in South Africa

A companion guide in support of increased compliance in the reporting of goods and conveyances (RCG) to Customs, South Africa.

Necessary information for – Air, Sea and Road carriers, vessel’s agents, NVOCCs, freight forwarders, Air and Sea terminal operators, container depot operators, transit shed operators and de-grouping depots. Also, all private software service providers to the trade.

The guide offers easy navigation through –

  • registration and electronic trading with SARS Customs
  • the various electronic messages mandated by law, covering import and export movements, across all modes of permissible international transportation
  • message types for each transaction type
  • scenarios to facilitate easier understanding across operators in the supply chain on how the various electronic reports are sequenced, ensuring that Customs formulates a comprehensive end-2-end view of a international trade transaction
  • reference webpages, official notifications, Customs rules and other pertinent information concerning cargo reporting.

All information is hyperlinked to SARS documentation, found on the official SARS website www.sars.gov.za

You may download the Guide below (File size: 3MB)

Illicit Cigarettes – Hong Kong customs intercepts four shipping containers

Photo: Winson Wong

Hong Kong customs has uncovered HK$85 million worth of smuggled cigarettes in the largest seizure of its kind in two decades, after authorities acted on intelligence indicating a syndicate was shipping the haul into the city in four containers.

Some 31 million cigarettes were stashed in the containers from Yokohama in Japan. They were then shipped through different ports in South Korea, Vietnam and mainland China, according to Lee Hoi-man, deputy head of the Revenue and General Investigation Bureau under customs.

He said the circuitous route was used by smugglers to avoid detection.

“The containers were shipped into three to four different ports before they came to Hong Kong,” Lee said adding that the contents listed on import documents were changed to throw off law enforcement in various jurisdictions.

Four men – one mainlander and three Hongkongers – aged between 24 and 41 were arrested in the operation on Monday. They were still being held for questioning on Tuesday evening.

Information on the containers was shared to a global database operated jointly by customs from different countries, under an anti-smuggling campaign code-named “Project Crocodile”.

A law enforcement source said the containers were left idle at another port since December, but were then suddenly moved across different countries before arriving in Hong Kong, one at a time since last Friday.

Lee said: “It is possible smugglers believed our frontline officers were tied up in dealing with the coronavirus outbreak.” He added that some of the contraband items were believed to be destined for countries in eastern Europe as some cigarette brands seized in the operation were popular there.

Hong Kong customs began investigating the syndicate in mid-December before identifying the four containers.

On Monday afternoon, officers from the Revenue and General Investigation Bureau swooped into action and seized 22 million sticks of cigarettes stashed in three containers at yards in Yuen Long, Sheung Shui and Man Kam To, arresting the four men.

At the Sheung Shui site, officers also seized 3,500 bottles of duty-not-paid liquor worth HK$2.5 million.

On Tuesday, the fourth container which had arrived from Shenzhen a day before was selected for inspection. Nine million cigarettes were found in it.

Lee said the combined haul had an estimated street value of HK$85 million, and was the biggest seizure of its kind in two decades in a single operation.

He said his team was working with overseas counterparts to determine the exact origin of the shipment and track down the ring leader and core syndicate members.

In Hong Kong, importing or exporting unmanifested cargo carries a maximum penalty of seven years in jail and a HK$2 million fine.

Source: Article by Clifford Lo, South Morning Post, 18 February 2020

South African Customs – Recent Illicit Goods Busts

Customs teams from Durban, Cape Town, Gauteng and the Free State recently dealt a blow to non-compliant traders by busting drugs, illicit cigarettes and undeclared fuel.

Customs officers at OR Tambo International Airport (ORTIA) were responsible for several major drug busts over the past couple of weeks, including the following:

  • On 8 February, a female passenger arriving from Sao Paulo was stopped and her luggage scanned, which revealed suspicious images. After searching her luggage, officers discovered packages wrapped in black tape and containing a white powdery substance. The powder was tested and confirmed to be cocaine, valued at approximately ZAR54 284 349. Officers also searched a male passenger arriving on the same flight and discovered three body wraps on his torso, containing a white powdery substance. The contents were tested positive for cocaine, valued at about ZAR9 057 566. On the same day, officers intercepted a male passenger about to board a flight for Hong Kong and searched him. They discovered body wraps on his upper torso containing cocaine valued at about ZAR11 700 000.
  • On 2 February, a male passenger arriving from Sao Paulo was stopped by Customs officers and his luggage searched. After a luggage scan revealed irregular images, officers searched his bags and discovered packages wrapped in black tape containing cocaine, valued at about ZAR5 850 000.
  • On 27 January, in a similar incident to the above, a male passenger arriving from Sao Paulo was arrested after Customs officers discovered a false compartment in his luggage, which contained cocaine valued at about ZAR6 750 000.

In all the above incidents, the suspects and goods were handed over to the SAPS for further investigation.

In the Durban incident, officers became suspicious of two containers of goods arriving on a vessel in the Durban harbour from China.

The containers, which were declared to contain glassware and household goods, were placed for examination at a cargo depot in Durban. 

Upon inspection by Customs officers on 5 February 2020, the containers were found to contain various suspected counterfeit goods, and several cartons with tablets packed in plastic packets.

Members of the Customs detector dog unit reacted positively to the cartons, which were tested and found to contain Methaqualone (Mandrax).

There was a total of 15 cartons, each containing 20 000 Mandrax tablets with a street value of about ZAR24 million. The case has been handed over to the SAPS for further investigation.

In Cape Town, officers were responsible for a massive bust of illicit cigarettes, one of SARS’ key focus areas when it comes to illicit trade (particularly in terms of lost revenue due to the fiscus). 

After receiving an alert from the Compliance Risk and Case Selection team about a possible mis-declaration of a container on a ship arriving in South Africa, a detention notice was issued to the shipping liner and the goods were detained in December 2019.

After following the required legal processes, a Customs Branch Physical Inspection team searched the container at the Cape Town harbour on 20 January 2020.

During the inspection, the team discovered 1050 master cases of “LEGATE” cigarettes, each case containing 50 cartons of 10 packets, with an estimated street value of about ZAR3 150 000.

If the consignment of cigarettes was not detected, the potential loss of revenue would have amounted to about ZAR12 208 350 in Customs & Excise duties and VAT. 

The Western Cape Customs Branch Inspection team has handed over the case to Criminal Investigations from further investigation.

In the Free State, Customs officers dealt a blow to another key area of illicit trade, ie. ghost exports or false declarations of fuel. On 31 January 2020, officers stopped a truck coming from Lesotho through the Ficksburg border post. They had become suspicious of this particular trucking company, as they had recently changed their route to using South Africa as a transit route from Mozambique to Lesotho. 

Officers noticed that the same truck had driven through the border into Lesotho the day before, having declared the truck full with fuel they acquired in Mozambique. The following day it re-entered South Africa, with the driver claiming that the truck was empty (which could indicate a possible ghost export in which they were trying to avoid paying taxes and duties/levies).

They then asked the driver to park the truck at the depot for inspection. However, after the truck was taken to the depot, the truck driver disappeared and the truck company’s lawyer was called to attend an inspection. 

Customs officers then discovered the truck contained 26 000 litres of diesel, with the owners having failed to pay duties and taxes totalling ZAR176 000 due to the fiscus. The truck was detained for further investigation.

And in a similar incident, two trucks were stopped at the Maseru Bridge border post on 4 February for falsely declaring fuel coming from Mozambique to Lesotho. The trucks contained 39 388 litres and 39 414 litres of petroleum respectively. Both were detained for further investigation. 

Source: South African Revenue Service [SARS]