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The following article appeared on Maritime Executive’s webpage titled ‘Can C-TPAT be fixed?‘ authored by Stephen L. Caldwell (2017-07-18). The assessment reveals that Customs-Trade partnerships require continuous review and enhancement to retain their appeal and relevance – a significant challenge for customs and border authorities primarily focussed on compliance with the law. I have appended hyperlinks to the critic’s articles at the bottom of this post.

As the Customs-Trade Partnership Against Terrorism celebrates its fifteenth anniversary, it faces stagnant membership, software train wrecks, questionable assertions of benefits and a much- needed retooling to stay current.

The Customs-Trade Partnership Against Terrorism (C-TPAT) is a voluntary security program started in the aftermath of 9/11. Member companies sign up and agree to maintain strong supply chain security. U.S. Customs and Border Protection (CBP) staff then validate members’ security practices to ensure they meet minimum criteria. Members are then eligible for benefits such as reduced likelihood that CBP will examine their shipments.

C-TPAT currently has about 11,500 members including importers, consolidators, sea carriers, port terminals and foreign manufacturers. Membership is segregated into three “Tiers” with Tier I representing companies that sign up, Tier II representing validated members, and Tier III representing companies with the highest demonstrated level of security.

The program grew rapidly in the beginning, reaching 1,500 members by 2002, 3,000 by 2003, 7,000 by 2004 and 10,000 by 2012. Given this growth, Congress wanted to make sure it was more than just a “sign- up sheet” and asked its watchdog, the Government Accountability Office (GAO), to monitor the program.

GAO’s July 2003 report found that, after companies signed up but before any validation process was completed, CBP went ahead and provided benefits by reducing their scores in its risk algorithm. By May 2003, for example, there were 3,355 members receiving benefits but only 15 had been validated. It took a couple of years to work down the backlog.

Even then, GAO’s March 2005 report found the validation process was not rigorous enough to ensure that a company’s security practices were reliable, accurate and effective. Its 2008 report found that CBP still faced challenges in verifying that C-TPAT members met minimum security criteria. It also found that CPB’s records management system did not allow managers to determine whether C-TPAT members complied with program requirements.

Midlife Crisis

Michael Laden, head of customs compliance firm Trade Innovations in Eden Prairie, Minnesota, has been helping industry clients with C-TPAT since 2005. Laden has been a licensed customs broker since 1981 and served as Director of Global Trade Services at Target Corporation prior to founding his own firm. He believes that C-TPAT is having a midlife crisis: “The stagnation of membership levels in the 10,000-12,000 range is an indication that industry has lost its appetite for C-TPAT.” He cites a problematic history of revolving short-term leadership as part of the problem.

Laden says the program reached its nadir with the August 2015 release of the much-anticipated Portal 2.0 software, designed to further automate the validation process. “The release was rushed into service with limited capabilities and minimal pre-testing,” he explains. “It was a complete train wreck. The data from the previous version just disappeared. In some cases, not only did the data disappear but the company disappeared too.”

The problems with Portal 2.0 were documented in GAO’s most recent report of February 2017, which found that Portal 2.0 incorrectly altered C-TPAT members’ certifications or security profiles, impairing the ability of C-TPAT specialists to identify and complete required security validations. Portal 2.0 problems also prevented C-TPAT members from accessing their own data and responding to validation reports.

Since C-TPAT was presented as a partnership with CBP benefiting from its knowledge of member companies’ security practices and companies benefiting from reduced scrutiny of their shipments, CBP in 2012 developed a software “Dashboard” to track such benefits. It used the Dashboard in its Program Benefits Reference Guide to assert that entries filed by C-TPAT members were less likely to undergo a security examination than those filed by non-members. Tier III members, for example, were nine times less likely to be examined, and Tier II members 3.5 times less likely.

However, the February 2017 GAO analysis found that C-TPAT members’ shipments did not consistently experience lower examinations, hold rates or processing times compared to non-member shipments. When GAO shared its preliminary analysis with C-TPAT officials, they acknowledged that they had never completed system verification, acceptance-testing, or checks on the data in the Dashboard. GAO’s conclusion was that the data was unreliable going back to the Dashboard’s introduction in 2012, and CBP to this day remains unable to determine the benefits of C-TPAT membership.

Industry Finds Its Own Solutions  

While industry was anxious for definitive information on membership benefits, it decided to find its own solutions to some of the costs. One key cost involves security audits of the supply chain, particularly in foreign countries. Shippers and importers got together and created the Supplier Compliance Audit Network (SCAN) to address costs, “audit fatigue,” inconsistent reporting and varying compliance requirements.

Companies pay a sliding fee to become part of SCAN, where they can commission audits and get access to completed audits, which could obviate the need for a new audit of a particular supplier. In 2016, SCAN completed more than 3,379 audits in 51 countries. Its board of directors represents some of the largest importers in the U.S., and its audits are conducted by proven service providers such as Bureau Veritas and business standards company BSI.

Dan Purtell, Senior Vice President of 30 BSI’s Supply Chain Solutions Group, says, “SCAN members clearly see the benefit of the C-TPAT program. These companies are the ‘who’s who’ of the Tier III C-TPAT community and truly are the supply chain security thought-leaders within the private sector. Member companies compete on the shelf but unite to secure trade, mitigate supply chain risk, and identify and correct security deficiencies.”

Purtell notes that “More than 15,000 such deficiencies have been remedied by SCAN since its inception just two years ago. No other association has done more to address global supply chain exposures.”

Next Steps

Despite problems, there are signs of improvement according to Trade Innovations’ Laden, starting with the decision by the last CBP Commissioner to make the Director of C-TPAT a more permanent position. “This should add continuity to the leadership of the program,” he explains, “allowing it to reach its true potential.” Laden also praises the new Director, Elizabeth Schmelzinger, for her openness to listen to industry.

“We’re retooling the program so that it stays current,” says Schmelzinger. “There are a lot of factors that have changed over the years. We want to make sure the minimum standards are still relevant.” CBP had enlisted its industry-based Commercial Operations Advisory Committee (COAC) to help it validate those minimum standards and develop C-TPAT best practices with the results to be announced at COAC’s March 1 meeting in Washington, DC. However, it was announced at the meeting that the results had been delayed to “make sure they get it right.”

When asked whether the intent of revisiting the minimum standards was to increase membership, Schmelzinger responded: “C-TPAT’s standards remain high. It’s not all about joining the program. We also suspend companies and remove them from the program. So, there is a constant churn in membership.”

She also described the evolving roles of C-TPAT and CBP’s newer Trusted Trader program, noting that “C-TPAT was foundational to any Trusted Trader status.” In other words, the first element of a Trusted Trader program was to ensure security. Then the elements of compliance with rules and regulations would be taken into consideration.

Ultimately, C-TPAT and Trusted Trader would transition into a global safety net whereby low-risk importers and exporters would have their goods expedited through customs processes in both the U.S. and its trading partners.

AEOs and Mutual Recognition

In international parlance, security partnership arrangements like C-TPAT are called Authorized Economic Operator (AEO) programs. The U.N. reported that, as of 2016, some 79 countries had established AEO programs and an additional 16 planned to launch such programs in the near future. The E.U., consisting of 28 countries, has the largest program, and its Union Customs Code of 2013 aims to, among other things, reinforce swifter customs procedures for compliant AEOs.

Many countries with AEO programs, including the U.S. with its C-TPAT, have signed “mutual recognition agreements” whereby two countries’ customs administrations agree to recognize the AEO authorization issued under the other’s program and provide reciprocal benefits to companies. As of May 2016, some 40 bilateral agreements had been concluded with 30 more being negotiated. According to the U.N., these bilateral agreements will form the basis for multilateral agreements. To date, the U.S. has signed 11 agreements with, among others, the E.U., Canada, Mexico, Japan and Korea.

C-TPAT Director Schmelzinger adds that “We are also restructuring the program to include exports so that it is more in line with the structure of other countries’ AEO programs. As part of our agreements with countries that have AEO programs, those countries will honor a commitment to our exporters who are low- risk. This will help U.S. exporters establish a foothold in those markets.”

One Step at a Time

Michael Laden is more skeptical of mutual recognition, calling it a “noble gesture” but adding there will be little enthusiasm from industry. Most of his clients are importers and will not get any benefit from the new export component.

Regarding exporters, he says that “Since CBP so rarely examines exports, the usual benefit offered by C-TPAT membership does not exist for that part of industry.” In Laden’s view, “Let’s fix C-TPAT before we move on to harmonize customs security and compliance throughout the world.”    Source: Maritime-Executive

Recommended reading –

 

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CP Mission 16_01_465_ Successful Stakeholders Training

During November 2016, 16 Customs officers from SACU member administrations received training in the area of successful stakeholder consultation. The training was facilitated by Accredited WCO Experts from the SACU region. As a result of the workshop, participants drafted National Stakeholder Consultation action plans which outline the administration’s national effort in necessary interaction with key stakeholders. The action plans will be used to guide and improve cooperation with businesses in the implementation of the Preferred Trader Programme once they are approved by the Member administrations. Source: WCO

trusted-trader-transparent

A new customs program aimed at bringing Australia into line with other major trading nations could substantially cut costs when exporting to Asia.

The Department of Immigration and Border Protection (DIPB) believes that the benefits to the Australian economy of this streamlined export process could be worth up to $1.5 billion for every one per cent increase in efficiency of transport and logistics supply chains.

The pilot for the Australian Trusted Trader (ATT) program launched this month will eventually allow accredited export businesses to gain streamlined customs and security clearance in countries that have a mutual recognition agreement with Australia.

Similar programs have already been adopted by more than 58 international jurisdictions – including China, India, Japan, Singapore, Taiwan and South Korea – since being introduced by the World Customs Organisation (WCO) in 2005.

Known generally as Authorised Economic Operator (AEO) schemes, they provide a framework of standards for trading partners in recognising each other’s customs and security regimes.

According to the Centre for Customs and Excise Studies (CCES) at Charles Stuart University, the goods of exporters who are accredited to the New Zealand AEO scheme are 3.5 times less likely to be inspected or held up on arrival in the US.

Professor David Widdowson, head of school at CCES, and a leading advocate and advisor on the introduction of the ATT, says that accreditation to an AEO is often an imperative for many international supply chains.

“When exporters send goods overseas and they get held up, there’s basically two ways that countries are dealing with them,” he said. “There those that come from a known secure supply chain – such those where a mutual AEO agreement is in place – and they’re treated as low-risk; and then there’s the rest, which are treated as high-risk.

“Without being part of an AEO or trusted trader agreement, Australian exporters are more often likely to fall into the latter category.

“In some jurisdictions it can be very difficult to be accepted onto an AEO scheme as an importer, so big multinationals often actively look for partners and suppliers who are already accredited to a scheme in their own country – and won’t deal with anyone who isn’t. They don’t want to run the risk of their non-accredited parts of their supply chain compromising their status on the scheme.

“So we can see how AEOs are actually now being used by commerce as a key indicator of the standard that business is looking for in terms of protecting their international supply chain.”

The aims of the ATT include expedited border clearance, reduced or priority inspections and priority access to trade services. The DIPB will also explore the possibilities for duty deferral and streamlined reporting arrangements.

Accredited trusted traders are to be assigned an account manager within the DIPB, as a single point of contact to assist with customs and export issues across all federal departments.

To apply to enter the program, Australian exporters and supply-chain businesses – including freight-forwarders, brokers and logistics firms – first need to obtain a self-assessment questionnaire from DIPB.

The information submitted by the business is then audited by the DIPB to ensure that the necessary security systems and procedures are in place, before accreditation can be given. There is no licence or application fee for the program, and Prof Widdowson expects the process to take “a few weeks if it’s a major company or it could be a few days if it’s a medium-sized company”.

The pilot phase will be completed in this current financial year, and only four companies will be taking part initially: Boeing Aerostructures Australia, Devondale Murray Goulburn, Mondelez Australia and Techwool Trading.

Teresa Conolan, assistant secretary of the Trusted Trader and Industry Branch at the DIPB, said more companies would be included in the pilot as it progresses.

“We’re hoping to have around 40 companies over the 12 months in the pilot, across a range of business sectors, so we can actually test the processes and make sure they are not too burdensome,” she said.

“Over four years we’re expecting around 1500 companies to join the scheme – so it’s certainly not going to cover all business.”

Conolan added that preliminary discussions with some countries were already underway, though negotiations on agreements were unlikely to begin until the ATT was fully launched next July.

She said Australia’s key trading partners would be the priority, but expected the negotiations and implementation of agreements with some of them to take a further year.

The rollout of the pilot program follows years of pressure from the Australian business community to embrace AEO, after initial reluctance by the Australian Customs and Border Protection Service (ACBPS).

Following an article by The Australian Financial Review on March 20, 2013, which flagged Australia’s non-participation, business leaders sponsored a research study, undertaken by the CCES, which found that the scheme could be highly beneficial. Business groups began to lobby the federal government, by which time the ACBPS had reversed its attitude and agreed to consider implementing an Australian scheme.

For more information on the Australian Trusted Trader scheme, visit – trustedtraders@borders.gov.au

Also read:

AEO-LogoHere follows an appreciation of AEO within the context of the EU. According to KGH customs consultancy services, being an Authorised Economic Operator (AEO) already entails advantages for companies that have invested in doing the work to gain the AEO certification. With the new Union Customs Code (UCC), companies with an AEO permit will be able to gain additional advantages leading to more predictable and efficient logistics flows as well as an increased competitive edge.

Centralised clearance (being able to clear all customs declarations from one central location in the EU) and self-assessment (self-declaration of custom fees, similar to VAT reporting) are two new possibilities under UCC that will be implemented towards the end of the initial UCC implementation period from 1 May 2016 to 31 December 2020. To take advantage of these, AEO will be a prerequisite. AEO-ready businesses will therefore be well positioned to take advantage of these new possibilities when they become available.

Direct AEO benefits, including fewer physical and document-based controls, pre-notification in case of controls, easier access to customs simplifications and other customs authorisations, as well as access to mutual recognition with third countries, will continue to apply under UCC. The same is true of the soft benefits, such as better cross-functional communication and cooperation, improved customs knowledge and better risk management, which often outweigh the direct benefits as detailed by customs authorities.

With the UCC, AEO becomes a permit (authorisation) and all AEO certifications will have to be reviewed in line with the new UCC guidelines. Much is recognisable from before, but there is an additional competency requirement that is realised through either experience and/or professional qualifications. There is also likely to be more focus on ensuring that AEO applicants have robust routines that reflect their business, and that those routines are known in the business and used on a day-to-day basis.

Ever since the Authorised Economic Operator (AEO) certification was launched in 2008, many companies have been trying to evaluate whether to go for AEO or not. What are the benefits? How long does it take to become certified? Can we do it ourselves or do we need some help? What do we really gain by being AEO? This has sometimes stopped companies taking active steps to get ready for AEO.

Furthermore, some AEO-certified companies have felt that they have been exposed to more controls after AEO certification than before. In other instances the initial certification was fairly easy to achieve, but it then proved much harder to retain at a subsequent audit because routines were not being kept up to date or there had been insufficient internal controls and reviews performed in the business.

Our experience shows that companies that did a thorough job at the time of certification and that also afterwards had a genuine focus on maintaining knowledge, following routines and updating documentation as and when appropriate, have been able to benefit from improved customs management to a greater extent than they first envisaged.

KGH opines there are six situations where being AEO could be beneficial for a company:

  • Freight forwarder serving customers with logistics flows to and from the EU.
  • Strong business links with countries where the EU either has mutual recognition or is likely to have it in the not too distant future.
  • Businesses with many permits that will be reconsidered as part of the transition to UCC, where being AEO may facilitate the reconsideration process for other customs permits.
  • Large customs guarantee, which may be able to be reduced as a result of being an AEO.
  • Interested in centralised clearance and self-assessment that will be introduced towards the end of the UCC implementation period.
  • Interested in raising customs knowledge in a business, in order to better manage risks and be able to take advantage of business opportunities connected with international trade.

Here AEO can also be seen as a seal of quality. Source: kghcustoms.com

ESA_Regional-WS_South-AfricaThe WCO Regional Workshop on Strategic Initiatives for Trade Facilitation and the Implementation of the WTO Trade Facilitation Agreement (TFA) – Mercator Programme – for the WCO East and Southern Africa (ESA) region was held from 15 to 17 September 2015 in Johannesburg, South Africa. It was hosted by the South African Revenue Service (SARS) representing the WCO Vice Chair of the ESA region, and financially supported by the United Kingdom Department for International Development (UK DFID) and the Ministry for Foreign Affairs of Finland. More than 100 participants from 21 ESA Members (Customs, Trade Ministries/equivalent Ministries), the WTO and other international organizations, development partners and the private sector participated in the event.

The Workshop was opened by the Commissioner of SARS, Mr. Thomas Moyane. He expressed his view that the WCO Mercator Programme created significant conditions for contributing to intra-African as well as international trade facilitation benefits. As Vice Chair of the ESA region, he hoped that the Workshop could recommend immediate actions for the region.

The Workshop raised a lot of interest and active discussions from a variety of well-prepared and informative presentations, including the role of the WCO in TFA implementation;  TFA regulations such as Article 23.2 on National Committees on Trade Facilitation (NCTF) and specific national and (sub-)regional examples of implementation approaches; experiences of Trade Ministries and several partner institutions active in the region; and discussions on further approaches to Capacity Building and TFA implementation, including in cooperation with Development Partners.

The region agreed on next steps forward, including on a regional focus on the establishment and maintenance of NCTFs (for instance further provision of replies to the respective WCO survey; identification of the situation within ESA Members); reporting the outcomes of the Workshop to the ESA Regional Steering Committee; encouragement of ESA Members who are not yet Contracting Parties to the Revised Kyoto Convention to accede to it as soon as possible (and/or to identify related Capacity Building needs) – as one concrete way to also support TFA implementation; and responsibility of the ROCB and the Vice Chair to continue collecting and publishing information on ongoing Capacity Building projects and work of partner organizations such as SADC, COMESA, SACU and UNCTAD especially in the TF(A) area in the region – while encouraging Members and partner organizations to share such information.

The Workshop was successfully concluded with positive feedback from Members, partner organizations and development partners. A summary document on the discussions held during the Workshop is currently under finalization by the Vice Chair’s office and the ROCB and will be circulated to all participants of the Workshop in due course. Source: WCO

WTO LogoThe following article is published with the kind permission of the author, Tapia Naula who is Principal Transport Economist at African Development Bank, based in the Ivory Coast. He is an international project manager and transport economist with experience in logistics business, research and trade facilitation. This article is a must for anyone associated with or working on the TFA on the African sub-continent, and a bit of a wake up call to those countries who have as yet done little or nothing to progress their participation.

In the World TFA Cup Asia is leading Africa 72 – 35. The first scores of the WTO Trade Facilitation Agreement are out as member countries submit their Category A notifications. Initial results of the African first series are somewhat unfulfilling. Some teams are playing defensive even if attacking tactic is the only way to win.

In December 2013, WTO members concluded negotiations on a Trade Facilitation Agreement (TFA) at the Bali Ministerial Conference, as part of a wider “Bali Package”. Among trade facilitation practitioners the Agreement was received with great enthusiasm: finally there was a legal instrument, which is concrete enough to make a difference! TFA will enter into force once two-thirds of members have completed their domestic ratification process. Section I contains substantive provisions in 12 main Articles. The members are required to categorize and notify each provision of the Agreement as either A, B or C Category. The A Category commits a country to implement the provision upon entry into force of the TFA, or one year after for LDC’s. For B-Category there will be a transitional period. C-Category provisions are allowed a transitional period, technical assistance and capacity building.

First, let it be said loud and clear: the WTO TFA is an excellent collection of modern trade and transport facilitation instruments in one folder. In developing countries its implementation would mean reforms that would save time, money and efforts for regular business people and consumers. These reforms may be painful but the countries that can do it, will be the future winners of their regional competition and they will be the ones that will most benefit from joining the global value chains. TFA is the best vehicle for poverty reduction invented so far and that is why it is so important.

In August, 2015, 14 African countries and 25 Asian countries had submitted notifications for category A provisions. Asian countries had “accepted” 72 % of all the provisions as A-Category commitments on average where the respective share of the African countries is only 35 %. On Article-level African countries lag behind on every Article except one (Table 1).

In addition to the low overall share of category A-notifications, the African notifications generally look like “random picks” of sub-paragraphs, compared to many Asian members that have commonly chosen the strategy of basically accepting the whole Agreement and making exceptions for certain few paragraphs according to their particular needs.

Were African governments well-informed of the impact and substance of each paragraph – or are they just being cautious, perhaps trying to delay the final commitment? The patterns between African and Asian countries are in any case different.

Table 1

TFA includes also “low hanging fruit” – sections that require little technical expertise to be implemented. At least some of these should have been easy for member countries to accept. “Publication and Availability of Information” is one of those sections. Access to information through internet is routine and affordable. It should not require transition periods or particular technical assistance. Donors are even competing to assist governments with such low cost and high-return activities. Still, less than one third of the African Governments notified this Article.

Here are some other peculiar findings:

  • Out of 14 African countries only Morocco accepted “Border Agency Cooperation” as A –Category provision. Three of the others countries that did not notify it are landlocked countries;
  • Only four out of 14 African countries had fully notified “Freedom of Transit.” Transit challenges in Africa are probably the single most significant source of inefficiency in trade logistics;
  • One of the foundations of modern customs management is the introduction of Risk Management. Only 3 out of 14 African countries had notified this provision;
  • Only Morocco notified Trade Facilitation Measures for Authorized Economic Operators (AEO), which gives certain privileges to traders and transport operators, who show high level of compliance to regulations. One wonders why Kenya, Uganda, Rwanda, Burundi and Tanzania did not notify it as we know that an AEO program is being piloted in the East African Community;
  • Only Senegal notified the sub-Article on Single Window, which is probably the most important one of the whole Agreement. Senegal perhaps deserves this honor – being the first truly African-based single window country – and also representing the good practice of SW management. Yet, according to the African Alliance for e-Commerce, currently there are at least 16 other single windows either already operational or under development in Africa. Why weren’t these developments recognized?

Despite the above “peculiarities” the African situation is fortunately nowhere near as somber as the A-Category notifications indicate. There are plenty of trade and transport facilitation initiatives under implementation – and Africa is indeed “on the Move.” We should on one hand side make sure that the valuable TFA Agreement is not becoming a separate formal process alongside the practical actions on the ground, but rather a framework for coaching governments in climbing up the stairs toward greater competitiveness. On the other hand, the countries should not ignore the existing achievements. A lot has been achieved in Africa in recent years and this process should go on and gain speed. Some sub-regions, which have been less successful in this field need  benchmarks, encouraging and coaching. This is where African and international organizations can play a role.

Although the direct cost of TFA implementation is relatively low, the indirect cost may be extremely high. The indirect cost concerns existing structures, which generate income for organizations and individuals, who often greatly benefit from the status quo. Some governments have entered into concessions outsourcing critical government functions such as pre-customs clearance operations and processing and submissions of declarations to customs. Western firms have efficiently seized the opportunity and negotiated deals, which guarantee profits for in many cases for decades to come. Single Windows in certain countries are good examples for these. In an unnamed Southern African country for example, humanitarian aid is exempt from taxes and duties in import. If however a UN agency for example imports a container of pharmaceuticals worth five million USD, it will have to pay for a Single Window fee of 42,500 USD! Such Ad Valorem fee arrangements are against the TFA. Such concessions are often built inside structures, which profit from the concessions and in exchange – protects its operations and continuity. This is why they are difficult to tackle. This is an example of the problematics that African policy makers must deal with when taking a position in committing in TFA provisions. It may be a whole lot more complicated than what it looks like.

Association between % Share of Sub-Article Level A-Category Commitments and the Corruption Perception Index Score (CPI). Sources: WTO and transparency International.
Association between % Share of Sub-Article Level A-Category Commitments and the Corruption Perception Index Score (CPI). Sources: WTO and transparency International.

The diagram above shows the association of share of the provisions that have been covered by A-Category notifications and the Corruption Perception Index (CPI) score of the countries. For African countries the correlation is moderate (correlation co-efficient: 0.42) but for Asian countries the association is strong (correlation co-efficient: 0.73). The association of the two variables is understandable: the less corruption a country has (the higher the CPI rank is), the more reforms the government is in liberty to conduct (the higher coverage of TFA as A-category Notifications).

We need to better understand the underlying reasons why policymakers cannot let reforms take off. Traditions, corruption and outdated structures are usually the biggest obstacles. These cannot be overcome by merely providing short-term technical assistance and bench-marking the world best practices but only strong political leadership can make the change. Developing partners should raise this topic on the highest political level and “live together” through the reforms with the counterparts.

The Northern Corridor (Kenya, Uganda, Rwanda) provides an encouraging example how multiple reforms can be carried out in very short time. Only two years ago it took staggering 27 days to transport a container from Mombasa Port and deliver it in Kigali, Rwanda. Today it takes only seven days. The improvement was enabled by series of reforms, which were championed by the Heads of States of the Corridor member countries. The example proves that major improvements can indeed be achieved in very short time. On the other hand, even with the most sophisticated instruments, reforms will not succeed if there the high-level ownership is not there. Author: Tapio Naula

EAC CompliantThirteen compliant companies across East Africa were awarded Regional Authorized Economic Operator (AEO) certificates jointly by Partner States Commissioners of Customs and Director Customs, EAC at a ceremony held at Serena Kampala, Uganda on 24th July 2015.

The Commissioner Customs, URA Mr. Dickson Kateshumbwa who represented the URA Commissioner General was the chief guest during the award ceremony. The Chief Guest observed that with the award of Regional AEO certificate, the project had now come of age and indeed puts EAC on the global map of being the first region to implement a regional AEO programme. The Director Customs, Mr. Kenneth Bagamuhunda congratulated the thirteen companies and remarked that the AEO programme will go a long way in supporting the SCT implementation and eventually spur the growth of intra and extra trade. The SCT Coordinators recited each company profile before all the commissioners and Director Customs awarded the Regional AEO certificate to each of the awardees.

The companies were selected after meeting the set admissibility as set out in the AEO selection criteria. The awarded companies participated in the project pilot phase of the project but have continued to demonstrate and maintain high compliance to the set standards. The companies, from different sectors have continued to move consignments under the AEO scheme and in return have been offered benefits that are now currently under review to ensure they are not only tangible but are attractive enough to draw interest from other traders. Source: WCO

Headquarters of the Rwanda Revenue Authority

Headquarters of the Rwanda Revenue Authority

Thirteen companies, three of them Rwandan, last week signed a Memorandum of understanding with Rwanda Revenue Authority to be accorded preferential treatment when clearing their goods at customs. The Authorized Economic Operator (AEO) is a regional trade facilitation program recommended by the world customs organization to ease trade and customs clearance for tax compliant and prominent importers and exporters.

Delay in clearing goods at customs is one of the major impediments to smooth trading within the East African Community (EAC). It also contributes to making the EAC region one of the most expensive places to do business despite being the second most growing economy in the world. The AEO creates some kind of obstacle-free zone where traders in the import or export business, known to be complaint with customs requirements, are accorded special treatment to ease the process of clearing their goods while in transit.

The pilot project will see how the system works in reality and the beneficiaries have all been informed of their rights and which ports or borders to claim them from. Rwanda customs officials issue special identifiers to the beneficiaries to help them identify the benefiting traders once their goods appear at any of the designated custom points. These identifiers will be recognizable everywhere in the five partner states of the EAC where the beneficiaries will pass and claim their privileges as AEO.

The growth of global trade and increasing security threats to the international movement of goods have forced customs administrations to shift their focus more and more to securing the international trade flow and away from the traditional task of collecting customs duties.

Recognizing these developments, the World Customs Organization (WCO) drafted the WCO Framework of Standards to Secure and Facilitate global trade (SAFE). In the framework, several standards are included that can assist customs administrations in meeting these new challenges and developing an Authorized Economic Operator programme is a core part of SAFE. Source: AllAfrica.com

Enforcement, Risk Management and Preferred Trade come together in the SACU Region

Enforcement, Risk Management and Preferred Trade come together in the SACU Region

A WCO workshop on the topics of Enforcement, Risk Management and Preferred Trader was conducted in April in Johannesburg, South Africa, with the involvement of the WCO Secretariat, UK Customs and the member countries of the Southern African Customs Union – SACU (Botswana, Lesotho, Namibia, South Africa and Swaziland). Capacity Building in the mentioned areas in the SACU Region is part of the WCO Sub-Saharan Customs Capacity Building Programme financed by the Swedish Government through the Swedish International Development Cooperation Agency, SIDA.

An assessment including lessons learned was conducted concerning Operation Auto, targeted at second hand motor vehicles. This first ever regional enforcement operation in the 102 years of history of SACU presented good results as around 250 vehicles were seized by the Customs administrations. The Regional Intelligence Liaison Office contributed actively in the assessment process, ensuring that also future enforcement operations will benefit from the experiences gained.

The development of further risk management capacity is ongoing at the regional level and discussions were held concerning the establishment of common risk profiles. A number of high risk products have been identified and the formulation of profiles to engage illegal trade in these areas is ongoing.

Regarding the Preferred Trader program, progress can also be reported as SACU Members are approaching implementation at operational level. This project component fits very well with the risk management component as the latter is the foundation of the Preferred Trader approach. The process of selecting high compliant, low risk economic operators for the upcoming pilot scheme is well underway while capacity in verification and post clearance audit is being enhanced. A launch of (a pilot of) the regional Preferred Trade program is tentatively envisaged for the second half of 2013. Source: WCO

Director-General of Singapore Customs Fong Yong Kian and Vice Minister of the General Administration of China Customs Sun Yibiao (both seated), signed the China-Singapore MRA at the WCO Council Sessions in June 2012. The signing was witnessed by Chairperson of the WCO Council and Chairman of the Revenue Commissioners of Ireland, Josephine Feehily and WCO Secretary-General   Kunio Mikuriya.

Director-General of Singapore Customs Fong Yong Kian and Vice Minister of the General Administration of China Customs Sun Yibiao (both seated), signed the China-Singapore MRA at the WCO Council Sessions in June 2012. The signing was witnessed by Chairperson of the WCO Council and Chairman of the Revenue Commissioners of Ireland, Josephine Feehily and WCO Secretary-General Kunio Mikuriya.

General Administration of Customs of Singapore has announced that the Mutual Recognition Arrangement (MRA), signed with Customs of the People’s Republic of China went into effect on March 15, 2013.  Following the effective date, both Singapore’s STP-Plus companies and China’s Class AA accredited companies will be recognized as Authorized Economic Operators (AEOs) of the respective countries.

This recognition as AEOs allows Customs from both countries to grant clearance facilitation for accredited AEOs such as lower examination rates, priority inspections, and priority handling of customs clearance documents at each country’s port.  Included in the announcement were specific instructions for how importers in both Singapore and China should fill out customs forms when receiving exported goods from one of their respective AEOs.

For goods exported directly to Singapore from a Chinese Class AA company, the Chinese exporter would need to provide the Singapore importer with the 10-digit Customs Registration Code to place on their import declarations to Singapore along with inputting the “AEO code” into the portal for mutual recognition purposes and benefits of AEO.  The AEO code is comprised of “AEO”, “CN” and the 10-digit Customs Registration Code.

For goods exported to China from a Singapore STP-Plus company, the Chinese importer must fill in the “AEO code” of the Singapore’s exporter in the “remark column” in their import declarations to receive mutual recognition benefits.  The format for the AEO code is as follows:  “AEO (written in English half-width characters and capital letters)” plus “<” plus “SG” plus “12-digit AEO code” plus “>”.  For instance, if the AEO code of one Singapore STP-Plus company is AEOSG123456789012, then the remark column filled in by the Chinese importer would read as “AEO”.

The MRA signed between China and Singapore is but one example of several security programs in different countries making it easier for trusted traders to move goods through the supply chain. Other countries that also participate in MRAs include:

  • US Customs & Trade Partnership Against Terrorism (C-TPAT) which has MRAs in place with Canada’s Partners in Protection (PIP), New Zealand’s Secure Export Scheme Program (SES), Jordan’s Golden List Program (GLP), Japan’s Authorized Economic Operator Program (AEO), Korea’s AEO, and the European Union’s ( EU) AEO
  • European Union (EU) AEO which has MRAs in place with Canada’s PIP, Japan’s AEO, Australia’s AEO, New Zealand’s SES, and US C-TPAT
  • Japan Customs has MRAs in place with New Zealand’s SES, EU’s AEO, Canada’s PIP, Korea’s AEO, and Singapore’s STP-Plus
  • Singapore Customs has signed MRAs in place with Canada’s PIP, Korea’s AEO, Japan’s AEO, and China’s Class AA

Part of participating in any security program is the ability to assess and manage risk across the supply chain.  This includes soliciting and analysing information received from every partner within the supply chain to corrective actions and best practices.  While are security programs are still voluntary in nature, companies that take advantage of them are reaping benefits such as faster customs clearance and less inspections. Source: Integration Point

EACThe EAC business community has been asked to take advantage of the Authorized Economic Operator (AEO) scheme that seeks to cut down costs of doing business in the East African member states.

The AEO programme, launched in Dar es Salaam on Wednesday, is an entity involving importers, clearing agents, transport companies authorized to import and move cargo within the EAC region with minimal inspections and other customs interventions at checkpoints.

The Permanent Secretary in the Ministry of East African Cooperation Dr Stergomena Tax, launching the World Customs Organisation (WCO)-AEO pilot programme said, “The AEO status can provide companies with significant competitive advantages in terms of supply chain certainty and reduced import costs and finally to the final consumer.”

Apart from reduced transport costs, Dr Tax said the programme would also pull down storage charges because of minimal customs border inspections as well as few checkpoints or road blocks for transit goods.

The Swedish Ambassador to Tanzania Mr Lennarth Hjelmåker said the AEO scheme is a broader compliance strategy to reward compliant traders with simplification benefits which are concrete and predictable.

“Regional integration and cooperation are factors which are important for development, including creation of favourable conditions under which private sector can operate and provide for economic growth with focus on sustainability,” he said.

Sweden, through the Swedish International Development Cooperation (SIDA), has been supporting the work carried out by the WCO-EAC-AEO programme since 2008. Speaking on behalf of the Tanzania Revenue Authority (TRA) Commissioner General Mr Saleh Mshoro, the revenues body’s Finance Director said efficiency and effectiveness of customs procedures can significantly boost the nation’s economic competitiveness.

The launching of AEO programme marks the beginning of a journey between the region’s revenues authorities and the business communities in facilitating smooth and win win trading activities. Source: Tanzania Daily News

4209_image002January, 2013 saw the United States and the European Union implemented the mutual recognition arrangement for their respective supply chain security programmes. The US Customs and Border Protection (CBP) administers the Customs-Trade Partnership Against Terrorism (C-TPAT), which is now recognised as equivalent to the European Union’s Authorised Economic Operator (AEO) programme.

Should they elect to allow CBP to share certain information with the European Union, US importers authorised under C-TPAT will be considered secure and their exports will receive a lower-risk score by the customs administrations of EU member states. In practice, certification translates into time and money savings for parties dealing with trusted operators. In that sense, certified operators are successfully marketing their status as a distinguishing competitive advantage.

Both programmes are voluntary, security-based programmes aimed at improving supply chain security. As programme members, importers receive lower risk-assessment scores in customs administrations’ computer targeting software. Therefore, members are subject to fewer security-related inspections and controls. The mutual recognition arrangement between the United States and the European Union allows for members of one programme to receive reciprocal benefits when exporting to the other jurisdiction.

However, not all C-TPAT members qualify for full AEO benefits. Only Tiers 2 and 3 C-TPAT importers (considered as more secure) may receive a lower risk-assessment score, and consequently undergo fewer inspections when exporting to an EU member state. In addition, in order to receive these benefits, C-TPAT members must expressly elect for the United States to share certain information with the European Union and certify that their exports meet all applicable requirements.

The mutual recognition arrangement may also exempt members’ facilities from undergoing validation site visits by both administrations when initially being certified or during revalidation visits. This benefit is available for every tier of C-TPAT membership.

The mutual recognition arrangement applies only to C-TPAT importers which also act as exporters. A C-TPAT manufacturer will benefit from the arrangement only if it also acts as the US exporter. For example, if a US company owns a C-TPAT-certified manufacturer in Mexico that directly ships merchandise to the European Union, those shipments will not benefit from the arrangement.

CBP’s targeting system recognises AEO-certified entities by their manufacturer identification number. Certified manufacturers will receive benefits under the arrangement regardless of whether they are the EU exporter. A certified exporter which is not a manufacturer may obtain a manufacturer identification number to gain from the benefits of mutual recognition. As such, AEO-certified manufacturers and exporters may benefit under the arrangement, but only US exporters are eligible for benefits.

Although the United States and the European Union have recently announced the possibility of a US-EU free trade agreement, this arrangement is a trade facilitation measure that companies may elect to participate in immediately, regardless of the results of potential free trade agreement negotiations.

The United States also has mutual recognition arrangements for supply chain security with Canada, Japan, Jordan, Korea, New Zealand and Taiwan. Source:  Sidley Austin LLP, and The International Law Office

Over 230 delegates representing WCO Members, the academic world, international organizations, the private sector, donor organizations and other interested parties attended the 7th WCO Conference on the Partnership in Customs Academic Research and Development (PICARD) hosted by the University of Cadi Ayyad in partnership with Morocco Customs and the WCO in Marrakesh, Morocco from 25-27 September 2012.

The Conference was co-chaired by Prof. Michael Wolffgang, University of Münster, and Prof. M’barek Benchanaa and Prof. Abdullah Ait Ouahman from the University of Cadi Ayyad. The Conference focused on three main topics: The Impact of Regional Economic Integration and Preferential Trade Arrangements on Customs Services; Emerging and Evolving Risks; and Customs Strategic Human Resource Management.

The WCO PICARD Programme was officially launched in 2006 to strengthen co-operation between the WCO, universities, and Customs human resources entities such as Customs Academies. The programme’s objective is to provide a platform where stakeholders can co-operate, collaborate, and contribute to two main pillars: (1) Customs professionalism and (2) Customs-related research.

Key PICARD achievements include adopting the PICARD Professional Standards for operational and strategic Customs managers; holding six successful PICARD Conferences; and publishing many Customs-related research papers in the World Customs Journal. Moreover, a growing number of universities have obtained WCO recognition of their Customs-related academic curriculums.

The PICARD Conference has become an annual meeting place for Customs officers, Customs human resource professionals, and academics to network and exchange ideas on Customs professionalism and Customs-related research. It is an opportunity for Customs academies and the WCO Regional Training Centres to glean new ideas on human resource development. At each conference, research papers are presented; this year, papers will be presented on regional economic integration, emerging and evolving risks, and human resource management.

The dearth in Customs expertise has become an international phenomenon, and South Africa is no exception. Locally based training organisation, GMLS, has been working with the University of Kwazulu Natal, Durban and UCT in Cape Town and in Durban specifically it is expected after council of Higher education approval next year that we will be offering a full masters Degree in Customs for the first time in South Africa as a MCom Customs and Excise, says GMLS CEO Mark Goodger. GMLS is a WCO E learning trainer, an ICC accredited trainer and an approved TETA (Transport Education Training Authority Trainer).

Mark was invited as a guest speaker to this year’s Picard Conference. He explained that the WCO arranged presentations to  stimulate discussions and guidance required from the WCO in the future. Along with South Africa, presentations were also delivered by Finland, Canadian and Moroccan Customs training experts in the results of research and the status in SADC countries of recognised accredited training frameworks which can be utilized by Customs worldwide. Whilst Customs administrations are implementing the Revised Kyoto Convention and the SAFE Framework it is clear that trade will need to follow the direction of future compliance as Customs leads forward into the 21st century.

U.S. Customs and Border Protection (CBP) and the European Union (EU) signed today a Mutual Recognition Decision between CBP’s Customs-Trade Partnership Against Terrorism (C-TPAT) program and the EU’s Authorized Economic Operator (AEO) program.

U.S. Customs and Border Protection Acting Commissioner David V. Aguilar and European Union Taxation and Customs Union Directorate Director-General Heinz Zourek sign the Mutual Recognition Decision between CBP’s Customs-Trade Partnership Against Terrorism program and the EU’s Authorized Economic Operator Program.

CBP Acting Commissioner David V. Aguilar and Director-General Heinz Zourek, European Union Taxation and Customs Union Directorate (TAXUD) signed the decision, which recognizes compatibility between the EU and the U.S. cargo security programs.

“Today’s decision on the mutual recognition of the EU and U.S. trade partnership programmes is a win-win achievement: It will save time and money for trusted operators on both sides of the Atlantic while it will allow customs authorities to concentrate their resources on risky consignments and better facilitate legitimate trade,” said Director-General Zourek.

C-TPAT is a voluntary government-business initiative to build cooperative relationships that strengthen and improve overall international supply chain and U.S. border security. C-TPAT recognized that U.S. Customs and Border Protection can provide the highest level of cargo security only through close cooperation with the ultimate owners of the international supply chain such as importers, carriers, consolidators, licensed customs brokers, and manufacturers. Source: US CBP

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SARS has issued its inaugural SARS Compliance Programme, a high-level overview of its plans for the next five years to further grow compliance with tax and customs legislation. More so than perhaps any other time in history, the current global economic conditions have thrust domestic resource mobilisation into the spotlight, highlighting sustainability built on a foundation of tax compliance. Countries lacking this solid base have found their room for manoeuvre in these uncertain times severely curtailed and, in some cases, completely absent. The impact of self-reliance on self-determination is self-evident.

Many tax administrations publish similar compliance programmes (including Australia, Brazil, Canada, Denmark, Netherlands, New Zealand, Poland, Spain, Sweden, Turkey, USA, UK) and SARS has based it’s Compliance Programme on their ground-breaking work. To download and read the SARS Compliance Programme, click here! For Customs specialists and trade practitioners no less than 3 priority areas involve Customs –

Illicit cigarettes: the trade in and consumption of illicit cigarettes is detrimental to the fiscus and to the health of South Africans. SARS interventions will continue to focus on clamping down on cigarettes smuggled via warehouses as well the diversion of cigarettes destined for export back into the local market. SARS also plans to modernise it’s warehousing management and acquittal system.

Undervaluation of imports in the clothing and textile industry: Undervalued imports pose a significant risk not only to the fiscus but to local industry and job creation. SARS will continue to work together with other government agencies and industry stakeholders to clamp down on this practice including through the establishment and frequent revision of a reference pricing database to detect undervaluation, increasing inspections as well as supporting an integrated border management model.

Tax Practitioners and Trader Intermediaries: Regulation of this industry will be pursued to ensure that tax practitioners and trade intermediaries are all persons of good standing, are fully tax compliant in their personal capacity and provide a high quality service and advice to their clients. SARS will also develop a rigorous risk profiling system to identify high risk practitioners and trade intermediaries.