Archives For Customs compliance

Mozambique flagThe Maputo Corridor Logistics Initiative (MCLI) recently published a communication informing it’s stakeholders about the Single Road Cargo Manifest as received from the Mozambican Revenue Authority (MRA).

The MRA has informed MCLI that the 2nd phase of the Single Road Cargo Manifest process will come into effect from the 16th of June 2017, when all international road carriers transporting goods to Mozambique through the Ressano Garcia border post will be required to submit the Road Cargo Manifest on the Single Electronic Window platform in compliance with national and international legislation. MRA Service Order Nr 17/AT/DGA/2017, in both Portuguese and English, is attached for your consideration.

For information and full compliance by all members of staff of this service, both (National and Foreign) International Cargo Carriers, Clearing Agents, Business Community, Intertek and other relevant stakeholders, within the framework of the ongoing measures with a view to adequate procedures related to the submission of the road cargo manifest, for goods imported through the Ressano Garcia Border Post, in strict compliance to both the national and international legislations, it is hereby announced that, the pilot process for transfer of competencies in preparation and submission of the road cargo manifest to Customs from the importer represented by his respective Clearing Agent to the Carrier is in operation since December 2016.

Indeed, the massification process will take place from 15th of April 2017 to 15th of June 2017, a period during which all international carriers (national and foreign) who use the Ressano Garcia Border, are by this means notified to register themselves for the aforementioned purposes following the procedures attached herewith to the present Service Order.

As of 16th of June 2017, the submission of the road cargo manifest into the Single Electronic Window (SEW) for the import regime, at Ressano Garcia Border, shall be compulsory and must be done by the carrier himself.

International road carriers must therefore register for a NUIT number with the Mozambican Revenue Authority between the 15th of April and the 15th of June 2017 and the necessary application form is included. Road carriers are urged to do so as soon as possible to enable the continued smooth flow of goods through the border post.

Specific details can be found here! 

Source: MCLI

China Customs EmblemAudit firm KPMG reports that the General Administration of Customs (GAC) will reform the existing customs clearance procedure for imported goods, according to a GAC Circular on Carrying out Pilot Reform of Tax Collection and Administration Procedure issued on 29 October 2016. Under the current procedure, review of the customs declaration is required before goods are released. This reform is designed to further guide import and export enterprises to be self-disciplined and law-abiding, with the principle stated as “honesty and observance of the law brings convenience; dishonesty and irregularity leads to punishment” to improve customs clearance efficiency.

Content of pilot reform  includes the following elements:

Independent customs declaration and tax payment – when importing goods, enterprises should submit customs declarations truthfully and accurately in advance, calculate tax payable and surcharges and handle payment-related procedures on their own.

Review of elements relating to tax calculation after release of goods  – generally, goods will be released after enterprises complete the customs declarations and tax payment procedures on their own. Afterwards, the customs authority will spot-check and review the valuation, classification and origin of the imported goods of the enterprises. In special cases, the authority will inspect the customs declaration in advance.

Proactive disclosure scheme After release of goods – enterprises are encouraged to report to the authorities in writing if they are aware of any of their own violations against customs regulations. Enterprises which the customs authority believes to be voluntary disclosers of their own irregularities will be less punished or free from punishment. For enterprises which have disclosed their irregularities and paid back taxes proactively, late fees can be reduced or eliminated.

For more details access the KPMG report here! Source: KPMG

sars-edi-user-manualSARS has been operating Electronic Data Interchange (EDI) with its external stakeholders since 2001. More than 98% of all customs declaration (CUSDEC) transactions are today submitted electronically to Customs and the electronic submission of multimodal cargo reports (CUSCAR) is steadily increasing. Today, declaration processing is fully electronic end-to-end thanks to the availability of highly established EDI and Customs software service providers supporting the local customs and logistics community. SARS has also recently introduced a benefit for compliant cargo reporters who will be absolved of certain manual (paper) submission requirements once they attain an acceptable level of electronic submission compliance and data accuracy.

The ultimate objective is to ensure that all Customs-to-Business (C2B) transactions are electronic to enable full supply chain connectivity between the South African business community and Customs. This in turn enables the possibility of SARS accrediting or approving ‘supply chains’ as opposed to just individual trader segments (importers and exporters). The extent of electronic compliance is also a pivotal requirement for traders operating under the new Customs Control Act, to be enacted in the future.

SARS overall EDI capability extends further than declarations and cargo reports. In recent years Customs-to-Government (C2G) messaging has also been successfully established between SARS and the Department of Trade and Industry (dti) as well as the South African Reserve Bank (SARB). SARS is also engaging other government stakeholders concerning IT connectivity and data exchange.

Moreover, developments for cross-border Customs-to-Customs (C2C) data exchange are also in the pipeline and could come to fruition with the partner administrations in Mozambique and Swaziland in the foreseeable future. These initiatives will usher in increased supply chain connectivity through active use of the Unique Consignment Reference (UCR) between participating customs administrations. The ultimate objective here is the creation of mutual recognition benefits for local and cross-border traders based on their accreditation status agreed between the participating customs administrations.

The SARS Electronic Data Interchange (EDI) Manual (which can be downloaded from the SARS EDI webpage) has been updated with the latest versions of SARS Edifact Data Mapping Guides as well as improved diagrams explaining the functional composition of the various electronic messages specified for Customs processing. Also included are the requirements for registering as an EDI user with SARS.

The manual includes recent updates relating to cargo reporting (manifests) as well as the updated customs declaration message incorporating recent inclusion of customs surety, penalty and forfeiture requirements. The latter enhancement removes another document based requirement (the Form DA70 Provisional Payment) for Customs Brokers with the view streamlining data requirements, enhancing customs billing and customs status reporting with the trade and logistics community. This EDI Manual will be an important document over the coming months and years in that it will feature updated electronic requirements in support of the new Customs Control Act. Watch this space!

customs-taxThe “Guidelines for strengthening cooperation and exchange of information between Customs and Tax authorities at the national level” have been formulated with the support of WCO Members and development partners, especially the Organisation for Economic Co-operation and Development (OECD) and the International Chamber of Commerce (ICC). The Guidelines aim to provide reference guidance to Customs and Tax authorities who wish to go further in their cooperation and develop operational models which enable agencies to work together to their mutual benefit.

Although there is no limit to the ways in which these two agencies can work together, and countries should consider new and innovative methods based on their organizational structure, needs and operational requirements, the Guidelines highlight some overarching principles and associated benefits concerning enhancement of Customs-Tax cooperation.

The WCO Guidelines for Strengthening Cooperation and the Exchange Of Information between Customs and Tax Authorities at the National Level are intended to supplement the ongoing initiatives in this domain. The aim is to provide general, overarching principles for cooperation which take account of operational considerations, bearing in mind the different organizational structures and national requirements of countries. It is expected that these Guidelines will be useful to Member Customs administrations in developing a sustainable cooperation mechanism (including a MoU where needed) tailored to their unique situation, in close cooperation with their respective Tax authorities

In particular, the Guidelines provide a comprehensive overview of the enablers for mutual cooperation and the exchange of information, address the scope and remit of information exchange, cover different information exchange mechanisms, list the type of activities that Customs and Tax authorities may undertake together, and provide key principles and points to consider when developing a Memorandum of Understanding/Agreement (MOU/MOA). 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

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ZIMRA AEOFollowing an invitation from Zimbabwe Revenue Authority (ZIMRA), WCO successfully completed a review of Zimbabwe’s Authorized Economic Operator (AEO) pilot and developed a series of recommendations for a “next generation” AEO programme that takes into account the WCO SAFE Framework of Standards, the WCO Voluntary Compliance Framework and best practices from other WCO members, as outlined in the WCO AEO Compendium. The mission, which took place between July 18 and 22, built on the March 2016 Mercator scoping mission, which established a multi-year framework of support for Zimbabwe under the tailor-made track of the Mercator Programme and was delivered with the financial and technical support of Her Majesty’s Revenue and Customs (HMRC).

A total of 20 representatives from ZIMRA and 15 trade representatives, participated in a facilitated dialogue which provided the mission team with a comprehensive overview of ZIMRAs’ current AEO programme, while raising awareness and understanding of relevant international standards and best practices. Based on the review, the mission team identified a series of future capacity building activities and deliverables, which can be supported under the current multi-year Mercator Programme engagement with Zimbabwe. The WCO looks forward to continued collaboration with ZIMRA and HMRC and UNCTAD in the implementation of this plan. Source: WCO

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

New WCO InstrumentAn important new instrument was finalised at the 42nd Session of the Technical Committee on Customs Valuation which took place in Brussels from 18 to 22 April 2016 under the Chairmanship of Ms. Yuliya Gulis of the United States.

The instrument contains a case study illustrating a scenario where Customs took into account transfer pricing information in the course of verifying the Customs value.

The WTO Valuation Agreement sets out the methodology for establishing the Customs value, used as the basis for calculating Customs duties. The Agreement foresees that Customs may examine transactions between related parties where they have doubts that the price has been influenced by the relationship.

The Organisation for Economic Cooperation and Development (OECD) has developed Guidelines for establishing the transfer price, that is the price for goods and services sold between controlled or related legal entities, in order to determine business profit taxes where businesses are related.

Over recent years, the similar objectives but different methodologies of transfer pricing and Customs valuation have been noted, and it has been recognised that business documentation developed for transfer pricing purposes may contain useful information for Customs. An earlier instrument of the Technical Committee, Commentary 23.1, confirmed this principle.

The new case study provides an example of Customs making use of transfer pricing information based on the transactional net margin method. On the basis of this information, Customs accepted that the sale price in question had not been influenced by the relationship.

The OECD has provided valuable input to the Technical Committee discussions in the development of the new instrument which provides helpful guidance to both Customs administrations and the business community.

Both the WCO and the OECD advocate closer cooperation between Customs and tax administrations in order to strengthen governments’ ability to identify the correct tax and duties legally due and enhance trade facilitation for the compliant business sector.

WCO Secretary General, Mr. Kunio Mikuriya, has congratulated the Technical Committee on the work achieved : “This new instrument is an important step for the WCO and demonstrates its relevance by providing guidance on the management of Customs valuation in an increasingly complex trade landscape, whilst maintaining consistency and strengthening cooperation with Tax authorities.”

The case study (Case Study 14.1) will be made available in the WCO Valuation Compendium, subject to approval by the WCO Council in July 2016.

Further information on this topic can be found in the WCO Guide to Customs Valuation and Transfer Pricing, available via this link

RWG-terminalRotterdam World Gateway says it is the first deep sea container terminal with minimal customs presence in the European Union. Ronald Lugthart, Managing Director of Rotterdam World Gateway,has received the definitive customs permit and AEO certificate for RWG, handed over by Anneke van den Breemer, Regional Director of customs at the port of Rotterdam.

Lugthart said: “Due to the high degree of automation at RWG, the introduction of a 100% pre-announcement procedure for containers and cargo via Portbase and the implementation of simplified customs procedures, over 95% of the administrative process is now completely digitised.

“This means that the administrative process can operate independently of the logistic process at the terminal, enabling fast and reliable handling.”Anneke van den Breemer commented: “As Dutch customs, our goal is to minimise any disruption to the logistic process caused by the required customs formalities. RWG and customs have recently been collaborating intensively.

“At the RWG terminal, optimal use is now being made of the simplified customs procedures. This is in the best interest of all parties: not just of the terminal and customs, but of freight forwarders and hauliers as well.”

By applying these simplified customs procedures, RWG is able to implement a fully automated gate process for road hauliers. This has great benefits for hauliers because no physical customs handling has to take place at the RWG terminal and thus no stop has to be made.

RWG adds that it is the first terminal in the port of Rotterdam to act as an Authorised Consignee, which means the customs transit will be automatically ended upon arrival at the terminal. This gives parties involved extra assurance that this transit has been cleared properly.

In addition to simplified customs procedures, constructive cooperation between customs and RWG has resulted in the establishment of a new scanning facility that is fully integrated into the terminal’s automated logistic process and operates 24/7.

Furthermore, nuclear radiation detection takes place for all truck and rail handling, and a high percentage of the containers arriving and departing by barge will be inspected as well.  Source: WorldCargoNews

ZIMRAaaaaaaaThe implementation of the Government’s new pre-shipment regulations under the Consignment Based Conformity Assessment (CBCA) programme (essentially a fancy term for plain old pre-shipment inspection – who they trying to fool?) took off with host of challenges last Tuesday. The new regulations that were gazetted into law on 18 December last year and requires that goods be tested for conformity with required standards prior importation into Zimbabwe, went into operation on 1 March.

Government introduced the programme with the view to reduce hazardous and substandard imported products and improve customs duty collection. Bureau Veritas has been appointed by the Ministry of Industry and Commerce for the verification and the assessment of conformity of goods in exporting countries.

The new developments have seen cargo piling up on the South African side of the border with most importers failing to produce the required transitional certificate of conformity. The Shipping and Forwarding Agents Association of Zimbabwe (SFAAZ) chief executive officer, Mr Joseph Musariri, called on the government to waive the implementation of the CBCA on goods that were shipped before it became operational.

“You will note that the Zimbabwe Revenue Authority (Zimra) has failed to enforce the regulations since 18 December last year only to try and implement it this week (last week) and that has resulted in a chaotic situation.

“It is sad that cargo is piling up at Beitbridge border post where most importers are having challenges in acquiring the transitional CBCA certificates,” he said.

Mr Musariri said the government introduced the idea on 27 July last year but could not implement it since there was no legislation to that effect.

He said under the new dispensation all products regulated by the Ministry of Industry and Commerce of Zimbabwe exported into Zimbabwe must be accompanied by a CBCA certificate.

“The categories of goods regulated under the programme include the following: food and agriculture, building and civil engineering, petroleum and fuels , packaging material, electrical/electronic products, body care, automotive and transportation , clothing and textile and toys,” he said.

Mr Musariri said Zimra was now refusing to clear goods without the CBCA certificate and requesting for the conformity certificates.

“They are telling those importers to contact the nearest offices for Bureau Veritas for inspections and issuance of the requisite certificates.

“Locally destined cargo which is being shipped from various overseas markets is the worst affected and importers are incurring daily demurrage expenses of between $250 and $5000.

“In some cases duties had been paid to Zimra but now they are singing a different song,” he said.

The Minister of Industry and Commerce, Mr Mike Bimha, could not be reached for comment.

Bureau VERITAS liaison officer for Zimbabwe, Mr Tendai Malunga, said his organisation was ready for the implementation of the CBCA programme.

“We have trained various stakeholders on the new programme and are ready to roll.

“Furthermore we have hired more staff in most countries to conduct inspections and various conformity tests on the various countries exporting goods to Zimbabwe,” he said.
Source: The Herald (Zimbabwe)

WCO - Technical Guidelines on Advance Rulings for Classification, Origin and ValuationThe World Customs Organization (WCO) has made the “Technical Guidelines on Advance Rulings for Classification, Origin and Valuation” publicly available. These guidelines were developed in order to support the implementation of Article 3 (Advance rulings) of the Bali Ministerial Decision on the Agreement on Trade Facilitation (TFA) and shared only among the WCO Members.

The purpose of publishing this document is to further enhance the transparency of the WCO’s work in this area as well as to provide additional information to any interested party. The Technical Guidelines are available here. Source: WCO

The WCO, in its effort to assist Members with Strategic Planning activities and WTO TFA implementation held two back to back accreditation workshops in Pretoria, South Africa. These events were held during the week of 1-5 February 2016 and 8-12 February 2016, were funded by the United Kingdom within the framework of the WCO-DFID ESA project and HMRC-WCO-UNCTAD project and organizationally supported by the South African Revenue Service.

24Customs officers from the WCO ESA and WCA regions participated in the workshops and were assessed against the Customs Modernization Advisors (CMAs) and Mercator Programme Advisors (MPAs) required profile through a series of testing exercises, presentations, role-plays, group activities and plenary discussions.

Participants were also required to demonstrate their knowledge and strategic application of core WCO tools and instruments and the WTO Trade Facilitation Agreement along with their potential to facilitate discussions with senior Customs and other officials in a strategic context.

At these two events 15 participants successfully completed step 1 of the accreditation process as they demonstrated their potential to become CMA’s/MPA’s during the range of workshop activities.

From the five WCO CMA/MPA accreditation events held to date a total of 41 participants have been assessed as being suitable to become CMAs and MPAs under step 1 of the accreditation process and will be invited to participate in TFA implementation support missions under the Mercator Programme in order to complete the accreditation process. It is expected that the successful candidates are made available by their Customs administrations for further support missions in the future. Source: WCO

AfricaFrom time to time it is nice to reflect on a good news story within the local customs and logistics industry. Freight & Trade Weekly’s (2015.11.06, page 4) article – “SA will be base for development of single customs platform” provides such a basis for reflection. The article reports on the recent merger of freight industry IT service providers Compu-Clearing and Core Freight and their plans to establish a robust and agile IT solution for trade on the African sub-continent.

In recent years local software development companies have facilitated most of the IT changes emerging from the Customs Modernisation Programme. Service Providers also known as computer bureaus have been in existence as far back as the early 1980’s when Customs introduced its first automated system ‘CAPE’. They have followed and influenced Customs developments that have resulted in the modern computerised and electronic communication platforms we have today. For those who do not know there are today at least 20 such service providers bringing a variety of software solutions to the market. Several of these provide a whole lot more than just customs software, offering solutions for warehousing, logistics and more. As the FTW article suggests, ongoing demands by trade customers and the ever-evolving technology space means that these software solutions will offer even greater customization, functionality, integration and ease of use for customers.

What is also clear is that these companies are no longer pure software development houses. While compliance with Customs law applies to specific parties required to registered and/or licensed for Customs purposes, the terrain on which the software company plays has become vital to enable these licensees or registrants the ‘ability to comply’ within the modern digital environment. This means that Service Providers need to have more than just IT skills, most importantly a better understanding of the laws affecting their customers – the importers, exporters, Customs brokers, freight forwarders, warehouse operators, etc.

Under the new Customs Control Act, for instance, the sheer level of compliance – subject to punitive measures in the fullness of time – will compel Service Providers to have a keen understanding of both the ‘letter of the law’ as well as the ability to translate this into user-friendly solutions that will provide comfort to their customers. Comfort to the extent that Customs registrants and licensees will have confidence that their preferred software solutions not only provide the tools for trading, but also the means for compliance of the law. Then, there is also the matter of scalability of these solutions to keep pace with ongoing local, regional and global supply chain demands.

The recent Customs Modernisation Programme realised significant technological advances with associated benefits for both SARS and trade alike. For the customs and shipping industry quantification of these benefits probably lies more in ‘improved convenience’ and ‘speed’ of the customer’s interaction with SARS than cost-savings itself. My next installment on this subject will consider the question of cross-border trade and how modern customs systems can influence and lead to increased regional trade.

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

CBP logoU.S. Customs and Border Protection (CBP) published a Federal Register Notice inviting U.S. exporters to request CBP’s assistance in resolving disputes with foreign customs agencies over the tariff classification or customs valuation of U.S. exports. CBP explains that it is willing to assist U.S. exporters with these disputes under the auspices of the World Customs Organization (WCO). CBP is very active at the WCO and regularly participates in meetings concerning the application of the Harmonized Commodity Description and Coding System (HS System) and the World Trade Organization’s (WTO) Customs Valuation Agreement (CVA). According to CBP, this process was helpful in providing a successful outcome for clients who disputed a foreign customs agency’s classification of imported goods.

Tariff Classification
CBP represents the United States at meetings under the auspices of the International Convention on the Harmonized Commodity Description and Coding System (“HS Convention”). The HS Convention is the international agreement that provides that WCO Members will implement the HS System and comply with decisions of the various committees organized under the convention. CBP attends semiannual meetings of the WCO’s Harmonized System Committee (HSC), where contracting parties to the HS Convention examine policy matters, make decisions on classification questions, settle disputes, and prepare amendments to the HS System and its Explanatory Notes.

Article 10 of the HS Convention governs disputes between contracting parties concerning the interpretation or application of the HS Convention. The article provides that parties with potential disputes should first try to settle the dispute through bilateral negotiations. If such negotiation cannot resolve the dispute, the parties may refer the dispute to the HSC for its consideration and recommendations. The HSC, in turn, refers irreconcilable disputes to the WCO Council for its recommendations.

Customs Valuation
CBP represents the United States at the WCO with respect to issues arising under the CVA. Pursuant to Annex II to the CVA, the WCO’s Technical Committee on Customs Valuation (TCCV) is authorized to examine specific problems arising from the customs valuation systems of WTO Members. The TCCV is responsible for examining the administration of the CVA, providing WTO Members with advisory opinions regarding particular customs valuation issues, and issuing commentaries or explanatory notes regarding the CVA. Like the HSC, the TCCV may get involved in disputes amongst foreign customs agencies. CBP stands willing to help U.S. exporters with these disputes. This process may provide U.S. exporters with a faster procedure to resolve disputes than a typical WTO dispute.

CBP’s Role at the WCO May Resolve Export Issues for U.S. Exporters
CBP states in the notice that its communication with other customs administrations through the meetings of the HSC and TCCV at the WCO can “often serve to eliminate or resolve export issues for U.S. traders.” As an example, in 2014, a U.S. exporter notified CBP of a foreign customs administration’s misclassification of its textile exports. The U.S. exporter requested that pursuant to Article 10 of the HS Convention, CBP (1) contact the foreign customs administration to resolve the tariff classification dispute; and (2) refer the matter to the HSC at the WCO, if it could not be resolved bilaterally. After confirming it agreed with the U.S. exporter’s position, CBP engaged the foreign customs administration directly. Within seven months of the exporter’s request, CBP secured a favorable decision by the foreign customs administration to classify the merchandise in a manner consistent with the U.S. position. Consequently, the U.S. exporter obtained correct tariff treatment of its imported merchandise in the foreign country as a result of CBP’s engagement.

Source: http://www.internationaltradecomplianceupdate.com/