Category / Customs

by Mike Poverello

Nigerian Customs – a paramilitary display

Ports.co.za reports that Nigerian Customs Service has signed an agreement for the delivery of two 24 metre P249 patrol craft, which will use them to combat smuggling and piracy.The supplier is a Cape Town based outfit called Kobus Naval Design (KND). In the context of intra-Africa trade this deal should be considered a real scoop. Kobus Potgieter, CEO of Kobus Naval Design (KND), confirmed that his company had received the order and would deliver the vessels in ten months’ time. The aluminium vessels will be built in Cape Town. This will be the sixth KND designed vessel in the Nigerian waters delivered over the last couple of years. The company is also busy with a dive boat contract for the oil and gas industry in Nigeria.

Nigeria’s Federal Executive Council (FEC) also recently approved N1.7 billion (US$11 million) for the purchase of a Cessna Citation CJ4 aircraft for the Customs Service. The aircraft would be used for surveillance missions along Nigeria’s borders and would help combat economic sabotage and cross-border crimes. Alhaji Mohammed Dikko, the Comptroller-General of the Nigerian Customs Service, said that his agency had already acquired the helicopters for surveillance of Nigeria’s borders and added that President Goodluck Jonathan had approved the purchase of 400 Toyota Hilux vehicles for border patrol.

Border control is an increasingly important issue in Nigeria. Militant groups in the oil-producing Niger Delta have been illegally supplying weapons for years and Boko Haram is also believed to have received illegal arms, raising questions about border surveillance, especially after reports that weapons looted from Libya have turned up in Nigeria. Source: Ports.co.za and Defenceweb.co.za

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by Mike Poverello

A study in Corruption and Firm Behavior

Extensive literature argues that reducing trade costs can substantially increase income and improve welfare in trading countries, particularly in the developing world where these costs are highest. In 2007, a shipping a container from a firm located in the main city of the average country in Sub-Saharan Africa was still twice as expensive, and six times more time-consuming, than shipping it from the US. It was also twice as expensive and just as time-consuming as shipping a similar container from India or Brazil, according to the World Bank. As a result, a significant portion of international aid efforts has in recent years been channeled to reducing trade costs and improving logistics in the developing world. Evidence is growing on how corruption in transport networks can significantly increase the cost of moving goods across borders.

A recent paper “Corruption and Firm Behaviour” investigates how different types of corruption affect company behavior. Firms can face two types of corruption when seeking a public service: cost-reducing, “collusive” corruption and cost-increasing “coercive” corruption. Using an original and unusually rich dataset on bribe payments at ports matched to firm-level data, the authors observe how firms respond to each type of corruption by adjusting their shipping and sourcing strategies. Cost-reducing “collusive” corruption is associated with higher usage of the corrupt port, while cost-increasing “coercive” corruption is associated with reduced demand for port services. Data suggests that firms respond to the opportunities and challenges created by different types of corruption, organizing production in a way that increases or decreases demand for the public service. This can have important implications for how we identify and measure the overall impact of corruption on economic activity. The data further allows us to understand the bribe setting behavior of different types of public officials with implications for the design of anti-corruption strategies.

In our setup, firms have the choice to ship through two ports: Maputo in Mozambique, and Durban in South Africa. The majority of firms in our sample are equidistant to both ports while a subset of firms will be significantly closer to the more corrupt port of Maputo. Survey data revealed that the choice of port is driven primarily by the interaction between transport and corruption costs at each port. Transport costs are linear to the distance between each rm and the ports, while corruption costs are determined by the type of product the firm ships. Our main measure of the distortion caused by corruption is how rms shipping products that are more vulnerable to corruption will opt to go the long way around to avoid a closer, but more corrupt port. We also nd suggestive correlations between the level and type of corruption rms face at each port, which directly affects the cost of using port services, and firms’ decision to source inputs from domestic or international markets.

Source: Corruption and Firm Behavior (December 2011) by Sandra Sequeira and Simeon Djankov.

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by Mike Poverello

Trade costs and corruption in Ports of Durban and Maputo

Recent years have brought an increased awareness of the importance of trade costs in hindering trade, particularly in the developing world where these costs are highest, says a report in the latest edition of Port Technology. The most salient type of trade costs have often been tariff duties and costs associated with the physical transportation of goods. As a result, several countries embarked on extensive programmes of tariff liberalisation and a significant portion of aid effort was channelled to investments in hard transport infrastructure, such as rebuilding railways and ports (the World Bank alone devotes more than 20 percent of its budget to transport infrastructure projects worldwide).

More recently, new light has been cast on the importance of a different type of trade cost: the cost imposed by the soft infrastructure of transport, defined as the bureaucratic infrastructure handling the movement of goods across borders. While there are many possible sources of inefficiencies stemming from the soft infrastructure of transport, recent research is beginning to document the role played by corruption in transport bureaucracies in driving trade costs. This article provides an overview of this research.

Research into corruption

Corruption can take many forms and emerge in many different phases of the process of clearing goods across borders. Sequeira and Djankov (2011) documented in great detail the ways in which port corruption emerges in Durban and Maputo in Southern Africa – this report is featured in my next post. This research was based on a unique dataset of directly observed bribe payments to each port bureaucracy for a random sample of 1,300 shipments.

The study began by defining two broad categories of port officials that differed in their administrative authority and in their discretion to stop cargo and generate opportunities for bribe extraction: customs officials and port operators. In principle, customs officials hold greater discretionary power to extract bribes than regular port operators, given their broader bureaucratic mandate and the fact that they can access full information on each shipment, and each shipper, at all times. Customs officials possess discretionary power to singlehandedly decide which cargo to stop and whether to reassess the classification of goods for tariff purposes, validate reported prices of goods, or request additional documentation from the shipper.

Regular port operators, on the other hand, have a narrower mandate to move or protect cargo on the docks, and at times even lack access to the cargo’s documentation specifying the value of the cargo and the client firm. This category of officials includes those receiving bribes to adjust reefer temperatures for refrigerated cargo stationed at the port; port gate officials who determine the acceptance of late cargo arrivals; stevedores who auction off forklifts and equipment on the docks; document clerks who stamp import, export and transit documentation for submission to customs; port security who oversee high value cargo vulnerable to theft; shipping planners who auction off priority slots in shipping vessels, and scanner agents who move cargo through non- intrusive scanning technology.

The organisational structure of each port created different opportunities for each type of port official to extract bribes: the high extractive types -customs agents- or the low extractive types -port operators. These opportunities were determined by the extent of face to face interactions between customs officials and clearing agents, the type of management overseeing port operations, and the time horizons of each type of official.

Durban and Maputo

In Durban, direct interaction between clearing agents and customs’ agents was kept to a minimum since all clearance documentation was processed online. In contrast, all clearance documentation was submitted in person by the clearing agent in the Port of Maputo. The close interaction between clearing agents and customs officials in Maputo created more opportunities for corrupt behaviour to emerge in customs relative to Durban.

In Maputo, port operators were privately managed but in Durban, most terminals (for containerised cargo) were under public control, with very lax monitoring and punishment strategies for those engaging in corrupt behaviour. Private management in Maputo was associated with fewer opportunities for bribe payments due to better monitoring and stricter punishment for misconduct. As a result, the organisational features of each bureaucracy determined that the high extractive types in customs had more opportunities to extract bribes in Maputo, while the low extractive types in port operations had more opportunities to extract bribes in Durban. While corruption levels were high in both ports, bribes were higher and more frequent in Maputo relative to Durban.

Finally, port officials with opportunities to extract bribes at each port differed in their time horizons. Customs in Maputo adopted a policy of frequently rotating agents across different terminals and ports, and since bribes varied significantly by the type of terminal at the port, customs agents were aware of the risk of being assigned to terminals with lower levels of extractive potential. On the other hand, port operators in Durban had extended time horizons given the stable support received from dock workers’ unions. Customs officials were therefore the high extractive types with the shortest time horizons, the broadest bureaucratic mandates and more opportunities to interact face to face with clearing agents. As a result, they extracted higher and more frequent bribes, relative to port operators in Durban (the low extractive types) who had longer time horizons and narrower bureaucratic mandates. Source: Port Technology.

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by Mike Poverello

Making X-ray scanning safer

Given recent public outcry regarding airport passenger scanning, I found this scientific report which provides very sensible recommendations in regard to X-ray scanning of vehicle borne commercial cargoes. A recent study commissioned by Economic Commission for Europe provides some key recommendations to ensure improved safety of scanner operators and vehicle drivers. The protection of drivers against sickness and injury arising from their work activities is an important matter, and how to manage the hazards and risks associated with transport activities which are unavoidably connected to the possible exposure of employees to ionising radiation whilst undergoing the cargo/vehicle scanning process was a key question of the study.

Ensuring maximum safety precautions, all stakeholders have a role in enhancing the radiation protection culture within the road transport sector. As it is clear that drivers included in this study are not regarded as occupationally exposed to ionising radiation, the study recommends the following to Customs and Border agencies:

  • Install appropriate information panels, which include pictograms, highlighting that x-ray scanning is being performed and giving clear indications on what the driver should do to avoid unnecessary exposure;
  • At concerned border crossings, make available multi-lingual information leaflets, including pictograms, which describe the x-ray process, risks and safety information;
  • Develop and introduce a mutually recognised x-ray scanning certificate to prevent repeated scanning and thus facilitating and accelerating the control process;
  • Ensure, with the support of the International Atomic Energy Agency (IAEA), the European Commission (EC), the International Labour Organization (ILO) and the World Customs Organization (WCO), the correct implementation of internationally accepted x-ray scanning procedures;
  • Ensure that customs officers and x-ray equipment operators are properly trained on the functioning and risks of x-ray scanning machines enabling them to operate the equipment safely and give adequate safety instructions to drivers; and
  • In cooperation with x-ray machine manufactures, to ensure that x-ray equipment is properly maintained.

Source: UNECE – Scientific Study on External Ionising Radiation Exposure during Cargo / Vehicle Radiographic Inspections

by Mike Poverello

Nigeria – Single Window initiative back on track

After much controversy centering on allegations of corruption and impropriety, the Federal Government terminated the contract awarded to Single Window Systems and Technology Limited. The contract which allowed for a sole submission point for importers and exporters to lodge their documentation was unilaterally awarded by the Federal Ministry of Finance, under the Umaru Yar Adua administration, on behalf of the Nigeria Customs Service to the company registered in June 2010 with N 1m share capital.

The contract was reported to be worth N 4.5 trillion. The decision to discontinue the contract was based on an investigation by the Ministry of Finance which looked into the processes and the terms of the contract. The investigation which was approved by the President revealed that the contract breached the provisions of both the Procurement Act and the ICRC Act. Nigerian Customs received a letter of notification from the supervisory of the ministry of finance that a concession agreement had been entered between the Federal government and the Single Window System Technologies Limited, so where did the customs come into play before the contract was signed?”

Nigeria Customs Service had earlier said on the controversy, “How can a company enter such an agreement without the knowledge of the Nigeria Customs Service?” The Customs was not involved in the execution of the agreement entered by the Federal Ministry of Finance through the Former Honourable Minister of Finance; Olusegun Aganga. Therefore Nigerian Customs was not carried along by the company called Single Window System Technologies Limited. The tender was scuppered.

Recently, the Nigerian Customs Service convened a Single Window National Stakeholder Conference under the slogan – “Collaboration -Towards a Facilitated Trade Environment”. The conference and workshop took place between 23 and 26 April 2012, and was attended by several local and international delegates representing UNECE, UN/CEFACT, and donor companies German Development Company (GIZ), USAID and Crown Agents. Details concerning the launch of this event can be accessed via the following links – Conference Website and Conference Summary Report.

Comment: So what started on shaky ground has finally materialised into a fully-fledged Customs-led programme – the way it should be, and hopefully remain. Moreover, trade representatives and intermediaries will need to be an integral part of this development for it to attain success.

Source: Business News Nigeria and Valentina Mintah (Trade Facilitation Consultant).

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by Mike Poverello

Hong Kong Customs Moves Forward With E-Lock Plans

The Hong Kong Customs and Excise Department (C&ED) reports that RFID-based container locks can effectively improve the security, convenience and visibility of the customs process for cargo entering the airport. In November 2011, C&ED began testing three types of electronic locks (e-locks) in order to speed up the process of performing customs checks on containers filled with cargo. The solution, known as the Intermodal Transhipment Facilitation Scheme (ITFS), was implemented as a way to streamline the clearance of cargo passing through customs at Hong Kong International Airport for cargo destined for areas both domestic and outside of Hong Kong. The installation and consulting services were provided by the Hong Kong R&D Center for Logistics and Supply Chain Management Enabling Technologies (LSCM), according to Frank Tong, LSCM’s director of research and technology development.

An electronic lock with an active RFID tag is being used to secure freight passing through
customs and Hong Kong International Airport, ensuring that the cargo remains tamper-free,
while also expediting the clearance process.

The Hong Kong C&ED estimates that the system reduces the amount of time required for clearing each container through customs, from two to three hours down to five minutes, since customs officials can now be assured that the containers have not been opened between their inspection at the border control point and their arrival at the airport. What’s more, the agency can now collect a digital record of where each container has been, along with when it was inspected.

Cargo is loaded into freight containers or directly onto trucks—such as those operated by United Parcel Service (UPS)—in Mainland China, and is then transported to a customs control point located at the border with Hong Kong, where C&ED officials inspect the cargo and clear it for entry into Hong Kong. Following that clearance, the shipment continues on to Hong Kong International Airport’s cargo terminal, where the goods are unloaded from the container or vehicle, and are placed into an air cargo container. Once this has occurred, the cargo is moved through another customs control point at the airport, where C&ED again inspects and approves or rejects its passage.

To speed up this process, the R&D Center implemented the use of an e-lock for the customs agency, consisting of a physical lock activated by a built-in active RFID tag, designed to receive a transmission from an RFID reader that allows the lock to be opened or closed. Three types of e-locks are currently being used, provided by three different vendors: Long Sun Logistics Development Ltd, CIMC Intelligent Technology Co. and CelluWare Research Laboratory. Each of the three products employs a different frequency—433 MHz, 315 MHz and 2.4 GHz—but all comply with the ISO 17712 standard for mechanical seals designed for freight containers.

LSCM has installed fixed RFID readers (provided by the three e-lock vendors) at two border control points—Lok Ma Chau and Shenzhen Bay—as well as at Hong Kong International Airport. When a shipment first arrives at either border control point, C&ED’s staff attaches an e-lock, reads the ID number encoded on its built-in RFID tag via a handheld reader, and links that ID with the vehicle registration number of the truck transporting the container. The transporting company must pre-register each vehicle with the Hong Kong C&ED prior to its arrival; the truck’s ID number is listed in the agency’s database, and the customs official can confirm that the vehicle is, in fact, the one expected.

That data, along with the specific cargo being transported, is then stored on the Hong Kong C&ED’s integrated tracking software platform, developed by LSCM, which collects and processes the data and then displays it for customs officials when necessary. The system stores the e-lock ID number linked to the vehicle ID, and transmits instructions to the e-lock, along with a password, thereby causing it to lock. The device also requires a physical key, which remains in the driver’s possession. In this way, two actions must be completed before the container or vehicle can be unlocked: The e-lock must be electronically unlocked via a password from a customs official, and the driver must use a key to physically open the padlock.

The shipment is then transported approximately 42 kilometers (26 miles) to the airport. The e-lock comes with a built-in GPS device that tracks the vehicle’s location as it moves. In that way, the e-lock stores a record of where the vehicle has been. When the lock is later read at the airport, the back-end software compares the actual GPS data against the container’s expected route. The system can issue alerts in circumstances in which an e-lock is found to have lost a GPS signal, or, based on GPS data, the truck appears to have deviated from the intended route.

At Hong Kong International Airport, a C&ED official either selects the container for inspection, or simply instructs the system to issue an unlocking command with the matching password; the container is then brought to a site where the cargo is removed and then loaded onto an aircraft, says Steve Wai-chiu Chan, a C&ED special duties officer. If the container is selected for inspection, the e-lock remains locked. In this scenario, a truck driver would be instructed to await a C&ED officer, and would be unable to unlock the container without providing the proper password. The C&ED officer, upon arrival, would then use a handheld device to read the e-lock, instructing it to unlock by providing the necessary password.

LSCM installed a total of 38 readers at the two land border control points, five logistic hubs at the airport and a marine control point known as the Kwai Chung Customhouse, for items arriving by sea (at the Marine Cargo Terminal located at the airport). Altogether, by February of this year, 109 containers had been equipped with the e-lock device. An average of 100,000 consignments pass through the border daily, and the ITFS e-lock system is utilized for about 17 percent of that cargo.

The solution has enabled a faster customs clearance process, as well as providing a digital record of what was unlocked, and thus inspected, and when this occurred. The system also improves security, since only officers who know the proper password can access the container. Ultimately, Chan says, “it enhances the Hong Kong logistic industry’s competency and reinforces Hong Kong’s position as a world-class logistics hub.” Source: RFID Journal and a word of thanks to Andy Brown (Tenacent) for bringing the article to my attention.

by Mike Poverello

America – shees verry beeeeg!

Publication of the latest USCBP Border Patrol Strategic Plan reflects and builds on the transformation of the United States’ relationships with Mexico and Canada, particularly in the areas of border management and security. The joint Declaration of Principles for the 21st-century border represents an enhanced and strengthened commitment to fundamentally restructure the way we manage our shared border. The depth and breadth of cooperation that occurs now between the United States and Mexico was unthinkable even a few years ago. Similarly, the Beyond the Border declaration between Canada and the United States has an equally significant potential in what is already our historically extraordinary relationship with Canada. These developments have created unprecedented opportunities with both Mexico and Canada, in which DHS and CBP will play a defining role, to improve our security and economic competitiveness – and CBP will play a defining role in taking advantage of those opportunities. The Border Patrol in turn is key to advancing CBP’s security agendas with Mexico and Canada, working with its law enforcement counterparts in each country to identify and mitigate threats.

The U.S. Border Patrol is a premier law enforcement organization, recognized around the world for expertise, capabilities, and professionalism. CBP’s officers and agents are the frontline, the guardians of the Nation’s borders. We honor and are proud of them, and we thank them for everything that they do to protect America and the American people. Source: CBP.gov

So there you have it – for a real dose of commercialized Customs and what it can do for the good folks in America, and anywhere else in the world for that matter, check out the strategic plan by clicking here! You’ll be forgiven if you thought you were reading an edition of Jane’s Defense & Security Intelligence & Analysis. Most customs and border management agencies around the world can only dream about such impressive kit! 

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by Mike Poverello

SA auto industry to gain from 2013 policy shift

Trade remedies are by their very nature complex and most often ill-thought-out. This is said not so much from an entity whom gains to benefit from such an incentive scheme but more from an administrative and compliance perspective. These schemes require more than your average customs and trade consultant; someone who in fact not only knows  customs and trade law very well, but the motor industry as well. Similarly, on the side of the administrating authority an equally adept and experienced team is required to audit this process. I would like to believe that every attempt has been made to ensure that clear legal and procedural guidelines are in the offing, compared to the current MIDP process. On the other side of the coin, exactly how will the local community benefit from the ‘auto cartel’s’ new fortune? Based on SARS recent publication of its Compliance Programme it is noted that the tobacco and textile industries are singled out for scrutiny. Has the motor industry been purposely overlooked?

The SA motor industry stands to benefit from the introduction of a new programme next year, which will affect firm-level strategies, according to Standard Bank research analyst, Shireen Darmalingam. The Automotive Production Development Programme (APDP) aims to raise volumes to 1.2 million vehicles produced per annum by 2020, and to diversify and deepen the components supply chain. The new programme replaces the Motor Industry Development Programme (MIDP), which has been in existence since 1995. The soon-to-be phased out programme centred, among other things, on encouraging motor vehicle and component exports by allowing duty-free imports or reduced import tariffs, depending on the level of local content of exports.

Darmalingam said the replacement of the MIDP should not be viewed as a failure but rather as a point from which to move on and encourage further development of the SA motor industry. She said the APDP would offer the local automotive industry a sense of certainty through to 2020, which should encourage further growth.

“Whether the APDP will benefit certain industries more than others is still a contested question. Indeed, it appears that some benefits may be in favour of larger firms. Nonetheless, all firms are in line to benefit from the new APDP programme.” She said there was a concern that multinational companies were choosing to source leather products from suppliers closer to the major markets. She added that there was a further concern that the APDP, which aimed to provide a production incentive rather than an export incentive, might impact negatively on export-orientated component companies such as those in the leather sector.
However, she said sectors that supplied the aftermarket should benefit from the shift in policy, from MIDP to APDP, due to be implemented from January next year. Source: Business Live


by Mike Poverello

South Africa – Considering Rhino Horn Trade

South Africa is considering whether to approach the international community with a proposal to trade in rhino horn, Environment Minister Edna Molewa told MPs on Wednesday. Opening debate in the National Assembly on her department’s budget, she said this included engaging “major role players, including international and regional partners [and] potential consumer states”.

Molewa’s remarks come 10 months ahead of the 16th congress of the Convention on International Trade in Endangered Species (Cites), set to take place in Bangkok, Thailand, in March next year. According to reports, South Africa is sitting on an estimated 20-ton stockpile of rhino horn; some of it in private hands, some stored by conservation authorities. The price of the horn, should the Cites moratorium on trade be lifted, has been estimated at more than R500,000 a kilogram.

Molewa has declined to say how much rhino horn is held by government-managed parks and reserves.”Due to security risks, the department cannot publicly announce the amount of stocks being held by these agencies”. On Wednesday, she said her department was involved in an “extensive” preparatory process ahead of the Cites congress.

“This will include discussions on whether or not to approach the international community with a proposal to trade in rhino horn.” On the rhino poaching crisis in South Africa, Molewa said 199 rhino had been killed so far this year. “We are very, very deeply concerned,” she told the House. Earlier, briefing journalists at Parliament, Molewa said South Africa would not table a document at the next Cites meeting calling for the rhino horn trade moratorium to be lifted.

“No, not this time around. We are still considering all options, as well as probabilities towards that direction. We have not decided yet. Let it be clear. “We are still doing some very serious work in analysing whether we need to move in that direction or not.”

Among the things that needed to be done before trade could be resumed was “to ensure we get to know who the partners are on the other side”.Policies had to be in place “that do not allow any shenanigans to operate in the system,” Molewa said. “There are just too many things to do before we can place the discussion before the conference of parties. We are not yet there.”

Hmmmm! Would seem that the temptation for monetary profit is so compelling – R500,000/kg. Given the frequent outbursts at incidence of poaching and the horror pictures which normally accompany such reports how about burning the rhino horn reserves? That will send a clear message on government’s concern and intent.There exists a similar parallel where the importation of second-hand motor vehicles are banned in South Africa, but condoned because certain neighbouring countries want them. The old adage – ‘laws are meant to be broken’ comes to mind.  Source: SAPA

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by Mike Poverello

USCBP and EU sign C-TPAT Mutual Recognition

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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by Mike Poverello

SARS issues Compliance Programme 2012/13 – 2016/17

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.

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by Mike Poverello

Decay in ‘morals’ – irrational and corrupt behaviour

My recent post – Harbour mafia busted! – prompts a serious look at human judgement and the cause and effects of corrupt behaviour. The tragedy of the hit on Johan Nortje brings to reality the result of playing with danger. Those that will subsequently be convicted, most likely never conceived this ‘danger’ at the moment of their initial courtship with the criminal underworld. Neither did they perceive that a fellow law enforcement colleague would bear the brunt of their wrong-doing. That’s the reality of consequence of choice.

The origin of customs collection and control dates back more than 2000 years, as do attempts to undermine a country’s fiscal and economic security. Therefore the scourge of corruption is as old as the laws which gave rise to ‘controls’ at borders and ports of entry. The levying of taxes has always resulted in attempts to circumvent the payment thereof. Corruption of senior officials and politicians is the Achilles heel of poor and developing countries. It is a crime that is largely invisible but its consequences can be far reaching. It destroys confidence and morale in law enforcement structures, and robs local laborers and companies trying to etch out a decent living.

Over the centuries, and particularly the latter decades, governments and their law enforcement arms have fought against fraud in various ways. Populous countries (in the past) always had an abundance of people to staff the Customs or Border agency. Above all it was important for the government of the day to be seen as providing employment, hence a measure of comfort at election time. The close-knit command and control of port and border officials under strict observation of their respective port commanders – who in the past had ultimate control over their regions – proved effective in the main in preventing cross border crimes. However, the emergence of bootlegging and the mafia in the 1930’s (USA) proved a real challenge given that these ‘movements’ had an enormous amount of money to neutralise uncooperative customs officials and law enforcement officers. Buying the cooperation of officials left ‘blackmail’ hanging over the heads of the unfortunate officers. In many cases, breaking silence or turning state witness meant possible assassination for the individual and possibly his family as well. Yet, let it be said that such cross-border crime was very much tangible by way of the persons and the modus operandi involved. No, I’m not suggesting it was easy to contain, but it was certainly a whole lot more visible and localised for the authorities to contend with and address. Still, the manpower and the cost to deploy large task forces on the ground were inhibitive for law enforcement agencies.

Today, the world of ‘illicit goods’ is global; the operators can direct activities from the remotest parts of the world thanks to the information super-highway and all means of information and communication technology available today. Similarly, technology ensures near real-time payments to willing participants in crime. Despite this, the matter of ‘illicit goods’ remains a physical movement requiring ‘people’ to arrange and oversee transportation, and distribution to the buyer. It is a well-known fact that the movement of ‘illicit goods’ has a corresponding financial pipeline through which the profits of crime are channeled. Law enforcement has a challenge in trying to piece these activities together. This will involve cooperation of multiple agencies to bring about a result. More often than not, the selfish ambition of one or other agency overrides the collective approach to smash a syndicate. Once again its the age of key performance areas and indicators, and outcomes based initiatives which get ahead of the real issue – to neutralise an enemy. Today furthermore, unfortunately, its better to secure a huge penalty or forfeiture than to apprehend criminals and face months if not years in court – the revenue target is the primary goal. Money drives both the state and the criminal underworld.

Maybe I will be censured yet. Nonetheless, I will conclude with exercising some freedom of expression concerning views on what I believe fundamentally contributes to criminal and irrational behaviour. The democratic way of modern life has indeed perpetuated a lot of freedoms. With this, however, comes a corresponding responsibility and ability to discern between what is right or wrong. Freedom comes in both guises, sometimes simultaneously so as to confuse the mind – not unlike the ‘forbidden fruit’ in the Garden of Eden – making a choice between the right or wrong path. A flaw in democracy is that it tends to present everything in a “yes we can!” mentality. What this does is ‘challenge’ the individual or group to ‘achieve’. There might be little wrong with this, however, there are no documented guidelines on how to ‘achieve’, hence it is concluded that one must ‘achieve at all costs’. So what has this to do with corruption? The multiplicity of (false) ‘comforts’ offered by the modern world tend to excite the senses and numb the conscience. After all democracy tends to advocate equality in everything, so what can be wrong with a bit of excess, since one has freedom of choice? Wrong! unfortunately, this is the very mentality which drives ‘corrupt’ behaviour. There will always be consequences. Add to this indiscretion some measure of peer pressure, jealousy, or avarice and you have a recipe for a corrupt organisation.

The causes are multi-facetted –

  • The blatant disrespect of corporate structures in not recognising the need for staff to spend quality time with their families. (Less work = less profit and poor returns)
  • Parents too focused on personal gain or pleasing the shareholder, rather than tending to the real needs of their children to build honest citizens.
  • Ill-disciplined ‘educators’ who care little about their ‘learners’ and more about their rights!
  • Law enforcement agencies focused on revenue collection rather than law enforcement.
  • Lack of knowledge amongst politicians and heads of government agencies as to what their real mission ought to be.
  • Lack of a real support base within law enforcement agencies to deal with the threats being faced by their organisation.
  • Lack of role models in our society.

Is it little wonder then that the majority of tendencies today follow corruption? I’ve yet to note a single statesman (sorry states-person) who is morally upright. I would however like to concede that at least that maverick Prof. Jonathan Jansen (University of the Orange Freestate) is not afraid to stand up and talk straight.

Those interested in the topic of organised crime in Africa should can an interesting analysis (below) which the Internet has freely allowed me to obtain. ICT is without doubt a necessary evil!

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by Mike Poverello

Durban – Harbour mafia busted!

A 3-year covert investigation into a multi-billion rand racket at the Durban harbour has exposed an international mafia, allegedly bribing customs and police officials to allow in container-loads of contraband.

This week, a former Sars customs official was taken by surprise when Hawks and Sars investigators swooped on his Umbilo home and arrested him on 80 counts of alleged corruption. Etienne Kellerman, 47, a former Sars anti-corruption task team member, appeared in the Durban Regional Court on Tuesday. He was released on R100 000 bail and the matter was adjourned to next week. Kellerman is suspected of receiving substantial benefits for allowing contraband through. It is alleged that Sars lost millions of rand in revenue as a result. He resigned from Sars three years ago, days after he was quizzed by Sars investigators about his alleged role in the racket. His job had been to profile and identify high risk companies and containers entering the country.

A further seven Sars officials from Durban and Johannesburg were suspended for their alleged roles in the smuggling racket. Hawks investigator and project manager of this undercover operation, Colonel Brian Dafel, said that in coming weeks they would swoop on 100 more suspects in the country, including Sars officials, police and syndicate members, on charges ranging from racketeering, corruption, money laundering, extortion, murder and attempted murder.

Warrant Officer - Johan NortjeHe said the investigation was triggered by informers who tipped them off about the alleged crooked activities and racketeering at the harbour. The undercover investigation was a joint operation by the Hawks, Sars, independent law enforcement agencies and other key role players, Dafel said. He said they were also closing in on suspects believed to have ordered the hit on Warrant Officer Johan Nortjé, an officer in the police’s protection security service. He was responsible for investigating smuggling of goods and drugs through Durban harbour. A hit was allegedly ordered on his life days after he made a R100m counterfeit bust at the harbour. Nortjé was gunned down outside his Montclair home on January 17 last year, 10 days after he had made the bust.

“Nortjé was one of the few honest cops. He was aware of the container racket and was determined to expose it. He was killed because he was hampering the operation of the syndicate members,” Dafel said.

“This is a very dangerous investigation that involves extremely high levels of corruption. “Durban harbour is the biggest port authority that handles 40 percent of the containers nationally. In the past two years, during this investigation, we have seized over R1 billion worth of counterfeit goods and contraband.” He said that several witnesses had been placed in witness protection programmes as they feared for their lives. “People’s lives have been threatened and hits have been ordered. But, none of this will deter this investigation.

Dafel told the Daily News that investigations had revealed that certain SARS and police officials were working in teams between KZN and Gauteng. “This could not be done alone. They worked in groups, including those who cleared the documentation to those who inspected the containers and gave them the final clearance.

Thousands of containers pass through the harbour daily and it is impossible to check each and every one. That is how the counterfeit goods and contraband got through so easily. The syndicate members also communicate through cellphones making it a very smooth operation. He said every member of the syndicate was paid for his or her role in allowing the illegal goods through. The potential value of the illegal commodities was between R10 and R20 million for each container. The international mafia pays bribes of up to R30 000 per container that is allowed to pass through customs undetected. It is reported that one of the biggest problems is the clearing agents who work in cahoots with the police and syndicate members.

Dafel said many of the SARS and SAPS officials who were being investigated stood accused of allowing counterfeit goods or contraband to enter the country illegally, or under-evaluating containers. Since the investigation started, much stricter measures are in place at the harbour making it difficult to smuggle goods into the country. “We have closed the gap significantly for any form of corruption to take place. Also, staff know that they will be arrested and charged if they break the law,” Dafel said.

He said they were also working closely with people abroad and international law enforcement agencies to close in on the racketeers. “There are big name international companies, mainly from China, that are also being investigated. In fact, the goods imported from China are the biggest problem.” Source: Daily News E-edition

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by Mike Poverello

US Customs – Testing new way to decrease border dwell-time for travellers

In an ongoing effort to reduce wait times at the International Bridge, U.S. Customs and Border Protection Office of Field Operations will pilot a project to bring vehicles to the inspection booths in less time.
The stop signs will be placed in all three upper lanes and will shorten the “pull up” distance to the booth. This allows vehicles to queue up quicker. “Efficacy in movement is paramount to this project’s success. We are always trying to improve the flow of legitimate traffic while enforcing the laws of the United States,” said Patrick Wilson, CBP Sault Ste. Marie Assistant Port Director.

The Sault Ste Marie port of entry has a unique design that separates commercial traffic from car traffic, creating an upper and lower plaza. The focus of this project will be on the upper plaza only and will not affect the flow of traffic on the lower plaza.

Stop signs will be placed in all three upper lanes beginning Friday, April 20. The stop signs will shorten the “pull up” distance to the booth. This allows vehicles to queue up quicker. The stop signs will be placed near Radio Frequency Identification readers where the traveling public can display their Western Hemisphere Travel Initiative RFID-enabled document to pre-populate the officer’s computer screens.

CBP is testing the theory that they can process more travelers each hour by reducing the amount of time it takes each vehicle to get to the inspecting officer. This pilot project will incorporate a two-stop sign process. Upon entering the upper plaza, vehicles will be required to stop at the first existing stop sign. As the vehicle ahead clears, travelers will move to the next new stop sign and present their ID to the RFID reader. Once the vehicle at the inspection booth clears, travelers will proceed to the inspection booth.

Vehicles with trailers/campers are asked to use the lower plaza lanes so as not to impede the functionality of installed equipment. LED signage will be adjusted to notify motorists of this change.

CBP officers will direct traffic periodically during this project to help educate travelers on this new process. “We continue to look for efficiencies in our processes to improve the border crossing experience. If we can save a couple of seconds of inspection time per vehicle, the time savings should reduce each traveler’s wait,” said Assistant Port Director Wilson. Source: http://www.cbp.com

by Mike Poverello

Mozambique Tomato Mafia – Customs link?

Mozambique’s Minister of Industry and Trade, Armando Inroga, has promised that the people responsible for restricting the entry of imported tomatoes into Mozambique will be arrested, reports Thursday’s issue of the Maputo daily “Noticias”. Since early March a group of speculators has successfully pushed up the price of tomatoes in Maputo markets by obstructing cross-border trade, sometimes physically seizing trucks hired by small scale Mozambican importers. The group, in collaboration with some South African citizens, has taken up positions on the South African side of the border and is preventing other importers from bringing tomatoes into Mozambique. To achieve this, they evidently enjoy the protection of some people within the South African police or customs service. Huh! Really?

As a result, the price of tomatoes in Maputo’s main wholesale market has more than doubled in the space of five weeks, rising from 200-250 meticais (about seven to nine US dollars) to 500 to 600 meticais for a 22 kilo crate.

Inroga described the obstruction to trade in tomatoes as “illicit and criminal” and in violation of the rules governing the SADC (Southern African Development Community) Free Trade Area. He said that the Mozambican and South African governments are now working together to guarantee the normal circulation of people and goods on both sides of the border. The government sent a team from the National Inspectorate of Economic Activities (INAE) to work with the South African authorities, with the support of the Mozambican consulate in the eastern South African city of Nelspruit.

“The South Africans have begun to investigate these acts to identify the culprits and arrest them”, said Inroga. “Very soon the people associated with this movement to obstruct cross-border trade will be detained”

Mozambique resorts to importing tomatoes from South Africa because national production is insufficient to meet demand, particularly in Maputo which consumes 40 tonnes of tomatoes a day. Source: Noticias, Mozambique

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