Category / Information Technology

by Mike Poverello

Ethiopia Customs Authority – RFID programme under review

Officials at the Ethiopian Revenues & Customs Authority (ERCA) have made a turnaround on their earlier plan to compel IT companies to raise 20 million Br in capital if they are to be registered to supply devises for electronic cargo tracking. Troubled by an increasing practice of pilfering goods on the Addis Abeba to Djibouti transport corridor, the ERCA hired an US-based company for 2.5 million dollars to establish an electronic monitoring system. HI-G-TEK developed the system using Radio Frequency Identification (RFID), which will help customs officials get real-time information on the activities of trucks to and from Djibouti port. There are around 10,000 trucks with varying carrying capacities, of which half are fuel transporting vehicles. A trucking company has to pay around 20,000 Br, including installation fees, to get the devices in each truck under its fleet.

The US company has installed the system in the six selected stations along the corridor and trained around 30 officers of the Authority. However, the system is yet to be functional, for every truck on the highway should be fitted with electronic tracking devices to be supplied by IT vendors certified by the Authority. In order to be certified, a company is required to have 20 million Br in capital, produce a performance bond worth two million Birr, and have a five-year contract with major IT suppliers, according to the directive issued by the ERCA to regulate the new system. No vendor has been certified, yet, for many see the requirement to raise such lofty capital as an impediment. So far, GCS Tracking Plc, Global Tracking Plc, Ramsea Industrial Solution Plc, and FC Tracking are the companies that have applied to get into the business. The companies are to supply the seals, locks, and compact readers as well as GPRS modems to identify locations of the cargoes.

Subsequent to complaints from the IT industry, legal experts at the ERCA are busying themselves, studying the experiences of other countries, which they hope will be used for possible amendments. However, these experts are divided over the proposition to reduce by half the current capital requirement, while others argue that a performance bond is enough, according to sources. Surprised to hear about the amendment, Zelalem Dagna, managing director of Global Tracking Plc, sees the change as an appropriate move by the ERCA. However, he still claims that the requirement for a two million Birr performance bond should not be removed but be determined on a project basis.

Officials at the ERCA, which is enforcing the current requirements, however, declined to comment. The Authority is also negotiating with the Ministry of Transport (MoT), which is implementing a fleet management system that will also monitor and indicate the whereabouts of trucks, negotiating with the Authority to interface the two systems. Most of the devices used for both systems are the same, thus can run with a single subscriber identification module (SIM) card, transferring all data for the respective institution, according to an electrical engineer at the ERCA. He is concerned that failure to interface the systems would allow transport companies to jack up prices, which he fears would trickle down to the end user.

By all accounts it seems like the initiative was launched on impulse and a whim without prior consultation with stakeholders. Per usual it’s the consultants who have scored out of this. Source: Addis Fortune

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by Mike Poverello

Advancing the argument for sealing cargo and tracking conveyances

South African Customs law provides for a seal integrity regime. This consists in provisions for the sealing of containerised sea cargo as well as sealable vehicles and trailers. These requirements have, however, not been formally introduced into operation due to the non-availability (until recently) of internal systems and cross-functional procedures that would link seal integrity to known entities. To explain this in more layman’s terms, it is little use implementing an onerous cargo sealing program without systems to perform risk assessment, validation of trader profiles and information exchange. It’s  like implementing non-intrusive inspection (X-ray scanning) equipment without backward integration into the Customs Risk Management  and Inspection environment and systems. It has often been stated that a customs or border security programme is a layered approach based on risk mitigation. None of the individual elements will necessarily address risk, and automation alone will likewise not accomplish the objective for safe and secure supply chains. Moreover, neither will measures adopted by Customs or the Border Agency succeed without due and necessary compliance on the part of entities operating the supply chain. It therefore requires a holistic strategy of people, policy, process and technology.

In the African context, it is surmised that the business rationale will be best accomplished with a dual approach on IT connectivity and information exchange. Under the political speak there are active attempts within SACU, SADC, COMESA and the EAC to establish electronic networks to facilitate and safeguard transit goods. Several African states are landlocked and are not readily accessible, some requiring multiple transit trips through countries from international discharge in the continent to place of final destination. National laws of each individual country in most instances provide obstacles to carriers achieving cost effective means in delivering cargoes. Over and above the laws, there exists (regrettably) the need to ‘grease palms’ without which safe passage in some instances  will not be granted. Notwithstanding the existence of customs unions and free trade areas, internal borders remain the biggest obstacle to facilitation.

Several African logistics operators already implement track and trace technology in the vehicle and long-haul fleets. This has the dual purpose of safeguarding their assets as well as the cargoes of their clients which they convey. Since 9/11, a few customs administrations have formally adopted ISO PAS 17712 within their legislation to regulate the use of high security seals amongst cargo handlers and carriers. In most cases this mandates the use of high security ‘mechanical’ bolt seals. However, evidence suggests there is a growing trend to adopt electronic seals. Taiwan Customs for one has gone a significant way in this regard. Through technological advances and increased commercial adoption of Radio Frequency Identification (RFID) technology the costs are reducing significantly to warrant serious consideration as both a viable and cost-effective customs ‘control’ measure.

Supply chain custody using RFID as an identifier and physical security audit component – as provided for in ISO 17712 – is characterized by the following:

  • it uniquely identifies seals and associates them with the trader.
  • the seal’s unique identity and memory space can be used to write a digital signature, unique to a trader on the seal, and associating that seal with a customs declaration.
  • using customs trader registration/licensing information, together with infrastructure to read seal information at specified intervals along a route to create a ‘bread-crumb’ audit trail of the integrity of the cargo and conveyance.
  • using existing fleet management units installed in trucks to monitor seal integrity along the high risk legs of a cargo’s transit.
  • record the seal’s destruction at point of destination.

Looking forward to the future, it is not implausible for customs and border authorities to consider the use of RFID:

  • as a common token between autonomous customs systems.
  • to verify and audit that non-intrusion inspections have taken place en-route, and write that occurrence to the seal’s memory with the use of an updated digital signature issued to the customs inspection facility.
  • to create a date and time stamp of the cargo’s transit for compliance and profile classification – to confirm that transit goods have actually left the country as well as confirm arrival at destination (to prevent round tripping).
  • Lastly to archive a history of carrier’s activities for forensic and/or trend analysis.
This is a topic which certainly deserves more exposure in line with current regional developments on IT-connectivity and information exchange. A special word of thanks to Andy Brown for his contribution and insight to this post.
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by Mike Poverello

Special Economic Zones – how special?

Despite having burned its fingers with Industrial Development Zones (IDZs), which involved a few fiscal benefits (shrouded in legalese) and billions in infrastructure, Trade and Industry has gone into overdrive to push its new policy on special economic zones (SEZs). It has relaxed ‘locality’ for one, i.e. such zones need not be located in close proximity to an international port or airport. Moreover, SEZs are now being promoted to ‘compliment’ existing IDZs and not replace them as was erroneously suggested in an earlier post.

While the South African Department of Trade and Industry (the dti) is conducting public hearings on the matter, it is perhaps relevant to consider what the Free Market Foundation (FMF) – a think-tank on limited government and economic freedom – has to say on the matter. The content of the report might well attract support from some in the business community involved with manufacturing, distribution and logistics. Read the FMF’s evaluation of the dti’s SEZ Policy here!

While there are not many trade remedies available to local business many prospective requests have over the last decade been presented to establish so-called distribution centres/hubs and ‘virtual bonded warehouses’, which have not borne much fruit mainly due to the lack of a legal framework for their operation. Moreover, in government there is always a cautious resistance to liberalisation in customs and trade laws (they directly impact the fiscus) in the absence of viable risk mitigation strategies or remedies. Perhaps it has something to do with the dwindling public sector skills and experience levels available to conduct effective audits; although, the big audit firms would readily contest this and advocate the outsourcing of such function to the private sector. As the development of more sophisticated systems in SARS come on stream, ICT will no longer be an obstacle. Through increased automation comes the availability of additional human resources who can be up-skilled to perform audit work. Both Tax and Customs Modernisation programmes bare testimony to this.

The establishment of the IDZ programme (circa 2000) was fraught with inter-departmental tensions around the so-called benefits and concessions to be made available to foreign investors. The lack of a clear framework did not allow for much ‘liberalisation’ of controls and fiscal benefits. In fact the customs dispensation offered procedures and facilities to IDZs identical to that available in the national customs territory. Tax holidays and relaxed red tape are characteristic of some of the more successful SEZs around the world, as the article will attest. The dti’s latest SEZ Bill and Policy do not hint to any great length how things will be different this time round. There is however some firm calls within government to consider relaxed labour regulations – the test however lies in whether the policy makers have the appetite (or vision) to permit liberalisation in this area. I have a simple view on this matter – (i) create a favourable economic environment focusing development on SMMEs and entrepreneurship, and (ii) get the standard customs procedures and controls right through modernisation and there will be no need for ‘tax holidays’ and economic zones in this country!

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by Mike Poverello

WCO News – February 2012 Edition

WCONews Edition February 2012Herewith a link to the latest edition of WCO News, providing a wealth of customs news and developments from across the globe. This edition focuses almost entirely on regional initiatives involving C-2-C information exchange. On pages 20 to 22 you’ll read about new developments emerging on customs inter-connectivity and information exchange in the Southern African Region. At this time, a conference lead by the WCO, involving representatives from UNCTAD, SACU, SADC and COMESA and SARS is taking place in Pretoria to establish a firm framework for introduction of customs information exchange. I will devote a dedicated article on these developments shortly, as this has implications for the business community as well. Also, don’t miss the feature on South Africa’s modernisation developments, pages 29 and 30. Besides the usual editorials this edition includes –

  • WCO Secretary General launches Year of Connectivity.
  • Evolving technology landscape and its impact on Customs.
  • Latest developments in Latin America, Southern Africa and Europe.
  • West Africa implements airport task forces to fight drug trafficking.
  • South Africa to roll out mobile Customs controls.
  • Operation “Short Circuit” successes and challenges.
  • WCO Tariff and Trade Affairs Directorate
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by Mike Poverello

Financial pinch affects CBP’s modernisation and developmental capacity

The US Bureau for Customs and Border Protection  has money to run commercial trade processing system (ACE) but not expand it. Customs and Border Protection has US $140 million to operate and maintain a commercial trade processing system, but there’s no money in the 2012 budget to further develop the program. The lack of development money, particularly for the simplified entry process, has caused concern amongst business community members. Simplified entry is something that Customs and the trade community are looking for to further automate import processing and lower transaction costs. Source: USCBP

by Mike Poverello

SAD Story – Part 2

What is clear in regard to modern day business is the fact that ‘harmonisation’ in the international supply chain is essentially built around ‘data’. E-commerce has been around for decades, plagued by incompatibilities in messaging standards, and computer software, network and hardware architecture. However, one of the key inhibitors has been organisations and administrations having to adhere to domestic ‘dated’ legislation and so-called standard operating procedures – seemingly difficult to change, and worst of all suggesting that law has to adapt!

A lot has had to do with the means of information presentation (format) and conveyance (physical versus electronic) rather than the actual information itself. Standards such as the UN Layout key sought to standardise or align international trade and customs documentation with the view to simplifying cross-border trade and regulatory requirements. In other words, each international trade document being a logical ‘copy and augmentation’ of a preceding document.  This argument is still indeed valid. The generally accepted principle of Customs Administrations is to maximise its leverage of latent information in the supply chain and augment this with national (domestic) regulatory requirements – within a structured format.

The Single Administrative Document (SAD) was itself borne out of this need. The layout found acceptance with UNCTAD’s ASYCUDA which used it as a marketing tool (in the 1990’s) in promoting ‘What-You-See-Is-What-You-Get’ (WYSIWYG). It certainly provided a compelling argument for under-developed countries seeking first-time customs automation. Yet, the promise of compatibility with other systems and neighbouring customs administrations has not lived up to this promise.

Simultaneous to document harmonisation, we find development of the Customs data model, initially the work of the Group of 7 (G7) nations at the United Nations. Its mandate was to simplify and standardize Customs procedures Customs procedures. In 2002, the WCO took over this responsibility and after further refinement the G7 version became version 1 of the WCO Customs Data Model. Once more a logical progression lead to the inclusion of security and other government regulatory requirements. This has culminated in the recent release of WCO Data Model 3. Take note the word “Customs” is missing from the title, indicating that Version 3 gives effect to its culminating EDI message standard – Government Cross Border Regulatory (GOVCBR) message – an all inclusive message standard which proposes to accommodate ALL government regulatory reporting requirements.

Big deal! So what does this mean? The WCO’s intent behind GOVCBR is as follows –

  • Promoting safe and secure borders by establishing a common platform for regulatory data exchange enabling early sharing of information.
  • Helping co-operating export and import Customs to offer authorized traders end end-to to- end premium procedures and simple integrated treatment of the total transaction.
  • Contributing to rapid release.
  • Elimination redundant and repetitive data submitted by the carrier and the importer.
  • Reducing the amount of data required to be presented at time of release.
  • Reducing compliance costs.
  • Promoting greater Customs Co-operation.

Undertaking such development is no simple matter, although a decision in this direction is a no brainer! Over a decade’s work in the EDI space in South Africa is certainly not lost. Most of the trade’s electronic goods declaration and cargo reporting requirements remain intact, all be they require re-alignment to meet Data Model 3 standard. Over and above this, the matter of government regulatory requirements (permits, certificates, prohibitions and restrictions, letters of authority, etc.) will require more ‘political will’ to ensure that all authorities administering regulations over the importation and exportation of goods are brought into the ‘electronic space’. Some traction is already evident here largely thanks to ITAC and SA Reserve Bank willingness and capability to collaborate. In time all remaining authorities will be brought on board to ensure a true ‘paperless’ clearance process.

So, I digress somewhat from the discussion on the SAD. However, the bottom line for all customs and border authorities, traders and intermediaries is that ‘harmonisation’ of the supply chain operation follows the principal and secondary data required to administer ALL controls via a process of risk assessment, to facilitate release including any intervention required to ensure the compliance of import and export goods. As such even legislative requirements need to enable ‘harmonisation’ to occur otherwise we end up with a non-tariff barrier, uncertainty in decision-making, and a business community unable to capitalise on regional and international market opportunities. Positively, the draft SA Customs Control Bill makes abundant reference to reporting – of the electronic kind.

In Part 3, I will discuss regional ‘integration’ and the desire for end-to-end transit clearance harmonisation.

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by Mike Poverello

Customs Modernisation Release 3 – SACU

Saturday 11 February 2012 sees the implementation of new modernised customs procedures and formalities at South Africa’s first SACU land frontier office – Kopfontein – border between South Africa and Botswana.  While enhancements are slanted more in terms of internal SARS customs procedure, SACU traders will no doubt experience some anxiety with the transition. For the first time SARS Customs Modernisation impacts directly on traders and neighbouring Botswana Customs operational procedures in a significant way, which will fashion operations at all remaining inland border posts of the Customs Union. Over the last few months SARS has worked with trade, the Botswana customs authority as well as the business chamber in Botswana concerning the intended changes and their impact on stakeholders. The implementation ushers in cross-cutting changes for customs staff operationally, new technology as well as legal and policy changes. In the case of the latter, a further element of the draft Customs Control Bill is introduced whereby foreign business operators (importers, exporters and road carriers) must be registered with SARS to perform customs transactions in South Africa. This is perhaps the single issue which has had ramifications for parties who regularly cross the border between Botswana and South Africa. Hopefully recent iterations of notices and explanations have helped clarify the SARS requirements. (See the SARS Customs Modernisation webpage).

Other modifications and changes include –

Elimination of paper clearance documents – this is a significant departure from traditional SACU processing where all member countries have relied on the Single Administrative Document (SAD) to facilitate intra-SACU clearance. With the bulk of clearances expected to be electronic, SARS will now only print a customs notification (CN1) which will specify the status and outcome for each clearance. This the trader will use in support of customs clearance in Botswana. SARS will therefore no longer stamp and authorise hardcopy SAD500 clearance documents. Of course, there is nothing which stops a trader printing the SAD500 for cross border purposes, only SARS will no longer attest these. As concerns SARS VAT requirements, arrangements will be made for traders to submit the CN1 for purposes of VAT returns. Details on this to follow.

Electronic supporting documents – already tried and tested at sea and airports across South Africa, traders no longer need to carry on their person hard copy clearance supporting documentation , i.e. invoices, worksheets and packing lists. These are only required should SARS indicate via electronic message that a consignment requires further scrutiny. Customs brokers and traders using EDI will in most cases have the SARS e@syScan facility available on their computer systems which makes it relatively simple and easy to scan, package and submit to SARS. In the event a trader cannot perform this electronically, he may approach any of the 4 Customs Hubs (Alberton, Cape Town, Durban, and Doringkloof) across the country, to have these scanned and uploaded by SARS. Alternatively, these can of course be delivered to the border post for manual processing and finalisation of a customs intervention. Supporting documents are linked to a unique case number which SARS notifies to the trader in the event of a risk.

Clearance processing – SARS has centralised its backend processing of clearances where goods declarations are now processed off-site at one of the 4 Hubs. No longer are clearances processed at customs branch office. All goods declarations – whether electronically submitted or manually captured – are routed to a central pool for validation, verification and assessment if flagged by the risk engine. In the case of land borders all clearances once successfully processed will receive a ‘Proceed-to-border’ message implying that the road carrier may commence delivery to the border. A key feature of the new clearance process is the availability of Customs Status Codes. These codes are initiated by the customs system at specified points in the process to alert the declarant of the status of his/her transaction. These status’s also indicate the follow-up required of the declarant to bring the transaction to a state of finality.

Automated Cargo Management (ACM) – All road carriers are now required to submit their road manifests electronically, via EDI, to the Customs ACM system. For now, SARS will not electronically match the manifest against the declaration, but will monitor compliance and data quality of electronic manifest  for a period of time before initiating real-time matching and acquittal. This will invoke a significant responsibility on both trader and road remover to ensure that they both provide credible data to customs otherwise delays will occur. Upon arrival of the cargo at the border, the driver presents a printout of his electronic manifest. The manifest number is ‘checked in’ by a customs official which in seconds brings up all associated goods declarations linked to the manifest number on the system. The customs officer is able to determine the overall risk status of the vehicle. Where no risks are present a status notification (CN1) is printed for each goods declaration, and a gate pass (CN2) is handed to the driver permitting him to exit the customs controlled area. The future real-time matching will comprise a combined risk assessment of both manifest and declaration information that will result in a single risk outcome. Such risk assessment will include both fiscal and security compliance features thereby bringing SARS in line with international supply chain security standards. Going forward, risk assessment will accommodate ‘all-of-government’ requirements ensuring that all regulatory measures and associated risks are administered in a single instance obviating the need for successive, time-consuming inspections and costly delays.

Automated Customs Inspection – Following its recent introduction at the Beit Bridge border post, the new hand-held inspection tool, conveniently developed on an iPod, allows the customs border control official to electronically access, capture and upload an inspection outcome to the central customs system. This significantly improves the efficiency for this time-intensive activity where the officer can initiate a status up date electronically at the inspection site, where previously the declarant would have to wait for the outcome of the manual inspection report and release note. What’s more, the customs officer has access to the underlying clearance data and can even activate the camera function and capture visuals of suspect cargo which can be appended to an inspection case for verification by higher authority or historical reference value.

There are additional features and functionality to be introduced at Kopfontein and all remaining border posts over the next few months. These relate to improved revenue accounting, new trader registration and licensing system offering online application and approval, and a new traveller and temporary import/export processing. More about this in a future post.  For traders, the benefits of the new solution at SACU land borders aim to remove random and unwarranted intervention by customs. All activities are risk driven via a secure ‘get next’ selection function ensuring that internal integrity is maintained and only ‘risk-related’ consignments/transactions are dealt with. Please visit the SARS Modernisation webpage for all the latest updates and notices on modernisation releases.

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by Mike Poverello

Africa – Information Technology’s Dangerous Trend

Here’s some food for thought…

For the past few decades, emerging technologies such as biotechnology, microelectronics, information technology and communications technologies have become central to the socioeconomic development of nations. These technologies improve productivity and facilitate better living standards when they penetrate into societies. Among them, information technology (IT) has become the most dominant; IT has revolutionized almost every aspect of our lives, public and private, by connecting individuals, institutions and governments in mutually dependent ways. With its ease of adoption, this interdependence has scaled rapidly, unlike any other technology in modern history. In Africa, for example, despite decades of using electricity, no one can claim that the continent has fully adopted it. The same applies to the aerospace and biochemical industries, among others.

IT is good for developing countries — it empowers people and improves their lives. But, in many African countries, the successes afforded by IT can backfire if it becomes a too-dominant focus. Take Nigeria for example: Despite decades of crude oil exploration, it cannot claim that it has developed indigenous domain expertise in that industry. If the MNCs depart, Nigeria will cease to remain an oil-producing nation, as it lacks the local ability to explore, extract and sustain production. But in the IT industry, most Nigerian firms are well-positioned for any challenge.

The success of IT in Africa has reached a level where it is being dangerously over-emphasized. From The World Bank to The African Union, everyone is talking about IT. IT events are very common everywhere, not to mention the Google, Microsoft, and Blackberry platform-based competitions that are being endlessly unleashed as these brands jockey for position on the continent. The Nigerian government has created a new ministry to focus solely on IT and related areas. And African leaders are neglecting most non-IT technologies. Across most African universities, the only funded and active labs are the IT labs. University administrators are happy to tout how they equipped IT labs, though everything else is broken. Agricultural engineering students are more focused on IT than on learning to build next-generation farm machinery. It’s a troubling pattern, as everyone wants to be seen as IT-savvy.

While IT can be applied to any field, the way Africa is promoting it sets a dangerous precedent. In my continent, “information technology” has become synonymous with “technology” itself. If you don’t know IT, you’re not a techie. You can master diesel engines and polymer technology, but without expertise in IT, few believe that you belong in the technology sector.

So, what’s the danger? Everyone wants to be an IT guy. No one remembers that we still need food. At the University of Nairobi, I recently asked a group of agricultural science students about their plans upon graduation. Only one wanted to stay in agriculture; others are making apps for farmers. Yes, they know more about mobile operating systems and mobile payments than they do about farming! The farms are now IT labs. And while you can simulate farming on tablets, you can’t eat the virtual fruit.

Pick up a typical newspaper on the continent, and you’ll find that the technology column has been changed to an IT column. Newspapers write about Google, Blackberry, Facebook and Apple in the technology section, but non-IT companies — though they’re technology firms — are rarely reported on. Tech journalism is now IT journalism. Even the governments have confused technology policy with IT policy.

I firmly believe that IT has helped Africa, and that it has a role to play as the continent advances. But, there needs to be a balance. The continent needs techies in mining, geology, semiconductors, agriculture, chemicals, and other areas besides IT, and government must ensure that IT does not create a situation that will destroy the continent’s capacity to feed her citizens and compete in the future. Source: Harvard Business Review