The following article featured in the 1st Issue of the WCO Newsletter 2023. It is authored by Anthony Buckley, Chair of Customs Knowledge Institute. The article argues that a formal plan for building and managing Customs knowledge is necessary for a Customs brokerage to operate effectively. The components of such a plan are discussed, as well as the determinants that may affect the choices made. The discussion refers also to general issues of Customs knowledge acquisition, management and updating. The considerations apply to all Customs practitioners and trading businesses.
The number of possible games of chess is greater than the number of atoms in the observable universe according to Claude Shannon. In Customs, there are many more variables than the 32 pieces on a chessboard. In any transaction, we have the interested parties, the type of transaction, the goods involved, the route being followed, the intended procedure, the non-tariff controls, the rates of duty and the liability for payment, each of them with many possible variations, combinations, and types of supporting evidence. On that basis, it seems that every single movement of goods across a Customs border is unique, at least in some minor way. How does a Customs broker meet the expectation of a client, who expects the broker to be familiar with every possible variation?
As if the challenge of complexity is not enough, the broker is also expected to maintain records of all transactions and retrieve them in various formats as required by customers and Customs administrations.
In practice, of course, we find ways of doing things that are theoretically impossible. Most Customs movements fall into certain categories and are handled accordingly, by operators familiar with one or a few of the categories. High value complex transactions are handled by teams with a mix of expertise, at considerable expense. Low value consignments use simplified procedures and reduced checking. Significantly, evidence suggests that many transactions proceed despite errors, sometimes of significant effect. Thus, when considering “Customs knowledge”, we must distinguish between what is necessary for all, and what is essential only for certain functions.
All economic operators must have a general understanding of what Customs is, how it controls trade, what its legal structure is, what rights, entitlements and obligations attach to the operator and to the Customs authorities, the importance of compliance with legal requirements, and the costs of non-compliance. For many who buy and sell internationally, their knowledge does not proceed far beyond this general understanding, except perhaps for some detail concerning the particular goods they trade.
For a Customs broker, this level of knowledge is only the beginning.
The World Customs Organization with the support of the European Union under the EU-WCO Rules of Origin Africa Programme has developed a quick guide to the private sector to assist with the practical implementation of the African Continental Free Trade Area (AfCFTA) Agreement Annex 2 on Rules of Origin of the Protocol on Trade and its relevant appendices.
The main objectives of the AfCFTA Agreement are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of a Customs Union in the future.
At the invitation of the African Continental Free Trade Area (AfCFTA) Secretariat, the World Customs Organization (WCO) gave a presentation on international standards for the drafting of tools and instruments on rules of origin at a virtual workshop on the drafting of the AfCFTA Rules of Origin Handbook held on Monday 21 February 2022.
In her welcoming address, the Chairperson of the Sub-Committee on Rules of Origin expressed her profound gratitude and thanks to the AfCFTA’s partner organizations, such as the WCO and UNCTAD, as well as to the Regional Economic Communities (COMESA, EAC, ECOWAS and the SADC) which had kindly accepted the invitation to share their experience of drafting rules of origin handbooks.
She reminded those taking part that Article 8.3 of the Agreement establishing the African Continental Free Trade Area laid down that any additional instruments, within the scope of that Agreement, deemed necessary, are to be concluded in furtherance of the objectives of the AfCFTA and will, upon adoption, form an integral part of the Agreement. In accordance with Article 13 of the Protocol on Trade in Goods, discussions among the negotiating bodies had led to the adoption of Annex 2 on Rules of Origin and of close to 88% of the tariff lines constituting Annex IV. She also emphasized that both of those legal documents on rules of origin had to be made operational through the use of the Rules of Origin Handbook.
With a view to the implementation of Annex 2 on Rules of Origin of the AfCFTA Protocol on Trade in Goods, she went on to stress that the 8th Meeting of the Council of Ministers, held on 28 January 2022, had decided that the work on drafting the AfCFTA’s Rules of Origin Handbook had to be given priority.
Accordingly, under Item 3 on the Agenda, the WCO gave a talk on the drafting of rules of origin handbooks, presenting some practical cases that explained the international standards applied in drawing up its tools. There was then a question-and-answer session in which the delegates from Customs administrations, trade and industry were able to have a fuller exchange on the subject of good practices on which the AfCFTA could draw in finalizing the drafting of the Rules of Origin Handbook.
The workshop was attended by more than 150 delegates, for whom it was an opportunity to learn more about good practices in relation to the drafting of operational handbooks on rules of origin, with a view to making proposals for improvements to the AfCFTA handbook, on the basis, too, of the experiences of the WCO, UNCTAD and the African RECs.
The workshop came before the 5th Meeting of the Sub-Committee on Rules of Origin to be held from 22 to 25 February 2022, at which the handbook in question would have to be drawn up in order to facilitate the implementation of AfCFTA rules of origin and thereby boost intra-African trade.
The WCO has published the 96th edition of WCO News, the Organization’s magazine aimed at the global Customs community, providing a selection of informative articles that bring the international Customs and trade world to life.
This edition’s “Dossier” focuses on cross-border e-commerce, in other words those “transactions which are effected digitally through a computer network (e.g. the internet), and result in physical goods flows subject to Customs formalities”. We have invited several administrations to share information on the initiatives they are taking to build their capacity for monitoring the compliance of such flows. Despite every country’s situation being unique, we still believe that it is important to share experiences and explain initiatives.
The “Panorama” section addresses a broad variety of topics such as rules or origin, goods classification, training and reforms. It also includes two articles which respectively present, from a Customs perspective, two recent regional Free Trade Agreements: the Regional Comprehensive Economic Partnership (RCEP) and the African Continental Free Trade Area.
The “Focus” section brings together two articles dealing with non-intrusive inspection (NII). In the first one, the WCO Secretariat shows how some Customs administrations and manufacturers manage the decommissioning of NII equipment when it has reached the end of its life. The second article describes the challenges of X-ray image analysis and the value of training.
Lastly, in the “Point of View” section, Dutch Customs explains the structure of the ISO Audit Data Collection Standard and why it supports the Standard’s extension to cover data related to Customs and indirect tax audits, while an attorney from Israel argues that governments should consider waiving taxes on transport costs until we are back to “normal” and the effects of the COVID-19 pandemic are no longer being felt.
From 1 January 2021, the transition period with the European Union (EU) will end, and the United Kingdom (UK) will operate a full, external border as a sovereign nation. This means that controls will be placed on the movement of goods between Great Britain (GB) and the EU.
The UK Government will implement full border controls on imports coming into GB from the EU. Recognising the impact of coronavirus on businesses’ ability to prepare, the UK Government has taken the decision to introduce the new border controls in three stages up until 1 July 2021.
Her Majesty’s Revenue & Customs (HMRC) published the first iteration of the Border Operating Model in July 2020, setting out the core model that all importers and exporters will need to follow from January 2021 as well as the additional requirements for specific products such as live animals, plants, products of animal origin and high-risk food not of animal origin. We also provided important details of Member State requirements as traders and the border industry will need to ensure they are ready to comply with these, and not just Great Britain (GB) requirements. Indeed, as set out in the recently published ‘Reasonable Worst Case Scenario’ assumptions, it is largely the level of readiness for Member State requirements which will determine whether there is disruption to the flow of goods at the end of the transition period. This is why we have included additional signposting to those requirements throughout the document, and are encouraging all GB businesses not just to ensure their own readiness but also the readiness of EU businesses to whom they export, and throughout their supply chains.
Since July, the HMRC has worked closely with industry to further develop plans for the end of the transition period, and also to respond to industry questions since the publication of the first iteration of the Border Operating Model. This latest iteration of the Border Operating Model provides additional information in a number of key areas as set out below as well as clarifying a number of questions from industry.
Kenya is among 15 African States that have agreed to pilot a new project seeking to ease movement of goods within the region’s trading bloc.
The electronic certificate of origin (eCO) System, developed under the Common Market for Eastern and Southern Africa (Comesa) digital free trade area will fast-track movement of goods, enhancing intra-regional trade.
The new plan will do away with registration, application and submission of certificates for post-verification of goods.
Certificates of origin are issued to exporters within the Comesa Free Trade Area (FTA) to confer preferential treatment to goods originating from an FTA member State.
Truckers issued with eCO certificates will no longer stop to undergo an audit of their cargo via a manual verification process.
Comesa trade and customs director Christopher Onyango said the pilot was launched after last week’s meeting where member States agreed to develop national piloting plans to ensure that electronic certificates are implemented as soon as possible.
“The emergence of the Covid-19 pandemic calls for speedy implementation of the Comesa eCO by all member States,” said Dr Onyango, adding that eCO will spur intraregional trade and attract more investments into the region.
Other countries involved in eCO are Burundi, DR Congo, Egypt, Eswatini, Ethiopia, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Tunisia, Zambia and Zimbabwe.
Adoption of eCo that replaces manual certificates follows increased restriction on movement of cargo across borders due to the Covid-19 pandemic.
“It is rather disheartening that despite the preferences offered under the FTA, intraComesa is at eight percent of total trade, compared to Africa’s 15 percent, America’s 47 percent, Asia’s 61 percent and Europe’s 67percent,” Dr Onyango noted.
A technical working group (TWG) on rules of origin (RoO) is engaged on easing rules to facilitate implementation of the Comesa eCO and other trade facilitation instruments.
The director urged the team to consider making the rules simple, transparent and predictable to enable businesses to thrive.
“RoO … are not just the passport for circulating goods under preferential tariffs but are as well the cornerstone behind effective application of preferences towards member States,” said Dr Onyango.
He observed that when the RoO are too costly to be implemented by firms relative to the expected benefits, exporters would rather pay tariffs than comply with strict rules of origin, leading to low utilisation.
According to the Kenya Economic Survey 2020, Kenya’s high appetite for imported goods saw it sink into a trade deficit with Africa for the first time in more than two decades.
Kenya’s import bill from other African countries rose to Sh234 billion last year, an 11 percent increase from the Sh210 billion spent in 2018 while export receipts rose by a paltry three percent to Sh224 billion in the year.
The increased consumption of foreign goods pushed the balance of trade to a deficit position of Sh9 billion.
“Imports from Africa rose by 11.4 percent to account for 13 percent of the total import bill, attributed to increased imports from South Africa,” the survey states.
The following article was published by Bloomberg and sketches the day-to-day hardship for cross border trucking through Africa. In a sense it asks the very questions and challenges which the average African asks in regard to the highly anticipated free trade area. While rules of origin and tariffs form the basis of trade across borders, together with freedom of movement of people, these will mean nothing if African people receive no benefit. As globalisation appears to falter across Europe and the West, it begs the question whether this is in fact is the solution for Africa; particularly for the reason that many believe globalisation itself is an extension of capitalism which some of the African states are at loggerheads with. Moreover, how many of these countries can forego the much need Customs revenue to sustain their economies, let alone losing political autonomy – only time will tell.
Nyoni Nsukuzimbi drives his 40-ton Freightliner for just over half a day from Johannesburg to the Beitbridge border post with Zimbabwe. At the frontier town—little more than a gas station and a KFC—he sits in a line for two to three days, in temperatures reaching 104F, waiting for his documents to be processed.
That’s only the start of a journey Nsukuzimbi makes maybe twice a month. Driving 550 miles farther north gets him to the Chirundu border post on the Zambian frontier. There, starting at a bridge across the Zambezi River, trucks snake back miles into the bush. “There’s no water, there’s no toilets, there are lions,” says the 40-year-old Zimbabwean. He leans out of the Freightliner’s cab over the hot asphalt, wearing a white T-shirt and a weary expression. “It’s terrible.”
By the time he gets his load of tiny plastic beads—the kind used in many manufacturing processes—to a factory on the outskirts of Zambia’s capital, Lusaka, he’s been on the road for as many as 10 days to traverse just 1,000 miles. Nsukuzimbi’s trials are typical of truck drivers across Africa, where border bureaucracy, corrupt officials seeking bribes, and a myriad of regulations that vary from country to country have stymied attempts to boost intra-African trade.
The continent’s leaders say they’re acting to change all that. Fifty-three of its 54 nations have signed up to join only Eritrea, which rivals North Korea in its isolation from the outside world, hasn’t. The African Union-led agreement is designed to establish the world’s biggest free-trade zone by area, encompassing a combined economy of $2.5 trillion and a market of 1.2 billion people. Agreed in May 2019, the pact is meant to take effect in July and be fully operational by 2030. “The AfCFTA,” South African President Cyril Ramaphosa said in his Oct. 7 weekly letter to the nation, “will be a game-changer, both for South Africa and the rest of the continent.”
It has to be if African economies are ever going to achieve their potential. Africa lags behind other regions in terms of internal trade, with intracontinental commerce accounting for only 15% of total trade, compared with 58% in Asia and more than 70% in Europe. As a result, supermarket shelves in cities such as Luanda, Angola, and Abidjan, Ivory Coast, are lined with goods imported from the countries that once colonized them, Portugal and France.
By lowering or eliminating cross-border tariffs on 90% of African-produced goods, the new regulations are supposed to facilitate the movement of capital and people and create a liberalized market for services. “We haven’t seen as much institutional will for a large African Union project before,” says Kobi Annan, an analyst at Songhai Advisory in Ghana. “The time frame is a little ambitious, but we will get there.”
President Nana Akufo-Addo of Ghana and other heads of state joined Ramaphosa in hailing the agreement, but a number of the businesspeople who are supposed to benefit from it are skeptical. “Many of these governments depend on that duty income. I don’t see how that’s ever going to disappear,” says Tertius Carstens, the chief executive officer of Pioneer Foods Group Ltd., a South African maker of fruit juices and cereal that’s being acquired by PepsiCo Inc. for about $1.7 billion. “Politically it sounds good; practically it’s going to be a nightmare to implement, and I expect resistance.”
Under the rules, small countries such as Malawi, whose central government gets 7.7% of its revenue from taxes on international trade and transactions, will forgo much-needed income, at least initially. By contrast, relatively industrialized nations like Egypt, Kenya, and South Africa will benefit from the outset. “AfCFTA will require huge trade-offs from political leaders,” says Ronak Gopaldas, a London-based director at Signal Risk, which advises companies in Africa. “They will need to think beyond short-term election cycles and sovereignty in policymaking.”
Taking those disparities into account, the AfCFTA may allow poorer countries such as Ethiopia 15 years to comply with the trade regime, whereas South Africa and other more developed nations must do so within five. To further soften the effects on weaker economies, Africa could follow the lead of the European Union, says Axel Pougin de La Maissoneuve, deputy head of the trade and private sector unit in the European Commission’s Directorate General for Development and International Cooperation. The EU adopted a redistribution model to offset potential losses by Greece, Portugal, and other countries.
There may be structural impediments to the AfCFTA’s ambitions. Iron ore, oil, and other raw materials headed for markets such as China make up about half of the continent’s exports. “African countries don’t produce the goods that are demanded by consumers and businesses in other African countries,” says Trudi Hartzenberg, executive director of the Tralac Trade Law Center in Stellenbosch, South Africa.
Trust and tension over illicit activity are also obstacles. Beginning in August, Nigeria shut its land borders to halt a surge in the smuggling of rice and other foodstuffs. In September, South Africa drew continentwide opprobrium after a recurrence of the anti-immigrant riots that have periodically rocked the nation. This could hinder the AfCFTA’s provisions for the free movement of people.
Considering all of these roadblocks, a skeptic would be forgiven for giving the AfCFTA little chance of success. And yet there are already at least eight trade communities up and running on the continent. While these are mostly regional groupings, some countries belong to more than one bloc, creating overlap. The AfCFTA won’t immediately replace these regional blocs; rather, it’s designed to harmonize standards and rules, easing trade between them, and to eventually consolidate the smaller associations under the continentwide agreement.
The benefits of the comprehensive agreement are plain to see. It could, for example, limit the sort of unilateral stumbling blocks Pioneer Foods’ Carstens had to deal with in 2019: Zimbabwe insisted that all duties be paid in U.S. dollars; Ghana and Kenya demanded that shippers purchase special stickers from government officials to affix to all packaging to prevent smuggling.
The African Export-Import Bank estimates intra-African trade could increase by 52% during the first year after the pact is implemented and more than double during the first decade. The AfCFTA represents a “new pan-Africanism” and is “a pragmatic realization” that African countries need to unite to achieve better deals with trading partners, says Carlos Lopes, the former executive secretary of the United Nations Economic Commission for Africa and one of the architects of the agreement.
From his closer-to-the-ground vantage point, Olisaemeka Anieze also sees possible benefits. He’s relocating from South Africa, where he sold secondhand clothes, to his home country of Nigeria, where he wants to farm fish and possibly export them to neighboring countries. “God willing,” he says, “if the free-trade agreement comes through, Africa can hold its own.”
In the meantime, there are those roads. About 80% of African trade travels over them, according to Tralac. The World Bank estimates the poor state of highways and other infrastructure cuts productivity by as much as 40%.
If the AfCFTA can trim the red tape, at least driving the roads will be more bearable, says David Myende, 38, a South African trucker resting after crossing the border post into South Africa on the way back from delivering a load to the Zambian mining town of Ndola. “The trip is short, the borders are long,” he says. “They’re really long when you’re laden, and customs officers can keep you waiting up to four or five days to clear your goods.”
Source: article by Anthony Sguazzin, Prinesha Naidoo and Brian Latham, Bloomberg, 30 January 2020
The world’s first blockchain-based platform for electronic certificates of origin (eCOs) was unveiled in Singapore on Tuesday.
The platform is the result of a partnership between the Singapore International Chamber of Commerce (SICC) and Singapore-based vCargo Cloud. As the first chamber in the world to implement blockchain-based eCOs, SICC seeks to provide its members and trade-related agencies, including trade financing and insurance firms, with a system that offers higher security, efficiency and flexibility. The platform aims to vastly improve transparency, security and efficiency in authenticating trade documents. It permits instant verification of eCOs and runs on a private blockchain network that prevents fraud, alterations and third-party interference.
SICC says the platform represents a quantum leap in processing trade-related documents by hosting information of trade transactions on a tamper-proof distributed ledger system, which can be authenticated and accessed by various stakeholders of the platform. The platform uses QR codes, allowing eCOs to be scanned using smart phones and then printed. The number of allowable prints is restricted to prevent unauthorized duplicates. This improves efficiency and minimizes the costs of verifying COs, removing a major impediment in the process and a frequent cause of high insurance or trade finance costs.
vCargo Cloud intends to leverage on the Singapore launch to promote the platform globally, beginning with Asian countries that are substantive manufacturing exporters such as Japan, Myanmar and Sri Lanka, using a pay-per-use model.
The launch of the blockchain-based eCO platform comes amidst the Singapore Government’s call for a Self-Certification regime through the ASEAN Single Window, which aims to expedite freight clearance and reduce manual paperwork across all 10 member countries.
Classification and origin determination of goods are closely interlinked. It is therefore critically important to update Rules of Origin (i.e. Product Specific Rules) to ensure consistency between HS classification and origin determination. This would help to prevent misapplication of Rules of Origin, ensure efficient and effective revenue collection and facilitate trade. Source: WCO
Social media certainly provides a useful platform to share ones knowledge experience and creativity. I spotted this one on a LinkedIn group which should certainly be useful for US shippers and trade practitioners. The designer Jason Ge, Senior .NET Consultant at Mercer, has created a web-based tool for analyzing the origin status of bills of materials. It contains more than 6000 rules of origin of these US-based free trade agreements:
North American Free Trade Agreement
U.S. – Chile Free Trade Agreement
U.S. – Australia Free Trade Agreement
U.S. – Central America / Dominican Republic Free Trade Agreement
U.S. – Colombia Free Trade Agreement
U.S. – Korea Free Trade Agreement
U.S. – Panama Free Trade Agreement
U.S. – Peru Free Trade Agreement
U.S. – Singapore Free Trade Agreement
If you want to quickly check your product’s origin status, this would be a good tool to use. Try it out for free at – https://www.originreview.com
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