Tag / illicit trade

by Mike Poverello

WCO News – February 2020

This edition’s “Dossier” focuses on how Customs can foster sustainability for people, prosperity and the planet, the WCO’s theme for 2020, and includes a selection of articles on the implementation of Multilateral Environmental Agreements, the role of the Harmonized System, the trade in illegal timber, and tools for logistics planning and supply chain optimization.

The “Panorama” section covers various topics such as internal communication, cultural goods, partnership with express couriers to fight illicit trade, management of e-commerce transactions via blockchains, and measurement of the time required to process imports in order to boost logistic service providers’ efficiency.

You can also read an insightful “Point of View” article on how machine learning can automate the determination of the valuation of goods, as well as an “Events” article containing highlights from the WCO Communication Strategies Conference held in October 2019.

Source: WCO, WCO News, February 2020

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by Mike Poverello

South African Customs – Recent Illicit Goods Busts

Customs teams from Durban, Cape Town, Gauteng and the Free State recently dealt a blow to non-compliant traders by busting drugs, illicit cigarettes and undeclared fuel.

Customs officers at OR Tambo International Airport (ORTIA) were responsible for several major drug busts over the past couple of weeks, including the following:

  • On 8 February, a female passenger arriving from Sao Paulo was stopped and her luggage scanned, which revealed suspicious images. After searching her luggage, officers discovered packages wrapped in black tape and containing a white powdery substance. The powder was tested and confirmed to be cocaine, valued at approximately ZAR54 284 349. Officers also searched a male passenger arriving on the same flight and discovered three body wraps on his torso, containing a white powdery substance. The contents were tested positive for cocaine, valued at about ZAR9 057 566. On the same day, officers intercepted a male passenger about to board a flight for Hong Kong and searched him. They discovered body wraps on his upper torso containing cocaine valued at about ZAR11 700 000.
  • On 2 February, a male passenger arriving from Sao Paulo was stopped by Customs officers and his luggage searched. After a luggage scan revealed irregular images, officers searched his bags and discovered packages wrapped in black tape containing cocaine, valued at about ZAR5 850 000.
  • On 27 January, in a similar incident to the above, a male passenger arriving from Sao Paulo was arrested after Customs officers discovered a false compartment in his luggage, which contained cocaine valued at about ZAR6 750 000.

In all the above incidents, the suspects and goods were handed over to the SAPS for further investigation.

In the Durban incident, officers became suspicious of two containers of goods arriving on a vessel in the Durban harbour from China.

The containers, which were declared to contain glassware and household goods, were placed for examination at a cargo depot in Durban. 

Upon inspection by Customs officers on 5 February 2020, the containers were found to contain various suspected counterfeit goods, and several cartons with tablets packed in plastic packets.

Members of the Customs detector dog unit reacted positively to the cartons, which were tested and found to contain Methaqualone (Mandrax).

There was a total of 15 cartons, each containing 20 000 Mandrax tablets with a street value of about ZAR24 million. The case has been handed over to the SAPS for further investigation.

In Cape Town, officers were responsible for a massive bust of illicit cigarettes, one of SARS’ key focus areas when it comes to illicit trade (particularly in terms of lost revenue due to the fiscus). 

After receiving an alert from the Compliance Risk and Case Selection team about a possible mis-declaration of a container on a ship arriving in South Africa, a detention notice was issued to the shipping liner and the goods were detained in December 2019.

After following the required legal processes, a Customs Branch Physical Inspection team searched the container at the Cape Town harbour on 20 January 2020.

During the inspection, the team discovered 1050 master cases of “LEGATE” cigarettes, each case containing 50 cartons of 10 packets, with an estimated street value of about ZAR3 150 000.

If the consignment of cigarettes was not detected, the potential loss of revenue would have amounted to about ZAR12 208 350 in Customs & Excise duties and VAT. 

The Western Cape Customs Branch Inspection team has handed over the case to Criminal Investigations from further investigation.

In the Free State, Customs officers dealt a blow to another key area of illicit trade, ie. ghost exports or false declarations of fuel. On 31 January 2020, officers stopped a truck coming from Lesotho through the Ficksburg border post. They had become suspicious of this particular trucking company, as they had recently changed their route to using South Africa as a transit route from Mozambique to Lesotho. 

Officers noticed that the same truck had driven through the border into Lesotho the day before, having declared the truck full with fuel they acquired in Mozambique. The following day it re-entered South Africa, with the driver claiming that the truck was empty (which could indicate a possible ghost export in which they were trying to avoid paying taxes and duties/levies).

They then asked the driver to park the truck at the depot for inspection. However, after the truck was taken to the depot, the truck driver disappeared and the truck company’s lawyer was called to attend an inspection. 

Customs officers then discovered the truck contained 26 000 litres of diesel, with the owners having failed to pay duties and taxes totalling ZAR176 000 due to the fiscus. The truck was detained for further investigation.

And in a similar incident, two trucks were stopped at the Maseru Bridge border post on 4 February for falsely declaring fuel coming from Mozambique to Lesotho. The trucks contained 39 388 litres and 39 414 litres of petroleum respectively. Both were detained for further investigation. 

Source: South African Revenue Service [SARS]

by Mike Poverello

WCO – Illicit Trade Report 2018

Download a copy from the WCO website

During December 2019, the World Customs Organization (WCO) issued its 2018 Illicit Trade Report, the annual publication in which the Organization endeavours to quantify and map the situation concerning illicit markets in six key areas of Customs enforcement. 

Every year since 2012, the WCO has published its Illicit Trade Report with the aim of contributing to the study of the illicit trade phenomenon through robust and in-depth data analysis based on voluntary submissions of seizure data and case studies by its Member Customs administrations around the world. 

This year, the analysis provided in this Report is based on data collected from 154 Member administrations, compared to 135 the previous year.  The Report consists of six sections: Cultural Heritage; Drugs; Environment; Intellectual Property Rights, Health and Safety; and Revenue and Security. 

For the third year in a row, the WCO has partnered with the Center for Advanced Defense Studies (C4ADS), a Washington, D.C.-based non-profit organization dedicated to providing data-driven analysis and evidence-based reporting, thereby enriching readers’ experience with advanced data visualization technologies and enhanced data analysis.

“This analysis of 2018 illicit trafficking trends and patterns around the globe is aimed not only at supporting law enforcement planning activities, but also at future-proofing countries’ borders from the multitude of threats faced on a daily basis,” stressed the WCO Secretary General, Kunio Mikuriya. He also expressed his gratitude to the Customs administrations having reported their seizure data to the WCO CEN database.

Source: WCO, 19 December 2019

by Mike Poverello

OECD – Recommendations on Tightening Controls over Free Trade Zones

The Organisation for Economic Co-operation and Development (OECD) has drawn up recommendations on free trade zones (FTZs) in a bid to stop them being used for illicit trade.

The new guidance – published towards the end of last month – recognises the importance FTZs can play in facilitating globalised trade and stimulating economic growth, but also that they can make life easier for “increasingly sophisticated traffickers dealing in a range of prohibited goods and services including counterfeits.”

One problems with many FTZs is that they are operated by licensed private companies – or sometimes public-private partnerships – which can sometime lead to a disconnect between FTZ internal policies and the laws and regulations laid down by the governments in whose jurisdiction they operate.

The OECD notes also that some with some FTZ the authorities struggle to get physical access to the premises, while obtaining information on the activities of organisation operating within – such as the ownership of goods in transit – can be a challenge.

The result? Some economic operators may “take advantage of inadequate oversight, control and the lack of transparency in FTZ to commit trade fraud, intellectual property rights (IPR) infringement, smuggle contraband, facilitate the proliferation of weapons and launder the proceeds of crime.”

The agency’s recommendations reaffirm the need for law enforcement and other competent authorities to have direct supervision of trade through FTZs, which includes the right to demand access to information related to the production and movement of goods and carry out inspections.

Authorities must also ensure that the organisations operating FTZs are aware of their legal obligations to counter illicit trade.

It has also developed a voluntary Code of Conduct for Clean Free Trade Zone operators, including “strict control of consignments arriving from, or for which there is evidence of having transited through, FTZs that do not implement the code.”

“While FTZs produce economic benefits to their local economies, there is strong evidence that illicit trade (e.g. counterfeits, wildlife and arms) flows through them,” says the OECD.

There is “a positive correlation between the size of FTZs – in terms of employment and numbers of firms – and the value of illicit trade in counterfeits.”

Source: OECD

by Mike Poverello

WCO – Blockchain for Customs

WCO-Unveiling the Potential of Blockchain in CustomsThe World Customs Organization (WCO) has initiated work to identify possible case studies and uses of blockchain for Customs and other border agencies with a view to improving compliance, trade facilitation, and fraud detection (including curbing of illicit trade through the misuse of blockchains and Bitcoins), while touching on associated adjustments in legal and regulatory frameworks.

The objective of this research paper is to discuss ways in which Customs could leverage the power of blockchain and the extent to which the future of Customs could be shaped by the use of blockchain-based applications. Blockchain projects are currently in the beta testing phase in the finance sector (facilitating inter-banking system processes), insurance sector (preventing fraud and accelerating coverage) and international trade. With regard to the latter, this paper focuses its attention on two initiatives.

  • The first was launched by MAERSK-IBM as a global trade digitalization platform to which Customs administrations are expected to join.
  • A second initiative consists of an “information highway”, joining the National Trade Platform of Singapore and the Trade Finance Platform of Hong Kong, with a view to creating a Global Trade Connectivity Network (GTCN).

A conclusion that has been reached after discussion is that Customs would be able to have a broader and clearer picture of international trade particularly in terms of the movement of cargoes and consignments as being tied with the flow of capital. With blockchain-based applications, therefore, Customs could become a full-fledged border regulator with greater capabilities in the future.

Source: WCO, Y.Okazaki, June 2018

 

by Mike Poverello

Illicit Trade Rankings – 2018

Global Illicit Trade Environment Index.PNGThe Economist Intelligence Unit and the Transnational Alliance to Combat Illicit Trade (TRACIT) have released their Global Illicit Trade Environment Index, ranking 84 countries on the extent they enable or prevent illicit trade.

Finland ranks first in the Index with a score of 85.6 (out of 100), just barely ahead of the U.K. The rest of the top 10 includes a handful of European countries (Sweden, Austria, Netherlands, Denmark and Germany), along with the U.S., Australia and New Zealand. South Africa features 42nd in the list.

At the bottom of the Index ranking is a group of developing economies from all regions of the globe. Libya ranks last with a score of 8.4, and is joined by Iraq in 83rd place, scoring less than six points better. Filling out the bottom ten of the Index are: Myanmar, Laos, Venezuela, Cambodia, Kyrgyzstan, Belize and Ukraine.

Regionally, Europe (34 economies in the index), earns the highest the average score (68.0). The Asia-Pacific (21 economies) comes second at 56.0 and the Americas (19 economies), including the U.S. and Canada, is third at 54.0. The Middle East and Africa (10 economies) comes in last, with an average score of 50.0.

The Index is constructed on consideration of government policy, supply and demand, transparency and trade, and customs environment.

Download the White Paper here!

“The Index provides essential information to help policy makers better understand the regulatory environment and economic circumstances that encourage illicit trade,” said Jeffrey Hardy, Director-General at TRACIT. “Illicit trade not only hurts consumers and takes revenue away from governments, it threatens the security of nations by supporting transnational criminal syndicates and terrorist groups, and governments and the private sector must work together to fight it.”

TRACIT hopes that economies that are at the top will concentrate on implementation and enforcement and says they need to provide leadership to help countries with lower scores to build a better environment to prevent illicit trade.

TRACIT calls for Governments across the globe to:

  • Commit to illicit trade related treaties;
  • Tighten controls on money laundering;
  • Reduce corruption;
  • Rationalize tax policies;
  • Strengthen law enforcement efforts;
  • Protect intellectual property;
  • Enhance interagency cooperation;
  • Improve governance of FTZs;
  • Report and share statistical data across borders.

Source: The Economist, Illicit Trade Index, June 2018

by Mike Poverello

How SA’s abalone ends up on China’s plates

Abalone Shells

Oxpeckers’ environmental investigative journalist, Crystal Chow,  digs up the dirt on the illicit abalone trade.

Abalone tops the list of the most exquisite seafood in Chinese cuisine, and fresh South African abalone are always the first choice for feasts in Cantonese restaurants, where one fresh abalone alone can cost up to HK$2,000 (about R3,000). In recent years, the overfishing and smuggling of wild abalone has pushed this endemic species of the South African coast towards extinction.

“The South African wild abalone are heavier, and they are better than the farmed Japanese and Australian ones in terms of fresh flavour and texture,” said Chit-yu Lau, general manager of Ah Yat Abalones restaurant in Hong Kong. “Our fresh South African abalone are all imported through legitimate channels. The smuggled ones are usually dried, and are rare in Hong Kong.”

Nonetheless, the illicit abalone trade has been gathering significant attention from conservationists combating wildlife trafficking, who believe the profitable contraband market of abalone is linked to the black market of ivory and rhino horns – both of which are driven by high demand from the Chinese market. To read the full story Click here!

Source: oxpeckers.org, author – Chow. C, June 9, 2017.

by Mike Poverello

WCO to unveil future norms for e-commerce trade

Kunio Mikuriya - Hindu Times

The Hindu Times reports that the World Customs Organization (WCO) will soon bring out guidelines on ‘cross-border e-commerce’, which will focus on preventing illegal trade as well as addressing the challenges stemming from the ‘digital divide’, according to the WCO Secretary General Kunio Mikuriya.

In an interview to The Hindu on his recent India trip, Mr. Mikuriya said, “We are developing guidelines on e-commerce to see how best Customs can facilitate legitimate trade through that route.” He added, “We [the WCO] will address issues related to digital divide by looking into what is blocking e-commerce trade, and what kind of enabling environment is needed to support developing countries so that they benefit more from e-commerce.”

Terming e-commerce as a “game changer” in global trade that is benefiting small firms and consumers, he said the new guidelines would, however, include provisions to prevent illegal trade and illicit financial flows. This would be ensured through measures that would help strengthen information exchange between Customs administrations of countries as well as collaboration with other government agencies.

The WCO has a Working Group on e-Commerce and four sub-groups. To develop guidelines on cross-border e-commerce, the work packages identified are: ‘trade facilitation and simplification of procedures’, ‘safety and security’, ‘revenue collection’, and ‘measurement and analysis’. According to the UN body ‘UNCTAD’, the value of online trade jumped from $16 trillion to $22 trillion between 2013 and 2015.

“The continuous increase in online trading has raised questions regarding regulation, consumer protection, revenue collection and national security,” according to the WCO’s ‘Study Report on Cross-Border E-Commerce’ (March 2017). “These questions cannot be dealt with individually, but require a common, broad approach by the international Customs community, together with all relevant stakeholders as a whole.”

The WCO said more sophisticated equipment was needed to combat illicit trading through low-value shipments in the postal, express and cargo streams.

“Pre-arrival information on the consignment and the consignee could be of great importance in detecting and intercepting illicit trade. In addition, the improvement of non-intrusive inspection equipment and an increase in the number of trained staff could help to enhance the detection rate of illicit goods,” it said.

In an article on e-commerce, the WCO’s Director of Compliance and Facilitation Ana Hinojosa pointed out that in many countries, there were de minimisthresholds that allow low-value packages to enter a country with little or no duties or taxes, and with much more simplified procedures.

“This has led to clever manipulations by either the shipper or the consumer to avoid the extra charges by splitting invoices, undervaluing the invoices or mis-declaring the items altogether,” wrote Ms. Hinojosa. Another type of manipulation used was to classify the item as something else or claiming a different country of origin for the product, to take advantage of better duty or tax rates, the WCO official said, adding that these distortions had had an impact on many countries’ revenue collection volumes. Therefore, “some countries… are re-evaluating their established thresholds due to the significant implications that the changes brought about by these growing volumes of low-value small packages are having on their fiscal revenues,” observed Ms. Hinojosa. Source: The Hindu, 2 August 2017.

by Mike Poverello

WCO News – June 2016

WCO News June 2016 (1)The WCO has published the 80th edition of WCO News, the Organization’s flagship magazine aimed at the global Customs community.

This edition features a special dossier on illicit trade which gathers together articles focusing on the trafficking in various commodities such as cultural goods, small arms, fisheries products and pesticides, as well as articles highlighting the tools and technologies that can contribute to enhancing Customs enforcement capabilities.

Readers will also benefit from articles on how pollen analysis (palynology) has become an essential Customs forensic and intelligence tool in the United States, the challenges in accurately quantifying the illicit trade in tobacco, and why publishing time release study results is advantageous. Source: WCO

by Mike Poverello

Its Annual Budget time – Tobacco, Tax and the Black Market

Cigarettes+XXX+smokingThe nation awaits the 2015 Budget Speech with trepidation to know if income taxes will rise. But there is unanimous certainty there will, as per usual, be an increase in ‘Specific Excise Duties’. The only question is by how much? Taxation of cigarettes and tobacco products appears to be the path of least resistance for tax-collectors. It receives little backlash from the wider public (unlike e-tolls) and even support in some quarters.

The imposition of the so-called “sin taxes” on cigarettes and liquor products, in addition to generating significant fiscal revenues, does serve an economic purpose. Unlike normal goods and “necessity” products, cigarettes are not an essential good which people need to survive. As far back as the 1700s, Adam Smith averred “Sugar, rum, and tobacco, are commodities which are nowhere necessaries of life … are therefore extremely proper subjects of taxation.” Again, the notion of the importance of tobacco to the fiscal basket is exemplified in utmost simplicity and honesty – if a politician, or an emperor in this case can be believed –

This vice brings in one hundred million francs in taxes every year. I will certainly forbid it at once – as soon as you can name a virtue that brings in as much revenue [Napoleon III (1800s) – reply when asked to ban smoking]

Despite all the furore over public health and governments efforts to decrease the demand for cigarettes, South Africa is no different to other nations – annual tobacco revenues to the state coffers amounts to around R10 Billion! Another round of sin tax increases in the upcoming budget appears inevitable, and these increases are spawning a range of unintended (but not unexpected) consequences – the illicit trade. Source: Polity.org / DNA Economics.

by Mike Poverello

ZIM Police struggle to bust cigarette racket

CigarettesAn intricate web of smugglers, which reportedly involves manufacturers and middlemen, has been illegally carting cigarettes worth millions of dollars out of the country over the years, prejudicing the treasury of vital revenue.

Cigarette manufacturer, Savanna, has been fingered as one of the main culprits, while multinationals like BAT have also been mentioned in the illicit cross-border trade, mainly to South Africa.

Commonly smuggled brands include Remington Gold, Madison, Sevilles, Magazine Blue, Chelsea and Pacific Blue, manufactured by Savanna – which consistently denies smuggling.

A senior police sokesperson said “Even though we don’t always talk about it, we have managed to make significant arrests and the cases have been taken to court. The arrests include smuggling attempts at undesignated spots along the border and through official exit points such as Beitbridge”

A senior customs official told The Zimbabwean that cigarette smuggling, particularly through Beitbridge and Plumtree border posts, was difficult to arrest because of corruption.

“Policing at the border posts involves several agencies, namely the police, CIO (Central Intelligence Organisation), customs and special deployments from ZIMRA (Zimbabwe Revenue Authority). The problem is that these officers work in collaboration with the smugglers and haulage trucks and other containers carrying the cigarettes are cleared without proper checking. Hefty bribes are involved and the money is too tempting to resist,” said the customs official.

“You would be amazed how wealthy these officers have become. They have bought houses, luxury cars and send their children to expensive schools – yet their regular salaries are so low,” he added.

Immigration and customs officials, who also constantly liaise with their South African and Botswana counterparts and meet physically regularly, pretend to be checking the containers but clear them without completing the task, and know what the trucks and other carriers would be ferrying.

ZIMRA has four scanners for detecting contraband and an anti-smuggling team that also uses sniffer dogs, in addition to guard soldiers posted between the Zimbabwean and South African borders.

There are about 15 regular roadblocks along the Harare-Beitbridge road and 10 between Bulawayo and Plumtree that search trucks, buses and private cars. Despite this, the smuggling continues because of the collusion among the officials, said the source.

In early January, the Ferret team, a joint operation involving Zimbabwean and South African officers, intercepted a truckload of 790 Remington Gold cigarettes worth an estimated $119,000 destined for South Africa along the Masvingo-Beitbridge road. The smugglers were caught and arrested while offloading the cartons into small trucks. Source: The Zimbabwean

by Mike Poverello

South Africa leads the Continent in Illicit Cigarette Trade

illicit cigarettesSouth Africa leads Africa in the illicit trade in tobacco and is listed among the top five illicit markets globally, according to the Tobacco Institute of Southern Africa, which represents tobacco growers, leaf merchants, processors, manufacturers, importers and exporters of tobacco products in SA.

More than R20bn in tax revenue has been lost in SA since 2010 due to the illicit trade in tobacco, the institute’s CEO, Francois van der Merwe, said on Wednesday. The problem is severe in SA, but Zambia, Namibia and Swaziland have estimated incidences of well above the global average of between 10% and 12%.

Mr van der Merwe said efforts to combat the illicit trade in tobacco were complicated by the links that the business had with transnational organised crime syndicates, some of which funded terrorism.

“The problem runs far deeper than enormous losses of fiscal income that could have been put to good use to bolster government efforts in education, infrastructure development and poverty alleviation,” said Mr van der Merwe.

He was speaking ahead of a meeting later in November of global, regional and local law enforcement, along with revenue and customs agencies in Cape Town, who will seek better ways to collaborate in addressing the illicit tobacco trade in sub-Saharan Africa.

“We have seen first hand what effective focus on combating illicit trade by government can achieve,” said Mr van der Merwe, ascribing a decrease in the illicit tobacco trade, from 31% to 23% this year, to better collaboration.

“This is in the most part due to the excellent efforts by the various law enforcement, customs and revenue, Treasury and defence departments in the South African government.”

Mr Van der Merwe said that although the declining numbers in SA were encouraging, this did not bode well for the rest of the region as organised crime was a moving target prone to shifting its focus to “easier” markets when it was under attack.

He claimed that those who traded in illicit products, whether cigarettes, alcohol, textiles or DVDs, or committed environmental crimes such as rhino poaching or abalone smuggling were most often also involved in other serious crimes and even the funding of terrorism and money laundering. Source: BDLive.co.za

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