Promoting Integrity in Customs

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Alvaro Fernández Acebes

WCO Integrity development expert

 

 

Role of Customs

Modern Customs administrations around the world play a key role not only in trade facilitation and revenue collection but also in other “non-traditional” Customs areas such as community protection and national security. Terrorism, money laundering, proliferation of improvised explosive devices, trafficking of arms, and illicit diversion of dual-use commodities pose a serious threat not only to the economic development of countries across the globe but also to the security and safety of people.

Customs services are in a position to manage cross-border flows of goods and means of transport to ensure compliance with the law. Therefore, apart from facilitating trade and promoting economic growth, Customs should detect and prevent trafficking of restricted and prohibited goods.

Risks

A lack of integrity in Customs may pose a threat to global trade, international security and the wellbeing of all citizens. Integrity is a crosscutting issue in nature and a prerequisite for the proper functioning of a Customs Administration. In other words, the presence of corruption can severely limit Customs capacity to effectively accomplish its mission.

It does not mean that there is only corruption in Customs. The total cost of corruption around the world amounts to four to five percent of global GDP, nearly $2.6 trillion USD, according to the World Economic Forum.

“Corruption, embezzlement, fraud, these are all characteristics which exist everywhere. It is regrettably the way human nature functions, whether we like it or not. What successful economies do is keep it to a minimum. No one has ever eliminated any of that stuff” .

Concepts

Corruption is a complex phenomenon with negative consequences on economic growth, health, safety and security. It should be envisaged as a crime that is punishable by the law, and not as a fault, that is a matter of morality.

On the other hand, Integrity is more than simply the absence of corruption. Rather, it involves developing values, which give effect to the organization’s aims and objectives.

As pointed out above, corruption exist everywhere, not only in Customs. However, Customs Administrations are often more exposed to certain Corruption practices than other governmental/private institutions due to some specific factors such as:

  • Contacts with goods, people and money;
  • Important decisions on duty/tax or admissibility of goods;
  • Social networks/expectations;
  • Customs personnel often work in remote border stations; and
  • Clearance of many goods is time sensitive.


The approach of the World Customs Organization (WCO)

Enhancing integrity remains one of the priorities of the World Customs Organization’s (WCO)  strategic agenda for leading Member administrations to remain relevant to the demands of the 21st Century global environment. The WCO approach is that corruption must not be seen as a separate/standalone problem but as the focal point of Customs reforms.

Corruption does not stop at national borders. Sharing information internationally can be a powerful strategy to identify and prosecute corruption. The WCO and Members discussed the key factors to prevent corruption and increase the level of integrity in Customs and concluded the Revised Arusha Declaration (RAD) in 2003. This Declaration contains specific elements that are designed to improve the efficiency of Member administrations and reduce or eliminate opportunities for corruption.

The RAD, for instance, establishes “Leadership” and “Transparency” as two key elements against corruption. There needs to be a firm commitment at the highest political level to maintaining a high standard of integrity throughout the civil service and particularly in Tax and Customs. In addition, increasing transparency, accountability and maintaining an open and honest relationship with clients, private companies and stakeholders in general is crucial to maintaining public trust and confidence in the performance of their functions.

Moreover, other of the important elements of the RAD is “Relationship with the private sector”. Economic operators and stakeholders should be in a position to accept an appropriate level of responsibility and accountability for integrity problems and the identification and implementation of practical solutions.

In that connection, in June 2005 the WCO Council adopted the SAFE Framework of Standards to Secure and Facilitate Global Trade. The Framework has been updated in 2018 including provisions on the Authorized Economical Operators (AEOs) programme and also with respect to strengthening cooperation between Customs administrations, for example, through the exchange of information and the mutual recognition of AEOs, based on mutual trust and transparency.

Future challenges

Customs administrations worldwide have now come to appreciate, more than ever before, the enormity of the fight against corruption.

Even though many Customs administrations have made significant progress in curbing corruption, new corruption threats are always emerging. The old threats are also changing to present even more complex challenges which seem to have no end in sight for Customs.

Automation, artificial intelligence, e-commerce, cryptocurrencies, Blockchain technologies, etc., are, potentially, new tools that can make an important contribution to reducing face-to-face interaction and discretionary practices in the Customs Control.

However, at the same time, these new technologies would also force to dramatic future changes in the Customs procedures and systems. Cross-border e-commerce, for instance, brings high volumes of low value and small parcels, participation of unknown players, return/refund processes, and a time-sensitive goods flow. Inefficient controls or inappropriate regulations would be breeding ground for illegal trade practices.

Customs and stakeholders

The Customs community, in general, understands that the challenge of upholding integrity must be tackled in partnership with stakeholders. Authorized Economic Operators (AEO) and, in general, all the Private Sector community should be involved in the strategies of the Administrations to promote Integrity in Customs.

In this context, it should be noted that Pillar 2 (“Customs-to-Business”) of the SAFE Framework establishes the criteria by which businesses in the supply chain can obtain authorized status as a security partner.

Partnership and Communication are guiding Customs-to-Business joint efforts. Standard 5 of Pillar 2, on Communication, establishes that “the Customs administration will regularly update Customs-Business partnership programmes to promote minimum security standards and supply chain security best practices. Customs should establish, in consultation with an AEO or its representatives, procedures to be followed in the event of queries or suspected Customs offences, including providing the AEO or its agents with contact information where appropriate Customs officials can be contacted in an emergency”.

In that connection, it is important to keep in mind that many forms of corruption require the active cooperation of external partners as recognized in most international Declarations and Conventions on the matter (e.g., United Nations (UN) Declaration against Corruption and Bribery in International Commercial Transactions; OCDE Convention on Combating Bribery of Foreign Public Officials in International Business Transactions).

Customs Administrations should foster an open, transparent and productive relationship with the Private Sector, including AEOs. While by no means an exhaustive collection of best practice, it is worth noting some successful experiences, such as the establishment of Memoranda of Understanding between Customs Administrations and stakeholders or the development of codes of conduct for the Private Sector, as elements of an Integrity Strategy to fight against corruption.

AEOs and in general stakeholders with that privileged status may benefit from Customs simplifications, quicker movement of cargo through Customs, and increased business opportunities. However, for the successful establishment of an AEO Programme it would be advisable the implementation of an Integrity Strategy to diminish any corruption concern.

Conclusion

Corruption is a complex and hidden phenomenon, which is difficult to be detected, quantified or prosecuted. There is no a single standard solution to reduce corruption in Customs Administrations but rather a collection of tailor-made measures adapted to the different realities and contexts of the Countries and based on an appropriate diagnostic of the situation. Prioritizing efforts to maximize impact and regular evaluation of the outcomes/impact of the measures, based on performance indicators, should be also part of any strategy against corruption.

Therefore, establishing appropriate diagnostics and “base lines” of the situation of the Customs Administrations concerned would be a prerequisite for approaching strategies in order to promote integrity.

The diagnosis should involve not only Audit and Investigation but also other sensitive areas such as Human Resources, Automation, Management, Communication as well as the views of all the stakeholders. Fighting corruption should, therefore, be understood in the context of a global reform and modernization of Customs. In addition, Customs should encourage economic operators to accept appropriate levels of responsibility for integrity problems.

Last, but not least, it is important to keep in mind that the absence of corruption is neither a starting point, nor a goal; it is a way of working in Customs. When fighting corruption and promoting integrity, the reward is in the journey itself, not the destination!

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Professors Andres Rhode and Alvaro Fernández Acebes will be leading the theme “Trade Facilitation and Integrity” at the III AEO International Congress “AEO in Gloabl Supply Chains: Agility, Security, Integrity”. Do not miss their key note addresses on 26th June 2019, in Barcelona.

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