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A Discussion Paper on Terror and Trade Facilitation extended to Ports World Sdn Bhd by the World Bank under the Global Partnership for Trade Facilitation Programme. Ports World is a member of the Programme.
The paper was submitted to the World Customs Organization by John Raven, which offers interesting suggestions as to some new controls and facilitation approaches.
Terrorist attacks in the USA offer a patent challenge to the main facilitation objective of the trouble-free passage of persons, goods and means of transport across national frontiers.
Governments and traders alike need to meet this challenge with a full understanding of the relationship between global and national political strategies and practical, on-the-ground responses.
While by no means the only or even the main focus of extra precaution controls at national frontiers, applied primarily by Customs, will have obvious importance.
It would be a major terrorist achievement if a severe intensification of traditional controls at key national frontiers in the global business network were to trigger a serious diminution in international trade, the engine of global economic growth and poverty alleviation.
A sudden rush of unfamiliar, often costly controls, leading to delays and distortions in global goods movements, might be absorbed without serious patent consequences in a period of general trade expansion, but will have far greater effects if they impinge on consumption, production and so employment, at a time of down-turn in market confidence.
Such an outcome would be particularly hard on developing countries and could aggravate the acute political and social tensions that generate and sustain terrorism.
All these considerations place a premium on effective yet unobstructive frontier controls.
It is very doubtful if this dual requirement can be met by any strengthening of national Customs controls, as currently administered.
In the face of a new, internationally active terrorism Governments and their electorates are entitled to look for entirely new methods of control, deploying all the resources and techniques of modern Customs practice to the very best total effect. That cannot be expected from Customs, however efficient, controlling goods and persons on the basis of information obtained at the time of arrival at national frontiers and operating within the constraints of existing legislation.
The patent urgent requirement is for a new international regulatory regime which will open the way for a global Customs co-operative network, operating aligned and inter-connected risk management systems and databases, to apply all relevant official frontier controls on goods and persons, in the light of complete origin destination information, provided well in advance of arrival.
Such arrangements for the integrated control of the entire international transaction, attended by harmonisation of information requirements and procedures, and assisted by well organised Customs-trade consultation and co-operation, would bring Customs practice into overdue alignment with modern business practice. Facing recent and future terrorist threats by a unique advance in the facilitation, as well as control, of international trade would be a resounding answer to the terrorist.
The WCO Role
The WCO is ideally placed to present and explain this new dimension in control to governments and to mobilises and motivate member administrations to form and operate the necessary new alliances and networks.
Furthermore, by a series of fortunate coincidences all the necessary elements for such an advance lie, ready to hand, at some point in the WCO overall work programme. Most are in a form, and at a stage of development, that would be particularly helpful to assembly and synergy within a rational, purposive Customs anti-terrorist strategy. They include -
Nairobi Convention
The legal and administrative groundwork for international Customs-to-Customs mutual assistance has been explored in experience with the Nairobi Convention. The limitations of multilateral agreement have been seen and appreciated. Some preliminary attention has been given to the more selective bilateral alternatives and to proposals for extending the scope of agreements beyond enforcement to cover the full range of Customs activities.
Risk Assessment
Risk assessment is now an accepted and central Customs practice in all major trading countries. Necessary experience and confidence has been acquired along with the development of reliable compliance testing and recording.
The revised Kyoto Convention and relevant Guidelines offer a solid regulatory background for future progress.
Data Exchanges
The practical development of Customs information exchanges has been greatly assisted by the G7 work on standard data requirements.
Responsibility for carrying this work forward has now passed to the WCO, which is in a uniquely favourable position to broaden its benefits and applications.
The concept of linking consignment data to origin-destination movement to shared export-import control is given new credibility by the availability of the WCO Unique Consignment Reference. Strengthening Customs co-operation, in the face of terrorism gives a new and potent reason for its early implementation.
Advance Information
The WCO Immediate Release Guidelines offer a modest but very significant pointer to effective Customs control in situations of extreme pressure.
The pressures leading to WCO work on the Guidelines came from the need to provide Customs with a new, effective method of exercising effective but user-friendly controls over a massive growth in the cross-border flow of small, low value consignments, primarily documents, in North America.
Similar, if much more urgent pressures may be discerned in the present need to meet the need for better anti-terrorist control, and here too, the principles adopted in the Guidelines should also provide improved conditions for the general body of operators.
It is usefully significant that once the express situation began to be examined, in detail, starting some ten years ago, it was speedily realised that the concept of granting immediate release to consignments carried in compliant trading systems and preceded by the submission of prescribed control data, at a specified time in advance of the arrival of the goods, had implications and advantages for both Customs and carriers, stretching well beyond the express delivery industry.
These key principles are now included in the revised Kyoto text and the Guidelines, themselves, are under review in the Permanent Technical Committee. It would be timely to push them, in combination with the other elements set out elsewhere in this paper, to the forefront of WCO anti-terrorist planning.
The highly innovative IATA concept of Advance Passenger Information is a powerful piece of supporting evidence for the principles set out in the Immediate Release Guidelines. Given the special security risks associated with air passengers we should look for strong early inter-governmental support for this initiative, which would provide the WCO with very useful arguments for developing common advance information principles and procedures, for both cargo and passengers, within a single border control system.
Automation
These proposals for a range of interlocking advances, within a co-operative global network, dependent on real-time Customs-to-Customs and Customs-carrier-trader communication, and complex, constantly adjusted risk management systems, are only practicable because of the resources of modern information technology and the extent to which its main elements are already familiar to, and employed by, leading Customs services.
The now considerable expertise assembled in specialised WCO Committees and Working Groups, especially in respect of Customs use of e-commerce, is a firm base from which the Secretariat can move all relevant elements in the overall WCO work programme into optimal relationship, within a coherent and integrated anti-terrorist strategy.
Convergence of Official Controls
Trade has long advocated the convergence of all official frontier controls in the hands of a single administrative agency. Customs are the obvious choice for this task, given their unrivalled experience of trade operations and requirements.
The need for converged controls and the Customs claim for central management q are heightened by recent terrorist activities.
Trade would be highly appreciative if the WCO could facilitate and give added value to convergence by extending its existing consultative interface on traditional Customs operations to include the implementation of other frontier controls.
Obstacles
The WCO, supported by international business, needs to move forward rapidly enough to pre-empt what could be early Government and inter-governmental decisions to introduce new Customs controls without adequate concern for professional Customs experience or legitimate trade requirements.
Prompt, early WCO action to offer governments a well-presented package of improved controls, adding up to a patent leap forward in Customs practice, could secure major advantages of political will and associated funding, which have been notably lacking at many points, and for long periods, in the tedious and banal business of improving individual control and facilitation elements.
It will be important, for credibility, to supplement maximum visible progress with the new control strategy in those Customs and business sectors, where this is immediately feasible, with an associated programme to extend benefits and standards to the wider Customs and trade communities as soon as possible. Main likely difficulties include -
Integrity
Apart from major differences in efficiency between individual Customs services, which could be addressed reasonably rapidly under an accelerated and broadened technical assistance programme, there are still numerous countries in which standards of commercial and official integrity are such that their Customs cannot safely be included in any effective international co-operative control network.
The necessary exclusion of these states from any worthwhile Customs co-operative network faces governments and business with a serious obstacle to normal progress towards modernisation and reform.
Seen in the new light of the need for an effective global anti-terrorist coalition, this problem becomes much more noteworthy and immediate.
It would be negative and defeatist, however, to see it as invalidating the concept of co-operative Customs controls set out in this paper.
The response should be a strengthening of the work underway in OECD, the World Bank and Transparency International to attack and defeat official and commercial corruption, which, apart from its specific Customs manifestations, has obvious potential links to terrorism and associated money laundering.
Meanwhile, the WCO and other interested parties should press ahead with a constructive co-operative strategy, knowing that the bulk of world trade passes between basically honest Customs services and that a very high proportion is managed and carried by legitimate, compliant businesses.
It would be timely, in addition, to see how far weaker Customs links in a potentially extended network could be strengthened by large-scale staff exchanges, individual secondments, the negotiation of special and temporary extra-territorial powers to enable advanced Customs to ensure end-to-end controls and the use, within Customs co-operative agreements, of specialised private control agencies.
Legal Constraints
Early experience with the Integrated Transaction prototype demonstrated some serious legal difficulties in implementing a full exchange of transaction data between individual Customs services. Some data, required by Customs, are furnished under strict legislative requirements to preserve confidentiality for both public and business purposes.
In addition, there are now severe restrictions in international data flows under a range of national and regional data privacy laws.
Some of these difficulties could be overcome by multinational businesses that might be prepared to supply the same data, under the same conditions of legal liability to both Customs services, so eliminating the notion of international information movement.
The general use of Customs-to-Customs data interchange, however, which is an essential element in the proposed co-operative anti-terrorist strategy, is best solved by concerted international agreement on specified exceptions to existing and future legal constraints on cross-border data flows.
The WCO should highlight this need in their discussions and negotiations with other parties to the strategy.
Discrimination
The development of working examples of better trade facilitation within a substantially improved system of Customs control, as set out in this paper; will require complete confidence between all concerned.
The nature of the proposal, dependent as it is on risk-assessment and easy data interchange between Customs and business systems, requires that all participants can deploy a high-degree of automation and expertise in its use and extension for novel purposes. There will be substantial associated financial costs, beyond the available resources of smaller Customs and business operators.
In addition anyone familiar with a prototype project will appreciate the practical limits imposed on the number of participants in a situation where consultation may be continuous and decisions have to be made very rapidly.
All these considerations might limit participation in initial applications of the strategy in ways that could seem discriminatory. This could give rise to complaints that poorer Customs and small and medium sized businesses were being by-passed and neglected.
This factor, which should be foreseen from the outset, provides a powerful incentive to rapid progress. It also points to a need for sensitive consultation, in general terms, outside the project process, at all stages of development, with potentially interested parties.
The most effective justification for what may seem discrimination, however, will be a very rapid extension and adaptation for broad use, of the experience and benefits gained from work with limited participants.
The WCO is ideally fitted to carry out such cross-fertilisation at all stages of progress.
Means and Mechanisms
The WCO is the logical base from which to open up the concept of a new dimension in Customs control, based on the premise that the arrival of goods or persons at a border is now completely outdated and unreliable as a point at which to take informed control decisions.
"The border is too late" should be a well-publicised WCO slogan. In moving to make essential changes in time to preserve the initiative for Customs, the WCO and trade will need to -
· Convince governments that global anti-terrorist strategy can be aided
by an entirely new concept of co-operative Customs control
· Convince them that this should, and can, enable legitimate trade to
make a full and unobstructed contribution to global prosperity and
poverty alleviation
· Persuade them to make the necessary legal changes
· Convince WCO member administrations of the need for, and
feasibility of, a new operational Customs community to manage the
global control network
· Provide, within the WCO, the necessary overall management to
bring all the relevant technical elements together across individual
technical committees.
· Make appropriate revisions to the WCO Strategic Plan, relating the
concept to such across-the-board factors as e-commerce, integrity
and Customs-Business Partnership.
· Provide and promote necessary, effective, consultation with trade,
centrally and at other points in the Customs network
The main features of this concept should be fed into prospective WTO discussions on trade facilitation. The extra element of political will, derived from justified global inter-governmental concern at terrorism, can add an entirely new impetus to the calls for Customs-to-Customs co-operation and improved procedures, conveniently set out in the revised Kyoto Convention.
In the longer term Customs and the trade should combine to urge regulation authorities, including, especially, ICAO, the EU Commission and relevant US Government Departments, to take every reasonable opportunity to bring those business interests most directly affected by regulatory changes into early consultation, particularly in respect of the timing and scope of proposed new controls.
Trade organisations will have to take up their own positions, within a new security environment, as well as giving full support to sound control measures by Customs and other official agencies.
Finally, the World Bank and other development agencies could amend their lending and aid programmes to place increased emphasis on good governance and official integrity, especially in Customs services, as a major contribution to anti-terrorist strategy. They should also take account of the need to introduce automation into client Customs services on a basis that will facilitate and encourage eventual co-operation with other Customs services within a developing global mutual assistance network.
John Raven October 2001
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