MINISTRY OF REVENUE AND CUSTOMS CUSTOMS & TRADE DIVISION Practical Applications of the Financial Programming Framework Apia Samoa Customs and Trade Division Application of Risk Assessment

OVERVIEW Background about Customs/ Importance of data Customs Modernization and Reform Risks and its Importance Risk Application by Tonga Customs Results of Risk Application Impact on Revenue Collection Way forward

TONGA CUSTOMS Functions for the Division Collect Revenue Border Protection Trade Facilitation Staff Nukua’lofa - 70 Officers Vava’u – 8 Officers

CUSTOMS STUCTURE

BORDERS DIVIDE CUSTOMS UNITE Customs worldwide is positioned strategically to administer Trade related matters, Border Security, Trade Facilitation and Revenue Collection. Information derived from these activities is essentially important for the effective administration of such activities. World Trade is increasing globally annually. Transportation and Travelers has also increased significantly over the years. This has required Customs to work more diligently to facilitate goods and people crossing our borders with the same or less resources especially in times of physical constraint. Importance of having relevant information is crucial so Customs can strategically operate efficiently under these circumstances and adopt policy to cope with these changes.

IMPORTANCE OF DATA COLLECTED BY CUSTOMS Provide accurate data for Customs decision making which includes Profiling, Risk Assessment, Forecasting, Policy proposal etc. Provide data to the Statistics department for compiling of their foreign Trade report. Provide Trade data to the MOFAT for Trade Policy monitoring and evaluation. Provide Revenue collection data to MOFNP for cash Flow Projections, Revenue Forgone etc. Provide Trade data to MCL to assist with Price Control Regulation. Provide Statistics to MOH for NCD policy monitoring, evaluation and review. Provide data to other Customs Administration Internationally.

CUSTOMS REFORM & MODENIZATION Capacity Building. Automation of Customs Procedures(CMS). Updating of laws/regulations. Removal of discretionary power. Introduction of Customs Brokers. Application of Risk Mgt Approach. Introducing of International Conventions (HS: WTOVa: Kyoto: Nairobi). Application of PCA. Right of appeal. Partnership with Trading Communities/Stakeholders. Creation of Committees (Participatory Approach). Recruiting qualified staff to key positions. Propose new structure.

DEFINITION OF RISK? “the chance of something happening that will have an impact on objectives. It is measured in terms of consequences and likelihood”

WHAT IS RISK? Event – Action Known – Identified – Planned Unknown – Unidentified – Unplanned Organizational Operational Personal The potential for non-compliance with Customs laws.

WHY RISK MANAGEMENT? The Management of Risk provides value to Customs Administration. Increased protection. Holding or reducing costs. Dependence on information systems. Changing legislation. Risk Management should provide us with an opportunity to solve the efficient control, simplified procedures and facilitated international trade and People Movement.

RISK MANAGEMENT For the effective management of risk there are a number of aspects that need to be recognised: Risk is present in all work. Everyone has a responsibility to manage risk. Management of risk requires encouragement and support. Requires a decision framework. Needs to be integrated throughout an organisation. Requires Quality Information. Adoption of Risk Management enables Customs to not only carry out its key responsibilities effectively but also organize its resources and deploy them in a manner so as to improve its overall performance.

RISK MANAGEMENT 20 years ago.... Customs Officers had a mentality of 100% inspection. 15 years ago.... Through Customs Reform and Modernization Officers were over Facilitating Trade. 3 years ago.... Introduction of Risk Assessment Framework in order to strike a balance between Trade Facilitation and the reform process.

EFFECTIVE CONTROL MECHANISM Customs Dilemma FACILITATION CONTROL Customs administrations therefore face the challenge of facilitating the movement of legitimate passengers and cargo while applying controls to detect Customs fraud and other offences. These competing interests mean that it is necessary to strike a proper balance between trade facilitation and law enforcement.

GOLDEN RULES OF RISK MANAGEMENT Support and enhance, not replace existing processes. Not all risks can be controlled. Risks are not static its always changing. Insurance is an option for treating some risks. Everyone must contribute to managing risk. Importance of planning. Integrate into all decisions. Those who assess risk should not manage risk.

PROFILING Risk Profiling System is incorporated into CMS The following Entities are profiled in the system which determines the final lane of a CD (ESAD) Taxpayer (TIN/CIN) Customs Broker Supplier Country (Export & Origin) Tariff Code Concession Code Profiling Point Thresholds 1201 + 1 - 1200

RANDOM PROFILING Imports Exports Green Lane Clients Yellow Lane Clients Exports All Exports are Red except for the King and the Diplomats

INSPECTION No Inspection Documents Inspection 1 - 1200 No Inspection Documents Inspection 1 - 1200 Documents Inspection + Goods Inspection 1201 +

INSPECTION Green (0) Vetting checks only to ensure complete documents are submitted and no minor error contain in the ESAD that would deter CMS from processing the ESAD Check by PCA at a later stage Yellow (1 – 1200) Document Inspections which involves checking of Tariff Classifications, Valuations, Excise Goods, Exemptions Applicability etc Red (1201 + ) Document Inspections Goods Inspections which involves checking for Restricted & Prohibited goods, Smuggled goods, Labeling Issues etc

PROCESS OVERVIEW

PROCESS OVERVIEW Daily Process Green Lane Entries Post Clearance Audit Risk Management Committee Risk Management & Intelligence Team Yellow Lane Entries One Stop Shop Team Red Lane Entries Physical Inspection Team

DETAILING THE PROCESS

FIRST REVIEW SECOND REVIEW

THIRD REVIEW FOURTH REVIEW

REVENUE TARGETS Vs ESTIMATE

FIRST SIX MONTHS ACTUALS vs. ESTIMATE

EXPECTED REVENUE INCREASE FY2016/17 Tariff Policy Proposal -$10 million plus but proposed $5 million due to the volume of imports Current Trends FY2015/16 – $7 million plus but proposed $5 million Total Revenue proposal submitted $10 million Financial year 2016/17

WAY FORWARD Improved inspection facilities and technology are the main infrastructure requirements to fully support the risk management module when it is introduced. There is an urgent need to update Customs legislation so as to comply with the international Customs standards and best practices as per the Revised Kyoto Convention requirements. Current Automated system cannot fully address business confidence of the trading community such as electronic submission of declarations and manifests and electronic payment for clearance of goods. Customs has not fully developed its intelligence capability at this stage, but through staff development and attachments to other organization local and international, this is slowly being developed. Lack of coordination among border agencies in enforcing trade facilitation. Connectivity of the current automated system to the Airport and Ports. Timeliness of filling vacant positions and recruitment of staff to specialized areas.

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