1. Module I What is Customs? Customs Awareness Training Series

2. What is Customs? Customs Awareness Training Series – Module I Module Overview This module on ‘What is Customs?’ will cover the following topics: Definition, Role and Activities of Customs Customs Organization and Actors Customs Documentation Legal Framework, Free Trade Areas and Customs Unions

3. What is Customs? Customs Awareness Training Series – Module I What is “Customs”? “Customs is the Government Service which is responsible for the administration of the Customs Law and the collection of duties & taxes and which also has the responsibility for the application of other laws and regulations relating to the importation, exportation movement or storage of goods.” -General Annex, Chapter 2 of the Revised Kyoto Convention Usually located within the Ministry of Finance, with strong relationship to enforcement agencies (police, military, etc.) Reflection of the authority in a country, region or location Either structured (in organized countries) or unstructured (in failed states) For most countries, no other single body fulfils role of collecting revenue while protecting society. ??? Did you know the first historical evidence proving the existence of customs appear on the Stele of King Necho of Egypt in 609 B.C. ???

4. What is Customs? Customs Awareness Training Series – Module I Purpose of Customs For Economic Reasons For Health and Environmental Reasons For Security and Political Reasons CONTROL Ensure compliance with national and international laws and with security requirements Facilitate participation in international trade Ensure contribution to national economy and economic competition Encourage investment and prevent movement of contraband

5. What is Customs? Customs Awareness Training Series – Module I Activities of Customs Collect duties and taxes (revenue collection) Control imports & exports Check for contraband Check for health & safety issues Protect society Perform security checks To carry out their function, Customs are granted with powers that often equals enforcement agencies: stop and search, personnel detention, seizure of goods, etc. However, they still need to respect the laws. No arbitrary methods should be allowed when interpreting the law, applying the law, acting as arbitrator of an appeal, ruling on forfeitures and penalties, etc.

6. What is Customs? Customs Awareness Training Series – Module I Who’s Who - Customs Customs Organisations Other Organisations Administration Officer Junior Clerk/Clerk Officer/Inspector Supervisor Senior Officer/Chief Inspector Departmental Manager Surveyor/Port Director Commissioner Director of Operations CEO/Board Level

7. What is Customs? Customs Awareness Training Series – Module I Takes receipt of the paperwork Ensures all paperwork is together Takes a look at the shipment and checks if suspicious Identifies consignments that need inspection Who’s Who - Customs Administrative Officer Looks at the paperwork and validates it Approves or rejects paperwork Physically looks at the goods and decides to check or seize the goods Officer / Inspector Senior Officer / Chief Acts as point of reference in case of disagreements, queries, seizure, refusal to release and makes a judgement Deals with questions from his own staff on dealings with certain consignments

8. What is Customs? Customs Awareness Training Series – Module I Who’s Who - Customs Sets local policy Implements group directives Sets budgets Sets and controls Key Performance Indicators for a particular location Sets profiles against historical shipments Surveyor / Port Director Is the main link at ministerial level Sets strategies Sets direction and policies for the country Sets and controls budgets for country level Commissioner

9. What is Customs? Customs Awareness Training Series – Module I Who’s Who - Contractors Act on behalf of the importer or exporter when it comes to any formality with the Customs authorities – classification of goods, document presentation, guarantee duties & taxes are paid and exemptions are applied Must normally qualify to obtain an operators’ licence from the relevant government authority or Customs Department In many countries, only officially licensed clearing agents are able to effect the customs clearance and obtain the release of goods Work on behalf of importer – important to keep good relationship with them, monitor their performance and update authorities of changes in agents Clearing Agents

10. What is Customs? Customs Awareness Training Series – Module I Who’s Who - Contractors Usually include the services of clearing agents but specialize in transport and storage services As with clearing agents, it is mandatory in some countries to obtain an official licence Their services are sometimes compulsory to obtain delivery and to export Services vary but often include: document handling, goods presentation, guaranteeing duty & tax payment, planning and costing of transport, storage, payment of freight-related fees, represent cargo interest in claims Some freight forwarders operate their own fleet of vehicles while others sub-contract Freight Forwarders

11. What is Customs? Customs Awareness Training Series – Module I Who’s Who - Contractors Important to select trustworthy and competent contractors as they represent the organization Criteria should include: Reputation with authorities, local population, other importers Efficiency in clearing/moving goods Experience and capacity, size and presence in country Cost of services and facilities Understanding of organization’s needs and principles Important to keep in mind that, since operators represent organizations, any negative behaviour can cause consequences for the organization – often up to 10 years later. Selecting Clearing Agents and Freight Forwarders

12. What is Customs? Customs Awareness Training Series – Module I Who’s Who - Contractors Some countries require imported goods to be certified for value and physical compliance before they are shipped. Inspection companies carry out inspections and issue those certificates. These companies are usually well established in the countries and regulated by the authorities Such a company is not an average agent that can be used for insurance purposes. However, sometimes, their report can be accepted by some insurance companies as additional evidence to support a cargo claim. Inspection Companies

13. What is Customs? Customs Awareness Training Series – Module I Customs Documentation Needed documentation varies between countries and between goods. Some documents must also be certified while other do not. The following is a list (not exhaustive) of common documents:  Import Licence (used to regulate import quantities)  Export Licence (permission to export certain goods)  Certificate of Origin (usually by manufacturer and provides origin proof)  Gift Certificate (certify goods are donated/free)  Fumigation Certificate (certify goods/packaging is fumigated)  Radiation Certificate (certify goods are free from radiation)  Phytosanitary Certificate (certify agricultural disease free)  Veterinary Health Certificate (certify certain foods are free from disease)  Non-GMO Certificate (certify no genetically modified organisms)  Inspection Certificate (certify inspection done)  Analysis Certificate (for medical and controlled drugs)  Packing List (full details of commodities)  Dangerous Good Declaration (regulates/classifies the carriage of dangerous goods for qualified people/authorities)

14. What is Customs? Customs Awareness Training Series – Module I Legal Framework Every state is sovereign and keeps control over all commodities imported, exported or placed in transit Customs implements laws related to the movement of goods by applying the national Customs Code (normally published in the form of an Parliamentary Act): General Principle  Covers the implementation of the country’s, commercial and other economic policy measures  Contains general rules and procedures which ensure the implementation of the Tariff and other measures introduced at policy level in connection with trade in goods between the country and other countries Tariff is a systematic list of all commodities plus the rates of duties applicable. It is published separately and reviewed regularly.

15. What is Customs? Customs Awareness Training Series – Module I Legal Framework All countries apply regulations on goods imported, exported or in transit and some of these are international norms (i.e. treaties, protocols, etc.) First international customs convention governing procedures created in November 1923 by the League of Nations. Governed until the Kyoto Convention of 1973 Geneva Nomenclature of 1931 (revised 1937) provided original basis tariff classification of the Harmonized System of today (21 sections, 97 chapters) – developed and maintained by the World Customs Organization In the last 50 years we have seen: Creation of the World Customs Organization Nairobi Convention, 1980 Conv. on the Harmonized Commodity Description/Coding, 1988 Convention on Temporary Admission, Istanbul Conv., 1993 Customs Convention on Containers, 1975 International Conv. On the Simplification and Harmonization of Customs Procedures (Kyoto Convention), Revised 1999 International Customs Regulations

16. What is Customs? Customs Awareness Training Series – Module I Legal Framework Countries are sovereign to control all commodities in and out of their territory. But, in the last decades, international trade treaties have been agreed and signed, in which countries have renounced/given up a part of their original competences when it comes to tariffs and quotas decisions, among others. For example: - GATT (currently WTO) - Free Trade Areas (e.g. EU, EFTA, NAFTA) - Customs Unions (e.g. EU, COMESA [in process]) Free Trade Areas and Customs Unions

17. What is Customs? Customs Awareness Training Series – Module I Free Trade Area – Customs Union

18. What is Customs? Customs Awareness Training Series – Module I Free Trade Area – Customs Union Free trade areas and customs unions are essential components towards economic integration – a term used to describe how different aspects between economies are integrated – of nation states. As integration increases, barriers to trade decrease. The most integrated economy today is the EU. The degree of economic integration can be categorized into six stages, with a free trade are and a customs union as two of the earlier stages: i.Preferential trading area ii.Free trade area iii.Customs union iv.Common market v.Economic and monetary union vi.Complete economic integration

19. What is Customs? Customs Awareness Training Series – Module I Customs Unions European integration process began with a Customs Union and the goal was to create a common market whereby there was a free trade area, developing in two directions:  Externally: eliminate all duties among member states and introduce a Common Customs Tariff (CCT) and a Common Commercial Policy (CCP)  Internally: create a frontier-free area whereby people, goods, services and money (four-fold) can move freely Example: European Economic Community

20. What is Customs? Customs Awareness Training Series – Module I Customs Unions  Step 1: Elimination of all customs duties and restrictions among member states Started with the creation of a tariff union (1968) to abolish all customs duties on trade between member states Common customs legislation (code) created (1992) to ensure goods are subject to the same provisions. This includes a common declaration form – SAD (Single Administrative Document) Additional trade laws needed to consolidate different legislations of member states and make them uniform Development of a Customs Union (European)

21. What is Customs? Customs Awareness Training Series – Module I Customs Unions  Step 2: Create a Common Customs Tariff and Common Commercial Policy Common Customs Tariff (CCT) is the external aspect of a union whereby the same rates apply to the same goods, regardless of the external border point of the Customs Union.  It is common to all members of the Union and depend on the economic sensitivity of products Common Commercial Policy (CCP) implies uniform conduct of trade relations with third countries. Development of a Customs Union (European)

22. What is Customs? Customs Awareness Training Series – Module I Matching Customs Terms Customs Nomenclature Harmonized System Combined Nomenclature Tariff Customs Declaration Goods Declaration Customs Procedure a)Systematic list of all commodities plus rates of duty applicable b)Standardized system of names and numbers for classifying products c)Indicating the customs procedure to be applied to goods and declaring particulars as required d)Statement or action giving information required by customs e)EEC customs nomenclature with 21 sections, 98 chapters and 8 digit code f)Customs nomenclature, with 21 sections, 97 chapters and a 6 digit code, maintained by the World Customs Organization g)Treatment applied by customs to goods (incl. transport) which are subject to control

23. What is Customs? Customs Awareness Training Series – Module I Matching Customs Terms - Answers Customs Nomenclature Harmonized System Combined Nomenclature Tariff Customs Declaration Goods Declaration Customs Procedure f) Customs nomenclature, with 21 sections, 97 chapters and a 6 digit code, maintained by the World Customs Organization b) Standardized system of names and numbers for classifying products g) Treatment applied by customs to goods (incl. transport) which are subject to control e) EEC customs nomenclature with 21 sections, 98 chapters and 8 digit code a) Systematic list of all commodities plus rates of duty applicable d) Statement or action giving information required by customs c) Statement indicating the customs procedure to be applied to goods and declaring particulars as required