International Convention on Mutual Administrative Assistance in Customs Matters: briefing

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Finance Standing Committee

13 March 2006
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Meeting report

FINANCE PORTFOLIO COMMITTEE
14 March 2006
INTERNATIONAL CONVENTION ON MUTUAL ADMINISTRATIVE ASSISTANCE IN CUSTOMS MATTERS: BRIEFING

Chairperson:
Mr N Nene (ANC)

Documents Handed Out:
Presentation on International Convention on Mutual Administrative Assistance in Customs Matters
Convention available at World Customs Organisation website

SUMMARY
The Committee was told that it was important to have a proper legal network in place that would enable one to give and receive information on criminal activities that were taking place. The Convention would provide a binding and enabling legal instrument for reciprocal co-operation between customs administrations. Contracting parties would accept the obligation to provide each other with administrative assistance under the terms of the Convention. All contracting parties would be expected to supply immediate assistance on own initiative in cases of substantial damage to each other. Information requested and received from contracting parties could only be used for the purposes for which it was provided.

The Committee raised the following questions, amongst others, before approving accession to this Convention:
- What were the problems created by unilateral decisions and actions taken by some countries in relation to the conventions and treaties?
- What were the impacts of the conventions on developing countries and if the instruments had been used to undermine some countries.
- Whether SARS was able to get other law enforcement agencies to deal with some of the problems it was experiencing.

MINUTES
Mr E Kieck (Senior Manager: International Relations) and Ms Singh (Manager: International Customs) represented the South African Revenue Services. Mr Kieck made the presentation. [See document attached]. The Convention was adopted in June 2003 by the Council of the World Customs Organisation (WCO). South Africa was in a position to accede to the Convention. The missions of the Convention were to simplify and facilitate international trade and to facilitate co-operation between customs administrations. It was driven by smuggling, international terrorism, growth in international trade and new trading patterns. There was pressure to facilitate trade and to secure international supply chains.

Discussion
Mr B Mkhaliphi (ANC) said that SARS had employed a number as anti-smuggling officials. He asked what was the status of the anti-smuggling squad in relation to inland matters, for instance, goods that had been declared when entering the country but found to be of less value and quantity when exiting our borders. He also asked what were the problems created by unilateral decisions and actions taken by some countries in relation to the conventions and treaties?

Mr Kieck replied that SARS had approximately 2600 customs officers and 200 of them were anti-smuggling officers. The Commissioner had announced the launch of the Customs Border Control. The unit would do the current anti-smuggling operations and would also be responsible for the integrity of the customs control areas. The first unit of newly trained Customs Border Control officers would be deployed around June.

With respect to inland matters he said that SARS's primary focus area was goods that had entered or left the country. The movement of goods occurred at designated ports of entry and not all borders were designated as borders through which one could bring goods into the country. This did not mean that SARS did not know what was happening in other ports of entry. The powers that SARS had through the Customs and Excise Act applied more to customs control areas. This was one of the reasons why even inland warehouses and depots would be classified as customs control areas. There was a transit system and all goods (whether destined for South Africa or any other country) had to be cleared so that they were not diverted into our markets without customs duties or value added tax being paid on them. For example, all goods coming in through Durban destined for Botswana had to be cleared at the Durban port. The owner of the goods did not have to pay duties and taxes because they were not destined for South Africa. However, SARS would require a bond or deposit from the person responsible for the removal of the goods. The person would get the deposit back once the goods had been removed from the country. SARS would hold onto the bond should the goods not be removed and would then enquire as to what had happened to the goods.

On unilateral decisions by some countries, he said that the international trade environment was very connected and very sensitive to these types of things because they had negative impacts on a country. This was one reason why SARS had championed (in the WCO) the development of one international standard. Having more international standards meant additional costs and it was not in South Africa's favour (as an export country) to have different countries coming with different customs standards. The big players could live with coming up with new standards. Unilateral decisions and actions were detrimental to emerging countries.

Mr J Malahlela (ANC) said that there were legal agencies like the Special Investigating Unit and the Asset Forfeiture Unit. He asked if there were situations where SARS was able to get other law enforcement agencies to deal with some of the problems it was experiencing. Were there any turf battles between SARS and other law enforcement agencies? He also asked if some of the prosecutions that SARS had initiated had contributed to the development of jurisprudence in the country. He said that risk management seemed to be the alpha and omega of what SARS did. The question was what was South Africa's capacity in this regard. There were quite a number of Departments that had internal risk management structures. One could ask if there was reliance in each other so as to develop this field. Lastly, he asked what were the impacts of the conventions on developing countries and if the instruments had been used to undermine some countries. Some countries might not have the capacity that South Africa had.

Mr Kieck replied that there was a number of agencies with responsibilities in our borders. SARS was responsible for trade administration or ensuring that the movement of goods across the borders complied with national laws and policies. The Department of Home Affairs was responsible for processing people. Border police also had a presence in our borders. Different supporting Departments like Health and Public Works were also involved. SARS was a member of the Justice, Crime Prevention and Security cluster. It was represented by different heads in Border Control Operations Co-ordinating Committee (BCOCC) (an organ of the cluster) by the Commissioner. The BCOCC had a number of working groups that looked at things like infrastructure at the borders. There was co-operation at strategic and technical levels. There were structures and mechanisms in place to ensure proper co-ordination.

He said that SARS had been engaged in a number of cases and in most cases people had paid fines instead of going to court. There were instances where it had been challenged. Risk management was one of the most important tools in any customs administration over the world. There was need of a methodology to identify the risks given the volume of documents that passed through customs administrations. Risks differed from country to country. For instance, America would be more concerned about weapons of mass destruction being imported into the country whilst South Africa would be concerned with the evasion of high duties on sensitive goods and round tripping or ghosts exports. SARS had the Integrated Customs Risk Assessment system that enabled it to change risk factors depending on people, clearing agents and commodities.

With regard to impact on developing countries, he said that the United Nations Economic Commission for Africa (UNECA) had done a study that found that the average Sub-Saharan African country relied on 35% of customs duties for total government revenue. In some countries the figure was as high as 70%. This was because customs duty was a relatively easy tax to collect. A customs duty was at the same time a very easy tax to avoid should one put all ducks in a row. The convention would strengthen the hands of some of the countries. Most of the requests for information that SARS received were from fellow African countries.

Mr A Moloto (ANC) asked what was the difference between surveillance and hot pursuit. He gave an example wherein South Africa had this type of an agreement with Zimbabwe, for instance, but had not signed an extradition agreement with it and a crime was committed. How would South Africa handle the extradition and prosecution of the offender?

Mr Kieck replied that a hot pursuit would be a case wherein a suspect had crossed the border forcing SARS to go after him or her. There would still be a need to comply with normal border formalities but where this was not possible, one could still cross the border and inform the authorities upon entering the country. Surveillance applied to undercover operations. There was a slight between the two. Extradition was dealt with in terms of another convention.

Ms J Fubbs (ANC) asked for an explanation of Article 20(3). The convention was taking the country but its requirements seemed to involved increased capacity in the equipment and technology and human resources. Not all of our border posts had the capacity and even some of our neighbouring countries did not have the required capacity. The question how effective the convention would be.

Mr Kieck replied that there was a need for capacity in order to apply the convention. SARS was engaged in helping other countries to set up international relations units to deal with information requests.

The Committee recommended that Parliament approve the Convention.

The meeting was adjourned.

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