Convention on Mutual Administrative Assistance in Customs Matters: SA Revenue Services briefing

NCOP Finance

31 May 2006
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Meeting Summary

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Meeting report


31 May 2006

Mr T Ralane (ANC) (Free State)

Documents handed out:
International Convention on Mutual Administrative Assistance in Customs Matters (2003)

Explanatory Memorandum of Convention on Mutual Administrative Assistance in Customs Matters
SA Revenue Services briefing
Draft Committee Annual Report

The South African Revenue Services (SARS) briefed Members on important elements of the Johannesburg Convention being considered for ratification. The meeting also looked at further aspects of customs-related international obligations. The delegation attempted to persuade the Committee to support the Johannesburg Convention. Much emphasis was placed on the increase in volume and changes in type of trade. There was a need to redefine customs and consider the employment and ‘upskilling’ of customs officials. The meeting agreed to support the ratification of the Convention.

The meeting also took on the Committee Annual Report for later personal review. The Chairperson suggested that Members present their comments at the next meeting before likely adoption.

SA Revenue Services briefing
The presentation was conducted by Mr Giorgio Radesich, SARS Policy Unit and Ms Varsha Singh, Manager of International Customs from the International Relations Unit.

Mr Radesich emphasised that there were 48 points of border entry and much trade movement with the Southern African Customs Union (SACU) countries. The purpose of the Convention was to redefine the role of customs so that it not only related to security issues, but also to trade facilitation. The coming together of key stakeholders was essential. He illustrated the complexity of customs and the need to employ people with the necessary knowledge in processes of trade.

There was a need to balance the interest of trade and security in every province at all 48 points of entry. There were only two provinces without international land borders, namely Gauteng and the Western Cape. It was a challenge to improve infrastructure at certain border posts and this would become more relevant in the future

The driving force behind this Convention was the World Customs Organisation (WCO), where South Africa enjoyed a strong strategic position. The need for the Convention was based on numerous factors. Many changes had occurred, both commercially and electronically, regarding the movement of high-value goods. There was a need for a specific calibre of people to deal with this. Officials would need an economic grasp of customs in relation to the types of goods and the type of trade. Due to globalisation, there was also a growing inequality between countries. There was a growing demand for consumer goods and therefore a need for more effective anti-smuggling measures.

Ms Singh continued that from a multilateral perspective, there were two main international responses. The first was the WCO and the Kyoto Convention. The Johannesburg Convention was also built around the Frameworks of Standards to facilitate trade. There was a need for good networks with other customs administrations. Information from the exporting country could possibly then be used in the risk analysis process in South Africa. For example, at the Durban Port, American customs officials were profiling goods moving between the two countries. Non-intrusive equipment and scanners should be used to assist in trade facilitation. There was also the identification of ‘Authorised Economic Operators’, where different status could be given to clients in a whole supply chain. The concept of a ‘single window’ sought to ensure that there was only one point of entry where information was shared with other stakeholders, and a process of integrated inspection.

Mr Radesich then discussed the Legal Enabling Framework. To date, there had been an accession to the Revised Kyoto Convention. Currently there was an intention to implement the Framework of Standards, as a working blueprint document on customs requirements. Various Multilateral Assistance Agreements had been signed to support customs-to-customs networks.

Ms Singh went on to discuss customs-to-business partnerships, such as the accreditation system. For example, clearing agents could ensure goods complied with customs standards, and in return offered a short timeframe incentive. Hygienic inspections were carried out on a periodical basis. If there were no compliance, then sanctions would be attached.

Other important elements were visibility issues, a ‘mindset change’, and recognition of wider discretionary powers. The Discipline issue needs to be addressed and how the image of officials had to be portrayed, in the coming months there would be dogs as well as scanners and non-intrusive equipment at ports of entry.

Ms Singh elaborated on the fourth objective of the Convention, which looks at expanding customs focus because traditionally the focus was on imports, however there was a need to focus on security when goods were leaving the country as well as goods that were transiting in our country. Therefore customs had to be looked at in terms of the whole supply chain. Commenting on the benefits in terms of accession, it was said that the Convention would provide the legal basis to use information in court proceedings, currently there was no such basis. This would be useful especially in regard to Valuation fraud, which was becoming more prominent.

The obligatory core provisions would only to be used for the purpose that it was provided for, however there was an exception in terms of Article 24, where data elements could be exchanged between customs administrations there were numerous data elements in a customs bill of entry, in drafting the Convention 27 data elements had been identified which were the most important to be used in risk assessment.

There was an incentive to allow for more modern methods of customs corporations, includes cross-border surveillance, joint control and investigation. The joint investigation team had been created to address issues of smuggling such as the smuggling of cigarettes and also combating criminal syndicates.

Mr Radesich elaborated on an important selling point of the Convention, which also looks at the possibility of co-operation between SA officials and the importing or exporting country, whereby SA official could go abroad and implement SA law at borders and vice versa, this relates to the concept of ‘one–stop’ borderposts, and was largely dependant on whether SA was able to do the work abroad.

The Chairperson was particularly concerned about female officials being vulnerable as no security was provided. The critical issues were sharing information across borders and dealing with criminal activities.

Mr Robertson (ANC) asked about the percentage of counterfeited imports and the percentage of contraband goods confiscated. He also enquired about corruption at warehouses in Johannesburg, where it had been alleged that illegal goods were being cleared by customs officials, such as with Digital Video Disks (DVDs) from India. How was this being monitored? A further question related to the BMW motorcar issue in Johannesburg.

Ms Singh replied that in terms of their risk-based approach, a number of rules regarding counterfeit goods were important. There was a 6% target rate on ‘red’ goods; and a target of 94% on smuggled goods at the point of entry. About 40 - 50% of counterfeit goods were found at points of entry. Currently teams were also visiting importers’ premises and checking their accounts books. A percentage of counterfeit goods were found on post-clearance inspections.

In terms of the Johannesburg Convention, there were regular meetings with SACU. The Convention would provide exact information on goods to SACU Members. With regards to corruption, an Ethics Office at SARS conducted regular checks on staff. All customs officials were required to sign an Integrity Pledge. If any members were found not to meet the ethical standards, their names would be published. This was done on a regular basis. She was not able to provide any information on the BMW case.

Ms Robinson (DA) sought clarity on the one-stop borderposts. Mr Radesich replied that the idea was that there be only one stop and both countries did whatever they had to in terms of the cargo. The way in which it manifested depended on the port of entry. There could be officials from both countries at the same port and where forms would only be filled in on one occasion. In order to achieve this, there would have to be an assessment. The first challenge would entail harmonising the laws between the two countries and setting standards on how the job could be done between the two officials. The WCO Framework of Standards assisted in this regard. SARS had already promulgated legislation where the commissioner could permit that SARS officials work in other countries and allow for reciprocity.

Ms A Mchunu (ANC) asked why Cape Town and Richards Bay had not been mentioned in the presentation. Mr Radesich apologised for his oversight, and acknowledged that they were equally important.

Mr Mkhaliphi asked how monitoring of goods transiting the country was taking place. The issue of security was raised. Some Members asked about the effects of unilateralism.

Mr Radesich noted that the questions of security and unilateralism were important. The Framework of Standards had been accepted worldwide. The WCO had not succumbed to any unilateralism. This could clearly be seen in working committees and its Policy Committee, particularly regarding security standards.

Mr Sogoni questioned the effect of the Kyoto Convention if the USA did not support it. A second question related to abuses of the customs-to-business system. A further issue was the question of customs officials being vulnerable to crime themselves.

Mr Radesich replied that the USA was in fact the 40th signatory to the Convention. The Accreditation System had defined criteria in order to prevent abuse of the customs-to-business arrangements. The system checked whether the official had fulfilled these criteria, and there was a system in place for staff removal. Much work still needed to be done here. Ultimately they would need to introduce a mechanism of strict licensing conditions, linked to criminal records, to prevent accessing particular markets. There were fiscal implications if business was not being done the proper way, and education and awareness campaigns were needed. A programme at schools had already been introduced to promote ‘fiscal awareness’.

Mr Radesich replied that corruption was also linked to who was being appointed as customs officials, and training selection factors and recruitment needed to be looked at. A standard of excellence was required.

Mr Sogoni wanted to know more about the role of the Southern African Development Community (SADC). Mr Radesich replied that operations, documentation and practices would have to be the same in SADC. However, there was scope for different kinds of packaging. Mr Singh pointed out that in Namibia, Botswana and South Africa, there was a single Administration Document. It was hoped that by October, all SACU Members would use this document.

Mr Sogoni asked more about national rules superseding the Convention. Mr Radesich replied that the Convention provided for the exchange of information confidentially. This had to be done within the framework of national law. If a country offered more protection and there were certain legislation restrictions, this would over-rule the Convention.

In terms of effectiveness, South Africa was not where it should be. Customs modernisation had to come into effect soon. Capacity and human resource remained a couple of the biggest challenges. In some countries there were customs genetic laboratories, such as those in Italy. He suggested a laboratory at the Port of Durban. There was a need to increase visibility with regard to passengers. There had been a legal struggle to obtain advanced passenger information to identify possible suspects.

Mr Botha mentioned delays and asked how one-stop borderposts would be monitored and managed. Mr Radesich replied that in terms of the WCO Framework of Standards, there were guidelines for the level of co-operation and checking. He further commented on the proposal whereby, for example, a Zimbabwean official would act as a South African agent abroad to implement South African law. The Border Control Operations Co-ordinating Centre (BCOCC) reported to the security cluster in which all agencies had an interest, was operating in a governmental joint venture to do the work at borderposts. SARS had the one-stop legislation in place, but was a bit ahead of other agencies.

The Members unanimously agreed to support ratification of the Convention.

The Chairperson thereafter referred to the Committee’s Annual Report and requested that Members critically review the report. It was hoped that the report would be adopted at the next scheduled meeting.

Ms Robinson (DA) wanted to raise further more technical questions about this report. The Chairperson responded that she should forward these to the Committee Clerk.

The meeting was adjourned.


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