A commentary by Arne Mielken, Managing Director of Customs Manager Ltd
Does the WCO still matter in 2023? A commentary by Arne Mielken, Managing Director of Customs Manager Ltd., on the occasion of the ICD
Why do we still need customs control today?
Every business owner, trading across the globe, knows: Getting through customs is a hassle. But it is a necessary burden: Customs regulations at a country's external borders safeguard customers against potentially hazardous or unhealthy goods and products. They preserve animals and the environment by preventing plant and animal illnesses and combating the illegal trafficking of endangered species. Customs officials also collaborate with policy and immigration agencies to combat organized crime and terrorism. They fight human, drug, weapon, and counterfeit goods trafficking and ensure that travelers carrying considerable quantities of cash are not laundering money, dodging taxes, or funding criminal organizations. In fact, one of the most pervasive crimes in today's society is illegal trading. According to the World Economic Forum, the illicit market is worth an estimated $2.2 trillion, or 3% of the global GDP. International criminal activity is funded by illegal trade, endangering international stability and progress. However, law enforcement seldom works together. Customs also combat tax and duty fraud by corporations and people, which deprives national governments of essential money for public expenditures. And, obviously, customs duty is collected, too.
The case for trade facilitation
However, what is equally true is that with the growth of globalization and trade, customs also need to avoid disrupting lawful commerce.
Businesses have said that all along, but this time it is different: Technology has evolved dramatically, transforming international freight transit. GPS and ECS enable freight forwarders and merchants to track products in real-time. Blockchain technology can protect trade data collecting and sharing. Big data analysis has the potential to identify supply chain bottlenecks and enhance risk-based decision-making.
AI and machine learning have removed linguistic barriers while also introducing exciting new warehouse management and product creation methodologies. Although innovation is still in its early stages, 3D printing has the potential to eliminate the need for certain goods to be transported. Individuals, manufacturers, suppliers, businesses, freight forwarders, industry experts, and institutions are now more connected than ever before thanks to social media and networks. Trade liberalization has been revolutionized by technology.
The Fourth Industrial Revolution's new and disruptive technologies have an impact on trade. Services, software, and information exchange have largely supplanted physical goods in the commercial world. E-commerce has aided the growth of micro-small-to-medium-sized enterprises (MSMEs) both locally and abroad. Because of these trends, MSMEs' low-value exports need expedited Customs operations.
For decades, trade liberalization, integration, and cross-border free movement have been critical challenges. Economic liberalization and integration are two of Africa's challenges, which are driving the African Continental Free Trade Agreement (AfCFTA), a continental free-trade zone with a $3.4 trillion GDP.
Regional economic communities are integrating business and liberalizing the movement of products. Tariff regulations, applications, and paperwork may be complicated by the overlap of numerous economic sectors.
So, we require a renewed focus on trade facilitation and the reduction of tariff barriers by the WCO and WTO. This means that authentic business transactions require prompt authorization. As shipping becomes more efficient, businesses across the globe are trying to cut their inventory cost, and speedy border clearance can play an important role. Just-in-time delivery is the norm in modern industry, so businesses require lightning-fast customs clearance. Because of the impact on manufacturing, supply chains can't be changed. In short, in today's world, modern customs administration must strike a balance between strictness and ease of transaction.
Is the WCO still up to the task of trade facilitation?
Businesses are in trouble and a modern, reformed WCO can help. But will it?
Micro, Small, and Medium enterprises now need expedited Customs procedures for low-value shipments. Customs need to constantly work on reducing tariffs and non-tariff barriers to boost imports. Trade tensions have increased globally, especially between the US and China. Protectionism varies throughout Africa. Thus, they believe opening borders would hurt their economy. Due to a lack of smooth conduits and uniform laws, rules, processes, and systems needed to facilitate trade during crises, landlocked states suffered the most. Non-Trade Barriers changed too. Businesses face increased trade barriers despite widespread corruption. Intellectual property concerns, outdated customs procedures, and others are barriers. It is time that the WCO looks at this with fresh eyes and designs a program to play its pack in tackling these challenges.
Nonetheless: Borders separate, WCO unites
Yet, besides these challenges, the WCO remains indispensable, even if not (yet) perfect. Without it, we would be much worse off. The history of customs is fascinating and far-reaching. As regards joint initiatives, one, however, does not need to venture back that far. The Customs Cooperation Council (CCC) was the first attempt by Customs authorities to work more closely together, it evolved into the independent intergovernmental organization World Customs Organization (WCO) in 1994 to strengthen customs systems worldwide. Today, the WCO comprises more than 180 Customs administrations, handling combined around 98% of all international trade.
As such, the WCO plays a crucial role in strengthening international customs cooperation and tackling emerging customs and trade-related concerns. It is intimately engaged in the creation and implementation of global policies that include measures to protect supply chain security, fight to counterfeit, promote commerce and development, and ensure the effective collection of customs revenues. Membership in the WCO allows customs authorities and businesses to engage in international debates on customs matters, particularly customs reform.
What areas does the WCO work on today?
Participation in the WCO will concentrate on the whole spectrum of customs concerns, including the following main areas:
Nomenclature and classification within the context of the Harmonized system;
Origin of commodities;
Customs value;
Simplification, harmonization, and convenience of customs operations and commerce;
Development of security requirements for the supply chain;
Standardization of IPR enforcement;
Building capacity for customs modernization and reforms, notably in the framework of development cooperation;
Mutual Administrative Assistance for the prevention, investigation, and punishment of customs offenses.
All this means that, for customs administrations and the business community alike, the WCO still matters greatly today – it is – in fact, more significant than ever. It is the only organization to ensure the proper procedures for international customs. It works to harmonize Customs procedures worldwide to make people and goods safer and economies more prosperous. Borders undoubtedly separate, but Customs serves as a link between countries. By providing leadership, guidance, and support to Customs administrations, the WCO works toward its mission to develop international standards, foster cooperation, and build capacity to facilitate legitimate trade, secure a fair revenue collection, and protect society. Global Trade and businesses doing cross-border trade business benefit from these efforts every day.
“The WCO is important for global trade because it’s the venue where the conversations happen about the guidelines and the rules that allow customs to manage international trade effectively,” US CBP Deputy Assistant Secretary Saunders said. “The WCO influences the day-to-day work of its members to maintain the safety of international trade and to keep legitimate goods moving. Our support of the organization into the future can only help preserve and improve the standard of life enabled by trade.”
Some ideas forward
I believe the WCO needs to change and rethink how it wants to approach modern challenges. Technology should be utilized to simplify and standardize border and border authority activities. Paperless operations, automated systems, electronic data, e-payment, risk management, and revenue collection away from the border all need resilience, efficiency, and consistency in supply chains. Customs should set the tone for border agency collaboration and regulations. It should increase revenue and commerce through collaborating with businesses and the government. Future priorities include:
Identify and repair the fragmented border management approaches utilized at the national and regional levels to effectively manage Customs, border authority, and trade in the future.
Reduce coordination and application challenges by using technology.
Streamline operations because risk management in some border agencies has resulted in substantial crossing malfunctions and delays.
Supplement current change suggestions with action plans and timelines.
Enable trading for "trusted traders" while focusing enforcement on higher-risk merchants and commodities to ensure firm growth and organically alleviate government revenue deficits.
Businesses are ready to engage and support the WCO to maintain its relevance going forward.