CHAPTER 9. Computerization of Customs Procedures

Michael Keen
Published Date:
October 2003
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François Corfmat and Patricio Castro 

In the last 40 years, computers have become an essential tool in the administration of customs control. They are used to speed up the processing of information, ensure accurate interpretation and application of tariff law, control manual labor costs, focus on specific target consignments, encourage compliance by traders, and improve the quality as well as the timeliness of data on external trade. While it is thus a necessary part of modern customs administration, computerization alone is not enough to bring about an effective modern approach to customs administration.

Even though computerization is not a sufficient condition for modernization, it is a necessary one. This chapter sets out the objectives of computerization and describes the main applications of computer systems in customs administration. It also provides an overview of the types of new technology that can be used in customs computerization and examines the strategy and preparations that experience suggests are essential to the effective introduction of a customs computer system.

A. Computerization in the Strategy for Modernization

Customs specialists have no doubts that computerization yields its best results for customs administration when it is accompanied by complementary reforms in organization and procedures. However, there is still a common belief that the administrative difficulties of customs clearance operations can be overcome simply by having a small staff equipped with up-to-date computers and with no other changes. Although there is no doubt that the use of computers can increase the efficiency of well-run operations, computerization is not a miracle solution to existing problems.

Computerization of customs procedures needs to be part of an overall modernization reform. However, international experience has demonstrated that customs administrations often find it difficult to implement these complementary components of the modernization effort. It is not difficult to find examples where the inappropriate introduction and use of computer systems have exacerbated existing problems. In both developed and developing countries, a disturbing pattern has been observed in which investment in computer systems in customs departments has grown steadily, while the average time needed for the release of cargo still exceeds several days, with no clear improvement in assessments and the detection of fraud.

When introducing or expanding computerization, customs authorities face a number of important decisions regarding design and implementation. Should the system be centralized or decentralized? Should they computerize current operations first, and then change procedures and organizational structures? Should they use off-the-shelf packages or should they develop their own systems? Should they immediately establish on-line links with the banks, customs agents/brokers, and some of their largest importing companies? These are a few examples of the common questions, and they raise the more fundamental issue of which strategy and reforms need to be established to ensure the success of computerization. They also point to the benefits of learning from the experiences of other countries, for example, in the approach to and sequencing of reforms.

B. Objectives of Computerization

The computerization of customs administration must be linked to the ultimate objectives of revenue administrations, which are, broadly, the collection of revenue, the enforcement of trade policy, and the protection of society from prohibited goods. More specifically, the objectives are to expedite the processing of declarations and the release of goods, to verify the accuracy of customs valuation (in order to collect the proper amounts of duties, taxes, and fees on imports), and to ensure the effective control of goods in transit, entering warehousing, or being imported under temporary admission.

To ensure that computer systems meet the objectives set by management, performance measurement needs to be established for the systems already in use so the new system can be evaluated against the old one. The main performance measures should include

  • the clearance time for release of goods from customs control, including such activities as the processing of customs declarations and payment;
  • the monitoring of exemption programs based on such items as CIF import values per type of exemption and revenue forgone;
  • improvements in statistical data and management information;
  • more effective enforcement through faster processing of data and the matching of information;
  • improvements in the consistency of enforcement of the tariff law;
  • improvements in the quality of record keeping;
  • improvements in the verification of trader-supplied data; and
  • control of labor costs by improving the rate of declarations processed per staff member.

C. Main Applications


Computer systems generally consist of a number of logical subsystems. In the customs area these are

  • control of the cargo manifest;
  • processing of declarations;
  • tariff and documentation control;
  • import valuation;
  • control of goods in transit, entering warehousing, or imported under temporary admission;
  • risk management; and
  • maintenance of trade statistics.

In addition, customs administrations have systems to track receipt of revenues. These systems maintain accounts of duties and taxes paid, penalties assessed, credit ceilings and debits, and refunds and balances due, at the level of the individual customs agent/broker or importer. At a summary level, the accounting system tracks revenue transfers from customs collection offices or banks to the treasury and reconciles reports of revenues received by the treasury with the revenue recorded.

The principal benefits expected from these basic applications (or modules) include faster processing of entries, targeting of controls to specific traders, improved revenue collection and control, data exchange, improved accuracy of entries and accounts, improved management information, and up-to-date statistics. All this, in turn, plays a key role in supporting post-release control activities.

Three key specific features characterize modern customs computer systems:

Separation of functions. The separation of functions in the process of customs clearance is necessary to maintain a controlled environment and to minimize the risk of collusion between customs officers and importers/agents. It is important, for example, that sensitive data (such as risk profiles or price information) are not accessible to officers dealing with the day-to-day processing and verification of declarations.

The use of “open” system technology (that is, the use of international standards and codings as the basis of the architecture of the computer system). This is essential to allow for interface with other systems and to improve the efficiency of customs procedures. The adoption of an open system architecture will also ensure that customs has autonomy of action with hardware procurement.

The distinction between “advanced,” “on-line,” and “batch” processing of information. To speed up the flow of goods while maintaining an effective deterrent against fraud, computer systems are organized to meet both trade facilitation and control objectives. “Advanced” or pre-arrival processing of transactions enables the submission of pre-arrival declaration data, thus allowing the rapid release of cargo out of customs control soon after its arrival. However, most of the computer equipment and resources is generally allocated to “on-line” transactions, as the combined use of computer and electronic data interchange (EDI) systems—discussed below—can allow for quick release of goods and assess almost instantaneously (in “real time”) the customs risk of a particular consignment. Less time-sensitive management tasks are often handled through “batch processing.” This allows the computer to collect data and process it at a later stage to maintain official records, produce daily and periodic accounting statements, and compile official reports and tables.

Organization of functions

The customs computer functions and the interactions between headquarters and field offices need to be determined in order to ensure the efficiency and flexibility of the systems and to reduce dependence on central systems. Generally, control files, maintenance of tariff files, and compilation of trade data need to be centralized to ensure uniform application of the laws and regulations, while the handling of manifests, declarations, and accounts needs to be decentralized to customs clearance offices.

Headquarters functions should include117

  • coordination among automated customs offices;
  • centralization of all data from the customs field offices;
  • collation of all information on the integrated tariff;
  • codification of references and control elements;
  • processing entries from nonautomated offices;
  • resolving technical problems received from various offices;
  • hardware maintenance and purchasing;
  • operator training;
  • program development;
  • management and distribution of trade statistics; and
  • postclearance valuation control and investigation.

Field office functions should include

  • declaration processing, which includes duty and tax assessment, routine tariff classification and valuation checks, selection of entries for documentary control, and physical examination of goods;
  • cargo and inventory control;
  • accounting; and
  • transmission of declaration files to headquarters.

Customs computer applications should be developed to assist customs officers in the efficient performance of their duties, keeping in mind the principal objectives to speed up clearance, maximize revenue yield, and improve statistical information. While computerized customs systems may differ significantly in terms of technological approach to implementation, the hardware and basic software platforms required, the flexibility to interact with other external systems (such as tax administration and accounting), their scope, and the basic functions that are automated are very similar. A system is usually composed of a number of subsystems or modules, each of which is more or less self-contained and automates the different phases of a specific customs function.

Specific applications

Manifest handling

The importance of simple procedures for handling manifests was seen in Chapters 4 and 5. Computer applications in this area deal with the capture of manifest data and the control of entries against manifests. The application writes off entries against manifests (the acquittal process) and prints out control reports. Information from manifests can be entered manually, but newly developed systems use EDI or other electronic data transmission facilities, allowing manifests to be transmitted in electronic format directly to customs by the carrier or freight forwarder.

Declaration processing

The processing of customs declarations constitutes the core of customs day-today work and most systems now use the European Union single administrative document (SAD) as a standard declaration format. Automated declaration processing requires the creation of a set of files (called the “integrated tariff”) that contain, for each customs tariff heading, all the data needed to verify that goods meet the legal requirements necessary for customs clearance, such as quotas, licenses, prohibitions, and health regulations. It also calculates the duties, taxes, and fees payable. The system usually performs automatic verification of all declaration types (imports, exports, warehousing, and reexports) through the use of the on-line integrated tariff and reference files.

The application includes the capture of input data, registration of entries, calculation of duties and taxes, control of payments, control of warehousing and reexport regimes, and a printout of entries. This application usually provides online help to accredited importers/exporters and customs agents/brokers to guide the user through the completion of the customs declaration. Once the tariff classification and the value of the goods have been approved by a customs officer or preapproved by routine checking modules, the system will compute the duties and taxes to be paid and will validate the declaration. The system also takes into account duty reliefs, exemptions, or adjustments that may apply to specific transactions on the basis of tariff laws, Customs Code, and regulations.

Warehousing and transit management

The automated processing of duty and tax suspensive regimes (in the case of warehousing and for the temporary admission of goods) is performed through a module that provides information about when the goods arrive and are removed (entry date) or are to be removed (for clearance or new status), where goods can be inspected (physical location), the description of goods, and the status of fee and levy payments or cash deposits or guarantees.

With transit operations—discussed at length in Chapter 8—the computer module provides facilities to log and control the goods in transit, with specific information on the mode of transportation (sea, air, road, or rail), the identification of the carrier and vehicle (license number), the port of entry and the place of final destination (or port of exit), and cargo (general description). In addition, it provides the required security measures (bonds/guarantees, seals, and restriction of movement with respect to routes and checkpoints on transit routes); and the time limits for reporting to the final destination and for the acquittal of cargo documents. Accurate and timely information from local offices is essential for tracking the movement of cargo at a central processing site or at the final destination site (the acquittal process). Recent developments in transit control include the usage of “smart cards”118 to record and control transit information, “intelligent” seals affixed to containers to enable transit follow-up using simple portable readers, and even transponders attached to containers or to cargo vehicles, allowing for follow-up through satellite-based systems such as GPS (Global Positioning System).

Duty and tax accounting

This application controls the different revenue receipts and payments. It includes the registration of payments (in cash or through a credit account); automatic account maintenance (through the management of bond payment, credit limits, and cash transactions); the printing of assessment notices and receipts; and the generation of statements for users of credit or bond facilities. Consolidated accounts are usually produced by customs headquarters, which also provide the required revenue statistics to the treasury department or central bank.

Clearance controls

This application consists of separate subsystems that allow customs officers to perform documentary controls with the assistance of programs using information from reference files (tariff nomenclature definitions, documentation based on laws and regulations, countries, traders, currencies, etc.) and risk-analysis profiles (see Box 5.1 in Chapter 5). For example, a transaction can be passed through a risk profile module (combining criteria such as product, country of origin, importer, value, etc.) to determine the risk potential and trigger further preventive action. A major risk element is the price charged for goods. Price information stored on a system allows price comparison from reference data gathered from reliable sources and previously approved transactions.

Statistical reporting

This application allows the integration of all declaration files into a database; aggregation of data on external trade and revenue; database interrogation; and reports. Standard reports generated by the system may be tailored to specific requirements, in particular for external trade statistics and management information purposes. Standard reporting includes the following types of reports: total imports/exports; source country; duty and tax; imports/exports by commodity classification; product price; insurance and freight; customs entry point; importer/exporter relationship; and importer/customs agent relationship.

Management information reports on such areas as changes in work loads, fraud analyses, and collection and administrative costs are obtained by combining data (e.g., customs value, duties and taxes, revenue loss, net weight) and criteria (e.g., number of customs staff and declarations, trader balance, trader product, trader/country) gathered from the processing of customs declarations. Management reports and other intelligence information allow customs to conduct audits and investigations on current transactions, as well as internal audits on the actions of individual customs officers.

D. Strategy and Preparation for Implementation

There are a number of fundamental issues that have to be considered to ensure the success of computerization, and a sound strategy for design and implementation must be developed and strictly adhered to. Such a strategy should address the fundamental issues, weighing the different alternatives against the local context and the actual constraints in terms of resources and infrastructure that a particular administration faces. From this exercise, the best approach and sequencing of reforms can be derived, and an action plan prepared.

There are, however, several prerequisites that have to be adequately addressed before actual implementation of computerization begins. Optimal conditions for success require support from the political authorities, simplification of customs legislation, and an in-depth reform of procedures, including documentation, planning, and a strategy for implementation.

Support from the political authorities

To significantly improve the effectiveness of customs administration, the government must be politically committed to the reforms. Explicit support of the reform effort and the tax and customs administration’s management from the country’s top government officials is of fundamental importance. The government’s political commitment should be visible to the public and to the staff of the revenue departments. Successful implementation of changes in the customs structure and in systems and procedures also requires a committed management team. The management team in charge of the customs administration and of the reform program should be headed by a highly motivated and trained group of professionals at customs headquarters.

In addition, the reform measures must be politically sustainable, and the management and staff of the customs administrations must be involved in the design and implementation of the reform project from the beginning. It is essential that the customs department have “ownership” of the project. Reform projects that do not sufficiently reflect the concerns of the country’s own customs administrators and are imposed by outsiders will not succeed.

Simplification of customs legislation

One of the most important lessons learned from IMF experience is the requirement for the prior simplification of customs tariffs and legislation. A customs tariff with a limited number of rates and limited exemptions has proved to be much easier to administer and to result in higher compliance by traders, uniform application of the law, and faster processing of declarations. There is also less opportunity for customs officials to engage in circumvention of the law and to exact commissions for services provided to release cargo.

Reform of procedures

Development of a self-assessment system

The development of a self-assessment system—the essence of customs administration modernization—and the development of a computer system are complementary. Under a self-assessment system, customs agents/brokers or importers are able to complete their own declarations and make the duty and tax payment at the time required. Computers, after the capture of data through EDI or other forms of electronic filing, are then used to perform routine functions such as verifying Taxpayer Identification Numbers (TINs) and carry out other credibility and arithmetic checks, maintain individual accounts, and match payments with declarations.

Self-assessment allows customs administrations to devote more of their resources to the facilitation of procedures and to the detection of noncompliance and fraud. Self-assessment, together with the extension of computerization, also enables them to cope with the additional workload resulting from any increase in the number of declarations.

Simplification of customs procedures and documentation

One of the major tasks in preparing for automation is the simplification of existing manual systems, procedures, and documents. In many customs administrations, the existing computer system is often grafted onto the manual system rather than replacing it in whole or in part. This results in a duplication of procedures and an excessive number of administrative steps for the processing of customs declarations. In customs administrations where the procedures and the processing systems of declarations are entirely or essentially manual, the number of administrative steps imposed by customs is usually considerable.119

When introducing computerization or upgrading existing systems, it is important to first review the current manual systems, procedures, and documents. In most cases, the review will lead to modifications in legislation, the transfer of staff, and changes in work habits. If computer systems are superimposed on badly organized or ill-conceived manual procedures, they will prove useless and probably exacerbate existing problems. Moreover, from the outset, these reforms have to be established in conformity with both automation requirements and internationally agreed-upon norms and procedures.

Planning and preparation for implementation

Once the prerequisite changes have been initiated and the decision to computerize is made, the functions and organization of the system should be defined, and a detailed implementation plan should be prepared. The plan should consist of clearly defined objectives, with a list of actions, target dates, and resources required. The team responsible for implementing the system should be involved in the preparation of these plans, the determination of resource requirements, and the setting of deadlines.

The computerization of customs procedures will require specialized staff to carry out the analysis, development, and implementation of the system. For a system to be effective, users need to understand how to work with it and what results to expect from it. To obtain user cooperation, they need to be involved in the development and implementation of the system.

One of the key elements of the strategy is a phased approach, based on the identification of a set of tasks that should be completed and consolidated before the next activity begins and the use of one or two pilot sites. In these pilot sites, the new systems and procedures should be developed and tested in a controlled way, without disrupting day-to-day operations. Later, the new systems and procedures can be replicated in other offices, once they have been thoroughly tested and have shown they work properly.

Software development

When considering the introduction of a customs computer system, there are two basic options for software development: either to develop an “in-house” system or to acquire an existing software package. Each option has its advantages and disadvantages.

The advantages of an in-house system are that it is developed to meet the specific needs of the individual customs administration, changes are controlled locally, and customs has full control of the computer software. However, the disadvantages are the very high cost of development, the high level of expertise required to design the system, and the long period of time required for development.

Several well-tested software packages are available. The most popular are ASYCUDA, which was developed and is maintained by UNCTAD, and SOFIX, a version based on the French Customs system SOFI. Both have been installed in a number of countries. Offerings by private companies include the TIMS system developed by Crown Agents and successfully implemented in Mozambique. Recent announcements by private groups promote Internet-based (i.e., remotely managed) customs packages, although so far none of these has actually reached the market.

Using such a package has several advantages. It has already been tested and may be fully operational in other countries. It may include the automatic provision of ongoing updates to user countries, and the software uses internationally agreed-upon standards and codes. While the software is generally free, substantial implementation costs can be involved. Nevertheless, the cost is generally much less than for an in-house product. The disadvantages of a software package system are that it has to be adapted to meet the specific requirements of the country, and changes to the system may have to be approved by the vendor. The IMF experience is that countries that opt for the software package system often make demands for too many specific requirements to be included, which can negate the advantages of choosing that option.

Today, personal computers (PCs) offer high performance and capacity at low cost and are easily maintained. Therefore, it is preferable that the selected software package be capable of operating in a PC environment. This may include stand-alone PCs, units linked to a network (most probably a local area network for a particular work location), or units linked to computer servers to cover a wider geographical area (most probably in a client-server architecture).

Other issues to be considered prior to and during development include the existing power supply, telecommunications network, computer hardware suppliers, and the availability of local maintenance services. Each of these will influence the choices of hardware, software, and the approach to contingency planning (e.g., it may be more cost-effective to provide an additional processor in case of equipment failure than to rely on the availability of maintenance personnel in each location).

E. Trends in Customs Computerization

In recent years, a wide range of new computer technologies have been introduced by various tax and customs administrations. This section discusses the most important of these: (1) electronic data interchange, a structured and typically expensive approach to securely exchange data between computer systems; (2) direct trader input, a means for customs administrations to acquire data from the trade community; (3) advance cargo information systems, operational arrangements that allow carriers pre-arrival processing of their transactions through specific modules of the computerized customs system; and (4) the use of the Internet as an inexpensive and easy-to-use option for connecting computer systems to make secure transactions and exchange data.

Electronic Data Interchange (EDI)120

The merging of computer technology with communications technology provides the opportunity to speed up international trade transactions and reduce paperwork. Customs administrations have been quick to grasp the importance of electronic data interchange (EDI). The objective of EDI is to get data from one computer system into another computer system by a method and in a format for the receiving system to fully understand and process it. For EDI to work properly, rules must be defined about the characteristics of the data that will be exchanged, which data items are included in the Electronic Data Interchange for Administration, Commerce, and Transportation (EDIFACT) message, their format, and where they will appear within the message.

Introduction of EDI

Customs must first develop the capacity to process data through computers before considering transmitting data using EDI. Without basic customs automation, the use of EDI to support trade is not possible.

Such innovations and changes in the customs administrations of developing countries can only be introduced gradually. Those customs authorities that can interface with other trade participants’ systems (both nationally and internationally) are in a strong position to promote the effective coordination, integration, and standardization of systems by user groups. Because of the variety of participants both large and small, this also makes the role of customs in developing countries more complex. Customs must be aware of the degree of computer readiness of the organizations and companies with which it deals in order to plan its computer installations and assess the likely volume of data transactions with which it will have to cope. Although the widest possible use of EDI should normally be encouraged, for economic and practical reasons, it is more sensible to cater to large users and provide incentives for the most important trade participants to use EDI. It is important, therefore, that customs makes its plans known and works in cooperation with the trade community. An advisory committee (ADP/EDI Steering Committee) should be formed, consisting of administration officials and members of the trading community, and it should meet on a regular basis. Through these meetings, trade participants (including importers, exporters, banks, port and airport authorities, shippers, brokers, and freight forwarders) are able to agree on such matters as trade data interchange standards, telecommunications standards, and other specific conditions and security arrangements to be adopted.

Concepts and facilities of EDI

The flow of information between organizations has always been based on paper documents. Documents are typically generated by one computer system only to be followed by the manual input of the information in that document into the computer system of the recipient. The inefficiency of this approach was the impetus for a better method to get data from one system into another and led to the development and implementation of EDI.

There are two predominant international EDI standards in use, although some industry-specific standards have survived. The American National Standards Institute (ANSI) developed the >X.12= standards, which have been uniformly adopted in North America, Australia, and New Zealand. Europe went in a different direction, with the EDIFACT standard developed under the auspices of the United Nations Economic Commission for Europe (UN/ECE).

Components of an EDI system

An EDI system has three main components. First, the originator of an EDI message needs a method to extract data from its computer system and translate this data into a standardized format ready for transmission to the intended recipient. EDI translation software provides this capability. This software may be either fully integrated into the originator’s computer programs or independent from the existing systems. The end result must be the same, which is an EDI message conforming to the guidelines issued by one of the two message parties (i.e., the originator or the recipient).

Second, when one or more EDI messages have been generated, a method is needed to deliver the message(s) to the intended recipient. This could be as simple as copying the messages to some form of magnetic media (tape, cartridge, or floppy disk) that is then physically delivered to the recipient. However, for an organization sending EDI messages to many addressees, the exchange of magnetic media is often impractical, although it has typically been an approach used in some countries between financial institutions such as banks. Where possible, some form of data communication method is preferred, because of the advantages of speed and simplicity.

Many EDI users prefer to use the services of a separate, and typically independent, network to pass messages. Such network providers are called “Value Added Network Services” (VANS). VANS are essentially electronic post offices, allowing subscribers to pass EDI messages via the network to other subscribers of the service. They are closed and secure networks that are only open to paying subscribers. A variety of connection methods may be available to transmit EDI messages from the subscriber’s computer system via VANS. Normal voice-grade telephone lines are often used to establish dial-up connections. For subscribers with a heavy volume of EDI messages to send or receive, a leased data line may be cost-effective. Many countries have a public Packet Switched Network (PSN) based on the X.25 communications protocol which is often a good method for transmitting EDI messages, and some VANS may even support wireless connections using cellular systems or wireless packet switching. Unlike the Internet, the main benefits of using VANS for data transmission are reliability and security. VANS normally guarantee the secure and prompt delivery of messages in an uncorrupted state. Access is password-controlled, and the network normally employs integrity checking to prevent the corruption or duplication of data. Audit control functions provide a high degree of reliability, and charges are usually based on message volumes. The main shortcoming of VANS is the cost per transaction: usage of a private network has a much higher cost than using the Internet.

The third main component of an EDI system is an EDI Interpreter/Translator. The recipient of an EDI message must be able to decipher the contents of the message and translate it into a format that can be recognized and processed by its computer system. As most EDI users must send and receive messages, the same software is typically used for both purposes.

Advantages of using EDI

There are a large number of participants in even the most simple commercial transaction, such as a purchaser ordering a product from a foreign supplier. At the purchaser’s or importer’s end of the order are the purchaser, customs broker, shipping agent, and bank, plus the importing customs administration and its bank. The seller or exporter deals with a shipping company, a customs broker, a bank to receive payment for the goods, and the exporting customs administration, and many documents are exchanged by these different organizations over one transaction. In today’s business world, many, if not all, of these enterprises employ computer systems, resulting in the information printed by one computer system in the chain being manually entered into the computer system of the next organization in the transaction chain. Even today, it is estimated that more than 70 percent of all information entered into a computer system has been generated by another system. Every time data are entered into a computer, there is a risk of introducing error. Furthermore, data entry is expensive and can require large numbers of staff. All this adds to business costs, delays the completion of the transaction, and introduces unnecessary risks, whereas, exchanging data by an electronic method costs typically a tenth of what it costs to use paper-based information exchange.

The degree to which EDI would be used in any particular scenario depends upon the desire and capabilities of the participants to the transaction. While it is feasible for EDI to be used at every step in the transaction, the lack of EDI capability by one or more of the participants could force a reliance on paper-based information exchange for that part of the transaction. More and more businesses are now moving to time-critical-based inventory systems, such as the “just-in-time” method, requiring fast and accurate transportation and processing. Government agencies such as customs administrations must also provide effective services that are sensitive to the time, cost, and low-error needs of the trade community. For example, the importance that Singapore has given to trade facilitation and modern data processing and communications methods is no coincidence to their success in attracting and retaining international trade. EDI is, therefore, an important component of business-enabling technology and is employed successfully by competitive businesses and government agencies throughout the world.

Direct Trader Input (DTI)

There are two methods available for a customs administration to acquire or capture data from the trade community. Customs can assume most of the responsibility itself by inputting manifest data received from shipping companies and declaration data received from brokers or importers and exporters. The problem with this approach is that customs bears the cost of providing the data-entry terminals or workstations, the maintenance and operation of the data-entry computer programs, and the staff to enter the data. Although this cost could be passed on in higher processing fees, customs is obliged to deploy substantial resources and effort that could be more effectively used elsewhere. The second approach is to transfer the data-entry task from customs to the trader. This shifts the cost and burden away from customs, but normally the trade community will seek an offsetting gain, such as faster release times, reduced processing charges, and simplified procedures. Under either strategy, of course, due weight should be attached to the burden being borne by traders.

For more than 20 years, French customs has employed a kiosk operation for traders to input declaration data into their SOFI system via terminals at customs offices. But requiring traders to visit a customs office to enter data into the customs system also has drawbacks. It is much more convenient for traders to enter data into the customs system from their own offices, where they have access to all the source documents, and without having to compete for access to a kiosk terminal. This is called remote data entry or, more usually, Direct Trader Input (DTI). It has been so successful in France that only about 10 percent of entries are input to SOFI at the customs kiosk, while the vast majority are entered from the traders’ premises. To encourage early and widespread acceptance of their new computerized system, the Australian Customs Service incurred the cost of installing terminals on the premises of those traders involved in importing and exporting.

Compared to the manual preparation of a declaration, DTI is a superb solution. The information that a trader enters is interactively validated, and when complete, the declaration is printed, eliminating the need for typing or manual completion of the form. However, for traders with their own computer systems, most of the data entered manually via DTI probably already exists on their system. The traders’ systems may already be capable of printing a declaration listing all the information needed by customs. Printing it out so that it can be reentered into the customs system becomes redundant and inefficient. EDI is the obvious solution to avoid this duplication.

Advance cargo information systems

In many instances, the information required to complete customs formalities is available prior to the arrival of the consignment. To make a cargo declaration, carriers in a growing number of countries have the option of sending their data through EDI to customs brokers, and the latter to customs, in advance of the arrival of the physical shipment. Before the shipment arrives, customs is able to process the cargo and release data through an automated cargo/release selectivity system. As soon as the shipment arrives, customs can provide cargo release notification through EDI, if no further examination is required. (See also Box 4.2 or the Unique Consignment Reference number.)

Prearrival processing of transactions through advance cargo information systems (ACIS) can make a substantial contribution to cost savings in transport and storage operations, especially for transit cargo. The submission of data through EDI facilitates this process and, with appropriate safeguards, the control objectives of customs are not compromised.

The Internet

The Internet has a longer history than EDI, but until recently it was mainly limited to academic and research uses. The advent of the World Wide Web and the exponential proliferation of its use have been explosive. Meanwhile, businesses and governments have invested heavily in EDI, and in most developed countries it is inconceivable for enterprises in certain sectors of the economy to be competitive without EDI. Simplification of standards (such as EDIFACT and X.12) and constantly dropping prices for hardware and telecommunications have helped spur demand for EDI, although software costs have not declined in the same manner, and in many cases have actually increased in real terms.

EDI has been, and probably will continue to be, dominated by wholesale commerce rather than retail commerce. EDI is particularly cost-effective for moving large and small volumes of data between the computer systems of commercial traders and agencies. Electronic commerce on the Internet and the web on the other hand, has initially focused on the retail level, giving individual consumers alternatives to conventional shopping methods such as department stores and mail- and phone-order businesses. At first, traditional EDI advocates were alarmed about the Internet and its potential to encroach on their domain. However, these fears are unwarranted in the immediate future for various reasons. First and foremost, the Internet is unregulated and simultaneously owned by everyone and no one. Although enormous progress has been made in recent years, security and reliability are still problems, as the Internet is an international connection of many computers. While there are technological firewalls available to protect individual servers on the Internet from attack or abuse, data and programs that are transmitted across the Internet remain open to interception, manipulation, or even imitation. Encryption and other security methods have been developed, but many of these solutions are not yet stable or standardized. Certain encryption technology developed in the United States, for example, remains subject to export restrictions. An EDI VANS, on the other hand, is a safe, secure, and reliable environment. EDI users can be confident that their messages will be safely delivered to the ultimate addressee via VANS without the risk of corruption, although this type of service obviously comes at a price.

In spite of these problems, the Internet cannot be ignored. Those EDI users who are thinking ahead should be considering the potential for enhancing the capabilities of their EDI investments with new opportunities provided by the Internet. Colombian Customs, for example, implemented in 2000 a system that accepts the input of manifest and declaration data via a website. While initial usage by traders was quite limited, one year after introduction about 80 percent of all transactions were being input via the Internet or through a customs-managed extranet, in lieu of traditional EDI transfer methods through VANS. Many customs administrations now use the Internet to exchange information on customs frauds via the World Customs Organization (WCO).121 In March 2002, UNCTAD announced a web-based version of its customs automation system, ASYCUDA, which will allow customs and traders to handle most of their transactions—from customs declarations to cargo manifests and transit documents—via the Internet.

Just like any seriously competitive business, a modern customs administration also cannot afford to ignore EDI and electronic commerce. Failure to provide EDI and Internet capabilities will have negative implications in terms of higher transaction costs, possibly longer consignment release times, and ultimately poorer trade facilitation, compared to countries providing these services, with implications for international competitiveness.

In addition to the facilities allowing the input of manifest and declaration data described above, the more common services that customs administrations have made available on the Internet include the following:

  • Forms and publications. Importers can download customs forms and guides instantly over the Internet rather than wait to receive them through the mail. In addition to providing better service, this function offers potentially significant savings in printing costs for customs administrations.
  • Procedures and regulations. Customs administrations allow users to obtain details of the application of procedures or a particular regulation through keyword searches. A large number of international organizations specializing in tax and customs matters have also developed their own websites. This is the case, for example, of the WCO site, which provides the opportunity to view or download the texts of WCO conventions, recommendations, and other technical documents related to customs procedures and rules on valuation and origin. Customs administrations can also gain access to collections of data on specific types of fraud or contraband.
  • Frequently asked questions (FAQs). FAQs normally address questions, such as how to complete customs forms, what items are taxable, and how customs brokers can contact customs service staff.

F. Conclusion

Modern customs administrations need computerization to support their operations. The trend is to substitute electronic data for paper documents and to connect computer systems (of government agencies and businesses) to securely transact and exchange data on trade. The move to risk-based decision systems requires that customs administrations focus as much on managing information as they have focused in the past on managing physical goods.

All this requires careful planning and a phased approach. The process should start with taking stock of the current situation. Then the requirements for the new system must be defined and specified. Once this is done, a decision must be made on how to achieve the desired systems. This decision should be based on an analysis of the gaps between the existing and future systems. Options for closing these gaps could range from further enhancements of the existing systems to the wholesale replacement of the entire suite of programs and applications. While cost will be a key consideration in making that decision, timing issues will also be crucial; and for both reasons the adoption of an existing packaged system is likely to be preferred to a complete in-house development from scratch.

Any organization trying to improve its use of information technology must beware of being excessively influenced by the outwardly visible components of the plan—hardware and infrastructure. Before attention is given to the acquisition of infrastructure, the focus must be on streamlining procedures and business practices that are then reflected in the new applications. The premature acquisition of hardware is a common mistake in the rush to demonstrate progress: at best, the equipment will underutilized for a significant portion of its useful life; at worst, the hardware will be obsolete by the time the systems are ready for deployment.

117As discussed in Chapter 10, the typical customs administration organizational structure often includes regional offices, in addition to headquarters and local offices. In this case, a determination needs to be made concerning the computer support that is required at the regional level. This will depend on the operations that are being performed in the regional office—for example, refund processing, exemption verification, post-release reviews, and monitoring of operations.
118These are credit-card size cards incorporating a high-capacity chip on which information can be stored and updated.
119In many customs administrations visited by IMF missions, the processing of customs declarations involved over 20 separate steps.
120This section draws on Kloeden (1997).
121The WCO Permanent Technical Committee on Customs Fraud and Offences acts as a pooling institution for member countries, the UN, UNESCO, and ICP/Interpol.

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