The concept of information sharing does not always sit comfortably between sovereign nations. Possibly the strangest element of the ‘5 Eyes’, the five nations with an agreement to share intelligence information, is that, globally there are indeed only five such countries. Whilst the prime focus of national customs authorities is to ‘facilitate legitimate trade’ this phrase, itself, rightly suggests a corresponding responsibility to identify illegitimate trade. Indeed, it is not an exaggeration to say that customs authorities provide the police forces in relation to international trading. Neither is it an exaggeration to say that the best tool that national agencies have in identifying illegitimate transactions is intelligence.
Globally Networked Customs is, simply, about the sharing of information between national customs agencies. For every export, there is an import and for every export customs declaration a corresponding import customs declaration. What should be the difference between these declarations? Well, very little really. The HS commodity code should correspond as should the origin and the description of the goods. Customs Procedure Codes will not be the same but, again will correspond and the value, with certain adjustments at import, should once again correspond. As such, a very obvious innovation would be for an export customs declaration to be transmitted electronically to the customs office of entry to, automatically, become the import declaration (the necessary adjustments can be made automatically). There are several advantages to this approach. Firstly, there would be a reduction in overall documentation – one entry instead of two. Secondly, as long as the exporter has declared a correct value there will be no opportunity for the importer to under-declare as a duty evasion measure or to over-declare to facilitate currency flight and, potential, money laundering. Finally, customs authorities would have a much more holistic awareness of the detail of individual transactions and trading partners.
The World Customs Organisation, simply, define Globally Networked Customs as “A standardized way for Customs authorities to exchange information” and describe the scope as “Customs-to-Customs (C2C) information sharing only, including data obtained from commercial sources”. It is envisaged that such arrangements would, mostly, be bilateral although there are occasions where multi-lateral agreements would be more appropriate – for example in the case of Customs Unions. The principle elements of the Globally Networked Customs approach will be a set of Protocols, Standards, and Guidelines for WCO Members to follow, this is very much in accordance with the standard WCO approach. It is envisaged that this approach to GNC will speed up the time between authorities agreeing to an exchange of information arrangement, and implementation of such an arrangement. It should also lower implementation and operation costs. GNC is intended as a voluntary rather than mandatory protocol, customs administrations will still be able to agree one off arrangements if they wish to. An important pre-cursor for a GNC arrangement is that national legislation must allow for the envisaged sharing of information. The GNC approach is designed to conform with the architecture of other instruments, such as the Revised Kyoto Convention, the Data Model and the WCO SAFE Framework of Standards. The concepts of information sharing are also embedded within the articles of the WTO Trade Facilitation Agreement.
The implementation of the scheme is based on utilising a series of ‘Utility Blocks’, each block representing one of the elements of the customs business process and each block being constructed to a standard template of content. For example, there will be specific blocks for transit operations. Authorised Economic operators and commercial fraud. The idea is that the blocks allow Customs authorities to be selective about what business processes and associated information they choose to share with partner authorities. It is also believed this will help to more quickly facilitate networking arrangements
Globally Networked Customs has a two track operational approach. Firstly, the ‘Commercial Track’ consists of systematic transactional exchanges of information, such as customs declarations whilst, secondly, the ‘Enforcement Track’ is more of an intelligence led process, where a customs authority makes a specific request for information to another authority. So, should traders worry? As usual, the answer is they only need worry if they have something to hide! This is rather flippant and importers and exporters may have understandable concerns over confidentially breaches resulting from authorities sharing commercially sensitive information. Security measures must be included in the texts of the agreements and must evidence that each party has equivalent legislation providing the other party with the same levels of information security and protection.
Essentially, Globally Networked Customs has been an aspiration for many years. The pursuit of improved trade facilitation, globally, requires globally implemented solutions, of which the concept of GNC makes complete sense. As to whether it will happen quickly is a separate discussion. As a component of the WTO Trade Facilitation Agreement there should be clearly defined timescales but these may not be realised or, indeed, realistic. Some have argued that Blockchain technology could be a component, indeed the main component, of such a system. Inevitably, any agreements to share information between sovereign nations take time and GNC is probably not a short term priority at the moment.
Article written by Jon Walden, an Associate of Strong & Herd LLP.