Understanding International Customs Law for better Logistics

31 October 2012 06:30 pm - 0 - {{hitsCtrl.values.hits}}

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By Lalith Edirisinghe
In any economy, the Customs plays a crucial role in trade operations and revenue collection. From a trade and industry perspective, it directly affects the private rights and obligations of citizens thus Customs Legal Framework plays a very important role. An effective border management system should therefore compliment the growth trajectory to achieve the government’s vision for 2016, primarily to increase per capita income to USD 4000 and sustaining the present economic growth of 8%.
Fundamentally, a comprehensive and modern legal framework is the foundation upon which an effective Customs and trade facilitation regime should be built.
Obviously, a clear understanding of the international Customs Law is the key in developing a comprehensive border management system that fully support the new requirements, procedures, systems, and controls and allow for the implementation of related international instruments, agreements, and standards. On the other hand, the stakeholders in the trade, industry, shipping and Logistics also need to be sufficiently aware of the frequent changes that take place in the customs and other border management agencies and their procedures in order to reap the real benefits that are resulted from the new reforms.

International Customs Law
International Customs Law is the body of international conventions, treaties, norms and standards which Customs agencies are entrusted by their Governments to implement and observe and which, if breached, would constitute a breach of that Government’s legally binding international obligations.
The World Customs Organization (WCO) has introduced the Revised Kyoto Convention (RKC), to establish benchmarks by which Customs services can best manage their responsibilities in relation to the movement of goods. It is believed that since its inception in 1952, the WCO has been working to develop Modern principles. The simplifying and harmonizing of customs procedures was reflected in the Kyoto Convention, which was adopted by the WCO in 1973 and entered into force in 1974.
The realities of modern international trade have prompted modernized customs legislation internationally. Because outdated customs laws constrain social and economic progress by acting as significant nontariff trade barriers. On one hand they prevent effective revenue collection, discourage foreign trade and investment, while creating a potential threat to social and national security.

Revised Kyoto Convention (RKC)
RKC was developed to standardize customs policies and procedures worldwide. Over the years economies have realized that it embodies best practices of national legislation around the world.

On the other hand this contributes towards compatibility of the rules of the World Trade Organization (WTO) because implementation of RKC would enable countries to meet international commitments concerning trade and border procedures. The resultant revision of the Convention due to globalization, rapid transformation of international trade patterns, and advances in information technology (IT), is today known as the RKC.

To become party to the Convention, a state must accept the Body of the Convention and the General Annex. Sri Lanka signed the Revised Kyoto Convention (RKC) in 1999, subject to ratification. The Department of Customs of Sri Lanka use both printed and electronic media to publish regulatory and administrative changes related to trade. Therefore visualizing the structure of the general annexure is a prerequisite of understanding the International Customs Law.

The intensifying global interconnectedness make it vital for countries to cross borders thus customs administrations will be increasingly important for managing the impact of the changes at the border. A solid and modern legal framework is the foundation of effective customs operations. This legal framework benchmarking should be based on internationally accepted standards and best practices as set out in the RKC which provides important guidelines for the design and operation of a modern and efficient customs organization.

RKC General Annex structure
It is not difficult to understand that the size of the local economy in Sri Lanka preclude a domestic demand driven strategy for attaining sustained 8-10 per cent growth, thus SL has to improve its export performance significantly. This may need more foreign investors to commence export driven industries in the country.

In order to create such investor friendly atmosphere in Sri Lanka, the relevant indicators such as Logistics Performance Index (LPI) published by the World Bank should be maintained at competitive levels. In the year 2012 Sri Lanka’s Logistics Performance is ranked in the 81st position. When compared to the 137th position in the previous report in 2010 this is a great achievement by the logistics sector in Sri Lanka. The stake holders in the country’s Logistics and Supply Chain activities should therefore develop a vision to place Sri Lanka in the “Top Ten” in the LPI ranking during next few years.

The World Bank’s LPI analyzes countries’ performances in six components including, (a) The efficiency of customs and border management clearance; (b) The quality of trade and transport infrastructure; (c) The ease of arranging competitively priced shipments; (d) The competence and quality of logistics services; (e) The ability to track and trace consignments; and (f) The frequency with which shipments reach consignees within scheduled or expected delivery times.
The good news is that SL is ranked at 71 with regard to Customs which is relatively better performance than the overall LPI. But this should be and could be further improved. India and Pakistan are ranked at 52 and 46 respectively with respect to customs while their overall LPI stand at 46 and 71 respectively. Therefore improving knowledge and skills should be the key and such approach would have an equally effective impact on the competence and quality of logistics services that is identified as the fourth pillar of LPI.

Risk Management Process Matrix
A comprehensive and modern legal framework is already in existence in SL through the RKC as the foundation upon which the Customs and trade facilitation regime has been built.

Many customs reform program that supports the new requirements are made possible to some extent through existing customs laws, regulations, administrative guidelines and standard operating Procedures are in place.

Key governing principles of RKC
The initiative that are already in place regarding, simplified customs procedures ,the use of modern information technology and communication, modern Customs systems and procedures, such as risk management, post-clearance audit based controls and adequate automation should be strengthened from the customs administrative perspective.

The transparency and predictability especially in valuation issues is vital. Maximum use of information technology is one potential area given the rapid improvements in infrastructure and high computer literacy rate of majority users in related fields
.
But the knowledge and awareness of the employees who actually play in the ‘modernized customs environment’ should be equally broadened and upgraded in order to make the real use of those facilities effectively and efficiently.

In a summary, ‘professionals in Logistics and Supply Chain Management therefore need to be fully conversant with the modern approaches in customs and other border management procedures in order to play an active role in today’s competitive logistics arena’.
(The writer is the Head of School, City Branch CINEC Maritime Campus)

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Understanding International Customs Law for better Logistics

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