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The issues at stake for the Less-Advantaged Countries in the Agreement on Customs Valuation

(held in the Centre William Rappard, Geneva on 6 November 2000)

Introduction

Overview of the ACV from a LAC point of view

Customs administration issues

Training and technical assistance: coherence and cooperation

Case studies on preparing for the implementation of the ACV

The lunch address

Round Table on the LAC aspects of implementing the ACV

 

I. Introduction

1. In response to requests from less-advantaged countries (LACs), and in the current series of AITIC assistance projects, on 6 November 2000 AITIC held a workshop on the issues at stake for the LACs in the Agreement on Customs Valuation (ACV). It was held with the sponsorship and collaboration of the World Trade Organization, the World Customs Organization and the World Bank. The Société Générale de Surveillance sponsored the participation of African customs officials.

2. The formal sessions covered:

•  an overview of the ACV from a LAC point of view

• customs administration issues

• training and technical assistance: coherence and cooperation

• case studies on preparing for implementation of the ACV

• a lunch address

• a Round Table on the LAC aspects of implementing the ACV.

II. Overview of the ACV from a LAC point of view

3. The key points made by the speakers were that:

• as a multilateral trade agreement, the focus, naturally, is trade with the emphasis on facilitation and self-assessment;

• for importers this has led to price and procedure predictability with transparent appeal processes and the prompt release of goods under guarantee pending final determination of value;

• for customs administrations this has resulted in a loss of the traditional 'upper hand' control which was often based on reference prices;

• implementation by LACs requires very significant technical cooperation, along with investment in information technology;

• a recent World Bank report noted that one third of international trade was between affiliated companies, which made less obvious the transparent nature of a sale which would be expected in open-market conditions and may lead to doubts about the completeness of a transaction value for duty calculation purposes. This was a particular problem for LACs where there was often a heavy fiscal dependence on customs revenue;

• implementation of the ACV goes hand in hand with customs reform.

III. Customs administration issues

4. The key points made by the World Customs Organization were that:

• it is not unknown for customs administrations to be unaware of their governments acceptance of the obligations of the ACV before the event;

• customs administrations then have to plan for implementation within the 5 year transition period. A comprehensive strategy with an implementation team involving all parties, including the private sector, is essential;

• the traditional emphasis on control has to move towards a more balanced facilitation/control approach. The lack of 'authority' implicit in this approach can cause problems for administrators;

• there may be worries over a loss of revenue (for some LACs customs revenues can account for up to 60% of total revenue), but an informal WCO survey seems to indicate that generally the ACV “has not resulted in a loss of revenue and only in a few cases had there been marginal variations”;

• the establishment of value data bases as risk assessment tools is not discouraged, but to maintain such data bases for reference price or minimum value purposes is contrary to the ACV;

• the 'untouchable' status of importers in some LACs from the point of view of questioning import values has to change;

• recourse to pre-shipment inspection agencies should be regarded as an interim measure only;

• participation in the WCO Technical Committee on Customs Valuation and the development of bi-lateral arrangements is helpful;

• technical assistance should be sought.

5. The key points made by the Société Générale de Surveillance were that:

• prior to the ACV, customs administrations had an easier task in that declared values could be rejected if they were below such as export market values or notional values, thus revenue was more easily protected, particularly where pre-shipment inspection services were used;

• now, given the range of factors to be taken into account in assessing  value under the ACV, it is difficult to finalise valuation before the release of goods, albeit with guarantees, thus making fraud more difficult to combat;

• a price verification system supported by a risk analysis programme is a sound medium term approach. This requires a database of values, for fast and effective comparison, with values verified from both exporter and importer sources, all of which involves investment in computer systems and expertise;

• programmes typically will identify compliant, low risk importers and assist in the selection of transactions for post-entry audits. The private sector can assist with systems which include the transfer of technology and expertise to the host country;

•  where a system of pre-declaration before entry is not feasible, procedures might allow for a 'second look' at values before finally clearing the goods;

• LACs often have an urgent need for the customs revenue and may have difficulty with post-entry audit procedures. Fraud and ignorance of requirements are commercial realities. Therefore arrangements that can protect the revenue are important, so long as they also comply with the ACV.

6. The key points made in the general discussion were that:

•  valuation and customs administration reform should go together;

• the move towards transaction values should be accompanied by a change in customs culture - from a rigid control approach to a more trade facilitative approach - based in part on guarantees and post-release audit;

• data bases should not be relied on as a prime source of anti-fraud information;

• the WCO should be consulted on modern investigation techniques;

• many LACs, nevertheless, relied on minimum values to safeguard their revenue.

IV. Training and technical assistance: coherence and cooperation

7. The key points made by the speakers were:

• the oversight of the Committee on Customs Valuation and the WCO Technical Committee on Customs Valuation were very important. A lot of good work had been done and was continuing, but there was a clear case for better coordination, perhaps with a greater involvement of the Committee on Customs Valuation:

• it was vital that technical cooperation be:

• demand-driven, following a country level stock-taking and that there be a clear commitment on the part of the recipient. Ideally this commitment should be from government departments outside the customs, also;

• based on cooperation and coordination amongst donors; there were many examples of overlap and a lack of transparency;

• followed-up by effective monitoring post-provision of specific technical cooperation activities, so that procedures could be improved;

• it was important that technical assistance be long term, with a commitment to the secondment of staff in two directions: both of experts to LACs and of local staff from LACs to donor countries. Investment in IT and in the wider reform of customs administrations was also important;

• the World Bank would provide credits and soft loans where there was a clear commitment to reform. The World Bank wished to see the removal of the protection implicit in certain valuation procedures and the stimulation of exports that should flow from the implementation of the ACV, with a positive impact on structural reform and economic growth;

•  there was a significant amount of bilateral assistance, which was essential, but there had to be greater coordination;

• consideration was being given as to how the private sector might assist; certain international companies could see merit in helping LACs develop effective valuation systems and it was possible that they might provide IT hardware, software and training.

8. The key points made in general discussion were that:

• training should be long-term, even if it meant that fewer countries could be serviced;

• full consultation with the recipients prior to starting a programme was essential;

• several LACs still have doubts about the advantages for them of the ACV;

• it would be helpful if the World Bank would consider grants rather than loans, given the existing debt burden of LACs, or alternatively move forward on debt-forgiveness.

V. Case studies on preparing for the implementation of the ACV

9. The key points by Madagascar were that:

• 60% of government revenue was from customs duties, and it was essential to maintain the current fiscal levels. However, the rebalancing  of revenue away from customs duties was being considered;

• new legislation and new subordinate regulations had been drafted, but it was done by a part-time ad hoc team; this caused delays;

• the translation of all documents into the two official languages was another problem;

• but the main difficulty was the need to train a largely reactionary customs inspectorate; the WTO and WCO had been helpful and bilateral assistance from the EU and UNCTAD was appreciated, but much more was required;

• it was hoped that a regional system of information exchange could be set up.

10. The key points by Senegal were that:

•  50% of government revenue was from customs duties, which had to be protected. There were real problems with the valuation of such as second hand cars, furniture and domestic electrical equipment;

• many importers kept no or very simplistic records, so audit checks were virtually impossible. Also barter was a common basis of trade with many transactions being between family associated companies, which introduced further problems of valuation;

• they had the will to implement the ACV, but they had real fears as to its impact on revenue. They accepted the principle of trade facilitation, but needed a lot of assistance, in particular with staff training and IT equipment.

11. The key points by Bolivia were that:

• they had embarked on a major restructuring of their customs service, involving the replacement of all the key staff from the previous structure and the recruitment of specialist judges and police. This had cost US $35 million. So far the results were encouraging in that revenue, which was very important, had not been reduced;

• continuing technical assistance was needed for the development of new legislation, specialist staff training and IT.

12. The key points by Mali were that:

• there was acceptance of the need for economic reform and structural adjustment, but for the present it was essential to guarantee the customs revenue;

• the industrial base was fragile - dumping was a problem - so tight customs controls were important;

• they favoured regional customs control cooperation;

•  there were few business/accountancy laws which made audit checks on the value of imported goods difficult;

• the legislation to implement the ACV was being worked on and a data base was being established;

• there was a need for more technical assistance.

VI. The lunch address

13. The key points in the lunch address by Mr. R. Moretta, Chairman of the Committee on Customs Valuation, were that the Committee on Customs Valuation had done some good work on coordinating and providing technical assistance and this should be taken further. In particular, attention should be given to coherence and coordination with other bodies working in this area. Possibly a symposium in early 2001 would be helpful. Some overlap between donors was inevitable and not necessarily a bad thing, but greater coordination was needed. It was generally accepted that technical assistance should be demand-driven and that the Committee on Customs Valuation had already done a lot of work on a needs assessment. Priorities in providing funds were sensitive and important.

VII. Round Table on the LAC aspects of implementing the ACV

14. The key points to emerge from the Round Table were that:

• coherence and coordination amongst donors had to be improved. The Committee on Customs Valuation had done well, but it might take a more prominent role, though it was recognised that it was difficult to complete a comprehensive needs assessment of recipients. It was a fact that some LACs did not have the economic or political motivation to benefit from technical assistance;

• the WCO was also doing excellent work, in particular with its revised modular approach to training (basic, intermediate, senior managers, distance learning by CD-Rom and post-implementation modules). Some thought there was a case for the WCO to work closer with other agencies;

• on the impact of the ACV on LAC revenue, several expressed serious doubts about the WCO finding that there had generally been no loss as a result of implementation;

• technical cooperation should be rationalised and be for longer rather than shorter periods. A year’s secondment to a developed country customs valuation unit was cited as a good form of assistance. A short visit by a consultant was thought to be of little benefit. It was noted that LACs could help each other by sharing experiences through regional arrangements and the practical training provided by India was identified as a good example;

• there were real practical problems for LACs in the post-importation checking of the value of goods, given that many importers have no or very basic accounts and that such as barter transactions are not uncommon. One approach was to make greater use of export prices. The WCO had set up a Working Group to study, inter alia, this issue which would report in February 2001. However, some developed countries had reservations on the use of information exchange arrangements;

• the technical complexity of the ACV and its demands in terms of trained staff, IT and telecommunications infrastructure present severe problems for LACs, which required significant technical assistance;

• many LACs had informal sectors of trade. Some thought that the WCO might study the fiscal impact of this trade and the implications for such as the ACV;

• the introduction of the ACV into national legislation was only part - often the catalyst - of the wider, more important need for customs reform, which had significant economic implications.

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