Customs Modernisation

Presentation to

SAAFF – KZN Chapter

24th November 2009

CUSTOMS MODERNISATION 2009

Principles of Customs Modernisation

1. To achieve at least a 10-fold improvement.2. Modernisation –the combination of changes across

people, process, policy and technology3. No area of customs operations will be worse off than

current state.4. Deliver meaningful benefits through early introduction

of new integrated modern technology. 5. Modernisation - a process of continuous change.

SARS Customs modernisation drivers

1. Enhance international, regional, trade and OGA partnerships;

2. Focus on improved service delivery to trade and all internal and external stakeholders;

3. Encourage ownership and accountability for individual and organisational performance;

4. Enable automation of non-value adding activities to leverage scarce Customs human resources;

5. Empower intelligent and assertive Border Management & Control; and

6. Foster a transparent and predictable regulatory environment to facilitate self- compliance / regulation.

SARS Customs Transformation Journey

Consistent, predictable , efficient and effective processes

Concentrate specialised skills on value adding activities. Create a new culture and performance driven.

Smart and flexible systems enabling Customs operations to adapt to current and future regimes.

Policy

Process

People

Technology

Modernisation of Customs is defined by how business is impacted across people, process, technology and policy streams.

Policy dictates mandate, legal framework, rules, and procedures

POLICY

Why change?• Implement modern customs

policies and practices – Kyoto Convention and SAFE Framework of Standards.

• Current practices and systems difficult to evolve and adapt to modern customs practices.

• Improve data exchange between traders and operators in the logistics pipeline.

• To meet increased and complex requirements of new trade agreements and national regulatory measures.

• Give SARS the confidence to engage on a customs-2-customs basis with other administrations and leading trade partners.

• Give full meaning and effect to a new automated processing and control environment.

What changes?• Introduction and phased

implementation of new Customs Control and Customs Duty Acts.

• New improved, and internationally aligned methods of declaration processing, inspection, risk management, document management, and management of outstanding cases.

• Departure from transaction-based declaration control to a concept of control within Customs Procedures.

• Departure from amendment by voucher of correction to amendment by versioning.

• More control over supply chain operators through expanded licensing requirements.

• Provision for ‘Fast-track’ procedures for accredited traders, and specified types of clearances.

Impact?• Complete overhaul of declaration

procedures, and related requirements.

• New legal framework implies adoption of new interpretations and terminology.

• Entails a Learning curve for all internal staff and external stakeholders.

• Widespread impact on current policies and procedures.

• More expansive coverage of supply chain operators in customs control.

• Improved Customs tariff engine.• Increased coverage of electronic

messaging between SARS, traders and logistics operators.

POLICY

Customs New Policy in action

POLICY

Define &

Control

Know &

Maintain

Movement

Control

Facilitate &

Enforce

• Appoint places of entry/exit and regulates specific Customs activities.

• Visible Control activities: Anti-smuggling checks, rummages, etc.

• License and register supply chain operators.

• Segment trade.• Reward legitimate and

complaint entities.• Intensify focus on non-

compliant trade.• Define accountability /

liability obligations across the supply chain.

• Monitor “single view” of trader across SARS tax products.

• Account for all goods entering, transiting and leaving the Republic.

• Maximize use of electronic pre-arrival information, and e-communication with “release authorities” ensuring integrity across the supply chain.

• Prevent smuggling.• Control market entry.

• Administer trade policy and trade remedies.

• Centralised processing of trade transactions.

• Collect taxes.• Conduct transaction and Entity-

based audit controls.• Perform enforcement

interdictions.

Risk Management

Trader Management

Cargo Control

Declaration Processing

Financials

PRE-ENGAGEMENT PRE-ARRIVAL / DEPARTURE ARRIVAL / DEPARTURE / CLEARANCE POST CLEARANCE

[28] REGISTRATION

[29] LICENSING

[30] ACCREDITATION

[2] DESIGNATION [Chapter 3] CUSTOMS CONTROL – VESSELS, CRAFT & PEOPLE

[Chapter 1] DEFINITIONS

[4, 12] COASTWISE & TRANSHIPMENT TRAFFIC

[Chapter 5] MOVEMENT OF GOODS

[6] PROCESSING OF PEOPLE

[Chapter 8] TAX STATUS OF GOODS

[Chapter 22] IN TERNATIONAL POST

[Chapters 7, 9 – 11, 13 -21] CLEARANCE & RELEASE OF GOODS

[Chapter 24] FAST-TRACK PROCEDURES

[Chapter 23] ACCESS TO SAMPLING

[Chapter 25] DAMAGED, DESTROYED, LOST GOODS

[Chapter 26] ABANDONED & UNCLAIMED GOODS

[Chapter 27] SWH

[Chapter 31] SECURITY[31] SECURITY

[31] DEBT COLLECTION

[Chapter 33 -36] GENERAL ENFORCEMENT FUNCTIONS INCL. DETENTION, SEIZURE , COUNTERFEIT AND P&R GOODS

[38] DISPUTE RESOLUTION[38] DISPUTE RES.

[37] RULINGS

[39] JUDICIAL MATTERS

[40] MISCELLANEOUS

[Chapter 27] SWH

How the Control Bill applies to Customs operations

Kyoto informs Customs Clearance formalities

Revised Kyoto Convention*

Kyoto Specific Annexes Kyoto Procedures SARS Procedures

B Importation B1 Clearance for home use (i) Home Use

    B2 Re-importation in the same state

    B3 Relief from import duties and taxes

C Exportation C1 Outright exportation (ii) Export (iii) Temporary Export

D Customs warehouses D1 Customs warehouses (iv) Warehousing;

E Transit E1 Customs transit (vi) National Transit (vii) International Transit

    E2 Transhipment (viii) Transhipment

    E3 Carriage of goods coastwise

F Processing F1 Inward processing (ix) Inward Processing

    F2 Outward processing (x) Outward Processing

    F3 Drawback

    F4 Processing of goods for home use (xi) Processing for Home Use

G Temporary admission G1 Temporary admission (xii) Temporary Admission

J Special procedures J1 Travellers

    J2 Postal traffic

    J3 Means of transport for commercial use

    J4 Stores (xiii) Stores.

J5 Relief consignments

(v) Tax Free Shop

* Refer to Kyoto slides for detailed descriptions.

* Current “ SAD500 purpose codes are aligned to the relevant (appropriate) procedure. For the purposes of the operational and systems implementation of the Control Bill, “Home Use” is treated along the lines of a customs procedure. The table includes cross-border SACU transactions, which will for the purposes of the Customs Bill be treated as imports and exports.

Key Implication - Customs Procedures to replace Purpose Codes*

Home UseDP, OL, TOL, XDP, XOL [GR, TGR, XGR, Items 403.00; 405.00;406.00, 407.04; 407.06; 408.00; 412.00; 413.00; 460.00; 495.00;497.00], IM4

National Transit Procedure RIB, IM8

International Transit Procedure RIT

Transhipment Procedure *** (occurs on the inward and outward manifest)

Temporary Admission Procedure [GR, TGR, XGR, Items 470.01; 470.02; 480.00; 490.00], IM5, EX3, EIG

Tax Free Shop Procedure WH, XIB, XRW,

Stores Procedure EAS, XES, ZES

Warehouse Procedure WH, XIB, XRW, WE

Export Procedure EIG, ELG, ZE, XE, EX1

Temporary Export Procedure [GR, TGR, XGR, Items 407.01/00.00/01.02; 409], IM6, EX2, EIG, ELG

Inward Processing Procedure [GR, XGR, TGR Items 470.03; 498.00], EIG, ELG, ZE, XE

Outward Processing Procedure [GR, XGR, Items 409.04; 409.07] EIG, ELG, ZE, XE

Processing for Home Use Procedure [IR, XIR, TIR (All 3rd Schedule Items)]

* Current “ SAD500 purpose codes are aligned to the relevant (appropriate) procedure. For the purposes of the operational and systems implementation of the Control Bill, “Home Use” is treated along the lines of a customs procedure. The table includes cross-border SACU transactions, which will for the purposes of the Customs Bill be treated as imports and exports.

TECHNOLOGY

TECHNOLOGY

Why change? What changes? Impact?• Numerous outdated systems that

operate on different technology platforms.

• Systems not designed to handle integration in the customs environment.

• No single view of Trader.• Duplication of data and poor data

quality.• System hard to change due to

inflexible architecture.• Hard-coded business rules.• Poor network performance.• Multiple platforms to support and

maintain.• Too many human interventions in

the automated process.

• Replacement of legacy systems with TATIScms, U3TM and SAP financials - enabling a single client view at a national level.

• Introduction of more electronic channels for traders – not only EDI/discs, also eFiling and e@syFile.

• A dynamic “self-tuning” risk engine encompassing traditional Customs risk filters as well as 3rd party data, statistical analysis, etc.

• An automated trader compliance history/rating capability.

• Web-based, centralised processing for registration, accreditation and licensing.

• Automated, centralised assessment of goods declarations.

• Automated acquittal and tracking of goods in transit.

• Virtual collaboration with OGAs -“single-window” processing.

• Your tasks will become more automated and less cumbersome.

• Your work activity will be risk-driven.

• The system provides multiple entry channels catering for trader needs.

• You will only be allocated work that you are able to complete and you will be measured on your performance thereof.

• You will have more and better information at hand to guide your tasks, activities and decision-making.

* TatisCMS – Customs’ new integrated declaration solution* U3TM – SARS’s new Unified Taxpayer, Traveller and Trader Management system – for client licensing, registration and accreditation.* SAP Financials – Customs’ new revenue accounting system

PROCESS

PROCESS

• Too much time and effort spent on chasing volumes, revenue targets, in the absence of real risk basis, and inadequate resources.

• Lack of integration across legacy systems requires significant human intervention and broken processes.

• Lack of alternative channel to EDI means more burden on customs to capture non-automated clearances, especially BLNS cross border transactions.

• Current processes are founded on transaction control – do not cater for the modern concept of control over customs procedures.

• Replacement of legacy declaration systems with a single integrated clearance processing system.

• Process re-design to adopt a ‘Pull” action as opposed to “Push” – will enable customs to manage highest risk, trade volumes according to available resources.

• Processes and procedures must augment the concept of “Customs Control” contained in the new legal framework.

• Your tasks will be primarily automated.

• Your skills will define the next course of action – free from having to move vast amounts of paper from place to place.

• All supporting documents will in future be filed electronically to you for action and finalisation.

• Dynamic forms will provide ease of data capture – specifically for trader management, and branch front-end assistance to traders.

• Automated case management will bridge the parallel customs activities with the mainstream system.

Why change? What changes? Impact?

PEOPLE

PEOPLE

• Technology innovation means less administrative tasks – – more time for ‘real’ customs

work!– certain tasks become redundant.

• Centralised processing allows trade administration staff to work in isolation of cargo location.

• Need to consolidate scarce resources and capability.

• Capitalize on concentrated work efforts – centralised and virtual deployment.

• Need to maximise capacity and skills released from redundant tasks and activities.

• Dispense with all non-value adding activities.

• Automated risk management - minimises transactional ‘human’ intervention and focus – increase “pre-clearance” and “post clearance” staff capacity and trade coverage.

• Comprehensive overhaul of Trader Management to provide ability for Customs to manage and monitor trader compliance.

• Introduce specialised areas of customs focus and intervention through a segmented approach – Trade regimes, areas of analysis (i.e. Tariff, Valuation, Origin, and invoice analysis).

• Take performance management to new heights through end-to-end auditibility of new solution.

• Possible staff displacement due to organisational redesign and job concentration.

• Expansive job and work opportunities available for displaced staff.

• Extensive staff re-skilling and re-alignment with the interpretation of new legal framework, work procedures, and policies.

• Staff performance and activities to be tracked in ‘real time’.

• New solution will enable Customs to be demand-led according to capacity and risk.

Why change? What changes? Impact?

The End – Thank You24th November 2009