Facilitating Trade:

Improving Customs Risk Management Systems

In the OIC Member States

Introduction

Customs risk management (CRM) is of great importance for developing appropriate techniques

for systematic risk identification and implementation of all measures needed to facilitate

legitimate trade, to limit exposure to risk, to implement strategies in accordance with the

relevant legislation, analyzing and assessing risks, determine action and monitoring outcomes

to facilitate, improve and streamline control procedures.

An effective CRM can reduce the time and costs in supply chainmanagement, both for the traders

and their customers, increase delivery of products and services, and improve CAs efficiency.

Many unexpected and unpredictable disruptions add to the risks of a supply chain, and the risk

has, thus, become the new norm in supply chain operations. Having in mind that there are many

entities along the supply chain, it becomes clear that, in the global trade, the Customs

Administrations have a significant influence on the supply chain efficiency and effectiveness

Customs is one of the main postulates of the Trade Facilitation (TF) concept. The TF is the

simplification, harmonization, standardization, and modernization of trade procedures. It seeks

to reduce trade transaction costs at the interface between business and government and is an

agenda item within many customs related activities. So, governments, but also international

organizations include this concept as one of the top priority for full implementation. The World

Trade Organization (WTO) have added Trade Facilitation Agreement

where in Article 7, point

4 the customs risk management is highlighted as an important part of trade facilitation process.

With this agreement, member states shall adopt or maintain a risk management system for

customs control because the Customs Administrations (CAs) are in the middle of the supply

chain process.

The ways that traders are experiencing customs services are changing. On the one hand, there

are traders expecting service simplification and quick flow of goods across the borders, use of

web-based interfaces and easy access to the government services. On the other hand, the

Customs are operating in competitive surroundings: the globalization, the wide use of

Information and Communication Technology (ICT), the increasing knowledge in the trade and

the processes which follow those trends, are forcing the Customs to change and take steps to

catch up with traders in the provision of services. Indeed, they have realized the need, and they

are making constant efforts to respond to challenges and requirements for introduction of

electronic public services. Most of these significant attempts are not delivering the expected

benefits in the form of costs and goods flow time, neither for the Customs nor the traders.

According to the World Bank Doing Business report

many countries still have a significant

amount of time and costs required for border and documentary compliance. Many studies report

the impact of the Customs regarding reduction of costs and time, namely reduction of clearance

time, increasing compliance and reduction of a number of documents required. CAs performs

time release study based on WCO Time Release Study (TRS) from the clearance process or port

dwell time using their data. This facilitates Customs to identify both the problem areas and

potential corrective actions to increase their efficiency. The use of automation and other

sophisticated selectivity methods can allow CAs to improve compliance and deliver the expected

trade facilitation objectives.