Digital Customs. WCO Experience

The State Official Educational Institution of Higher Education «RUSSIAN CUSTOMS ACADEMY»

The Regional Training Center of the World Customs Organization The Research Institute of the Russian Customs Academy








MOZER SERGEI


DIGITAL CUSTOMS

WCO Experience


Monograph











Moscow


2019

UDC 339.543








     Reviewers:
     E.G. ANISIMOV, Professor of the Department of Customs of the Peoples’ Friendship University of Russia, Doctor of Technical Sciences, Professor, Honored Worker of Science of the Russian Federation;
     M.A. RYLSKAYA, Doctor of Law, Associate Professor, Deputy Chairman of the Dissertation Council of the Russian Customs Academy (jurisprudence)


     Mozer S.V.
        Digital Customs. WCO Experience: monograph / S.V. Mozer. Moscow: Publishing House of the Russian Customs Academy, 2019. 266 p.

        ISBN 978-5-9590-1070-6



         The monograph represents historical and current facts of the formation of the institution of electronic and digital customs in the World Customs Organization. It analyzes various activities of the WCO working bodies for the development of digital customs. Attention is paid to the issues related to preparation of the Digital Customs Concept, the Digital Customs Maturity Model, and the WCO Digital Customs Work Program. The author investigates the issues of correlating the analyzed institution with various instruments of customs regulation which are created by the international customs community in the World Customs Organization.
         The monograph can be useful for a wide range of specialists in the field of international customs cooperation and improvement of customs regulation on the basis of international standards. It can be used by scientists, lecturers, students, graduate students and other categories of students in the Russian Customs Academy, in other universities and Regional Training Centers of the World Customs Organization specializing in «Customs» and «Jurisprudence» as well as for experts of the WCO working bodies, Customs and other executive authorities in the Member States of the EEU, experts of the Eurasian Economic Commission for organizing and implementing mutually beneficial customs cooperation between the Eurasian Economic Commission and the World Customs Organization.


UDC 339.543






ISBN 978-5-9590-1070-6

© S.V. Mozer, 2019

Digital Customs constituted a means, rather than an end in itself, and the aim should not be to digitalize the existing bureaucratic processes, but to review them first in order to achieve the best possible result


(Item 235. Report to the Policy Commission.
Policy Commission, 74th Session. Punta Cana, 7-9 December 2015.
Doc. SP0550E1a. Brussels, 27 January 2016. -P. 47)

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From the author








    Dear friends, colleagues!

    We are continuing a series of publications on the activities of the World Customs Organization. This time, the study touches upon the development of the digital customs institute.
    To date, experts of the customs bloc of the Eurasian Economic Commission (hereinafter - EEC), together with the Customs Administrations and economic operators of the Member states of the Eurasian Economic Union (hereinafter -the EEU) have begun to establish the institution of digital customs. This issue is complex and at the same time interesting, promising from the standpoint of developing the theory of international, administrative, customs law as well as improving customs regulation in the EEU Member states.
    Modern research in science on this subject are presented by individual scientific publications, which investigate the issue of creating electronic customs. At the same time, there are no fundamental developments of an international legal nature on the subject of digital customs.
    The main problem we encountered in the course of the study is the lack of understanding of digital customs as a complex phenomenon, an instrument of customs regulation, a concept, an approach as well as a combination of organizational, legal, technical and technological solutions, etc. Paradoxically, in the presence of the WCO Digital Customs Concept, the Digital Customs Maturity Model as well as the WCO Digital Customs Work Program, the international customs community did not define the terms «electronic customs» or «digital customs». In other words, the conceptual apparatus of the analyzed institution is not formed.

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    To date, none of the instruments of the WCO provides an answer to the question of what is electronic or digital customs. This also applies to the Revised Kyoto Convention and the WCO IT Guide for Executives. Digital Customs, unfortunately, is considered in a very narrow sense and is actually identified with information communication technologies (hereinafter - ICT). In our understanding, this approach is not fully consistent with objective reality.
    It should also be noted that the scientific expert community is not aware of the competencies of digital customs as well as its characteristics, scope, models, management mechanisms, instruments and tools. Moreover, the answer remains to the question about the relationship between digital customs and the e-customs institute, the «single window» mechanism, e-commerce, the authorized economic operator, e-declaration, preliminary information, and other customs institutions. An important topic is the analysis of digital customs in the context of customs operations and business processes.
    Another interesting problem is the ratio of digital customs with ICT as well as technological solutions in the analyzed area. It is obvious to us that for the development of digital customs within the framework of the WCO, it is necessary to develop a separate Digital Customs Guide, and also to issue the corresponding Compendium of practices of the WCO Member countries in this area.
    In the context of the development of the digital customs institution in the EEU Member states, we turned to the experience of the World Customs Organization and tried to analyze existing approaches, conceptual vision, proposals for the development of digital customs in a single coordinate system. Within the framework of the study, conclusions and suggestions are formulated.
    We continue to adhere to the thesis that the WCO is a serious international structure, under whose auspices the international customs community creates modern standards and legal instruments of customs administration. The WCO Secretariat, led by the Director General, provides invaluable assistance in this process. Active cooperation of the Eurasian Economic Commission with this international institution, which brings together experts from customs administrations of the world, began in 2016 after the signing of the Memorandum of Understanding between the Eurasian Economic Commission and the World Customs Organization. During this time, the EEC specialists opened doors to

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a number of the WCO working bodies, which competence covers various issues of customs administration and trade facilitation. Of course, such cooperation brings positive results.
    In the light of the above, we hope that the research material presented to your attention will be useful in the framework of the WCO capacity building as well as the work being done to improve customs regulation based on the WCO standards.

Kind regards,
Sergei Mozer

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TABLE OF CONTENTS



SYMBOLS AND ABBREVIATIONS.......................................... 11

FOREWORD .......................................................... 12

Chapter 1
ELECTRONIC CUSTOMS: EXPERIENCE OF THE WORLD CUSTOMS ORGANIZATION ............................. 17
1.1.  E-Customs Strategy: General Provisions ...................... 17
1.2.  Customs and E-Commerce Strategy.............................. 19
1.3.  Conclusions from the review of the draft «Strategies Customs and Electronic Commerce»...................26
1.4.  WCO E-Customs Strategy Review (2007) .................... 30
1.5.  Conclusions from the analysis of the World Customs Organization’s E-Customs strategy - 2007.......................37
1.6.  Electronic Customs - 2015: on the eve of the introduction of the «digital customs» brand............ 39

Chapter 2
DIGITAL CUSTOMS: APPROACHES OF THE WORLD CUSTOMS ORGANIZATION ..............................46
2.1.  On the development of a Strategic Concept of Digital Customs. 46
2.2.  Integrated approach to the creation of digital customs... 49
   2.2.1. Current operating (working) environment ............. 50
   2.2.2. Digital Customs: instruments, tools, guidelines and WCO systems............................................. 52
   2.2.3. Positioning Information Customs Technologies in the WCO Strategic Plan .................................. 52
   2.2.4. The Concept of digital customs ...................... 57
   2.2.5. Digital Customs: Vision, Opportunities and Challenges ... 60
   2.2.6. Digital customs: the experience of Morocco .............. 61
   2.2.7. Conclusions on § 2.1 - § 2.2..........................64

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2.3.   Policy Commission and Digital Customs Agenda: Formation of digital customs theme ..................................... 68
2.4.   Classification of current issues of digital customs ............ 76
   2.4.1. Conceptual apparatus .......................................... 78
   2.4.2. Customs digitization .......................................... 80
   2.4.3. Customs (customs administration) and digital customs......... 83
   2.4.4. Management mechanism, customs administration
          in the context of the development of digital customs ........ 86
   2.4.5. Customs operations (business processes) in the framework of digital customs ................................. 87
   2.4.6. Risk Management System and digital customs .................. 89
   2.4.7. Subject composition of legal relations within the framework of digital customs .................................... 89
   2.4.8. Instruments used to support digital customs.................. 92
   2.4.9. Technologies promoting development of digital customs in the system of customs administration.............................. 93
   2.4.10. Single window and digital customs, their relationship and correlation in the field of customs regulation .................. 96
   2.4.11. Supply Chain Security of goods and the institution of authorized economic operator.................. 96
   2.4.12. Regional integration and digital customs.................... 97
2.4.13. Legal issues of the organization of the functioning of digital customs .............................. 97
   2.4.14. Capacity building, personnel issues......................... 97
   2.4.15. Problematic issues of implementation of the digital customs institute .................................... 98
   2.4.16. Additional themes for the digital customs concept........... 99
   2.4.17. The role of the World Customs Organization in the formation of the institution of digital customs............... 99
   2.4.18. Conclusions on § 2.3 - § 2.4.................................99
2.5.   The Year of Digital Customs (2016)............................. 105
   2.5.1. Conclusions on § 2.5........................................ 108
2.6.   Permanent Technical Committee: Digital Customs Agenda.......... 112
   2.6.1. The WCO Data model as a promotion strategy
          for international organizations, regional organizations and the private sector ..................................... 113

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   2.6.2. Single window .............................................. 115
   2.6.3. Data security .............................................. 118
   2.6.4. Modernization of management in customs through the use of information -       communication technologies................123
   2.6.5. Global Network of Customs Handbook.......................... 125
2.7.   Permanent Technical Committee and Enforcement Committee: Big data and Data mining .......................................... 127
2.8.   Big data: challenges and opportunities ........................ 131
   2.8.1. International standards .................................... 131
   2.8.2. Risks Management............................................ 131
   2.8.3. Internet of things ......................................... 132
   2.8.4. E-commerce ................................................. 132
   2.8.5. National Customs Enforcement Network
          and Digital Customs......................................... 133
   2.8.6. Conclusions on § 2.6 - § 2.8.................................135
2.9.   WCO Capacity Building Committee: Digital customs in the context of capacity building development.................... 141
   2.9.1. Conclusions on § 2.9........................................ 154
2.10.  Information Management Sub-Committee: Digital Customs Work Program......................................... 159
   2.10.1. General provisions ....................................... 159
   2.10.2. Structure of the Digital Customs Program................... 164
   2.10.3. Actual issues of the Digital Customs Work Program ......... 169
   2.10.4. Conclusions on § 2.10...................................... 171
2.11.  WCO Policy Commission Digital Customs:
       review and disseminate of advanced practice of customs administration...................................... 174
   2.11.1. Conclusions on § 2.11 ..................................... 177
2.12.  Digital Customs Maturity Model: general provisions ............ 181
   2.12.1. Maturity models: scientific and methodological approaches . 190
   2.12.2. Conclusions on § 2.12.......................................196
2.13.  Information Management Sub-Committee: Electronic Services ............................................... 200
   2.13.1. Background ................................................ 202

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   2.13.2. Electronic Services and Border Management..............203
2.14. E-Commerce Working Group Digital Customs: bridging the digital divide.....................................206
   2.14.1. Conclusions on § 2.14................................210
2.15. Information Management Subcommittee: Revision of customs administration instruments....................212
2.16. Prospects of development of the digital customs institute . 219

Chapter 3 INFORMATION COMMUNICATION TECHNOLOGIES .......................... 230
3.1.  The concept of information communication technology.......230
3.2.  Information and communication technologies for e-customs . 237
   3.2.1. General characteristics of the Border ICT Solutions Mapping Tool .................. 237
   3.2.2. Characteristics of e-customs in the framework of the Border ICT Solutions Mapping Tool .................. 240
   3.2.3. WCO Technology Network ................................ 243
   3.2.4. Conclusions on § 3.1 - § 3.2............................245

CONCLUSION....................................................... 249

LIST OF SOURCES USED..............................................251

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                SYMBOLS AND ABBREVIATIONS




AEO                - Authorized Economic Operator             
CCC, Council       - The Customs Cooperation Council          
CEN                - Customs Enforcement Network              
CTS                - Container Targeting System               
CBC                - Capacity Building Committee              
EEC, Commission    - The Eurasian Economic Commission         
EEU, Union         - The Eurasian Economic Union              
ISCM               - Integrated Supply Chain Management       
ICT                - Information Communication Technologies   
IMSC               - Information Management Sub-Committee     
nCEN               - National Customs Enforcement Network     
PC                 - Policy Commission                        
PTC                - The Permanent Technical Committee        
RKC, Revised Kyoto - The International Convention on the      
Convention         Simplification and Harmonization of Customs
                   Procedures                                 
SAFE               - SAFE Framework of Standards to Secure and
                   Facilitate Global Trade                    
TeN                - Technology Network                       
Treaty             - Treaty on the Eurasian Economic Union    
WCO, Organization  - The World Customs Organization           

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                FOREWORD





    At the end of 2018 the specialists of the customs bloc of the Eurasian Economic Commission held a regular meeting of the thematic block «electronic customs», where special attention was paid to the issue of scientific and methodological approaches to the formation of the institution of digital (electronic) customs in the Member states of the Eurasian Economic Union. During the discussions, the meeting participants concluded that it is necessary to study international experience and, above all, the World Customs Organization in terms of the development of the digital customs institution. In our opinion, a comprehensive study of digital customs as a complex phenomenon, mechanism, and instrument will allow to form effective proposals for the development of this institution in the EEU Member states.
    In various scientific publications and working materials (EEC, WCO) customs is referred to as paperless, electronic, digital and smart. At the same time, there is a position according to which there is no any difference between electronic and digital customs, and the question is only in the preferences of the applied conceptual apparatus. The participation of the author in the sessions of the WCO working bodies made it possible to analyze these problems from various points of view. Looking ahead, it should be noted that there are still differences. We believe that the planned series of publications on the formation of electronic and digital customs will allow scientists and practitioners to reflect on the analyzed institution in the field of customs regulation in a new way.
    The analysis of the working materials allowed us to identify three periods during which the WCO experts made active efforts to create an e-customs institute, and then digital customs.
    The first period begins with the adoption of the Baku Declaration in June 2001 by the WCO Council and ends on November 8, 2007.
    In 2001 the Council adopted the Baku Declaration, in which Member countries are encouraged to accept and implement the Revised Kyoto Convention in order to create a modern, transparent, clear, efficient, rapid and simplified e-Customs environment.¹ The beginning of the second period is dated

¹ It should be noted that the Baku Declaration took into account the fact that the Internet and e-commerce will require customs to respond appropriately to agreeing on measures to simplify procedures and control in response to the needs of trade participants, while ensuring the protection of society. It also highlights the key role of customs in international trade, as well as the need for a consistent strategic customs policy in the field of electronic commerce, which

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November 8, 2007 and is related to the 179/180 session of the WCO Permanent Technical Committee (hereinafter - PTC), where it was considered the issue of the WCO e-Customs Strategy. The end of the period falls on March 7, 2008, when at the 181/182 meeting of the PTC it was presumed the absence of necessary Strategy. The third period starts from the moment of the 72nd session of the WCO Policy Commission, which took place on November 12, 2014. Attention was drawn to the need for the development of modern customs, taking into account the digital revolution. Subsequently, the WCO experts proposed the Digital Customs Concept and the corresponding Work Program.
    The analysis of the development of digital customs revealed a problem - the lack of understanding of digital customs as a complex phenomenon (institution, instrument, tool, mechanism, organizational, legal, technical and technological solutions), lack of scientific and practical developments as well as the WCO Guide for digital customs.
    The need to study the digital customs institution of the World Customs Organization is also confirmed by a number of other circumstances, namely:
    9 in scientific circles the issue of the formation of electronic and digital customs and the scientific and methodological apparatus used for these purposes has not been studied enough;
    9 there is no classification of topical issues of the development of the digital customs institution in the modern conditions of customs administration;
    9 the activities of the WCO working bodies (groups, subgroups, committees, subcommittees), that are involved in the development of instruments for digital customs, have been little studied;
    9 today the expert community involved in the formation of digital customs (WCO, EEU) is in need of effective scientific and methodological support for the project on the development of the digital customs institute;
    9 there is no fundamental classical concept of digital customs, which allows WCO Members to get a complete picture of all the possibilities offered by such customs;
    9 the competencies of digital customs are not defined;
    9 insufficiently studied the prospects and possible models for the construction of digital customs, including models of its development;
    9 there is no Reference model for digital customs;

should facilitate discussion of trade and taxation policies in other forums. The developers of the Declaration expressed a desire to contribute to the development of this new economy and to increase the efficiency and effectiveness of Customs administrations. Moreover, they also announced their intention to develop a consistent WCO strategic policy for electronic commerce.

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the scope of digital customs is not defined;
    9 in the scientific and expert environment there is no unified understanding of the digital customs management mechanism;
    9 a comprehensive analysis of existing approaches, trends, concepts of digital customs development at the research and development level was not carried out;
    9 there is no unified system of the WCO indicators for digital customs;
    9 there are no methods for evaluating the key performance for digital customs;
    9 there are no scientific studies regarding the correlation of digital customs and ICT, technological solutions for economic operators;
    9 the place of «electronic», «digital» customs is not determined in conjunction with the «single window» mechanism, customs operations and business processes;
    9 it is necessary to form an integrated digital customs palette, which consists of the necessary instruments, best practices, the WCO systems, solutions and tools that exist in the world and are related to digital customs.
    The above circumstances determine the relevance of this study.
    The object of the study is the institute of digital customs.
    The subject of the research is the rules, procedures, working materials of the World Customs Organization related to the development of the digital customs institution.
    The purpose of the study is to research the WCO activities in the creation of digital customs as well as the preparation of conclusions and practical proposals for development of digital customs.
    The need to achieve this goal determined the formulation and solution of the following main tasks:
    9 study of the institution of electronic customs as well as the strategic approaches of the international customs community to create it;
    9 study of the WCO conceptual approaches on the formation of the digital customs institution;
    9 analysis of the WCO instruments associated with the institution of digital customs;
    9 analysis of the Digital Customs Concept;
    9 study of the Digital Customs Work Program;
    9 analysis of the WCO Digital Customs Maturity Model;
    9 study of technological solutions for digital customs.
    The regulatory legal base of the research consists of international conventions and agreements, normative legal documents regulating the activities of the

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