Sergei Mozer, Ph.D. at law
Senior Researcher in the Research Institute of the Russian Customs Academy.
Published: Social and Political Science № 2, (April) — 2019. — pages 162-167.
© S.V. Mozer, 2019
When using the article referance is required
The article touches upon the topical issues of the formation of the e-customs institute in the World Customs Organization. The author analyzes the «WCO Strategy Paper Customs and E-Commerce», which was first presented to the international customs community at the WCO headquarters in 2007. In the research material, the following blocks of the WCO e-customs concept (2007) are highlighted: legal aspects of the formation of the institute of electronic customs; administrative (organizational) regulations; technological aspects; customs operations (business processes); «single window» mechanism; law-enforcement block; cooperation issues; institutional development. The research material is a matter of interest to a wide range of specialists whose activities are related to the development of the institute of electronic (digital) customs, the improvement of customs regulation, as well as international customs law.
Keywords: the World Customs Organization, the WCO, the Eurasian Economic Union, the EEU, the Eurasian Economic Commission, the EEC, electronic customs, e-customs, digital customs, e-commerce, customs regulation, international customs law, customs, single window.
At the end of 2018, the specialists of the customs block of the Eurasian Economic Commission (EEC, Commission) held a regular meeting of the thematic unit «electronic customs», where special attention was paid to the issue of scientific and methodological approaches to the formation of digital (electronic) customs in the Member States of the Eurasian Economic Union (EEU, Union). During the discussions, the meeting participants concluded that it is necessary to study international experience and, above all, the World Customs Organization (WCO) in terms of the development of the digital customs institution. In our opinion, a comprehensive study of digital customs as a complex phenomenon, mechanism, instrument, will allow to form effective proposals for the development of this institution in the EEU Member States.
There is a point of view that at the heart of the national «single window» mechanism, its central core and foundation is a paperless (electronic) customs, designed to replace the traditional format of paper workflow when performing customs operations on electronic workflow organized on the basis of information and communication technologies (ICT), thus creating a more efficient customs environment. The materials of the EEС customs block indicate that the term «paperless customs» is equivalent to the term «electronic customs». The widespread use of ICT in the daily work of the customs authorities has fundamentally changed the activities of modern customs, from automating the office work of customs officials to using the Internet to publish and disseminate
information, use automated customs systems to produce declarations, perform risks management, process and verify information, issue permits (documents), interact with other government bodies.
In various scientific publications and working materials, for example, the EEС, the WCO, customs is referred to as paperless, electronic and digital. At the same time, there is a point of view 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 meetings 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 administration in a new way.
The purpose of this article is to analyze the approaches of the World Customs Organization to the formation of an e-customs institution.
The analysis of the working materials allowed us to identify three periods during which 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 states are encouraged to adopt and apply the Revised Kyoto Convention (hereinafter referred to as RKC) in order to create a modern, transparent, clear, efficient, fast and simplified e-customs environment.
We note for reference that the Baku Declaration took into account the fact that the Internet and electronic 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 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 to increase the efficiency and effectiveness of Customs administrations. Moreover, they also announced their intention to develop a consistent WCO strategic policy in the field of electronic commerce.
The beginning of the second period is dated on November 8, 2007 and is associated with the 179/180 meeting of the WCO Permanent Technical Committee (PTC), at which the issue of the WCO e-Customs Strategy was considered. The end of the period falls on March 7, 2008, when at the 181/182 meeting of the PTC it was stated that there was no necessary Strategy. The third period starts from the moment of the 72nd meeting of the WCO Policy Commission, which took place on November 12, 2014. It drew attention 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. Conceptual approaches to the development of these important documents will be discussed in the next publication.
Since then, the WCO has developed a coherent e-commerce strategy, recognizing the need to step up efforts to overcome differences in levels of development between Member countries in terms of e-infrastructure and Internet use.
This strategy was presented at the 179/180 meeting of the Permanent Technical Committee at the WCO Headquarters in the period of November 8-9, 2007 (6 years after the adoption of the Baku Declaration — author’s note). In addition, at that time, the Customs Compendium on Electronic Commerce was being prepared, in which it was supposed to present a clearer explanation of the concept of electronic commerce, to highlight the customs implications of electronic commerce, as well as the main problems and opportunities that determine this phenomenon.
We need to note that the emphasis here is made on e-commerce but not on e-customs. At the same time, the e-commerce strategy is considered as part of the e-customs strategy. As it is written in the note of the Secretariat of October 8, 2007, the WCO Members would like to have at their disposal a consolidated document on e-customs and the creation of a simple and paperless environment for customs and trade. The main objective of the analyzed strategic document is to determine what basic actions should be taken as well as potential deadlines that should be met by all interested parties. In the context under consideration, it is worth noting that the concept, the term «electronic customs» is not applied in the strategic paper under consideration. So, we will consider its basic provisions.
First of all, we will note that the project prepared by WCO within the «E-Customs Strategy» block and presented at the 179-180 meeting of the PTC is called «The WCO Strategy Paper Customs and E-Commerce » (hereinafter — the Strategy). It consists of five parts: introduction, electronic commerce as an influence, electronic commerce as an opportunity, electronic commerce as a challenge, and conclusions. At the same time, there is no separate set of issues called «electronic customs». The Strategy developers rightly point out that the main role of customs is to collect duties and taxes as well as to protect society and the economy by controlling goods and people crossing borders. In fulfilling this role, customs should promote legitimate international trade and travel applying best practices in their procedures and processes in order to limit overall trade
interventions and move individuals to the required absolute minimum. The authors note that the global environment in which customs operates is increasingly determined by factors such as transnational and related companies trade among themselves; changing security requirements; the growing volume of shipments; electronic commerce with optimal use of information and communication technologies; and establishing links between Customs administrations and other international trade agencies.
In particular, the emergence of e-commerce has created a global, virtual and unlimited market, providing a tool and a catalyst for radical changes in business. Trade expects governments will use an electronic one-stop-shop border management to clean goods using harmonized procedures and data requirements through open networks. A common challenge for customs administrations will be to operate in a modern electronic environment and at the same time to act more efficiently and effectively. To do this, customs should use many opportunities that e-commerce will provide to improve existing customs processes and practices, as well as to develop new delivery mechanisms that will take into account changes in trade practices both now and in the future. In particular, Customs administrations will need to provide a number of e-services to those traders who has the opportunity to e-commerce, to work with customs authorities exclusively in electronic form, using simple and easily accessible services. The draft Strategy (2007) notes that different levels of development in terms of IT infrastructure and Internet use will require more active efforts of all sides and, in particular, will require more effective coordination between donor countries and institutions to overcome the so-called «digital divide».
It is rather interesting the definition of the term (concept) «electronic customs» in the draft Strategy. In particular, e-commerce is described as «doing business electronically», which includes not only the use of the Internet. In current global discussions, e-commerce is used as a general term to describe various electronic relationships that have their own rules and specific aspects. E-commerce has a wide range of issues in terms of e-commerce for business-to-consumer (B2C) operations, business-to-business (B2B) operations, and three e-government issues, namely, government-to-business (G2B), government — citizen (G2C) and government-government (G2G). Customs will have to consider all these aspects of e-commerce and identify problems and possible solutions in order to arrive at an integrated e-commerce approach for customs. Although B2C issues are important and represent a potentially significant market in the future, trade and revenue statistics will require customs to initially focus on B2B, G2B, G2G and G2C transactions.
Considering e-commerce as a challenge the developers of the Strategy for Customs and E-Commerce project present a number of important points. Among them are the following:
Customs need to make optimal use of the opportunities provided by information and communication technologies in general, and e-commerce in particular, for their internal and external operations, including training and capacity building. Customs must overcome the independent and one-sided development of country-specific automated systems, often several systems, to handle international trade transactions. It is noted that customs should be flexible and farsighted when developing electronic methods of control and trade facilitation, especially in the use of information technologies, including electronic data interchange. The need for customs to operate in such an international and open environment using the Internet will require:
- harmonized customs procedures and processes based on the Revised WCO Kyoto Convention as well as electronic legislation relating to issues such as «signature» and «document»;
- standard data requirements for export and import, as defined in the WCO Customs Data Model;
- a comprehensive information security strategy concerning, inter alia, the cross-border recognition of digital certificates.
The World Customs Organization believes that customs will need to use technology and open standards, such as the Internet, to improve their overall information management by making better use of existing business information for purposes of collecting duties, risk management and auditing. While the Internet allows companies to store information in one centralized location throughout the world, it also allows Customs authorities to have instant access to relevant information without knowing where this information is physically stored.
Therefore, customs will have to maintain their ability to provide access to reliable and verifiable information in order to identify the responsible person and obtain the information necessary to perform its function. Such an operating environment will require uniform application of the relevant rules as well as bilateral or multilateral cooperation and adequate resources.
The project «Strategies for Customs and Electronic Commerce» notes that by providing comprehensive service in real time, customs will make a significant contribution to improving the overall level of compliance with the law. Access to all relevant rules and regulations, access to real-time consultations on customs issues as well as online training on the customs website, according to the WCO, should help the trading entities comply with customs requirements.
The summarizing part of the draft Strategy (2007) states that customs need to develop a corporate, comprehensive and holistic business strategy to respond to the effects of e-commerce. According to the WCO, such a business strategy should include the following requirements:
- Simplification of customs processes and requirements while achieving higher levels of compliance (compliance with the law — author’s note) and security, which, in turn, will reduce the burden on trade and lead to lower costs associated with compliance.
- Development of seamless international trade operations and related standardized processes as well as data flows that can be successfully used by all WCO Members, and which are based on the WCO Customs Data Model and the Revised Kyoto Convention.
- Ensuring that the use of e-commerce allows Customs administrations to identify and manage risks at an earlier stage as well as to improve the targeted use of resources in the areas of greatest risk.
- Rely more on the use of commercial data to fulfill customs requirements.
- Ensuring safe, accessible requirements and the availability of reliable IT systems that are user-friendly and capable of processing information.
- Using the potential to improve the exchange of information and information between the administrations of Member countries and, in particular, the use of the concept of a WCO Unique Consignment Reference (UCR) for end-to-end international trade transaction audit trails.
- Development of joint work between customs authorities and other government agencies involved in international trade in order to facilitate the smooth transfer of data on international trade (the «single window» concept) and the exchange of operational (intelligence) risk information at the national and international levels.
- Ensuring that all relevant international trade rules are updated (modernized) so that the electronic functional equivalents of «documents» and «signatures» are legally valid.
- Ensuring that personnel receive the necessary training at all levels to develop the skills necessary to work in a fully automated electronic environment.
The final focus of the draft Strategy is that WCO will need to step up efforts to help bridge the digital divide, taking on the role of coordinating modernization and capacity building activities in the customs area with other international organizations and institutions operating in this area.
Having considered the «Strategy Customs and Electronic Commerce» we formulate the following conclusions.
- The strategy (2007) is a matter of great interest for the study of the genesis of the institute of electronic (digital) customs. It is a serious, complex and important document in which the World Customs Organization, together with the international customs community, attempted to formalize, highlight, define the boundaries of two interrelated institutions — customs and e-commerce. The analyzed document was prepared professionally and deserves high appreciation.
- In the draft Strategy, e-commerce is characterized as «conducting business electronically», which includes not only the use of the Internet. It is stated that e-commerce is used as a general term to describe various electronic relationships that have their own rules and specific aspects.
- The strategy does not contain the concept, definition of «electronic customs» or «digital customs» but uses the concept of «digital divide» characterizing the differences in levels of development between the WCO Member countries in terms of electronic infrastructure and Internet use.
- Despite the fact that the Strategy touches upon the development of the institution (instrument, mechanism, mode, environment) of e-commerce, it contains important characteristics (approaches, proposals, vision) that, in our opinion, are relevant to the prototype of electronic (digital) customs as an integrated institute (tool) of customs administration.
- On the basis of the draft Strategy, approaches to the formation of e-customs (in the context of the e-commerce institute) can be divided into the following blocks:
- organizational and technical;
- customs operations (business processes);
- single window mechanism;
- law enforcement;
- cooperation issues;
- institutional development.
This classification is conditional and has been prepared in order to systematize the approaches to the e-customs institute set forth in the Strategy as well as the subsequent analysis of the genesis of this legal phenomenon.
The legal aspects of the formation of the institute of e-customs affect the development of a comprehensive and holistic business strategy for e-commerce by customs; the formation in the Customs administration of an integrated approach to the institution of e-commerce and its role in customs legal relations; definition of a range of subjects within the framework of customs legal relations that can participate in operations (business processes) carried out electronically; forming a vision of electronic customs used in the implementation of various electronic relations (relations through electronic forms of interaction), which are governed by their own rules and have specific characteristics; uniform application of the rules governing legal relations in the field of e-commerce and e-customs; modernization of the current legislation so that the electronic functional equivalents of the «documents» and «signatures» are legally valid; customs and other relevant regulatory information is stored centrally in only one global location.
Administrative (organizational) provisions of the e-customs institute can be correlated with the problems of finding the necessary resources for the development of e-commerce and e-customs as well as the stated thesis on the creation of one-stop-shop border management. In our opinion, the functions of such a center could be performed by a specialized unit of the customs administration, for example, a kind of electronic customs.
Technological aspects, voiced in the draft Strategy, are associated with such issues as the electronic environment; formation of the necessary operating environment; ensuring safe, affordable requirements and availability of reliable IT systems; optimal use of information communication technologies in the context of the institution of e-commerce and e-customs; modern automated processes: ensuring consistency, transparency, increased efficiency, better risk assessment and support in the fight against corruption; independent and one-sided development of automated systems for the state in the field of customs administration in terms of e-customs; harmonization of procedures and data requirements across open networks; the provision of electronic services to individuals involved in the trade; development of electronic control methods, in particular, using information technologies, including electronic data interchange; information for customs
purposes is not stored by companies within the jurisdiction of a specific Customs administration; the work of the customs authority in the new international and electronic environment requires: harmonized customs procedures and processes based on the RKC as well as electronic legislation on the subject of «signature» and «document», standard data requirements for export and import, as defined in the WCO Data Model, an integrated information security strategy, relating in particular to the cross-border recognition of digital certificates; improving access to commercial information directly or indirectly related to an international trade transaction for risk management and customs control purposes; introduction of UCR; using technology and open standards to improve overall information management at customs through more efficient use of available commercial information for purposes of collecting fees, risk management and auditing.
Customs operations (business processes). Separate provisions of the considered Strategy can be related conditionally to the group — customs operations (business processes). In the named block of questions, we add the problematic of the use by customs authorities of the opportunities provided by IT in general and e-commerce in particular, for its internal and external operations; simplification of customs operations (business processes) and requirements within the framework of the formation of the institution of electronic commerce and electronic commerce development of seamless (end-to-end) international trade operations and related standardized processes as well as data flows based on the WCO Data Model and RKC; the creation of mechanisms (systems) to identify risks and manage them at an earlier stage of supply of goods as well as to improve the targeted use of resources in the areas of greatest risk; the creation of mechanisms (systems) of end-to-end (integrated) audits of international trade transactions, for example, UCR; development of the institution of preliminary information; provision of complex services in real time: organization of access to the regulatory framework in the field of customs regulation, consultations on customs regulation issues.
Single Window Mechanism. To date, the issue of the relationship between the administrative and legal regime of the «single window» mechanism and the legal institution of electronic (digital) customs has not been sufficiently studied in science. We deliberately single out the «single window» mechanism in a separate block in order to emphasize that the concept of this mechanism in the WCO materials was developed before the formation of the e-customs institute. For the «single window», the Strategy focuses on facilitating the smooth transfer of international trade data (the «single window» concept).
Law enforcement block. It is clear that the fight against violation of customs rules cannot be carried out without taking into account the dynamics of IT development and benefits that Customs receive as a result of their use. The Strategy notes that information resources are an invaluable source of information for its control and enforcement functions of customs. Among other things, the actual issue is the organization of the exchange of operational (intelligence) information for customs purposes on risks at the national and international levels.
Cooperation issues. In our opinion, the draft of the considered Strategy highlights the cooperation issues in a separate block. We believe that the voiced questions on this topic can be positioned through the prism of electronic customs. Here we consider the problems of organizing bilateral, multilateral cooperation between customs administrations in the field of electronic commerce; issues of coordination of legal, organizational and technical mechanisms of interaction on e-commerce issues between government agencies and between countries; concluding multilateral agreements on cross-border risk management and control based on auditing; exchange of operational information (intelligence); improving the exchange of information and information between administrations of the WCO Member countries; development of joint work between customs authorities and authorized state authorities regulating foreign trade relations.
Capacity building. In the last group, we highlighted the important provision according to which the World Customs Organization has a coordinating role in the field of capacity building (in the customs field) with other international organizations and institutions. Another aspect of this direction is the thesis about the need to train customs officers and develop the skills necessary to work in a fully automated electronic environment.
- «Customs and E-Commerce Strategies» successfully covers the e-commerce institution in conjunction with customs. However, such customs are not called electronic. We understand that the fixed positions and issues reflected in the Strategy are related to the e-customs institute. However, due to the lack of direct reference to this legal phenomenon as well as the lack of the necessary conceptual apparatus in the text of the Strategy, the draft document under study cannot be called conceptual for the formation of electronic customs. In the absence of explanations on the merits of the matter, it can only be taken into account and further elaboration and necessary analysis in the framework of the WCO rule-making activities.
In conclusion, we note that the Concept of e-customs in the framework of subsequent discussions in the WCO was modernized, and subsequently reviewed at meetings of the Information Management Sub-Committee and the Permanent Technical Committee. We will present the analysis of its main provisions in the next article. The author believes that such publications popularize the activities of the World Customs Organization and characterize its importance in improving customs administration and the development of international customs law.
- Note on the organization of an international conference on topical issues of electronic declaration development within the framework of the «single window» mechanism dated September 2, 2016. Item 4 of the agenda for the 2nd meeting of the thematic unit «Electronic Customs» of the Working group on the implementation of the Action plan for the implementation of the Basic Development Directions of the «single window» mechanism in the system of regulation of foreign economic activity // EEC Archive.
- E-Customs Strategy. Secretariat Note. Item V on Agenda. Permanent Technical Committee, 179th/180th Sessions, 8-9 November 2007. Doc.PCO195E1a. Brussels, 8 October 2007.
- WCO Strategy Paper Customs and E-Commerce. Annex to Doc. PCO195E1// Customs Strategy. Secretariat Note. Item V on Agenda. Permanent Technical Committee, 179th/180th Sessions, 8-9 November 2007. Doc.PCO195E1a. Brussels, 8 October 2007.
- Declaration of the customs Cooperation Council Concerning E-Commerce (Baku Declaration), June 2001. URL: http://www.wcoomd.org/-/media/wco/public/global/pdf/about-us/legal-instruments/declarations/baku_declaration.pdf?la=en (date of request: 01.03.2019).
 Note on the organization of an international conference on topical issues of electronic declaration development within the framework of the «single window» mechanism dated September 2, 2016. Item 4 of the agenda for the 2nd meeting of the thematic unit «Electronic Customs» of the Working group on the implementation of the Action plan for the implementation of the Basic Development Directions of the «single window» mechanism in the system of regulation of foreign economic activity // EEC Archive.
 Declaration of the customs Cooperation Council Concerning E-Commerce (Baku Declaration), June 2001. URL: http://www.wcoomd.org/-/media/wco/public/global/pdf/about-us/legal-instruments/declarations/baku_declaration.pdf?la=en (date of the request: 01.03.2019).
 Point 5. Ibid.
 Point 1. WCO Strategy Paper Customs and E-Commerce. Annex to Doc. PCO195E1// Customs Strategy. Secretariat Note. Item V on Agenda. Permanent Technical Committee, 179th/180th Sessions, 8-9 November 2007. Doc.PCO195E1a. Brussels, 8 October 2007. – P.1.
 Point 3. Ibid.
 Point 6. WCO Strategy Paper Customs and E-Commerce. Annex to Doc. PCO195E1// Customs Strategy. Secretariat Note. Item V on Agenda. Permanent Technical Committee, 179th/180th Sessions, 8-9 November 2007. Doc.PCO195E1a. Brussels, 8 October 2007. – P.2.
 Point 19. WCO Strategy Paper Customs and E-Commerce. Annex to Doc. PCO195E1// Customs Strategy. Secretariat Note. Item V on Agenda. Permanent Technical Committee, 179th/180th Sessions, 8-9 November 2007. Doc.PCO195E1a. Brussels, 8 October 2007. – P.4.
 Point 22. WCO Strategy Paper Customs and E-Commerce. Annex to Doc. PCO195E1// Customs Strategy. Secretariat Note. Item V on Agenda. Permanent Technical Committee, 179th/180th Sessions, 8-9 November 2007. Doc.PCO195E1a. Brussels, 8 October 2007. – P.5.