A few weeks ago I was invited to speak at the IV Joint Forum of Customs of the Americas and the Caribbean and the Private Sector, held in Montego Bay, Jamaica. The topic that brought us together was: “Ethics and transparency in international trade: Transparent Supply Chains and Anti-Corruption Measures.”
And yes, it is true that it seems to be a topic that never goes out of fashion, particularly in Latin America, where every so often we are shaken by scandals and allegations of corruption in municipalities, governments and, unfortunately, in customs as well. It is a delicate issue, but one that must be faced directly, face to face. The worst thing we can do is bury our heads in the sand like an ostrich.
Corruption is like the tango, it is danced by two people, there is someone who offers and someone who accepts; someone who asks and someone who gives. Therefore, the involvement and commitment of the private sector in this matter is fundamental. It is not enough to complain, nor is it enough to denounce. It is necessary to adopt concrete actions that allow us to reduce the opportunities for corruption and increase the spaces for transparency. It is, in the end, about shedding light where today it is dark.
And what do international instruments tell us about ethics and transparency in international trade?
At first glance, not much. If we look at the WTO Trade Facilitation Agreement, we do not find any rule that explicitly speaks of ethics or measures against corruption. But there is transparency and publicity. Indeed, Article 1 refers to the publication and availability of information; and Article 2 establishes the need to establish an opportunity to formulate comments, information before entry into force and consultations.
If we now review the WCO Revised Kyoto Convention, we also do not find very direct references to integrity and measures to strengthen it, highlighting Chapter 9, referring to Information, resolutions and rulings communicated by Customs.
And what about Ethics? Nothing explicitly…
However, the WCO has for many years considered a very important instrument in this matter, which is the Revised Arusha Declaration of 2003. This instrument, which has served as a basis for the construction of many Members' Integrity Codes, is based on ten elements that provide a practical basis for the development and implementation of different strategies to strengthen ethics in the customs environment.
These include leadership and commitment at the highest level that can inspire officials in the performance of their duties; a clear and precise regulatory framework; transparency in regulatory and operational processes; greater automation in all processes; continuous reform and modernization of the structure that allows it to adapt to changes; auditing and investigation processes, both external and internal; the development of Codes of Conduct; adequate management of human resources; policies aimed at strengthening morale and organizational culture; and building a relationship with the private sector based on ethical standards.
All these elements are essential when it comes to developing a “healthy” and transparent customs environment that provides legal and economic certainty to operators.
However, beyond the importance of Integrity Codes, it is important to note that there are countless other instruments and disciplines where we can find standards that strengthen transparency, ethics and legal certainty in international trade.
As an example, I bring to mind the Advance Rulings, provided for in Article 3 of the AFC, but also prescribed in numerous free trade agreements. They are not only established to know the tariff classification, but also the originating character of a good, and also the application of a customs valuation method, and other matters. Advance rulings are an instrument that allows operators to have legal and economic certainty about the treatment that customs will give to their goods, and they also collaborate in the transparency of Customs decisions, to the extent that they are public and enforceable (used) by third parties.
Regarding the AFC, Article 4 refers to administrative and judicial remedies that operators must have. At this point, most countries formally consider this type of resources. However, the opportunity, in terms of the timeframes for a definitive resolution, can be too long, introducing a variable of uncertainty, almost infinite, which does not help in the claim process, discouraging its filing. The possibility that the decisions adopted by customs be reviewed in judicial or contentious administrative proceedings should strengthen the transparency of the system, should help improve the application of control and sanction measures, and should be seen as such by all.
In relation to the sanctioning regime, it is also important to review whether the disciplines contained in the various legal systems comply with the provisions of Article 6.3 of the AFC. The application of sanctions, especially in the administrative field, by Customs or other administrative control bodies, must be developed in accordance with the principles established by the Agreement. Namely, the principle of legality (crimes and infractions and their sanctions must be clearly described in the law; there must be no lack of precision or breadth in the description of the criminal or infraction types); proportionality between infractions and sanctions; absolutely dissociating monetary incentives for control officials or collection objectives from the determination of fines; and the possibility of having administrative and judicial resources that are easy to process so as not to discourage claims processes; among others. Open, unclear and imprecise sanctioning regimes open spaces for discretion and corruption.
Finally, in this limited list, the development of Dispatch Time Studies (TRS), also included in the AFC, article 7.6, are essential when it comes to promoting transparency. They allow both the public and private sectors to know where the bottlenecks are, and evaluate targeted remedial actions, destroying “myths” associated with delays in dispatch.
What is the role of the private sector?
We have already said that ethics and transparency are a two-way street. Commercial operators must also cooperate in building more informed and transparent commercial environments. They must implement systems that allow their clients to know the traceability of cargo, costs and rates; and strengthen, through their trade associations, a culture of ethics.
In this sense, the approach must be multidimensional. Customs and the private sector must develop bidirectional training programs. It is not enough for Customs to train on the regulatory framework and procedures; it is also necessary for the private sector to be able to train officials on changes in international trade logistics, new forms of international distribution, value chains of a particular industry, and new and possible risks. This will not only allow Customs to have greater knowledge, but will also allow it to update the regulatory framework and procedures to the new forms of international trade.
And in order to build trust between Customs and the private sector, it is still necessary to generate greater mutual understanding. The relationship between Customs and the private sector cannot be limited to the figure of the AEO or the publication of information. There is much more!
Strengthening ethics and transparency in international trade involves a number of factors, including the adoption of a voluntary compliance policy and approaches that allow for greater knowledge and trust.
We live in an era where the legitimacy of the system, of the rules, of the authority, of the decisions is called into question every day. It is therefore imperative to move towards approaches that allow us to achieve higher levels of transparency and integrity, which ensure that we all, public and private sector, have an “enlightened” environment, which reduces the dark spaces in the customs area.
Lawyer, Master in International Law from the University of Heidelberg. He worked for almost 20 years in the Chilean Customs, holding various responsibilities. He is an accredited expert of the WCO and is a frequent arbitrator/panelist at the WTO. He is a professor at various universities and the author of various publications on customs and international trade. He is President of the Chilean Institute of International Trade, and is currently Director of Regulatory and Customs Affairs for DHL for Central and South America.