south african revenue services
TRANSCRIPT
28-30 APRIL 2014
South African Revenue Services Customs Preferred Trader Accreditation Programme 2nd Global AEO conference Madrid, Spain
CUSTOMS– Strategic Outcomes
DELIVERY STRATEGY
TRADE ADMINISTRATION
• Efficient trade administration
• Assist with compliance
• Provide trade policy support
• Collect duties and taxes lawfully
• Managing incentive schemes & Free Trade Agreements
BORDER SECURITY
• Prevent smuggling
• Ensure confidence in trade and travel channels
• Promote SA as secure trading partner
ECONOMIC & COMMUNITY PROTECTION
• Prevent harm to the community, the economy and environment
• Protect industry from harmful, and unfair trade practice
Key to this approach is ensuring that taxpayers/traders understand their obligations
MAKE IT AS EASY AS POSSIBLE FOR THOSE TRYING TO COMPLY
MAKE IT AS HARD AS POSSIBLE FOR THOSE TRYING TO AVOID PAYING THEIR FAIR SHARE
Improve Service
ENHANCED COMPLIANCE
Improve Enforcement
Focusing our Resources- Hub Concept
CT HUB
DBN HUB
ALB HUB
DKF HUB
STAFF(2014)
• 2597 Customs Officers in total
• 1920 Team Members
• 270 Managers and Team leaders
• 407 Support Staff
STATS • Border line = 4862 Kms
• Sea Line = 2798 Kms
• Seaports = 8
• Airports = 10
• Inland ports = 1
• International Land ports = 2
• SACU land borders = 17
• Non-designated borders = 35
VOLUMES (2013)
• Transaction Volume: 5,560,000 declarations • Transaction Value: R 2,494,498,978,328
TRADERS(2014)
• 90% by value of declarations of all imports are submitted by 10% (4000) of traders.
• 80% by value of declarations of all exports are submitted by 10% (4000) of traders.
EDI(2014)
• Electronic International
transactions submissions have increased from 65% to 99%
• SACU transactions have increased from 30% to 90%
• Supporting documents are 100% digitised
Customs Modernisation Delivery
Preferred Trader Customs Inspection
Declaration Processing
Leveraging SARS Capabilities
Customs Systems Replacement
Value-Adding Activities
Registration Declaration Assessment Inspection Audit
Re
sou
rce
Dis
trib
uti
on
Current resource distribution
Post Modernisation resource distribution
Accreditation / Entity assurance audits
Removing mandatory checks
Periodic declarations & Simplifications
Entity based performance audits (systems & process)
Inspection
Proactive client management
Automated processing through integrated risk assessment
Compliance audits (customs regimes)
Modernised risk-based approach for Customs: Preferred Trader
Deliver A Paradigm Shift – Risk Management
LEGAL
ADMIN
MNGT
ENABLERS
One size fits all Flexible and tailored solutions
A unilateral approach Balance between regulatory control and trade facilitation
Indiscriminate intervention Focus on “high risk” with minimal intervention in ‘low risk’ areas
• Legal provisions • Appropriate ICT infrastructure • Consultative business process
GATE-KEEPING RISK MANAGING
• 70% of all import declarations are submitted by only 10% (4000) of the active traders.
• 90% by value of declarations of all import declarations are submitted by 10% (4000) of traders.
• 80% of all export declarations are submitted by only 10% (4000) of the active traders.
• 80% by value of declarations of all export declarations are submitted by 10% (4000) of traders.
Introduction of the Preferred Trader initiative - foundation for the AEO programme with Trade
Segmentation of the trade allows customised service provision and risk application
Focus efforts on the risky and facilitate the trusted - compliance vs. service
Operating Model alignment
8 Trader Management
Risk
Technical Stops
Enfo
rcem
en
t / Large
bu
s C
usto
ms
Spe
cific
Customs Interventions Client segmentation Audit Types
Doc Stops
Scanner Stops
CBCU
Integrated Audit
PT Entity Based Audit
PT Assurance Audit
Transactional Audit
Transactional inspection
Transactional Risk targeting
at frontline 20%
Client Management 80% via
Pre + Post Engagement
PT/AEO
Integrated Audit
SARS Strategic Plan 2011-2014- Strategic Alignment
Strategic direction
•Develop partnerships with all supply chain stakeholders to facilitate legitimate trade
whilst combating illicit trade in order to strengthen and secure SARS’s economy, & collect revenues due
•A seamless transition to an integrated border management model, developed with
other government departments across the supply chain
Key deliverables •Rapid accreditation of traders qualifying for its preferred trader programme and refining the preferred trader programme
• An enhanced service offering (reduced paperwork, quicker processing times) to Preferred traders comprising 80% of all legal trade entering the country
PT index will comprise of two measurements:
•Preferred trader registration effectiveness: % Trade volume (number of
Preferred Traders declarations processed vs. total number of declarations processed. The objective of this factor is to measure the amount of trade covered by the preferred trader programme:
•Preferred trader compliance level: The objective of this factor is to measure the level of compliance among the registered preferred traders and will be measured by conducting regular compliance audits on the preferred trader pool.
- The Preferred Trader concept was conceived in 2010
- Driven by SARS Modernisation Strategy
- Its aligned to the SARS Strategy 2014-2017
- Aligned to the SARS Compliance Programme
- Legislated in Customs and Excise Act Section 64;
- Legislated as Level two Accreditation ito Rule 64E.13
- Legislated in the Customs Control bill
- Based on the WCO Safe Framework of Standards
- Revised Kyoto Convention : Risk based Approach
Preferred Trader Snapshot
Preferred Trader approach
– Risk based approach for client segmentation & volumetric
– SARS selection linked to Govt. priority industries & Self application approaches
– Self assessment &
– Self evaluation
– Audit verification
– Compliance improvement programmes
– Accreditation & benefits with relationship managers
– Participation in SACU PT
– Appropriate record of Customs compliance
– Computer systems & level of automation
– Accounting systems & standards
– Logistical systems
– Sufficient knowledge & Customs competency
– Sufficient financial resources
– No criminal convictions
– Tax compliance status
– Governance committees (C.A.R.C & SARS Compliance Risk Committee)
Key Elements Qualifying Criteria
Audit Standards for client systems and Level 2 Rules – Criteria
Focus Areas for PT Assurance Process 1. Risk screening 2. Audit Verification 3. Organisation vetting
and compliance evaluation
Customs sample test of the applicants declarations, evaluated by the Percentage error rate of the lines on all entries passed for the applicant for the preceding two (2) years for all regimes:
i) Quantity; ii) Classification iii) Valuation iii) Originating status iv) Duties relief, warehousing, special import
measures (permits), statistics, CITIES (industry codes), samples, Unsolicited goods (prohibited & restricted), VAT, other areas of concern.
Systems based Audit
Standards and test
conducted :
1. Purchasing
2. Receiving
3. Internal accounting
4. Accounting to Customs
5. Exporting
Determine effectiveness of client operational Systems to qualify for Accreditation for Customs control at the client:
Reliability of record keeping systems
Quality and consistency of track & traceability
Procedures to identify errors.
Procedures to self-manage & correct errors at the root cause
Have appropriate information technology security measures in place to protect the applicant’s computer system from unauthorised intrusion and to secure the applicant’s documentation
Effective control systems that manages accounting to Customs and all relevant Customs regimes.
Client selection
Receive Application and SA and SQ
Preform Risk Profiling
Accept or Reject Application
Pre Engagement
Primary Engagement
Audit Engagement
Audit On-Site
Reporting & Follow up
Send client application acceptance confirmation letter
Pre- audit engagement visit to discuss approach & process and confirmation of audit engagement date
Send client on-site verification notice letter
Systems Testing and Risk Testing
Perform sample testing as per audit programme
Audit Progress Meeting
Evaluate results vs. evaluation criteria & Standards
Compile Audit Report
Communicate Audit results to client
Monitor compliance or compliance programme where required
Submit Final Report to the Customs Accreditation Review Committee for Status Approval
SARS
Client Submit application in Regional office
Confirms interest & commitment to following Audit process
Complete and Submit Systems Questionnaire & additional information requested related to the audit
Conduct systems walkthrough
Develop Audit Plan
Select samples for the audit programme
Submit samples selected to the client
Correlates & submits declaration & supporting documents for verification
Client Hosts SARS to execute audit programme
Client Provides data & information as required / as per Audit Policy / Procedures
Hosts close out report meeting
Commits to implement any Compliance improvement initiatives
PT Audit Process – High level
PT Benefits for all PT clients, large & SMME’s may include
• Appointment of a Customs Relationship Manager tasked with facilitating the relationship between the client and customs;
• PT clients have direct access, no need to use contact and/or walk in centres • Reduction of the amount of any security required for compliance with a customs
procedure; • Fewer routine documentary and physical inspections; • Fewer audit interventions • Prioritising a request for tariff and valuation determinations; • Prioritising access to non-intrusive inspection techniques when goods are stopped
or detained for inspection.
• Qualifying for SACU PT programme. Note: • In the future an extended set of benefits will be available to clients, as befit a
specific Client type and Accreditation Level. • Future additional benefits available to Accredited Clients will be dependent on
new systems and legislative provisions ( i.e. further electronic interfaces, electronic warehousing, periodic, simplified clearances )
RKC alignment
6.2: Customs control shall be limited to that necessary to ensure compliance with the Customs law
6.3.In the application of Customs control, the Customs shall use risk management
6.5:The Customs shall adopt a compliance measurement strategy to support risk management.
6.6: Customs control systems shall include audit-based controls.
6.10: The Customs shall evaluate traders’ commercial systems where those systems have an impact on Customs operations to ensure compliance with Customs requirements
6.7. The Customs shall seek to co-operate with other Customs administrations and seek to conclude mutual administrative assistance agreements to enhance Customs control: SACU, EU, USA, BRICS
6.9. (TS) The Customs shall use information technology and electronic commerce to the greatest possible extent to enhance Customs control.
16
Guidelines to Accreditation & a detailed Guide developed
• Category 1 – General discussion
• Category 2 - Accreditation Legislation and Audit
• Category 3 – Tariff Classification
• Category 4 – Customs Valuation
• Category 5 – Rules of Origin
• Category 6 – Prohibited and Restricted Goods and Import Control
• Category 7 – Penal Provisions and Risk
• Category 8 - Appeals
• Category 9 – Internal Controls
• Category 10 – Integrity
Accreditation: Written test & answer database created
Internal staff tested as well
Client invited to sit for test
Invite letters, application forms & guide to study sent to PT clients
A minimum of 1-5 persons dealing with customs can write the test
Open book, 2 hour- 60% pass mark ( 2 add attempts)
5 different test venues
Applicants using ID’s will be confirmed and company notified of progress
Individual invites will be sent confirming date and venues: test programme as follows
• Registration
• Welcome and program overviews
• Information Session : Customs Preferred Trader (informal training 2hr)
• Assessment Admission Process (Pre-assessment Questionnaire)
• Lunch
• Competency Assessment
Competency certificate issued after 30 days
ACCREDITATION GUIDE COMPETENCY TESTING
COMPETENCY ASSESSMENT RESULTS TO DATE
Session Region Number of Candidates
Number Passed
Average Pass mark
26 – 30 Nov 2012 All regions 143 143 88.00%
27-Feb-13 G South 65 65 91.00%
27-Feb KZN 11 11 86.00%
19/28-March-2014 WEN 23 23 87.00%
Dec 2013 and Feb GN 32 32 94.00%
TOTAL 274 274 89.20%
Preferred Trader Today
• Engaged / invited 480 clients to participate in the programme • 205 Audits have been finalised for confirmation of the status • 156 Audit had compliance issues ranging from tariff; valuation; rebate for
compliance improvement • 205 traders contribute 25.25 % of transactional line volumes of the total trade
volume • Approximately R 3,15 bn ($301bn) revenue has been collected through the PT
audits and voluntary compliance from the sensitised clients
AUDIT ACTIVITIES 2010/2011 2011/2012 2012/2013 2013/2014 Totals 31 march 2014
Engagements: 125 117 117 121 480
Finalised Audits 40 62 52 51 205
Total CIP's: 35 52 33 36 156
Volumes % of trade Not Recorded 21.13% 24,42% 25.25 25.25%
Revenue Collected (Audit) Not Recorded R 1,4 bn R 0,8bn R0,9bn R 3,1bn
IMPORTS 2012/2013 COMPARISON
0
50,000,000,000
100,000,000,000
150,000,000,000
200,000,000,000
250,000,000,000
300,000,000,000
350,000,000,000
400,000,000,000
450,000,000,000
500,000,000,000
Africa America Asia Europe Oceania Other Unclassified
103bn 99bn
385bn
250bn
13bn 1,2bn
119 bn 102bn
460bn
299 bn
15bn 1,5bn
WORLD REGIONS IMPORTS
2012 Import CustomsValue
2013 Import CustomsValue
SACU IMPORTS= R44,56bn 34.87%
World Region 2012 Import CustomsValue 2013 Import CustomsValue % Tototal
Africa (3) R 103, 95bn R 119 ,15bn 11.94%
America (4) R 99, 89bn R 102 ,19bn 10.24%
Asia (1) R 385, 96bn R 460, 87bn 46.17%
Europe (2) R 250, 44bn R 299,45bn 30.00%
Oceania R 13, 52bn R 15, 02bn 1.51%
Other Unclassified R 1 263 147 267 R 1 573 116 434 0.16%
RSA EXPORTS 2012/2013 COMPARISON
R 0
R 50,000,000,000
R 100,000,000,000
R 150,000,000,000
R 200,000,000,000
R 250,000,000,000
R 300,000,000,000
Africa America Asia Europe Oceania Other Unclassified
232bn
85bn
252bn
165bn
8bn
76bn
265bn
86bn
298bn
198bn
9bn
68bn
WORLD REGIONS EXPORTS
2012 Export CustomsValue
2013 Export CustomsValue
World Region 2012 Export Customs Value 2013 Export Customs Value % Total
Africa (2) R 232 ,8 bn R 265, 9bn 28.67%
America (4) R 85,02 bn R 86,6bn 9.35%
Asia (1) R 252,09bn R 298, 89bn 32.23%
Europe (3) R 165,4bn R 198, 52bn 21.41%
Oceania R 8,35bn R 9 ,01bn 0.97% Other Unclassified R 76, 49bn R 68, 35bn 7.37%
SACU EXPORTS R113,6bn 42,75%
Formal Creation of a Regional SACU Programme with reciprocal benefits through Mutual Recognition is based on Domestic PT (Step 1)
1. Pilot Common PT programme
2. Solidify core team in each Member
State
3. Solid infrastructures
– Legislation
– Policy
– Process / SOPs
4. MS have companies who meet all
domestic PT standards
5. MS have Compliance Monitoring
program (to Maintain PT standards)
STEP 1
Formal MS Domestic PT
STEP 2
SACU Regional “Mutual
Recognition” PT
• Pilot “to learn by testing” common SACU
requirements, communication,
interconnectivity, common standards
verification & governance
• Ensure enabling IT Connectivity, data
sharing & ability to Identify PT clients
• Formalise SACU PT through MR of
domestic programmes & governance
MR Terms of Reference
Alignment of MS Policies,
capabilities, & governance
Evaluation & monitoring processes
Signing of MR Agreements
Step 1: Work plan for MS Piloting SACU-wide infrastructure
MS confirms PT owner, &
core team
MS Policy team confirms
Pilot infrastructures
– Policies
– Processes
– SOPs & templates, Forms
MS report all non
implementable aspects of
RSA Policies, processes,
SOPs to SACU for tracking
MS’s Exco sign-off MS
Policies & Pilot materials
Establish Pilot
Policy & templates
Prepare each MS
To Pilot
Kick-off
Pilot Audits
Deploy dedicated Pilot PT
resources for Risk & Audit
Identify & engage “clients”
to include in the SACU pilot
Create risk profiles
Perform team training:
– Policy, SOPs & templates
– Practical field training with
SARS team
Amend PT team HR / KPIs
MS’s Exco sign-off MS
Policies & Pilot materials
Invite clients to Pilot kick-off mtg
Initiate self-assessment process
Mobilise dedicated Audit team,
in preparation for Audit
Arrange Audit “kick-off” Meeting
Walk-through client systems &
Self Assessment Questionnaire
Perform systems Audit,
evaluate & improve compliance
Create Audit Reports & files
Feedback to formalise MS
Align SACU Policy
Policy workshops Training on PT processes & SOPS
at SARS Venues in S Africa
Finalise domestic benefits Stakeholder forum Receive SARS assistance
Short term “Pilot” vs Long term implementation: Discussion
Short-term considerations Long-term implementation
• Benefits testing and feasibility? Bonds Lower Risk scoring Whole of supply chain facilitation
• Processing of declarations / systems
• Exchange of information
Company profiles / risks With OGA’s / CBRA’s Pilot SAD 500’s
• Identification of clients
System Physical / stickers
• Legal roadmap and programme
• Mutual Recognition framework, Common legal criteria and standards
• C2C Exchange of information Data Block Systems identification
• Vetting & implementation, monitoring &
reciprocation
• Benefits: including Facilitated release exporter to importer end to end
• Structures to support regional PT
National Pilots, then formalise National PT legislation
Regional PT enablement, Legislation, Systems, Processes
SACU Preliminary legal context
Regional Pilot considerations Long-term implementation
• RSA: No Benefits testing until formal legislation
• Other MS: ok to test benefits prior to implementation
• RSA: No circumnavigation of Processing systems via emails
• Other MS: Will consider testing benefits when “ready” to do so
• RSA: No Exchange of company specific information unless company permission is given, and or SACU protocol section E is ratified / MOU signed
• All: No use of stickers for Proposed regional pilot at this point -
• MS to implement & bed-down Domestic Programmes 1st, then seek regional pilot
• Further Legal meetings to expand and plan the implementation roadmap and programme Common legal criteria and
standards Include vetting of standards,
implementation & monitoring • Alignment to C2C Exchange of
information Project Data Block Systems identification
• Development of a Mutual Recognition
framework - proposal is for RSA to develop for discussion
Step 2: A regional Pilot facilitates & tests the formal journey to create a Regional SACU Programme with Mutual Recognition
STEP 2
SACU Regional “Mutual Recognition” PT
1. Identify gaps between
countries Policy &
capability
2. Agree on shared
responsibilities Technical,
Joint Risk rules, Threat
Assessment, Governance
3. IT and data connectivity &
alignment to enable
SACU PT
MR
Terms of
Reference
Alignment Sign SACU MR
Agreements
1. Set-up SACU Joint
Working Group
2. Agree TOR
3. Define Mutual
Recognition
4. Agree roadmap,
process & governance
5. PT Utility block
1. Amend Legislation in
each country to enable
MR
2. Political agreements
3. Terms to Include
technical, policy, &
evaluation parts
4. Ensure SACU level
structures are in place
Controlled learning by sharing / testing draft methodologies, operating requirements
verification & governance for implementation of any specific regional PT features
Regional Pilot
Situation: Regional Capacity Building Initiatives Supported development of the SIDA funded SACU AEO program, by helping to develop a set of SACU PT policies, processes and Standard operating procedures and providing capacity building for a Preferred Trader implementation plan in joint association with the WCO.
• SACU PT legislative & Policy framework ; SACU PT Accreditation Policy; PT Audit Policy; PT Risk
Policy
• SACU capacity building assistance / Training programs already hosted in RSA
• 2013 SACU work plan developed by SARS/WCO for SACU
• Assisted SACU Member States develop their own PT project plans
• PT approach used to build an Excise PT model and Audit unit ready to pilot.
• ALL SACU countries have now engaged their own clients for domestic & regional consideration.
• SACU legal meeting (May 2014): Provide high-level context to PT Programme and journey to full AEO. Review each MS’s and SACU region’s legal “room for maneuvers” in a legislative context. For establishing legal agreements including Mutual Recognition, Info Exchange & For Vetting the MRA
• Completed the scoping of AEO Safety and Security program and developed an AEO implementation plan, with the assistance of the EU, supported by the TDCA Dialogue Facility;
• EU AEO files and dialogue documentation: Phase 1, 2,3 and 4
• SARS AEO Benchmark study and reports on EU AEO
• EU AEO National Treasury report
• Legislative requirements for AEO and Gap document
Challenges
• MS political will not cascaded
• Low compliance environment in Africa, requires significant initial investment
• Lack of Risk and Audit based technical skills & structures to support AEO Compliance & Security type programs
• Maintaining focus on developing a sustainable quality of Assurance audit work
• Providing coordinated capacity building support to multiple countries of differing maturity & competencies
• Maintaining, development & consistency of staff in the program – PM, Audit, Risk
• Dependency of trade on their Agents & operators
• Working with 5 different operational models, in different levels of modernization
• Keeping scope realistic, and restricting benefits promised to achievable ones
• Building solid legislative framework for domestic and regional Mutual Recognition
• Maintaining alignment of policies and templates across domestic MS, without any shared legislative framework, oversight or direct accountability to conform
• Coordinating delivery and timelines across 5 countries
Reflections 1. Countries need to build solid, stable and
reliable domestic programmes first,.
2. MR is valuable, but over focus on developing regional type activities can distract from putting the basics in place on which a regional program is dependent
3. International Benchmarks are very valuable to learn from and align to gain best practice standards
4. Benchmarks can be misleading to follow other countries programmes or approaches – especially where legislation is different
5. Countries must consider their own strategic context and requirements when developing their Accreditation and AEO programmes
6. The overall tool in RSA has also been very effective in assisting valuation compliance and revenue generation
7. Pilots are very valuable to help develop competencies and for learning – however they require careful handling and should not be considered a “playground”
1. Important to undertake a fair and transparent method for voluntary inclusion, and terms of involvement of Pilot economic operators;
2. Benefits should be carefully handled so as not give an unfair / anti-competitive advantage in an unlawful context b) not create concessions to trade that are not firm commitments from Customs
3. No WCO Mutual Recognition framework is available which makes individual country development challenging, especially for developing countries
4. SAFE requires development of Pillar 1 Exchange of Information, risk engines and advanced electronic information to support operationalization of AEO Mutual Recognition – these activities require complex legal agreements, systems and data developments to identify, match and protect data security for the AEO Programme. This can ultimately restrict the long-term MR reciprocation in an operational context