Introductory Remarks

Mr. Chairman,

Distinguished delegates, Ladies and gentlemen,

I would like to start these brief remarks by expressing my appreciation for the opportunity that the CCLE has given me to address you today on a subject that is central to the mandate of my organisation, and one in which I have been personally involved for many years. The Caribbean is a region that has been particularly receptive to UNCTAD’s work in the area of customs reform and I am happy to see many partners of our ASYCUDA programme in this room. I am therefore pleased that this Conference also allows me to reiterate UNCTAD’s commitment to accompany the customs administrations of the Caribbean region in their efforts to respond to the needs of their governments and their enterprises as we move into a new era of deep, global technological and economic changes.

These days it is difficult to attend gathering like this one without hearing the word "globalisation" pronounced over and over again. Globalisation means different things to different people, ranging from the scapegoat for everything that is wrong in the world, to the panacea that will cure all its ills in no time. In reality, the expression "globalisation" encompasses many different but convergent processes that are reshaping the world in social, political and, of course, economic terms, raising fears and hopes without recent precedent. I would like that my remarks today should clarify why, when it comes to customs matters, the reasons for hope are stronger than the reasons for fear.

The expansion of international trade, the growth of trans-border investment flows, the increasing mobility of people and businesses (to mention just a few manifestations of globalisation) are examples of the ways in which the environment of customs operations is being radically altered. This means that new answers need to be found to old questions. There are a few new questions as well, and then the challenge is first to understand what they mean for the role of customs in the new economy. We in UNCTAD are working hard to help customs administrations cope with these old and new challenges. I cannot pretend that we have found quick-and-easy answers to them all but I can, at least, share with you our ideas about what the basic elements of a successful strategy can be.

Of all the forces driving globalisation, the Internet and its application to international trade is probably the most formidable one. Electronic commerce is changing the way value is created and distributed. It is affecting the direction and volume of international trade flows. It is revolutionising the strategies, structures and decision-making processes of companies. To put it shortly, there is no business process, from procurement to customer service, that will be left unchanged by electronic commerce and electronic business. Adapting to electronic commerce will therefore be the major factor of change in customs operations in the next few years.

The impact of electronic commerce on the revenue-collection role of customs is certainly the aspect of this issue that is catching most of the attention of governments. This is only natural, particularly for developing countries, as customs revenue remains a fundamental component of the income of many governments. Electronic commerce raises serious concerns, such as the problem of the determination of the jurisdiction that applies to an e-commerce transaction, the difficulty in identifying the participants in an e-commerce operation or the diminished role of intermediaries on which tax enforcement agencies used to rely for information. It is also feared that the Internet will facilitate international criminal activities in areas that directly or indirectly involve customs, such as for instance, trafficking in illegal products or money laundering.

There is however, another aspect of electronic commerce that I would prefer to emphasise today. This is the impact that the Internet is bound to make on the role that customs play as the link between a country’s economy and the global markets. Electronic commerce provides an opportunity for customs to change their role from that of a barrier traders must overcome, to one of an active trade-facilitating agency. Electronic commerce will allow, is already allowing, customs administrations to balance the need for control against that of ensuring facilitation at minimal risk, at a lower cost to taxpayers.

Adapting customs to electronic commerce will be a complex task that will require redesigning all aspects of customs operations, as well as their legal and regulatory framework. This will not be an exclusively, or even mainly, technological problem. However, technology, and automation in particular, will be an indispensable instrument for customs wishing to adapt themselves to the age of electronic commerce.

Electronic commerce adds to the pressure for change that other on-going phenomena have been putting on customs. Just-in-time production methods and the emergence of express airfreight business are examples of this. With many countries now having enhanced on-line banking facilities and the widespread use of credit cards, the traditional methods of cash handling are gradually being phased out and the clearance process is now becoming simpler and shorter.

The trading community has felt the need and found the resources to automate their inventory and sales control, together with the customs process. In simplifying and automating the process, the trade have come to expect that the direct electronic input of declarations to customs is an automatic choice and that with the growth of the Internet, clearance of their goods is just a fingertip away.

In short, as trade increases and technological change accelerates, so the pressure grows to facilitate the trade chain by ensuring that customs automate their processes and procedures as part of their everyday business.

Over the last twenty-five years customs departments all over the world have continued to automate their processes. However, we have often seen that automation has not necessarily facilitated the trade nor reduced the burden on customs.

In many cases automation has just been about processing data rather than optimising the use of information technology. Thus the benefits expected from automation have not been realised and the perception in many countries is that automation has failed to facilitate trade – thus increasing costs to consumers and the economy as a whole.

An example of the areas in which the potential of information technology is far from being fully exploited by customs administrations is the application of risk analysis and management tools. It is understandable that customs are reluctant to reduce the level of their controls. However, for an economy to remain competitive in today’s world, its customs must strike the right balance between enforcement needs, quick clearance by the trade and better use of resources – a combination that can only be achieved when risk-based techniques are introduced. By allowing the implementation of selectivity criteria, automation gives customs the opportunity to satisfy the trade needs for facilitation and still meeting high control standards.

In addition, through automation, customs departments now have the possibility of exchanging data on the WCO’s RILO network. In the future, the Internet will render intelligence exchange between customs administrations (as well as inside national departments) much faster and comprehensive. Automation thus allows intelligence efforts to concentrate on high-risk consignments. This enables customs to focus on the areas of most concern and allow the low risk consignments to be cleared with minimal intervention. 

Adopting selectivity as an integrated part of the customs clearance process is therefore crucial. Those customs departments that do not move towards risk-based techniques or introduce simplified processes based on automation will be left behind and will become a burden to their national economies. The costs associated with imports and exports will remain high and the complex, complicated clearance process will act as a significant deterrent or barrier to inward investment. 

For this region, in particular, with its proximity to major regional trading partners and the continuing expansion of the informal trading sector, the failure to reform, modernise and automate, will be seen as a lost opportunity rather than one which can benefit all parties in the global trading chain.

Mr. Chairman, I will close my intervention quoting a rather blunt but accurate remark by Stuart Brand, the founder of the Global Business Network, who said recently that "when a new technology rolls over you, if you’re not part of the steamroller, you’re part of the road". I am convinced that the customs administrations of the Caribbean will rise to the challenge of automation and become part of the e-commerce steamroller.

Thank you very much.