Information technology and document checks are an essential aspect of customs controls.

Information technology and document checks are an essential aspect of customs controls.

Challenges and engagement for world customs

In the previous edition of the 1540 Compass, I found 26 occurrences of the words customs and WCO, in various articles. Screening the latest World Customs Organization (WCO) annual report I found 1540 and weapons of mass destruction occurring twice apiece and STC appearing in the context of one conference. This little exercise may not be the most rigorous scientific study on the subject, but the figures illustrate the historical gap between the customs community, internationally embodied in the WCO, and the nonproliferation community, which promotes and implements UN Security Council resolution 1540.

Articles 3.c and 3.d of UNSCR 1540 require that states establish “effective” border controls as well as export and transshipment controls. That is, they must establish strategic trade controls (STC). These requirements from UNSCR 1540 have profound implications for customs services.

According to the WCO mission statement, the organization should “provide leadership, guidance and support to Customs administrations to secure and facilitate legitimate trade, realize revenues, protect society and build capacity.” But implementing UNSCR 1540 calls for more than protecting national territory, collecting revenue, and securing supply chains. It is about contributing to global security. This demands a significant shift from the traditional customs work culture, and customs administrations worldwide may look to the WCO for guidance and technical assistance. These demands differ even from more recent concepts like the SAFE Framework of Standards (SAFE), which aims, in short, at mitigating risks and threats posed by rogue actors to international supply chains. When the words export control are mentioned in SAFE guidelines, they refer to pre-import controls conducted in the exporting country at the request of the importing state. Even the 1999 Revised Kyoto Convention on the Simplification and Harmonization of Customs Procedures, which lays the foundation for national customs practices and is a fundamental document for the WCO, hints at how new a subject STC is for customs. It recommends, for example, that for straight exports, “the customs shall not require evidence of the arrival of the goods as a matter of course.”

Additionally, the WCO has to face the absence of universal agreement on methods for implementing UNSCR 1540. Particularly nettlesome are disagreements over what constitutes “effective” controls on items whose risk of diversion may justify a license denial. Also problematic is determining which commodities should be considered as potentially contributing to WMD, or even what the term “dual use” means. The commonly used lists of dual-use commodities are

established by export control regimes in which not all WCO member states participate.

Nevertheless, the WCO has endeavored to take on the challenge and recently launched a number of interesting initiatives. (See interview of P. Heine from the WCO, below.) This is an appropriate time to look at where and how the WCO can best provide leadership, guidance, and support to customs administrations striving to implement UNSCR 1540.

Capacity Building

Effective border and trade controls, as called for by resolution 1540, require building and implementing a sound national legal framework, physical- and document-based commodity identification, risk management, audits and investigations, and safe CBRN controls; establishing reach-back channels; and integrating such controls into existing processes and procedures. Many international and national capacity-building programs and organizations are already active on that scene, promoting awareness, delivering training, and providing various types of assistance to countries around the world on 1540-relevant subjects. The European Commission Long Term Project and Centers of Excellence, the U.S. Department of State Export Control and Related Border Security Program, the U.S. Department of Energy International Nonproliferation Export Control Program, the OPCW, the IAEA, the OSCE, and bilateral cooperation programs are among these enterprises.

One limitation of these international assistance programs is that they are bound by their mandate or by task-specific funding from their donors. This has at least two negative consequences.

First, the different programs are run in silos, whereas efficacy would require exploiting synergies and sharing common elements between assistance programs directly or indirectly relevant to UNSCR 1540 implementation. For example, capacity to control chemicals requires essentially the same elements, whether controlling explosives precursors, chemical-warfare (CW) agents’ precursors, or drug precursors. Separate enforcement training geared toward controlling chemicals run by the WCO Global Shield program (explosive precursors), by OPCW (CW precursors), or by others (drug precursors) creates confusion

and redundancy. In the field, a chemical analyzer provided for one program is as useful for the others, provided that the right digital libraries of products are delivered with the equipment. Another example is the implementation of sanctions. It may be legally and politically understandable to distinguish between sanctions and STC, but in practice UN sanctions are enforced by national STC systems. Conversely, many export control enforcement activities are conducted in the framework of national and international sanctions, especially against Iran and North Korea.

Additionally, the multiplication of seminars and training sessions can be a problem by itself. In many small and medium-sized countries, only a few people in customs are assigned to strategic trade in a broad sense (CBRN, STC, arms, explosives and their precursors, sanctions, etc.). These specialists sometimes spend more time attending seminars and workshops than actually implementing what they have learned.

The second consequence is that programs with a specific UNSCR 1540 or STC mandate rely on a strong foundation of customs control but cannot address general customs capacity-building needs. The impact of training customs officers on the control of strategic commodities will be limited if the basic ability to enforce non-revenue-related controls, to profile risks, to follow legal procedures, or to safely and efficiently check shipments is not there. This view prevailed, for example, in the design of the UN Office on Drugs and Crime-WCO Container Control Program training curriculum on strategic-trade risk profiling. This “Advanced Interdiction Training” was developed as an extension of existing risk-profiling capacity, set as a prerequisite.

Looking into the WCO’s role in capacity-building is therefore about understanding its added value in this sometimes-confusing landscape of assistance programs. First, the WCO’s general customs capacity-building mandate should be an integral part of UNSCR 1540 enforcement efforts. Second, the WCO can help in coordinating general or specialized UNSCR 1540 enforcement training and promoting the perspective of the main beneficiary service (customs), which sees all these offers coming from parallel channels.

Conversely, the WCO should have a key role in identifying and explaining customs realities and existing capacities, which may not be sufficiently understood by 1540 implementation stakeholders. This understanding could help officials tailor capacity-building efforts to be more effective. For example, many customs services have capacity in place to control certain types of exports (narcotics in Central America, national treasures, endangered species, and so forth); and to routinely conduct end-user and end-use analyses to identify mis-declared shipments or possible smuggling operations. Many are accustomed to the generic dual-use concept (as it pertains to drug precursors, for instance), or know how to work for other organizations with specialized expertise (on counterfeit goods or medicines, for example). If well understood, such capacities can lay the foundation for more efficient assistance and training.

Another role of the WCO may be to collect, share, and disseminate best practices, including through capacity-building. Indeed, best practices in the area of STC enforcement are not necessarily easy to establish and share. Even in the most industrialized countries, identifiable enforcement practices are less common than on other subjects where controls have been implemented by many nations for a long time. They may also come mainly from the most developed countries of the northern hemisphere and not be easily transferable to other UN member states. Moreover, there may not be enough fraud cases to establish fraud patterns at the national level, and even when these cases do happen, they may be deemed too sensitive to be shared. On all these subjects, the WCO’s position and experience can be of great help in fostering exchanges on best practices and general fraud patterns.

Commodities Classification

A second area where the WCO has an essential role to play, and has started working, is the much-discussed correlation between export control lists and customs classification of commodities (a.k.a. customs tariff or nomenclature, which is based on the international Harmonized System Convention, or HS). The HS and its national derivatives constitute the lingua franca for commerce, industry, and customs. They are pivotal to customs systems and processes, but they are designed for the implementation of trade policies, the determination of customs duties, and the establishment of trade statistics—not the enforcement of strategic trade controls. A customs category can include many controlled and non-controlled items, and all or parts of a controlled commodity may be classified in many different customs categories. As a consequence, systems for customs automated clearance, risk management, and targeting that are based on customs tariff numbers cannot easily be used to target risk or to process shipments of dual-use items. Equally, international statistics cannot measure the volume of trade in controlled strategic commodities.

In November of 2012, the WCO hosted its first Strategic Trade Control Enforcement conference in Brussels. (WCO)

The WCO is at the driving seat of the Harmonized System and is the depository of the HS convention. Its role, therefore, is essential in bringing the two classification systems closer to each other. Initiatives have already been taken in cooperation with the OPCW to establish specific HS codes for some controlled chemicals listed in the Chemical Weapons Convention (CWC). But more remains to be done with the support of WCO member states and other relevant international bodies.

There will never be a precise and comprehensive correlation between the two systems, for technical as well as political reasons. However, the WCO, in cooperation with other international bodies, can make a difference in four areas at least.

First, and above all, the WCO can push other organizations involved in UNSCR 1540 implementation to better take into account the perspectives of customs services. For example, it can encourage them to take customs categories into consideration when establishing control lists. It can also build on existing customs legal definitions and processes. The WCO could also promote the participation of national customs services in the activities of organizations involved in export controls. Again, perfect matching among these efforts is an unattainable Holy Grail, but the quest can be facilitated if each side takes at least one step towards the other.

Second, the HS can be adapted to make correlation with control lists less challenging. Using common vocabulary, creating more specific categories, adopting compatible categorization approaches (e.g., based on technical specifications as opposed to the end-use or function), or issuing classification decisions and explanatory notes would eliminate some of the ambiguity from customs classification challenges.

Third, faced with the problem and few solutions at the international level, many countries have established correlation tables between the two systems or added subcategories to their customs nomenclatures to capture the specific description of controlled items. None of these efforts manage to completely fit the square peg of control lists into the round hole of customs nomenclature, but they are useful tools nevertheless. The problem is that building divergent systems in different countries across the world directly contradicts 60 years of global effort to facilitate trade by harmonizing practices. This adds to the challenges already faced by the private sector in dealing with very heterogeneous national STC and licensing practices. The WCO can certainly help identify common ground between different national experiences and build common approaches to the problem.

Fourth, the WCO is also a reservoir of expertise on its own. It has specialists in customs classification, in illicit trafficking and enforcement, in risk-management and trade-facilitation systems, and, more recently, in STC. Brought together, these experts can refine the approach to customs/strategic-trade classification dilemmas. For example, one could distinguish between correlation in one direction (probability that a customs category includes controlled commodities) and the other (probability that a controlled item falls within specific tariff categories). The correlation may be approached differently, depending on what it would be used for. It may be different if its purpose is to establish statistics, facilitate risk profiling, or tell trade operators which customs code to use for a specific controlled item. The quality of individual correlations may also be rated, in order to better fit the algorithms of automated risk-management systems, improve statistics, and facilitate compliance. The

correlation between controlled technology (as defined in export control regimes), and the very general HS code for digital CDs would then not be treated with the same weight as the correlation between controlled fissile material and the different customs codes for uranium products.

Bridging the Gap between the Customs and STC Communities

Political support is often outlined as a necessity, as the cornerstone of efficient national implementation of UNSCR 1540 requirements. This is also true at the level of national customs services, which represent their countries at the WCO. For them, STC is just one topic among many competing priorities. The WCO can help customs services take ownership of the subject, adopt international security-related controls, and overcome the many enforcement challenges they bear. As happened in the past with counterfeit goods trafficking, authorized economic operators, or explosives precursors, having the WCO set a subject as a priority can help raise its priority for national services. In addition, WCO involvement demonstrates the legitimacy of UNSCR 1540, which should not be seen as an option that serves the interest of certain states, but as an international legal obligation that advances everybody’s security and prosperity.

At the international level, much remains to be done to harmonize international legal instruments related to free trade (the Kyoto Convention, maritime laws, agreements on transit for landlocked countries, WTO rules, and so on) with 1540 requirements. Controlling exports and the transit of dual-use items, for example, does not generally fall under the restrictive list of exceptions to free trade, right of innocent passage, or even freedom of operations in free zones (as set by the Kyoto Convention). Here, too, the WCO has a role to play in establishing bridges between different conventions, different international organizations, and different professional communities.

In that respect, the case of transit controls on strategic commodities is emblematic of what enhanced involvement of the WCO in 1540-related issues could prevent. The UNSCR 1540 obligation to control transit, and the way it was translated in certain regional and national STC regulations, doesn’t seem to have taken into consideration the extent to which transit is a legally precise, politically sensitive, economically significant, and operationally challenging concept for the world of customs and international logistics.

In the end, beyond practical considerations, the role of the WCO is about culture. It is about continuing a cultural shift towards a global security culture while helping incorporate the UNSCR 1540 philosophy into the work of customs agencies around the world and bringing the culture of customs and international logistics to the nonproliferation community. Whoever has attended joint licensing and customs UNSCR 1540 seminars can measure the gap that still needs to be bridged but will also attest to the progress made in recent years. I once wrote that in essence, customs people do not like STC and nonproliferation people fail to understand customs. I am now more optimistic that this statement is starting to become somewhat obsolete.

Renaud Chatelus’ Interview with Pete Heine, National Expert—Strategic Control Enforcement, World Customs Organization

Q: How did the WCO’s Strategic Trade Control Enforcement Project get started?

First, the foundation for strategic trade control for customs is customs control, and the WCO has been assisting members in establishing and enhancing customs control since its founding as the Customs Cooperation Council in 1952. But strategic trade controls specifically became a focus area starting with the Enforcement Committee meeting of March 2012, when several WCO members took the floor and outlined challenges they face in relation to enforcing strategic trade controls. The Secretariat was encouraged to explore ways to support members in this context. In November 2012, the WCO hosted its first Strategic Trade Control Enforcement (STCE) conference in Brussels. There were over 190 participants from almost 100 countries. Members asked the Secretariat to become more active in providing technical assistance in this field of work. In March 2013, based on that, the Enforcement Committee unanimously approved an STCE Project to provide technical assistance to members.

Q: What kind of technical assistance is the WCO planning to provide to its members?

We are developing a comprehensive STCE Implementation Guide to help WCO members develop and review their STCE processes and procedures and to provide a framework for training along those lines. Depending on each administration’s situation, this guide will serve different purposes, whether it is taking the first step or enhancing the effectiveness of an existing system. Of course, as a guide, the recommendations included are not mandatory.

The guide is divided into two principal sections, one for senior customs managers and policy officials and one for operational customs officers. The section for senior managers discusses the importance of strategic trade controls, the role of customs, and how to establish strategic-trade-control enforcement procedures and processes and to create conditions for their success. The section for operational customs officers discusses techniques used to carry out those activities across the major functions that comprise the overall strategic-trade-control process and several related activities.

We believe members will also benefit from an annex to the Implementation Guide that provides profiles of many strategic goods. This annex, which is directly responsive to requests from members, has been organized following the chapters of the Harmonized System to provide a reference on strategic goods from a customs perspective.

Q: Speaking of the HS, what is the WCO doing to address the difficulties with correlating the HS and export control lists?

As you know, there was a great success with respect to CWC chemicals with the specification of additional subdivisions of the nomenclature in 2009 and 2011. However, the Secretariat is not “in the driver’s seat” with respect to HS reform. In fact, the Secretariat can’t initiate reform; that’s the job of the HS Committee, which is driven by the contracting parties to the HS Convention. At this time, the decision has been made not to pursue fundamental reform or to alter the existing review process. Further adjustments to the HS will be based on proposals made to the HS Committee, and proposals made now would not come into effect until 2022 at the earliest.

However, through the process of developing the STCE Implementation Guide and its profiles of strategic goods, we have come to understand the challenge better. We actually found that the majority of strategic goods have clearly correct HS codes, and we have identified a small number of problematic codes to focus on. This narrows the range of potential reforms to something that may actually be achievable through the regular review process.

Q: What else is the WCO doing with respect to STCE?

Another important part of the STCE Project is a global enforcement operation planned for 2014, and a series of awareness-raising seminars leading up to it. This year, we have already conducted seminars for the WCO’s Asia-Pacific, European, and Americas and Caribbean regions to scope and plan that operation. Additional seminars are planned for the African regions early in 2014. Participants have greeted the WCO’s attention to this topic with enthusiasm.

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