WORLD TRADE
ORGANIZATIONG/C/W/467
2 July 2003
(03-3512)
Council for Trade in Goods Original:  English
CAPACITY BUILDING IN CUSTOMS
A Customs Capacity Building Strategy prep ared by the World Customs Organization
on behalf of the international Customs community1
The following communication, dated 30 June 2003, has been received from the World
Customs Organization
_______________
1. Introduction
Customs administrations around the world play a vitally important role in the implementation
of a range of critically important government policies and contribute to the achievement of a number
of national development objectives.  In addition, as Customs is often the first window through whichthe rest of the world views a country it does much to shape the perceptions of the key individuals and
organizations involved in making important trade and foreign investment decisions.
Without an efficient and effective national Customs administration, governments will not be
able to meet their policy objectives in respect to revenue collection, trade facilitation, trade statistics,
and the protection of society from a range of social and national security concerns.  Customs
contribution to national development is potentially enormous and can make a significant difference tothe lives of many impoverished people throughout the world.
As such, well-designed and targeted capacity building investments focussed on improving the
efficiency and effectiveness of Customs administrations can deliver significant dividends for
governments and donors alike and allow developing countries to take advantage of the manydevelopment opportunities provided by the expanding global trading system.
Unfortunately, to date at least, many capacity building initiatives in Customs have failed to
meet their desired objectives.  This strategy reflects the views of the international Customs
community and presents a case for a more focussed, co-ordinated and well-resourced approach toundertaking capacity building in the Customs administrations of developing and least-developed
countries.
2
                                                     
1The WCO has organized two sessions of the High-Level Working Group on Capacity Building with the participation of
our Members, international organizations including the WTO and the World Bank, donors, and representatives of theprivate sector in September 2002 and March 2003.  This paper is based on the outcome of these meetings, contributions
from other stakeholders and our own research.
2This Strategy is an attempt to respond to the WTO Doha Ministerial Declaration in November 2001 where the role of
capacity building is highlighted in Customs-related areas.  It will be a contribution to the WTO Ministerial Conference inCancun in September 2003.G/C/W/467
Page 2
2. The Case for Comprehensive Capacity Building in Customs
While the core roles and responsibilities of Customs have remained essentially the same for
many years, the manner in which Customs administrations discharge these roles and responsibilitieshas changed significantly in recent times.  The drivers for this change can be summarized as :
• globalization and continued growth in the level of international trade;
• heightened international awareness (and quantification) of the costs associated with complying
with inefficient and outdated border formalities;
• increased investment by the private sector in modern logistics, inventory control, manufacturing
and information systems, leading to increased expectation for Customs to provide prompt andpredictable processing of imports and exports;
• increased use and availability of new information and communication technologies;
• greater policy and procedural requirements dire ctly associated with international commitments
(such as accession to the WTO);
• increased international competition for foreign investment;
• proliferation of regional trading agreements which significantly increase the complexity of
administering border formalities and controls;
• increased workload and government expectations, with static or decreasing financial and human
resource allocations;
• increased awareness of the importance of good governance and sound integrity within Customs
services; and
• following the terrorist attacks of 11 September 2001, a significantly heightened awareness of the
need for Customs administrations to play a more  meaningful role in protecting society from a
range of threats to national security.
As a result of these drivers for change there has been a growing realization, both amongst the
business community and within major international financial institutions, of the importance of sound
Customs administration to the economic and social prospects of developing countries.  It is now
clearly understood that a well-performing and et hical Customs administration can make a major
contribution to effective revenue mobilization
3 and can assist governments to facilitate trade and
investment and increase confidence in the qual ity and integrity of government institutions.
As traditional barriers such as tariffs have progressively been reduced, trade facilitation
reforms that address non-tariff barriers to trade are becoming increasingly important.  Following the
Uruguay Round of multilateral trade negotiations, developing countries took on an unprecedented
range of obligations, many of which relate directly to Customs.  However, unlike traditional marketaccess obligations, the elimination or reduction of a range of non-tariff barriers is not a simple or
                                                     
3In contrast to most industrialized countries where Customs duty makes a negligible contribution to total government
revenue, many developing and least-developed countries still depend on Customs for up to 50% or more of government
revenue.G/C/W/467
Page 3
inexpensive task for many developing countries.  The potential benefits that could be realized through
such activities are, however, significant.4
Committing appropriate resources to undertaking pr actical capacity building initiatives in the
Customs administrations of developing countries therefore represents a sound andcost-effective economic investment for governments a nd donor organizations.  Moreover, it can assist
Customs to make a more meaningful contribution to a range of national development objectives such
as revenue collection, trade facilitation, community protection, foreign investment, national security
and ultimately poverty reduction.
Indeed, as every single international shipment of goods is subject to Customs control and
processing at the time of import and export, Customs is uniquely positioned to successfully co-ordinate, consolidate and simplify border-related regulatory formalities on behalf of all government
stakeholders.  Moreover, it is the only government agency capable of successfully responding to the
need to facilitate trade while at the same time collecting all revenue due and protecting society from a
range of social and national security threats.
While there is now widespread agreement amongst the donor community that more attention
needs to be paid to improving the capacity of Customs administrations in many developing countries,
there is far less agreement on how such improvements should be designed, resourced and
implemented.  What has been missing to date is a broad and comprehensive strategy designed to
mobilize international support, increase co-ordination and co-operation between all stakeholders, andprovide a sound framework for practical and sustainable capacity building in the Customs
administrations of the developing world. This strategy is designed to fill this development vacuum.
3. What Does Capacity Building Mean in the Customs Context ?
In the Customs context, capacity building is commonly understood to mean developing or
acquiring the skills, competencies, tools, processes and resources needed to improve the capacity of
the administration to carry out its allotted functions and achieve its objectives.
It is a broad and comprehensive process involving all aspects of Customs administration and
cannot be tackled successfully on a narrow technical or single-issue basis.  By way of example, the
effective implementation of the WTO Valuation Agreement requires much more than simplegovernment agreement.  It usually involves legislative change, the creation of new administrative
infrastructure, the development and implementation of new systems and procedures, and a significant
increase in the skills and knowledge of national Customs officials.
While there is no universally accepted model for modern Customs administration, the
international Customs community believes all capacity building activities in Customs should be
focussed on increasing Customs’ performance in respect  of each of the key principles outlined in the
Revised Kyoto Convention.  The following principles are therefore based heavily on the Convention :
                                                     
4The OECD has estimated that time delays, paperwork and compliance related to border crossing costs between 5 - 13%
of the value of the goods involved.  A recent study estimated that reducing the cost of international trade transactions by
just 5% by 2006 could add $US 154 billion or 0.9% to the Asia Pacific Economic Co-operation region’s GDP each year.
The same report concluded that Customs reforms in Singapore, Thailand and the Philippines are estimated to yield a$US3.9 billion increase in real annual income.G/C/W/467
Page 4
Integrity Customs administrations should be free of corruption and strive to uphold the highest
levels of integrity.
Transparency Customs laws, regulations, administrative guidelines and procedures should be made
public and provided to clients in an easily accessible manner.
Accountability Customs administrations should be accountable for their actions through a transparent
and easily accessible process of administration and/or judicial review.
Predictability Customs laws, regulations, administrative guidelines and procedures should be
applied in a stable and uniform manner.
Facilitation While ensuring proper enforcement of Customs laws and regulations, Customs
& Control administrations should strive to facilitate the processing and clearance of legitimate
trade by risk management.
Client Service Customs administrations should continually strive to improve the level of service they
provide to clients.
Standardization  Customs laws, regulations, administrative guidelines and procedures should, where
appropriate, be harmonized with internationally agreed standards.
Simplification Customs laws, regulations, administrative guidelines and procedures should be
simplified to the extent possible so that Customs clearance can proceed without
undue burden.
Minimum Customs administrations should apply sound risk management systems, and audit-
Intervention based controls to identify high-risk activities, people, cargo and conveyances and
limit the level of Customs intervention.
Information Customs administrations should make maximum use of information and
& Communication communication technology to facilitate the adoption of the principles
Technology outlined in the Revised Kyoto Convention.
Co-operation  Customs should strive to develop co-operative relationships with
& Partnership all stakeholders including government agencies, the private sector and other Customs
administrations.
Continuous Customs should establish standards of performance and implement systems and
Improvement procedures which strive to continually improve the efficiency and effectiveness of all
business processes.
Compliance Customs should work with clients to assist them to improve their level of voluntary
Improvement compliance.
In addition, all Customs reform and modernization efforts should be focussed on establishing
or strengthening the management and administrative capacity of Customs administrations.
4. Six Lessons Learned from Previous Capacity Building Activities
Research by the WCO Secretariat, Member administrations and donor organizations in recent
years has identified a range of factors that contribute to the success or otherwise of capacity building
initiatives.  These lessons are summarized as follows :G/C/W/467
Page 5
4.1. The Need for Sustained High-Lev el Political Will and Commitment
Research conducted by several international organizations has identified the critical
importance of high-level political will and commitment to the successful conduct of capacity building
programmes.5  Without such commitment, maintained over  the longer term, capacity building efforts
are likely to be unsuccessful, regardless of the quality of their design and implementation.  As such,
the international Customs community believes high-level political commitment should be regarded as
a prerequisite or fundamental criterion for determining whether to support and fund capacity building
activities in Customs.
While it is relatively easy for senior government officials to indicate their wholehearted
support and commitment for Customs reform and modernization programmes, experience has shownthat it is much more difficult for governments to  demonstrate that degree of commitment through the
allocation of appropriate human and financial resources.
 6   The international Customs community
believes that the prime responsibility for capacity building rests with governments and that they must
be prepared to match donor funding and technica l support with their own commitment of human and
financial resources.
Moreover, given the high level of political change and volatility in many countries, greater
attention needs to be paid to obtaining bipartisan  political support for capacity building initiatives.
Without such support it is unlikely that the improvements achieved will be sustainable or resilient to
policy and/or environmental changes.
4.2. The Need for Greater Ownership and Participation of Customs Personnel
Feedback obtained by the WCO from a number of Member administrations indicates that
many capacity building programmes have failed to adequately address the need to obtain the fullparticipation and commitment of Customs officials.  As a result, many Customs personnel have had
little personal stake in, or commitment to, the organizational and administrative reforms being
promoted through various capacity-building activities.
Such participation needs to be obtained we ll before the implementation of any capacity
building programmes.  Where appropriate, local Customs personnel should be involved from the
earliest stage of the capacity building initiative, including the diagnostic stage, to identify capacity
building needs.  Appropriate attention should also  be paid to ensuring relevant information is
conveyed throughout the course of the capacity building intervention.  To successfully address this
problem, special attention needs to be paid to invo lving local Customs officials at all levels in the
formulation, design, implementation, monitoring and evaluation of capacity building efforts.
Where practical, capacity building initiatives should be under the overall direction of local
Customs personnel and senior officials should be actively involved in the promotion and
communication strategy.  Implementation teams and project support groups may assist in this
endeavour.  In essence, capacity building initiatives should be seen as being driven by the
government, the head of the Customs administrati on and his/her senior management team, with the
involvement of, and in close co-operation with, the trade.
                                                     
5See World Bank PREM notes series, April 2002, No. 67, OECD Development Centre, Technical Paper
No. 175, April 2001, and WCO Policy Commission document, SP0119.
6A relatively long and stable tenure of Directors General of Customs is desirable for a strong leadership by seniormanagement.G/C/W/467
Page 6
Customs consultants, technical specialists and in-country advisors need to focus on ensuring
adequate local participation and ownership, and such objectives should be clearly articulated in the
design and development of project proposals and other documentation.
In this connection, pursuing appropriate regional approaches may provide a useful
opportunity for participants to exchange experience with other Customs officials and administrations
which often face a range of similar problems.
4.3. The Need for Accurate Diagnosis of Capa city Building Needs and the Development of
Country-Specific Responses
Experience suggests that one of the critical success factors associated with the conduct of
effective capacity building initiatives is the accurate diagnosis and analysis of developmental needs.
While Customs administrations throughout the world face similar strategic challenges and perform
similar regulatory functions, their individual circumstances, operating environments, administrative
competencies, resource availability and development ambitions vary greatly.
As such, it is vitally important that appropriate account is taken of these factors during the
analysis, design, development and implementation of individual capacity building interventions in
developing countries.
The international Customs community is conc erned that many of the capacity building
programmes that have been undertaken in the past were based on an inaccurate or insufficiently
comprehensive assessment and analysis of needs.  There are many factors that contribute to this
situation, including :
• lack of a high-quality diagnostic tool focussed specifically on Customs which could provide a
sound model or framework for comprehensive assessment and analysis of capacity building
needs;
• limited pool of adequately experienced and qualified Customs specialists and consultants
competent to undertake diagnostic assessments;
• diagnostic assessment results being driven by the requirements, competencies or objectives of
donors or training and technical assistance providers rather than the recipient administrations; and
• insufficient attention being paid to mission-critical but non-Customs-specific issues such as sound
public sector management and administration competencies, strategic planning, change
management, external co-operation, management information and the collection and analysis of
base-line statistics.
In order to overcome these problems, more attention needs to be paid to thoroughly analysing
the needs and circumstances of recipient Customs administrations.  In addition, to increase the quality
and scope of diagnostic assessments, greater attention needs to be paid to the selection, training and
qualifications of Customs specialists engaged to conduct in-country assessments.  The WCO’s
Customs Capacity Building Diagnostic Framework will provide a comprehensive tool kit for
undertaking assessment missions and will assist Customs specialists to focus on all aspects of
Customs administration rather than simply the areas in which they enjoy particular professionalexpertise.
Capacity building programmes should respond to country-specific needs and be designed to
fit the individual political, economic and social circumstances of each Customs administration.  InG/C/W/467
Page 7
Customs, as elsewhere, it is clear that one size does not fit all.  In other words, it requires situational
solutions.
4.4. The Need for Realistic Government and Donor Expectations
In reviewing many capacity building projects and other activities that have been conducted
during the past decade, the WCO identified few that met or exceeded their stated developmental
objectives.  While this is disappointing, given the quantum of funding and technical assistance that
has been provided to many Customs administrations, it seems likely that many initiatives were
evaluated against somewhat unrealistic and overly ambitious expectations.  Moreover, in many cases
the capacity building inputs were either inappropria te or insufficient to ensure the transformations
expected.
Undertaking comprehensive reform and modernization programmes in the Customs
administrations of developing countries is a difficult and challenging task.  The international Customs
community believes that expectations need to be real istic and calibrated to take account of the scale
and scope of the problems to be overcome and the quantum of resources allocated to the task.Likewise, and closely linked to the problems associated with ensuring the accurate diagnosis of needs
(described above), capacity building inputs need to be accurately targeted to the problems they are
expected to overcome.  For example, research undertaken by the WCO has indicated that the vast
majority of capacity building activities undertaken around the world have concentrated on the
provision of training and/or technical assistance inputs.  While such inputs can play a valuable role,capacity building inputs should also have been directed at a range of more broadly focussed
management, administrative, procedural and infrastructure related issues in order to produce the
desired results.
Moreover, even when anecdotal evidence suggests that significant progress has been made as
a result of a particular capacity building programme, there is usually a lack of objective base-line data
upon which meaningful comparison can be made.  The WCO’s Customs Capacity Building
Diagnostic Framework addresses this problem in some detail and should provide a sound basis for
improving the quality of base-line data obtained at the start of any capacity building intervention.
Likewise, the WCO’s Time Release Study methodology should be regarded as a fundamental tool for
the collection and analysis of Customs’ operational performance.
7
4.5. The Need for Adequate Human and Financial Resources to be Devoted to CapacityBuilding Initiatives
Customs administrations in many developing countries typically face enormous pressure to
maximize revenue collections.  To achieve this, particularly in an operating environmentcharacterized by poor levels of voluntary compliance, Customs officials often resort to high levels of
documentary and physical inspection to verify the value, classification and origin of goods.  This
results in significant delays in Customs clearance and creates an operating environment that is
vulnerable to corruption.  At the same time, Customs administrations also face significant pressure
from the private sector and trade-related government agencies to expedite the processing andclearance of goods.  This can only be achieved by reducing the level of resource-intensive
documentary and physical examination.
While experience in a wide range of industrialized countries has proved that such apparently
competing demands and objectives can be successfully managed by an efficient and effective
                                                     
7The WCO Time Release Study is currently being automate d to facilitate its use by consultants and WCO Member
administrations.  Funding for the automation project was provided by the World Bank under the Global FacilitationPartnership for Transport and Trade Initiative.G/C/W/467
Page 8
Customs administration, the scale and the scope of the improvements necessary to achieve this in
many developing and least-developed countries are extensive.  Having reviewed a wide range of case
studies, the WCO has concluded that the quantum of human and financial resources devoted to
achieving such fundamental changes has often been inadequate to achieve the changes required and in
many cases, even when improvements have been made, they have proved unsustainable in the longerterm.
By way of example, many Customs capacity building projects have devoted substantial
attention to implementing communication and in formation technology systems.  While the
international Customs community fully supports such activity, it is concerned that such projects are
often under resourced relative to the scale of the changes being contemplated.  The information
technology industry typically works on an implemen tation post-implementation support ratio of 1:4.
In other words, 25% of the costs associated with implementing a new information technology system
should be devoted to implementation itself and 75% to post-implementation hardware and software
support.
Research conducted by the WCO has found that in many of the cases reviewed the ratio was
closer to the reverse.  As a result, many Customs administrations in the developing world are unable
to adequately support their current information technology infrastructure and are unlikely to obtain
government support to migrate to later versions of the same product.  This problem is compounded by
the fact that implementation of new information technology systems typically involves a significant
amount of non-IT-based business process re-engineering.
Many successful capacity building initiatives often specify the involvement of high-quality
Customs advisors to assist local officials to implem ent project objectives.  Placing skilled advisors in
developing countries often represents a significant proportion of the costs associated with capacity
building projects.  As a result, many capacity building projects deliberately limit the number andduration of short and long term advisors assigned to particular projects.
The international Customs community is concer ned that in many cases the advisors are
appointed for inadequate periods and that insufficient attention is paid to post-implementation support
and assistance.  As a result, improvements made are sometimes not maintained in the longer term.
Indeed, in a number of cases, Customs administrations have had a succession of medium to large
scale capacity building projects one after the other, all designed to address similar institutional needs.
In order to redress these problems, capacity building initiatives should :
• incorporate significantly longer implementation timeframes;
• make better provision for post-implementation support;
• incorporate adequate provision for short- and long-term in-country advisors; and
• include mechanisms for the provision of additio nal support and long term funding provisions
(particularly in the case of communication and information technology based interventions).
4.6. The Need for Enhanced Co-operation and Coherence
One of the perennial problems facing all capacity building recipients and providers is the poor
level of co-ordination and communication between national, regional and international donors leading
to duplication of effort in certain areas and little or no attention to other strategically important areas
of Customs administration.G/C/W/467
Page 9
Despite recent improvements designed to increase the level of co-ordination and coherence in
capacity building delivery, ensuring effective co -ordination between different donors continues to
plague international capacity building efforts.  For example, the WCO Secretariat was recently
involved in discussions with one Member administration where six different national and internationaldonor organizations were all offering significant capacity building programmes to the administration.
In such cases, the WCO may be able to play an important co-ordination and facilitation role.
To achieve real improvement in this area, Member governments and Customs administrations
must take a more active and strategic approach to meeting their capacity building needs.  Moreover,
governments need to avoid the temptation of accepting donor assistance simply because it is available
and play a more strategic and positive role in determining the needs and shaping the direction of thereform efforts.
In addition, existing vehicles for such co-operation such as the Integrated Framework for
Trade-Related Assistance to Least Developed Countries, should be utilized
8 to ensure greater
coherence in the identification of needs and the deployment of appropriate capacity building expertiseand resources.
5. Capacity Building Needs and Challenges
In early 2003 the WCO conducted a comprehensive survey of Member administrations to
determine the key capacity building needs, barriers and challenges facing its Member Customs
administrations.  The results of this survey, complemented by data obtained from additional
consultations, is summarized as follows :
WCO Member administrations identified six key building blocks which were considered
essential prerequisites for effective and comprehensive capacity building in Customs.  The building
blocks were identified as :
• sufficient political will, leadership and stakeholder support to ensure sustainability of capacity
building initiatives;
• adequate long-term resourcing and access to sustainable funding;
• a fully functioning civil service which provides the basic infrastructure necessary to administer
national laws and international commitments;
• a sound legal framework and a functioning judicial system;
• adequate remuneration and employment conditions for Customs officials; and
• a broad climate supportive of change and improvement.
Each of these issues was regarded by WCO Members as fundamentally important for
successful capacity building.  While it was acknowledged that some of the above-described issues are
out of the direct control of Customs personnel, it was emphasized that without these building blocks
in place it would be difficult to achieve meaningful and sustainable improvement.  As such, in
assessing the capacity building needs of particular administrations it is vital that appropriate attention
                                                     
8Agencies participating in the Integrated Framework include the World Bank, IMF, International Trade Centre,
UNCTAD, UNDP and the WTO.  The WCO makes a contribut ion in providing experts for diagnostic missions upon
request.G/C/W/467
Page 10
be paid to these issues.  The WCO has included a “Readiness Assessment” tool within its Customs
Capacity Building Diagnostic Framework for this purpose.
Where it is determined that one or more of these fundamental building blocks is not present,
or at least not to some realistic threshold level,  then capacity building programmes such as those
conforming to the model described in this document may be inappropriate.  In such cases, and
particularly where normal border controls and infrastructure are not present or viable9, then recourse
to some form of emergency measures might be appropriate.
For example, in cases where revenue collection vital to the functioning of the government is
at risk and established capacity building solutions are not viable in the short to medium term, a
number of governments and international financial institutions have resorted to the adoption ofpreshipment inspection (PSI) regimes.  While acknowledging the reasons why governments have
decided to employ such regimes, the WCO and its Member administrations have traditionally been
concerned about their longer-term effects on capacity building of Customs, because PSI regimes have
often been viewed as a substitute for Customs rather than as a stopgap measure.  Instead, the WCO
recommends that the service of private companies be employed in a complementary capacity tosupport Customs activities while concerted efforts are made to establish the infrastructure necessary to
manage Customs in a more sustainable manner.  As such, it is critical that comprehensive capacity
building programmes, conforming to the models described in this document, be conducted
simultaneously with the use of preshipment inspection.
Through the capacity building survey, Member Customs administrations identified seven
priority areas of capacity building assistance.  While responses varied significantly in terms of
detailed requirements, Members highlighted the following areas as of particular relevance.  Members
require capacity building assistance to :
• prepare and implement modern Customs legislation;
• develop and/or improve systems and procedures to accommodate changes required to comply
with international and regional commitments;
• strengthen strategic and operational planning capacity;
• strengthen the management and leadership competency of Customs personnel;
• analyse, design and implement effective organizational and administrative structures;
• implement or improve communication and inform ation technology systems and infrastructure;
• review and improve Customs systems and procedures to bring them in line with modern practice
(as outlined in the Revised Kyoto Convention and other WCO instruments);
• improve the level of co-operation, communication and partnership with external stakeholders
including other government agencies and the private sector;
• improve the level of integrity; and
• obtain appropriate infrastructure, technical aids and equipment and human and financial
resources.
                                                     
9For example, during or immediately following periods of civil war or international conflict.G/C/W/467
Page 11
In addition, in analysing the responses that were received to the WCO Capacity Building
Survey it was clear that many Customs administrations had defined their capacity building needs
according to their current government priorities.  As a result, a great deal of attention was paid to
identifying capacity building needs associated wi th ensuring that implementation of the WTO
Valuation Agreement does not have a detrimental impact on revenue collection.  Related to this issue,
many administrations were anxious to obtain assistance to deal with the perception of widespread
valuation fraud.  As described elsewhere in this document, dealing successfully with this issue will
require significant investment in a wide range of Customs system and procedural improvements.
Due to the current focus on heightened national security concerns, Customs administrations
also identified capacity building needs associat ed with implementation of the WCO Resolution on
Security and Facilitation of the International Trade Supply Chain.  Respondents agreed that capacity
building assistance was required to :
• improve the level of co-operation and communication with other government agencies involved in
trade, transport and national security;
• improve physical security and surveillance over Customs-controlled areas;
• obtain timely submission of relevant import/export data in order to identify high-risk cargo and
conveyances (legal, procedural and IT implications);
• improve inspection and examination capabilities (including enhanced human competencies and
deployment of appropriate technical aids such as scanners);
• improve Intelligence capacity, including exchange of information with other national and
international agencies;
• establish co-operative agreements with the Trade;
• improve integrity; and
• implement the provisions of the Revised Kyoto Convention.
While the above capacity building needs were highlighted in connection with implementation
of the Resolution, a number of respondents correctly identified the significant degree of overlap
between these issues and the wider capacity building needs identified earlier in the paper.
6. Roles and Responsibilities of Potential Stakeholders and Partners
As described above, the scale and scope of the capacity building challenges facing the
Customs administrations of the developing world are enormous.  To achieve meaningful and
sustainable improvement in efficiency and effectiveness, many Customs administrations will require
the concerted and co-operative effort of all stakeholders including :
• governments;
• Customs administrations;
• the private sector;G/C/W/467
Page 12
• key international organizations;
• international financial institutions, regional development banks and national assistance agencies;
• WCO Member administrations from developed countries; and
• the WCO Secretariat.
Each of the above groups has an important role to play in undertaking capacity building in
Customs.  A brief summary of their potential contribution follows.
6.1. Governments
The key responsibility for capacity building rests with individual governments.  Governments
must establish the sound administrative infrastructure necessary for effective Customs administration
and must ensure that the human and financial resources allocated to Customs are commensurate with
its potential contribution to the achievement of national development objectives.  Experience
demonstrates, however, that this is often not the case.
Customs administrations in many developing and least-developed countries are
under-resourced, poorly equipped, and inadequately remunerated.  Moreover, governments rarelyplace sufficient priority on Customs reform and modernization during consultations and negotiations
with international financial institutions and donor organizations. As donor organizations lend money
to governments and not to individuals or international organizations, it is vital that governments build
convincing business cases for capacity building in Customs and actively seek the necessary funding
support.
Governments are also uniquely positioned to direct and co-ordinate the capacity building
efforts of other stakeholders, including the donor community.  In some cases, governments have been
content to allow donors or capacity building providers to dictate the direction of reform and
modernization efforts and have shopped around for assistance rather than taking a strategic approachto obtaining support.
6.2. Customs
As Customs in most countries is the key agency associated with border control and
facilitation, it has the responsibility to provide valu e-for-money services to the community it serves.
Customs understands the environment in which it operates and has day-to-day contact with other
government agencies and the private sector.  Customs administrations should take a strategic
approach to identifying their capacity building n eeds and should take responsibility for setting the
direction and content of their improvement programmes.
Many capacity building initiatives require a relatively small amount of money and can be
accommodated within existing human and financial resources without necessarily resorting to external
funding or assistance.  Customs administrations should also allocate appropriate resources to support
productive capacity building initiatives and be more  active in promoting their developmental needs to
government and other stakeholders.  Moreover, Customs administrations should make better use of
capacity building offered by donor organizations to ensure improvements achieved are maintainedand further developed.G/C/W/467
Page 13
6.3. The Private Sector
The private sector has an important role to play in capacity building.  In many cases, private
sector corporations are the prime beneficiaries of any improvements achieved through capacity
building initiatives in Customs.  For most businesses, speed of delivery, predictability and a securesupply chain are vital for their business survival.  As such, the private sector should use its influence
with governments to direct necessary resources to Customs reform and peak industry bodies to
generate and sustain support for sound capacity building initiatives.  Likewise, it should participate,
wherever possible, in such activities.
Where appropriate, the private sector could also augment capacity building assistance
provided by donors either through the provision of training and technical assistance or via directfunding support.  In order to develop viable mechanisms for private sector involvement, individual
corporations and relevant industry bodies will need to take a long-term view and avoid narrow
sectional interests.
A sound and fully functioning Customs administration is an asset to all stakeholders, and
opportunities to participate in reform and modern ization initiatives should be viewed from this
perspective.  The private sector also has a responsibility to support Customs capacity building efforts
by participating in consultative fora and by adopting modern and ethical business standards.
6.4. International Organizations and Financial Institutions
International organizations have, and will continue to play, an important role in supporting the
capacity building efforts of Customs administrations.  International organizations are able to generate
global agreement to international agreements and standards and can support such efforts through
targeted training and technical assistance programmes.  Organizations such as the WTO, the OECD,UNCTAD, the UNDP and the World Economic Forum are all active in formulating and delivering a
range of Customs-related capacity building initiatives.  In addition, peak private sector bodies such as
the International Chamber of Commerce have been active in establishing recommendations for
modern and effective Customs administration.
International financial institutions such as the World Bank and the International Monetary
Fund play a vitally important role in the formulation and provision of capacity building assistance.Many developing and least-developed countries do not have the financial or human resource
capabilities necessary to undertake comprehensive capacity building programmes.  International and
regional financial institutions can play an important role by providing guidance and access to
appropriate funding for productive capacity building in itiatives.  Increasingly, international financial
institutions are working together through initiatives such as the Integrated Framework for Trade-Related Technical Assistance to Least-Developed Countries to ensure assistance is well designed and
effectively targeted to meet key developmental needs.
Likewise, the Global Facilitation Partnership for Transportation and Trade (GFP) is a key
World Bank programme aimed at bringing together all interested parties, public and private, nationaland international, to achieve significant improvements in transport and trade facilitation.  The Partners
will work together to design and undertake specific programmes towards meeting this objective,
making use of their respective comparative advantage in the subject matter in a co-ordinated
fashion.
10
                                                     
10The WCO has been working with the World Bank in enhancing GFP activities with more focus on Customs.G/C/W/467
Page 14
It is important for international financial institutions to recognize the critical value of Customs
to the economic, social, fiscal and trade ambitions of nations and to emphasize Customs as a key
component of their country-specific development programmes.
6.5. Regional Organizations
Regional development banks provide guidance and funding to assist Customs administrations to
undertake various capacity building activities.  In many cases, the assistance that is provided is
directly related to complementary regional initiatives.  Assistance is generally provided to Customs
administrations through bilateral partners, international organizations or private sector consultants.
For example, the WCO has been involved in capacity building programmes funded by the Asian
Development Bank and the Inter-American Development Bank where its Customs-related expertise isable to add value to regional initiatives.  Likewise, the WCO has worked in close co-operation with
organizations such as the APEC Sub-Committee on  Customs Procedures and is currently pursuing
closer relationships with a range of orga nizations, including COMESA, ASEAN and the
Commonwealth Secretariat.
6.6. Bilateral Donors
National development assistance agencies also provide a valuable source of funding and
technical assistance for capacity building in Customs,  particularly in cases where the recipient country
enjoys close historical ties and/or is of strategic importance to the donor country.  Increasingly,national agencies are undertaking joint projects with international organizations and international
financial institutions to ensure limited resources ar e used most effectively.  Agencies such as the
United States Agency for International Development (USAID), the UK Department for International
Development (DFID), The Japan International Co- operation Agency (JICA), the Agence Française de
Développement, and the national agencies of Germ any, Denmark, Sweden, Korea, the Netherlands,
Australia and New Zealand have been generous in funding Customs-related activities in the past.
6.7. WCO Member Administrations
In many cases, successful capacity building programmes in Customs rely heavily on access to
highly skilled and qualified Customs expertise.  While some of this expertise is available through
international organizations such as the WCO and through the private sector, the pool of availablepersonnel is extremely limited.  In order to adequately resource capacity building initiatives
undertaken in developing and least-developed countries, the continued contribution of developed
country Member administrations is required.  The WCO Capacity Building Diagnostic Framework
will guide national experts and thus serve as quality control of advisory service.  In addition, Member
administrations will need to continue to be acti vely involved in supporting bilateral assistance
programmes and providing policy guidance to the WCO Secretariat.
7. The Role of the WCO
The WCO’s mission is to enhance the efficiency and effectiveness of Customs
administrations, thereby assisting them to contribute successfully to national development goals
particularly in the areas of trade facilitation, revenue collection, community protection and national
security.  In order to fulfil this mission, the WCO pursues three main capacity building strategies :
Firstly, through its conventions, other instruments and best-practice approaches the WCO
provides an internationally agreed series of models for effective Customs administration.G/C/W/467
Page 15
Secondly, the WCO provides a forum for inte rnational co-operation and the exchange of
information and experience between Member administrations, other international organizations and
the private sector.
Thirdly, through its training and technical assistance programme it provides a range of high-
quality capacity-building opportunities in areas of organizational competence.
In addition, the WCO is actively involved in :
• improving the quality of, and access to, its high-quality training and technical assistance
programmes through the development and implementation of ane-learning-based distanceeducation programme;
11
• promoting the importance of efficient and effective Customs administrations at various
international fora and to key donor organizations;12
• re-developing its Customs Reform and Modernization programme to make it more accessible,
flexible and responsive to WCO Members’ needs;13 and
• improving the level of co-operation and coherence in the delivery of international capacity
building efforts;14
• identifying opportunities where delivery of capacity building activities can be outsourced to
Member administrations and, where appropriate,  private sector consultants;
• exploring means of better co-ordinating capacity  building assistance through the development of
appropriate regional mechanisms.15
In addition, based on the need to focus its limited resources on those areas of most strategic
value, the WCO is developing a comprehensive Customs Capacity Building Diagnostic Framework
which will serve as a key tool in identifying n eeds and in developing effective capacity building
programmes in Member administrations.  An outline of the Diagnostic Framework follows.
                                                     
11The first e-learning module on Customs control will be ready by the end of June 2003.
12The WCO has energetically stressed the importance of Customs in economic and social development and the need for
capacity building at various international fora, including the WTO, the OECD, various UN agencies, and non-governmental organizations such as the World Economic Forum.  It has also vigorously advocated the case for Customsreform to the IMF, the World Bank, regional development banks (including the Asian Development Bank and the Inter-
American Development Bank) and other donor organizations, including the Commonwealth Secretariat.
13The WCO High-Level Working Group on Capacity Building has intensively reviewed the past WCO capacity building
activities, including the Customs and Modernization programme.  This resulted in the development of a CustomsCapacity Building Diagnostic Framework by the Secretariat (see Section 9 below).
14The WCO has delivered joint technical assistance with the WTO and the Commonwealth Secretariat.  It has been
working as executing agency for the UNDCP African Seaport Project and the USAID Programme of Technical
Assistance in Valuation for Sub-Saharan Countries.  In addition to providing experts to the diagnostic missions for theIntegrated Framework (see footnote 7 above), the WCO is currently working with the World Bank on enhancing theGFP activities with more focus on Customs capacity building (seefootnote 10 above).  It is also
 discussing the delivery
of country-specific capacity building activities fo r Customs with the Commonwealth Secretariat.
15Taking into account the increased importance of regional trade arrangements, the WCO is developing a regional
approach for capacity building, including assistance for regional groups to base their Customs procedures oninternational standards.G/C/W/467
Page 16
8. Funding Options
Given the scale and scope of the capacity building needs and challenges identified in this
paper, it is clear that the quantum of financial support required to achieve meaningful and sustainable
capacity building results will be significant.  The international Customs community has identified
only four possible sources of funding support for capacity building initiatives.  These are :
• Self funding by national governments;
• Loans and grants from international and regional financial institutions and other donor
organizations;
• Voluntary contributions by private sector corporations and peak industry bodies; and
• User fees or service charges.
All of the above sources of funding for capacity building have advantages and disadvantages,
some of which are summarized below.
Funding Sources Advantages Disadvantages
Self Funding • High level of local
ownership
• No conditionality applied
by external agencies
• High degree of flexibility
in utilization of funding
• Limited external
monitoring• Inadequate quantum of
support
• Lack of sustainability
• Vulnerable to policy and
political changes
Loans from Donors • Continuity of funding
• External monitoring of
performance
• Access to external advice
and guidance• Debt to repay
• Sometimes lengthy
negotiation process
• Conditionality applied
• Limited local ownership
• Limited flexibility in
utilization of funding
Grants from Donors • No debt incurred
• Particularly useful for
short-term projects orinfrastructure acquisition• Limited flexibility in
utilization of funding
• Lack of predictability and
sustainabilityG/C/W/467
Page 17
Private Sector Contributions • Contributes to shared sense
of responsibility and
potential for partnership
approach• Potential for conflicts of
interest
• Lack of predictability and
sustainability
User Fees and Charges • Predictable and sustainable
funding
• Benefits of improved
performance channelled
directly to beneficiaries• Increased cost to traders
• Cost of administration of
scheme
• Potential for income to be
diverted to national
budget
In an attempt to identify potential sources of funding to assist Member administrations to fund
the capacity building requirements associated with implementation of the WCO Resolution on
Security and Facilitation of the International Trade Supply Chain, the WCO Secretariat recently
commissioned a comprehensive research study into potential funding mechanisms.16  T h e  r e p o r t
concludes that there are three main sources of fund ing : payment by the users; private sources; and
public sources.  It outlines the advantages and disadvantages of each and provides a number ofalternative scenarios that offer potential for long-term financing.  It also identifies the potential
benefits to be gained from establishing national and/or international development funds based on the
collection of fees associated with individual container movements.  The proposals outlined in the
research study deserve further investigation and will be analysed by the WCO Secretariat and relevant
working groups in the coming months.
At the WCO level, there is significant potential to expand the current level of voluntary
contributions to the Customs Co-operation Fund (CCF).  To facilitate this process, the WCO is
currently developing a range of marketing and promotion products and will emphazise the importance
of the Fund in bilaterial discussions with Member administrations.  Moreover, it is examining the
feasibility of establishing a regional approach to capacity building designed to increase the quantum
of funding provided at the regional level.
9. Developing a Customs Capacity Building Diagnostic Framework
In recent years, governments, donors and Member administrations have increasingly looked
to the WCO to provide sound advice and direction on the diagnosis of Customs needs and the content,focus and methodologies needed to effect real and sustainable improvement in the Customs
administrations of the developing world.  In effect , they have been looking to the WCO to provide a
comprehensive guide or road map on how to achieve effective modernization of Customs
administrations in the developing world.
Fortunately, unlike some other areas of public administration, the basic building blocks for
improving the efficiency and effectiveness of Customs already exist.  The WCO maintains a range of
internationally agreed conventions, instruments and best-practice approaches that collectively provide
a sound blueprint for modern Customs administration.  The International Convention on the
Simplification and Harmonization of Customs Procedures (Revised Kyoto Convention), the
Harmonized System Convention and the Arusha Decl aration on Integrity in Customs are examples of
                                                     
16Dulbecco, P. and Laporte, B. “How to Finance the Security of the International Supply Chain ?  A Global Approach for
the Public Good”, “Centre d’études et de recherches sur le développement international”,April 2003.G/C/W/467
Page 18
the internationally agreed standards that are currently available to guide sound capacity building
initiatives.
However, there is currently no standardized and comprehensive approach available for
identifying and addressing Customs capacity building needs.  Likewise, many previous efforts havebeen narrow in focus and have had little link age to WCO instruments, tools and best-practice
approaches.  This had led to poorly diagnosed and conceived capacity building interventions.
The WCO’s Customs Capacity Building Diagnostic Framework brings together in one clear
and concise document all key elements and foundations necessary to establish an efficient and
effective Customs administration.  It provides a comprehensive and standardized methodology for the
diagnosis of needs and the design and development of appropriate capacity building programmes.  Itpromotes WCO conventions, instruments and best-pract ice approaches, as well as a range of relevant
materials provided by other organizations.
17  It is designed to be a practical capacity building tool and
will be of use to WCO officials, Member administrations, donor organizations and anyone involved in
designing and implementing Customs-related capacity building initiatives.
It includes a readiness assessment tool and a series of ten chapters that cover all the core
components of a comprehensive capacity building programme.  The ten components cover :
• Leadership and strategic planning • Information technology
• Customs systems and procedures • External co-operation and partnership
• Organizational and institutional
framework• Change management and continuous
improvement
• Legal framework • Good governance
• Resources (human, financial and
physical)• Management information and statistics
The Diagnostic Framework includes a comprehensive assessment tool or checklist for each of
the above-described components.  In addition, it includes practical guidance on how to conduct
diagnostic assessments ensuring maximum objectivity, as well as the active participation of
stakeholders including local Customs officials.  The Framework is designed to identify individualdevelopmental strategies that are appropriate to the social, cultural, political and economic needs and
circumstances of recipient Customs administrations.
To ensure that the Diagnostic Framework leads to the design, development and
implementation of sound programmes, it includes guidelines on how to design, implement and
monitor capacity building initiatives.  The guidelines include specific sections on :
• Preparation of action plans, project proposals and costing schedules;
• Identification of project objectives, input/activities, outputs, performance indicators, assumptions,
etc.;
                                                     
17For example, the content of the ICC Customs Guidelines and Columbus Declaration provide some useful input into the
Framework.G/C/W/467
Page 19
• development of a logical framework; implementation advice including input/activity sequencing,
project management, stakeholder participation and programme support; and
• monitoring and evaluation guidelines.
The Customs Capacity Building Diagnostic Framework has already been completed and is
available in draft form.  It will continue to be refined and developed as a result of feedback obtainedduring a series of pilot tests that have been conducted in recent months.
10. Recommendations for Change
Based on the conclusions of this Customs Capacity Building Strategy, the international
Customs community strongly recommends that future capacity building initiatives directed at
improving the efficiency and effectiveness of Customs administrations be based on the followingrecommendations :
• Governments, international organizations, regional and international financial institutions and
donor agencies recognize the significant contribution that Customs administrations make tonational development objectives and commit appropriate human, financial and technical resources
to comprehensive capacity building initiatives in Customs administrations around the world.
• Governments take primary responsibility for the initiation, direction and resourcing of capacity
building efforts.  Governments maintain their commitment in the longer term and take
responsibility for ensuring the sustainability of capacity building initiatives.
• Greater attention be paid to the accurate diagnos is and analysis of capacity building needs and
interventions be tailored to the cultural, political, social and economic situation of individual
Customs administrations.  The WCO should finalize  its Capacity Building Diagnostic Framework
as soon as is practically possible and make it available to the international Customs community.
• Greater attention be paid to improving the selection and competencies of Customs specialists
engaged in the conduct of diagnostic study missions and in the design of capacity building
interventions.  Action will be required by the WCO, national Customs administrations and a rangeof organizations involved in sourcing Customs specialists for capacity building missions.  The
WCO could play an important role by ensuring Customs specialists are adequately skilled in the
use of its Diagnostic Framework and by using its extensive Member network to source
appropriately skilled and experienced Customs specialists.
• Donor organizations and the international Customs community commit to achieving a greater
degree of co-ordination and coherence in the delivery of capacity building assistance.  To achievesignificant improvement in this area, Member governments and Customs administrations must
take a more active and strategic approach to mee ting their capacity building needs.  Governments
must avoid the temptation to accept donor assistance simply because it is available and play a
more strategic and positive role in determining the needs and shaping the direction of the reform
efforts.G/C/W/467
Page 20
• Existing vehicles for international and inter- agency co-operation such as the Integrated
Framework for Trade-Related Assistance to Least-Developed Countries and the GlobalFacilitation Partnership for Transport and Trade, should be supported by all members of the
international Customs community to ensure greate r coherence in the identification of needs and
the deployment of appropriate capacity building expertise and resources.
• Greater use be made of existing regional organizations and fora to ensure the cost-effective
deployment of scarce capacity building resources.  Where possible, capacity buildinginterventions conducted on a regional or sub-regional basis should complement or be aligned with
existing programmes and developmental opportunities.  The modalities for such an approach will
have to be established.  However, the WCO’s regional network may provide an appropriate
vehicle for undertaking such aco-ordination role .  The WCO should conduct a feasibility study
into the efficacy of developing a regional approach to capacity building.
• Customs personnel in recipient administrations be actively involved in the formulation, design,
implementation, monitoring and evaluation of capaci ty building initiatives.  Donor agencies must
specify the level of participation required by local Customs personnel, and recipient
administrations must be prepared to allocate high-quality personnel to such work.
• Donor expectations should be realistic and calibra ted to take account of the scale and scope of the
problems to be overcome and the quantum of resources allocated to the task.  To ensure adequate
sustainability of any improvements achieved, greater attention needs to be paid to non-Customs
technical issues, such as management, administration, strategic planning and change management.
In addition, capacity building initiatives need to incorporate significantly longer timeframes,
make better provision for post-implementation support, include adequate provision for in-country
advisors and identify suitable long-term financ ing arrangements, particularly for information
technology acquisitions.
• All stakeholders including governments, Customs administrations, the private sector, regional and
international organizations, donor agencies and the WCO commit to a new and more effectiveapproach to undertaking capacity building in Customs based on the observations and conclusions
described in this Strategy.  In order to achieve a significant improvement in quality and quantityof capacity building support provided to the Customs administrations of the developing world,
each stakeholder will need to commit to adopting the recommendations described above.
11. Conclusions
Customs administrations around the world play a vitally important role in the implementation
of a range of critically important government policies, and contribute to the achievement of a number
of national development objectives.  Without an efficient and effective national Customs
administration, governments will not be able to meet their policy objectives in respect to revenue
collection, trade facilitation, trade statistics, and the protection of society from a range of threats tonational security.
Well-designed and effectively targeted capacity building investments focussed on improving
the efficiency and effectiveness of Customs administrations can deliver significant dividends for
governments and donors alike, and allow developing countries to take advantage of the many
development opportunities provided by the expanding global trading system.
To improve the quality and relevance of Customs capacity building initiatives, governments,
Customs administrations, donors and all sections of the international Customs community need to
draw lessons from the successes and failures of the past and commit to a range of new approaches andG/C/W/467
Page 21
practical strategies.  The key lessons to emerge, to gether with suggestions for improvements in the
design, development and implementation of capacity building initiatives, are articulated in this
document.
The WCO’s Customs Capacity Building Strategy is designed to provide a pragmatic response
to identifying and addressing the capacity building needs of Customs administrations in the
developing world.  Likewise, the WCO’s internatio nally agreed conventions, instruments and best-
practice approaches provide the building blocks necessary for sound Customs administration.
The much-needed road map is therefore now available for undertaking successful capacity
building initiatives in Customs.  It is now up to al l stakeholders to commit themselves to the practical
implementation of the principles and suggested actions contained in this strategy.
__________