# **Box 1: OECS Customs: More than an Administrative Transaction**

# What are the key characteristics of best practice customs

The concept of modern customs encompasses effective, efficient, transparent and predictable operations consistent with broad strategies and goals in order to meet prevailing times demands (WCO, 2007). Customs offices around the world are currently confronting a challenging environment featuring increased and more complex international trade, just-in-time distributions models, increased security treats and organized crime, higher expectations from the public as well as private sectors, and trade facilitation negotiations. To face this changing and challenging environment, international organizations such as the World Trade Organization (WTO) and the World Customs Organization (WCO) are promoting customs best practices. In this regard, the Revised Kyoto Convention provides a set of best practices whereby the role of the Custom office is simultaneously are defined as:

- policy advisor: to provide trade statistics for macroeconomic purposes and trade negotiations,

- policy implementer, to help to regulate trade agreements,

- trade facilitator: to facilitate the doing business of the country, and

- security provider: to contribute to national security at borders.

# Where are the OECS countries in relation to custom best practice?

According to the Customs Assessment Trade Toolkit (CATT), the assessed processes of the OECS customs offices are far from best practices. OECS customs performance was classified in the low to medium ranking for ‘in progress’ performance with average scores between 30% and 36% out of a maximum of 100% (CATT, 2010).

According to CATTs, OECS customs offices are largely characterized by their embracing of tax and duties collection as the top strategic goal, at the expense of their potential role as advisor, facilitator or security provider. OECS Customs lack proper risk management systems and have only partially implemented integrated information systems. Information systems are capable of receiving the electronic manifest before the cargo arrives, but they are unable to assess risk in advance, implement facilitation measures or to formally share information with tax administration to update risk profiles of authorized operators. The control mechanisms of OECS Customs are based primarily on physical examinations of almost 100 percent of entries, and efforts to promote voluntary compliance have not met with success.

Finally, the CATT analysis showed a lack of effective feedback mechanisms between the trading community and the Customs office to promote continual performance improvement. The latter is aggravated by the absence of formal Standard Operating Procedures (SOPs). Overall, the transition costs of dealing with OECS customs are high, especially in terms of time.

# Why OECS countries have not embraced best practices?

While the Caribbean economies are highly integrated with the global economy, customs performance is lagging behind. One clear pattern is that OECS customs offices are physically examining almost all entries, a practice far removed from trade facilitation best practices. This is likely the response to a widely accepted practice of overtime pay that sets out a distorting incentive structure.

20