# **Box 5.1 OECS Customs: More than an Administrative Transaction**

# _What are the key characteristics of customs best practices?_

The concept of modern customs encompasses effective, efficient, transparent, and predictable operations consistent with broad strategies and goals to meet current needs (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 threats and organized crime, higher expectations from the public as well as private sector, and trade facilitation negotiations. To face this changing and challenging environment, international organizations such as the World Trade Organization (WTO) and the WCO are promoting customs best practices. In this regard, the Revised Kyoto Convention provides a set of best practices whereby the role of the customs office is simultaneously defined as that of a:

- `­` Policy advisor: to provide trade statistics for macroeconomic purposes and trade negotiations

- `­` Policy implementer: to help to regulate trade agreements

- `­` Trade facilitator: to facilitate doing business in the country

- `­` Security provider: to contribute to national security at the borders

# _Where are the OECS countries in relation to customs best practices?_

According to the Customs Assessment Trade Toolkit (CATT), the assessed processes of the OECS customs offices are far from best practices. The OECS customs performance was ranked low to medium for “in progress” performance, with average scores between 30 percent and 36 percent out of a maximum of 100 percent (World Bank 2010).

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 the OECS customs are high, especially in terms of time. The average amount of time it takes to release goods can reach more than ten times the international standard of eight hours in some cases.

# _Why have the OECS countries not embraced best practices?_

While the Caribbean economies are highly integrated with the global economy, their customs performance is lagging behind. One clear pattern is that the OECS customs offices physically examine 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. Overtime compensation is very attractive and pursued by customs officers to top up their salaries, and taken as part of the aggregate income for all financial transactions, including mortgage applications.

|Other elements that are far from trade facilitation best practices have been identified by the CATT|
|---|
|diagnostics in the OECS. Those elements include incomplete harmonization and dissemination of the|
|valuation and classification rules, lack of SOPs, nonsystematic updates on customs regulations and<br>procedures, lack of electronic payment options, and absence of operational benchmarks.|

|_What has been done to improve OECS customs practices?_|
|---|
|Most Caribbean countries, including those in the OECS, have implemented an integrated information|
|system solution: the ASYCUDA World (AW) system, which has become the regional standard due to|
|its functionality and reasonable implementation cost. The rollout of an integrated information system|

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