BOC Third Party Validators

THE Bureau of Customs (BOC) is finalizing rules which will result in the outsourcing of certain customs functions to the private sector, and which will further enhance customs-business partnership to promote customs compliance and trade facilitation.

In a previous article, we wrote about the BOC Voluntary Program for Authorized Economic Operator (AEO). The program will require the accreditation of the various stakeholders engaged in export and import activities — importers, customs brokers, truckers, forwarders, shippers, port operators and others in the gateway community. Part of the accreditation process is the validation of the use of advanced information technologies and the application of the security standards in the operations of a company, particularly those activities relating to the documentation, handling, storage and transport of international cargo.

Approved Customs Partner

Prior to accreditation as an AEO or “approved customs partner”, customs will require the third party validation of the security standards implemented by an applicant. This early, several companies are already preparing to offer their services to customs (e.g. Intertek, Cotecna, SGS and Bureau Veritas) once the program is implemented.

Once accredited by customs, an AEO will be accorded with international recognition and reputation similar to that of having an ISO qualification. In addition, an AEO will qualify for trade facilitation programs (e.g. super green lane, special passes and online facilities) and other special benefits that are not available to regular entities dealing with customs.

Pre-Shipment Inspection (PSI)

In a consultation conducted last July 11, BOC presented its plan to require the accreditation of third party surveyors to conduct pre-shipment inspection of bulk and break bulk cargo.

Among the issues extensively discussed during the consultation were as follows:

• the rational for implementing a partial PSI regime when the modern customs paradigm is towards post clearance controls;
• the added costs to be shouldered by the trading community;
• the additional layer of documentation and processes that may impact negatively on trade facilitation; and
• the accreditation of third party surveyors.

Importer Information Verification

In another consultation recently conducted, BOC also discussed with the private sector the planned accreditation of third parties to perform the function of validating the information submitted by importers to BOC under the present customs accreditation program.

Under the proposed program, customs will select a single Information Validation Service Provider (IVSP) to perform the task of verifying the completeness and accuracy of the information submitted by importers and other stakeholders. The ISVP shall likewise provide compliance risk assessment prior to the accreditation of the importer or stakeholder.

Third Party Validators

The initial plan of customs is to pre-qualify prospective IVSPs and after going through a process of bidding selection, select a single IVSP.

Given the various customs programs for implementation in the coming months and years, an IVSP will mostly be involved in many aspects of customs operations relating to supply chain security, trade facilitation, customs compliance and risk management.

Specifically, an IVSP may as well function as a third party provider for the existing and planned customs programs: (1) the AEO program, (2) the Client Profile Registration System (CPRS); (3) the PSI system for Bulk and Break bulk Cargo; (4) risk profiling and assessment under the Post Entry Audit system; and (4) selection of cargo for physical examination based on a risk management system.

Costs and Benefits

In theory, there are clear benefits to the trading community in terms of trade facilitation and enhanced security in the supply chain. However, these benefits may not be maximized if the programs are not properly implemented and managed.

This early, stakeholders are already raising concerns on the financial impact of all these programs. An added concern is the need to maintain free competition among the third party providers. Obviously, stakeholders will expect better services and competitive prices when there are more service providers. As has always been the case, a single IVS provider will most likely result in monopoly pricing and poor services.

The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs & Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. He was also Bureau of Customs Deputy Commissioner for Assessment and Operations Coordinating Group (2013-2016). For questions, please email at agatonuvero@yahoo.com and agatonuvero@customstrade.asia