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Home3PL/4PLUse of customs broker services should be optional—WCO

Use of customs broker services should be optional—WCO

ID-10022352The World Customs Organization (WCO) said customs brokers’ services should be made optional in keeping with provisions of the Revised Kyoto Convention, although in countries that still require services of brokers, they should be accredited by Customs authorities.

In its June 2016 publication entitled “WCO Study Report on Customs Brokers,” the organization added the “use of Customs brokers… could potentially be governed by free-market principles as are other professional services, keeping in mind the national social and economic situation.”

The report aims to provide clarity on WCO member countries’ practices in terms of brokers’ role, institutional framework, regulatory and licensing requirements, challenges, opportunities, and lessons learned, and to further guide members as mandated by the Policy Commission. It is primarily based on WCO survey results and research carried out by the WCO Secretariat, which includes a detailed analysis of members’ practices.

Initiatives of the Philippine government hew closely to WCO report, with the recent signing into law of Republic Act 10863 or the Customs Modernization and Tariff Act. Under the CMTA, services of brokers are required for two years but optional after.

READ: PH Customs modernization act signed into law

Incoming Customs commissioner Nicanor Faeldon has also said he favors the optional engagement of customs brokers, going so far as saying he will push for the repeal of the Customs Brokers Act of 2004. That measure designates customs brokers as declarants in the lodgement of import entries.

READ:  Incoming PH Customs chief bares top priorities, including re-imposition of pre-shipment inspection on containers

The WCO report noticed that 71 members (73%), a majority of the survey’s respondents, do not mandatorily require traders to use customs brokers. A total of 23 members (23%) spread over all WCO regions still require the mandatory engagement of broker services, albeit with some exclusions (e.g. specified commodities, personal effects, good below a specified threshold) in 14 members.

The report suggested that fees and charges for customs brokers should neither be fixed nor regulated by an authority, but determined by the market. General oversight may, however, be required by the government/customs—sometimes together with brokers’ associations or other private organizations—to protect the interest of traders.

The report said both individuals (natural persons) and companies (legal persons) should be permitted to become licensed brokers, in cases where licensing is required. “This is to ensure equal opportunities for everyone, and also to have a wider availability of brokers.”

Regulation and licensing

Since the line of work of customs brokers involves mainly Customs clearance, WCO said Customs should ideally “be the regulatory and licensing authority for Customs brokers, where applicable,” adding Customs may also be entrusted with giving examinations for brokers, and—together with brokers’ associations or any other private body—be entrusted with oversight authority over their business ethics and professional conduct.

WCO said the regulatory and licensing criteria should be transparent, non-discriminatory and simple, and may include specific sanctions and penalties for misconduct and violations by customs brokers. There should be provisions for dealing with informal/unauthorized brokers to ensure effective compliance with Customs and other government agencies’ requirements.

Where licensing requirements are foreseen for traders who are permitted to carry out Customs formalities for clearing the own goods, WCO said the requirements need not be as stringent as the licensing requirements for Customs brokers. “However, some minimum prerequisites such as knowledge of Customs and related laws, good compliance record and financial solvency could be prescribed,” it continued.

“In order to test the Customs knowledge of brokers and ensure that they keep themselves abreast of the latest developments, Customs administrations should consider designing suitable assessment/verification systems, for example, an examination which could be either written or oral.”

WCO said obligations and liabilities of brokers may include representing their clients under proper authorization; advising their clients on various compliance requirements; and never lending their license or permitting any other person or agent to use it.

“They may also be jointly and severally liable for the payment of duties, taxes and other charges on behalf of their clients.”

The report noted challenges posed by some brokers, including those by informal/unauthorized brokers that could be met by increased use of information and communications technology, the application of demonstrative sanctions and penalties in appropriate cases, and constant dialogue with traders and with such brokers.

According to the WCO survey, 42 member countries (47%) have noticed that the issue of compliance and integrity of brokers is a problem area, of which 13 members (15%) noted it as a very serious problem.

Fields of collaboration

The report noted opportunities for cooperation between Customs and brokers could include Customs modernization and trade facilitation initiatives; implementation of bilateral/multilateral agreements (e.g. Free Trade Agreements (FTAs), World Trade Organization Trade Facilitation Agreement (WTO TFA); compliance with Customs and other government agencies’ requirements, including due diligence and data quality; enhancing supply chain security; enhancing the professionalism and business ethics of brokers (e.g. capacity building and joint training activities); and carrying out performance measurement (including conducting time release studies).

The WCO report said the remit of Authorized Economic Operator (AEO)/trusted trader programs should be expanded to include brokers, with well-identified tangible benefits. “Where appropriate, Customs brokers could also be involved in the National Committee on Trade Facilitation set up/maintained under the WTO TFA.”

The report suggested considering establishing or recognizing a brokers’ association at the national or regional level, “as such associations can provide support to their members while assisting Customs administrations with the fulfilment of their regulatory/licensing responsibilities.”

These associations can provide training, capacity building, and an oversight framework which might add to the overall capacity of brokers, the report said. It noted, however, that Customs administrations should support customs brokers, including through brokers’ associations, by informing or educating them about the regulations and requirements, including those of other government agencies.

Areas of comparison

Worth considering too, the report said, is measuring compliance rates of traders who use a customs broker against those who do not, alongside studies that measure the release times of traders who use a customs broker against those of traders who do not.

“Such studies, conducted at regular intervals, could provide valuable insights into the role and responsibilities of Customs brokers, and identify potential areas for further improvement,” the report pointed out.

It suggested ascertaining how much customs brokers are used in the Customs clearance process. Several members reported a high percentage of use of brokers’ services despite these being “optional” in their jurisdiction. Outcomes of such studies might require policy changes not only in adjusting licensing requirements, but also in setting up an effective oversight and capacity building mechanism, said WCO. – Roumina Pablo

Image courtesy of razvan ionut at FreeDigitalPhotos.net

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