Catdom’s Customs Department.

  Catdom’s Customs Department.

Introduction

Customs administration is crucial in facilitating trade, collecting revenues, protecting the community, and ensuring national security. Therefore, countries must establish robust customs administration systems to promote trade and protect the welfare of the citizens. The paper looks at the case study of Catdom, a landlocked country with a population of about 20 million people. Catdom shares a border with four states. Only two of these countries, Eastdom and Southdom, have direct access to the sea. Therefore, it implies landlocked countries such as Catdom should have efficient customs administration frameworks to facilitate their global trade. Catdom, on the other hand, faces numerous customs administration challenges. Some of the critical problems include lack of an effective transit system, rampant corruption, lack of modernization, and increased cases of unprofessional conduct among the immigration staff. The paper evaluates these problems and recommends solutions that would reform the Catdom’s Customs Department.

Key areas of consideration

Corruption

Catdom Customs Department struggles with rampant corruption cases. Corruption is a priority area because it deprives the essential revenue, which would have been used for economic development activities. Catdom’s economy relies on revenue collected from imports and exports. This revenue accounts for 60% of the total government revenue. The monies collected by the customs department may temp some of the staff to engage in fraudulent activities to enrich themselves (Abbott & Woolcock, 2015). For example, some of the customs officials may collaborate with unscrupulous traders to evade taxes or pay less tax by declaring their goods to be of low value compared to the actual value of their products. Greedy staff may receive bribes to prioritize the clearance of some traders’ goods at the border.  Case studies of countries like Bolivia show that inefficient customs administration systems increase the waiting times at the border posts (WCO, 2017). As a result, some of the traders prefer using shortcuts such as bribing the immigration officials to clear their goods. The average waiting times for trucks at Catdom’s border posts averages six to eleven days for exports and imports respectively. The longer waiting times allow the immigration staff to solicit bribes to “help” the trader hasten the clearance process (WCO. 2017). These and other forms of corruption at the Catdom Customs Department presents detrimental economic effects.

Recommendation

Catdom Customs Department should increase its level of transparency to reduce corruption cases. According to the Arusha Declaration, the department should publicize its administrative guidelines, procedures, laws, and regulations (WCO, 2003). Furthermore, the department should define how it exercises its discretionary powers. Increased transparency would enable the clients, and the border post officers to take their roles seriously in preventing corruption. Another strategy that the department can use to prevent or eliminate corruption is to establish sound HRM policies and procedures. Case studies of countries like Canada and Belgium have shown that sound HRM procedures are crucial anti-corruption strategies in customs administrations (WCO, 2017). Some of the HRM practices that Catdom should implement include recruiting and retaining human resources with high integrity standards and providing sufficient salary to the Customs personnel to enable them to lead comfortable lives (WCO, 2016). Other practices include implementing management and performance appraisal systems that foster the highest standards of professional integrity.

Relevant Risks

Corruption is not an independent variable. Therefore, curbing corruption will require Catdom with its neighboring countries to implement an anti-corruption framework. The primary risk is that some of the states may not consent to the agreement due to factors such as high implementation costs. The department can solve the problem by collaborating with both private and public business enterprises to help with funding (WCO, 2016).

Lack of an effective transit system (delays)

Another critical problem for Catdom is that it lacks an effective transit system. A transit system is a priority issue because it links the country to the sea. Since Catdom is a landlocked country, it relies on transit through Southdom and Eastdom to access the seaports. Lack of an effective system increases Catdom’s trading expenses. Some of the problems that interfere with the effectiveness of the system include poor infrastructure and border and inter-border management practices (Groenendijk, 2019). Catdom is a developing country. Therefore, it lacks critical infrastructure, such as advanced computer management systems at the border points. Groenendijk (2019) indicates that the lack of this infrastructure makes it challenging to communicate and coordinate with the customs departments of the neighboring countries. As a result, the traders (trucks) are exposed to manual document verification and signing at the border points. The manual system wastes a lot of time and slows down trading activities.  Besides, poor border management practices make it difficult for trucks to transit from one country to another (World Customs Organization, 2017). When crossing Catdom’s borders, vehicles are required to sign about 22 different documents from 9 various documents. Harmonizing the process to reduce the compliances would prove useful in reducing the delays at the border points.

Recommendation sing WCO

Catdom should sign to be a member of the WCO (World Customs Organization). Becoming a member of WCO will present three main benefits that will help to strengthen Catdom’s transit system (World Customs Organization, 2017). The benefits include setting standards, building capacity, and fostering cooperation. By signing to the organization, Catdom will benefit from capacity building initiatives that would streamline its transit system. WCO has a wealth of expertise in terms of accredited experts that would provide tailor-made support to Catdom to establish and effective transit regime (WCO, 2013). The system would comply with the established standards since it is the same organization that the instruments and tools that relate to the administration of customs. For example, WCO applied its TRS Guide to build the capacity of EAC countries to launch the Central Corridor (from Dar-es-Salaam to Bujumbura via Kigali) in favor of the Northern Corridor from Mombasa, Kenya to Kampala, Uganda. Besides, WCO will give Catdom Customs Department a platform to partner and share information with the customs departments of other member states (World Customs Organization, 2017). Sharing information will help to streamline the flow of documents to straighten the transit procedures and increase their transparency.

Relevant Risks

Rules and information practices may vary from one country to another, especially if the neighboring countries are not members of WCO. For instance, some states may require the traders to provide HS codes with up to 10 digit codes with a full description of the goods (World Customs Organization, 2017). On the other hand, other countries may require a simple explanation of the products only. Catdom can address the risk by encouraging the neighboring countries (not members of WCO) to join WCO to form a universal transit system.

Lack of Modernization

Catdom struggles with increased inefficiencies in handling the exports and imports because it continues to use outdated procedures in clearing goods. WCO (2015) indicates that the modernization of customs administration is an essential concept in that it reduces shortens the waiting times for trucks by streamlining the clearance processes. OECD (2005) notes that it also helps to reduce corruption cases. Catdom has continued to use the manual processing of goods in its border points for over 25 years. In this model, the principals are required to sign more than 20 signature of 9 different departments to have their goods cleared. The process also involves the physical examination of products, which wastes a lot of time. The use of outdated systems increases the corruption risk in customs administration (WCO, 2003). For example, it gives the clients an incentive to bribe the customs officials by “paying” facilitation fees to avoid the burdensome and slow clearance procedures.

Moreover, the outdated procedure makes it easy for unscrupulous traders to evade taxes. Since there is no robust system to monitor the exports and the imports, unscrupulous traders collaborate with greedy customs officials to navigate the bottlenecks at the clearance stations. WCO (2003) notes that the practice deprives the country of revenue that would have been used to modernize the current customs administration system.

Recommendation

Catdom should consider computerizing operations in its border controls to improve the efficiency of the clearance processes. Computerization of the clearance processes will facilitate trade by combating illegal commerce, reduce corruption, and reduce the delays at the border controls (WCO, 2015). Computerizing operations at the border controls would integrate better information technologies into the current systems. The integration will improve coordination among the customs departments, thereby improving efficiency. The case study of Jordan shows that modernizing the customs department is crucial in reducing inefficiencies in customs administrations. JCD (Jordan Customs Department) started implementing a modernization program in 1997 in collaboration with ASEZC (Aqaba Special Economic Zone Customs) (UNECE, 2013). The primary goal of the modernization program was to shift the operations of the department from the traditional model of collecting taxes to increase tax collection. Besides, the program sought to improve transparency and integrity administrations. UNECE (2013) identifies that the program proved useful in enhancing communication between the business community and the Jordan Customs Department. Implementing a similar program in Catdom’s Customs Department will improve operational efficiency significantly.

Relevant Risks

Computerization may introduce complexities if the customs departments of other countries implement technologies incompatible with the model implement at Catdom Customs Departments (Grainger, 2012). The complications may introduce inconsistencies in customs administrations. Catdom Customs Department can avoid the risk by ensuring that it adheres to WCO and WTO guidelines when modernizing its systems to ensure consistency with other implemented systems (International Cooperation Department, 2018).

Unprofessional conduct

Catdom’s customs department has widespread cases of unethical behavior ranging from high absenteeism to deliberate delays. WCO (2017) notes that unprofessionalism is a critical issue in customs administration because it undermines the integrity of customs departments and poses national security issues. An analysis of the Catdoms Customs Department shows that most of the customs are high on absenteeism. Absconding duty affects the operations of the department negatively in that there are not enough human resources to handle the work backlog (WCO, 2015). The reduced HR makes it inevitable to have deliberate delays since the working members can manage a limited number of principals.  Another case of unprofessional conduct prevalent at the Catdom Customs Department is the increased allegations of corruption among the customs officials. Some of the customs officials take advantage of the operational inefficiencies to solicit bribes from traders to facilitate the processing of their packages.

Recommendation

Catdom Customs Department should adopt robust HRM policies that foster the highest levels of professional conduct. The Arusha Declaration indicates that these policies should be enforced through leadership and commitment (WCO, 2003). Leadership failures are some of the causes of the high absenteeism cases among the customs officials. Adopting a robust leadership approach among the managers and the managers will help to enforce high levels of integrity and professionalism among the customs officials. Therefore, the Catdom Customs Department should develop a code of conduct in line with the Arusha Declaration to guide operations at the border control offices. Any customs personnel violating the code of conduct should face severe consequences, including immediate dismissal (WCO, 2017). The case of RMCD (Royal Malaysian Customs Department) shows that the implementation of sound HRM policies and a strict code of conduct is crucial in promoting professionalism. Malaysia’s Customs Department struggled with increased corruption cases among the customs officials (Abdul, Yusoff, & Mohamed, 2019). The implementation of strict HRM policies saw a reduced number of corruption-related cases in the space of one year.

Relevant Risks

The implementation of new HRM policies may present culture shock due to changes in operational management. The changes in culture may present adverse effects to the department (WCO, 2015). The department can manage the impact by re-training the staff to increase their competence in the new polices.

Conclusion

The report analysis identified that the Catdom Customs Department faces various challenges that reduce its operational efficiency. Despite there being many issues, the report identified corruption, lack of modernization, lack of an efficient transit system, and unprofessional conduct among the customs officials as the priority areas of consideration. The report analyzed these issues in detail and recommended solutions to help Catdom Customs Department to improve its operational efficiency.