Article: Abdul Qadir Memon Changing the role of Customs administration

Abdul Qadir Memon

Changing the role of Customs administration

The events of 9/11, when the United States suffered the worst terrorist attack in its history, proved to be a defining moment that has changed the global security order. Since then, internal security has been at the forefront of the policy space in the US and other developed countries.

The US took drastic measures to revamp its internal security apparatus and created the Department of Homeland Security with the mandate for protection of its territory and citizens from terrorism. A number of US agencies such as US Custom services, Immigration, Border Patrol were brought under this department and today it has around 250,000 employees and, after the Department of Defense, is the second largest cabinet department of the US government with an annual budget of over $100 billion.

The US Customs Service which was established in 1798 also saw its rejuvenation with increased responsibilities when the US government brought the immigration, agricultural quarantine inspection, and border patrol under the leadership of the Customs Service by creating a new department named US Custom and Border Protection (CBP) in 2003.

The mandate of CBP was further enhanced in 2006 by equipping it with air and marine monitoring capabilities. This increased the stature of US Customs Services where it became the paramount border security agency for protecting national borders and managing all enforcement and regulatory functions relating to goods and passengers at the entry and exit points.

The changes in the security perception of the US also had profound impact on other countries where a large number of developed and developing countries followed the US model of revamping their custom services as lead border protection agency.

There were also similar deliberations in Pakistan amongst the policy makers to redefine the role of Pakistan Customs from a revenue collecting agency to a uniform force capable of performing homeland security as well.

In Pakistan the transformation of Customs services from a revenue collecting department to a border protection agency did not happen despite Pakistan is playing an important role as frontline state in war against terrorism, which created increased pressure on the law enforcement agencies including Pakistan Customs to play its due role in protecting the homeland.

The main reason is the increased reliance of the Government of Pakistan on taxes from international trade as main source of revenue generation. In Pakistan, the Federal Government collects as much as 42 percent of its total revenue through customs tariff and other taxes on import of goods.

The other concern was the use of customs tariffs as an instrument of industrial policy where Pakistan was pursuing the policy of supporting nascent industry by providing tariff protection to the domestic industry. There were apprehensions that repositioning the role of the Customs service would diminish their ability to perform these important functions.

The new law enforcement role of the Customs Administration was not being viewed favorably by businesses as more intrusive checks on consignmentsand security protocols were increasing the burden of compliance cost for international trade. It created a pressure on the governments and policy makers to introduce trade facilitation measures that led to the consensus in the WTO for the Trade Facilitation Agreement. It took 14 years for the WTO members to complete the negotiations for this agreement with a hope that its implementation would disentangle international trade from complex procedures and overleaping regulatory procedures.

In the foreseeable future revenue collection would remain the core responsibility of Pakistan Customs where maintaining high customs tariff would be an important policy measure for the Government of Pakistan. In the high custom tariff environment, there will be an increased economic incentive in evasion of duties and taxes by undervaluation of goods and smuggling. In this regard custom functions such as valuation of goods, post clearance audit, automation and anti-smuggling would be an important area of operations.

The steady growth of Pakistan’s international trade would also make it necessary for the Customs administration to use technology and automation for facilitating timely and efficient clearance of goods at the ports and land border station.

Pakistan Customs as compared to other public sectors department and ministries has done considerably well in introducing reform and automation. Pakistan Customs needs to further enhance the automation processes by including all custom processes in its computerized clearance system.

The way forward for the Customs administration is the reform process to strength its capabilities for core customs functions such as valuation of goods, post clearance audit, anti-smuggling operation and automation.

The implementation of the WTO trade facilitation agreement is an opportunity for Pakistan Customs Administration to accelerate the reform processes and strengthen its service delivery for its core functions.

The writer is an officer of Pakistan Customs presently posted as Consul General of Pakistan in Hong Kong.

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