By Pascal Minvielle, Chief Operating Officer at Webb Fontaine
This article has been split into two parts. Read part one here.
Transit
The management of transit operations also benefited from the automation and networking of border posts. One of Customs’ essential functions is to ensure that goods intended to cross the territory for clearance abroad are not diverted to the local market, thus avoiding considerable revenue loss, a common problem in many countries. To address this, in the absence of an electronic control solution, convoy escort to the border was often used and remains a solution for countries without adequate IT solutions.
Since the early 2000s, customs systems have adapted by associating a bank guarantee with the transit form. The guarantee amount is deducted from the declarant’s account in the customs system at the truck’s departure and is automatically restored at the border. This system has been particularly beneficial in Southern Africa, where it has been adopted by all COMESA countries.
This digitisation process is accompanied by bilateral and regional initiatives aimed at connecting national customs systems to share data for transit operations through an interface, given that automated customs systems often differ from one country to another. Ethiopia and Djibouti customs thus exchange their transit declarations daily on a common platform so that each country can generate the necessary transit forms at the truck’s arrival from the information sent by the country of origin. The SIGMAT system allows West African countries to do the same, while Central American countries use a system called SIECA. Gulf countries have developed a similar system called Maqassa, which also consolidates the periodic repatriation of duties and taxes paid in the first transited country to the destination country.
Guarantee management does not prevent partial unloading during transit, especially for containers subject to unloading at the origin. To address this, many countries have adopted Internet of Things (IoT) technology for GPS truck tracking. This allows monitoring the speed of the truck, number, and duration of stops, and deviations from a strictly defined corridor on a map. In case of GPS tracker removal, the truck can be immobilised.
Customs also uses the same transit forms for controlled movement, mainly of used vehicles, from the port of arrival to hinterland countries.
Single Window
After 2010, the first Trade Single Window systems were deployed, and other border regulatory processes such as license, permit, and exemption applications and issuance began to be digitised.
These new systems facilitate cooperation with various ministries and Other Government Agencies (OGAs), particularly in risk analysis and inspections. An electronic collaborative visit concept emerges. The systems allow evaluating declarations based on customs and OGA selectivity criteria and allow scheduling inspections involving inspectors from all organisations.
The Single Window concept has evolved to duplicate some customs IT system functions, such as manifest collection or declaration entry, sparking debates. This evolution was likely inspired by the European and American models, where declaration entry is entrusted to a private sector third party interfacing with the customs server. This is also the case in the Philippines, where Value Added Service Providers (VASP) retain declarants and offer training.
However, Single Window systems subsequently refocused on their initial functions, namely pre-clearance, with the Pre-Import Declaration (DPI) serving as a basis for automatically creating license applications for regulated products. The Pre-Import Declaration also serves for creating the electronic document used for domiciliation and exchange control in many countries. This application is validated by the central bank, treasury, or commercial bank supporting the commercial transaction and is written-off by the customs declaration at the end of the cycle.
The Single Window platform also manages the issuance of various certificates such as export Certificates of Origin (COO) derived from the export customs declaration, insurance certificates, and phytosanitary certificates (ePhyto).
It also enables a single electronic payment system for all types of transactions, including customs duties payment. Furthermore, many interfaces have been established with other ministries’ systems, such as the transport ministry after vehicle clearance or the trade ministry for company and declarant registration.
Thanks to the Single Window platform, customs no longer operate in isolation.
Port logistics
Every international cargo shipment involves various stakeholders such as carriers, freight forwarders, terminal operators, customs administration, and port authority. In recent years, Port Community Systems (PCS) have been introduced, interconnecting these actors’ IT systems to centralise goods release authorisation procedures.
These systems exchange EDIFACT messages within the PCS, for the dispatch of the Delivery Order (DO) by the shipping line or airline local representative or for the terminals to send containers discharge/loading notices. The declarant must pay all port fees online (terminal handling, shipping agent, various beneficiaries including the port) and obtain customs clearance.
However, since the Port Community System concept is not generalised, customs systems have had to take on some of these functions. For example, systems are connected to port terminal systems to electronically confirm the loading or unloading of a vessel. Customs then receives the “discrepancy report,” a document detailing the differences between the initial manifest and the loaded or unloaded cargo. Furthermore, in many countries, shipping agents must enter the Delivery Order (DO) in the customs system to designate the importer associated with the waybill. The port announces the arrival and departure dates of ships, allowing verification if the manifest was recorded within regulatory deadlines.
In the most modern customs systems, shipping agents can amend waybills online and process transshipment requests, freight forwarders can manage degroupages, and terminal operators submit transfer requests. Customs only needs to approve these operations with a simple click.
However, in some countries, the Customs Act provisions still require customs to perform all these operations themselves, affecting clearance times. This highlights the importance of modernising legislative frameworks to allow greater efficiency in goods processing by delegating certain tasks to appropriate stakeholders.
Risk management and artificial intelligence
The years following 2010 saw the arrival of dynamic risk systems based on econometrics, highlighting actors’ compliance levels. Around 2015, the use of machine learning to identify fraud based on historical occurrences of proven fraud represented a major innovation.
These technological developments have demonstrated great efficiency in risk assessment. It is essential here that explanations of AI algorithm decisions are provided to customs inspectors when a fraud alert is triggered, particularly to build trust in automated systems. A branch of Artificial Intelligence (AI) specifically addresses this challenge: Explainable Artificial Intelligence.
For scalable systems
Over the years, customs systems have integrated many new functionalities. In addition to core functions such as accounting, manifest, customs declarations, risk management, and goods release, functionalities have been added for bond management, transit, and offences. In some countries, customs systems also manage the control of inbound and outbound flows in manufacturing and free zones, excise declarations, and passenger customs declarations. Some functionalities, such as report and dashboard generation, have also been improved, leveraging Big Data technologies.
Due to the multiplicity of functionalities in a customs IT system, the development cycle is so long that the technology used to create it is often already obsolete when the system is deployed. Since it is economically unfeasible to recreate a system whenever a new technology emerges, existing systems are maintained and enriched by integrating new functionalities, for example, by adding a mobile interface even when the native technology does not allow it.
The problem lies in the fact that most systems were designed monolithically, with all components grouped into a single “package”. This is particularly true in the most developed countries, using systems 15 or 20 years old. Any modification of a module, such as the accounting function for example, can cause instabilities in the entire system.
To avoid such problems, it is necessary to develop a customs system in the form of co-existing and independent systems, each dedicated to a specific task (e.g., inspection) and communicating through secure message exchanges. Such an architecture facilitates system maintenance, promotes high availability, and allows technological scalability. Each module or microservice can be developed, tested, and deployed independently, reducing instability risks and accelerating the development cycle. Moreover, using secure communication protocols ensures the integrity and confidentiality of exchanged data.
Separating the backend (which manages logic and data) from the frontend (which manages the user interface) allows optimising development time and modifying one without affecting the other. This flexibility is essential to meet users’ changing requirements and technological advancements, including mobile interfaces. User experience is paramount, especially when it concerns the needs of thousands of trade community users.
For governments deciding to acquire a new customs system, it is crucial to ensure it meets technical requirements for scalability. Besides meeting these criteria, the system must be generic enough to adapt to local regulations while complying with WCO requirements for customs procedures and data codification.
Technological evolution is constant, and customs must be agile, leveraging it more than ever to continue protecting public safety and the state’s economic and commercial interests while facilitating trade and travel.
Originally posted on WCO News. Access this article in English, French and Spanish.
About Webb Fontaine
Webb Fontaine is revolutionising international trade by empowering governments and communities with technology powered by AI. We offer comprehensive solutions across the trade spectrum, ranging from risk management to customs systems, single window, and beyond. Webb Fontaine is headquartered in Dubai, UAE with a presence across Europe, Middle East, South America, Asia and Africa.
