Glossary

Air Waybill (AWB)

Receipt and air transport contract which, once completed by the air carrier, certifies the shipment of the goods. The Air Waybill (AWB) is also a bill for the freight, serves as evidence of insurance, and can be used as an invoice and as a customs simplified declaration. It is issued by the airline or its agent. In case of a consolidated shipment, a House Air Waybill is issued by a freight forwarder and endorsed by the airline before loading.

 

Authorised Economic Operator (AEO)

The concept of AEO derived from the fact that all over the world, approximately 80 percent of foreign trade is handled by 20 percent of operators. It then seemed logical that customised procedures should be introduced for these operators, subject to overall compliance checks. In exchange, AEOs would receive preferential treatment in terms of priority treatment, and relaxed (but not overlooked) checks, possibly carried-out on the premises of importers. Some countries have introduced release by default for AEOs, with the submission of a simplified declaration and a monthly consolidated declaration. These are lodged electronically, and customs have a short period of time to decide if they will inspect the shipment; once the delay is over, the declaration is considered as green channel by default (but can still obviously be picked-up at post-release control).

 

Bill of Lading

Maritime transport document establishing the title of ownership of goods and the contract between a shipper and a carrier to deliver goods to a consignee. The bill of lading represents the goods and is considered as evidence that they were handed over to the carrier. It describes the type, weight, and markings of the goods, is signed by the ship’s master, who undertakes to deliver the goods in the same state and conditions. The bill of lading can be negotiable and endorsed to a bank which will hand the bill over to the buyer when payment has been made.

 

Border

Geographically, the separation line between two countries, where national sovereignty is established. However, borders nowadays can also be located within or outside the national territory. Some countries also have a border zone, in which customs have extended powers of control. Territorial waters are usually considered as part of the customs territory, within which some sovereign powers are also enforced. Borders can also be “chronological”: For example, goods entered into a customs warehouse are not subject to duties and taxes (with some exceptions) until they are removed from warehousing and distributed on the domestic market.

 

Border Management (integrated)

The concept was invented by the EU, and subsequently refined by the World Customs Organisation (Coordinated Border Management), then the World Bank (Collaborative Border Management).

 

The main principles are:

•    Co-location of all agencies of both countries on a single platform;

•    Joint inspection area;

•    Data sharing, ideally using a local community network across all agencies;

•    Mutual recognition of findings; and

•    Pooling of equipment (e.g., scanners, weighbridges, disinfection pits).

 

Border Queues

The reason for a queue is usually part of the “Poisson theorem”, whereby when upstream traffic slows down, it causes a downstream stoppage, largely because vehicles slow down more rapidly than they accelerate. At border stations, the queuing effect is amplified by (i) the multiplicity of checks, which are often performed in sequence when some of them could be simultaneous), (ii) a choke-point effect because all traffic is channeled, with possibly outdated traffic flow design, and (iii) overlaps in the adjacent country, if only because exit checks are faster than those on entry. Modern shared or co-located facilities, especially those where border checks are streamlined and carried out simultaneously, can reduce significantly this queuing effect.

 

Clearing Agent

Usually, a customs (or Government) approved individual or company handling all clearance-related formalities on behalf of an importer or exporter. In cases of fraud or mis-declaration, the clearing agent is usually liable before customs, but can claim from his client damages for fraudulent or insufficient submission of data. Clearing agents are usually bonded. Larger importers may have clearing agents on their staff.

 

Consignee

Person entitled to take delivery of the goods under a contract of carriage indicated on a bill of lading.

 

Consignor

Person that enters into a contract of carriage with a carrier. The shipper is also known as consignor.

 

Corruption

Customs are often blamed for corrupt practices, although this may be overstated. The reason is that customs officers have discreet, real-time, access to high-level tangible wealth. However, experience shows that, in many countries, bribes collected by customs officials are often redistributed between the (numerous) agencies involved in cross-border control or subsequent clearance. While efforts to deal with corruption within customs have often been successful, it should be remembered that customs are only a microcosm of the society in which they operate, and corruption should also be addressed at country level.

 

Customs

Probably the oldest administration in the world, customs are responsible for ensuring that everything that crosses the border complies with all the laws of the land. There is thus a distinction between the function (compliance) and the institution (the administration that discharges on that mission). Also, while the main compliance is fiscal (payment of duties), there are other obligations (abiding with different laws, and regulations, such as standards, prohibition, phytosanitary requirements, immigration regulations, etc.). This is the reason why over the years, other specialised agencies have joined customs in the control of goods, with the risk of duplication of checks.

 

Another aspect is the placement of customs within the administration: Customs may be standalone, placed under the ministry of finance (the majority of cases), merged with the tax administration under a concept of autonomous revenue agencies, or possibly merged with immigration authorities. There have even been in the past hints of eliminating customs altogether, in the (proved wrong) belief that the generalisation of VAT would make border control obsolete, as discrepancies in values would be self-adjusted in subsequent transaction steps.

 

An important feature is that, in all cases, the goods act as the collateral for the payment of duties and taxes, and can only be released when all obligations regarding compliance are either satisfactorily discharged, or guaranteed.

 

Also, customs are at the cross-roads between different missions of enforcement, protection of the land and society, fiscal compliance and revenue collection, gathering of foreign trade statistics, cooperation across borders (as customs systems are usually very similar all over the world, and use international tools to describe and assess the goods), in the process of which they are normally guided by overarching principles of standardisation and trade facilitation.

 

Customs (Bonded) Warehouse

A facility where imported goods can be kept for a period of time without payment of duty, until they are cleared for home consumption. A bonded warehouse is not to be confused with a “transit shed”.  Bonded warehouses may be managed by the authorities (usually port or airport), or by a private entity. There should be a guarantee or bond that ensures that duties shall be paid on all goods, including those pilfered, illegally removed, and in some cases damaged. In all cases, bonded warehouses must be approved by customs, and audited at least once a year. There are different types of bonded warehouses, depending on whether they are open to all operators, limited to specific goods and storage conditions, or allow specific action on goods other than basic maintenance.  Special computerised modules enable inventory control, and regular inspections ensure that all goods are accounted for.

 

Customs Broker

The American expression for a clearing agent.

 

Customs Clearance

The set of procedures that place goods on the domestic market under the same conditions as those locally produced. Customs clearance is based on a self-assessment principle (i.e., the importer declares, under his responsibility, what he owes to the Treasury) and customs verify the sincerity of the declaration. This is distinct from inland revenue taxation, where it is the authorities that calculate the duties to be paid.

 

Customs collectors

Depending on the legal system in place, customs collectors are (often personally) responsible for the assessment and collection of duties and taxes, and may, under their personal responsibility, provide reliable importers with deferred payment facilities.

 

Customs Enforcement

Customs administrations are traditionally split between the two functions of (i) control of assessment and corresponding duty collection, and (ii) ensuring that all goods that cross, or have crossed, the border comply with all the laws of the land, and that no prohibited goods are imported or released unlawfully or subsequently traded. The latter implies surveillance and policing functions (either at the border, or, more effectively, inland), as well as investigatory powers. Customs law being historically a lex specialis, these powers of enforcement can exceed those of other law enforcement agencies. In particular, customs law does not usually take into account the criminal intent of a smuggler, but rather the status of the goods. Thus, penalties are assessed based on the value of such goods.

 

Customs Inspection

Includes all acts performed by customs to ensure that a declaration describes precisely and exactly the goods being presented, whether for import, export, or suspense regimes. Inspection may be documentary, physical, immediate, or delayed. IT tools, including the use of artificial intelligence, automate or target part of the inspection process thus reducing the need for routine compliance verification. In addition, the notion of non-intrusive inspection has appeared (mainly using scanners), and there is currently research in remote inspections, using a range of hi-tech solutions, and whereby inspectors need not be on site during the inspection.

 

Customs Payment

The goods act as a collateral for the payment of duties and taxes incurred on imports, thus they may not be removed until such payment has been made, secured, or guaranteed. In many countries, the notion of ex-warehouse customs payment does not exist, and the immediate release of the goods is secured against a guarantee (usually a bank guarantee) or by an immediate payment. In some other countries, importers are systematically entitled to a duty payment period, usually on a monthly basis. In other cases, deferred payment is negotiated on a case-by-case basis, subject to a customs collector’s personal responsibility. Furthermore, some countries entitle deferred payment on all charges (duties, taxes, excises, fees), while in others deferred payment is possible for only one charge, usually import VAT. When simplified declarations and periodic monthly ones are submitted, payments may be periodic (monthly) and deferred, provided that there is a general guarantee covering such payment.

 

Customs Procedures

To meet the increasingly diverse requirements of operators, over the years customs have diversified the range of procedures offered, and sometimes enlarged them to a Customs Union. The main customs procedures are import, export, transit (including external and internal transit), inward processing (compensating products are re-exported), and outward processing (compensating products are imported). Increasingly, transit (or clearance) by itinerary has gained momentum for flows in transit to land-locked countries. With the multiplication of regional agreements, special procedures have been added to cover specific origin, as well as documentary and shipment requirements. Also, more sophisticated procedures have been introduced to ensure that goods are not re-routed through countries that were not part of the initial agreement. Finally, customs have extended over the years the notion of guarantees to specific procedures, some of which are also applicable for example to excise goods.

 

Data Mining

The extraction of useful and practical information from large data-sets, and the processing of such data-sets through sophisticated software programs and algorithms, to be used for economic, fiscal, social, political or administrative purposes. Data-mining can also be used for forensic purposes, in particular to track and identify anomalies, frauds and fraudulent behaviour.

 

Declaration (Customs)

A document whereby a customs applicant states precisely what goods are presented for clearance. The customs declaration can be lodged by a broker, freight forwarder, or the importer himself. The customs declaration is based on a standard international format, and shall provide the elements for the customs authorities to verify that the correct amount of duties and taxes has been assessed. In many cases, supplementary documentation is required to back the declaration, such as a certificate of origin or an invoice. The declaration and corresponding process may be facilitated for simplified procedures by using streamlined documentation. For example, as the importer declares under his responsibility the amount of duties he owes, a monthly declaration for simplified procedures can replace individual importation declarations. One of the key aspects of the customs declaration is the information about the goods’ origin, value, and status (e.g., for specific purposes, or for sale).

 

Deferred Payment

Subject to prior customs approval, and depending on the size and amount of the transaction, some importers may benefit from a deferred payment of customs duties and taxes. This option is usually provided on a case-by-case basis, and under the responsibility of the customs collector. While duty deferred payment (i.e., when goods are warehoused and gradually released for home consumption) has largely disappeared, this is the only option for the importer to avoid advance payment when goods are not immediately sold or further processed. As deferred payment is not possible in many countries, the most frequent option is for the importer to offer a general guarantee for a given period, allowing deferred payment of specific charges, most often the import VAT. In such cases, the importer may submit simplified declarations, then pay the corresponding duties and taxes at the end of each month. Some countries entitle deferred payment on all charges (duties, taxes, excises, fees), while in others deferred payment is possible for only one charge, usually import VAT. Furthermore, deferred payment may be allowed for up to 30 days, thus providing the importer with an additional month’s capital.

 

Derogation

The formal act of allowing a practice not normally accepted under regular circumstances, and which does not fall under established standards, practices, or regulations. A derogation must be decided at high level, and based on a demonstration that the derogation does not pose a threat or cause damage to a third party. In customs, derogations are usually temporary, and the customs authorities shall check that the derogation has been fulfilled without adverse consequences. As an example, derogations may be allowed for an individual shipment if the freight forwarder can demonstrate that the overall conditions of safety and security have been met, even though the shipment has not followed the required regulatory path.

 

Digitalisation

The generalisation of IT and data exchange has brought about the progressive implementation of paperless procedures. While purely digitalised systems are still in the process of being fully developed, especially in least developed countries, the overall trend towards full digitalisation has become irreversible, with immediate benefits in terms of data entry and capture, risk profiling, and customs automation.

 

Duty-free

The sale of goods that have not been taxed, usually at ports or airports. Duty-free goods are restricted to exportation, and shall be packed in such a way as to indicate clearly that they are not released on the domestic market. Duty-free shops may also be allowed in some customs controlled areas, such as land-border customs offices, or in special zones.

 

Ex-ante (Clearance)

Based on the submission of a declaration and pre-receipt of supporting documentation, ex-ante clearance enables the release of goods at the border in minimal time, subject to the condition that all regulatory requirements have been met before the goods actually cross the border.

 

Ex-post (Clearance)

The counterpart of ex-ante clearance, it enables the release of goods before all regulatory formalities have been finalised, based on a general guarantee and a verification by the customs authorities at a later stage.

 

Fiscal Control

One of the two major areas of customs control, whereby customs ensure that the correct amount of duties and taxes (both internal and at the border) is levied and collected. With the implementation of VAT, fiscal control has extended to inland (post-release) audit of goods and services, rather than exclusively at the border.

 

Freight Forwarder

Transport expert acting on behalf of a shipper, consignee or importer, to arrange the carriage of goods and ancillary services. The freight forwarder may perform customs clearance operations on behalf of an importer or exporter, provided he is authorised to do so.

 

GATT (General Agreement on Tariffs and Trade)

The GATT is a multilateral agreement that aims to promote international trade by reducing tariffs and other barriers to trade. The GATT was established in 1947, and has been replaced by the World Trade Organization (WTO). The GATT sets out the principles and rules for the conduct of international trade, and provides a framework for the negotiation of trade agreements. The GATT also includes provisions for the resolution of trade disputes, and for the protection of domestic industries from unfair trade practices.

 

Guarantee

A bond or security that ensures the correct payment of duties and taxes, or the completion of specific customs formalities. Guarantees may be financial (cash deposits, bank guarantees), personal (undertakings by specific institutions or individuals), or in-kind (deposit of valuables or title deeds). The guarantees may be individual (applicable to one transaction), or general (applicable to a series of transactions). The guarantee shall remain in force until such time as the customs authorities have cleared the operation or process under guarantee. Thus, when goods are placed under temporary importation, the guarantee is released only after the goods have been re-exported within the required time period. In case of derogations from the regular customs process (such as simplified or pre-clearance), general guarantees may also be required, especially when deferred payment is considered.

 

Invoice

A document issued by a seller to a buyer, stating the type, quantity, price, and terms of the goods sold. The invoice provides the basis for the customs authorities to calculate the duties and taxes payable on the goods. An invoice may be commercial, or pro forma (i.e., intended for use only for customs or administrative purposes, and without a commercial value). Some countries require an invoice to be certified by the competent Chamber of Commerce.

 

Letter of Credit

A document issued by a bank guaranteeing payment to a seller, provided the terms of the letter of credit are met. The letter of credit is often used in international trade to ensure that payment will be made, even if the buyer defaults. The bank issuing the letter of credit will require the presentation of specified documents (such as a bill of lading, an invoice, and a packing list) before payment is made.

 

NCTS (New Computerised Transit System)

The NCTS is a European-wide system designed to simplify and accelerate the transit of goods across borders. It is based on the electronic exchange of information between the customs authorities of the countries involved, and the use of a standardised declaration. The NCTS enables the tracking and control of goods in transit, and reduces the need for physical checks at the border. The system is intended to facilitate the movement of goods within the European Union, and between the EU and other countries that are part of the Common Transit Convention.

 

Port Community System (PCS)

An electronic platform that connects multiple systems operated by different organisations involved in the port community. The PCS enables the exchange of information between the port authority, customs, shipping lines, terminal operators, and other stakeholders. The PCS aims to improve the efficiency and transparency of port operations, reduce delays, and facilitate trade.

 

Risk Management

The process of identifying, assessing, and prioritising risks, and taking steps to mitigate or manage them. In the context of customs, risk management involves the use of data and intelligence to target high-risk consignments for inspection, while allowing low-risk consignments to be cleared more quickly. Risk management is intended to improve the efficiency and effectiveness of customs controls, and to reduce the burden on compliant traders.

 

Single Administrative Document (SAD)

A standardised form used for customs declarations in the European Union and other countries that are part of the SAD convention. The SAD is used for the declaration of goods for import, export, or transit, and provides the basis for the calculation of duties and taxes. The SAD is intended to simplify and harmonise customs procedures, and to facilitate trade.

 

Single Window

A single point of entry for the submission of all documents and data required by customs and other regulatory authorities for the clearance of goods. The single window is intended to streamline the clearance process, reduce duplication, and improve coordination between different agencies. The single window may be operated by customs, or by a separate entity.

 

Tariff

A schedule of duties or taxes levied on goods imported or exported. The tariff may be based on the value of the goods (ad valorem), their weight or quantity (specific), or a combination of both (compound). The tariff may also include preferential rates for goods from certain countries, or for goods that meet specific criteria (such as environmental or social standards).

 

Third Country

A country that is not a member of a particular customs union or trade agreement. For example, in the context of the European Union, a third country is a country that is not a member of the EU. Goods from third countries may be subject to different duties, taxes, and regulations than goods from countries that are part of the customs union or trade agreement.

 

Transit

The movement of goods through one or more countries between the country of origin and the country of destination. Transit may be external (from one country to another) or internal (within a single customs territory). Transit procedures are intended to facilitate the movement of goods, while ensuring that duties and taxes are not evaded. The NCTS is an example of a transit system that aims to simplify and accelerate the movement of goods across borders.

 

Valuation

The process of determining the value of goods for customs purposes. The valuation is used to calculate the duties and taxes payable on the goods. The valuation may be based on the transaction value (the price actually paid or payable for the goods), or on other methods, such as the value of similar goods, or the cost of production. The valuation must be conducted in accordance with the principles and rules established by the World Trade Organization (WTO) and other international agreements.

 

WCO (World Customs Organization)

An international organisation that develops and promotes standards for Customs procedures and practices. The WCO provides a forum for cooperation and information exchange between customs authorities, and works to improve the efficiency and effectiveness of customs operations. The WCO also provides technical assistance and training to its members, and supports the implementation of international agreements, such as the WTO Agreement on Trade Facilitation.

 

Zone

A designated area within a customs territory where specific rules and regulations apply. Zones may include free zones, where goods can be imported, processed, and re-exported without the payment of duties and taxes; bonded warehouses, where goods can be stored under customs control; and special economic zones, where businesses may benefit from tax incentives and other benefits. Zones are intended to promote trade, investment, and economic development, while ensuring that customs control is maintained.