Summary
In modern conditions, international trade is the driving force of the economic development of any state. Its level contributes to the growth of living standards in developed and developing countries and is the basis of stability and security (Organisation for Economic Co-operation and Development, 2020). Customs Administration is an integral part of world trade because customs authorities are entrusted with law enforcement functions, collection of customs duties and taxes and control of goods by international standards (Thompson Reuters, 2020). At present, customs authorities should contribute to the large-scale simplification of trade procedures while exercising the necessary control over the international movement of goods and vehicles.
It is evident that customs authorities are confronted daily with new schemes of illegal trafficking of goods that help smugglers evade taxes. Consequently, it has always been vital for border management agencies to represent a unique barrier and “protect the interests of the nation” by controlling everyone and everything trying to cross the border (Widdowson, 2007, p. 32). Nowadays, it is recommended that all customs authorities adhere to the risk-managed style of compliance management that comprehensively covers all stages of customs operations (De Wulf & Sokol, 2005). Nevertheless, previously, these agencies had been considered ‘gatekeepers,’ following the gatekeeper style (World Customs Organisation, 2010, p. 12). This paper aims to discuss the difference between these compliance management approaches and explore some strengths, weaknesses, threats and opportunities and board management agencies. What is more, another aim is to analyze the various elements of a specific organization’s approach to compliance management against the Integrated Compliance Management Framework. The particular customs administration selected for this assignment is the Australian Border Force (ABF).
Compliance Management
Before discussing the difference between the two approaches and defining the one that customs administrations typically follow, it is essential to define compliance management. As researchers noticed, compliance management “demands compliance with external laws and regulations, as well as internal norms and procedures” (Bleker-van Eyk & Houben, 2017, p. 110). Consequently, this concept can also refer to customs agencies and appear rather useful. On the one hand, a customs administration needs to make sure that the goods, baggage, mail and people crossing the borders of a nation do not break this nation’s laws and rules. On the other hand, it is also required for customs administration workers to follow workplace guidelines and norms.
The Gatekeeper Style
One of the possible styles of compliance management that a customs administration can adopt is the gatekeeper approach. One may guess its essence from the title of this risk-management type. Overall, those border management agencies that act as gatekeepers present a barrier where everything and everyone automatically falls under suspicion and must be checked by authorized employees. According to Widdowson (2017), “such a role is often manifested by regulatory intervention in commercial transactions simply for the sake of intervention” (p. 32). However, not all people are satisfied with the dominance of this type of compliance management (De Wulf & Sokol, 2005). While the strength of this style is that it allows preventing of many threats, the disadvantage is that it is time-consuming. Widdowson mentions that “the WCO was also an early proponent of the need for customs authorities to reconsider their traditional approach to international trade control, and to abandon the ‘gatekeeper’ mentality that has traditionally dominated their thinking” (p. 34). As a result, more and more customs agencies began adopting a new type known as the risk-managed method.
The Risk-Managed Style
Overall, this is a more refined style that allows organizations to save their time and valuable resources while meeting the same performance goals, which are the primary advantages of this approach. As for the weaknesses, the risk-managed approach increases the possibility of missing a threat because it does not require all items and persons crossing the border to be checked (Widdowson, 2017). United States Agency for International Development (2018) defines risk management as coordinated activities that are necessary to control and direct a company with regard to risk. However, World Customs Organisation provides a more detailed definition: “the systematic application of management procedures and practices providing Customs with the necessary information to address movements or consignments which present a risk” (United States Agency for International Development, 2018, p. 5). The reason why there is a shift from a gatekeeper style to risk-managed compliance is that “social expectations no longer accept the concept of intervention for intervention’s sake” but prefer ‘intervention by exception’ or “intervention based on identified risk” (Widdowson, 2017, p. 32). Consequently, this approach allows customs authorities to follow the principle of selectivity.
Strengths and Weaknesses of Border Management Agencies
Overall, similar to any organization or firm, customs administrations also have their own specific weaknesses and strengths. While border management agencies do their best to maintain the security and effectiveness of their operations and address any potential errors or risks in a timely manner, there are still weak areas (De Wulf & Sokol, 2005). They may be divided into internal and external (United States Agency for International Development, 2018, p. 15), and it is easier to address the former because agencies can analyze and evaluate all inner shortcomings. As for the external dangers, it is always much more difficult to make sure that the necessary measures are effectively adopted.
To begin with, it is essential to discuss those weaknesses that appear internally. According to the United States Agency for International Development (2018), this group can potentially include confusing instructions, complicated procedures, lack of resources and tools, inadequate facilities and low morale among workers (p. 15). The latter may include corruption within the ranks or any inability of employees to coordinate their common efforts. The mitigation of these potential threats can be rather costly as it typically requires additional financial investments, for example, to pay for employee training (De Wulf & Sokol, 2005). At the same time, if internal issues remain unaddressed, successfully identifying and eliminating external dangers will not be possible.
Further, as noticed in a new report from the European Court of Auditors (2017), specialists managed to identify serious loopholes in customs controls. Despite all recent and past measures, importers still can “deliberately reduce or evade customs duty liability by, for example, undervaluing their goods, declaring a false country of origin or shifting to a product classification with a lower duty rate” (European Court of Auditors, 2017, p. 1). While checking the documentation’s accuracy and legality is the direct responsibility of customs control workers, there is a severe gap in their operations.
One may analyze a number of shortcomings in the legal framework of border management agencies on the example of the customs authorities of five countries, including the U.K., Poland, Romania, Spain and Italy. Thus, since customs authorities sometimes fail to track undervaluation, misclassification, or misstatement of origin, they need to think of more effective approaches and measures and impose more severe customs penalties (European Court of Auditors, 2017). Precisely importers’ ingenuity and their desire to save their money and trick the customs employees is a significant threat to border control operations. The strengths of customs administrations include the availability of the necessary resources, collaboration, coordinated work, access to modern technologies and improving infrastructure. Customs authorities should have access to reliable and up-to-date sources of information and competently evaluate the data obtained. Systematic and comprehensive collection measures will ensure maximum reliability and objectivity of the results received and will also contribute to making optimal decisions to determine the necessary measures to prevent and minimize risks.
Potential Sources of Risk Encountered in Border Management
It is challenging to disagree that customs administrations meet a vast number of threats and risks. Precisely the fact that these agencies fight against such dangers and keep nations safe makes border management companies extremely important. Various types of external risks may involve “smuggling contraband, other criminal activity, or declaration errors such as merchandise undervaluation, misclassification, incorrect application of preferences or restrictions, or wrong country of origin” (United States Agency for International Development, 2018, p. 15). Overall, the sources of risk may be divided into three groups: transnational criminals, terrorists and unauthorized migrants. Customs authorities need to interact with the representatives of these groups on a daily basis, not allowing them to smuggle counterfeit goods and drugs or weapons of mass destruction or disturb the life of a community in any other way.
The Impacts of International Trends
Another factor to be discussed is the extent to which international trends may affect border management agencies’ work and compliance management techniques. In this paper, emerging technologies as an example of international trends are discussed. First of all, the development of new and more advanced technological solutions fosters all customs operations. Since the recent COVID-19 pandemic “highlighted the importance of trade and foreign trade logistics,” it is essential to secure border management by adopting new technologies (Corcuera-Santamaria & García Sanjinés, 2021, para. 2). Many customs administrations are making significant investments in the modernization and optimization of their functionality to meet the requirements of the international trading environment. Some organizations are creating a system with a fully automated mechanism for monitoring all incoming documentation. This fact can help reduce the time for the trading procedure and increase the effectiveness of risk management (De Wulf & Sokol, 2005). What are more, precisely advanced technological solutions allow for the shift from gatekeeper to risk-managed style: customs authorities receive an opportunity to detect illegal or threatening activity without checking everyone and all baggage physically.
Integrated Compliance Management Framework
In his article, Widdowson (2020) presents an Integrated Compliance Management Framework. It would be rather insightful to analyse the various elements of the Australian Border Force’s approach to compliance management against this framework. The latter involves several aspects, namely, legislative base, processes and procedures, information and support and compliance assessment:
- Legislative base. This element refers to the presence of “the administration’s legislative base, which may be very broad or quite limited, depending on the context in which the framework is being applied” (Widdowson, 2020, p. 66). When it comes to the Australian Border Force, the service follows the laws and recommendations from the WCO Kyoto Convention and the SAFE Framework of Standards. For instance, as mentioned earlier, the former insists on the shift from the gatekeeper style to the risk-managed approach (World Customs Organisation, 2010). According to the latter, the Australian Border Force should have its own risk-management system that includes “a mechanism for validating threat assessments and targeting decisions and implementing best practices” (World Customs Organisation, 2021, p. 13). Thus, the ABF has a strong legislative base and follows all the necessary international recommendations.
- Processes and procedures. As noticed by Widdowson (2020), this element of the framework refers to whether the authority has its own rules that either narrow or expand international laws. The Australian Border Force Act 2015 defines many of the service’s procedures and responsibilities, including “the exercise of powers of the commissioner and the ABF employees” (Parliament of Australia, n.d.). While this act does not change or cancel the general regulations for the operation of the border control services, it presents recommendations adapted specifically for Australia and the ABF.
- Information and support. The essence of this element is that ABF’s “rules and practices should be transparent and accessible to anyone who may be dealing with Customs” (Widdowson, 2020, p. 69). Moreover, “interested parties should be provided with all necessary information regarding customs laws, regulations, administrative guidelines, procedures and practices” (Widdowson, 2020, p. 69). It is possible to say that the Australian Border Force manages to provide clear and easily obtained information to its workers and clients. For instance, there is a “Guide to Customs and Border Protection Compliance Audits” in which the service outlines the types of audits their client may encounter (Australian Customs and Border Protection Service, 2013).
- Compliance assessment and continuum. ABF’s Compliance Assurance Branch monitors “the effectiveness of Customs and Border Protection’s cargo process system” and also undertakes “compliance activities designed to improve industry compliance with border-related laws” (Australian Customs and Border Protection Service, 2009, p. 2). Some assessment measures are pre-clearance interventions like declaration verifications and cargo examinations and post-transaction verification activities, such as targeted audits. If non-compliance is detected, corresponding fines and punishments are selected.
References
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