E-commerce has become a game changer in the international trade arena. One may argue that it is just another form of trade, but we need to keep pace with the changes it brings to the trade environment, and provide innovative solutions to deal with them. Efficiency of clearance and delivery of low value and small parcels is especially crucial. To manage e-commerce transactions, Customs administrations need to engage with all relevant stakeholders with a view to collectively defining the appropriate approach to adopt both from a trade facilitation and enforcement perspective.
Essential elements to consider in the definition of e-Commerce
- online initiation;
- Cross-border transaction/shipment;
- Physical goods; and
- Destined to a consumer (B2C and C2C).
Key characteristics of e-commerce cross border transactions
- Time-sensitive goods flow
- High volumes of small packages
- Participation of unknown players
- Return/refund processes required
Challenges faced by Customs administrations
Trade facilitation and security
Fair and efficient collection of duties and taxes
- Ensuring speed and efficiency in the clearance process for an increasing volume of transactions
- Managing change from a few large/bulk shipments into a large number of low-value and small shipments
- Managing risks posed by limited knowledge on importers and the e-commerce supply chain (new class of sellers and buyers/occasional shippers and buyers)
- Ensuring data quality (accuracy and adequacy of the data received)
- Defining the role and responsibility (liability) of e-commerce operators to assist governments (e-vendors/intermediaries)
Protection of society - criminal exploitation of e-commerce
- Identifying abuse or misuse of ‘de minimus’ for illicit trade purposes (splitting of consignments/undervaluation)
- Ensuring compliance with classification and origin rules
- Integration of e-commerce vs traditional trade
- Setting up a specialized unit to trawl the Web for information which might be of use in preventing, detecting, investigating and prosecuting a Customs-related offence (drug trafficking/counterfeited and pirated goods/illicit financial flows/money laundering)
- Enhancing international cooperation and ensuring that agreements on mutual legal assistance are in place to allow for investigations or prosecutions when websites are hosted outside a national territory
- Making the most of existing technologies, especially those related to data analysis
Work done so far by the WCO
Study Report on E-Commerce
The WCO has carried out a short survey to collect Members’ current practices and ongoing and/or future initiatives on cross-border low value e-commerce. Based on the survey findings, a Study Report has been developed. The Report is divided into the following sections: facilitation, risk management, data exchange/cooperation with e-commerce operators, control and enforcement, and revenue collection.
Detailed analysis of alternate models of revenue collection
The WCO supported the Organisation for Economic Co-operation and Development (OECD) in exploring alternate models of revenue collection (duties and taxes) on low value shipments. Results of the analysis undertaken by both Organizations were published last year as part of the OECD report titled “Addressing the Tax Challenges of the Digital Economy.”
Joint WCO-UPU messaging standards for advance electronic information
The WCO and the Universal Postal Union (UPU) have collaborated to jointly develop electronic messages, to permit the pre-advice and possible pre-clearance of postal items (the messages are part of the WCO Data Model Declaration Derived Information Package). Moreover, the UPU’s Postal Technology Centre has developed an electronic Customs Declaration System (CDS) on the basis of the Joint WCO/UPU Customs-Post EDI message.
Pre-loading advance cargo information (PLACI) for air and postal shipments
The standards on PLACI for air and postal shipments which aims at strengthening air cargo security were developed and included in the WCO SAFE Framework of Standards 2015 edition. The use of PLACI in the civil aviation environment is being addressed within the WCO-ICAO [International Civil Aviation Organization] Joint Working Group on Advance Cargo Information (JWGACI) which was set up in 2014 to discuss and recommend modalities for sharing and using advance cargo information (ACI) in carrying out security risk analysis by Customs and civil aviation authorities in order to mutually support each other and strengthen air cargo security. The JWGACI is following a two-phased approach. Phase I, which consisted of the elaboration of a report on the PLACI concept, its benefits and the cost of its implementation, has been completed. The JWGACI has now moved to Phase II of its work, i.e. dealing with issues concerning practical and technical implementation. An interim report has already been finalized.
Revised CN22/23 with additional data elements
Forms CN 22 – (packages under 2 kg in weight or valued at less than 300 special drawing rights (SDR)), CN 23 (packages valued in excess of 300 SDR), CP 71 (dispatch note) and CP 72 (manifold set) have been amended in 2016. The changes include additional columns on the CN 22 for the Harmonized System (HS) code and country of origin, "sale of goods" and "returned goods" as reasons for export, the telephone number of the sender and addressee, and an optional S10 barcode, in addition to substantially harmonizing and aligning these documents. The amendments are expected to assist Customs in carrying out better risk profiling and more efficient collection of duties and taxes where applicable, as well as supporting postal administrations in enhancing service delivery.
Risk indicators for express and postal shipments
The Postal/Express Consignments Risk Indicators and Manual have been incorporated into Volume 2 of the WCO Customs Risk Management Compendium (access to this document is restricted). The indicators listed in the document could be used to select possible high risk movements/consignments involving all types of Customs fraud (revenue protection, narcotics, security, IPR, etc.).
Setting up a working group
The WCO Working Group on E-Commerce (WGEC):
- Was established in July 2016
- Is co-chaired by a representative of a WCO Member administration and a representative of the private sector
- Was given the mandate of addressing cross-cutting issues in relation to growing e-commerce and come up with proposals for practical solutions to the clearance of low value shipments, including appropriate duty/tax collection mechanisms and control procedures that will facilitate and encourage the growth of e-commerce for the benefit of economic and social development
- Comprises various stakeholders: Customs administrations, tax authorities, partner international organizations, representatives from postal operators, express service providers, e-vendors/platforms and online payment providers as well as academia
Four work areas (click to enlarge):
What is next?
- Development of recommendations/guidelines/framework on cross-border e-commerce (by June 2018)
- Enhancement/update of related WCO instruments and tools including the Immediate Release Guidelines
- Development of measures at both policy and technical levels for enhanced facilitation and effective controls in relation to cross-border e-commerce
- Publication of case studies/best practices of WCO Members and business in the area of cross-border e-commerce
- Development and deployment of electronic interfaces or exchange of information mechanisms:
- Between Posts and Customs
- Between e-platforms/vendors and Customs
- New actors in the e-commerce chain/ new e-commerce business models = New data sources