Revenue Programme

Revenue risks in the Customs context include leakage through the smuggling of highly taxed goods, such as alcohol, tobacco, fuel and mineral oil. They also include commercial fraud activities such as, among others, undervaluation, misclassification, misuse of origin and preferential duties, and drawback fraud. In order to address these risks in a structured manner and provide Members with a platform for discussions and the exchange of best practices, the Working Group on Revenue Compliance and Fraud was established in November 2014. The Working Group builds on the success of the former Working Group on Commercial Fraud, created back in 2005. It addresses not only enforcement-related revenue risks, but also the compliance side of business, such as post-clearance audit.

Commercial Fraud

Customs commercial fraud is not only an area of concern for developing countries - it affects developed countries as well. Perpetrators take advantage of every opportunity presented in multi-modal transportation systems and trade patterns to execute a variety of fraudulent schemes, causing significant damage not only in the form of leakage of government revenues, but also by inhibiting the economic competitiveness of compliant traders. Furthermore, it is suspected that some aspects of Customs commercial fraud, in particular overvaluation, have been linked to money laundering. Such disguised illegal capital outflows could provide criminal groups with funds to fuel other criminal activities, such as arms purchases/sales, drug and tobacco smuggling, etc. This remains a long-standing issue, particularly because of its varied modalities and sophisticated nature.

In order to prevent and detect commercial fraud effectively, Customs needs to employ a strategic, multi-faceted approach, including capacity building and international cooperation. The WCO addresses the issue of commercial fraud within the framework of its Revenue Programme. In order to provide Members with best practices on this subject, the WCO has adopted several Recommendations. Furthermore, in response to requests from Members to enhance their capacity to counter the problem of commercial fraud, the WCO has produced a number of technical materials and guidance documents. Most recently, a specific CENcomm platform named GTEN (global trade enforcement network) was established. This joint initiative (WCO and Australian Border Force) has the aim of connecting WCO Members in a secure and closed platform where they can share and discuss experiences, best practices and documents on national operational cases related to commercial fraud.

The ABF led, on this platform:

  • Operation Leatherback on petroleum trade fraud (2017-2018);
  • Operation Landlock on the trans-shipment of commodities subject to anti-dumping duties (2019); and
  • Operation Jubilarian on ATA carnet misuse for the purpose of importing jewels and/or precious gemstones (2019-2020).

Smuggling of High Risk Goods (Tobacco, Alcohol, Fuel and Mineral Oil)

The WCO Revenue Programme has as its main goal to fight illicit trade in tobacco, alcohol and mineral oils. These types of goods are generally highly taxed by national governments in order to reduce the consumption of products which can undermine public health and safety. The smuggling of cigarettes and tobacco products, alcohol, fuel and mineral oil continues to be a global phenomenon that contributes to transnational organized crime, adversely impacts revenue collection and undermines public health objectives. The WCO’s Illicit Trade Report describes general trends and patterns in the illicit trade of tobacco and alcohol, including the continued diversification of smuggling routes. In recent years the analysis of fuel and mineral oil has been excluded due to the fact that data for this category was insufficient, and no contributions were received. Where the illicit tobacco trade is concerned, there have been numerous large-scale smuggling cases, resulting in the seizure of more than 10 million pieces of cigarettes. The disposal of such large quantities of tobacco requires the involvement of organized distribution channels. In addition, there has been growing concern within the international law enforcement community that cigarette smuggling appears to have been exploited by organized criminal groups as a global illegal business which generates high profits. Moreover, its proceeds may be linked with international terrorism organizations, which are seeking means of funding their activities.

Trafficking in counterfeit cigarettes is another aspect of the problem. Seizures of raw tobacco or leaf tobacco, as well as forged tobacco stamps, also continue. Counterfeit cigarettes are sometimes declared to Customs as genuine ones at the point of entry. In this way, counterfeit cigarettes are introduced into the legitimate market, and even though duties and taxes are paid a substantial profit is still made by the criminals, who no longer incur the additional costs associated with concealing the cigarettes.

Given that many countries are the target of tobacco smuggling and/or the production base of illicit cigarettes, enhanced multi-agency cooperation at the national and international level is urgently needed. The WCO has been working with other regional and international organizations in an attempt to identify the best possible enforcement strategies to counter this problem, including the conduct of its own joint Customs enforcement projects and operations, developed following a global or regional approach in accordance with WCO Members’ needs.

Alongside other, concurrent WCO efforts aimed at tackling illicit tobacco trafficking and smuggling, the WCO launched TobaccoNET, a closed-user expert CENcomm group, which the Secretariat presented to the 40th Session of the Enforcement Committee in February 2020. The aim of TobaccoNET is to promote, among WCO Members, the exchange of information on national seizures made, the sharing of best practices, and the available international tools and instruments, as well as ensuring an open dialogue to deliver more work on specific tobacco-related matters.

Post- Clearance Audit

The post-clearance audit (PCA) process is a structured examination, after Customs has released the cargo, of the relevant commercial data, sales contracts, financial and non-financial records, physical stock and other assets of traders. The purpose is to measure and improve the traders’ compliance. PCA has proved to be an essential tool ensuring that Customs controls are effective in many aspects, including compliance with the WTO Valuation Agreement. It also plays a role in the implementation of an effective Customs risk management strategy, making it easier for Customs to gauge the level of risk corresponding to each trader by measuring compliance with the rules and to fine-tune future controls based on the result. Through the application of a risk-based post-clearance approach, Customs administrations are also able to target their resources more effectively and create win-win partnerships with traders, who will be prompted to comply fully and voluntarily with the rules, as this will facilitate clearance procedures and hence trade.

Recognizing the importance of PCA as an instrument allowing the multi-layered risk management approach wished by Customs to be consolidated effectively, in 2012 the WCO Council adopted the PCA Guidelines. These serve as an essential reference tool for Members as the first crucial stage in the process of implementing an effective PCA process.

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