Legal Framework for Customs Operations and Enforcement Issues

Customs plays a crucial role in trade operations and revenue collection, and it directly affects the private rights and obligations of citizens. Customs is also expected to play an active role in protecting society and national security from cross-border movements of prohibited or restricted goods, including illicit drugs, counterfeit goods, endangered species, and weapons of mass destruction. Consequently, customs operations require a solid legal framework within which duties can be discharged. Without an effective legal framework that guarantees transparent, predictable, and prompt customs procedures, the international private sector will find it highly cumbersome to conduct business with or to invest in a country in a competitive international business environment. It is, therefore, of critical national interest for every country to maintain its customs activities at high levels of effectiveness buttressed by a legal system that meets internationally accepted standards.

In response to dramatic increases in trade volume and heightened requirements for security, many customs administrations are reviewing their operations in the context of international standards and best practices to assess the need for introducing legal reforms. Modernization of customs laws, regulations, and supporting legal systems is essential for modern customs administrations to cope with the increasing demands for their services. The International Convention on the Simplification and Harmonization of Customs Procedures (entered

Many thanks to Ms. Mashiho Yuasa, law student at the University of Michigan Law School, for her help in research.

BOX 3.1 An Example of Obsolete Customs Legislation

When Yugoslavia broke apart in the early 1990s, the newly independent republics inherited the Yugoslav Customs Code, which was, by socialist standards, considered to be relatively user oriented. However, the shortcomings of the Yugoslav Code became rapidly apparent.

Designed for foreign trade exchanges largely managed by the state or state-run entities, it did not envisage the rapid surge in the number of operators. Procedures that were designed for established corporations were no longer applicable.

For example, deferred payment was no longer realistic until the reliability of new market entrants had been assessed. In addition, the old code was too detailed and quite bureaucratic. It went to the extent of determining the opening hours of customs offices, which was unrealistic in a rapidly changing economic environment. In an attempt to be user friendly, the old code arbitrarily set the maximum time allowed for customs to clear goods. In the new market economy, customs had to deal with experienced traders and novice importers within the same amount of time. As a result, officials did not have the time to properly examine suspicious transactions, as the prevailing impression was that, as all goods should be cleared in five hours, declarations could be held up by prolonged examination of any one transaction. Worse, the Yugoslav Code made it mandatory to inspect every consignment, thus preventing the introduction of selective examinations.

From the penal side, the code made a distinction between individuals and legal entities. In theory, penalties for legal entities that committed customs fraud were higher than those for individuals. This did not make much sense in a market economy environment, and it led to numerous...

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