This handbook aims to make a positive contribution to the efforts that many countries are undertaking to modernize their customs administrations. The handbook views a competent and well-organized customs service as one that successfully balances its various responsibilities to ensure a high level of compliance with revenue objectives and regulatory requirements while at the same time intervening as little as possible in the legitimate movement of goods and people across borders.

The handbook recognizes that conditions differ greatly across countries, so that each customs administration will need to tailor its modernization efforts to national objectives, implementation capacities, and resource availability.

Nevertheless, meeting the modernization objectives will most likely require the adoption of the core principles discussed in this handbook: adequate use of intelligence and reliance on risk management; optimal use of information and communications technology (ICT); effective partnership with the private sector, including programs to improve compliance; increased cooperation with other border control agencies; and transparency through information on laws, regulations, and administrative guidelines.

Success in customs modernization is, as importantly, tied to the overall trade policy environment. Simple, transparent, and harmonized trade policies reduce administrative complexities, facilitate transparency, and reduce the incentives and opportunities for rent-seeking and corruption. Customs modernization, therefore, also needs to be examined from the broader and complementary perspective of trade policy reform.

Download Customs Modernization Handbook

PDF format, 3.8MB, 356Pages.

Editors: Luc De Wulf and José B. Sokol
© 2005 The International Bank for Reconstruction and Development / The World Bank

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Forward:

With world trade growth expanding more than twice as rapidly as world gross domestic product (GDP) over the past decade, the potential rewards from participating in world trade are considerable. Increased trade openness, through lower levels of protection in developed and developing countries, has contributed to this outcome. Nevertheless, it is widely acknowledged that an open trade regime will only foster trade integration when a range of complementary policies is in place.

One of the most important complementary policies is to put in place a well functioning customs administration that provides traders with transparent, predictable, and speedy clearance of goods.

Indeed, a poorly functioning customs administration can effectively negate the improvements that have been made in other trade-related areas.

For many countries, achieving efficiency and transparency in customs operations remains a formidable challenge. In 2002, over US$6.3 trillion of goods crossed international borders. Each one of those shipments passed through customs controls at least twice梐t entry and at exit. Customs services have often had to cope with these growing trade volumes without any commensurate increase in staff or resources. In addition, customs administrations continue to face changes to their operating environment, which emphasize the need to adjust and modernize their processes.

These include:

• more sophisticated and demanding clients, for example, traders who have invested
  significantly in modern logistics, inventory control, manufacturing, and information
  systems
• greater policy and procedural requirements associated with international commitments
• proliferation of regional and bilateral trade agreements, which significantly increase the
  complexity of administering border formalities and controls
• heightened security concerns and demands to respond to the threats posed by international
  terrorism and transnational organized crime
• widespread revenue fraud.

Many customs administrations are struggling to meet the continually increasing demands and priorities placed on them.

During the last decade many countries devoted substantial resources to reforming and modernizing their customs administrations, often with financial and technical support from international financial institutions and bilateral donors. The World Bank, the World Customs Organization, the International Monetary Fund, the United Nations Conference on Trade and Development (the ASYCUDA program especially), and the Regional Development Banks have, for a long time, been providing such support. As a result, a number of customs administrations have improved their capacities. Yet, far too many still operate inefficiently and, to some extent, fail to fulfill their assigned objectives. Modernization of customs is therefore likely to remain on the development agenda of many governments, and the donor community will be called upon to continue its support for customs modernization.

In recognition of this, the Trade Department of the World Bank prepared this Customs Modernization Handbook to provide guidance to the many organizations and individuals involved in the preparation and implementation of customs modernization projects. The Handbook draws on the lessons learned from past successes and failures, both by the Bank itself and a range of other organizations. It also draws on the collective experience of a wide range of individuals with extensive practical experience in the field. The Handbook is complemented by a 2004 World Bank publication of eight case studies of customs modernization in developing countries— Customs Modernization Initiatives. These works, in conjunction with the recent IMF publication Changing Customs, which focuses on the revenue mobilization function of customs administrations, provide the necessary tools for initiating and undertaking the process of customs reform.

The guidelines contained in the Handbook are aimed at several audiences. First, they are aimed at policymakers and national managers who are called upon to take the lead in providing advice and guidance on the direction of reform efforts and securing the necessary political support for such initiatives.

Second, they are aimed at project managers, national as well as from the donor community, who are required to design and implement customs modernization projects. Third, they are aimed at students of trade facilitation, who will find in the Handbook the context and operational modalities of an organization that plays a crucial role in the overall trade logistics chain.

This Handbook is not intended to be encyclopedic.

It is deliberately selective. It avoids many technical issues that are well covered in the many manuals and guidelines provided by organizations such as the World Customs Organization. Rather, it focuses on the critical issues that need to be addressed when designing and implementing effective and sustainable modernization projects and related initiatives.

We at the World Bank hope that the Customs Modernization Handbook will help in the achievement of the objective of helping policymakers to implement the needed reform and overall modernization that will enable customs to fulfill its role in the 21st century.

Danny M. Leipziger
Vice President and Head of the Poverty
Reduction and Economic Management Network

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