THE DIGITALIZATION OF CUSTOMS: SOME TRENDS PURPOSE OF THE RECENT EU CUSTOMS PLAN.

We are going through a historic moment in the matter of the digitization of the Tax Administrations (TAA) which evidently accelerated, in an unplanned and unforeseen manner, due to the isolation measures resulting from the coronavirus pandemic that continues without knowing for how long.

Within this process, Customs are permanently seeking to use the new Tics to be more effective and efficient.

 The WCO talks about the concept of “Digital Customs” and organizations such as the European Commission, IATA and IMO have invested significant resources in e-Freight[1], Single Windows and other powerful initiatives.

 In the performance of Customs, what is now known as the fourth Industrial Revolution comes to play with new technologies (big data, blockchain, artificial intelligence, internet of things, etc.).

 The digitization of Customs implies using modern ICTs to collect and safeguard customs duties, control the flow of goods, people, means of transport and money, and protect cross-border trade from crime, including international terrorism, which continues to emerge. all the world.

 Therefore, hereby I will try to comment on some trends in this regard, also considering the recent publication of the Customs Plan of the European Union.

 1.   SOME EXAMPLES OF DIGITALIZATION AT CUSTOMS.

 Customs have had to face the coronavirus pandemic with a lot of effort and creativity, since tons of personal protection materials such as masks, gowns, and medical equipment, medicines and disinfection products, as well as food and essential goods pass through them. .These shipments must be dispatched in a priority, agile and safe manner, without neglecting the regular flows of trade.

 As I said at the beginning, they have had to be digitized in an unforeseen and unplanned way.

 This is because the risks of the pandemic have required the implementation of simplified and safe procedures, the use of new ICTs and enormous coordination skills with other government entities and the private sector.

 In this regard,[2] some lessons learned by Customs from the pandemic such as:

 -      The ability to adapt and change to modify regulations, and implement simplified and agile procedures during the crisis.

-      The value of having a high level of automation and digitization for operational management that reduces human intervention and the use of paper.

-      The usefulness of applying and perfecting risk management to facilitate legal trade, encourage customs compliance, as well as successfully detect and apprehend illegal operations.

-      The need to have Contingency Plans coordinated with the other border management entities, the private sector and the Customs of neighboring countries.

-      The importance of establishing or expanding programs with the private sector such as Authorized Economic Operator (AEO).

-      The benefits of cooperation beyond our borders with harmonization measures and data exchange between Customs.

-      The advantages of taking advantage of this turning point for the adoption of new ICTs such as artificial intelligence (AI), blockchain and big data, which transform and streamline customs management and contribute to the economic reactivation of countries through their foreign trade.

The WCO[3] undertook a mapping exercise to gain an appreciation of existing ICT-related tools, instruments and applications currently available in the WCO and their intended purpose, and grouped them into several broad themes, namely:

-      Leadership – IT Guide for Executives; Single Window Compendium Volume 1;

-      Legal basis – Revised Kyoto Convention; Model Bilateral Agreement on Mutual Administrative Assistance in Customs Matters; Guidelines for Developing a Mutual Recognition Arrangement/Agreement;

-      Modernization and reform – Revised Kyoto Convention Guidelines on Application of Information and Communication Technology; Single Window Compendium, Volume 2; Recommendation on the Dematerialization of Supporting Documents; Recommendation on Electronic Transmission and Authentication of Customs and other Relevant Regulatory Information; etc.;

-      Protection of society – Risk Management Compendium; WCO Cargo Targeting System; Customs Enforcement Network (CEN) suite; IRIS; IPM;

-      Communication – Recommendation on Use of WWW Sites by Customs Administrations; Use of Social Networking Sites by Customs;

-      Interoperability and exchange/regional integration – Recommendation on the Use of Unique Consignment Reference; WCO Data Model, and the Recommendation related to its use; API PNR Guidelines, and the Recommendation on their use; Integrated Supply Chain Management Guidelines, etc.

These broad categories enable us to appreciate the diverse collection of instruments and tools, as well as the specific aspects that each tool supports. All of these themes are mutually supportive, and provide WCO Members with a snapshot of the types of resources currently available to support their ICT modernization and reform objectives.

The World Trade Organization[4] and Trade Finance Global have published their latest taxonomy of blockchain projects in international trade, arranged into what they present as a “periodic table” for the industry.

According to the report, blockchain — also known as distributed ledger technology or DLT — has two main benefits from the perspective of international trade. First, it enhances transparency, supporting what the analysts also refer to as “track-and-trace” capacity, which is useful for ensuring products’ authenticity and thereby enhancing trust on the customer end.

The other benefit of DLT is trade digitalization: streamlining trade documentation, processes, and the secure exchange and monitoring of data. Here, the report identifies what it believes remains the “weakest link” in the chain: “Any digital process will only be as strong as its least digitized link. For many international trade systems this means integrating customs. While several governments are testing or considering using DLT for their customs operations and single windows, most projects remain at a conceptual or piloting stage.”.

Regarding specific cases of application of modern technology such as AI in Customs in Brazil, SISAM[5] - Selection System for Customs via Automated Learning since 2014 has been in charge of analyzing all import declaration forms (DI) presented to customs.

It constitutes an AI system that learns from the history of the declaration forms and estimates the probability of around 30 types of errors that can occur in each line of each new import declaration form, and calculates the expected value of the income (in national currency) for each error detected.

On the other hand, today many Customs already have computed tomography equipment that allows the visualization of the merchandise with 3D technology to know the content of the shipments without having to open them.

This equipment, unlike scanners, "performs automatic controls through AI to automatically perform detections based on image training." To give an example in the AFIP of Argentina they were incorporated in March 2019[6].

In Brazil, in 2016, foreign trade fraud detection using AI was implemented[7].

Normal control and audit procedures are a costly and time consuming task for officials who are responsible for verifying thousands or even millions of operations.

The use of AI for fraud detection was designed in Brazil in 2008. The system allows detecting various types of fraud by identifying “outliers”helping officials to identify potential suspicious transactions.

In the same sense, the Argentine Customs has been working with data mining, which is the intelligent use of information for the early (preventive) detection of suspicious operations, firing "alerts" to the officials in charge of control.

In an article[8] Recent aspects of the digitization of Argentine Customs stand out as, among others, the modernization of controls in the primary zone, the organization and establishment of the Single Window of Argentine Foreign Trade -VUCEA-, the OAS -Authorized Economic Operator-, the digitization of export destinations through the pilot plan to digitize the customs declaration file in those final export destinations for consumption and the abbreviated summary procedure that implements a summary process for certain customs offenses.

One issue where AI is used is in airport facial recognition systems.

The first to launch it was that of Tocumen, in Panama, in 2011 the government of this country partnered with that of the United States to test a pilot program of the FaceFirst company in order to prevent illicit trafficking. And the success was such that they expanded it to other terminals.

Currently, all Canadian international airports use a facial recognition system. Australia and New Zealand use a border system called SmartGate, which automatically compares the traveler's face with the information on their electronic passport.

In the United States, the Department of Borders and Customs (CBP) has approved the installation of cameras with facial recognition in all airports in the country[9].

Until now, these cameras have been used in a test phase in 15 North American airports, but in the next 4 years this technology will be extended to all airports in the country.

The facial recognition uses AI to identify a person based on their traits. AI is capable of recognizing faces in a photo, with all that this entails in terms of privacy and freedom, if this information is used for other purposes beyond what is advertised.

Facial recognition is being used to identify all people leaving the United States on a commercial flight to find out if someone has spent more time in the United States than their visa allows.

 The system works by taking a photo of the passengers, when they approach the boarding gate. An AI compares the photo with the one that appears in the passport and visa, and so it can know, first, if it is the person it claims to be, and second, if it has spent more time in the country than it marks its visa.

 In the 15 North American airports where it is already implemented, the system has inspected more than 15,000 flights, and has scanned more than 2 million passengers. It managed to detect 7,000 visa violations.

Another example of digitization is the implementation of the Simplex project "E-Taxfree Portugal"[10]. The new system dematerialized the VAT refund for foreign tourists - who visit Portugal from outside the European Union, when they make purchases in Portugal above a certain threshold.

 In Chile, the National Customs Service recently launched a AduanaCl mobile application which will allow users to access relevant information to make online purchases from abroad, access online procedures and contact the Service in different ways to make requests.

 The application will grow progressively. It is intended that soon the citizen can carry out procedures for travelers and for postal shipments, we want to allow the buyer to monitor their shipment if it has entered customs review, access flows of border crossings, delivering valuable information to the traveler[11].

2.   RECENT CUSTOMS ACTION PLAN OF THE EUROPEAN UNION.

On September 28, the European Commission launched a new Customs Union Action plan[13].

 The action plan proposes measures such as better use of data, better tools and equipment, promotion of compliance, increased cooperation within the EU and with partner country customs authorities, and better preparedness for future crises.

 Fraud related to customs duties and VAT, as well as the smuggling of illegal or unsafe goods, have become major problems. Uneven customs control capacities between Member States can divert goods to the weakest points of entry and exit from the EU customs territory to avoid detection.

 Additionally, new business models such as e-commerce have added to the enforcement challenges faced by EU customs. At the same time, customs authorities need to be better able to react to changing or emergency circumstances, such as the coronavirus pandemic.

 Therefore, the Plan establishes ways to address these challenges and take the Customs Union to the next level through 17 actions that are grouped into four areas: risk management, e-commerce management, compliance promotion and customs authorities acting as one.

 The key initiatives under these four headings are:

 -      A new analytics center where greater availability and use of data and data analytics for customs purposes will be ensured to assist with risk management, customs clearance and post clearance, and anti-fraud actions.

-      Strengthen the obligation of payment service providers and online sales platforms to help combat cross-border tax fraud.

-      One-stop-shop environment for customs, which will make it easier for legitimate companies to complete their border procedures in a single portal. It will enable more collaborative information processing, exchange and exchange and better risk assessment for customs authorities.

-     A modern and reliable customs equipment startup.

-     International customs cooperation: The EU will work towards an EU-China agreement on a new strategic framework for customs cooperation 2021-2024 before the end of 2020.

-     Think Tank: To help prepare for future crises and challenges, such as unforeseen global developments and future business models.

3.   FINAL THOUGHTS

 The coronavirus pandemic has accelerated the process of digitization of Customs exponentially and has demonstrated its importance both in terms of control and exercise of international merchandise traffic.

 For this reason, the idea of having a totally digital and "paperless" customs, proclaimed by many international organizations today, is increasingly closer.

 As we saw in this comment, many customs already apply modern ICTs such as AI and have computerized mechanisms that allow intelligent control, data processing, information exchange, collection and interaction with other organizations.

 The recently published EU customs plan also shows the importance of being digitized to cope with the different scenarios and new forms of business that are increasingly globalized and complex.

 It proposes measures related to digitization such as better use of data, better tools and equipment, promotion of compliance, greater cooperation within the EU and with the customs authorities of partner countries and better preparation for future crises. .

 It is clear that ICT will continue to affect the role of Customs in different ways and will provide numerous opportunities to boost connectivity between Customs, with commercial operators and other border agencies, thus increasing productivity, ultimately leading to higher growth. economic.

 AI-powered digitized Smart Customs can help customs experts focus on high-risk profiles while continually managing all trade movements and improving with their predictions over time.

Without a doubt, digitization is an irreversible, unstoppable and constantly advancing process that will provide greater benefits than costs to countries that decide to bet heavily on it.

This process, as I always say, cannot be approached in isolation, but must be part of a Digital Government agenda with open data promoted by the countries with the collaboration of the private sector and broad international cooperation.

[1]E-freight is an industry-wide initiative that involves carriers, ground operators, carriers, customs brokers, and customs authorities. E-freight aims to build an end-to-end paperless transportation process for air cargo through a regulatory framework, modern electronic messages and high data quality.

[2] https://blogs.iadb.org/integracion-comercio/es/resiliencia-transformacion-aduanas-covid-19/

[3] https://mag.wcoomd.org/magazine/wco-news-79/digital-customs-the-opportunities-of-the-information-age/

[4] https://cointelegraph.com/news/wto-blockchain-report-says-customs-remains-weak-link-of-trade-digitalization

[5] Book ICTs as a strategic tool to enhance the efficiency of the CIAT TAs page 207. https://biblioteca.ciat.org/opac/book/5731

[6] https://www.iproup.com/innovacion/3615-afip-puerta-a-puerta-innovacion-tecnologica-Aduana-usa-tecnologia-3D-e-inteligencia-artificial-para-agilizar-procesos#:~:text = Innovaci% C3% B3n% 20% 7C% 20Tomography% C3% ADa% 203D-, Door% 20a% 20puerta% 3A% 20la% 20Customs% 20usa% 20technolog% C3% ADa% 203D% 20e% 20intelligence, USA.

[7] https://tradenews.com.ar/aduana-blockchain-impresion-3d-internet-de-las-cosas-drones-inteligencia-artificial/

[8] https://c1311835.ferozo.com/la-necesidad-de-la-digitalizacion-de-la-aduana-frente-al-covid-19/

[9] https://computerhoy.com/noticias/tecnologia/reconocimiento-facial-ha-llegado-aminos-410655

[10] Book ICTs as a strategic tool to enhance the efficiency of the CIAT TAs page 318. https://biblioteca.ciat.org/opac/book/5731

[11] https://aduananews.com/la-aduana-de-chile-creo-aplicacion-para-celulares-donde-se-podran-hacer-tramites-online/?s=03

[12] https://conexionintal.iadb.org/2020/05/13/seguimiento-de-politicas-y-obstaculos-al-comercio-2/ For a complete follow-up of the measures taken by the coronavirus pandemic see https://docs.google.com/spreadsheets/d/1wqzGQa09iiu2oov-Y_SbEtjXJWwIzlMBjGeS7-cx98s/edit?usp=sharing

[13] https://ec.europa.eu/taxation_customs/general-information-customs/customs-action-plan_en?s=03