AD ALTA
JOURNAL OF INTERDISCIPLINARY RESEARCH
Processing of import, export and transit
declarations
Acceleration the processing of documents, ignorance of fact that some cargo listed on the manifest
was not declared, certification of fictitious export or providing wrong classification
Assessment of origin, value and classification of
goods
Under-invoicing of goods, not challenging the declaration of goods under a different classification
code that attracts a lower tariff rate, acceptance of false country of origin declaration, thus permitting
the importer to benefit from a preferential tariff regime
Physical inspection, examination and release of
cargo
Accepting staff who would ensure that inspecting officer who will take an accommodating approach
to the inspection, influence the finding of the inspection or speed up the inspection
Administration of concessions, suspense and
exemption schemes and drawback schemes
Permission for traders to release, for domestic consumption and without paying the required import
duties, goods that entered under suspense regimes or goods made with inputs that entered under such
regime, obtaining of guarantees for temporary admission of import without adequate documentations,
permission for traders to claim tax repayment for fictitious export
Post- clearance audit
Influence on the outcome of the audit finding
Issuing of import licenses, warehouse approvals
and authorized trader status approvals
Approval of obtaining these licenses and certificates without proper justification
Processing of urgent consignments
Possibility to obtain preferential treatment or speedy clearance
Figure 1. Selected Customs Functions Examples of Integrity Violations Administration [compiled by the author]
Organization for Economic Co-operation and Development
(OECD) Development Centre (Hors, 2001), has identified three
types of corruption that typically occur in the customs working
environment and suggests that the strategies necessary to deal
with the three types of corruption vary significantly: (1) routine
corruption, in which private operators pay bribes to obtain the
speedy completion of routine customs procedures; (2) fraudulent
corruption, in which the trader or agent asks customs officials to
turn a blind eye to certain illegal practices to reduce taxation
liability or fiscal obligations; (3) criminal corruption, in which
criminal operators pay bribes to conduct a totally illegal but
lucrative operation, such as drug trafficking or the abuse of
export promotion schemes. Transparency International (Pope,
2000) takes a different approach and divides corruption into two
broad types: petty corruption and grand corruption. Petty
corruption is described as “survival” corruption—a form of
corruption that is most often pursued by relatively junior civil
servants who may be grossly underpaid and who depend on
small but illegal rents to feed and house their families and pay
for their children’s education. This corresponds closely with
Hors’ concept of routine corruption. Grand corruption usually
involves more senior officials and significant amounts of money.
Like Hors, TI recognizes that different strategies are required to
deal with the two types of corruption. Corruption in the customs
working environment could be classified as bribery, nepotism
and misappropriation (Nye, 2007). Bribery in the customs
context includes the payment of money to secure or facilitate
customs procedures, payment to alter or reduce duty or tax
amounts, payment to ensure that officials grants exemption from
normal administrative formalities or do not take appropriate
control measures. Customs officials often have discretion over
such disbursements. Nepotism in the customs context can
include such behaviour as the selection, transfer or promotion of
individuals or groups on the basis of an existing relationship
rather than on merit; the awarding of lucrative customs
appointments; and the allocation of scarce government resources
to individuals on a nonmerit basis. Misappropriation includes a
wide range of behaviour such as theft, embezzlement,
falsification of records, and fraud. It can be seen at the
individual, group or organizational level. According to Bryane
(Bryane, et.al., 2010) customs-related corruption costs World
Customs Organization (WCO) members at least $2 billion in
customs revenue each year. According to (Wadsworth, et.al.,
2010) The Baltic States have made more progress toward
democracy and a market economy than many of the other former
communist countries. Customs and trade regulations are midway
between no obstacle and a minor obstacle in Estonia and
Lithuania. Latvian businesses find customs and trade regulations
to be a minor obstacle to running and growing their businesses.
As described in information from Corruption Prevention and
Combating Bureau (KNAB) (Recommendation for prevention of
corruption in law enforcement, institutions), there is insignificant
number of notifications on possible integrity violation incidents
on the SRS Customs Administration. As is in 2009 there were
only 45 notifications received from natural and legal persons and
60 notifications transferred from other law enforcement
institutions. Small amount - 105 notifications per year can be
explained by the fact that customs matters are only a small part
of the everyday life of society, mainly active in the transport of
goods across the border or foreigners, and these people may have
concerns about possible future cooperation with the customs
(Recommendation for prevention of corruption in law
enforcement, institutions). Another explanation is connected to
behavioral changes and change in customs operation during last
decade.
3 Building a system to promote integrity
Systems for integrity promotion need to have background
definitions for the creation purposes. System deals with risks and
corruption risks. The risk is possible occurrence of undesirable
effects; the probability that an event or action will adversely
affect the obstacles for achievement of the target. Corruption risk
is probability that a member of staff with the intentional or
unintentional act for the interest and benefits for third parties and
harm public (general) interests and damaging good public
management. And system of the integrity promotion is a part of
general risk management system which includes definition of
risks, definition of risk factors, control and supervision measures
with aim to protect persons and institutions from possible
damage and ensure achievement of institution targets.
As defined in the second part of the paper corruption in customs
field includes political and staff factors. So in order to deal with
corruption firstly must be political commitment to address the
problem. Building a system to promote integrity in customs
administration includes not only measures to combat existing
corruption but also risk identification and risk management
system that ensure operational continuity and control of corrupt
behaviour. Political factors could be addressed through clear and
well-understood tax and customs policy framework.
Simplification of the system and reduction of tax and tariff rates
and restriction (or at least limitation) of exemptions is not only
recommendable economic policy but also possibility to reduce
opportunities for corruption. Simple and clear legislation creates
a framework for compliance. However, even in low tax countries
drug smuggling criminals have the ability to bribe the customs
officials for permission to proceed without shipment inspection.
Latvian system could be evaluated as low tax system and have
fully unified customs system as European Union Member state.
Political factors also can be covered by simplification of
procedures and creation of easy-to-understand systems. Such
procedures and systems reduce compliance costs for
international trade stakeholders and administration costs. Such
simplification includes one-step processes, minimal
documentation requirement and digitalization for customs
declaration processing. To support the adoption of Single
Window systems, diverse policies, recommendations and
guidelines have been developed by global organizations. The
UN/CEFACT Recommendation Number 33 recommends
Governments and traders the establishment of a Single Window,
in order 1) to facilitate payment of duties, taxes and fees and 2)
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