Customs supervision in Georgia based on risk analysis

Rusudan Seturidze, TSU Assistant Professor, Doctor of Economic Mzia Kikishvili, TSU Associated Professor, Doctor of Economics

By means of the reforms started in previous years and already successfully carried out Ministry of Finances of Georgia achieved considerable success in macroeconomic stability, financial and fiscal field development in the country.

Considering this progress and performance of strategic plan of 2005-2009, Ministry of Finances continues working in 2009-2011 years in the following directions:
– Budgetary policy;
– Treasury development;
– Financial Policy;
– Mobilization of incomes;
– Institutional development.
Main goal of this strategy set by Ministry of Finances is ensuring of steady economic development and financial stability of the country.
It is notable that in the research conducted by World Bank in 2008 – “Do Business” Georgia is holding 18th place, while in the research of USA Board of Trade was mentioned Georgia as the country with least corruption and administrative barriers in customs system; in 2007, Georgia has been recognized as world’s number one reformer country. Within the same period, by the economic freedom index of Heritage Foundation, Georgia was placed on 35th place out of 161 countries.
New tax code (2005) and new customs code (2006) were considerable step made for liberalization of business environment and trading. However, further reforms were necessary.
Issues connected with the adoption of risk management system were being worked out in January 2008, specifically: the mentioned system was tested and analyzed. Risk profiles based on risk criteria and legislative basis for implementation/operation of the system has been designed. Simultaneously, for the purposes of risk management system studying, employee of customs entry department were trained. Similar practice is implemented in the countries such as Switzerland and Rumania etc.
In the end, from February 2008, step-by-step implementation of risk management system has been started at customs entry department. Implementation process covered every regional center. Periodically risk profiles are being updated on the basis of risk criteria. Systemic work is conducted for refinement of risk management system.
As a result of implementing this system, decisions made during checking declared goods is strictly regulated, instruction are made only by means of computer database or by conclusion in writing of average level manager of customs organ. Even in this case, decision about inspection is registered in electronic database that enables to monitor decision making procedure in current regime.
Detailed regulation of inspection procedure has taken place: owner of goods, customs applicant, and customs officer, definition of rights and obligations of customs warehouse; in addition, with standardization and harmonization of inspection organ. All the above mentioned considerably decreased the time needed for customs treatment of imported goods and corruption prevention has been made.
Program ASYCUDA (The Automated System for Customs Data) – is a computerized system designed to administer a countries’ customs. The program has been designed by UNO experts, within the framework of UNCTAD (United Nations Conference on Trade and Development) is functioning with the principles of colors of corridors and random selection. Problematic risks have been defined by means of the program. In other words, risk profiles of various contents that represents integrity of preliminarily defined risk criteria. Goods are checked at customs by means of these risk profiles. If commodity fits any of these, system allots it in a corridor with corresponding color. About twenty risk profiles are operating today. They are designed for prevention of undeclared goods, manipulation with product codes, and protection of intellectual property; together with ensuring maximally simplified customs procedures for less risky organizations (governmental structures and diplomacy). While checking customs declaration system is comparing data of the declaration itself and of risk profiles. In case if they are matched, system transfers declaration into the corridor with corresponding color.
The colors of the corridors are defined by the composition of risk profiles and by random selection principle. Green corridor implies that there is no need in cameral treatment and examination of the goods. Yellow corridor considers cameral treatment of customs documentation of declared goods. Red corridor considers both cameral treatment of customs documentation and examination of the goods, while blue corridor implies audit of declared goods after passing. After the system moves the declaration into corresponding corridor customs officer is given an electronic massage concerning measures to be taken. In case, if the risk profile does not apply the declaration, system gives it a corresponding color by using random selection principle. At present, only green, yellow and red corridors are operating and system applies only to customs regime of imports.
Program ASYCUDA is divided into functional working fields with special operations. One of the fields ensures double control in the process of declaration filing. Tasks related with the formation of customs declaration are computerized. Second field covers registration operations of customs goods, while the third field covers calculation of customs duties. Bundled software accelerates customs clearance procedures, decreases impediments during customs examination of goods, processes connected with exports and imports are aggregately managed by computer network. Computer network is protected from unauthorized use. Customs operations are becoming transparent and operationally manageable.
In previous years 100% of goods were examined by customs officers. However, after implementation of risk management system, only 15% of imported goods are inspected in accordance with red corridor, in other words they are inspected physically, while 85% of goods are inspected in accordance with yellow corridor, (checking of customs declaration of goods and attached documentation). Cameral inspection of goods takes only two hours in yellow corridor. Time losses are decreased for importing, together with saving finances, the same terminal expenses; moreover, customs procedures are more simplified, quality of good inspection increases for incomes office, customs resources are freed from inspecting less risky goods and they became concentrated for high risk goods. Corruption level has been decreased: mentioned system excludes probability of any kind of deals between customs officer and importer. This is an effective step made in the direction of fighting against corruption.
Further stages will be development of maximally effective and flexible mechanism of risk management system and its improvement. New risk profiles will be designed, such as twofold purpose goods, weaponry and military materials, narcotic drugs, flora and fauna, nuclear and radiation goods etc. The work continues for the implementation of blue corridor and turnover maximal controlling. ASYCUDA Word system will be adopted and implementation of risk management system in new customs regimes, maximal reduction of time expenditures and improvement of quality of physical inspection. Customs officers will be trained systematically and their professional skills will be improved.
Simultaneously, issues concerning implementation of customs-trading cooperation (Golden list) are being elaborated. Applications of candidates are being reviewed in order to register them in customs-trading cooperation list. It should be noted that computerized system ASYCUDA World is being tested. The system enables participants of customs-trading cooperation to enter goods.
By means of measures taken by the Incomes office of Ministry of Finance, on the one hand customs procedures has been simplified, time needed for customs formalities decreased and on the other corruption level has been significantly reduced. Transitional Institutional Support Program is a part of memorandum concluded between Ministry of Finances of Georgia and OSCE Mission to Georgia.
Risk management system is planned to be implemented in every operation of customs processing in Georgia:
Risk management (assessing potential risks and context);
Gathering information;
Risk identification, analysis and classification;
Risk control and accomplishment;
Risk indicators;
Risk profile;
Risk reviewing;
Risk balancing, stages and safety;
Decision-making process based on risk;
Monitoring and reviewing risk process;
Risk management for fighting against illegal narcotic drugs at the boundaries of the territory;
Risk management in airports for fighting against narcotic drugs;
Scenario trainings (Role playing in practical exercises) for border policy and customs employees;
Therefore, customs control based on risk analysis has achieved significant success, including reduction of administrative barriers, simplifying customs procedures for business sectors, reduction of time needed for custom formalities, preventing corruption.