|Speech by Leonid Lozbenko, Deputy Head of the FCS of Russia at the round-table discussion of “The Customs Service of Russia: relations based on partnership between customs and business” held on May 12th, 2005|
Honorable General Secretary of the World Customs Organization,
I feel proud that, in the presence of the General Secretary of the World Customs Organization, I am able to address the theme which is probably the most significant not only in the activity of the FCS of Russia but for the whole business community. It is no secret that in the last two or three years we have been working in a completely open system. I am sure that those present today are able to confirm my statement. Our meetings and contacts with business are no longer occasional. These are not meetings between divided and belligerent camps; these are, by the highest standards, the meetings of like-minded groups of people, interested in resolving problems which arise regarding trade facilitation in the Russian Federation.
Under the instructions of German O. Gref, in the last few months we have been actively working, as Alexander Egorovich (Zherikhov – the Head of the FCS of Russia) has already mentioned, on building up the Concept of customs service development in Russia for the forthcoming years. Much has already been done. One might even ask whether the Concept should be developed at all. Nonetheless, the development of the events of which we had just been told by the Secretary General of the WCO has highlighted the necessity of adopting such a document for the contemporary period.
How to combine security and facilitation of trade? How to make the country safe and secure and at the same time raise additional income, to develop trade without barriers? And how to make the customs service rise to such a level of development that it is able to apply the standards as specified by Michel Danet? He has not mentioned one figure in his speech, but since I am a member of the senior level group of the WCO engaged in the development of such standards, I may quote what Mr. Bonner, the Head of the US Customs Service, said in the last meeting of said group. He said that they had been working on the security of sea containers transportation. The Americans have been working on this for a year within the framework of this program. Michel Danet named 34 seaports involved in this program, of which none, unfortunately, were Russian. Despite several attempts on our part to find out the reasons for the exclusion of Russian seaports from the program, we have received no definite answer.
However, we have analyzed last year’s results to find out what has been achieved by the companies participating in the program of secure overseas containers transportation. Our assessment is as follows: for the companies participating in the program, interference of customs has been reduced by six times; let me repeat that, by six times. Just imagine the magnitude of overseas containers’ transportation and then you may guess that for major and medium companies this has meant hundreds of million dollars without losses. The Americans are exercising a very strict attitude on this issue. Thus if, 24 hours before the arrival of a ship to a seaport, there is no preliminary information about it, then there will be no inspection of cargo and it will continue to ride out. It means that the issue is complex and has no easy solutions; but for those who are prepared to provide preliminary information to customs in the required format this presents no problems; just join the program. This is, actually, what Michel Danet said.
We shall adopt these standards by the end of the year. I am sure that General Directors of customs authorities all over the world are going to support this idea. This introduce a completely new approach to the operation of customs authorities all over the world; let me stress, all over the world. That was the reason for our invitation to the Secretary General of the WCO: we wanted him to share his views on customs procedures. If customs used to be more import-specific in terms of customs control, then today they are becoming more export-specific. Thus the things which are to be covered by export information are to match import requirements, and common approaches to the assessment and management of risks are to be established. In this case such an approach will enable us to work without too many problems in this field, by combining security and trade facilitation, thus creating benefits for all.
Now let me elaborate on the Concept. Some of you have already been to previous presentations of ours. This is a draft Concept which we are proposing to the government. We are now getting responses from many Russian ministries and agencies. Customs is something of interest to practically everybody, to all spheres. We have been instructed to forward this draft to almost all departments and agencies. We have already received comments from more than 15 major ministries and agencies, mainly of a positive nature. There are a few critical observations, which we are examining very attentively now.
On the subject of the Concept, I would like you, during its presentation, to compare what I am going to tell you with what you have been told by the Secretary General of the WCO, what are the prevailing trends in the world and where Russia is heading, or what has already been achieved by Russia. This request of mine is easily explained by the fact that long before the presentation, two or three years ago when we were thinking about our way forward, we were already considering all these matters. And most of the standards about which we are going to talk we have already used in practice or are beginning to use in our work.
What is the goal that we are envisaging for ourselves? It comprises determination of the most efficient methods whereby customs offices can directly implement the tasks in the field of customs control, in accordance with the international standards with unconditional compliance with the legislation of the Russian Federation. In other words: our targets are the international standards, and unconditional compliance with the legislation. Our targets also involve raising the quality of state regulation, improving customs administration and strengthening cooperation with national and international organizations. All this has very much in common with what Michel Danet said.
What are we ultimately aiming for? Our ultimate aim is to have a highly efficient customs administration which simply and efficiently processes passengers, goods and means of transport. This is what we call “control in the form of a service”. Frankly speaking, this term is not always easy to absorb. But we are building up a “service state” in Russia; we are building up a “service state”. This is a nationwide goal, and naturally customs may not build anything different. However, customs is always control and it remains our major function. This function may be realized in different ways. One may react to it with a smile or otherwise. You know it well on the basis of your daily contact with our employees on all levels.
We are not hiding the problems facing Russian customs administration. You are also aware of these problems. But once again I want to reiterate that we have no secrets; that we are speaking openly about what is wrong or about what we are still learning to do. We are not at all embarrassed because we are sure that we are quite able to improve this situation.
Right here on the slides you will see that among the problems, one may distinguish the insufficient realization of potential, the absence of single customs standards - directly assisting the implementation of logistics chains, which Michel Danet mentioned -, an inadequate system of information on price-formation, specializations and so on, and a weak basis for information analysis, especially in terms of law enforcement. I have to stress again what Alexander Zherikhov (Head of the FCS of Russia) has said many times: the level of social security in place for customs officials is very low. I am just compelled to mention this once again. Customs are to be modernized and another argument in favor of this is that the social security system is to be upgraded too, since a poor customs officer poses a threat to the national interests of any state. You may remember that I brought up this subject even when I worked as a Deputy General Secretary of the WCO.
What are the principles for implementation of our Concept? These principles, when we present them to the business community, are perceived easily since they are understood. You are not working solely in the territory of Russia; trade is not limited by the territory of Russia. Any foreign trade transaction has two sides: a Russian one and a counterpart elsewhere, which is why we have to apply such principles which may be understood in any trade transaction.
Let me list the major principles here: standardization, transparency and predictability, a balance between customs control in part of assurance of security and the measures facilitating trade, minimum interference, targeting to consumers, cooperation and partnership.
These are commonly-accepted principles and they have also been approved by the World Customs Organization, which means that we are not inventing a bicycle; we are applying the WCO principles to the basis of our Concept. I am sure that business is going to support us in this undertaking.
What will be the directions of the Concept implementation? Traditionally we evaluate any customs administration according to four parameters. In any country visited either together with Michel Danet, or with other colleagues, we traditionally ask four questions: what do you have in terms of infrastructure; do you have buildings and structures on the whole perimeter of your border; are these structures connected by any means of communication, including through a centralized system in regions, and so on; do you have information-engineering support, and what is the level of what you have; what are the qualifications of your personnel and what is your legal basis?
Thus from the standpoint of these four parameters, we have managed to achieve a considerable amount. To give you a brief description of the background I must mention that the current customs infrastructure presents most of the problems. Customs infrastructure includes buildings, structures and development of the border. After the Soviet Union collapsed, Russia inherited the longest overland borders in the world. The most serious situation is in the southern, south-eastern direction. We may say that the north-western direction has been covered well enough together with our Belarusian colleagues, while the situation in the south, especially on the border with Kazakhstan and to some extent even with Ukraine, is very serious. Huge investments are required. We are glad that the President of Russia supports us in this situation, and that we are getting support from the governmental agencies. A special Border Commission headed by the Chairman of the Government of the Russian Federation has been set up. This Commission also includes the Head of the FCS of Russia. If all governmental agencies participate in its operation, rather than one at a time, it is possible to define what and where these investments are required. The program “State border by the year 2010” is going to be the basis for new investments. The funds required are astronomical. On the other hand this problem is a primary one in any country we visit, mainly because such investments are official; no entity except for the state allocates money for investment in borders of a country. Each country needs to find ways to resolve this problem. Our approach is to follow the State Border Program, and we will continue to work this way in future.
As far as IT (Information Technology) is concerned, you will already be aware that we are discussing this issue. We have received a loan from the World Bank - the Government has borrowed 140 million United States dollars. Leonid M. Ukhlinov, the Head of our Main Administration of Information Technology, and I are in charge of administration of this program. Despite certain drawbacks, so far we remain one of the most advanced projects in the opinion of one of the World Bank experts. Incidentally, we expect them to visit us on May 25th with another audit; I believe they are sending a team of experts united in a commission to audit us every six months. They check the things so thoroughly that it is impossible to hide anything; they manage to establish everything which has been done and everything still outstanding. In this respect we are dealing with a Concept which is absolutely ready. We know what we want. We are creating a foundation based on Russian brainpower but absolutely adapted to operational conditions in every system. We may work using Edifact, while currently we are working with XML; I mean to say that we are able to use the same lingware in any situation.
I have some comments on the legal aspect. Here we have made considerable progress and I am pleased that Michel Danet has noted this; he commented on the fact that the Customs Code, which is compliant with international standards, has been adopted. However, we are not resting on our laurels: we know the shortcomings of the document, and we know what needs to be improved. Recently we had a meeting chaired by the Head of the Service in order to evaluate and discuss the details of the document. We have defined 13 aspects which require certain alteration and amendments to the Code. We are doing this now through discussions with the business community. We do not want this process to go on and on or to be hindered by episodic lobbying in the State Duma. That is, there is no point in opening a Pandora’s box for the sake of discussing a couple of issues. Let us remember that in the process of adopting the current Code more than four thousand comments and proposals were made. Should we start a discussion on every other point, the discussions would never end. The FCS believes that with the close collaboration and support of the Chamber of Commerce and Industry of Russia, and also with the support of business associations, we are going to review the Code again. We are going to ask your advice and we shall be able to prepare specific proposals for the autumn plenary session of the State Duma. We are working to reduce the number of secondary legal acts, although we are encountering some problems in this area. The Concept has not changed on the whole: the Code is the main document supplemented by some 100 legal acts, mainly orders issued by the Ministry of Economic Development and Trade. We do not have the right to issue such orders, as we are a law-enforcing organization.
Finally, let me elaborate on human resources. This issue poses a significant problem. There are things like equipment and logistics on the one hand, and on the other hand there is personnel, composed of people, us, our families, our knowledge, our salaries, our training which lasted many years.... From my own experience, and Michel Danet can confirm this, I can tell you that to train a rank-and-file customs officer in every country requires at least two years and 4-5 years are required to fully train an executive customs officer. It is also necessary to rotate the personnel. The principle of constant rotation has remained very important in our job. We keep doing it in order to prevent customs officers and offenders from establishing links in the course of long-term communication. We have a special human resources program, in which, I am pleased to say, the WCO is very actively involved. Their experts from the WCO Center together with colleagues from Belarus, Kazakhstan, Tajikistan and Kyrgyzstan, i.e. from the European-Asian Economic Cooperation Association (EVRAZES), are teaching our specialists. It is of paramount importance. So we shall proceed with our work along these four directions.
And now I would like to comment on a number of important matters. What things are to be changed and what new things may appear in terms of development? Let me draw your attention to what the General Secretary of the WCO said: “We want to go from totally controlling goods to controlling information about goods”. This is the gist of the customs revolution taking place around the world now. What happened before was that goods would be accompanied by documents but the customs officer would get suspicious for some reason and stop everything. This should not happen any longer, and things are going to change, as I said. The FCS of Russia is changing its methods and implementing new approaches, and we are going to proceed along the way pointed out by the Secretary General of the WCO. We, Russian Customs, have chosen this approach.
Now I have some comments on the “one stop” and “one window” principle. Many people are asking us about this “one window”. Well, it is not a window like the one in the Soviet movie about Ostap Bender (a popular literary character portraying a professional offender), who wished to squeeze through such a window on the border. It is easy to explain: there are many different departments working at the border – perhaps you know that there are currently seven control organizations working at the Russian border. We have motioned a proposal which will not be easily realized: we have suggested that only two departments stay at the border - border and customs services. I would like to bring it to the attention of the audience that we have no plans to press any one from the border; we are only stating that every one should stay nearby and, if required, they still will be able to conduct a quarantine, “phytosanitary” defense of overseas products, or any other type of control, but they must stay next to the control line. A few days ago I watched a TV show about Mr.Karaulov (renowned for his uncompromising interviews), where he claimed that practically everybody was to be removed from the border, that the border was going to remain unattended, and that this would be disastrous because infected meat would be hauled across the border in huge quantities and nobody would care. Let me tell you that these accusations were pure nonsense. We are not stupid. And we all understand that the worst case scenario he depicted was a fantasy and nothing else. The important issue is how to arrange control. Why? There are three categories which cross the border: goods, means of transport and passengers, and that is all. Who is always involved with all three categories? The answer is simple: the border and customs control; no one else. All other types of control only need to be involved in the case of any questions regarding goods or means of transport. Nobody is going to push anybody away from the border. We are just trying to develop an improved procedure which will allow better control without any additional problems, and which will avoid queues at various windows. I believe this is a sensible and practical approach and a working principle.
Now, let me focus on the assurance of high quality by means of better quality management of each particular operation. This means that everybody ought to know exactly what to expect at the border and inside the country, what to expect from a Russian customs officer, who should not go beyond the limitations set for his activities. These are standards; and this is what we are working on right now.
I have already discussed the complex human resources strategy and program-purpose oriented methods. Another item is the transfer of the attention of customs authorities in the field of security to the state border of the Russian Federation. Reiterating what the Secretary General of the WCO has already mentioned, we would like all major objects such as scanners, safety rails, and anything else related to security to be moved closer to the border, and goods and means of transport to pass the relevant control, provided that preliminary information has been sent to our Center. All other procedures are to take place within the country, namely everything related to fisc, economy, etc. Under the conditions of Russia the primary directions are north-west, centre and south. Almost 80% of the flow of goods is on the European side.
I would now like to speak about activating operational search actions and intelligence activities. I must stress at this point that we have no intention of replacing the secret service. This is particularly true in terms of intelligence activities. We do not have spies and will not engage in such activities. Let me explain: the World Customs Organization has a special strategy, which has been adopted by all the countries of the world. The system is called data acquisition, but this data is not intelligence data, but mainly special economical data required for customs work. I would like to assure you, therefore, that customs has always been and will continue to be an ordinary economic control authority and nothing else.
Next I would like to talk about participation in the implementation of the concept of common European economic space. You will know that the President of the Russian Federation has signed four “road maps”. It is very important that businesses understand the principle of our work in the future. On a global strategic level, these are the standards which Michel Danet was talking about; these are global standards used around the world, and we are taking them as the basis of our actions. On a tactical, operative level we are going to work together with the European community, harmonizing our documents and our transit schemes. The EC makes up more than 50% of Russia’s trade volume. Our partnership with Belarus is very important, since the main volume of trade goes through Belarus. That is why it is very important that Alexander Frantsevich Shpilevsky (Chairman of the State Customs Committee of the Republic of Belarus) is present here today. We are constantly in touch with Minsk, exchanging information about what we are doing. So you should understand that in the near future - within 2-4 years - we will produce a single administrative document of the EC and cargo customs declaration of the Russian Federation.
The next stage is the integration of transit schemes. There is a system within the EC called NCTS: this is a Convention on transit between the countries of EFTA (Europe Freedom Trade Assosiasion) and the European Community. In order to join the Convention we must first of all raise our transit system to such a level that we may be able to raise the issue of integration on a political level. We are very grateful to the European Community and its experts, who in cooperation with our specialists have already prepared a 70-page draft action plan outlining what we and our colleagues in Belarus are to do.
I also would like to speak about intensification of work in the field of unification of customs procedures standards and regulations in the member states of the C.I.S., Eurasian Economic Community and in the United State of Russia and Belarus. This is very important too and we, together with Alexander Zherikhov, are going to make a presentation for our colleagues in the Eurasian Economic Community to let everybody know what our targets are and what we are going to do. We have met with complete understanding and support.
And now you may compare the words of the Secretary General of the WCO and what we imply into this preferred direction. It happened a long time before Michel Danet came to visit us. This is something that we had started ourselves and which Alexander Zherikhov told you about. It matches the standards of the World Customs Organization almost word for word. This is practically the conduct sheet of the customs service. Everybody who wishes to cooperate with us in open regime and use all the privileges, please come and take a copy of this conduct sheet.
There are such things as preliminary information, electronic declaration, a risks management system, simplified procedures, selective control, a post-audit and unified automated system of acquisition, storing and processing of information during all state control procedures. These are the main outlines of the philosophy of customs for the next few years.
We have already started work in all the above directions. Currently we have a number of customs offices working in compliance with the above procedures. By the end of this year we hope that up to 60 customs offices are going to be working in the regime of electronic declaration. We invite all of you not just to note these developments but to cooperate with us and to visit our web sites to obtain any information on these topics.
I know that in this audience there are representatives from IKEA, a company which often serves as an illustration of fruitful cooperation with customs. We started with a pilot project and now up to 92% of IKEA goods are declared electronically; this is especially remarkable since their range of goods is enormous. You can imagine the effort required to put all the screws, nuts and other small items into electronic format.
I would like to say that when such things become routine, this becomes normal. That is why if you need any advice on these matters, please refer to Leonid Mikhailovich Ukhlinov (Head of Main Administration of Information Technologies of the FCS of Russia) and his team, who are able to provide you with information immediately. In our last meeting with business representatives, we even mentioned the price of the software required. The cost of the software and equipment is in the region of thirty thousand euros. Thirty thousand euros and you find yourself connected to the system. It does not mean you find yourself in paradise, but definitely in the system. My only concern is that you should be very cautious with unlicensed software on the market. I know some companies who bought such software and actually lost their money. They bought rather expensive software which may not be integrated with our system, which means they had to change their software. It is always better to ask for advice before buying something like that; we are always ready to listen to you.
Now let me speak on the methods of post-audit. This is our very close future; this method is being prepared now as a major program. We are going to do much to arrange acquisition of information in one place and we are working very closely with other control agencies.
How will the Concept be implemented? Implementation will take place in two stages. By 2008, when we are through with major preparation activities, when we have finalized the general strategy, completed all the negotiations with you, and when everything is finally ready. We shall also try to complete prior to 2008 the World Bank program on informatization, in order to be able to report by 2008 that we are completely and ultimately ready to work with an electronic regime. The task is not easy at all, but it is possible to achieve it. And customs are working towards this. We shall work according to state finance purpose-oriented programs: the state border, control and administration, development of institutional structures, without “inventing a bicycle again”.
The second stage is the period of 2008-2010 and subsequent time. Why mention the subsequent years? It is too difficult to arrange the required infrastructure on such lengthy state borders, so we shall try to complete this during this between 2008 and 2010. Great emphasis is laid on the operation of such self-regulating organizations as trade and industry chambers, brokers etc. We shall hand over many of the functions we are fulfilling now. We shall busy ourselves only with the real functions suitable for a governmental body such as our customs service, like control, but this control will be on a higher level. At the same time many things are going to be done by the so-called self-regulating organizations I mentioned before. And then we shall be working in compliance with the “one stop” and “one window” principle which will regulate all other functions.
Who is going to benefit from the Concept? This is an important question, and I know that journalists are very anxious to know this. What do we expect? Here is explained how passengers and the business community are going to benefit. There is no point in numbering exactly, as you may find everything on paper, and we are very specific in our description of the beneficiaries: state authorities, the government of the Russian Federation, customs authorities of foreign states. Everybody is going to be able to evaluate the benefits. As a matter of fact, the program gives an answer: the Concept shall be provided for by the state budget since a great deal of money required and from other sources envisaged by the plan of the Concept implementation. Here you can find a massive area for our mutual cooperation, cooperation with business. We are absolutely sure that in any of the strategic directions which have been mentioned above, in cooperation with the RCCI and business associations, there is a chance to think where you can apply your capabilities.
Michel Danet said that with the new strategy the traders who accept the standards are going to benefit from it. Let me tell you of the argument we had in the last meeting of the group; we were discussing how to characterize you – the participants of foreign trade. The argument was how to describe you in English? The representatives of the business community were inclined towards a stock-phrase which may be given to all participants ,and if it was to be safe it had to be safe all over the world, and everybody should recognize it. In the second option it was assumed that somebody would give such an evaluation to a trader, e.g. customs of Russia or customs of the USA. And in this case it would be not clear whether it would be accepted by the other side, while a trader needs to be recognized everywhere in the whole logistical chain. In our last meeting we accepted the decisions using the first option. And this concept is going to be presented for the session of the Council.
What is going to be chosen? Well, we are going to defend our point of view, and of course, we are not sure what is going to come out. But I can confirm that we expect very serious debates with respect to this topic. The Ministry of Economic Development and Trade of the Russian Federation has issued an Administrative Order based on Article 68 of the Customs Code. To some extent we have already been involved in work on this. It means this concept has been put to life and is being implemented now. Well, implementation is partial as yet but as soon as the whole Concept is accepted, I am absolutely sure that we shall then be able to work in this regime.
In conclusion, I wish to say that the Russian customs service together with our colleagues from Belarus, being aware of the developments, have included all the important strategic provisions in the Concept of development customs. I am sure that at the session of the Council we might be able to report, having advised the government and our minister about this and received their support and clearances, that we shall be among the first states to support the security standards of the WCO aimed at providing for safe delivery and assistance to legal traders. Thank you.
1. Central Customs Directorate (CTU)
2. Siberian Customs Directorate (STU)
4. Southern Customs Directorate (JTU)
5. Privolzhsky Customs Directorate (PTU)
6. Urals Customs Directorate (UTU)
7. Far Eastern Customs Directorate (DVTU)
8. North Caucasus Customs Directorate (SKTU)