What is the World Customs Organization (WCO)?

• The Customs Cooperation Council (CCC) which is the forerunner of the WCO has since its inception in 1952, been working to develop modern principles that would buttress effective customs administrations. One of its major outputs is the 1973 Kyoto Convention (KC) which came into force in 1974. The WCO improved on the KC with the entry into force of the Revised Kyoto Convention (RKC) in 2006.

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What is the Kyoto Convention (KC)?

• The early efforts of the CCC for simplifying and harmonizing customs procedures culminated in the KC or the International Convention on the Simplification and Harmonization of Customs Procedures which was adopted by the Council in 1973 and entered into force in 1974.

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Why did the WCO Revise the KC?

• Globalization, rapid transformation of international trade patterns and advances in information technology since then have compelled the WCO and its members to review and update the KC.

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What is the Revised Kyoto Convention (RKC)?

• The resultant revision of the convention which is the RKC reflects the economic and technological changes and incorporates best practices of member administrations. RKC was adopted by 114 customs administrations attending the WCO's 94th Session in June 1999.
• However, it came into force Feb 3, 2006 three months after India became the 40th signatory to the Protocol of Amendment.
• Necessary tool for facilitating trade, ensuring economic growth, and improving the security of the international trade system.
• Global call for professionalism and integrity in all customs administrations.
• Blueprint for modern and efficient customs procedures in the 21st century.
• Key anti-corruption initiative... promote the integrity and professionalism of customs administrations worldwide and reduce the susceptibility of businesses and citizens to corrupt customs practices.

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What has Philippine Customs done about KC?

• Philippine Customs was not a contracting party to the KC. However, in its various reforms and modernization programs particularly during the 1992-98 Customs Reform and Modernization Program, several national legislation, were issued and systems and procedures developed that made many Customs operations compliant with the major provisions not just of KC but also with the then being deliberated RKC.

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Results of not acceding and not ratifying KC?

• 1992-1998 Customs Reforms were Administrative initiatives that were changed or ignored by succeeding Customs management.
• Reforms were not sustained. In several fronts, there were even reversals.

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Compliance vs. Accession: Differences

• Kyoto Compliant means
  • Accepting the responsibility to construct regulatory policies and practices in a manner that is consistent with the principles laid down in the Convention.
  • Conforming to the standards set forth in the Convention.
  • Being compliant is something that can be done now and even without acceding.
  • Does not create rights and responsibilities relative to contracting parties.

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Accession

• A step beyond being compliant
• A legal act through which one recognizes that one is or intends to be compliant, that one accepts the obligations of the Convention as being legally binding
• Creates rights and responsibilities relative to other contracting parties
• Accession would:
  • Send a clear message that the public and private sector truly can work together to facilitate trade and that trade and security are not mutually exclusive.
  • Present a significant step forward in the promotion of economic growth, national security, and customs integrity at both the national and international level.
  • Send a clear message to both the international trade community and governments around the world that the Philippines stands firmly behind customs procedures that facilitate the secure movement of legitimate trade across national borders.
• Benefits of Accession:
  • Protection against Passage or Issuance of National Legislation (revision of Customs Code, Issuance of PDs and EO’s and Administrative Orders, CAOs and CMOs) that are against the principles and provisions of the RKC (anti Trade Facilitation (example- threat of the anti-smuggling law). That moves to legislate measures that are anti trade facilitation can outrightly be rejected if we are a signatory to the RKC
  • Solid Foundation for Reforming and Strengthening our Legislative Base which is a very important first step in reforming Customs and related institutions. Eliminating the Gaps between RKC and National Legislation can be the Action Program of a Joint Business-Congressional-DOF-BOC Reform Agenda
  • Benchmark for Assessing the Status of the Philippine Trade Efficiency and Competitiveness
  • Lead Shepherds and TTEs will later on lead the reform process
  • RKC Mgt Committee - the body to which foreign companies and countries can express grievance to if the customs service does not properly implement RKC

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BENEFITS expected from trading with countries that are RKC compliant

• Reduce cost of clearing customs in other countries.
• Reduce delays in getting the goods into the country.
• Individual companies do not have to learn 140 separate sets of customs procedures.
• Reduction of inefficient customs procedures and policies that impede access to markets and unnecessarily increase costs;
• Facilitation of product market introduction;
• More efficient customs procedures overall;
• Standardization of customs implementation and administrative procedures worldwide--across participating countries;
• Reduced cycle time due to more predictability in the customs entry and release process, which also results in inventory savings (inventory costs can run as high as $20 million per day);
• Greater understanding of compliance requirements resulting from increased transparency so that industry is better able to meet “time-to-market” objectives;
• Implementation of special procedures for low-risk importers;
• Reduced opportunities for extortion of facilitation/grease, payments, thereby paving the smooth transition to increased transparency and automation.

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The RKC Structure

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General Annex

• Cp 1 General Principles
  (e.g., partnership with the trade)
• Cp 2 Definitions
• Cp 3 Clearance and other Customs formalities
  (e.g., Standardized and simplified documents, minimum requests, pre-arrival declaration)
• Cp 4 Duties and Taxes
  (e.g., deferred payment)
• Cp 5 Security
• Cp 6 Customs control
  (e.g., risk management, audit-based controls, Specially simplified procedures for authorized traders, co-operation with OGAs)
• Cp 7 Application of information technology
• Cp 8 Relationship between the Customs and third parties
• Cp 9 Information, decisions and rulings supplied by the Customs
  (e.g., Publication of information, advance rulings)
• Cp 10 Appeals in Customs matters

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General Annex Sample Provisions

Risk management - Standards 6.2 and 6.3

• Customs control shall be limited to that necessary to ensure compliance with the Customs law.
• In the application of Customs control, the Customs shall use risk management.

Advance rulings - Standard 9.9

• The Customs shall issue binding rulings at the request of the interested person, provided that the Customs have all the information they deem necessary.

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Specific procedures covered by the Specific Annexes and their Chapters

A1 Formalities prior to the lodgement of the Goods Declaration
A2 Temporary Storage of Goods
B1 Clearance for home use
B2 Re-importation in the same state
B3 Relief from import duties and taxes
C1 Outright exportation
D1 Customs warehouse
D2 Free zones
E1 Customs transit
E2 Transhipment
E3 Carriage of goods coastwise
F1 Inward processing
F2 Outward processing
F3 Drawback
F4 Processing of goods for home use
G1 Temporary admission
H1 Customs offences
J1 Travellers
J2 Postal traffic
J3 Means of transport for commercial use
J4 Stores
J5 Relief consignments
[K Origin]

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RKC Management Committee

• To administer the RKC
• To recommend amendments to the RKC
• To make a decision on amendments to Recommended Practices
• To make a decision with respect to a request of extension of the implementation period
• To review and update the Guidelines
• 1st meeting on 6-7 March 2006

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THE PROJECT

• “Research and Advocacy Support for Trade Facilitation: Philippine Compliance with the Revised Kyoto Convention”
• Joint undertaking of the Partnership and Advocacy for Competitiveness and Trade (PACT) and PhilExport
• Cleared and approved by the Export Development Council

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STATUS of the PROJECT

• Completed Activities
  • Applicability Analysis
  • General Annex Gap Analysis
  • Specific Annex Gap Analysis
    • A-1,2; B-1,2; C-1; D-1,2; E-1,2; F-1,2,3 and J-1
  • Emerging Strategy for RKC Compliance

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General Annex Gap Analysis

Chapter No.	Subject	Not Applicable	Compliant	Not Compliant
3	Clearance and Other Customs Formalities	3	26	12
4	Duties and Taxes	4	17	5
5	Security	0	5	2
6	Customs Control	0	6	4
7	Application of Information Technology	0	0	4
8	Relationship between Customs and Third Parties	0	3	4
9	Information, Decisions and Rulings Supplied by Customs	0	0	9
10	Appeals in Customs Matters	0	12	0
	TOTAL	7	69	40

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Specific Annex Gap Analysis Summary

Annex Chapter	Title	Not Applicable	Compliant	Not Compliant
A1	Formalities prior to the lodgement of the Goods declaration	1	13	4
A2	Temporary storage of goods	2	10	3
B1	Clearance for home use		1	0
B2	Re-importation in the same state		9	0
C	Outright exportation		1	1
D1	Customs warehouses		7	8
D2	Free zones		14	6
E1	Customs transit	1	9	17
E2	Transshipment		9	1
F1	Inward processing		14	11
F2	Outward processing		17	0
F3	Drawback		2	7
J1	Travelers	2	22	14

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Components of Gap Analysis

The Gap Analysis identified the Standards, Transitory Standards and Recommended Practices for which National Legislation is non-compliant. Also part of the analysis was the identification of the “compliance gap” or the reason for non-compliance and recommended measure to remove the gap. The recommended pathway to accession is as follows:

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Pathway to Accession and Compliance

1.0 Developing National Consensus on the Strategy for RKC Compliance

1.1 Posting in the www.rkcphil.net website of the Applicability Analysis, the Gap Analysis and the Emerging Strategy for Compliance and inviting stakeholders to comment thereon

1.2 Finalization of the Analysis (applicability and gap) and the National Strategy for Compliance

1.3 Workshops on the National Strategy for Compliance

1.4 Agreement on a 2-stage timetable for compliance

i. Compliance with Body of the Convention, the General Annex and those Specific Annex provisions which will not entail amendment of the Customs and related laws

ii. Amendment of laws to support acceptance of all other Specific Annex provisions recommended for acceptance in the national strategy

2.0 Drafting of Executive Actions

2.1 Customs Report on the Benefits of Accession, the Specific Annexes recommended for Acceptance and the Reservations to particular provisions

2.2 Department of Finance draft letter of indorsement to the Department of Foreign Affairs with the Indorsements of the Stakeholder Groups

2.3 Department of Foreign Affairs Draft Instrument of Accession for Ratification by the President

2.4 Draft Letter of the President to the Senate requesting advice and concurrence to the ratification of the Convention

2.5 Draft Senate concurrence to the Ratification

2.6 Draft Transmittal to WCO depository office of the Instrument of Accession

3.0 Activities following transmittal of the President's letter to Senate

3.1 Preparation of a Manual of Customs Operations structured along the lines of the RKC particularly of the Specific Annexes

Instead of reviewing all customs memorandum orders and amending the same to be able bring into force nationally all the basic rules from the General Annex as well as the accepted Standards and Recommended Practices of the Specific Annexes , a more expedient approach is to develop and maintain a Manual of Customs Operations detailing the regulations, systems and procedures for their implementation

The manual must have a section for each of the specific annexes of the RKC.

The manual must incorporate in the systems and procedures the various RKC standards and practices accepted as provided in the National Strategy and the Instrument of Accession.

Draft Manual initially containing the areas of operation covered by the RKC must be presented to the experts group (customs and port users) to identify other common questions on Customs that must be likewise be covered in the Customs Manual

3.2 Private Sector and Donor Agency Participations in the Manualization of Customs Operations and Compliance

The Convention standards and practices to which the country is non-compliant must be prioritized for assignment to private sector groups for the drafting of compliance of enabling systems and implementing regulations. Donor agencies assistance may be sought for those needing the development of systems or expertise for the proper implementation. For example, should transitory standard 3.32 on authorized persons and special procedures be recommended and agreed upon for acceptance, a volunteer private sector group must already develop the system and procedure for its implementation even ahead of RKC accession.

4.0 Drafting of Amendatory Laws for those provisions of the RKC that are inconsistent with current laws

4.1 Reorganization of TCCP

5.0 Post Accession Activities

5.1 General Announcement and Order

After deposit of the instrument of accession, an Executive Order must be issued immediately mandating the following:

Compliance by all concerned government agencies to all standards in the general annex as well as the accepted standards and recommended practices in the specific annexes that are not against or inconsistent with current laws.

The instruction shall include concerned agencies submitting a list of their existing regulations inconsistent with the RKC and their time table for aligning their regulations accordingly.

Silent Provisions.- All standards and practices for which national legislation is silent (C-3) may be particularly annexed in the Executive Order with instructions to the agencies concerned to issue implementing regulations to make clear observance of provisions as part of national legislation

Issuance of a general amendatory IRR for those standards and accepted practices not inconsistent with the Code but are inconsistent with regulations (C-1 except where the inconsistency is codal)

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