Text 12.3. The risk management process

For Customs administrations there is always an element of risk

in facilitating the movement of goods and persons. The extent of controls to ensure compliance with the laws and regulations which the Customs are responsible for enforcing should be proportionate to the level of assessed risk.

The level of risk is determined in the context of the priorities of the Customs administrations e.g. whether the priority is collection of duties and taxes or checking prohibitions and restrictions or any other specific area that has been identified.

The risk management process comprises the establishment of the risk management context, risk identification, risk analysis, risk assessment, addressing the risks and monitoring and reviewing the process through compliance measurement.¹

¹ Kyoto Convention. General Annex guidelines. Chapter 6 Customs control.

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A. Establish the context

This step establishes the strategic and organizational context in which risk management will take place. Risk areas have to be identified and criteria against which risk will be assessed established and the structure of the analysis defined.

B. Identify risks

Identify what, why and how risks can arise as the basis for further analysis. This step requires an in depth description of the current control process. It includes: participants/clients/stakeholders; strengths and weaknesses; where, when, how is the risk likely to be incurred and by whom; what are the threats and their impact in case of circumvention; why do opportunities arise for circumvention.

C. Analyze risks

Determine controls and analyse risks in terms of likelihood and consequence. The analysis should consider: how likely is an event to happen; and what are the potential consequences and their magnitude.

Combine these elements to produce an estimated level of risk.

If the estimated levels are low, then risks may fall into an acceptable category and action may not be needed.

D. Assess and prioritize risks

Compare estimated levels of risk against the pre-established criteria. Rank the risks to identify management priorities. The risks can be of HIGH, MEDIUM, and LOW levels. Risks must be continually monitored for any change in their nature, level or significance.

E. Address risks

Accept and monitor low-priority risks. For other risks, develop and implement a specific management plan which includes consideration of resources (human, financial and technical).

F. Monitor and review – Compliance measurement

Monitor and review the performance, effectiveness and efficiency of the risk management system and changes which might affect it.

G. Documentation

There should be a risk register which gives the rationale behind selecting the risks, and records the assumptions on which assessments have been made, to establish an audit trail that ensures important information is not lost.

Risk management within Customs can be strategic, operational or tactical. It should be remembered that the risk management process canapply across all of these levels.

Strategic risk management.By studying comprehensive information,Customs administrations can identify areas of risk, sift out those of minor importance, and intervene only where experienced and practical judgement indicates it is necessary. Risk areas in the Customs context can include social issues (exclusion of drugs, pornography etc.), import/export prohibitions and restrictions (eg. CITES), public health, environment, commercial policy measures (e.g. IPR, GSP), quotas, and duty and tax issues.

Operational risk management– is the determination of the level ofcontrol necessary to deal effectively with the assessed risk. An example of this is determining the audit controls applied to an importer or how to deploy limited staff and equipment effectively. Using this approach the Customs moves from being a «gatekeeper» checking every movement, to checking only selected movements which demonstrate the greatest risk.

Tactical risk management– is used by officers at their workplace indealing with immediate situations. Using set procedures combined with intelligence, experience and skill, they decide which movements require greater controls.

Selectivity, profiling and targeting are integral parts of riskmanagement (figure).

RISK	SELECTIVITY
	CRITERIA	RISK
		RISK PROFILE
AREAS	Choice of	INDICATORS
			Combination
	general	Specific details
	information	for the risk		of risk indicators

Parts of risk management

Selectivity criteria for dutiable goods include the history of theimporter, exporter, carrier, agent, etc., the origin and routing of the goods, and prohibitions or restrictions.

Risk indicators are specified selectivity criteria such as: specificcommodity code, country of origin, country whence consigned, licensing

indicator, value, trader, level of compliance, type of means of transport, purpose of the stay in the Customs territory, financial consequences, or financial situation of the trader/person.

Risk profiling is the means by which Customs puts risk managementinto practice. It replaces random examination of documents and goods with a planned and targeted working method, making maximum use of Customs resources. A risk profile is a document which can be set out in a number of ways but it should be comprehensive and relevant to the traffic throughput in a Customs office.

The risk profile should contain a description of the risk area, an assessment of the risk, the counter-measures to be taken, an action date, the results and an evaluation of the effectiveness of the action taken. A risk profile can be kept in a binder or on a local computer and it should be as accessible as possible to Customs officers.

Once established, the profiles along with other information and intelligence will provide a basis for targeting potentially high risk movements of consignments, means of transport, or travelers.

Risk indicators are emerging all the time. Customs should keep them up to date by gathering and accessing information from various sources such as the WCO Enforcement Bulletin, Regional Intelligance Liason Office, international databases on trader information (e.g. Dun & Bradstreet, Lloyd's Shipping register) and from other administrations acting under the Narobi Convention or bilateral agreements. It is essential that gathering and accessing information be based on mutual

administrative assistance.

Risk profiles should be reviewed at regular intervals to ensure that they are always up to date, and to rid the system of information that is no longer relevant. It is also important to carry out random checks, because companies that are in regular contact with Customs will be aware of profiling methods or sometimes the profiles themselves.

These random checks can also provide a cost effective means of identifying other types of risk and of monitoring or estimating their significance, or any changes in the risk pattern.

Review and evaluation within the risk management process should be incorporated into a regular review procedure to measure, assess and evaluate the effectiveness of the overall Customs control programme and should take into account the findings of external government audits.

Staff at all levels should be involved in these regular reviews. Feedback from staff is essential so that constant validation can take place and the necessary updating can be applied.

Customs administrations are encouraged to implement control procedures based on the use of risk management and profiling techniques as a means to identify reliable operators/persons who may then benefit from greater facilitation as opposed to those operators/persons which require higher levels of control.

Risk management is a basic principle of modern Customs control methods. It allows optimum exploitation of Customs' resources without threatening the effectiveness of controls, while relieving a majority of the trade/public from excessive bureaucratic constraints.

Procedures based on risk management techniques concentrate controls on the areas of highest risk while leaving the bulk of goods/persons to pass relatively freely through Customs.

EXERCISES

I. Match the words from the text with their corresponding definitions.

1. audit-based control a. the systematic determination of risk management priorities by evaluating and comparing the level of risk against predetermined standards, target risk levels or other criteria.

2. mutual b. specific criteria which, when taken together,

administrative serve as a practical tool to select and target

assistance movements for the potential for non-

compliance with Customs law.

3. risk areas c. actions of a Customs administration on

behalf of or in collaboration with another

Customs administration for the proper

application of Customs laws and for the

prevention, investigation and repression of

Customs offences.

4. risk assessment	d. measures by	which Customs	satisfy
	themselves as to the accuracy and authenticity
	of declarations through the examination of
	the relevant books, records, business systems
	and commercial data held by persons
	concerned.
5. risk indicators	e. the	potential	for	non-compliance	with
	Customs laws.
6. risk profile	f. any physical or electronic medium designed
	to carry and actually carrying a record of
	data entries.
7. risk analysis	g. a	predetermined	combination	of	risk
	indicators, based on information which has
	been gathered, analysed and categorised.
8. document	h. when someone obeys a rule, agreement, or
	demand
9. risk	i. those Customs procedures and categories
	of international traffic which present a risk.
10. customs offence	j. the systematic application of management
	procedures and practices which provide
	Customs with the necessary information to
	address movements or consignments which
	present a risk.
11. risk management	k. measures to ensure that a trader's system
	contains the checks and controls necessary
	for compliance with Customs laws.
12. systems-based	l. any breach or attempted breach of Customs
control	law.
13. compliance	m. systematic use of available information to
	determine how often defined risks may occur
	and the magnitude of their likely consequences.

II. Find 3 abbreviations for the given definitions. They are hidden in the grid horizontally and vertically.

G	I	P	R	K
S	E	T	I	C
P	B	l	A	T

1. It is an international agreement between governments. Its aim is to ensure that international trade in specimens of wild animals and plants does not threaten their survival.

2. Intangible rights protecting the products of human intelligence and creation, such as copyrightable works, patented inventions, Trademarks, and trade secrets.

3. A system which provides developing countries with unilateral preferential market access to developed-country markets in order to spur economic growth in poorer countries.

III. Speculate about the following:

How can Customs benefit from risk management?

FOLLOW-UP ACTIVITIES

I. Fill in the gaps to make the sentences complete.

Reference words: internal and external environment, risk, activity, risk management, assess, cost-effective, stakeholders, adverse, logical, study, criteria, consequences, basic, appropriate, determine, evaluation.

1. All activities undertaken in Customs carry an element of … Customs manages its exposure to risks through the practice of ...

2. Risk management is about looking at activities in a … and systematic way, to maximise opportunities and to minimise … effects.

3. The context sets the scope of the risk management process and defines the … parameters within which risk must be managed. It includes the … and the purpose of the risk management ... The context brings into focus the background of the …, the sources of risk and the … involved.

4. Risk analysis helps … whether risks need to be treated and the most … and … risk treatment strategies. Risk is analysed by combining … and their likelihood. When assessing risk, Customs considers all existing controls and management plans to … the risk level.

5. Risk … involves comparing the level of risk found during the analysis process with risk … established when the context was considered.

II. Translate into English.

Таможенные администрации должны максимально использовать информационные технологии для оказания содействия таможенным органам в эффективном осуществлении их функций. Следует рас-

ширять применение компьютеров для таможенной обработки внеш-неторговых и финансовых сделок с учетомдекларацийопыта всех стран. Сле-дует разрабатывать и передавать торговцам компьютерные интер-

фейсы (в целях использования стандартов обмена данными) для

представления в электронном в де судового груза, товарных деклараций и т. д.

III. EDI is not a technical exercise but rather a business strategy. The reasons for introducing EDI to facilitate the transport flow include: (Choose 8 items).

■ reduction of documents ■ tax exemption

■ improved lead time ■ more relevant and accurate

information

■ weather forecast information ■ improved control

■ improved customer service ■ better planning of transport

activities

■ scheduled coffee-breaks ■ repair service

■ better utilization of equipment ■ higher salaries ■ improved Customs Service

IV. Translate into Russian.

PRE-SHIPMENT INSPECTION

The pre-shipment inspection is based on physical inspection of goods by the private inspection agencies in the countries of exportation, i.e. prior to the shipments. The Customs shall be advised by these pre-shipment inspection companies regarding the physical aspects of the goods as well as the recommended value.

DO IT FOR FUN

I. Read the following text and discuss it with your partner.

PERSONAL SAFETY

Do you agree that there are many common- sense actions you can take to increase your safety but four basic things which you should always remember are:

• checking the people without an official or visitor's badge that you do not recognize in the non-public part of your building?

• telling someone where you are going if you are working away from the office?

• leaving the premises you are visiting if you feel especially threatened or vulnerable and discussing it with your manager as soon as possible?

• insisting that the trader (visitor, passenger...) removes aggressive animals from the work area?

II. Speculate about the following:

We either change to meet the demands of new times or we vanish to be replaced by others more open to adventure. (Frank Ogden¹)

¹ Frank Ogden – free-spirited futurist known as Dr. Tomorrow who was one of the first people to predict that the Internet would come to dominate our lives.

III. Find the following hidden words in the word search.

INFORMATION RISK INDICATORS

TECHNOLOGIES RISK AREAS

SELECTIVITY CRITERIA

RISK PROFILE

UNIT 13. CUSTOMS COMMUNICATIONS

Study the following words and word combinations from the text.

to amend изменять, исправлять

to batch пакетировать, группировать

intermediate document промежуточный документ

output file выходной фа л

Automated Export System автомат з рованная система экс-по та

Shipper's Export Declaration записи экспортной декларации гру-

records з отправителя

Communications – ways of sending information,especially using radio, telephone, or computers.

Communication – the process by which peopleexchange information or express their thoughts and feelings.

(The Longman Dictionary

of Contemporary English)