Mutual Supervision in Preshipment Inspection Programs

Preshipment inspection programs are implemented in many developing countries to fight customs corruption. They consist in delegating the inspection of imports to a private firm that operates in the exporting country. To study those PSI programs, we develop a hierarchical agency model where the government authority can rely on two supervisors, namely the private inspection firm and the customs administration, to control importers' declarations. The government's optimal program is fully characterized. We devote some attention to the optimal inspection policy and its comparative statics properties. In particular, we identify the situations in which PSI programs are optimal. Our results highlight the fact that implementing PSI programs both to fight corruption and to modernize customs is inconsistent. We also discuss the optimal reconciliation policy, i.e. what to do in case of conflicting inspection reports by the private firm and the customs administration. In the optimal mechanism, mutual supervision between the private firm and the customs administration is used to provide adequate incentives to all parties.Preshipment inspection, Mutual supervision, corruption, Customs administration.

Mutual Supervision in Preshipment Inspection Programs

Preshipment inspection programs are implemented in many developing countries to fight customs corruption. They consist in delegating the inspection of imports to a private firm that operates in the exporting country. To study those PSI programs, we develop a hierarchical agency model where the government authority can rely on two supervisors, namely the private inspection firm and the customs administration, to control importers' declarations. The government's optimal program is fully characterized. We devote some attention to the optimal inspection policy and its comparative statics properties. In particular, we identify the situations in which PSI programs are optimal. Our results highlight the fact that implementing PSI programs both to fight corruption and to modernize customs is inconsistent. We also discuss the optimal reconciliation policy, i.e. what to do in case of conflicting inspection reports by the private firm and the customs administration. In the optimal mechanism, mutual supervision between the private firm and the customs administration is used to provide adequate incentives to all parties.Preshipment inspection;Mutual supervision;corruption;Customs administration.

The costs of customs compliance in Croatia in 2001

The purpose of the paper is to show the size and the basic characteristics of customs compliance costs of importers (legal entities and small business) in the Republic of Croatia in 2001. The customs compliance costs comprise those costs that the customs payers incur in order to meet the provisions of the customs laws and the requests of the customs administration. Only the amount of the customs duty paid and any distortion costs arising from paying customs duty are not customs compliance costs. The research was carried out by the face-to-face interview method, in the period from June to October 2002. It was concluded that the Croatian customs compliance costs in 2001 were regressive. It was also concluded that costs were large in comparison with the total customs revenue and GDP. It is estimated that customs compliance costs for importers (legal entities and small businesses) in RC in 2001 were around 1,006 million HRK. That is 0.6% GNP and around 31% of total Croatian customs revenues in 2001. There is not, unfortunately, a single foreign research of the costs of customs compliance that could be used as a comparison. What is more the research faced many problems (e,g. non-representative and small samples) so one should be cautious when using its results. For this reason we would conclude that the primary purpose of this research is to pose relevant questions related to the conceptual and methodological problems of customs compliance cost research. Furthermore it should indicate possible size and characteristics of the customs compliance costs in the RC

Risk Management for Targeting Customs Controls in Developing Countries: A Risky Venture for Revenue Performance?

Customs authorities in developing countries are often reluctant to forgo systematic inspections for fear of risking revenue loss. Such physical inspections, however, impede rather than facilitate trade. Control selectivity is therefore a key issue in customs administration reform. This paper shows how a sophisticated risk management method can facilitate trade by automatically and rationally selecting transactions, with the end result of actually enhancing revenue performance.trade facilitation, fiscal revenues, risk management, moral hazard, customs controls

Mutual Supervision in Preshipment Inspection Programs

Preshipment inspection programs are implemented in many developing countries to fight customs corruption. They consist in delegating the inspection of imports to a private firm that operates in the exporting country. To study those PSI programs, we develop a hierarchical agency model where the government authority can rely on two supervisors, namely the private inspection firm and the customs administration, to control importers' declarations. The government's optimal program is fully characterized. We devote some attention to the optimal inspection policy and its comparative statics properties. In particular, we identify the situations in which PSI programs are optimal. Our results highlight the fact that implementing PSI programs both to fight corruption and to modernize customs is inconsistent. We also discuss the optimal reconciliation policy, i.e. what to do in case of conflicting inspection reports by the private firm and the customs administration. In the optimal mechanism, mutual supervision between the private firm and the customs administration is used to provide adequate incentives to all parties

Customs Brokerage Services and Trade Facilitation: A Review of Regulatory Coherence

The study looks at the rarely studied customs brokerage activity in the Philippines and its role in facilitating trade given the ongoing push to modernize customs administration. It analyzes how the customs brokerage profession is being regulated and synthesizes insights on opposing views on the importance of customs brokers in trade facilitation. The results of the study clearly point toward a declining relevance of the customs brokers' services in an environment where customs administration is modernizing, computerization is replacing the traditional, direct interaction of brokers with the Bureau of Customs, and a more transparent customs administration is emerging to efficiently process a significantly growing volume of trade transactions.Understandably, a threatened profession such as brokering mounts resistance in the face of changes. Customs brokers take the Customs Brokers Act of 2004 as their shield against any attempt to dilute or minimize their role in the customs administration process. However, their legalistic stand somewhat collides with the policymakers' attempt to modernize customs administration. A more positive outlook on modernization should trigger among customs brokers a paradigm shift, namely, that a modernized customs administration and trade facilitation process will necessarily create new opportunities for those adept and flexible enough to adjust to changing market conditions. Moreover, it will be more efficient and consistent with trade facilitation to allow traders to use various and modern options for releasing or shipping their goods

An Evaluation of the Need and Cost of Selected Trade Facilitation Measures in Bangladesh: Implications for the WTO Negotiations on Trade Facilitation

With the ongoing customs reforms in Bangladesh, the possible future negotiations on trade facilitation in the WTO will have a profound impact on Bangladesh, as well as on other LDC and developing countries. These countries will benefit greatly from new trade facilitation initiatives. Simultaneously, these countries may face enormous challenges in implementing their commitments in the area of trade facilitation. It is, thus, imperative for these countries to closely monitor the Doha negotiations in this area and be prepared to formulate their negotiating strategies. They should also continue with customs administration reform and trade facilitation capacity building programs in order to develop their own capacity.WTO, Trade Facilitation, Bangladesh

Japan, Britain, and the Maritime Custom Administration during the Founding of the Government of Nationalist China

The administrative ideals concerning maritime custom matters in early modern China indicate in condensed form the political circumstances, both internal and external, of that period. Despite the successive changes in the Inspector General of Customs during the years 1927-1929, from F.A. Aglen, to A.H.F. Edwardes, and finally to F.W. Maze, this remains true without exception. The foreign powers' system of giving precedence to an insured fund of money for the sake of the return of responsibilities for maritime administration became, under heightening Chinese nationalism, a thing of the past, and in its stead, the feeling arose on the Chinese side that a Chinese maritime custom administration which respects Chinese sovereignty in politics and economics must be advanced. F.A. Aglen and A.H.F. Edwardes, who failed to appreciate this, resigned from their position. This led to F. W. Maze, who well discerned the trends of his day, becoming the Inspector General of Customs. Thus arose the Nationalist Government, which, as the political force claiming to be able to effect these changes in maritime customs administration, replaced the Peking Government. Thus the major powers, beginning with Japan and Britain, who were out of step due to disparities in the benefits that they derived from the old system of customs, were forced to accept the changes in maritime customs administration in China

A political - economy analysis of free trade areas and customs unions

The authors analyze the welfare effects of regional integration in a model of endogenous protection. They show that introducing preferential trading leads to an increase in protection against countries outside the preferential trading area. Moreover, the important Meade result of preferential trading breaks down in the presence of endogenous protection. According to the Meade result, if excess demands exhibit net substitutability, the introduction of preferential trading is welfare-improving. In the presence of endogenous protection, because preferential trading is accompanied by increased protection against nonpartners, its effect on welfare is ambiguous. The authors also compare free trade areas and customs unions. They provide the first formal treatment of the argument that a customs union is a more effective instrument for diluting the power of interest groups than is a free trade area. Under a customs union, the tariff available to one country becomes available to all countries in the union. This introduces a free-rider problem in lobbying and all lobbying takes place in one country. The lobby chooses a lower (common) external tariff under a customs unions than under a free trade area. This means that welfare in the country where lobbying takes place is higher under a customs union than under a free trade area, although the same may not hold true for the other country. The level of the common external tariff declines as the number of members in the union increases. Therefore, the larger the number of partners in a customs union, the more likely it will improve the welfare of member countries. But, because of the free-rider problem, lobbies are likely to resist the enlargement of the customs union.TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade and Regional Integration,Environmental Economics&Policies,Economic Theory&Research,Trade Policy