13 - 15 November 2012

SARS Customs Modernisation

WTO – Trade Facilitation Symposium

For African Countries
Michael Velile Lekala
Customs Modernisation Strategy & Design

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From SARS Vision to Customs Delivery
The Customs Mandate
To be an innovative Revenue and Customs agency that
SARS enhances economic growth and social development, and that
Vision supports the country’s integration into the global economy in
a way that benefits all South Africans.

Collect all revenues due

SARS Mandate

Ensure efficient & effective revenue collection

Advise the Ministers of Finance and Trade

Ensure efficient & effective control over the movement and manufacturing of goods

First line of defence at borders to secure the supply chain and

Customs to protect the economy and society by controlling movement
Mandate of goods into, from, through and between SA ports of entry

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From SARS Vision to Customs Delivery 3

Delivery Strategy: Enhanced Compliance

CUSTOMS STRATEGIC OUTCOMES
TRADE ADMINISTRATION ECONOMIC & COMMUNITY PROTECTION BORDER SECURITY

• Efficient trade administration
• Assist with compliance
• Provide trade policy support
• Collect duties and taxes lawfully
• Managing incentive schemes &
Free Trade Agreements
• Prevent harm to the community, the
economy and environment
• Protect industry from harmful, and
unfair trade practice
• Prevent smuggling
• Ensure confidence in trade and
travel channels
• Promote SA as secure trading
partner

DELIVERY STRATEGY
IMPROVE SERVICE IMPROVE ENFORCEMENT

MAKE IT AS EASY AS POSSIBLE MAKE IT AS HARD AS POSSIBLE FOR THOSE

FOR THOSE TRYING TO TRYING TO AVOID PAYING THEIR
COMPLY FAIR SHARE

ENHANCED COMPLIANCE
Key to this approach is ensuring that taxpayers/traders understand their obligations

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 The Need to Change 4

The SARS Reality - Our Vision!

SARS vision is to transform the administration system to:

• Make it simpler, quicker and hassle free for Tax Payers and Traders

• Make the process less labour intensive and less cumbersome.

• Improve the service offered to clients,

BUT………………...

• Ensure maximum compliance.

This vision implied a clear path for Customs Modernisation…

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 Customs Tomorrow 5

Strategic Reality
Trade Facilitation
• High levels of transparency and predictability of policy,
legislation and supply chain impact;
• Preferential treatment of compliant and trusted traders;
• Development of a mature organisation with high skill levels and
Economic Security
efficient, effective systems and processes; and • Protect domestic industry through
• Facilitate Regional Economic Integration. application of trade tariffs;
• Collect all trade taxes due to the
fiscus; and
• Apply trade policy and all international
trade and customs commitments.
Safety and Security
• Creation of a data rich environment with mandatory
advanced information to facilitate effective targeting;
• Implement an approach dependent on high levels of trust and
compliance and self-regulation; and
• Assure consumer and trade protection from illicit and
dangerous goods.

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 Customs Tomorrow
Modernised risk-based approach for Customs
Accreditation / Entity based
Entity performance
assurance audits (systems
audits Automated &
processing
through integrated
Compliance audits process)
(customs regimes)
risk assessment
Periodic
Proactive declarations &
Resource Distribution

client Simplifications
Inspection
management Removing
Post
mandatory
Modernisation
checks
resource
distribution

Current
resource
Value-Adding Activities distribution

Registration Declaration Assessment Inspection Audit

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Customs Tomorrow
Cover the Supply Chain!
Pre-
Cargo Movement Post-
movement
Movement
Registration
/ Licensing / International Customs Customs Inland / Regional Importer /
Port of Export SA Port
AEO Transport front-line ops. Transport Distributor

• E-filing • C2C Data Sharing • EDI Manifest • E-Declaration • E-Release • Centralised • Transit controls • PCI / PCA
• 3rd Party Data • Risk + Targeting – 2D Barcode • CBCU Assessment – Documents • Compliance
• Centralised for security and – EDI – CCA – Analytics for – Bond controls Measurement
• Trader Segmentation contraband – Web channel – Gate valuation, – Seals
• 3rd Part Data • Risk +Targeting – Patrol classification – Controlled
• Single Window – Rummages and origin delivery
– Search • Suspense
• CBCU Inspections Regimes controls
OPERATING MODELPRINCIPLES – NII • Bond acquittal
– Detector Dog (centralised)
1. Electronic Data / Paperless
• Transit document • Intelligence and
2. Integrated Risk Engine (Manifest, declarations, 3PD with 2D barcode Investigations
and C2C)
3. Control Model (inspect, audit and investigate)
4. Trade Segmentation
5. Centralised Processing:
– Registration
– Risk
– Assessment
– Audit

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The Journey
Declaration Form(s)!
DA 500
Bill of Entry

DA 510
Transfer of liability

DA 550
Bill of Entry Export

DA 600
Bill of Entry Ex Warehouse

DA 610
Bill of Entry SA Products
Ex Warehouse

CCA1
Common Customs Area

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 SARS Customs Tomorrow 9

Customs - The Process Automation!

CHANNELS ORCHESTRATION BACK-END
CAPE
Permit System (Partial
Payments)
EDI / XML
Rules of Origin
EXPORTS
(ROO)
E-Filing

E@syFile
INTERFRONT Reporting &
Trade Stats
(CEI & CES)
CCA1

DPR TBK RAM TRANSIT

Tariff Admin & WH Inventory
Hand Held BIR PER INS GAC Publishing Mngt System
Scanners (LLT) (WIMS)

Disk (XML In Bond

Drawbacks
format) * Acquittal
(CER)
System (IBAS)

Manual Service Financial Passenger Registration &

Forms Manager Accounting Processing Accreditation
(SAP) (PPS) System (RAS)

State Value
Warehouse Determination
Contact
Centre ATP Mngt (SWM) System (VDN)

Tariff
Customs Risk Manifest
Determination
Engine (CRE) Acquittal
Document System (TDN)
DOCU- (MAS)
Scanning MENTUM
U3TM

LEGEND
Existing Customs Replaced Enterprise
Channel System System

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 Customs Tomorrow
From ‘Gate-keeping’ to ‘Risk Managing’
OLD STYLE COMPLIANCE APPROACH NEW STYLE COMPLIANCE APPROACH
- GATE-KEEPING - RISK MANAGING
• “One size fits all” approach to compliance management. • Provides for flexibility and tailored solutions - enabling risk
LEGISLA-TION

management.
• Onus for regulatory compliance rests solely with trade. • Recognises compliance responsibility for government and business
• Sanctions for non-compliers. • Sanctions for non-compliers.
• “One size fits all” approach to compliance strategy. • Strategy dependent upon level of risk.
ADMINISTRATION

• Control & Enforcement Focus • Balance between regulatory control and trade facilitation
• Unilateral approach. • Consultative, cooperative approach.
• Assessing the veracity of transactions. • Assessing the integrity of trader systems and procedures.
• Inflexible procedures. • Administrative discretion.
• “Real-time” intervention and compliance. • Increased focus on post-transaction compliant assessment.
• Indiscriminate intervention – 100% check. • Focus on “high risk” with minimal intervention in ‘low risk’ areas.
RISK MANAGEMENT

• Physical control focus. • Information management focus.

• Focus on identifying non-compliance. • Focus on identifying both compliance and non-compliance.
• Post-arrival import clearance. • Pre-arrival clearance.
• Physical control maintained pending revenue collection. • Breaks nexus between physical control and revenue liability.
• No differentiated benefits for recognised traders. • Rewards recognised traders.
• Legal provisions provide trade electronic, storage & authentication options. Enables ‘regulators’ to rely on commercially generated data.
IT ENABLERS

• Appropriate ICT infrastructure provides for automated processing of clearances. “Regulators” should seek to achieve maximum integration
with commercial systems.
• Consultative business process innovation prior to automation.

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 Customs Inspections Process

Release
(Low Risk)
System Generated

No
Request
Supporting Match Supporting Ranked &
Submission of Customs Prioritised Alerts Auto
Risk Assessment Yes Documents Documents to
Declaration Control? Release?
(High and Declaration Yes
Medium Risk) Get Next Pool

Release

Release?
Centralised Hubs

No
Inspection Document
Instruction to Physical Technical Review Inspection
Yes
Client Control? (Team Leader) (Documentary
(Booking System) Inspector)
Inspection
Finalisation?
De-centralised

Assignment of
Cargo Arrives at Inspection and
Inspection Cases
Depot; Booking is Report
(CBCU Team
made (CBCU Inspector)
Leader)
Centralised Hubs

Inspection
Inspection
Technical Review Finalisation
Finalise Case Finalisation
(Team Leader) (Adjustment
Officer)
Get Next Pool

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 Customs Modernisation: Customs Inspection
On 10 June 2011, a new inspection process was introduced at four Customs offices: JHB, ORTIA,
Durban and Cape Town. It will be introduced in a phased approach to other Customs offices
throughout this year.
Electronic Case Management Workflow

Submit • Validation
Payment Release
Declaration • Risk Analysis

Version Control
• Stopped
• Create Case
• Call for Docs

Await Docs • Docs

Received Payment Release
• Assess Case

• Stopped For Electronic Release

Electronic Submission of Supporting Docs Inspection

Electronic Dashboard Status Tracking

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 Land Border Process Overview

Customs Declaration

1 EDI
Gateway

Request for Declaration

Supporting Risk
Processing
Documents Engine
System

e-Documents

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Review of Electronic
Supporting Documents
at Centralised
Processing Centre

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Consignment marked for Examination

from Processing Centre

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 Clearance received
and Carrier proceeds
to Border

Manifest number
4 presented on arrival

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Record arrival of Truck

at Border Post using
Manifest Number

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Examination conducted
and finalised at Border.
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Record exit of Truck

END
at Border Post

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0
Customs Notification 1 (CN1)

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1
Customs Notification 2 (CN2)

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 Overview Accreditation & Preferred Trader
SARS aims to assist key strategic industries and traders to become complaint, and subsequently,
improve service and reduce cost of doing business.
By working with compliant clients, SARS can refocus resources on high risk

Tomorrow
Today
Yesterday

•Transactional data used to •Segment clients based on •SARS manages >50% of

inform risk, triggering their demonstrated volumes and value within
documentary & physical competency to perform PT Account & service
controls Customs procedures model

•Little partnership culture, •SARS validate via Assurance •A specific program will be
or understanding of the Audit offered to each client type,
client’s own controls and as per needs of SARS and
compliance •Client compliance rated the clients

•No formal framework to •Accreditation status and •Further benefits e.g.

give real benefits to reward relevant Benefits will periodic declaration,
level of good standing. awarded befit their Simplifications when Act &
compliance standing systems enable

•Manage client relationship •SARS-wide client model

& service

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 Release 2 & 3
Modernisation Journey
Release Two of Customs modernisation mainly introduced the Service Manager front-end for officers and the
electronic supporting documents process for traders, high speed bulk scanning to free up branch operations from
processing bulk documents.

Delivery Challenges‘ from Traders

1. Service Manager Front-End for Inspection Case 1. Ensuring that all pages are A4 size
Management 2. Ensuring that all pages are clearly
2. Get next inspection workflow printed not faded
3. Electronic Supporting Document- e@syScan 3. Ensure that the case number is clearly
4. Removal of the 70707070 code indicated on the first page
5. Centralisation of all back-end processing 4. Inclusion of SAD500 as a supporting
6. Enhanced vehicle movement control at the border post doc , when supporting docs are
(CN2) requested
7. Export and VOC Risk Engine 5. Paperclips, staples or any other binding
8. TBK testing has started material from the pages
6. Torn, folded, crumpled or smeared with
any liquid or dirt pages
Highlights 7. Bulk pages more than 10 pages
1. An electronic release system, reducing the need for 8. Training on the use of SARS e@ scan
paper and authorising stamps at branches.
2. Enhanced traffic flow of trucks through the control
area,.
3. Move L&R to Alberton
…and the modernisation journey continues…
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 Passenger Processing System (PPS)
Modernisation Journey
The purpose of this project is to enhance the traveller experience when entering or leaving the country as well as
ensuring enhanced security and data exchange between the different border agencies.

Delivery Highlights
1. Passenger Processing System (PPS) 1. Discontinuation of the printing of form
deployed on top of the existing Movement (DA331) – automated process
Control System (MCS) platform 2. Signature pads for digital signature.
2. The Traveller Card which will be completed 3. Passport scanner.
by all passengers entering South Africa and 4. Development of a Informal Trader
it will be scanned at the Ports of Entry. portfolio (70707070)
3. The Risk Engine will determine if a
passenger needs to be directed through the
Green or Red channel and processing a
customs declaration, automatically compute
duties payable.
Challenges'
4. The Assessment (Invoice) to be handed to
travellers, are also being redesigned to make 1. The bandwidth at remote land borders
it more user friendly..

…and the modernisation journey continues…

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 Automated Cargo Management(ACM)
Modernisation Journey
ACM is SARS’s automated solution for the receipt and processing of prescribed reports in respect of imported cargo
and the means of transport with which those goods are imported from abroad. It is necessary because ; in line with
international practices, that cargo be reported to it prior to arrival for the purposes of screening and risk assessment.

Delivery
1. New system will ensure the receipt of
“clean” data that meets appropriate
standards
2. Process and validate cargo reports at a much
faster rate than what was possible before
3. Allow the holistic and automated risk
profiling of goods by subjecting both the
goods declaration and the cargo declaration
to the SARS Customs Risk Engine (CRE)
4. Allow for the resolution of mismatches
(entry to manifest and outturn) on a formal
case management basis.
Highlights
1. Replacing MAS with ACM
Challenges‘ From Trade
1. Registration of shipping lines, airlines,
freight forwarders, groupage operators,
consolidators and other parties that
transport goods on behalf of foreign
shippers on bills of lading and air
waybills to South Africa (by sea and air),
or their local agents, to register as soon
as possible.

…and the modernisation journey continues…

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 Preferred Trader
Modernisation Journey
SARS Preferred Trader project aims to assist key strategic industries and traders to become complaint, and
subsequently, improve service and reduce cost of doing business. By working with compliant clients, SARS
can refocus resources on high risk.

Delivery Highlights
1. Engage top 200+ by invitation / application 1. Segment clients based on their
2. List of Top 300 traders created to enable demonstrated competency to perform
next set of clients Customs procedures
3. Ongoing work on Audit / Accounts – (push 2. SARS validate via Assurance Audit
to complete top 100 clients) Review Board 3. Client compliance rated
4. Ongoing Client communication on PT 4. Accreditation status and relevant Benefits
process will awarded befit their compliance standing
5. Next generation Audit Training plans 5. Manage client compliance, relationship &
underway with Academy service

Benefits
1. Appointment of a Customs Relationship Manager tasked with
facilitating the relationship between the client and customs;
2. Reduction of the amount of any security required for compliance
with a customs procedure;
3. Fewer routine documentary and physical inspections;
4. Prioritising a request for tariff and valuation determinations;
5. Prioritising access to non-intrusive inspection techniques when
goods are stopped or detained for inspection.
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…and the modernisation journey continues…
 The End 27

For Now!

Thank You !

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