Dossier: Supporting the Green Transition

Supporting the green transition: challenges and way forward

By Kunio Mikuriya, Secretary General, WCO

The WCO is celebrating its 70th anniversary this year and is taking this opportunity to look back at what it has achieved as well as at ways of responding to current challenges. One pressing issue is how to support the transition to a climate-neutral economy. At numerous events, including climate and biodiversity summits, representatives of national governments and international organizations have highlighted how imperative it is for trade to support environmental action and declare its readiness to take action. They have defended the idea that trade policies should support a green industrial revolution and serve an ecological transition. In this Dossier, we seek to give you an overview of the ongoing discussions and initiatives that aim to make modes of production and the supply chain more sustainable, and also provide a synopsis of the role of Customs in supporting this ambition.

Bolstering the implementation and enforcement of Multilateral Environmental Agreements (MEAs)

Let us start with the most obvious: the role of Customs in the effective implementation of Multilateral Environmental Agreements (MEAs). The objectives of MEAs include fighting illicit trade in hazardous waste and ozone-depleting substances, combating illicit trade in endangered species, and preventing the spread of plant and animal diseases, as well as of invasive alien species.

The provisions of these agreements are unequivocal, but their efficacy remains limited by the capacity of different countries to properly implement and enforce them. Often, the resources allocated are insufficient and allow illegal trafficking to continue. We have written extensively about this issue and about the initiatives the Secretariat of the WCO is leading to provide Customs administrations with the means to combat this type of illicit trade, or to strengthen their ability to do so, working together with the other public and private actors involved.

Recently, the Secretariat has stepped up capacity building activities related to the control of trade in waste, and more particularly the importation of plastic waste in countries of the Asia Pacific region. We provide assistance through two programmes: the Container Control Programme (CCP), which we have co-managed with the United Nations Office on Drugs and Crime (UNODC) since 2004, and the Asia Pacific Plastic Waste Project (APPW) created in 2020 with the financial support of the government of Japan. These activities are, of course, coordinated or co-organized with the Secretariat of the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal.

Our assistance is highly technical, but this is not the only form of assistance we provide. While we aim to improve or develop processes and procedures related to specific issues such as abandoned cargo, for instance, we also help Customs administrations to build relationships with the relevant national authorities and develop strategy and the related work plans with a holistic approach to the issue at hand.

Removal of trade barriers to the green economy

Beyond environmental regulations, Customs administrations must be aware of, comprehend and contribute to the initiatives aiming to promote trade in environmental goods and services. The liberalization of such goods and services has been on the agenda of the World Trade Organization (WTO) since the beginning of the Doha Round in 2001. The removal of Customs duties and other trade barriers would simplify access to goods and services that prevent or reduce air, water and soil pollution, and so improve the protection of natural resources. Measures to protect the environment and technologies that increase energy and resource efficiency would then become cheaper.

This Dossier includes an article by the National Board of Trade Sweden which looks at the ongoing discussions, focusing on issues of special relevance for Customs and trade professionals. It highlights the importance of involving Customs officials in negotiations, and even recommends the appointment of a body of experts to support negotiators.

Circular economy

Another idea gathering mainstream attention is the adoption of a circular economy. The idea of a circular economy is to use resources more efficiently and to decouple economic growth from material inputs. This means accepting a systemic change that will transform how a business, or even an economy, functions, and how societies consume. Some companies that have ventured into this territory have reported regulatory hurdles, as well as practical and legislative barriers to working in a circular business model. We asked the International Chamber of Commerce (ICC) to explain some of those challenges in another article, and to explore what needs to be done to enable and accelerate such business models, including through the WCO.

 

Circular economy and Customs valuation

In the traditional manufacturing industry, goods are generally sold for a price. The price of the goods forms the basis for determining the Customs value in international trade. By virtue of Article 1 of the WTO Customs Valuation Agreement (CVA), the Customs value is defined as the transaction value, that is to say, the price actually paid or payable for the goods when sold for export to the country of importation, adjusted, where necessary, in accordance with, in particular, Article 8 of that Agreement. The Customs value is primarily determined according to the transaction value method.

One of the challenges that may arise in a circular economy (CE) is that there may not always be a transaction value or a change in ownership. In a number of cases, goods are often leased rather than purchased outright, which means that there is no transaction value. Therefore, the Customs value of the imported CE goods cannot be determined using the transaction value of the goods and must be determined using one of the five alternative valuation methods to be applied in the order prescribed in the CVA. These methods are, respectively, the transaction value of identical goods method, the transaction value of similar goods method, the deductive method, the computed method and the fall-back method.

Each of these methods has its own specific features. For example, in order to apply the transaction value of identical goods method, previous transactions involving goods identical to the one being valued must be identified, and the transaction values of identical imported goods that have already been determined and, where appropriate, adjusted under Article 1 may be used to value the goods in question. Identical goods means goods that are the same in all respects, including physical characteristics, quality and reputation. In determining the Customs value of CE goods not subject to a sale, it might prove difficult to identify such transactions involving identical or similar goods. It is therefore likely that, in cases where none of the previous methods apply, the fall-back method will be frequently used for the valuation of CE goods not subject to sale.

Harmonized System

Be it promoting environmental goods and services or facilitating the adoption of circular business models, good trade-related policy requires good trade data, and this involves looking at the data generated by the Customs classification of goods. For trade beyond the imports/exports of a single Customs union or country, the comparison of data relies on its classification at the six-digit level, i.e., at the level provided by the Harmonized System (HS). In their articles, both the National Board of Trade Sweden and the ICC highlight the critical role played by the HS. The WCO Secretariat is often asked extremely tricky questions about the HS, and so we have included in the Dossier an article answering some of the most common questions posed, such as why a commodity does not have its own HS code, why the specificity level so is variable, what the procedure is for amending the HS, and how to make a successful proposal for an amendment.

Lowering the impact of trade operations on the environment

The final article in this Dossier looks at the efforts of Singapore Customs to bring efficiency to the management of trade operations so as to reduce their environmental impact, as well as at the initiatives it has taken to support environmental policies. One important point it makes is that, although digitalizing processes facilitates logistics operations and eliminates the dispatch of documents, the creation, processing, storage and movement of data rely extensively on finite resources: electricity, water, metals, chemicals and man-made materials, such as plastics and glass. This is why it is important to undertake rigorous environmental impact assessments before implementing any technology-related solutions, and in particular to ensure that data centres are located in buildings that are highly energy efficient and effective in terms of their environmental performance. Singapore Customs also remind us that we cannot leave everything up to governments, but need to take responsibility as individuals and follow green guiding principles in every aspect of our lives.

In wrapping up, I would like to invite you to attend the Green Customs Global Conference which the WCO Secretariat is organizing at the end of June. We have invited representatives of Customs administrations, international organizations, academia, the private sector, civil society and non-governmental organizations (NGOs) to further explore how Customs and the WCO can contribute to achieving environmental objectives. You can attend the event online or in-person at WCO Headquarters in Brussels.

Finally, I would also like to thank all contributors to this edition of the magazine for taking their time to share their thoughts and experiences with us.

Movement of waste: a self-assessment tool to ensure effective and efficient control

In February 2020, we published an article[1] highlighting the need for many Customs administrations to bridge the gap between the perceived importance of Multilateral Environmental Agreements (MEAs) and the capabilities to enforce them.

A new tool has been developed by the WCO Secretariat[2] to help implement one of these agreements: the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal.

Called Self-Assessment Tool – Basel Convention, it offers a methodology to help Customs administrations review the following:

  • the strategy for controlling the movement of waste and the importance given to this area of enforcement;
  • the legislation;
  • the procedures governing legal trade and, in particular, risk management, as well as the requirements relating to import or export;
  • the strategy and procedures to fight illicit trade in waste;
  • cooperation mechanisms at national and international level;
  • skills and capacity development.

Each of the aspects listed above has an associated table with columns to address:

  • questions that need to be answered to analyse the current situation and determine priority areas;
  • the answers to these questions, in the form of “Yes” or “No”, or on a scale of 1 to 5;
  • potential solutions and opportunities for improvement.

Below each table is a summary of potential challenges Customs authorities may face when implementing and enforcing general waste and plastic waste policies. Further information is provided in publications and resources which can be consulted for more guidance (e.g. guidelines issued by international organizations or international conventions).

More information
http://www.wcoomd.org/en/topics/enforcement-and-compliance/activities-and-programmes/environment-programme/ap-plastic-waste-project.aspx

[1] https://mag.wcoomd.org/magazine/wco-news-91-february-2020/gaging-engagement-customs-community

[2] This tool was developed under the Asia Pacific Plastic Waste (APPW) Project funded by the Japan International Cooperation Agency (JICA).