The number of possible games of chess is greater than the number of atoms in the observable universe according to Claude Shannon. In Customs, there are many more variables than the 32 pieces on a chessboard. In any transaction, we have the interested parties, the type of transaction, the goods involved, the route being followed, the intended procedure, the non-tariff controls, the rates of duty and the liability for payment, each of them with many possible variations, combinations, and types of supporting evidence. On that basis, it seems that every single movement of goods across a Customs border is unique, at least in some minor way. How does a Customs broker meet the expectation of a client, who expects the broker to be familiar with every possible variation?

As if the challenge of complexity is not enough, the broker is also expected to maintain records of all transactions and retrieve them in various formats as required by customers and Customs administrations.

In practice, of course, we find ways of doing things that are theoretically impossible. Most Customs movements fall into certain categories and are handled accordingly, by operators familiar with one or a few of the categories. High value complex transactions are handled by teams with a mix of expertise, at considerable expense. Low value consignments use simplified procedures and reduced checking. Significantly, evidence[1] suggests that many transactions proceed despite errors, sometimes of significant effect. Thus, when considering “Customs knowledge”, we must distinguish between what is necessary for all, and what is essential only for certain functions.

All economic operators must have a general understanding of what Customs is, how it controls trade, what its legal structure is, what rights, entitlements and obligations attach to the operator and to the Customs authorities, the importance of compliance with legal requirements, and the costs of non-compliance. For many who buy and sell internationally, their knowledge does not proceed far beyond this general understanding, except perhaps for some detail concerning the particular goods they trade.

For a Customs broker, this level of knowledge is only the beginning.

The most basic function of the Customs broker is to complete and lodge Customs declarations and other documentation. Associated with this is the ability to advise the client on the requirements for a compliant declaration – permissions, authorizations, licences, etc. – and this often extends to wider advice and possibly even training for the client to ensure that their understanding and behaviour supports compliance and minimizes the risk of problems with the authorities.

In addition, many firms offer brokerage in conjunction with transport, warehousing, storage and other services, including management of non-tariff obligations such as health and other certificates, and inspections at border control posts.

Very often, the client will seek to outsource Customs compliance to the broker, expecting the Customs broker to effectively manage the movement of the goods, and ensure that all goes smoothly. The broker may become the primary interface with the Customs authorities on behalf of the client. Deeper involvement/support by the broker entails risks, which the broker must provide for.

Most brokers develop their knowledge through practical experience, where they begin with guidance from experienced colleagues, and the solution to each new problem adds to their expertise. Before the move to electronic data handling by Customs, experience was paramount, especially local experience, where familiarity with the procedures and officers at a port could be far more important than a thorough grasp of Customs law.

Unfortunately, learning by experience alone often leaves lacunae in the broker’s knowledge. S/he will be excellent on familiar ground, but may struggle when confronted with an issue that requires a deeper understanding of national and international Customs law. In such situations, it is not uncommon for a broker to seek advice from a Customs expert or consultant. It is also not unknown for brokers to rely on practices “that have worked before”, or even to use “trial and error” to identify codes that succeed in obtaining clearance for a consignment. These practices are very understandable in a busy Customs brokerage, where it is difficult and expensive to perform thorough legal research, but they may embed errors in documentation. The computer analysis by Customs will not capture all errors – the detailed checking of a Customs audit may be required – and the broker may thus inadvertently leave the client open to significant penalty and cost.

The migration to full electronic exchange of Customs data, together with the associated computerized risk analysis, is progressively restricting the scope for the traditional approach based solely on experience. For example, the European Union (EU) CERTEX project[1], which will lead to a single window for Customs and non-tariff controls, requires complete accuracy and consistency across all declarations, authorizations and certificates, including those in parallel systems such as TRACES, the European Commission’s online platform for sanitary and phytosanitary certification required for the importation of animals, animal products, food and feed of non-animal origin and plants into the EU, and the intra-EU trade and EU exports of animals and certain animal products.

Further, the avowed wish of Customs authorities to move compliance activity further from the border-crossing and to rely more heavily on risk-rating, post-clearance checks, audits and system checks, makes it dangerous to regard successful clearance as the end of the process. Errors that could be overlooked in the past are increasingly being identified by enhanced checking systems, and the broker is now challenged to get everything exactly correct the first time, or risk unpleasant surprises at a later date.

It remains possible and practical for a broker to restrict their activity to areas where knowledge and expertise is at a high level, and to refuse business with which they are unfamiliar. This is unlikely to be an attractive option for brokers who wish to expand and grow their business; and even for those without growth ambition, knowledge development is essential to remain competent in an ever-changing regulatory environment.

It follows from the foregoing discussion that a brokerage requires that at least some staff have formal training to a high level in the law of Customs (national and international), relevant taxes, and non-tariff controls. Depending on the nature of the business, they may also require training in the law and practices of international trade and in accounting and logistics. Very important components of the training are research training – how to find the solution to a problem – and awareness training – how to ensure knowledge is always up-to-date.

No level of experience will compensate for absence of training, but experience is of course also vital. It is only by seeing law and regulations applied in practical situations that a full understanding can be achieved.

So, the broker’s knowledge comprises different types of knowledge, and comes from several sources:

• Formal training/education gives understanding, and the ability to further develop and enhance existing knowledge; trained operators are able to draw on a wide body of knowledge and sources to answer questions, solve problems, identify risks and anticipate issues.
• Experience gives assurance in dealing with familiar activities, and competence in the practical application of legal rules; experienced operators can draw on their store of knowledge to cut through technical complexity to the essentials of a problem, and provide a practical solution quickly.
• Information feeds from Government, online publications and other sources keep the brokerage knowledge pool up-to-date; they provide essential forewarning of policy developments and rule changes, and facilitate forward planning. They are also vital to ensure that advice given remains accurate and timely.
• Research activity is inevitably required where a new problem or challenge is presented. Properly documented research output is a precious asset for the brokerage, and over time leads to a valuable archive that will expand the scope of the brokerage and enhance its capability.

There are some Customs professionals who are able to acquire and maintain an astonishing level of expert knowledge through their personal working methods, but for the great majority of us, we must have structures and systems on which we can rely.

Knowledge-based systems are perhaps best seen through the eyes of a person newly recruited to work in a Customs brokerage firm. What is her ideal experience?

• Induction
  • The firm will assume that she has no prior knowledge and will need training or retraining.
  • She will be introduced to her team leader and have the reporting hierarchy clearly explained to her, ideally in a written form.
  • Her functions will be clearly described, with discussion about her level of knowledge/skill in different areas.
  • She will be given or guided to work protocols and training materials, and told when and where she will receive formal training.
  • She will be introduced to the team.

• Working
  • The recruit will be assigned work and will perform it under supervision.
  • She will present her work for regular checking as directed.
  • As she encounters problems, she will be
    • given direction,
    • shown reports of previous solutions to similar problems in the company’s knowledge archive, and
    • given references to relevant online and written resources where she is expected to research the answers to her questions.
  • When she has found the answer to her problem, she is expected to write a short account of the problem and solution and, after approval by the team leader, to add it to the company’s knowledge archive.

• Knowledge building
  • Each member of the team will attend a weekly meeting to discuss progress and any issues arising.
  • The team leader (at least) will attend regular (weekly/fortnightly) meetings of wider company management.
  • A member of the team will have the responsibility of monitoring information feeds and circulating a precis each week or as often as necessary.
  • The company knowledge archive will be maintained and indexed by a team member charged with that responsibility.
  • Available seminars, webinars and training courses will be monitored by the team leader, who will inform staff and management of opportunities that in her view should be availed of.
  • The team leader has primary responsibility for communications with the Customs authorities and industry colleagues. She will ensure that management and the team are aware of key contacts.

• Recording/storage
  • The team leader, in collaboration with company colleagues outside the Customs function (possibly in accounting/finance/IT) will ensure that quality checking is applied at least monthly to work done.
  • The storage and retrieval of data, forms, etc. will normally be set up and managed outside of the Customs function, but is subject to quality validation by the team leader.

This is necessarily a summary treatment of a complex subject, but we hope it provides some guidance to dealing with the hugely complex, demanding and risky field of Customs knowledge.

More information
cki@customsknowledgeinstitute.org

[1]Putting more Union in the European Customs – TAX-20-002-Future customs-REPORT_BIS_v5 (WEB).pdf (europa.eu)

[2] https://taxation-customs.ec.europa.eu/eu-single-window-environment-customs_en