People participate in a demonstration demanding the resignation of Guatemalan President Otto Perez Molina in Guatemala City, Guatemala, August 2015


Renewing Guatemala’s Customs service

20 June 2017
By Mgter. Werner Ovalle, Guatemala Customs Intendent, and MBA. María Lucía Soto, Guatemala Council of Users of International Transport

The year 2015 left an indelible imprint on Guatemala’s history. President Otto Pérez Molina and Vice President Roxana Baldetti were arrested over their alleged involvement in La Línea or “the line,” the name given to a multimillion-dollar fraud scheme involving the country’s top authorities, including the Superintendence of Tax Administration (SAT), in which importers paid bribes to avoid Customs duty or were offered greatly reduced tariffs in exchange for kickbacks that were shared among dozens of government officials.

Although the scandal negatively affected Guatemala’s image, it also generated an opportunity for change, including changes within the SAT, where it triggered major reforms as well as the establishment of enhanced dialogue with the private sector.

Regaining control and re-earning trust

Upon its appointment, the new SAT management team had one thing in mind: to regain control over the Customs service and to re-earn the trust of taxpayers. To achieve its two main objectives, the management team undertook a number of measures.

Procedures were reviewed and comprehensive cargo control plans were designed and implemented with the support of international organizations. The plans provide for:

  • improved processes determined in coordination with the private sector and other agencies;
  • effective and updated records of the shipments held by Customs and in Customs warehouses;
  • implementation of control measures throughout the clearance process;
  • protection of physical facilities – the development of a dashboard of indicators and statistics to enable better monitoring of physical controls on goods and of the different phases of the merchandise clearance process.

In addition, the SAT was restaffed with reliable and integrity conscious personnel. Following the corruption scandal, some Customs officers were dismissed or arrested, while others are still being investigated with respect to their involvement in the La Línea scheme or in other illegal activities. All the administration’s staff have been asked to undergo integrity checks of various forms.

SAT also reached out to the security and justice ministries to make sure that appropriate protection was given to Customs personnel, and that violations of the law detected by Customs were prosecuted in an efficient manner.

Several bodies were also created within the SAT: an Internal Affairs Department, which is in charge of monitoring integrity and prosecuting corrupt officials; a Taxpayers Office, which seeks to enhance the services provided by the institution to taxpayers; and a Staff Training Department, which is tasked with building and developing the capacities of personnel.

Moreover, a new impetus was given to the Inter-institutional Council for the Prevention and Combating of Tax Fraud and Customs Smuggling. Chaired by the SAT, the Council gathers various public and private entities to discuss strategies and actions to combat fraud and illicit trade. Together, they developed a national policy in this area, implementation of which was entrusted to a newly created Department of Tax Fraud and Smuggling within the SAT. They also undertake joint operations in different parts of the country, such as checks on Customs offices, road checks, raids, and the destruction of goods.

New dialogue and closer partnership

For the private sector involved in international trade, to have an agile, efficient and low-cost process to move cargo is essential. Therefore, any changes directly impacting the export and import process are monitored carefully. When a new government entered office in Guatemala in 2015, and, with it, new management teams at the head of the main national institutions, the representatives from the private sector were hopeful that things would change for the better.

When the new SAT authorities took office in March 2016, the private sector quickly realized that the revamped Customs service had an interest in adopting a more open and closer relationship with some private entities, besides the intention to improve the administration and its operating mechanisms in general. From the outset, the private sector representatives sought a way to expose their issues and concerns to the new service, which, although not new, needed to be addressed in a collective way.

In order to allow for all stakeholders to present their problems, visions and ideas without creating a burdensome consultation process, it was decided to set up a Committee for Dialogue and Cooperation between Public and Private Entities in Customs Affairs. Seventeen institutions joined the Committee upon its creation, and two more joined at a later stage.

The central objective of the Committee is to provide a platform for public and private sector representatives to discuss potential improvements in areas such as procedures, processes, systems, and risk assessments, as well as to share the results of studies or proposals to improve trade facilitation and transparency in Customs management.

By participating in this Committee, all participants are able to demonstrate their goodwill and commitment to making things better in an environment characterized by respect and cooperation. In addition, ideas that emanate from this Committee are submitted to the SAT, who carefully analyses and prioritizes them. The Committee is composed of three groups:

  • a High-Level Group, which comprises the most senior representatives of the participating entities, who meet twice a year to review progress made;
  • a Technical Working Group, which meets at least four times a year to discuss the work plan and how it has been executed;
  • two Coordinating Groups, one managed by the Customs service and the other by the private sector entities, which discuss, at their respective level, issues reported by their members, and who meet as often as necessary.

It should be highlighted that Committee representatives recently worked together to evaluate a crisis, which had started in one of the main ports of the country. They also work jointly on developing training material and delivering training to Customs personnel, besides defining and developing actions that form part of the 2017 work plan.

Overcoming obstacles by working together

During this process, the Guatemalan Customs service has demonstrated its capacity for dialogue and openness when it comes to discussing improvements of its services. But, like any government institution, it suffers from one important flaw: a lack of agility. This is particularly apparent when implementing the priorities and developing the projects established as part of the common work plan for 2017. Procedures, processes and work methodologies are not as flexible and efficient as they are in the private sector, mainly because of resource limitations and regulatory restrictions.

However, it is worth mentioning that although the views of the private and public sector may sometimes differ, often due to the fact that the central government has its own priorities, Customs and private sector representatives are still able to get ahead, overcome obstacles such as red tape, regulations and the lack of human and financial resources, and work together for the benefit of Guatemala.

The road ahead

As Customs is not the only agency involved in processing the international flow of goods, it soon became apparent that more State stakeholders needed to be invited to join the Committee. So, while coordination of the Committee’s work will remain in the hands of the Customs service, other institutions will soon participate in its meetings.

The challenge now is to make the dialogue a sustainable and ongoing process. Although there is still a long way to go, beginning with the production of tangible results and improved indicators to better measure transparency and the ease of doing business, both the public and private entities participating in the dialogue are confident that they will soon be able to improve Guatemala’s trading environment, which will contribute to the economic development of the nation as a whole.

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