How Brazil gave true meaning to partnershipBy John E. Mein, Executive Coordinator at Procomex, and Jackson Corbari, Coordinator-General of the Customs Administration at the Secretariat of Federal Revenue of Brazil
Customs authorities often boast about working closely and in partnership with the private sector – but what does that really mean? In too many cases, working with the private sector turns out to be little more than a tick-box exercise, perhaps based on a couple of unproductive meetings a year. In order to derive real benefits from public-private sector cooperation, a strong partnership approach is required, based on constant and genuine communication, a willingness to share information and experience, and – above all – building genuine trust between all parties.
When Procomex, an alliance of business associations, started working in partnership with the Government of Brazil to improve and simplify foreign trade, its first aim was to modernise Customs procedures. Over the years, Procomex was able to create a unique collaboration with the Customs authority that led to a transformation of Customs processes. The work continues on several projects, such as further development of the Brazilian Single Window, the establishment of a Port Community System solution, and the revision of domestic logistics processes.
This could not have been achieved without the proactive, positive input and sheer hard work of the Customs authorities and stakeholders across the private sector. Procomex Members and Customs worked through the challenges together and found new ways to simplify and streamline processes for foreign trade. What were the challenges? A legacy system, bureaucracy, and mistrust on both sides.
The existing IT solutions were bureaucratic, requiring information that did not enhance control capacities but created obstacles to foreign trade. Clecy Lionço, who was head of Brazilian Customs from 2001 to 2008, explained: “Brazilian Customs were computerised. The Integrated Foreign Trade System, Siscomex, implemented in the early 1990s, had provided a considerable advance in the management of trade, even introducing the concept of a single flow of information, improving statistics and reducing discretion. But the emergence of new trade patterns and business models, together with developments in IT, required a new modernisation effort.”
To achieve this, Customs had to involve economic operators. Lionço said: “Customs needed the private sector to design and legitimise new ways to manage trade which would guarantee enhanced control capacities, a requirement after the terrorist attacks of 9/11, but also enhanced facilitation of legitimate trade.” Discussions started in 2013, and ultimately led to the creation of a Single Window. The main channel through which dialogue was engaged with the private sector was PROCOMEX.
A neutral player
Procomex started out as an informal alliance of business associations, with 54 members in 2004. But it was a virtual organization without a proper, functional structure. Regina Terezin, Customs broker with Cualidad Assessoria e Despachos Aduaneiros, a Member of Procomex, said: “We thought that one year would be enough to modernise Customs. We rapidly found out that it wasn’t going to be that fast and it would take much more effort. We needed to have an institutional framework”. In 2005, the Procomex Institute was set up. “Today, it has 125 Members.”
Procomex and Brazilian Customs have formalized their relationship through an agreement. Procomex’s first task was to explain to Customs what the problems were. “We needed to compare views and decide what we wanted for the future, and why it was possible for us to help Customs solve the problems,” said Terezin.
There is a definite advantage for Customs authorities in not having to deal with too many organisations. Procomex does not represent a single interest or player in the logistics value chain. Its focus is to help bring the private and public sector together to work on foreign trade issues and, as processes move forward, also on domestic logistics issues.
Mistrust on both sides
The main challenge in setting up effective cooperation, said Lionço, was a cultural one – to break down the fear or prejudice existing in Customs regarding the relationship with the private sector. Customs had “to engage the private sector in a proactive, participatory process, seeking improvements in trade management”.
This was a first for members of the Customs team. Although they had already worked with the private sector, they had never been asked to collaborate to such a degree. Hence, there was a degree of caution at the beginning.
Flavio Scorza, former Director of Trade Facilitation at the Secretariat of Foreign Trade, noted that there was also resistance from officials to changing well-established bureaucracy, “not because of any malicious intent but because there was a way of doing things that was deeply ingrained in the organisation’s culture.”
Fears and apprehension at all levels of the organisation only began to dissipate when joint work was carried out effectively over time. The process of building this change within Customs was “learning by doing”.
The strong support received from the highest levels of the Customs administration, the Trade Department and the Presidency was essential for keeping momentum, overcoming the resistance and, eventually, changing the mindset of key officials.
Private sector representatives were cautious too, at first. Scorza explained that most of the people involved in the project were not used to this kind of relationship with government agencies. “In some situations, if you are from the private sector you don’t want to expose your problems to the Government because you fear they will use it against you. But you have to expose the problems in order to solve them.”
He added: “At the beginning, there was some scepticism about the actual will of the Government to really promote changes. Therefore, the first contributions were limited by how far people thought our will to change would go. It took some time for trust to build and for people to go beyond minor suggestions to improve inefficient steps in the process. Being neutral, Procomex was able to make things fair for both sides and create a trusting environment.”
André Zanin, representing the Ship Agents’ Association, has been working together with Procomex since 2006. He said: “For the first time in history, Customs was open to the views of the private sector about new regulations, and there was a lot of goodwill. Before that, Customs would just say: “Here is a new regulation – you have to follow it”. For us, it was an amazing change.”
Lucas Sanches, also from the private sector, agreed: “Government agencies are not the ones having to apply procedures. They just regulate. Procomex created trust with them so that we could sit around the same table, discuss problems and find solutions. Customs became helpers and showed its willingness to solve issues, rather than just imposing fines.”
Stepping out of the comfort zone
Lionço also highlighted that “the signing of a cooperation agreement between Procomex and Brazilian Customs demonstrated that the private sector was more aware of its role in formulating and implementing proposals to improve trade management, and of the need to step out of the comfort zone of just demanding improvements. Procomex, by encouraging and maintaining communication between all interested parties, was fundamental to the involvement of the private sector.”
The methodology developed by Procomex is unique. It starts from the basis that true collaboration is about making everyone feel that they are a participant and that they are making a difference. The Customs modernisation project was started by getting people together around the table, so they could present their issues and suggestions. A survey was carried out to consult associations and their members about the issues that needed work. Meetings were organised to prioritise the issues and, based on that, specific working groups were set up.
“The emphasis was on trade facilitation, and reducing bureaucracy and costs”, said Zanin of the Ship Agents’ Association. “We realized that what is good for one it not always good for another. Our ship agents, having to deal with processes in their everyday routine, were very helpful as they shared their expertise and views as to how things could be better.”
Public and private sector stakeholders were invited to contribute to the design of an enormous ‘As Is’ map, on paper on a huge wall. The map set out the legislation, processes, problems, bottlenecks, etc. This took many hours to work out. Everyone had a different view of how he or she handled processes. Participants could see not only the differences between them, but also the things they have in common. This was very rewarding. Since the COVID-19 outbreak, this work has been done through video conferencing using digital post-it notes.
The company GE-CELMA has been a proactive private sector stakeholder in the Procomex project. Part of GE Aviation, it historically manufactured aircraft parts and engines, and carried out engine overhauls for the South America region. After 9/11 it had to rethink its strategy and develop international trade in order to survive. Ricardo Keiper, GE-CELMA’s supply chain manager for South America, soon realised that in order for the company to compete internationally, processes would need to be developed to reduce the clearance times for imports and exports of parts. “We developed a very safe logistics chain worldwide, but that was not enough because we still had to prepare for Brazilian bureaucracy”, he said.
Keiper added: “For the first time, we were able to tell the Customs representatives sitting with us what would be the best options, and they were able to tell us what was feasible or not, and what options we had.” He was delighted that participants were able to give suggestions and explain how the system works. “We want to comply. If processes are efficient and aligned to the way different sectors work, then compliance is so much easier.”
Ruy Jorge, former adviser to the president of Petrobras and an early supporter of the Procomex-Customs work, said: “Using the mapping process to collect everyone’s ideas was very useful. Each person has unique views, his or her own “truth”. This permitted people to have a vision of the entire process and the impact that each particular action had on the process. That was something that had never been done before.”
Governments often adopt regulations “that really get in the way of solving the problem”, said Jorge. “This time it was different. When you have two sides, they usually do not trust each other. They almost always believe that the other is taking advantage, or not being totally honest. Therefore, it was important to have Procomex as a neutral party representing all sectors, not just each sector with its own agenda.”
Setting out the “As Is” map, and presenting a visual rather than written representation of the processes, caused the challenges to become technical rather than political. “Customs representatives were used to listening to us and we would often sound only negative to them, making them feel accused and on the defensive,” pointed out Jorge. “But presenting a process as a map or drawing makes it much easier to change opinions. It becomes evident that everyone is part of a system and not isolated, and that creates the basis for dialogue. Everybody can then work towards a common objective of harmony.”
Brazil historically has a reputation for its ‘heavy hand of State and bureaucracy’, said Tiago Barbosa, co-head of Brazil’s Single Window project at the Secretariat of Foreign Trade. “But in the past decade, the vision of the State has changed and Brazil has become more efficient. The Single Window project is all about taking out the bureaucracy, simplifying all the processes and reducing costs.”
Sergio Garcia da Silva Alencar, Customs Operational Coordinator, works directly with the team in charge of developing the Single Window environment. “The integration of public and private sector systems and requirements is, I think, one of the most important issues in such a project”, he declared. This view is supported by Alexandre da Rocha Zambrano, co-head of the Single Window project at Customs. “To ensure access to the information required, you need to engage all stakeholders. By doing so you can enable them to be more competitive, while securing trade flows”, he added.
Procomex facilitated the development of a solution which would work for all. “Since the beginning of the development of new IT solutions, we have gathered with private stakeholders monthly to discuss operational issues and promote the proper adjustments to the systems”, explained da Rocha Zambrano.
The Single Window is designed as a single system connecting the authorities in charge of taxes, licensing and surveillance. Keiper pointed out: “The idea is that instead of having your cargo arrive in Brazil, submitting documents and then waiting for release, you can request clearance while the plane is flying to Brazil so that the items due for inspection are already identified. Previously, 10% of our shipments were inspected. Can you imagine the disruption to the workshops? Now, with the new processes in place, the inspection rate is 0.4%.”
He emphasised: “Customs was not the problem. It was the regulation. With the implementation of a Single Window to manage imports, and other developments supported by Procomex, our lives are easier. It is a win-win for everyone.” It is estimated that annually, economic operators will save more than 25 billion United States dollars.
Consultative forum for AEOs
Procomex was also involved in the development of Brazil’s Authorized Economic Operator (AEO) programme. All AEOs are invited to participate in a consultative forum to discuss AEO requirements and benefits. Fabiano Diniz, manager of the AEO Programme, explained: “We have talks on a regular basis. Customs asks for the private sector’s opinions to make the Programme better.”
Much more to be done
The mapping of processes, which has been used to establish both the Single Window and the AEO Programme, was fundamental to expediting the movement of imported and exported goods in Brazil’s international trade. Although the Single Window project has yet to be completed, Customs and businesses have already achieved concrete results, such as reducing release times by half and increasing Customs’ effectiveness in cargo selection.
Customs is working on finalising the Single Window, but there are more projects for which cooperation with business is needed. The partnership with the private sector is now solid, remarked Clecy Lionço: “There is a continuity in the Customs-Business partnership which demonstrates its solidity. It is not only Customs who collaborate on a regular basis with businesses, but also other public agencies that control foreign trade”. Customs broker Regina Terezin supports her view, adding: “it is a continuous conversation. We form a community with a lot of interactions.”
Ruy Jorge was keen to praise the efforts made by all sides, and suggested that this type of approach should be used by other Government agencies – not only those involved in foreign trade and economic activities. “We carry a vision as to how to make the country more competitive,” he said. “It stands above individual interests, it is about mobilising a force to be able to work together for the common good.”
His enthusiasm for the Customs-Procomex partnership and the Single Window is understandable. His company, GE-CELMA, has already seen a significant reduction in bureaucracy and substantial time savings in the clearance of exports. Jorge is expecting that the deployment of the Single Window to manage imports will deliver even more benefits.