BORDERLESS CUSTOMS
Autore: Dott. Alessio Daniel De Marchi
Disclaimer
The contents of this article do not necessarily reflect the views or policies of theAgenziadelleAccise, Dogane e Monopoli, nor those of foroeuropa.it specialized magazine and its partners. The designations employed and the presentations do not imply the expression of any opinion whatsoever on the part of the institutions or contributory organizations concerning the legal status of any country, territory, city, company or area or its authority, or concerning the delimitation of its frontiers or boundaries. The issues related to International Relations, International Political Economy and Transnational Crime are addressed by the Author under his personal responsibility.
A borderless world
During the past few years, the world has witnessed the contraction of globalizing impulses. Some of the largest economies in the world have retrenched, reasserting traditional protectionist doctrines, unilaterally raising tariff and non-tariff barriers also against long standing allies and partners. Large multinational corporations have been reshoring critical strategic productions as increasing geopolitical tensions keep on troubling the global economy while the world is still struggling to recover from theturmoil caused by the pandemic. Ambitious and competitive, yet complementary initiatives such as the Chinese一带一路and the European Global Gateway projectshave lost momentum, forcing proponents and beneficiaries to rethink their paths towards a more cooperative and interconnected world. In this unsettling scenario under the ever-growing threat of thermonuclear warfare, natural disasters and the fact that governments around the world act in ways that increase the likelihood of these catastrophes to occur1, remains hard to envision what the future will look like on this tormented planet.
Since the first GATT round held in Geneva in 1947 to the Uruguay round of 1994, which ended with the establishment of the World Trade Organization, tariffs and duties on international trade have been progressively cut, allowing trade to flourish and develop into tightly interdependent global value chains. Such sudden and scaled economic expansion fostered the unprecedented growth of world economy; however, it has also created arrogant winners and sore losers, not to mention the toll indiscriminate exploitation of natural resources has had on the environment. The Doha Development rounds commenced in 2001, just after the 9/11 terrorist attacks on the WTO headquarters in New York and right before China acquired WTO membership in December the same year, and are yet to see an end. As of now, it is hard to foresee if and when the Doha rounds will ever come to a conclusion. The agenda could very well wind up with the establishment of a Brave New World2 Trade Organization seated in Tashkent or Samarkand in Uzbekistan. Despite the upheaval brought by neo-nationalist movements doused in sovereignistpropaganda, globalization shall ultimately resume in the unity of nations existing in harmony with the planet that sustains our very existence. The political centre of this revitalized, expanded, and better representative United Nations, featuring a sustainably democratized UN Security Council with membership distributed on regional basis3 will find its headquarters in Astana, now Nur-Sultan, in Kazakhstan. Central Asia was once at the heart of human civilization. Throughout the centuries, it regrettably lost its shine,ruled by dictatorships, spoiled by religious fundamentalism, raped bywarlords and drug traffickers, torn by wars and poverty. In spite of its troubled past,it is making a comeback, regaining a central role in world politics.
Within 30 to 50 years, global affairs will have radically changed and traditional duties and tariffs will eventually disappear becoming a thing of the past. Unlike the UN today that solely relies on member states’ contributions and is thus subject to partial influences, the governance body of the future shall self-sustain itself thanks to a harmonized levy applied on international trade based on the carbon footprint of goods. The 2021 EU Carbon Border Adjustment Mechanism4proposal is an experimental prototype of what such taxation would look like. Finally, a globalized worldfeaturing a global tax system will require some sort of a common resource-based currency with demurrage charge5able to guarantee financial stability by integrating inflation in relation to the natural decay rate of the goods it is based upon. A reliable currency created for major transactions that is not subject to petty nationalist monetary devaluation schemes and dangerous corporate and banking bubbles.
Borderless Customs
In a borderless world in which goods, people and capitals can movefreely from one country to the other, nation states would act as administrative bodies. Border and Customs authoritieswouldtranscend their role as tool of sovereign protectionism,becoming a finely tuned system that filters and regulatestransboundary movements, separating lawful trade from illicit operations. Knowledgeable, well spoken, multilingual and highly skilledCustoms officers shall be trained to prevent, deter, detect and prosecute tax frauds, money laundering, counterfeiting, illegal smuggling of protected species, waste, weapons, controlled substances, pharmaceuticals, chemical precursors, and all other goods that do not comply with national and international standards and regulations6, responsibly using their powers of judicial, tax, currency and border police to inhibit unlawful transnational trade while, at the same time, promoting and protecting legal transactions.Since tariff and non-tariff barriers are destined to disappear, the role of National Customs authorities will have to adapt accordingly. Most routine procedures will be progressively computerized and electronically streamlined as the possibility of receiving information since departure will allow Customs authorities to process formalities in a timely manner so that, when arriving at the port of entry, authorities have already been notified andconvoyscleared. Once again, the European Union is leading way in its efforts to computerize intrastat Custom procedures among Member States as well as rolling out cutting edge electronic border tests with Switzerland, completely eliminating the human component for routine procedures8. Human intervention is still required, however, to conduct investigations, searches and seizures based upon notifications built upon intelligence and risk profiling. Optimizing and computerizing standard procedures, at the same time gathering more and specific information on the exchange of goods, allows Customs authorities around the globe to cooperate at higher levels refining risk management, risk profiling, quantitative, qualitative and stochastic analysis of trade data, thus training algorithms through decision tree and random forest analysis methods9, developing customs specific artificial intelligence. Far from promoting an Orwellian, all-seeing, global government that oppresses citizens through a police state serving a predatory system of surveillance capitalism10, using technology in a responsible and innovative manner can ultimately aid Customs authorities around the world to fulfil their true calling.
Lessons learned
Since the creation of the European Customs Union in 1968, the Schengen area in 1995, the Euro currency in 2002 to the definitive integration of all Member states under a Common Security and Defence Policy in 2009, the European Union, once again, has led way as an experimental proving ground for what a body of global governance should eventually look like.When militarized borders between the European countries fell,illicit trafficking had a chance to develop transnationally, exploiting the weaknesses of the sudden politicalchanges that inevitably affected border control. Europe had become a sole economic entity, but integration was lagging behind to organized criminal groups’ great relief. Sluggish member state governments gradually caught on and,struggling through internal nationalist tensions and communitarian impulses,came to the conclusion that cooperation was key to protecting increasingly shared interests. Nevertheless, given 27 different languages, 27 different criminal law codes, 27 different criminal procedure codes and judicial systems required the institution of a body able to support national prosecutors and police authorities in persecuting transnational perpetrators closing those loops and gaps shrewd criminals could exploit to wriggle through the cracks in the system and get away playing by the books. To fulfil this purpose, Europol was established in 1998 for Law Enforcement Cooperation, and in 2002Eurojust was created to support judicial co-operation in criminal matters among agencies of the member states. The Lisbon treaty finally pushed towards complete integration, setting out the foundation for the creation of the European Public Prosecutor’s Office (EPPO).The first supranational prosecutor’s office experienceon the planet came to life in 2017. Thanks to EPPOacting through member states’ judicial systems it is now possible for the European Union to pursue crimes harming the Union’s financial interests.
Lessons learned at the forefront of international integration in Europe are key to the development of joint operations involving Customs authorities in different countries for the investigation and prosecution of transnational criminal activities that harm common interests. Under the umbrella of the World Customs Organization, an increasing number of projects with a global scope are promoted, coordinated, carried out and monitored throughtheir respective national Customs authorities in countries around the world. As an International Relations Customs Official, it is interesting to observe the regulatory impact a small office counting not more than 44 units can have in protecting national and European interests while integrating with WCO operations at a global level. Through its activities at the border between European member and non–member States, the Customs Office in Aosta has participated in the recent edition of Operation Pandora. In the month of September 2022, in collaboration with the Carabinieri Art Squad, Customs Officers intercepted and seized part of Charlie Chaplin’s historical archive that had been brought from Paris to Italy to be digitalized and was being re-exported to Switzerland without the required authorization of the superintendence for Fine arts11. Likewise, Customs officials at the Mont Blanc tunnel interceptedthe unauthorized transport of mirrors from the Seventeen and Eighteen-hundreds that were being carried from a villa in Como to Switzerland passing through France. Soon after, the officers of the Italian Excise, Customs and Monopoly Agency stopped a vehicle at the Saint Bernard tunnel that was transporting several boxes filled with books, some of which were more than 100 years old and thus constituted a valuable library altogether and were supposed to be accompanied by an export authorization in order to cross the border.The success of Operation Pandora is a fitting example of how a project commenced by the WCO in collaboration with INTERPOL, UNESCO and the Spanish Customs authorities in 2016 has been able to expand, covering an increasing number of countries in protecting their national cultural heritage from illicit transboundary trafficking. In Italy, in particular, Operation Pandora perfectly integrates with the Carabinieri Art Squad’s mandate. This specialized Unit of the Italian Military Police was established in 1969 to protect the country’s artistic and cultural heritage. With its long-standing tradition and experience in combating illegal trafficking of works of art and antiquities, the Carabinieri’s Art Squad’s activities have been increasingly challenging since the borders between European countries have disappeared consequently reducing Customs’ controls on the frontline. Nevertheless, cooperation with the Excise, Customs and Monopoly Agency, which is specialized in border control, has proven essential in allowing the success of Operation Pandora inercent years. As for prosecution, illicit trade of works of art does not specifically affect the EU’s financial interests and, thus, solely relies on national judicial systems.Still, intra-state cooperation between national authorities andinter-state cooperation between authorities of member states as well as international cooperation with authorities in “third parties,” highlights the fundamental role the WCO, INTERPOL and other International Organizations play in protecting those national interests that become common interests such as the protection of a nation’s cultural heritage.
Another topic of common interest is product safety. The Customs office in Aosta has recently been involved in an operation carried out in collaboration with the Guardia di Finanzain controlling the safety of products, such as electric and electronic equipment, toys, tools and other dangerous products for sale in Chinese retail shops in the province. A number of suspicious products displayed on the shelves were cross-referenced with the entries available on the RAPEX Safety Gate, which is the EU rapid alert system for dangerous non-food products. Once ascertained the noncompliance of such products with EU safety regulations some 150 items were seized to be later destroyed and the importing and distribution companies that introduced the merchandise into the EU from China were indicted. This is another example of successful in-state cooperation between national authorities in which Customs authorities acquire the important role of protecting citizens’ safety by enforcing supra national European regulations and further investigating and seizing noncompliant dangerous products after such commodities have been mistakenly cleared by Customs at the port of entry. Eventually this post-clearance detection will prove to be useful in refining risk profilesin order to intercept and prevent the entry of similar items at the port of entry wherever this may be at the European borders.
The path towards integration
Having consideredthese successful operations, it appears that a potential expansion of the EPPO’s mandate to include not only crimes that harm the European Union’s financial interests, but also crimes against European safety standards and European cultural heritage could be the next step towards a more complete integration between European states. For instance, in the case of product safety standards, the standards are EU regulations and evidence reveals that most, if not all, noncompliant merchandise is, in fact, marked with the CE logo. By counterfeiting the CE trademark, the perpetrators are not only committing a fraud in commerce against the buyers, but are also undermining the credibility of the CE logo that is supposed to represent quality and safety of products that have undergone thorough testing. This, in and of itself, represents a crime against a European Union’s legitimate interest in protecting its citizens. As for the protection of cultural heritage, the matter is slightly more complex. In fact, according to most member state’s national regulations it is forbidden to export works of art dating more than 70 years without a written authorization of the respective national superintendence for fine Arts. Therefore, exporting works of art among EU states is mostly a member state issue.Whereas,illegally exporting European heritage belonging to one of its member states towards a third country, instead, is to all effects harming both the nation stateto which the work of art belongs as well as the interests of the EU as a whole to the extent that the European Union is built upon a common cultural and historical heritage.
Finally, there is the Value Added Tax issue. Since only a small portion of nationally imposed VAT is destined to the EU, while a larger part remains to the member state, this is a hybrid issue. Despite VAT harmonization among EU countries has been an ongoing process for decades, as of today there still are sensible differences between VAT rates applied throughout different member states ranging from 17% in Luxembourg to 27% in Hungary. The Value Added Tax is applied by the country the goods are sold in, therefore it is possible for companies in member states to export and transfer goods to other member states under a regime of VAT suspension. Moreover, by filing a tax return form and presenting an Intrastat declaration, companies can claim a VAT refund from their home state when exporting goods to other European member states or third countries. This has led some companies to adopt aggressive tax planning schemes which,although resulting in base erosion and profit shifting phenomena, are still borderline-legal practices to the extent that the subjects using such shrewd tax manoeuvres are usually large corporations that must follow the rules, although they are prone to misinterpret and work around regulations to their benefit. In order to counter such practices, the OECD has recently adopted an Inclusive Framework on Base Erosion and Profit Shifting12. Less borderline, more explicitly criminal, instead, is the notorious carousel fraud that relies on the different VAT systems applied in member states and exploits the lack of communication between authorities in different countries to perpetrate a fraud against not one, but several national authorities by simply running fraudulent papers through an otherwise perfect system. Carousel frauds in fact do not need any material transaction, they only need paperwork to be pushed through various internal revenue services and receive VAT refunds on transactions that never actually occurred.
The European Union is proving to be an extremely effective boot camp where policies and integration amongst the judicial and police authorities of historically conflicting countries, each with their system, language and culture are being developed and refined. The more countries around the world arrange in regional organizations, engaging in customs unions and common markets the more the above-mentioned issues are likely to undermine increasingly integrated economies. Nevertheless, EU is also the living proof that ambitious integration processes can succeed in spite of the ongoing struggle set forth by nationalist tendencies and criminal attacks to this humanly imperfect effort to get along despite our differences.
It is perhaps hardto truly appreciate the meaning of the word “Customs” in languages other than English in which the noun Customs is defined as follows13:
1 a) a usage or practice common to many or to a particular place or class or habitual with an individual
b) long-established practice considered as unwritten law
c) repeated practice
d) the whole body of usages, practices, or conventions that regulate social life
and only as second meaning does the word refer to:
2 a) duties, tolls, or imposts imposed by the sovereign law of a country on imports or exports
b) usually singular in construction: the agency, establishment, or procedure for collecting such customs
It is hence Customs authorities’ specific duty to lead the way towards a borderless world by protecting the peculiarities, culture, uses, practices and conventions of a specific geographic area, including its heritage, its economy and population while, at the same time, opening up and interacting with counterparts that cover the same role in other countries, who, likewise take care and protecttheir own cultures and peoples.
Autore: Dott. Alessio Daniel De Marchi, International Relations Official, Agenzia delle Accise, Dogane e Monopoli.
Bibliography
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9 Jehad Ali, Rehanullah Khan Nasir Ahmad, Imran Maqsood (2012) Random Forests and Decision Trees.
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11 Porta Cristina (September 30th, 2022) https://www.lastampa.it/aosta/2022/09/30/news/al_gran_san_bernardo_sequestrato_larchivio_di_charlie_chaplin-9981232/
12 OECD (2021) Inclusive Framework on Base Erosion and Profit Shiftinghttps://www.oecd.org/tax/beps/
13 Merriam-Webster’s Dictionary of the English Language.
