Customs' Business Model

The business of border management is essentially the business of risk management, including the need to balance the facilitation of trade and travel with the management of security and community risks. However, the delivery of border management is not organised on a risk-by-risk basis, but on a process-by-process basis. These processes typically deal with a range of risks simultaneously and, as a result, the Government is able to gain many synergies and efficiencies. Knowledge of these processes is a key component in developing an understanding of Customs’ business.

Customs’ border processes are supported by extensive use of intelligence and other information systems. High quality and timely information, in combination with expertise in analysing that information, underpins good intelligence. Timely and relevant intelligence is essential for risk management through targeted interventions which, in turn, enable the facilitation of legitimate trade and travel.

Interventions

Traditionally, the core interventions for border control for all customs agencies have been focused on the processes used for clearing goods, people and craft across the border at international air and sea ports.

The economics of scope and scale are a key driver in the design of Customs legislation and business processes, in that the same process used to check for the smuggling of contraband is also used to collect both revenue and information for other purposes, such as trade data. This characteristic has become even more pronounced in recent times, with illicit activities such as counterfeiting and pirating increasingly being undertaken by organised criminal groups, terrorist groups or financiers of terrorism. More so than ever before, Customs officers are dealing with a wide range of border risks simultaneously, meaning that the majority of Customs’ outputs contribute to all Customs’ outcomes. While this adds significant complexity to analysis of the relationships between outputs and outcomes, it also enables cost effective responses to border and revenue risks.

The increasing threat posed by transnational criminal activity and terrorism has also resulted in a much greater emphasis on Customs activity “beyond the border”, as it has traditionally been defined. Customs agencies are increasingly attempting pre-emptively to meet threats to border security at their point of origin by moving from reactive enforcement at the border’s edge to proactive prevention, investigation and facilitation further afield. In the New Zealand context, this can be seen in the Advance Passenger Information provisions of the Border Security Bill and the creation of a separate dedicated inter-disciplinary drug capability proactively to investigate high level and complex drug activity and transnational organised crime.

In common with other modern customs administrations, Customs employs interventions at three stages of the trade and travel process:
Pre-border interventions: This involves the collection of information and the development and dissemination of intelligence about goods, people and craft before they arrive at the border. The information is used to target the level of intervention appropriate for people, goods and craft entering and leaving New Zealand. Customs also provides information to clients, including importers, exporters, excise licensees, and the travelling public on Customs’ and other government agencies’ border requirements, in order to facilitate trade and travel.
Border interventions: There are set control processes for the arrival of all goods, people and craft at all international ports and airports. Within these control processes Customs employs various interventions, including document examination, search, x-ray inspection, and questioning, to determine the legitimacy of goods, people and craft.
Post-border interventions: Post-border auditing of goods for tariff and other forms of revenue provides an essential check in a revenue system that is largely based on voluntary compliance at the time of entry. Customs also undertakes post-border investigation of offences under the Customs and Excise Act 1996 and other Acts under which it has investigative powers (e.g., the Misuse of Drugs Act 1975). These investigations are usually focused on serious crimes involving importation of drugs, objectionable publications, counterfeit or forfeited goods, revenue evasion and fraud.

The following diagram illustrates the relationship between Customs’ outcomes, the flows of goods, people and craft across the border, and Customs’ output structure.

Compliance Model

In carrying out its activities, Customs aims to cause minimum disruption for the travelling public and compliant importers/exporters. This is achieved by:

• an intelligence-driven approach based on advance access to information about cross-border movements;
• the use of risk assessment techniques to focus interventions on those transactions likely to cause most risk; and
• the positioning of certain processes in the pre- and post-border environment for low risk and routine transactions.

The specific range of interventions employed at any time to give effect to Customs’ regulatory responsibilities takes account of the behaviour of traders and travellers. Customs has developed a compliance model that seeks to employ interventions that are appropriate to the nature and level of risk being addressed.

The twin objectives of the model are:

• to tailor compliance interventions to trader and traveller behaviour; and
• over time, to move trader and traveller behaviour from noncompliance to voluntary compliance.

The model shows the continuum of traveller and trader attitudes towards compliance and summarises the different interventions that may be needed to ensure that the community is protected and that revenue is collected. It is a powerful tool in assisting Customs better to target its interventions while maintaining the free flow of legitimate trade across the border.

Compliance Model

	LOW <---------------------------------------------------------------------- RISK LEVEL----------------------------------------------------------------------> HIGH
Client Categories	Voluntary compliance People who want to comply	Assisted compliance People who try to comply, but don't always succeed	Directed compliance People who will avoid complying if they can	Enforced compliance People who deliberately do not comply
Client Behaviours	Voluntary compliance Informed clients	Attempting to comply Uninformed clients	Resistance to compliance Will avoid if possible	Criminal intent Illegal activity
Customs' Competencies	Interventions
Information High quality, timely, and accurate information about the arrival and departure of all persons, goods and craft	Advanced cargo/passenger/craft information (in and out). Monitoring of physical movement of all people, goods and craft across (in and out) the border	Patterns of non-compliance by: Industry, product, location,ethnicity, destination or port of origin Type of non-compliance (e.g. incorrect documentation)	Profile of individual non-compliant traders/travellers Identification of specific compliance problem (e.g. bad systems, poor data entry etc)	Profile and ongoing intelligence (on and off/shore) about offenders/potential offenders and their associates
Assessment Assessment of the level of risk posed by arriving and departing people, goods and craft	FrontLine Pax/Goods staff intuition Intelligence profiles Statistically valid random checks	Compile information on client behaviours Identify and monitor compliance trends/patterns	Problem solving approach to specific compliance problems Investigation	Assess risk and information needs in relation to seriousness of offence Investigation
Action Actions required to mitigare identified risk(s) without unduly disrupting legitimate trade and travel	Compliance programmes (e.g. FrontLine, Call Centre) Education and advice Visible deterrence Cargo and baggage screening	Targeted compliance guidance Punitive sanctions Rolling audit programme Increased attention	Deter by detection and surveillance Comprehensive audits Prosecution	Pre and post clearance interventions Comprehensive audits Passenger/cargo searches Prosecution

<---------------------------------------------------------- Direction that Customs wants to move travellers and traders ------------------------------
-------------------------------------------------------------Increasing levels of intervention by Customs ------------------------------------------------------>