Customs Operating Environment

This section outlines Customs’ operating environment and discusses what it means for Customs’ contribution to Government priorities and outcomes for the community.

Long-Term Operating Environment
In developing this Statement of Intent, Customs has taken a longerterm view of its environment.

Looking ten years ahead there are a number of emerging trends that can be identified – such as an increased emphasis on sustainability, an increase in the level of intangible trade, more pervasive technology, and the need to increase New Zealand’s competitiveness as a place to work. The implications for border management are unclear as the pace of global economic, environmental and social change is unpredictable. While Customs cannot know for certain what specific risks, threats, or opportunities it will face in 2015, it has identified four areas in which it must excel if it is to be ready and prepared for whatever the future may bring:

• Creating and utilising knowledge.
• Connectedness, domestically and internationally.
• Agility, including utilisation of technologies that facilitate more effective responses to current and emerging issues.
• Providing value to Government and citizens.

These themes align strongly with the key strategies identified in Customs’ Statement of Intent 2005-2006. This gives Customs confidence that the organisation development strategies identified last year remain appropriate.

Short to Medium Term Operating Environment
The outlook for the next three to five years for border management is expected to remain dynamic, with many of the issues outlined last year continuing to feature strongly. These issues are discussed below in terms of their impact on Customs’ ability to contribute to the Government’s priorities of economic transformation, families – young and old, and national identity.

Challenges to Achieving Economic Transformation

Complexity
The trading environment has a significant influence on New Zealand’s ability to achieve economic transformation. Border management should contribute to making New Zealand a competitive trading nation. New Zealand is, and needs to be seen as, a safe place to trade – efficient and contemporary, and free from corruption. Changing international trading patterns will continue to increase the complexity of border management but this may be balanced by the emerging emphasis on standardisation of international trade processes. Examples are the recently agreed World Customs Organisation (WCO) Framework of Standards, the Harmonised Commodity Description and Coding System (the Harmonised System) and the World Trade Organisation’s Doha Trade Agenda, which may offer potential for increased synchronicity in border processes internationally. As the development of standards and conventions will both affect Customs’ approach to its international relations and impact upon the way it does things domestically, Customs will need to maintain a strong interest in their development and implementation.

The growing global trade in pirated or counterfeit goods, which accounts for as much as 10 percent of world trade, is reflected in the dramatic growth in the volume of such goods intercepted by Customs at the New Zealand border.

Volume Growth
The growth in global trade is expected to continue as a result of increasing trade liberalisation and new technologies. New Zealand’s trade flows are expected to reflect this growth over the medium-term.

Customs cleared a record number of air passengers in 2004/05. While growth in passenger numbers has slowed in recent months, this is expected to be a short-term phenomenon with a return to higher growth rates in the medium-term.

Customs’ Response

Trade Security Strategy
Security of the supply chain will remain a key issue for New Zealand, its trading partners and the international community. The challenge here is for customs administrations to fully understand industry processes so that they are better able to use the supply chain to achieve their regulatory objectives while minimising potential barriers to trade and travel. Customs will continue to actively engage in forums to develop security standards for trade security and to help build Pacific capability to implement any resulting standards.

In the New Zealand context, there are opportunities for Customs to work with industry to develop innovative solutions to supply chain issues. Customs will therefore continue to explore opportunities to extend and enhance its trade security strategy so that New Zealand traders maintain access to key markets, even at times of heightened security alert.

Trade Negotiations
The Government continues to pursue a demanding programme of trade negotiations. Working with the Ministry of Foreign Affairs and Trade and the Ministry of Economic Development, Customs will continue to make an important contribution to these trade negotiations through its policy advice on rules of origin and customs procedures, in order to open up further opportunities for New Zealand exporters. Customs will also continue to protect New Zealand industry from unfair trade through enforcement of the trade remedies regime.

Intellectual Property Rights
The growth in interceptions of intellectual property rightinfringing goods at the border is expected to continue if the underlying policy settings remain unchanged. Customs is working with the Ministry of Economic Development, the lead policy agency, to develop a whole of government, sustainable solution to this issue.

Volume Growth
Increasing trade and travel volumes will continue to present an ongoing challenge in maintaining appropriate controls over potential risks while minimising the barriers to trade and travel flows. Customs will need to continue to seek costeffective responses involving the adoption and integration of new technologies into existing structures and processes, and increased synergies between government agencies and with the private sector.

Customs will continue working with other government agencies to implement the standard processing time, and with infrastructure providers to ensure that their future development plans incorporate sufficient facilities for border processing requirements.

Challenges to National Identity and Families - Young and Old

There are a number of potential threats to the New Zealand way of life. These could undermine the safety of communities, the health of New Zealand families and New Zealand’s international reputation as a safe, secure democracy that plays its part as a “responsible international citizen”.

Terrorism
Expanding trade and travel networks increase the risk that people and goods associated with terrorism will be able to move undetected between nations. Countering this will continue to be a focus of Customs’ attention for the foreseeable future. As part of its response, Customs will continue to work with other agencies to implement the maritime security framework set up by the Maritime Security Act 2004.

Transnational Organised Crime
It is expected that New Zealand will continue to see a steady growth in the involvement of transnational organised criminal syndicates in a range of criminal activities that impact on the border. These include smuggling of illicit drugs, goods infringing intellectual property rights and stolen property, and other activities such as illegal immigration, money laundering and identity fraud.

Illicit Drugs
The 2005 Illicit Drug Monitoring System Report describes a dynamic drug environment in New Zealand, with new licit and illicit drug types emerging on the market and methamphetamine well established in the illicit drug market place. Customs’ investigative and enforcement resources are likely to continue to face considerable pressure and Customs will need to ensure that its investigative and enforcement resources are appropriately directed to high priority risks. The respective responsibilities of Customs and the Police will be reviewed as part of the review of the memorandum of understanding between the two organisations.

Customs’ Response

National Targeting Centre
A National Targeting Centre (NTC) is being established that will bring together Customs’ passenger and trade targeting functions. The NTC will play a pivotal role in determining how Customs’ risk management priorities are operationalised through analysis and targeting. The NTC will facilitate improved risk management and operational performance and advanced interoperability with other agencies in New Zealand and overseas, ensuring that the border management system responds rapidly and efficiently to a wide range of border threats.

Customs’ Pacific Strategy
The Customs’ Pacific Strategy will continue to play an important role in contributing to the security of the region. The strategy informs Customs’ contribution to WCO capacity building projects, and Customs’ work with other government agencies and Pacific partners on initiatives to promote effective border control in the Pacific. Central to the strategy is Customs’ contribution to the Oceania Customs Organisation (OCO). In addition, funding has been provided from the Pacific Security Fund for a one year trial of a Pacific attache to facilitate further development of Customs’ relationships with customs administrations in the Pacific, and development of customs capability in the region.

Public Sector Management

In a tightening fiscal environment, efforts to demonstrate and improve cost-effectiveness are increasingly important and Customs is focusing on improving the evidence-base relating to its performance and impacts. The Development Goals for the State Services, launched in March 2005, provide a clear sense of the broader state sector development agenda. As the table opposite shows, there is a strong alignment between these goals and Customs’ capability goals for 2006-2010.

STATE SECTOR DEVELOPMENT GOALS	CUSTOMS’ CAPABILITY GOALS 2006-2010
Employer of Choice	People
Excellent State Servants	People
Networked State Services	Systems
Coordinated State Agencies	Reputation (as well as Customs’ outcome goals for Border Management Assurance, Border Security and Community Protection
Accessible State Services	Systems
Trusted State Services	People

What This Means for Customs

The environmental assessment outlined above poses challenges for Customs in four areas: knowledge, connectedness, agility, and value.

Knowledge
Customs collects information about all goods, craft and people crossing the border. Customs must use information effectively to ensure it is able to fully contribute to advancing government priorities. To achieve this, Customs will need to:

• move from transaction processing to information systems that are able to more effectively facilitate the generation of knowledge from information flows
• enhance the conversion of advance information and data into knowledge, to achieve better targeting and to improve the overall synergy of whole of government border management, and
• ensure its systems development keeps pace with demand and supports operational solutions.

Connectedness
Customs has strong connections with its key stakeholders. Customs must use these connections to increase synergies in the border management system domestically and internationally so that risks are able to be managed effectively over the long-term.
To achieve this, Customs will need to:

• further develop its relationships with policy agencies, to improve the synergy of border interventions with domestic intervention strategies
• deepen its relationships with industry and infrastructure providers in the trade and tourism sectors in order to better understand how regulatory and industry interests can be best aligned to ensure that increasing complexity does not result in increasing barriers to international trade and travel
• streamline customs and business practices through increased utilisation of technology, and
• continue to influence the development and implementation of standards for the border management aspects of global supply chains.

Agility
Customs must enhance its ability to anticipate and respond to changes at the right time in order to be able to protect New Zealand and its way of life from new and emerging border risks, and to take advantage of opportunities that could help New Zealand’s competitiveness as a trading nation. To achieve this, Customs will need to:

• be more proactive in risk identification, thereby strengthening its ability to identify emerging trends and to address border risks at their source
• ensure that it has appropriate powers to operate effectively in a rapidly changing and complex border environment
• further strengthen international connections, in order to enhance its ability to exert influence and to access timely and accurate intelligence, and
• undertake research and development to identify and develop technologies that facilitate more effective responses to current and emerging issues.

Value
Customs must also continue to provide, and be able to demonstrate, value to the Government in whatever it does. This means ensuring Customs’ work is focused on Government needs and priorities, and requires development of an evidencebased understanding of the costeffectiveness of Customs’ current and proposed interventions.

Customs’ outcome and capability goals for 2006-2010 address these challenges. The goals provide a framework for future planning in pursuit of Customs’ vision of leadership and excellence in border management.