Catdom is a small but prosperous Indian Ocean island nation with a population of around 3 million. Catdom has a seaport and an international airport located in the capital, Johnsonville. The Catdom Customs Department (CCD) has an office at the seaport and at the airport. The CCD comes under the authority of the Minister for Trade. Catdom is a low-key member of the WCO, has adopted the Harmonized Tariff, but is not a party to the Revised Kyoto Convention.
Catdom has high tariffs on imported agricultural products, as a result it has an important but internationally uncompetitive farming sector. Its major agricultural exports include citrus fruits, sugar, tobacco and cotton. In particular the importance of the citrus industry has seen rising concerns over any unwanted importation of the red-necked orange worm. If this worm was inadvertently released into Catdom it would result in the devastation of the citrus industry. All cargo arriving by sea or by air from all countries is physically inspected by Catdom Agriculture inspectors before it can be released to ensure that the worm does not impact on Catdom’s citrus industry.
The average rate of import duty in Catdom is 10% of the value of the goods imported. This revenue is a significant contributor to the national treasury and the Catdom Finance Department requires CCD to produce an annual forecast of revenue to be collected on imports. To ensure these duty collections meet the budget CCD staff are not provided with any minimum duty collection amount and are instructed “to collect every cent without exception”.
The Johnsonville seaport, which has never been particularly efficient, is now becoming clogged with imports waiting for examination by both Customs and Agriculture and exports waiting to be cleared for loading onto vessels. This is mainly due to the red-necked orange worm inspections on imports and to a lesser extent due to increased documentary and physical inspections which have been introduced to implement advanced security screenings on all exports to the USA.
Customs and Agriculture have separate offices at the seaport and do not coordinate their physical inspections. Another of the problems at the seaport is the lack of straddle carriers to move the unloaded containers from alongside the ship to the port storage stacks. This means that often when importers send a truck to the seaport to collect their containers they are left waiting for hours (sometimes days) in lengthy queues. All these problems are causing cargo delays. The Catdom trading community has been highly critical of these delays and has been focussing its angst on the CCD.
The airport is located some 20km from downtown Johnsonville. Customs and Agriculture share the same office space at the airport and unlike the seaport conduct coordinated physical inspections of air cargo. In the last 6 months the CCD have had to move 20 declaration processing officers from the airport to the seaport to overcome the delay problems being experienced there in response to the criticism from the business community. The remaining declaration processing staff at the airport are inexperienced and rely heavily on 2 experienced supervisors for advice and direction.
The Customs Act in Catdom allows for the lodgement of the goods declaration 7 days prior to the expected arrival of the vessels carrying the sea cargo but requires that for air cargo the goods declaration can only be made after ‘wheels down’ or the actual arrival of the aircraft carrying the cargo.
CCD procedures required that any applicable import duty and taxes be paid by certified bank cheque or in cash by the importer/owner in person. Goods are not released from customs control until the cheque has been cleared and the funds are in the government revenue account. These procedures were put into place a number of years ago after a large importer went bankrupt and the CCD was left with a number of worthless company cheques. A consequence was that the CCD did not meet is expected revenue collection level that period and were criticised by the Catdom Treasury Departments for this failure and CCD senior management were not paid their standard 10% performance bonus that year.
The CEO of CCD is again concerned that the delays being experienced could affect the executive bonus scheme and has shared that concern with her National Mangers. The National Manager Import Policy has commissioned his staff to undertake a time release study (TRS) to see if such a study might identify the source of the problems.
The TRS has produced the following results:
Table 1: Sea Cargo – Average times (days)
Last Period This period
Time from the arrival of the goods to the lodgement of the goods declaration -2.5 -2.0
Time from the lodgement of the goods declaration to the completion of the assessment 3.0 4.5
Time from the completion of the assessment to the payment of duties and taxes 2.0 2.0
Time from the duty payment to the delivery of the goods 2.0 3.0
Table 2: Air Cargo – Average times (days)
Last Period This period
Time from the arrival of the goods to the lodgement of the goods declaration 2.0 1.5
Time from the lodgement of the goods declaration to the completion of the assessment 2.0 2.0
Time from the assessment to the payment of duties and taxes 1.5 2.0
Time from the duty payment to the delivery of the goods 0.5 0.5
1. Arrival is the point of time where the goods enter customs control.
2. Time from the arrival of the goods to the lodgement of the goods declaration can be before arrival for sea cargo.
3. The time to the “completion of the assessment” means the time to the point where both Customs and Agriculture have completed all their assessments, including any necessary documentary and physical inspections, the provision of any required permits and the determination of the duties and taxes payable.
4. At the time of payment of duties and taxes there is no further regulatory impediments and permission is given to for the goods to be removed from customs control. From this time the goods are available to be delivered to the owner/importer of the goods.
5. Delivery is the time when the importer/owner leaves the controlled premises taking their goods into home use.
Table 3: Stratification of importers
20% of revenue is collected from 2% of importers
40% of revenue is collected from 5% of importers
60% of revenue is collected from 10% of importers
80% of revenue is collected from 20% of importers
100% of revenue is collected from 100% of importers
Table 4 – Cost of revenue collection
Last Period This Period
No of transactions (Declarations) 90,000 95,000
Total assessment costs $2,115,000 $2,280,000
Unit transaction cost of collection $23.50 $24.00
1. Total assessment costs is the full cost of the assessment activity including wages of staff and supervisors, leave payments and overhead costs such as rent, depreciation, IT and infrastructure costs.
Table 5 – Stratification of collections
Last Period Thist Period
Number of collections between $0 and $20 25,000 28,000
Number of collections between $20 and $50 15,500 16,250
Number of collections between $50 and $100 12,000 13,250
Number of collections between $100 and $500 25,000 24,500
Number of collections above $500 12,500 13,000
Total No of collections 90,000 95,000
You are the National Manager Import Policy in the Catdom Customs Department (CCD) and the CEO of the CCD has asked you for a report on what she should or could do to answer the strident complaints she has received from the trading community concerning the delays in cargo release times at both the airport and the seaport in Johnsonville.
She has asked you to be frank and fearless in your report and to give her ideas about how CCD might resolve the concerns of the traders including any suggestions about amending laws or changing current administrative procedures. She has invited you to be as creative as you like in drafting your report. She has asked you to particularly advise her of any good practice that you might be aware of that are used by other Customs administrations around the world that Catdom might profitably implement to resolve the ongoing problems.
She is not aware that you have commissioned the recent time release study.
The CEO has said that your report must not exceed 1000 words and that it must be provided no later than 22 April 2022.
Your report should be structured in 3 parts as follows:
Part 1 – Introduction – Up to 100 words
Tell the CEO about time release studies generally. Their purpose, the methodologies undertaken and your views of their overall benefit.
Part 2 – Problems – Up to 400 words
Outline and explain the results of the current time release study for the CEO and use the results of the study to, taking into account and using the information you have been provided with above, identify any bottlenecks or problem areas that might be affecting the clearance times in Catdom.
Part 3 – Solutions – Up to 500 words
Suggest practical solutions to the identified problems. This might involve amending laws or changing current administrative procedures. In devising these solutions or suggestions you should particularly tell the CEO about any good practice that have researched that is used by other customs administrations overseas.
There are many problems here in this troubled Customs Administration. Do not try to identify all the problems but rather just discuss the ones that you believe are are the most problematic.
If any of the identified problems are being caused by other agencies or factors not within the ability of the CCD to resolve tell the CEO how you think she should handle such problems to mitigate the criticism currently being directed at the CCD.
Please note that your Part 2 task is to use the results of the study to identify the problems/bottlenecks. Those students who principally rely on the narrative facts to identify the problems will not get as good marks.
MARKING CRITERIA AND STANDARDS
The following criteria and weighting will be used in marking this assignment
Your ability to:
• evaluate the World Customs Organizations’ methodology for measuring clearance times. (Weighting 0.1)
• identify problems in trade flows resulting from customs procedures. (Weighting 0.2)
• formulate practical solutions to problems in trade flows resulting from customs procedures. (Weighting 0.4)
• use informed sources to appropriately support your position. (Weighting 0.1)
• communicate effectively in academic writing. (Weighting 0.1)
• provide due and appropriate in text and end of text referencing in accordance with the required APA (6th Ed) style. (Weighting 0.1)
Time release study is important to do the assignment