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Trying to reach customs harmony
Journal of Commerce / April 13, 1998

By Larry Luxner

MIAMI -- As 34 heads of state gather in Santiago next week to formally launch negotiations towards a Free Trade Area of the Americas by 2005, regional integration won't be the only thing on the agenda. Also to be tackled at the hemispheric summit: customs harmonization procedures, anti-corruption efforts and protection of intellectual property rights.

This follows a mid-March meeting in Montevideo, Uruguay, where the 11-member Latin American Association for Integration (known by its Spanish acronym ALADI) voted to unify customs regulations on valuation, nomenclature and paperless documentation.

The decision -- which could improve the flow of trade and reduce costs for both exporters and freight service providers -- was made by the customs directors of Argentina, Bolivia, Brazil, Colombia, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay and Venezuela. The move has the support of the World Trade Organization, the U.S. government and the Brussels-based World Customs Organization (WCO).

Lynn Gordon is director of the South Florida Customs Management Center, a Miami-based division of the U.S. Customs Service. She says the WCO is trying to develop global customs standards in a region-by-region fashion "because it seems to be easier in smaller chunks," she says, adding that "this is critically important to our exporters."

Gordon, noting that the FTAA does have a separate committee dealing with customs harmonization, but that "progress has really been slower than everybody would like. Personally, I'd like to see a few more customs people on this committee."

Even if the goal of one big free-trade area from Alaska to Tierra del Fuego were someday realized, the need for standardized customs procedures would not disappear. Products coming in from Europe, Africa and the Far East would still be subject to duties, and dumping issues -- such as the recent salmon dispute involving the United States and Chile -- are unlikely to go away.

Many of these issues will be taken up at the Symposium of the Americas conference, set for May 31-June 2 in Miami. "One of the big goals of this conference is to try to harmonize customs procedures," says Gordon, adding that when it comes to paperless cargo documentation, Latin America is way behind the United States.

"In the U.S., we have a bonding system, so we release the cargo right away, as long as the carrier or importer posts a bond, making sure they'll cover any expenses that come up at a later point. This allows us to clear cargo even before it arrives," she told The Journal of Commerce. "Even in the most extreme inspections, this happens within a day, whereas in Latin America they don't have a bonding procedure. Frequently cargo can be tied up for months in customs while they're trying to clear the issues."

Adds German Leiva, president of Miami Free Zone Corp. and a strong proponent of regional customs harmonization:

"What we are doing now is even more complicated than with NAFTA. Before we had three countries. Now we have 34," he said. "Many Latin countries don't have the systems we have here. We must convince them that if we all have the same system, we definitely can operate in an easier and more competitive way, and avoid the involvement of tremendous numbers of customs personnel."

Gordon agrees. "In my opinion, making the process electronic helps cut down on contraband, because it allows you to do instantaneous analysis," she says. "For example, in the U.S. we have five to 10 years of data on every manufacturer who's done business. We have all this information on line. If there are certain products you're concerned about, you can sort it out in a matter of seconds."

Michael Skol, president of Washington-based Skol & Associates Inc. and a former U.S. ambassador to Venezuela, argues that one of the greatest areas of corruption in Latin America is customs evaluation.

"Let's say you're in Germany and you ship an electric generator to Ecuador," he said. "You claim it's worth $500,000, and the importer claims it's worth $500,000, so he pays customs duties on that. But in fact it's a $5 million item. So how does the inspector at the port of Guayaquil really know, especially if somebody bribes him? There are now online customs evaluation services that can tell him exactly what a given product is worth."

Gordon singles out Chile, Costa Rica, Peru and Uruguay for making strides in this area. Other countries, however, lag behind -- including Bolivia, Brazil and Paraguay. In addition to automation, she says, Latin governments need to improve the quality of customs inspectors themselves -- a step already taken by her Miami office.

"Before we started this program, we did not necessarily hire college graduates," she said. "Now, practically everybody we hire is a college graduate."

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