How Do Countries And Customs Enforce Regulation And Compliance? A Look At The Us And China

The enforcement of regulations and compliance in trade between the U.S. and China involves a combination of measures and cooperation between various government agencies, customs authorities, and international organizations. Enforcement of trade regulations and compliance involves a combination of legal frameworks, customs procedures, technological tools, cooperation between government agencies, and collaboration with trading partners. The goal is to facilitate legitimate trade while preventing fraudulent activities and ensuring that imported goods adhere to the relevant laws and regulations. The automation of global supply chains has commenced with the implementation of advanced technologies. The utilisation of advanced technology to enhance cross-border trade has garnered significant attention and exploration from international organisations, the private sector, academia, and various stakeholders. In this report, we would like to focus on the home categories of US and China customs for border protection. Especially how they use technology tools.

Overview

Both U.S. Customs and Border Protection (CBP) and China's General Administration of Customs (GACC) have responsibilities related to the import and export of various categories of goods, including those falling under the "home" category, which typically includes items related to home furnishings, appliances, and decor. Here's a general overview of how CBP and GACC might handle customs and border protection for such home-related categories:

U.S. Customs and Border Protection (CBP):

Technology and Scanning

Tariff Classification

Country of Origin Verification

Trade Agreement

Intellectual Property Rights Enforcement

Documentation Review

China's General Administration of Customs (GACC):

Technology-Assisted Inspections

Trade Regulations

Customs Clearance

Customs Declarations Verification

Quality and Safety Checks

The WCO Study Report on Disruptive Technologies highlights the profound influence of various advanced technologies, commonly referred to as disruptive technologies, on customs procedures. These technologies have fundamentally transformed the conventional methods and approaches employed in various operational aspects. The forthcoming advancements in technologies such as blockchain, Internet of Things (IoT), big data analytics, artificial intelligence (AI) and machine learning, biometrics, drones, virtual and augmented reality, and 3-D printing are expected to have a lasting positive impact on the operational efficiency and effectiveness of customs authorities.

Three areas of advanced technology in particular play a significant role in the work of customs authorities and in facilitating cross-border trade:

1. Blockchain and distributed ledger technology (DLT)

2. Internet of things(IoT)

3. Big data, data analytics, artificial intelligence and machine learning

1. Blockchain and DLT

The adoption of blockchain and DLT has the potential to enhance transparency, immutability, and accessibility of information, as well as improve the quality of data. Additionally, it enables the efficient sharing of pertinent information regarding border management procedures among all stakeholders.

The biggest problems with using blockchain and DLT in customs processes are the lack of expertise and good practices, as well as the costs that come with them. For a broader uptake of blockchain by customs authorities, there needs to be more widely available standardised datasets which are used by both government agencies and authorised economic operators. Standardising datasets would help to avoid the appearance of inefficient governance systems and to potentially prevent the proliferation of different blockchain solutions that are not interconnected.

2. Internet of things 

Customs authorities have made progress in their use of IoT. Countries are experimenting with the IoT to fully automate border crossings and customs procedures in national ports. One initiative involves integrating X-ray scanners into a cross-border image exchange to centrally analyse the results of multiple scanning stations. The initiative's specialised training facility for X-ray system operators and unified training software for image analysis have optimised human resource allocation and improved image analysis quality. Other projects involve the use of radio frequency identification antennas or electronic seals to ensure the traceability of goods and modes of transportation.

Customs authorities can benefit from better risk management, greater efficiency of customs clearance processes and improved analytics. To be successful, states need to first address the challenges of integrating data collected by IoT devices into customs operating systems. The various IoT devices need to be compatible and interoperable across a variety of interfaces without compromising data security and privacy.

Some Research showed that the majority of IoT deployments used X-ray or computed tomography (CT) scanning, QR code and barcode readers, automated licence plate readers and cameras, and e-seals.

3. Big data, data analytics, AI and machine learning

Many customs authorities have adopted advanced analytical technologies. Around half use some combination of big data, data analytics, artificial intelligence and machine learning. Those who do not currently use them have plans to do so in the future. The majority of customs authorities acknowledge the evident advantages associated with advanced technologies, specifically in the areas of risk management and profiling, fraud detection, and the promotion of enhanced compliance.

To ensure improved data governance and quality, a data strategy needs to be established. On the other hand, Data protection laws may limit the extent to which data can be used. Better guidance on how to interpret such legislation when analysing data for customs purposes would help to avoid overly cautious project design and promote data exchange between organisations and customs authorities. Resources will be needed to address the barriers and challenges to introducing this type of technology, such as the cost and the requirement for expertise and best practises.

Example- Blockchain &DLT

China Customs authorities are developing an international trade single window blockchain to exchange information on clearance, and logistics and cargo status to improve the port business environment and trade facilitation.

Eg. Blockchain-based logistics systems

This logistics system disclosed systems, methods, and computer-readable storage media providing an improved hardware and software architecture for providing logistics operations and services.

The system receives rating information from one or more logistics service providers, as well as parameters associated with a requested commodity transport from a shipper. A quote for commodity transportation is generated dynamically based on the rating information and one or more parameters included in the request and sent to the shipper. The system then receives an authorization from the shipper to transport the commodity in accordance with the quote and generates one or more smart contracts for the commodity's transport in response to receiving the authorization. The system monitors the commodity's transport and determines whether the terms of a smart contract have been met. When a term is satisfied, the operations that correspond to the satisfied terms are carried out automatically.

US Customs and Border Protection (CBP) conducted a blockchain PoC in September 2018. Blockchain improved CBP-trader communication, receipt documentation, and processing speed by eliminating manual documentation and data entry. Back-up documentation was easier to access, and since full data were received with the entry summary, potential issues were discovered early.

Eg. Hierarchical blockchain architecture for global trade management

This is a reactive hierarchical blockchain architecture, system, and methodology for Global Trade Management (GTM).

The system includes a comprehensive set of GTM applications and makes use of multi-national content to enable efficient cross-border transactions anywhere in the world. The tiered computer-implemented system and method enable the creation of distributed GTM blockchain solutions capable of processing massive amounts of global content at scale in order to meet massive transaction volume. The hierarchical blockchain architecture ensures the scalability of GTM solutions by reducing the need for extensive calculations to be performed on multiple blockchain nodes. GTM blockchain systems can operate independently or feed data into one or more main International Trade (ITC) blockchains. Smart contracts for specific GTM operations are distributed across appropriate childchains and validated by integrated GTM applications running on permissioned nodes.

Example of IOT : 

China

Since 2016, the Single E-lock Scheme (SELS) has connected the Intermodal Transhipment Facilitation Scheme of the Hong Kong Customs and Excise Department with the Speedy Customs Clearance of the mainland customs authority towards establishing a green lane to facilitate the flow of goods through a seamless clearance service.

One single e-lock and GPS technology accredited by both customs authorities are applied in the SELS under the principle of one single e-lock under separate monitoring. The GPS device is used for real-time tracking of the movement of the goods to ensure the security of transhipment cargo in Hong Kong and china.

US

CBP is exploring the use of IoT to manage its extensive network of sensors. The objective is to improve domain awareness and to make the data available to a wider audience within CBP by using an IoT gateway. CBP is also looking at IoT to help to modernize the experience of cargo processing at the border, reduce time spent on inspections and increase the speed of passage. AI and machine learning will utilise data from IoT devices to gain deeper insights on the information gathered and better secure borders.

Example- Big data, data analytics, AI and machine learning

According to WTO research, These three advanced technology are not mutually exclusive, and customs authorities often use them in combination. For example, blockchain, in combination with IoT, provides new ways to track the journey of products. It can be a powerful tool to promote transparency and traceability of supply chains.

China and US are applying these three advanced technologies to their customs and trade protection. They should combine these technologies and gain the most significant benefits from them.

A number of common benefits are expected from the adoption of these three areas of advanced technology such as, inter alia, enhanced transparency of procedures, better risk management and profiling, and improved data quality, which will lead to greater efficiency of customs clearance processes and greater revenue collection.