Georgian Customs System

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<p>Project: Prospects of Georgias Integration In the EU Customs Union</p> <p>Overview of Georgian Customs SystemBondo BolkvadzeSenior Consultant Policy and Management Consulting Group - PMCG</p> <p>Tbilisi, Georgia June- 2010Organization: Policy and Management Consulting Group -PMCG Funder: German Marshall Fund of the United States</p> <p>Funding was provided by The Black Sea Trust, a project of German Marshall Fund of United States. Opinions expressed in the written or electronic publications do not necessarily represent those of the Black Sea Trust, the German Marshall Fund, or its partners.</p> <p>1</p> <p>Table of Contents1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. General information ............................................................................................ 3 Organization and structure of Georgian customs ........................................ 5 Human resource management ......................................................................... 7 Customs legislation ............................................................................................ 8 Post-clearance Customs Control ................................................................... 10 Risk management .............................................................................................. 11 Customs valuation ............................................................................................ 12 Import-export duties and revenue collection .............................................. 13 Customs disputes resolution.......................................................................... 15 Authorized economic operators ..................................................................... 17 IT implementation .............................................................................................. 17 Intellectual property rights .............................................................................. 18 Trade across border ......................................................................................... 19</p> <p>2</p> <p>Georgia</p> <p>1. General informationIndependence from the Soviet Union declared - April 9, 1991 Capital (largest city) - Tbilisi 4143N 4447E Official language(s) - Georgian Ethnic groups - 83.8% Georgian, 6.5% Azeri, 5.7% Armenian, 1.5% Russian, 2.5% other [3]</p> <p>3</p> <p>Government - Unitary semi-presidentialrepublic Area (Total) - 69,700 km2 (120th) Population 2009 estimate - 4,385,400(Statistics Georgia) (122nd) Density - 61.1/km2 (134th) GDP (PPP) 2009 estimate - $20.862 billion; per capita - $4,757 GDP (Nominal) 2009 estimate - $10.737 billion; per capita - $2,448 HDI (Human Development Index 2007) - 0.778 (medium) (89th) Currency Lari () (GEL) Time Zone - UTC (UTC+4) Member of WTO since June 14, 2000 Member of WCO since October 29, 1993 Exports - $ 1.766 billion (2009 est.); Main exported product - scrap metal, wine, mineral water, fruits and nuts; Main partners Turkey 17.6%, Azerbaijan 13.7%, Ukraine 9%, Canada 8,8%, Armenia 8.2%, Bulgaria 7.2%, USA 6.8% Import - $ 4.477 billion (2009 est.); Main imported product fuels, vehicles, machinery and parts, foods, pharmaceuticals; Main partners Turkey 14.9%, Ukraine 10.4%, Azerbaijan 9.6%, Germany 7.9%, Russia 6.8%, USA 5.7%, China 4.7%, UAE 4.4%.</p> <p>Abbreviations:MoF Ministry of Finance; RS Revenue Service; MoIF Ministry of Internal Affairs; LEPL Legal Entity of Public Low; SAD Single Administrative Document; EU European Union; EC European Commission; WTO World Trade Organization; WCO World Customs Organization; UNCTAD United Nations Conference on Trade and Development; CIS Commonwealth of Independent States; FTA Free Trade Agreement; IT Information Technology; IPR Intellectual Property Rights.</p> <p>4</p> <p>2. Organization and structure of Georgian customsGeorgian customs was merged with tax administration creating Revenue Service as main revenue collecting agency in 2007. However, as in most other countries with a similar organizational framework, integration is limited to human resources management and a few other headquarters functions. Revenue Service of Georgia has a status of Legal entity of public law under supervision of MoF. The Law on Revenue Service defines services functions and objectives; specific functions of each department and unit are detailed in internal provisions decree of Revenue Service. Central headquarters: Supervisory body of all customs agencies. There are nine departments that define customs strategy; methodology; action plan; Solve customs disputes; elaborate legislation; monitor law enforcement process etc. Regional Centers: Customs operations are handled by seven regional centers. Regional centers plan and control activities of Customs checkpoints and clearance offices. Border Customs checkpoints: Border checkpoints are operating every day 24 hours. However they have anti-smuggling functions, but Georgian Customs is mainly oriented on fiscal targets. Resources are used on search and inspections of individuals and means of transport, as well as electronic and documentary registration of shipments for further customs clearance needs. Because of lack of adequate infrastructure at the border crossing points, imported goods are generally transferred to private owned ICDs (abbreviation) for customs clearance. Border customs checkpoints provide only registration of imported goods, but there is no room for logistics and warehousing, which is so crucial for customs clearance. Even Poti sea port facilities dont allow going through all customs procedures in docks. In total there are sixteen border customs checkpoints, though only eleven of them are fully operational without any restriction on movement of cargo or passengers. Customs Clearance offices: There are ten customs clearance offices under the regional centers that clear all cargo in Georgia, except minor imports by passenger, who are served at border checkpoints. Customs clearance offices work eight hours a day except weekends. Overtime service is available due to payment of additional overtime fee. Staff is divided according to operational lines: 1) unit that serves only documentary control of goods, 2) unit that serves both documentary and physical inspections of shipment; and 3) unit that serve to specific regimes other than import.</p> <p>5</p> <p>Revenue serviceCentral headquarters Regional centers</p> <p>Administrative department 32 Apparatus of head of revenue service 6 Legal department 11 Disputes department 30 Department of methodology 35 Customs control department 65 Internal audit 15 Revenue collection department 38 Bureau of international relations 7</p> <p>Tbilisi (detailed structure see below) Rustavi</p> <p>Telavi</p> <p>Gori</p> <p>Kutaisi</p> <p>Poti</p> <p>Batumi</p> <p>Akhaltsikhe</p> <p>Guria</p> <p>Abkhazia</p> <p>6</p> <p>Tbilisi Regional Center</p> <p>Administrat ion 38</p> <p>Legal unit 24</p> <p>IT and analytical unit 7</p> <p>Service unit 154</p> <p>Control unit 148</p> <p>Unit for special measures</p> <p>Customs clearance and control unit 121</p> <p>Customs checkpoint Tbilisi Airport 39</p> <p>Customs checkpoint Kazbegi 42</p> <p>3. Human resource managementReforms: Customs staff reform was the first important step taken by Georgian Government for modernization of the system. At present, over nine hundred customs officers work in Georgian Customs offices. Since 2005, more than 95% of the staff has been changed. Reforms intended to remove all corrupt personal and replace them with young motivated staff. Administration has elaborated standard rules, according to which new recruits have to go through two month training and four-month internship program before appointed. Replacement process was very intensive and it went by eliminating any links between new and old staff, which resulted in two outcomes: 1) New team was prevented to inheriting a total corruption from their predecessors; 2) they lack practical experience and skills. Nowadays its difficult to find a customs officer with more than two or three years experience. Anyway, such radical approach to staff reform is approved by Georgian customs administration, as they got rid of corruption (level of corruption was dramatically reduced in last five years), but it brought to another problem that seriously damages business climate and trade facilitation Lack of professionalism and skill of Customs officials. Training: Training capacity isnt highly developed, though RS made significant progress in this direction last year. Nowadays customs officers are trained mainly in the Academy of MoIF, while the Financial Academy of MoF is newly established and just began working on the strategy and action plans. 189 customs officers were trained in various professional courses during 2009. Training materials are developed by trainers who have biggest positive experience of working in the Georgian customs system, though they arent certified trainers. Weakness: Very high turnover of customs staff is still evident. 167 new recruits were trained only on 2009. Customs administration doesnt have any effective program for retention, motivation and long term development of personal.</p> <p>7</p> <p>The roles and responsibilities of each function, and of employees working at all levels within each function, arent clearly defined. Job descriptions highlighting the minimum levels of knowledge, skills and aptitude required for competent performance is not in place. Code of conduct for customs officers isnt elaborated. Only a few provisions can be found in various regulations about customs officers behavior. Anyway, customs became much more user-friendly and consumer oriented during recent 2-3 years, but there is a lot more to be done.</p> <p>4. Customs legislationStructure and hierarchy: Georgian Customs legislation consists of International Conventions, international bilateral and multilateral agreements, Customs code of Georgia and Secondary customs legislation. International Conventions and agreements take priority over national legislation where it contradicts. They are signed by Government of Georgia and ratified by Parliament. Customs code is the main document laying down general provisions and policies of customs administration. Present Georgian Customs code was elaborated on bases of EU customs code in 2006 and entered into force from January 1, 2007. Customs code is approved by Parliament of Georgia and it takes priority over secondary customs legislation. Secondary customs legislation generally provides implementing provisions for Customs code. Secondary legislation is approved by decrees of President, Government of Georgia and Minister of Finance. List of international conventions in customs area that Georgia has signed: 1. International convention on harmonized commodity description and coding system since 2009 2. Convention on Containers since 1999 3. International convention on mutual administrative assistance for the prevention, investigation and repression of customs offences (Nairobi convention) since 2009 4. International convention on harmonization of frontier controls of goods since 1999 5. Customs convention on international transport of goods under cover of TIR carnets (TIR convention) since 1994 6. Convention on the contract for the international carriage of goods by road (CMR convention) since 1999 8</p> <p>Overview of Georgian customs legislation: Customs legislation was elaborated according to EU model in 2006. However some gaps and differences between Georgian and EU legislation are evident. Customs regimes Seven customs regimes are in place: Release for free circulation; Export; Transit; Temporary import; Customs warehousing; Inward processing relief; Outward processing relief. Processing under customs control doesnt exist as a separate regime, but its provisions were merged with Inward processing relief creating one regime. Besides, there are approved treatments like re-export, abandonment of cargo with transfer of ownership to Government, destruction of goods under customs control and allocation of goods in free zones or free warehouses. Relation between traders and customs: Traders can have direct relation with customs or exploit customs representative (customs clearing agent). Customs representative shares responsibility on procedures he caries out on behalf of trader. To operate as authorized customs representative, any company is required to produce financial security covering at list 50 000 GEL. Binding information In many developed countries if trader doubts about the legality of operations he wants to perform, he can require (an approval?) from customs to make a decision prior to importation of goods. It applies not only on imported cargo, but any operation which must be approved by customs authorities. Such information has binding power and trader cannot be subject to any punishment or prosecution if he follows the prior decision made by customs authorities. Georgian customs has an obligation to provide prior decisions upon traders request but without binding power. It means that if trader wants to put goods under specific regime and he asks customs about the legality of such operation, he may receive prior approval (prior customs decision), but he isnt insured from punishment, even in case, when he follows such decision, because any other customs officer can interpret the legislation in different way. Customs penalties Penalties are addressed to specific violations and the amount of penalty is firmly defined for each case. This doesnt give customs officer flexibility in decision-making. On one hand flexibility is very important to make fair and reasonable decisions, but on the another hand such approach eliminates corruption risks. Total exclusion of human factor resulted unfair treatment to traders who make mistakes. If two traders reduced duties but first did it by mistake and another did it intentionally, both are treated with the same severe measures because legislation doesnt allow investigation of cases to find out whether it was a fraud or mistake. This problem requests immediate respond. Voluntary compliance In any normal trade relation there are cases when certain financial aspects concerning to shipment became clear after goods</p> <p>9</p> <p>are imported and released. Amendment (correction) of customs declaration is standard action to keep records clean in such cases. In Georgia voluntary amendment of SAD is available after the release of goods, but legislation doesnt protect trader from penalties or any other punishment measures applicable to the mistake made at the moment of release of goods. Such provisions do not stimulate traders to keep their records clean and remain compliant. Origination of goods Georgian legislation provides rules for preferential and non-preferential origination of goods. Preferential origination applies to goods imported from Turkey and former CIS countries with which Georgia has Free Trade regime. Rules are defined in relevant FTA documents. Customs warehouses and ICDs Majority of shipments are cleared in customs warehouses, which are...</p>