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Implementation of Integrated Customs Management System and Single Electronic Window System for Sultanate of OmanESCWA Presentation

Muscat, March 2011

Project Drivers and ObjectivesApproach, Work Plan and DeliverablesOman vis-à-vis Global Benchmarks

Booz & CompanyDecember 2010

Prepared for Royal Oman Police 2

Since 2004 the World Bank started publishing yearly “Doing Business” reports that rank countries across several dimensions

Focus of this Document

Doing Business Report Factors

Closing a Business

Starting a Business

Dealing with Construction Permits

Registering Property

Getting Credit

Protecting Investors

Paying Taxes

Trading Across Borders

Enforcing Contracts

Covers the time, cost and effort to start a new business

Covers the time, effort and cost of construction standardized buildings

Covers the procedures, time and cost of registering a property under one’s name

Covers the ease of borrowing and the accessibility of credit information

Measures the strength of shareholder protections against directors’ misuse

Covers the number of payments, time required and tax rates

Covers the number of documents, time and cost required to import or export

Covers the number of procedures, time and cost required to enforce contracts

Covers the time, cost and effort to close a business

Dimensions Description

Source: Doing Business 2011, Booz & Company analysis



Oman’s rankings in the Doing Business reports have not progressed as well as those of other GCC and Arab countries

Progression of Oman Ranking versus GCC and Arab Countries

Country 2006 Rank 2011 Rank Improvement in Rank

Sultanate of Oman 51st 57th

United Arab Emirates 69th 40th + 29

Kingdom of Saudi Arabia 38th 11th + 27

Egypt 141st 94th + 47

- 6

Source: Doing Business 2006, Doing Business 2011, Booz & Company analysis



Oman’s poor ranking is partially attributable to the “Trading Across Border” dimension

...

1. Singapore

2. Hong Kong

86. Solomon Islands

87. Gambia

88. Oman

89. Ghana

90. Dominica

Oman “Trading Across Borders” Standing

3. UAE

Exporters need to provide 9 documents to be able to export merchandise out of Oman, above the global average (6.4) and the MENA average (6.5)

Documents to Export: 9

It takes much less time to export merchandise out of Oman than in other MENA countries, where the average is 20 days

Time to Export: 14 days

The cost of exporting one container out of Oman is $766, whereas Egypt, KSA and UAE’s costs average to $571

Cost to Export: $7661

Oman requires 9 documents to import, a larger number than the MENA average (7.9) and the global average (7.3)

Documents to Import: 9

Oman also requires a smaller amount of days to import than the MENA average (24) and the global average (25.8)

Time to Import: 17 days

Whereas it costs $542 to import in the UAE, Oman falls behind with a cost $890

Cost to Import: $8901

Oman Trading Across Borders RankingOut of 183, 2011

Oman Trading Across Borders Factors

1) Per containerSource: Doing Business 2006, Doing Business 2011, Booz & Company analysis



Egypt

Korea

Between 2006-2011, reforms have improved the business climate across a diverse set of mature and emerging market economies

Saudi Arabia

Peru

Time for Import(Days)

ImplementationTime for Export (Days)

# Documents Required

Doing Business Rank

Improved procedures at port Implemented a version of

TradNet electronic data interchange system

38 1114 1036 131718

Introduced internet-based electronic data interchange systems

Initiated online issuance of trade documents

Implemented single window

27 1613 612 812

71 3621 1424 1231 17

Introduced risk based inspections

Improved customs administration

Improved electronic data interchange system

Introduced single window

141 9417 1227 1229 12

#+ -

Source: Doing Business Report; Booz & Company analysis

Period Compared for all Dimensions in 2006 - 2011

7

Implemented risk based inspections

Introduced electronic systems Established payment deferrals for

import duties



Dubai has benefited from an incremental and steady approach toward trade reform, making the UAE the 3rd ranked trade partner

Trade Across Borders Rankings

2005

Improved road and port infrastructure

New berths added at Jebel Ali Port

2006-2008 2009 2010

Reduced number of trade documents

Improved procedures at port

Improved customs and port infrastructure

Sustained rank as one of the cheapest cost per container for import and export

Introduced improved electronic data exchange

Timeline of Trade ImprovementsTrade Across Border ranking is forward looking

20105

200824

20113

200710

200914

20066

Source: Doing Business Report; Booz & Company analysis



Egypt’s ascent coincides with comprehensive improvements to customs operations and procedures

Egypt Trading Across Borders Improvement Metrics(WB FY06 to Present)

Time(days)

Import

Category

Cost(USD /

Container)

RequiredDocuments(number)

Export

Import

Export

Import

Export

WB FY06 WB FY11

29 12 -59%

27 12 -56%

1,049 698 -33%

1,014 613 -40%

9 6 -33%

8 6 -25%

∆

Restructure the regulatory and legislative framework1

Customs Improvement Initiatives

Revise import and export procedures2

Simplify the valuation system and tariff schedule3

Strengthen management and personnel training4

Reduce the number of tariff rates from ~27 to 6 Replace 13,000-line, 10-digit tariff structure with a 6-digit

structure with fewer than 6,000 lines

Consolidate hundreds of decrees and voluminous manuals on customs regime guidance into a single set of regulations

Establish national training centre, reduce layers of reporting levels, create code of conduct, increase performance monitoring, and establish reward system

Shift import risk management focus from transactions to companies

Create customs centres that allow importers to log their declarations

Egyptian Customs Improvement and Results

Source: ECA; WBDB; Booz & Company analysis

Introduction


Prepared for Royal Oman Police 8Booz & Company 8

To improve the country’s business environment, Oman has embarked on a major Customs modernization program

Modernization Project Objectives

Project Objectives

Electronic Single Window: Implementation of a Electronic Single

Window system that facilitates provision of regulatory import and export services to all customers

Integrated Customs ManagementSystem: Development and implementation of a

state of the art Integrated Customs Management System to be in line with the current economic and globalization trends and standards

1

2

Stakeholders

Customs EmployeeCustomer

Electronic Single Window

Integrated Customs Management System

System 1

System 2

System 3

System N

ICMS



Oman’s modernization program will involve collaboration with multiple stakeholders

Oman Customs Core IT Systems

Oman Customs

External Stakeholders

Air OmanRoyal Oman Police

Port Companies

Free Trade Zones

Postal Service

Trading Community

Airlines/Agents

Shipping Lines/Agents

Railways

Brokers

WarehouseCompanies

Couriers

Airports

Forwarding/Clearing Agents

Importers

ExportersMaritime Agencies

Bonded Warehouses

World Customs Organization

InternationalAnti-Smuggling

and Money Laundering Agencies

Customs Agenciesof Other Countries

CustomsEnforcement Network

ImportTemporary Admissions

Exemptions

Transit

Security

Human Resources

Free Zones

Tariff Valuation

Trade Statistics

Accounts/Cashier

Warehouse Management

Post Clearance Audit

Account Management Services (AMS)

Agent Affairs

Manifest

EnforcementLegal Affairs

Temporary Release

Technology

Export

Financial Affairs

Abandoned Goods

Passengers

Strategic Planning

Communications & PR International Affairs

Government Control Agencies: Health, Agriculture, Environment,

Communications, etc.



A significant implementation challenge is that many stakeholders are operating under other mandates and ministerial entities

Ministry of Oil & Gas

Ministry of Fisheries

Telecommunication Regulatory Authority

Ministry of Agriculture

Ministry of Transport

Source: Booz & Company analysis

Ministry of Finance

Ministry of Commerce & Industry

Ministry of Defence

Royal Oman Police

Ministry of National Economy

Ministry of Health

Ministry of Environment

Revenue: collection of tariff duties on imports based on their type and value

Safety: ensuring that imports are compliant with safety standards. These imports are not intrinsically risky, yet, if not compliant, have varying levels of risk (e.g. food - high risk -, cosmetics - medium risk - and radio transistors - low risk)

Security: prevention of smuggling of illegal commodities that are intrinsically risky. The products might or might not have an alternative legal way of importation (e.g. weapons -legal alternative exists - and drugs -no legal alternative)

Mandate

Control Agencies Mandates

Ministries Involved in trade Control

ILLUSTRATIVE AND NON-EXHAUSTIVE

Ministry of Communication

Information Technology Authority

Project Drivers and ObjectivesApproach, Work Plan and DeliverablesOman vis-à-vis Global Benchmarks



The modernization of Oman Customs will require four distinct phases - the first phase will end with a TOR for a new system

Focus of this Document

Deliverables include:– “As Is” Study– “To Be” Study– Technical Requirements– Draft RFP– Draft Contract

Deliverables include:– Technical Proposal evaluation– Commercial Proposal

evaluation– Combined Ranking report– Finalized TORs, time frames

and charges– Finalized Contract

Deliverables include:– PMO processes, templates, and

tools– Project Management Reports– MIS report– Support services report

Deliverables include:– Quality Assurance report– System Audit report

12 Months18 Months3 Months4 Months

This phase covers understanding the current Oman Customs setup, designing the target model and outlining the gaps. Additionally, we will develop the data migration and testing requirements, develop the SLA agreements and finalize the RFP

This phase focuses on supporting the efficient procurement of the IT system. This includes supporting the ROP in addressing vendor questions, evaluating and recommending a vendor, negotiating with the vendor, and finalizing the contract details

This phase focuses on supporting the effective implementation of the IT system through project management support, progress reporting and technical support

This phase ensures that Oman Customs’ long term transformation is a success by performing periodic auditing

Phase IV:Periodic Auditing

Phase III:Setup & Implementation

Support

Phase II:Procurement Support

Phase I:Design & TOR Generation

Focus of this DocumentKicked off NOV 20th



The aim of Phase I is the design of a new Customer-Centric model that will improve both operational efficiency and control

Oman Customs Modernization

Recommended Customer-Centric Community Model

Agriculture

Environment

Health

Traditional Community Model

Statistics

Hea

lth

Single Electronic Window (One Stop Shop)Community Platform

Envi

ronm

ent

Agric

ultu

re

Stat

istic

s

Transformation

Customs

Cus

tom

s

Government Control

Agencies

Gov

ernm

ent

Con

trol A

genc

ies

■ Importer, Exporter■ Broker■ Express carriers■ Travelers

■ Shipping lines, agents■ Terminal operator■ Stevedore■ Warehouse

ILLUSTRATIVE



Project Framework and Definition of Analysis Dimensions

Phase I will be comprehensive, and will address organization, legal, process, and IT requirements

Implementation Plan

Target Model

Benchmark SEW/ICMS

Current & Future State Assessment

Model Detailing

Legal & Regulatory Framework

Covers the pertinent

legislation and regulatory

frameworks, especially those associated with

the setup of single electronic window

and integrated customs system

2

Business Services & Processes

Describes the main business services and

enabling core and support processes especially those associated with

the setup of single electronic window

and integrated customs system

3

IT Setup

Details the Information Technology

functional and technical

specifications. This covers the software that is currently in use,

and the ones used by benchmark countries/best

practices

4

Design A

pproach

Analysis Dimensions

Organization& Stakeholders

Covers organizational

elements, roles and

responsibilities of relevant

stakeholders,existing

interactions, human resource skills capacity

1

Project Drivers and ObjectivesApproach, Work Plan and Deliverables

Oman vis-à-vis Global Benchmarks



Defining the organization’s prevailing mission, helps the customs authority to identify its alignment within government

Organizational Mission & Alignment

Organization

Aligned to Ministry of Finance/Revenue Authority

Aligned to Public Safety/Security Agency

Ministry of Finance

“As the guardian of Singapore’s trade, we uphold our laws to build trust, facilitate trade and protect revenue”

Singapore Customs

Revenue Ireland (Consolidated Revenue Authority)

“To serve the community by fairly and efficiently collecting taxes and duties and implementing Customs controls”

Customs Division

Ministry for Home Affairs

“Australian Customs and Border Protection Service manages the security and integrity of Australia's borders”

Australia Customs and Border Protection Service

Government AlignmentMission StatementCountry

Royal Oman Police

N/ADirectorate General of Customs

“The Canada Border Services Agency works to ensure Canada's security and prosperity by managing the access of people and goods to and from Canada”

Ministry of Public Safety

Canada Border Services Agency

Mission Statement Defines the fundamental

purpose of an organization Identifies objectives for the

organization, compatible with its mission

Revenue Generation

Safety & Border

Security




Most benchmarked authorities follow a hybrid model as in functional, geographic and/ or segmented

Oman Directorate General of Customs

Australia Customs and Border Protection Service

Canada Border Services Agency (CBSA)

Irish Tax and Customs

Singapore Customs

SegmentedGeographic

Functional

Korea Customs Service

Customs Organization Types

In a functional organization, the first-tier departments reflect value chain functions/operations. For example, at the top-tier of the CBSA, are departments titled Admissibility, Enforcement and Operations In segmented organizations, the first-tier

departments reflect the different customs agents/traders. For example, along with functional departments such as Enforcement & Investigation in Australia, the top tier departments reflect different customs segments like Maritime Operations Support, Passengers and Cargo A geographic organization has first tier

departments as the geographic areas served by the customs. For Irish Tax and Customs there are four regional departments at the top-tier HQ level A functional organization is by far the best

practice because it allows for standardization of processes across regions and allows customs staff to build functional expertise along the value chain

Comments

Source: CBSA, Australia Customs and Border Protection Service; Singapore Customs; Irish Tax and Customs; Korea Customs Service; Royal Oman Police; Booz & Company analysis

Organization



The WCO and WTO have shaped the customs environment with relevant conventions, standards, and agreements

Adopted in 1999, entered into force 2005 71 Contracting parties incl. US, EU, China Contains binding rules with regards to:

– Risk management– Selectivity– Audit-based controls– Automation– Trade consultation– Appeals– Information– Advance Rulings

WCO Revised Kyoto Convention

Adopted in 2005 163 Countries signed up Contains measures to secure and facilitate

the trade supply chain– Single window– Coordinated border management– Common risk management– Pre-arrival/pre-departure filing– Cargo, facility, conveyance, personnel,

and information security measures– Non-intrusion detection– Customs seals

WCO SAFE Framework of Standards

Adopted in 1994 155 Contracting parties Contains binding rules with regard to

– Customs valuation– Freedom of Transit– Fees and formalities at import and export– Anti-dumping and Countervailing– Countervailing– Safeguards– Subsidies– Sanitary/ phytosanitary measures– Publication of trade regulations

WTO Agreements

Convention and Standard Singapore Canada Ireland NewZealand

UAE (Dubai) Oman

WCO Revised Kyoto Convention 1 4 4 4 4 0

WCO Harmonized System 4 4 4 4 4 0

WCO Temporary Admission Convention 4 4 4 4 0 0

WCO Framework of Standards 3 4 3 3 2 2

WCO Data Model 1 1 3 3 1 0

WTO 4 4 4 4 3 3

International Best Practices & Standards

Source: WCO, WTO, Booz & Company analysis

Legal

4 Adopted, fully implemented

3 Adopted, partially implemented

2 Adopted, not implemented

1 Not adopted, partially implemented

0 Not adopted, not implemented

Legend



Oman Customs is not currently operating two key processes

RKC Customs ProcessesCustoms Value Chain

Processes

9. Customs transit

10. Transhipment

8. Customs warehousing

6. Re-importation

7. Relief from import duties and taxes

5. Clearance for home use

11. Investigation of Customs offences

3. Temporary storage of goods

3. Release of goods

2. Examination of the goods

4. Temporary admission

1. Goods Declaration

Cus

tom

s Pr

oces

ses

Source: Revised Kyoto Convention, Booz & Company analysis

Post Clearance

Review

Release of Goods

Collection of Duties /

Fees

Physical Inspection

Goods Declaration

Temporary Storage

Cargo Declaration

Present Absent



16✓✓✓✓✓✓✓✗✓✓✓✓✓✓✓✓✓

New Zealand

14✓✓✓✓✓✗✓✓✓✓✗✓✓✓✗✓✓

Korea

15✓✗✓✓✓✓✓✗✓✓✓✓✓✓✓✓✓

Singapore

13✓✗✓✗✓✓✓✓✗✓✓✓✓✓✗✓✓

Germany

8Total Implemented✗Details of automated procedures✗Classification decisions ✗Details of how to complete a Customs declaration ✗Currency rates of exchange ✓Tariff and duty information ✓National legislation including Customs regulations✓Overview of Customs procedures and legislation ✓Multiple language versions of the information✗Information about Customs channels ✓Comprehensive details of duty-free allowances ✓Links to other relevant sites✗Access to official publications ✗User helpdesk / 24/7 Call center / FAQ✗Contact information (including e-mail addresses) ✗Penalties for Customs offenses ✓Details of prohibitions and restrictions ✓General overview of Customs

OmanOnline Web Service / Function

Booz & Company

Compared to benchmarks, Oman has a limited number of services and functions accessible online

Customs Online Web Public Information

Source: Revised Kyoto Convention, Booz & Company analysis

Online

Gen

eral

Trav

eler

sTr

ader

s

✓ Implemented ✗ Not implemented

IT Setup


Prepared for Royal Oman Police 21Booz & Company

Customs in Oman is not fully supported by the various application modules where 3 out of 12 are implemented

1) Cargo reconciliation not implementedSource: Booz & Company analysis


Portfolio of Customs Application Modules

11✓✓✗✓✓✓✓✓✓✓✓✓

Korea

9✗✓✓✗✓✓✓✗✓✓✓✓

Singapore

31110Total Implemented✗✗✗Investigation

✗✓✓Export/re-export

✗✓✓Temporary importation

✗✓✓Inward processing / Drawback

✗✓✓Warehouse

✗✓✓E-Payment

✗✓✓Integrated tariff

✗✓✗Valuation

✓✓✓✓

New Zealand

✓✓✓✓

Germany

✓Duty/tax calculation✗Risk assessment ✓Declaration processing✓1Manifest

OmanCustoms Application Module123456789

101112

IT Setup


Prepared for Royal Oman Police 22Booz & Company

The absence of a risk management application hampers effective inspections keeping the inspection rate at Oman customs high


Customs Risk Management

~6%✓

Ireland

≤ 10%✓

Singapore

≥10%≤ 3%~3%Inspection Rate✓

New Zealand✓

Canada✗Risk management application

Oman

Uses TITAN system for automated targeting and risk assessment of electronic cargo, conveyance, and supplemental information

Marine commercial shipments screened for risk prior to departure for Canada

CBSA’s National Risk Assessment Centre (NRAC) provides 24/7 intelligence

Uses CusMod system for automated targeting and risk assessment

Intelligence business unit provides intelligence and risk management strategies, and identifies areas of risk

National Targeting Centre(NTC) provides 24/7 intelligence and helps direct Customs’ risk management work

Uses TradeNet system for automated targeting and risk assessment

Singapore’s Customs system is focused on trade facilitation

Enforcement relies on targeted inspections, based on risk profiling, historical information, and intelligence

Relies on “focused enforcement, coupled with high penalties”

Uses ESKORT system for automated targeting and risk assessment

Shipments are targeted based on configurable risk profiles, complemented by data warehousing and data mining techniques

Random sampling conducted based on statistical models to ensure fairness and identify new risks


IT Setup



By embarking on a radical modernization of its customs system, Oman will be able to address many of these deficiencies

Modernization Project Overview

Project Components

Single Electronic Window:Implementation of a Single Electronic Window system that facilitates the provision of customs services to all trading and logistics customers and stakeholders

Integrated Customs Management System:Development and implementation of a state of the art Integrated Customs Management System to be in line with the current economic and globalization trends and standards

1

2

Outcomes

Faster transactions Simpler processes Streamlined trade

Increased Trade

Improved data quality Better decision making

based on accurate and consistent information

Enhanced Decisions

Better Customs Operation

Increase revenues Consistent information

and reporting Stronger control over

procedures and security

Stakeholders

Electronic FacilityCustomer

Integrated Customs Management System

System 1

System 2

System 3

System N

ICMS

Single Electronic Window



Questions

Thank youFares Akkad

[email protected]