Pushing Boundaries: a future exploration
Describe a possible innovation or improvement of a customs process, based on your recently acquired knowledge, skills and insights. That was the assignment in an essay competition given to students of the Customs and Supply Chain Compliance master’s degree programme at the Rotterdam School of Management (see text box). Customs officer Jan ten Have put his reflections on tomorrow’s customs work on paper and saw his entry awarded. In his considerations, he introduced a concept of his hand, which fully ties in with the Pushing Boundaries vision: diagonal supervision.
In terms of content, the writing competition integrated seamlessly with the annual theme of the World Customs Organisation: ‘SMART borders for seamless trade, travel and transport’. By organising the competition, Dutch Customs’ management team aimed to mobilise the available thinking power within the service. “By doing this, we give colleagues the recognition for the competencies they’ve acquired in customs-related higher education,” CEO Nanette van Schelven explains. “Competencies that highly-qualified Customs employees must have in order to be prepared for the challenges that the organisation faces, now and in the future. This wealth of knowledge, skills and ideas must find its way from people’s minds to daily customs practice so that we can, hopefully, accelerate the developments initiated within the framework of our Pushing Boundaries vision.”
The future vision of Ten Have discusses ‘diagonal supervision’, a new concept that, according to the author, adds an extra dimension to horizontal supervision. The core idea is that confidential information, obtained from horizontal supervision, is used to strengthen vertical supervision. Read the winning essay below in full.
Rotterdam 2030. The general manager of Dutch Customs sighs contentedly and puts down her iPad, on which she’s been reading the newspaper Het Financieele Dagblad. Yes, it’s there in black and white: ‘Significant increase in drug seizures by Customs through diagonal supervision’. She cheerfully looks back at yesterday’s meeting with the CEOs from the logistics chain. The State Secretary of Finance was present at this monthly meeting to ensure that politics shared the limelight of the successful public-private partnership in the logistics sector. Dutch Customs has now been ranked first in the Logistics Performance Index for the fifth year in a row.
The main ports in the Netherlands have become a lot more secure since a few years ago when Customs started receiving a lot of tips from the business community about possible smuggling activities. This has led to trade facilities being put in place that speed up the flow of goods for part of the business community, especially Authorised Economic Operator. Both Customs and these AEOs benefit from a higher hit rate. These results have led to freight transport, particularly in Rotterdam, growing much more over the past decade than in other European ports. The dip in trade caused by Brexit is now many years behind us.
The Netherlands was and remains very progressive with its pioneering vision Pushing Boundaries. The diagonal supervision dimension was added ten years ago. Diagonal supervision involves using confidential information obtained from horizontal supervision to strengthen vertical supervision. Companies that operate horizontal supervision opt for the status of AEO. All other companies are subject to vertical supervision. Diagonal supervision encourages AEOs to share confidential data with Customs. This information may concern differences between the declaration and the related goods, the smuggling of goods, suspicious persons and incidents such as a fence being cut open. These are cases that violate the security of goods transport and the related compliant customs process.
It’s been more than ten years since a container of vodka for the North Korean leader Kim Jung-un was intercepted in the port of Rotterdam. This was the subject of a lot of media attention because at the time Kim Jung-un was having a number of meetings with President Trump. What’s more, the North Korean elite’s vodka consumption was also in stark contrast to the rations the civilian population had to live on. The container of vodka was transported under the fuselage of an aircraft, presumably to reduce the chance of detection. In an interview with the newspaper Algemeen Dagblad Customs manager Arno Kooij said that containers could be subjected to a closer inspection in response to tips. Of course, Customs doesn’t reveal anything about its inspection strategy, but it’s an open secret that tips from outside Customs play an important role.
Counterfeit goods form another example of where Customs has been working closely with the business community for many years. Large companies such as Adidas and Nike have employees who are solely dedicated tracking down counterfeits. Customs is informed as soon as they have traced a container of counterfeit goods. Customs in turn stops the container and inspects the contents. If the goods are indeed counterfeit, the container and its contents are seized. From that point onwards it is a matter for the company that made the report to take legal action to have the owner and/or producer of the counterfeit goods prosecuted. The counterfeit goods are destroyed. This public-private partnership against counterfeiting has been getting good results for years.
These examples gave rise to the question: how can we intensify public-private cooperation by exchanging information on possible criminal activities to make the flow of goods safer? The first question came from the business community: what do we stand to gain for our cooperation? The next concerned the need to provide more information about how confidential information should be treated. Not least in the light of the fight against crime. We now know that a solution has been found for both.
An important success factor for business to join in with diagonal supervision was to increase the so called hit rate: the chance that a container selected by Customs for further inspection will actually lead to an offence being detected. Increasing the hit rate saves costs, both for AEOs and for Customs. Better use is being made of Customs capacity and the business community to facilitate controls. The risk-based approach of Customs has become considerably more efficient over the years. As a result of this, the Netherlands has become the first country in the Customs Union that is no longer obliged to carry out a minimum number of checks as a percentage of the total number of containers. Stevedores, shipping companies and forwarders benefit from the fact that customs controls have less impact on container transport via the port of Rotterdam. Interventions in which a large number of containers are checked at the same time are now planned more efficiently. This has resulted in fewer containers being involved in such interventions, which – combined with a shorter turnaround time for the intervention – reduces disruptions to container transport and creates more support among all those involved. The improved efficiency of container transport in the Port of Rotterdam has led in recent years to a significant competitive advantage. The fact that this has not gone unnoticed is clear from the increase in container trade in Rotterdam compared to surrounding European ports.
A second aspect calling for more development was the handling of confidential information: from reactive to proactive. Not least in the light of the fight against crime. As far back as ten years ago, on 6 March 2019 Dutch Customs’ intranet carried a message on a public-private programme to combat crime within the Port of Rotterdam. This takes the form of a collaborative effort between the Public Prosecution Service, the police, Customs, the local council, the Port Authority and the local business community aimed at increasing security and integrity in the port area. During that period, Customs and the large companies were having to deal with employees who were abusing their positions to work with criminals. With diagonal supervision, it is crucial that the information shared by the AEOs with Customs can be shared anonymously. Employees of Customs and of companies can anonymously report ‘unusual behaviour’ of a colleague or an employee of another company in the logistics chain. An example from that time taught us that crane operators who observed suspicious behaviour from their high-up position did not report it. This was because their name would be mentioned in the criminal file, with a possible risk of reprisals by criminals. This taboo has now been broken by an ingenious system that ensures anonymity and lowers the reporting threshold.
A blockchain application has been chosen to implement diagonal supervision. Blockchain technology is widely used in an environment where mutual trust is an important aspect of exchanging information. It is now also possible to report anonymously without the need for an intermediary. This means that it’s no longer necessary to pass on confidential information where anonymity is desired using a hotline such as Meldpunt Misdaad Anoniem (Report Crime Anonymously) or another independent intermediary. The choice for the blockchain application is supported by the decision tree of Mulligan et al., 2018. This concerns passing on information rather than physical goods, for example. And nor does it call for any extreme performance levels in terms of response time or the storage of large amounts of data. After all, participating AEOs have a relationship of trust with Customs, but not with each other. The availability of blockchain technology has accelerated the implementation of the public-private tool that supports diagonal supervision.
Diagonal supervision has changed the world for both Customs and AEOs. There is a great deal of contact to share information about possible criminal activities at all levels, from directors to team leaders and employees. This keeps the port of Rotterdam relatively secure. And that in turn yields a competitive advantage over other European ports. Dutch Customs faces the challenging task of efficiently controlling goods whist facilitating trade. The additional information has increased the hit rate of inspections and has improved the trading facilities for the AEOs. Diagonal supervision, in line with the pioneering vision Pushing Boundaries, contributes to all the main tasks of Dutch Customs.
October 2019 will coincide with the start of the fourth course of the Customs & Supply Chain Compliance master’s programme at the RSM, a 2.5-year part-time course for future customs professionals. The study is open to people working in the trade compliance profession in international business, or charged with government control. The fact that students from both the private and public sectors are taught side by side is unique, as is the multidisciplinary approach and the broad curriculum, which includes legislation, logistics, IT and compliance. Every academic year, Dutch Customs offers ten colleagues the opportunity to complete this programme. The service makes every effort to create places where graduates can deploy their newly acquired knowledge and skills with maximum effect.