ETHIOPIAN CIVIL SERVICE

UNIVERSITY
Department of Customs Administration and International Trade
(Post Graduate Program)
MODULE CODE CAITM5071
NO.ECTS 6
Year I Semester II

Course Title: Customs Enforcement

By Gebrewahid W.Weldemichael

July 2023
 Customs Enforcement
Course content

 Basic Risk Areas or Challenges encountered to Customs and tax Administrations

 Commericial fraud
 Controband trade
 Customs Risk Management
 Customs Intelligence
 Customs PCA
 Customs Investigation
 Cooperation
 Tax evasion & Avoidance
 Assessments
 Covers both subjective and objective questions
 Individual assignment 20%
 Group assignment 20%
 Presentation 20%
 Final exam 40%
 Chapter I
• Customs Commericial Fraud
 Introduction
• In this chapter we will deal with the basic issues of customs
Commercial Fraud. That is one of the main Risks or
challenges encountered to the Customs Administrations.
• In the customs and tax context, Risk can be defined as “the
potential for non compliance to tax and customs laws and the
potential failure to provide an appropriate level of facilitation.
 1. What is Commericial Fraud?
• Customs Commericial fraud is any offence
againest statutary or regulatory provisions
which customs are responsible for enforcing,
committed in order to:- evade, or attempted
to evade, payment of duties /levies/ taxes on
movements of commericial goods or/and
Evade, or attampt to evade, any prohibition,
restrictions etc...
 Commericial Fraud ....

• Knowingly or ought to have been aware of

the fact, imports or exports or attempts to
import or export under/over invoice, mis
description, prohibited goods under the cover
of legally declared goods etc..
• fraud Committed by Opening of Parcels and
Removal of Marks committed with the intent
to remove, mix up, damage or steal the
goods or in any manner to procure undue
advantage to himself or another person or to
cause damage to any person.
 Commericial Fraud ....
• Commericial fraud by Carrier, any carrier who, in the
absence of force majeure, unloads, loads or attempts
to unload or load import or export goods at a place
other than a customs port
• Unauthorized Use of Electronic information Exchange
System of customs, any person who uses or allows
another person to use the Authority's electronic
information exchange, system without authorization of
the Authority.
• We will see some important detaiels in the following
few slides
 2. Under/Over-valuation
a) Under-valuation is to make a false declaration
indicating a value lower than the actual transaction value.
• This type of fraud is attempted, in principle, to pay
fewer amounts of duty/excise taxes and/or evade
import restrictions such as anti-dumping duty, to
resolve foreign exchange problem .
• False commericial invoice and declarations
b) Over-valuation is to make a false declaration indicating
a value higher than the actual transaction value aiming at,
for example; Obtaining higher export refunds, and higher
duty compensation; Evading internal taxes; Avoiding anti-
dumping duties; capital flight, and Money laundering
crimes.
 3. Misdescription
• Misdescription occurs when any information
provided in relation to goods under clearance is
false.
• Misdescription can take place when goods are
imported or exported and also when goods are
brought into free circulation (e.g. removal from
warehousing).
• Misdescription may be observed in connection
with, among other things, classification of imported
and/or exported goods.
 4. Falsification of origin
 There are several kinds of preference regimes, e.g.
Generalized System of Preference (GSP) and EC
preference. As an example, the GSP rules of origin
consist of three main elements, namely, origin criteria,
documentary evidence and the direct consignment
rules.
 Origin/preference fraud means any attempt to
knowingly violate or abuse rules of origin and/or
Customs documentary requirements as laid down by
bilateral or multilateral agreements in force in the
country concerned.
5. False declaration of quality and quantity

• False declaration may occur when any

information furnished to Customs authorities
concerning the physical attributes, nature,
volume, quantity or measure of goods
declared is untrue.
• This false declaration is made with the
intention of deriving undue advantage or
pecuniary benefits or to avoid existing
restrictions and prohibitions.
 6. Off-record transaction
• An off-record transaction is a commercial transaction,
is subject to a tax or duty or must be accounted but not
accounted .
• This fraud covers off-record transaction relating to
internal taxes and duties, such as sales tax, value add
tax and excise duties imposed on: hydrocarbon oils;
tobacco; alcoholic beverages; playing cards, matches,
lighters, etc. Off-record transaction fraud does not
cover smuggling, which is non- declaration of goods
subject to a Customs duty.
• However, it is worth noting that smuggled goods are
likely to be subject to an off-transaction when sold after
being smuggled.
 7. End-use fraud

• National legislation may offer a zero or lower

rate of duty on certain goods when imported
for a specified end-user.
• End-use provisions may be contained within
the tariff schedule.
• End-use certificates may be required by the
national Customs authority to support the
declared end-use but used for sale
 8. EVASION OF PROHIBITION, RESTRICTION OR
REQUIREMENT FOR IMPORT AND/OR EXPORT

This type of fraud includes the violation of

regulations other than Customs laws, such as
export/import license, physically changing the
presentation of the goods during transshipment,
for example, re-boxing, re-packaging, or re-
labelling.
(9) Falsification of trade licenses
 10. Violation of consumer protection
requirements
 Consumer protectionî is requirements/specifications
applied to goods to ensure minimum safety standards
usually applied by government departments/agencies,
national legislation and notified to Customs for
implementation at national borders.
 These goods may include items such as foodstuff,
medicines, chemicals, toys for babies, cosmetics and
other items, which could pose health and safety
concerns.
 There are a number of commodities which could pose
health and safety concerns but not subject to said
consumer protection requirements.
 11. UNAUTHORIZED RECEIPT OF REPAYMENT, SUBSIDY AND/OR
DISBURSEMENT
• Drawback in respect of Customs duties may apply to any commodity.
It is the refund of certain duties, internal revenue taxes and certain
fees collected upon the importation of goods and refunded when the
merchandise is exported or destroyed.
• Drawback in respect of excise duty will generally apply to those goods
produced domestically on which excise duties have been levied, such
as alcoholic beverages, tobacco products and petroleum products.
• Drawback fraud could be attempted in several ways, such as
substitution of commodity; incorrect quantity or fictitious export.
• Substitution can occur in two ways. Firstly, a legitimate product that
is not the product on which drawback has been claimed may be
exported, e.g. shirts may be exported instead of suits. Secondly, an
item of little or no commercial value may be exported in place of the
product on which drawback has been claimed, e.g. scraps/rags are
exported instead of suits.
Objectives of commercial fraud (customs fraud) and
smuggling goods

 Maximization of financial and/ or material Benefits

 Market domination
 To Import or export prohibited and restricted goods
 very high rates of customs duties and taxes
 Use of restrictions such as import licenses or quotas
 Shortages of supplies in domestic markets
 Strict exchange controls
 Reasons for fraud

 very high rates of customs duties and taxes

 Use of restrictions such as import licenses or quotas
 Shortages of supplies in domestic markets
 Strict exchange controls
 Outcoms or Impacts
Economical impacts
• Revenue loss
• Increased costs (often borne by the poorest)
• Threat for legal trade
• Unproductivity
• Prevalence of poverty
Social impacts
• Unemployment
• Health problems/ Restricted goods (food staffs, medicines,etc)

Political impacts
• Instability/weapons
• Crime & unlawfulness
• Terrorist
• Corruption
 Extreme act
• Extreme act, Terrorist act and Undemocratic
practices in a country that leads to armed
conflict
• Difficulties of procedures to follow the legal
process