TECHNICAL ASSISTANCE

V. Strengthening technical and operational capacities in Palestinian 
customs administration (preparation for ASYCUDA)

Context and rationale

While paving the way for integrating the Palestinian economy with regional and global markets, the numerous economic and trade agreements with new trade partners have generated new challenges for the PA. Owing to its limited experience in trade regulation, and technical and competency shortfalls, the PA is not well placed to take on such challenges, especially with regard to customs clearance, revenue collection, fraud, smuggling, and the provision of trade information for government analysis and planning.

The collection of customs and excise revenue is entrusted to the General Directorate of Customs and Excise, which is also responsible for the collection of VAT, administration of other taxes, economic policy and data processing. The Directorate also attends to daily problems with exporters and importers and the protection of the population against drugs, smuggling and poor quality standards. It has 25 regional offices across the West Bank and Gaza, working in close coordination with the Ministry of Civil Affairs, the Ministry of Trade and Economy, Chambers of Commerce and Industry, the Palestinian Police and the Department of Specifications and Measures. Meanwhile, it continues to rely on the Israeli customs law to regulate external trade, as it is yet to enact a customs law of its own and establish its own customs procedures, including those relating to temporary imports, inward processing, reimports, and re-exports. The Directorate relies on the Israeli authorities for obtaining customs statistics and information. Consequently, it is unable to adequately monitor imports, especially those originating from Israel, with lost customs revenue estimated at between US$ 166 million and US$ 275 million a year during the period from 1994 to 1996.

At the same time, the continued delays in the opening of Gaza Seaport have increased Palestinian traders' heavy reliance on Israeli trade facilities, since the Israeli authorities are mainly responsible for controlling customs procedures. This is so because the Paris Protocol provides that Israel controls clearing procedures for products imported through its ports and airports. This has inflated transaction costs incurred by Palestinian traders, which are generated by strict security measures at border crossings and cumbersome customs and overland procedures.

In 1995, the PA embarked on a comprehensive programme to modernize and strengthen the institutional and managerial capacity of its customs administration. At the request of the PA, the UNCTAD secretariat dispatched two missions to identify areas requiring reform. The missions assessed 

1. the tariff regimes in operation between the Palestinian economy and its trading partners, including preference-giving trading partners; 
   
   

2. systems and procedures adopted for generating customs data; and 
   
   

3. the PA's future plans with regard to the modernization of the customs administration. Guided by the missions' findings, the secretariat presented a project proposal to prepare the PA for the introduction of UNCTAD's Automated System for Customs Data (ASYCUDA), which complements ongoing projects undertaken by other international organizations, comprising a package of training and advisory services targeting procedural barriers, information-technology needs and competency shortfalls. The project was endorsed by the PA's Ministry of Finance in 1999 and is scheduled to be implemented in cooperation with the PA's Customs and Excise Directorate and relevant international organizations over a period of two to three years, depending on the availability of resources.

Objectives

To strengthen the Palestinian customs administration's capacity, enabling it to better monitor and regulate international trade, increase customs revenue and speed up the customs clearance process at low cost. The project also seeks to assist the PA in formulating the legislation needed for ensuring transparency and conformity with relevant multilateral agreements.

Main activities

The main activities under this project are grouped under three interlinked phases, focusing on developing the institutional set-up and legal framework for the eventual computerization of customs procedures and information systems through the UNCTAD ASYCUDA++ system.

In Phase I, a six-month preparation phase, the following activities will be carried out:

• Holding of training courses and workshops on computerized customs management systems in general and the UNCTAD ASYCUDA++ system in particular to help the General Directorate of Customs and Excise adapt its institutional set-up to an automated environment;

• Establishment of a national team to assist in implementing the project, and to assume the responsibility for providing further training courses for the staff and maintaining the production of national training manuals;

• Introduction of the Singe Administrative Document (SAD), in addition to development of proposals for streamlining and simplifying trade procedures;

• Development of a prototype version of ASYCUDA++ by UNCTAD in close coordination with the PA, to be installed at the PA customs headquarters. The system will be prepared so as to capture declaration statistics since the declaration processing is yet to be devolved to the PA, and will be tested to ensure that the configuration fully meets the requirements of national legislation.

In Phase II, the prototype ASYCUDA++ system will be installed at an international entry point (e.g. Gaza Airport and/or the Allenby crossing point) and in a customs office. The reform activities initiated in the first phase will continue together with the elaboration of a work plan for implementing the ASYCUDA++ system throughout the country.

Phase III, the full system roll-out phase, will be implemented by the national team with assistance from UNCTAD where necessary. The team will supervise the physical preparation of all sites to be computerized, and the technical installation and support of computer systems in the identified sites, in addition to training the staff.

Status

With financing from the Palestinian Economic Council for Reconstruction and Development (PECDAR), which administers the World Bank's Technical Assistance Trust Fund (TATF) for the PA, project implementation of Phase I began in July 2001 in close cooperation with the PA General Directorate of Customs and Excise. Activities under the first phase will be implemented during the second half of 2002.