Issues Relating to the Identification and Customs Examination of Internationally Traded Goods in Uzbekistan

1. Introduction

The emerging need to provide food products in an unstable international situation, on the one hand, and the ongoing restrictive measures of the global pandemic, on the other, require improvement in the methods and means of state regulation and control of foreign trade.

Organising customs control at customs border checkpoints is one of the most important and perhaps the most time-consuming stage in the process of managing foreign trade. According to Afonin et al. (2012), several ministries and departments are involved in this process in the Russian Federation, in addition to customs authorities: transport, veterinary, phytosanitary, sanitary-epidemiological control and other authorised bodies.

Under such conditions, participants in foreign economic activity (FEA) must work with each authorised body directly. However, the global pandemic does not allow direct contact between representatives of these institutions to resolve issues related to the certification of goods.

Against this background, the customs information system, Single Window (SW), introduced in the Republic of Uzbekistan, has shown itself to be an effective mechanism for remote management of foreign trade goods certification. In 2022, 527,095 and in 2023, 674,440 certificates and permits were provided remotely without direct contact with foreign trade participants. At the time of preparation of this article, 12 authorised bodies were integrated into the SW system and more than 85,868 participants of FEA were registered in the system (unpublished data).

The above figures are the results of an analysis of the database of the Customs Service of the Republic of Uzbekistan and the authors’ research in the framework of this article. The same study of the results of the effectiveness of the application of the SW system in the activities of customs authorities showed that there are areas that require improvement.

For example, an accurate code according to the Foreign Economic Activity Commodity Nomenclature (FEACN) is required for certification of foreign trade goods through the SW system. The role of customs examination in this process, which allows the establishment of a reliable foreign trade commodity code, is, however, not defined. Therefore, the issue of integration of customs examination and the SW system remains unresolved. In addition, in the process of ensuring customs examination, there are several issues that transform it from an instrument of trade facilitation to a technical barrier or a separate type of non-tariff regulation of foreign trade.

Considering the above, a study of the issues involved in the interaction of the SW system and customs examination, as well as improvement of customs examination procedures considering the requirements of today’s world, is relevant.

2. Statement of the problem

Technical barriers to foreign trade in the form of sanitary-epidemiological, phytosanitary, veterinary, environmental and other types of control refer to non-tariff methods of regulating FEA. They contribute to the development of the domestic economy and ensure economic security by streamlining the entry of certain goods into the domestic market of the country. According to Drobot and Ivko (2018), the use of this protective measure does not contradict the rules and regulations of the World Trade Organization (WTO).

Non-tariff measures to regulate foreign trade impose specific tasks on customs authorities, which are associated with the organisation of close interactions with other regulatory authorities. However, the main requirement for simplifying the organisation of customs control at customs border checkpoints, in the context of the urgent need to provide food products, is to eliminate unnecessary interference in international trade and transportation of foreign trade goods.

The concept of non-tariff measures covers almost any measures that do not relate to customs duties but have an impact on trade flow. At the same time, non-tariff measures can be aimed at both achieving legitimate goals, such as protecting human, animal and plant health, and at establishing restrictions in international trade.

According to the WTO (n.d.), the trend of foreign trade clearance involving non-tariff methods is increasing worldwide. For the 10 years from 2011 to 2020, the number of technical barriers initiated increased from 1139 to 2360, an increase of 207 per cent, and the number of sanitary and phytosanitary restrictions increased from 1265 to 1515, an increase of 120 per cent.

An analysis by Lee and Prabhakar (2021) shows that from early 2020 to August 2021 alone, more than 145 countries introduced around 440 trade-related non-tariff measures in response to the COVID-19 pandemic, of which, 27 per cent are tariff and 73 per cent are non-tariff measures to regulate foreign trade.

The administrative mechanism for the implementation of non-tariff measures of foreign trade regulation is a system of permits. This system includes specific procedures for the passage of each type of good and the issuance of the relevant permits in the form of, for example, certificates, licences and quotas. The process of issuing these kinds of permits involves several authorised bodies with their own rules and requirements for both goods for foreign trade and for participants in FEA. For example, Khakimova et al. (2022) studied the regulatory framework of the Republic of Uzbekistan and show that there are 17 authorised bodies involved in issuing 45 types of permits for foreign trade operations in the process of licensing operations and certification of foreign trade goods. The process of obtaining, for example, a certificate of conformity, from filing an application to receiving it, involves FEA participants passing through 19 stages, requiring an average of 74 working days (Khakimova et al., 2022). This procedure was in effect before the introduction of the SW system.

Regulating and simplifying this process is not difficult, since border processing is largely standardised throughout the world (Mikuriya & Cantens, 2021). To regulate and automate the process of licensing procedures for export and import operations of foreign trade goods in the Republic of Uzbekistan, the SW system was implemented, in accordance with the recommendations of the United Nations Economic Commission for Europe (United Nations Economic Commission for Europe [UNECE], 2020). However, users of this system face a problem before they enter the SW system. This is due to the difficulty in obtaining a reliable (or accurate) HS code for foreign trade goods.

The difficulty arises as follows. The procedure for the issuance of each permit or certificate, which must be obtained for customs clearance of foreign trade goods, is approved by a special Resolution of the Cabinet of Ministers of the Republic of Uzbekistan. At the same time, a list of the HS codes of the goods must be approved. For example, an extract from the list of products under plant quarantine control, imported into the Republic of Uzbekistan and exported abroad, approved by a special Resolution of the Cabinet of Ministers of the Republic of Uzbekistan No.65 of 29 January 2018 ‘on Approval of Regulations on the Procedure for Protecting the Territory of the Republic of Uzbekistan from Pests for Plant Quarantine and Passing Permitting Procedures in the Field of Plant Quarantine’ (Resolution of the Cabinet of Ministers No. 65; 2018), takes the form shown in Table 1.

This example demonstrates that the HS code must be accurately identified to allow decisions around quarantine permits to be made.

The situation for each type of permit for foreign trade operations is similar, and arises not only for participants in FEA, but also for employees of the State Customs Service. The fact is that an inaccurate determination of the HS code not only causes problems with the certification of goods, but also disrupts the entire customs clearance process, the consequences of which are ultimately the responsibility of an employee of the State Customs Service.

3. The role and place of customs examination in the certification process of foreign trade goods

In customs control, customs examination provides evidence for the legality of decisions taken by customs authorities and is an important part of this system. With its help, the main tasks of the customs authorities, in particular the economic security of the state and the replenishment of revenue for the state budget, as well as the interests and constitutional rights of citizens, are ensured (Kameneva, 2019).

At the same time, customs examination plays an important role in the effective regulation of the certification of goods in foreign trade. To prove this theory, we analysed the process of customs clearance in the Republic of Uzbekistan.

For foreign trade goods, customs clearance is mandatory. This procedure can be roughly divided into five stages, as follows.

Stage 1: Initiation of declaration of goods

The foreign trade participant completes all the necessary documents for customs clearance of the goods and provides the customs authority with a cargo customs declaration with the necessary information in the prescribed form. The customs declaration contains a description of the cargo and packaging, the HS product code, information about the sender and recipient, data on vehicles and paid customs payments.

Stage 2. Determination of cargo value

The costs for the purchase and delivery of goods to the place of import into the customs territory is determined during this stage. To confirm the customs value of the cargo, information from the foreign trade contract and the contract for international transportation, transport documents, invoice, manufacturer’s price list, payment documents, technical description of the goods and other papers are provided to the customs authorities, depending on the type of product.

Stage 3. Payment of customs charges

Customs charges are determined based on the documents provided, as listed above. They include customs duties, excise duties, value-added tax and customs fees. Each HS commodity code corresponds to a customs duty, established according to the customs tariff. The value-added tax rate is fixed but can be applied in a preferential regime in accordance with applicable law. Customs fees for customs operations are established by the Government of the Republic of Uzbekistan and have fixed values related to the customs value of goods.

The foreign trade participant also completes this stage.

Stage 4. Release of goods

All the declared data and the documents are checked during this stage. The compliance of the declared goods with the results of the customs inspection is also determined – if such a form of customs control was applicable – and write-off of customs payments occurs. Based on the results of the above actions, the decision to release the goods in accordance with the selected customs procedure is made.

A customs officer completes this stage.

Stage 5. The final stage

At the end of all customs operations, the foreign trade participant receives the goods and all the necessary documents: completed shipping documents, confirmation of the write-off of customs payments and a completed cargo customs declaration.

A customs officer also completes this stage.

This analysis reveals that Stage 1 of the process begins with the submission of a cargo customs declaration to the customs authorities, which contains the following data:

• description of cargo and packaging

• HS goods classification code

• information about the sender and recipient of the goods

• information about vehicles

• customs payments paid.

The analysis shows that HS classification of the goods is the first step in this process. Until identification by an expert is performed and the identity of the product established, as well as the group it belongs to and its HS code, it is impossible to proceed to the next stage of the process, and is essential for goods that may be subject to certain controls.

The ‘identification of goods for customs purposes’ is understood to mean the identification of the individual characteristics of goods, which allows their placement in a specific homogeneous group in the HS (Ipatko & Pavlenko, 2017). Identification precedes the decision on the classification of goods in accordance with the HS and is necessary for the implementation of almost all customs operations, including those for tax purposes, technical regulation and statistics.

This information allows us to develop a flow chart of actions during the customs clearance of goods (Figure 1).

Figure 1.Flow chart of the customs clearance process of goods with the inclusion of customs examination.

Source: Authors.

From this, we can conclude that:

• Certificates or other permit documents are required for the import of certain controlled goods. A list of these goods is approved by the government and includes their HS code.

• Certification of goods is performed during the preparation of customs clearance documents of the imported goods.

• At this stage, without knowing the HS code of the goods, the foreign trade participant cannot determine the legal requirements for certification of these goods because the type of certificates required depend on their HS code.

• A foreign trade participant, therefore, first needs to determine the HS code of the imported goods, which requires customs examination, and then contact the certification body.

The flow chart in Figure 1 indicates the extremely important place of customs examination in the process of certification of controlled foreign trade goods. Without customs examination, it is impossible to determine a reliable HS code for such goods, and without the HS code, it is impossible to determine the need for certification of these goods.

4. Analysis of the effectiveness of customs examination in the Republic of Uzbekistan

International experience in the field of customs examination and ongoing research by the Neparko et al. (2019), and Chernikova and Neparko (2021), show that customs examination should not be a ‘technical barrier’, regulating foreign trade in a non-tariff manner. The purpose of customs examination should be to simplify customs procedures. Ultimately, it should become a mechanism for providing high-quality services to participants in FEA. Before outlining the results of our research in the field of customs examination, we should emphasise that the following brief analysis may at first glance seem local, and only relevant to the Customs Service of the Republic of Uzbekistan. However, international studies of customs services with a similar level of development as in the Republic of Uzbekistan show similar problems (Andreeva et al., 2010).

The Central Customs Laboratory (CCL) is the main site of customs examination and research within the Customs Service of the Republic of Uzbekistan. Its status is that of a regional customs laboratory of the World Customs Organization (WCO). Today, this laboratory consistently undergoes large-scale reform aimed at simplifying customs procedures, ensuring the fulfilment of tasks set by national legislation, the Customs Code, the President and the Government of the Republic of Uzbekistan.

For nine months of 2022, the CCL and its regional offices conducted 7,299 cases of expert identification of goods for customs purposes. As a result, 2,763 inconsistencies under the HS code were revealed and additional customs payments of UZS61.6 billion were accrued (USD5.5 million).

We conclude from the above that customs examination remains an important tool to prevent customs offences and evasion of customs duties. At the same time, solving the following issues will strengthen its position and raise its level of efficiency in the customs control process.

4.1. Improving examination in the analysis of goods for customs purposes

The analysis of goods for customs purposes is inextricably linked with the quality and quantity of the submitted samples. That is, the higher the sample quality and the more fully the requirements for their collection and presentation are met, the higher the quality of their analysis.

The procedure for providing samples of goods for analysis by Customs was approved by the No. 145 of 17 March 2021, ‘On approval of the Regulations on the disposal of samples of goods in the system of customs authorities of the Republic of Uzbekistan’ (Resolution of the Cabinet of Ministers No. 145, 2021).

The quantitative and qualitative parameters of the samples to be submitted are, however, poorly defined. This means it is often necessary to repeatedly request samples and specimens for analysis. Studies of the causes of this problem show that the current legislative framework of the Republic of Uzbekistan on the provision of samples of goods for analysis by Customs does not establish a mandatory number of samples to be provided.

In developed countries, particularly in the European Union (EU), special attention is paid to this issue. Investigating these issues, Girgenti (2015, p. 9) notes the following, ‘Sampling methodology is the heart and the art of sampling. It defines the substance of it, answering questions such as: is partial sampling sufficient or is full sampling necessary? What is the quantity to be sampled?’

In many countries, the number of samples of goods for the purposes of customs analysis is clearly defined at the legislative level. For example, according to the Order of the Federal Customs Service of Russia 7 May 2021 No. 384 ‘On approval of the procedure for sampling goods for customs examination’, the requirements for the number of samples are clearly defined: ‘Group 07 HS EEU, vegetables and some edible root and tuber crops — 3 samples of 500 g; sample packaging’ (Federal Customs Service of Russia, 2021).

4.2. Forensic examination

According to the Resolution of the Cabinet of Ministers of the Republic of Uzbekistan No. 790 of 30 December 2021, ‘On measures to organise the activities of the Central Customs Laboratory of the State Customs Committee’, the CCL is entrusted with conducting the forensic examination of narcotic drugs, psychotropic substances and other types of forensic materials (Resolution of the Cabinet of Ministers No. 790, 2021). These examinations vary in complexity.

In accordance with the ‘Charter on the Central Customs Laboratory of the State Customs Committee of the Republic of Uzbekistan’, approved by this Resolution, it is established that:

e) in accordance with the needs of the State Customs Service bodies in the field of forensic medical examination of narcotic drugs, psychotropic substances, and other forensic types, the state forensic examination institution conducts the following examinations and studies:

• examination of herbal, synthetic drugs and substances
• examination of psychotropic substances and precursors
• examination of precious metals and jewellery
• examination of potent substances
• examination of special chemicals
• examination correspondence
• technical examination of documents.
  Also, the relevant experts can conduct other types of examinations if they have the necessary technical means. (Resolution of the Cabinet of Ministers No. 790, 2021, paragraph e)

In 2022, 21 applications from territorial customs divisions were received by the laboratory. A total of 626 studies were conducted to determine whether the items were narcotic drugs or psychotropic substances. The laboratory found that 26 of the items were potent substances, 199 were hemp seeds, and the remaining 328 items did not contain prohibited substances (Table 2).

A problem arises because one of the key conditions for the examination of such substances is that the CCL can only analyse them after they have been identified as suspect by the customs authorities and transferred to the laboratory. The CCL provides expert opinions based only on an analysis of the chemical composition of substances. Analysis of their physical and physical-chemical properties is not given much importance. On the other hand, the Uzbekistan Institute of Customs is researching into non-intrusive identification methods using the physical and physical-chemical properties of substances. The results of this research can be used not only in the analysis and identification of substances entering the CCL, but also in the process of border control and identification of narcotic substances. Another problem arises here because the capability of employees in the CCL who have the right to conduct such examinations needs to be strengthened to ensure these types of examinations can proceed. The CCL is equipped with the most modern equipment, such as high-performance and highly sensitive gas chromatography–mass spectrometers, infrared spectrometers, ultraviolet spectrometers and mass spectrometers. An urgent issue is the training of more employees to use these modern methods and technologies to strengthen their capability, as well as conducting scientific research on new methods and technologies that have not yet been applied in practice. The training of such employees falls within the scope of activity of the Uzbekistan Institute of Customs; thus, it must be provided with similar technical means and equipment to those used by the CCL. Also, the HS is currently only available in Russian. However, translation into the national language began in 2022. Its translation will facilitate foreign trade participants to fill out cargo customs declarations in the national language. This work is coordinated by the CCL.

The task of aligning the tariff of the Republic of Uzbekistan with the HS of the WCO and that of the Commonwealth of Independent States is another important one, as is the alignment of HS product codes with international scientific codes.

5. Conclusion

In conclusion, we would like to note that the problematic issues outlined above may at first glance seem local, and relevant only for the Customs Service of the Republic of Uzbekistan. However, the study of international experience shows that similar problems exist in many developing countries.

Currently in world trade, countries generally use the same categories of protective measures as those detailed above, in accordance with the rules and regulations of the WTO. However, studies by Khakimova et al. (2022) have shown that the involvement of several authorised bodies in this process with their own rules and requirements creates barriers along the supply chains of internationally traded goods.

The SW system has been implemented in the Republic of Uzbekistan to regulate this problem and to automate the process of licensing procedures for export and import operations of foreign trade goods. It appears to be effective in the process of remote management of certification of foreign trade goods. Our analyses show that this system not only allows remote certification of foreign trade goods, but also simplifies the process and gives tangible financial and temporal benefits to foreign trade participants. For example, the faster certification of goods with the FEACN code ‘1001990000 - wheat and meslin: - others: - other’ saved UZS16.5 billion during 2022 because the storage time in a customs warehouse was shorter. (Khakimova et al., 2022).

In addition, there have been indirect effects on potential corruption risks, which have been reduced. This is important for the organisation of state regulation of foreign trade, including the organisation of customs control. For example, studies showed that in 2022, by reducing direct meetings of importers of goods with the HS code ‘1001990000 - wheat and meslin: - other: - other’ with representatives of authorised bodies, 16,376 areas of corruption risk were removed (Khakimova et al., 2022).

However, users of this system have a problem associated with obtaining a reliable foreign trade commodity HS code. The main solution to this lies in customs examination of foreign trade goods. Without customs examination, it is impossible to determine a reliable HS code, and without the HS code it is impossible to determine the need for certification of these goods.

At the same time, customs examination remains an important tool for preventing customs offences and evasion of customs payments. The CCL is the main source of customs examination and research in the customs system of the Republic of Uzbekistan (Resolution of the Cabinet of Ministers No. 790, 2021). However, the results of the authors’ research within the framework of this article have shown that in the field of customs examination there are problems related to:

1. improving the quality of customs examination

2. examination in drug identification

3. strengthening the capacity of personnel in forensic examination

4. strengthening the material and technical basis of training personnel in customs examination.

Everyone connected in one way or another with scientific research knows that accurately presenting an existing problem paves the way to its solution. The authors hope that the above discussion provides useful prerequisites for solving the problems identified.

Acknowledgments

We thank our colleagues at the World Customs Journal and anonymous reviewers for their valuable comments. Responsibility for all errors and omissions remains with the authors.