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THE CURRENT ENVIRONMENT OF THE CUSTOMS ORGANIZATION

The role of customs organization has been reformed from the traditional role of collecting duties and taxes to make up certain percentage of the state budget to include special roles of protecting social health and ensuring national and economic security of the country.

The legal reforms for customs activities have basically been implemented and the customs officers are undertaking their role of ensuring national and economic security, and collecting the state budget revenues reputably.

The custom organization today has 1200 employees, a capital of approximately 40 billion MNT, and an expenditure of approximately 4 billion MNT. As of 2007, revenue per customs officer was equivalent to 429.1 million MNT, which indicate a revenue of 160 MNT per 1 MNT spent.

We are focusing on turning customs organization into a service organization rather than an administration and creating opportunities to provide information to the public, for instance, through the customs official website to allow them to access the customs laws and regulations, ask questions and seek advice. Additionally we have created a channel for the public to inform customs about any bureaucracy and hassle they might encounter in a timely manner via email and our phone hotline.

We have implemented a customs reform and modernization project with the assistance of Asian Development bank and the Korean Government. As a result of the reform, our customs operations have been fully automated since March 2010 and we have turned to paperless clearance system.

 

Political environment
The joint Government that was created as a result of the fifth election for Mongolian Parliament has developed an action plan to implement the priority goals and objectives of the Government. The action plan of the Government comprises of issues related to the country’s socioeconomic development, politics, regional development and the society as a whole.

Although the Customs organization is free from political party associations, the vision and mission of its operation align with the role of contributing to the development vision of Mongolia and they are closely tied to the goals such as implementing the Transit Mongolia program, eliminating bureaucracy and corruption, and to develop accountable political democracy. The following political environment has influenced the development of customs operations strategy.

Favorable international political environment has been created through the good relations with the neighboring countries, the support and trust from influential countries around the world, and through being a voting member of major international organizations.

As a result of rapid expansion of globalism the role of customs has been increased to include ensuring international trade security, countering and preventing from commercial fraud that has been at the center of attention worldwide, and to ensure the balance of the ecology and the environment.

These changes in the role of customs organizations define the image of reform in the new century.

 

Legal environment
The new democratic constitution has been passed and as a result of the fresh new environment with legal security for democratic reform, the society transitioned to market economy and the laws on customs, privatization, and bankruptcy of companies were passed. These laws are revised further in relation to the progress of the transition.

As of today, there are over 150 laws and legislations regulating the custom organization and its operation including the Law on the Mongolian Government, Law on Public Service, Law on Customs, Law on Customs Tariff and taxes, Law on General Taxes, Cabinet orders and other regulations passed by the Customs General Administration.

Additionally, the Customs organization also implements various international conventions including the Convention on the Harmonized Commodity Description and Coding System, Kyoto convention simplification and harmonization of customs procedures, Convention on temporary admission, Convention on International Trade in Endangered Species of Wild Fauna and Flora, Convention on International Transport of Goods Under Cover of TIR Carnets, United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, Vienna Convention on Diplomatic Relations, and United Nations Convention on Contracts for the International Sale of Goods.

 

Economic environment
Our country has joined the World Trade Organization in 1997, which was an important stepping stone for expanding our international trade and to raise the commerce sector to the common standard of the market. As the foreign trade turnover has been increasing every year and the macro economy has been stabilizing, the role of customs has increased in expediting the economic growth.

The foreign trade turnover has increased significantly from being 1.1 billion USD in 2000 to over 5 billion USD in 2008. The economy of Mongolia has expanded immensely in the recent years and it has been increasing at an average of nearly 9% annually. Customs organization is currently focusing on further stabilizing the growth, creating favorable business environment, and facilitating trade.

As Mongolia is currently fully dependent on import goods especially in terms of the main strategic commodity of foodstuff being dependent on one country, there arises a risk of economic security failing. Therefore we are undertaking research in carrying out differential tariff policy in the future, levying anti-dumping duties against cheap, low quality products filling the market, and supporting the national producers.

The Customs organization will promote activities that will increase the number of export goods, will produce Mongolian brand that is competent in the world market, will support the lives of the Mongolia people through industrial policy and that will make Mongolia a country that makes final products as opposed to merely an exporter of raw materials.

Although international trade is being carried out through over 30 ports, there still is a need for improving the infrastructure for controlling the quality, standard, hygiene, and the permits with regards to plants and veterinaries. As approximately 90% of the export and import commodities cross through Altanbulag, Sukhbaatar and Zamiin-Uud ports, the transport cost for such distant travel increases and consequently the profits from foreign trade negatively impacts the purchasing power of the people. On the other hand, due to the weak local purchasing power, the import goods tend to lack quality certifications. Additionally, as the provinces lack an enabling environment for production and trade, companies and individuals are reckless with the raw materials from the cattle and the natural resources and riches, which create a condition where those products would be sold overseas for low prices.

 

International customs environment
The role of customs in the 21st century has been changing radically due to the demands for facilitating trade and improving foreign trade environment to comprise of protecting the social health and national security, and countering terrorism and transnational crime as a result of the expanded borders and interdependence of countries due to globalism in comparison with the previous century.

In June of 2008, during the WCO council session 111/112, a policy document for customs to uphold in the 21st century was approved. The policy document comprised of two main issues, globally-networked customs and coordinated border management.

The policy document further defined the 10 building blocks for the new strategic directions to develop the customs operations:
1. Globally networked Customs
2. Better coordinated border management
3. Intelligence-driven risk management
4. Customs-Trade partnership
5. Implementation of modern working methods, procedures and techniques
6. Enabling technology and tools
7. Enabling powers
8. A professional, knowledge-based service culture
9. Capacity building
10. Integrity

In implementing the customs policy document for the 21st century, the WCO has developed several conventions, documents and recommendations with regards to the abovementioned 10 directions and has compiled the best practices of customs organizations in order to make the vast experience available to policymakers, customs stakeholder organizations and companies and to impact them.

The WCO believes it is important to focus on several issues when implementing the policy document. One of such issues is the countries that have not yet launched the implementation of the Authorized Economic Operator, even though the standard was passed in 2005.

Additionally, whereas until recently the WCO and its member countries were more focused on issues relevant to import goods, since the implementation of the SAFE standards to facilitate trade and to ensure its safety, they are faced with an inevitable demand to focus on all stages of the supply chain including export and transit. Implementation of change management and development of human resource are also issues that are considered to in need to be in the center of attention.

In the recent years the WCO has promoted customs and business partnership and collaborated with other international organizations, research organizations, universities and the public sector, and plans to receive their assistance when conducting research and developing legal documents suitable to the current trade environment. Enhancing the capabilities of the customs organization efficiently is considered to be especially important in setting the new strategic directions.

There is a need to set standards in the capacity building activities, considering the special circumstances on the selected countries, ensuring the pressing challenges are resolved, and analyzing and assessing the current level of development. The Regional Offices for Capacity Building and the Regional Training Centers are working with this aim and are able to appoint specially trained experts. In order to effectively implement the capacity building program, sufficient funding is required.

 

Legal reform
The revised version of the Customs Law and Customs tariff and tax law that was passed in 1996 was approved by the Parliament in 2008 and entered force on the first of July, 2008. These laws were based on the Kyoto convention on simplification and harmonization of customs procedures. The revised customs law and the customs tariff and taxes law enable the legal grounds for minimizing the obstacles in foreign trade, facilitating trade, decreasing the cost of import and decreasing the time required for clearance.

We have been focusing on simplifying customs clearance procedures, eliminating redundancy in regulations, making the required documents fewer and simpler, decreasing the centralization of operational management and providing the branch customs organization more decision power.