Air Cargo Newsdesk

FIVE ways to avoid air cargo corruption

When cargo is bribed through Customs

CUSTOMS departments and other government agencies are often the most corrupt, abused and fraudulent parts of the entire air cargo and logistics supply chain, hard-hitting reports reveal.

Paper-based Customs operations, along with other government agencies located at ports and airports, are consistently “the most challenging junctures in the logistics supply chains,” Alexandra Wrage, president of Annapolis-based anti-corruption business association TRACE International, tells Thelma Etim.

“This is largely because they involve frequent interactions with foreign government officials and often require engaging multiple third-party business partners,” she explains.

Customs barriers are where air cargo and logistics supply chains businesses are most at risk to corruption and bribery, exclusively reveals.

A World Bank study focusing on international trade in 2017 corroborates such lack of transparency at Customs barriers in global supply chains. “In the realm of international trade, and particularly in Customs clearance procedures, corruption can flourish because Customs officials control something that firms greatly value: access to international markets,” notes the bank’s latest report.

Its research shows that Customs officials are “particularly prone” to accepting bribes and are more likely to engage in corruption compared to other sectors of the economy.

Import and export processes are equally affected. “Customs officials can fraudulently overlook import regulations and exonerate goods from inspections while importing, or abuse their roles of gatekeepers during export procedures,” the reports states.

Outmoded, manual, paper-based processes, which can easily be manipulated, have led to systemic corrupt practices in many state Customs operations. “A low level of automation and computerisation in many remote locations and the lack of training and professionalism on the part of foreign government officials add to the bribery risks proliferating in Customs and ports,” notes Wrage.

The World Bank report points to the crucial role that new technologies must play in tackling corruption. “Increased trade digitisation, which minimises human interactions, creates fewer opportunities for bribery and fraud,” it says.

A typical example is how the Philippines is currently successfully fighting corruption in its Customs services by adopting modern technological systems that “limit in-person interactions and by imposing heavy penalties on corrupt officials,” it says. “As a result of the anti-corruption reforms, about 70 per cent of imports to the Philippines are now processed through the green channel within just two hours.”

Eventually, the automation and digitisation of administrative systems will largely eliminate the monopolistic power of Customs officials, the global study asserts. “Single window systems – which limit the monopoly power of Customs agents – can be implemented to deter corruption in Customs services.”

They are especially needed in places like Mexico, whose transport and logistics sector remains almost overwhelmingly burdened by corrupt manual processes, according to a World Economic Forum (WEF) report published in June this year. Corruption and inconsistencies in the Latin American nation’s Customs division are among a raft of operational weaknesses that are highlighted in the WEF study.

Customs and bribery: Three questions for air cargo decision-makers

For the air cargo industry, it is the procurement process that is often at the heart of the corruption problem even though there are enough red flags to put companies on their guard, including those surrounding the use of third parties, warns Wrage. “Has the third party been recommended by a government official? Were there last-minute or undocumented expenses? Have they refused to sign on to a company’s code of conduct or to undergo due diligence?” she asks. These are three fundamental questions decision-makers should be asking themselves, Wrage argues.

Another warning sign for air cargo and logistics bosses is the obvious lack of credentials or experience expected for the services on offer. Wrage urges airfreight and logistics companies to take every opportunity to remind their business partners that bribery will not be tolerated – and that they will walk away from “any partner engaged in misconduct”.

After a while, business partners come to see a good reputation as a valuable business tool and are willing to work to protect their’s too, rather than simply hand over cash.

Other clear signals can often be found in the reports published by the ‘genuine’ media – not in those propped up by revenues and ‘goodwill’ controlled by a mechanism which includes a constant threat of pulling advertising contracts. “Companies need to be alert to credible rumours or media reports of corrupt behaviour,” Wrage stresses.

TRACE Matrix 2016 Infographic

TRACE Matrix 2016 Infographic

Earlier this year, referring to the TRACE Matrix, a global business bribery risk index, published 10 of the most corrupt nations to do business with – which included major air cargo markets such as Nigeria and Vietnam. Updated every two years, the matrix scores countries from 1 to 100 – the higher the score, the greater the business bribery risk.

Its calculations are based on four main assessments, including business interactions with government, anti-bribery laws and enforcement, government and civil service transparency, and freedom of the press.

The latest version TRACE Matrix 2016, published this month, reveals Sweden is the least corrupt country to conduct business with. The Scandinavian nation, which introduced a special revision to its penal code system for anyone found to be engaging in corrupt practices in 2012, has the lowest scores.

New Zealand is in second place, followed by Estonia, Hong Kong, Norway, Ireland, the Netherlands, Singapore, Finland and Denmark in tenth. In stark contrast, Nigeria, Angola, Yemen, Guinea, Cambodia, Myanmar, South Sudan, Syria, Chad and Liberia produce the highest corruption scores.

“When we first launched the TRACE Matrix, we recognised the importance for the international business community to have a tool designed specifically for their anti-bribery compliance efforts,” explains Wrage.

“Although there were already other corruption-related indices, there wasn’t one that addressed the particular bribery-related risk assessment needs of companies doing business abroad,” she notes.

Read another news story about corruption here

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