17. August 2015

The Tianjin catastrophe, customs brokers and Collective Action

The death toll following the huge explosions and chemical fires at the storage centre in Tianjin port in China last week has now exceeded 100, including dozens of fire fighters, and hundreds more seriously injured.

Toxic chemicals and gasses have necessitated an evacuation of the area and the clean up will be a long process.

In the aftermath of the disaster it has emerged that the authorities in China do not know what was stored in the warehouses that were run by the Rui Hui International Logistics Company. According to the city’s head of the fire brigade however, ‘there are large discrepancies between customs papers and inquiries conducted with the company.”

Not knowing what chemicals were stored at the port may have caused the firefighters to use water to combat the chemical fires, with tragic consequences.

If investigations reveal that the declarations filed with the customs authorities were false, it raises the question whether bribes were paid by the importing companies either directly or through their customs brokers to public officials to turn a blind eye as to what was being deposited in the warehouses.

Customs brokers are sub-contracted by importers and exporters to interact with the customs administration to clear goods as quickly and efficiently as possible. As the key link between customs authorities and private companies, the broker has a dual responsibility to clear the goods according to the customer’s instructions and to make sure that the clearance through customs is in accordance with local laws and regulations.

In its work to address corruption in customs administrations the World Customs Organization has noted that:

Most Customs administrations have attempted to address corruption but, by and large, related initiatives appear not to have given the expected results for a range of reasons. One of the reasons is that anti-corruption projects have not been envisaged holistically and bad practices have remained.

Such holistic approaches are already underway in some countries. The Turkish Customs Brokers Anti-Corruption Collective Action provides an example that could be replicated elsewhere. This initiative brings together the customs authorities, customs brokers and civil society in an approach that seeks to raise anti-corruption standards, and awaken an ethical awareness amongst customs brokers as to the crucial role they play in ensuring security and fair competition. Further details can be found here.

Customs brokers in many countries habitually make facilitation payments to expedite the clearance of goods on behalf of their clients, and may be reluctant to stop for fear of losing business. But companies subject to laws passed under the OECD Convention, may be liable for such bribes in the countries where they are headquartered or in other jurisdictions, and they are also responsible for third parties acting on their behalf. Due diligence on customs brokers is essential; but more action is needed to reduce the risks of environmental and security catastrophes, and to bring about sustainable change.

Collective Action involving customs administrations, customs brokers, the private sector and civil society could support the implementation of integrity standards commensurate with national and international laws and to send a message that corruption is no longer tolerated.

Gemma Aiolfi

Senior Advisor, Legal and Compliance