STRATEGIC CUSTOMS PLANNING AND MANAGEMENT
MODULE 4
MANAGEMENT INDICATORS FOR CUSTOMS ADMINISTRATIONS
COURSE AUTHOR Interamerican Development Bank (IDB) (www.iadb.org), through its Integration and Trade Sector (INT). COURSE COORDINATOR Interamerican Development Bank (IDB) (www.iadb.org), through its Integration and Trade Sector (INT), the Institute for the Integration of Latin America and the Caribbean (INTAL) (www.iadb.org/es/intal), the Inter-American Institute for Economic and Social Development (INDES) (www.indes.org), the World Customs Organization (WCO) (www.wcoomd.org) and the General Secretariat of Central American Integration (SG-SICA) (http://www.sica.int/). MODULE AUTHOR Christian Josué Girón Carreto EDUCATIONAL COORDINATION AND EDITING The Inter-American Institute for Economic and Social Development (INDES) (www. indes.org), in collaboration with the Economic and Technological Development Distance Learning Center Foundation (CEDDET) (www.ceddet.org) and Caribbean Customs Law Enforcement Council (CCLEC) (www.cclec.net).
Copyright ©2016 Inter-American Development Bank. This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives (CC-IGO 3.0 BY-NC-ND) (http://creativecommons. org/licenses/by-nc-nd/3.0/igo/legalcode). This document is the intellectual property of the Inter-American Development Bank (IDB). Any partial or total reproduction of this document should be reported to: BIDINDES@iadb.org Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB’s name for any purpose other than for attribution, and the use of IDB’s logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license. Note that the link provided above includes additional terms and conditions of the license. The opinions expressed in this publication necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent. These materials have been revised in light of the ministerial decisions taken in the framework of the 9th World Trade Organization Ministerial Conference held in Bali, Indonesia, in December 2013. The adjustments were made in order to reflect a higher alignment between the course topics and the priorities identified in Bali’s Ministerial Declaration and decisions, where all IDB members participated. Bali Ministerial Declaration and Decisions
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Table of contents List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 General Module Aims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Questions to Guide Learning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 UNIT I. GENERAL THEORY OF MANAGEMENT INDICATORS . . . . . . . . . . . . . . . . . . 8 Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 I.1. Management control: basic concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 I.1.1. Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 I.1.2. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 I.1.3. Management Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 I.2. Management indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 I.2.1. Common misconceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 I.2.2. Indicator data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 I.2.3. Elements that define an indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 I.2.4. Indicator classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 I.3. Advantages of management indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 UNIT II. CUSTOMS MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 II.1. Customs administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 II.2. Customs management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 II.2.1. The aims of customs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 II.2.2. The purposes of customs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 II.2.3. Customs management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 II.3. The key areas of success in customs management . . . . . . . . . . . . . . . . . . . . . . 28
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II.3.1. Import . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 II.3.2. The customs transit of goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 II.3.3. Economic and temporary customs procedures . . . . . . . . . . . . . . . . . . . . . . 31 II.3.4. Export . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 UNIT III. MANAGEMENT INDICATORS FOR CUSTOMS ORGANISATIONS . . . . . 34 Learning objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 III.1. Importance of management indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 III.2. Methodology for establishing indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 III.2.1. National option: the institutional strategic plan . . . . . . . . . . . . . . . . . . . . . 37 III.2.2. International option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 III.3. Identifying management indicators for customs . . . . . . . . . . . . . . . . . . . . . . . . 41 III.3.1. Identify key areas of success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 III.3.2. Identify key factors of success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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III.3.3. Establish indicators for each factor of success . . . . . . . . . . . . . . . . . . . . . 42 III.3.4. Set the indicator range . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 III.3.5. Design the indicator measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 III.3.6. Test and adjust the system of indicators . . . . . . . . . . . . . . . . . . . . . . . . . . 45 III.3.7. Define indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 III.3.8. Incorporate indicators in customs administration . . . . . . . . . . . . . . . . . . 46 III.4. Advantages of management indicators for customs . . . . . . . . . . . . . . . . . . . . 47 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 CASE STUDY: THE IADB INDICATOR SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 1. The IDB system of indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 2. System structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 3. System methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 4. Available consultations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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List of Figures Figure 1.1. Administration diagram Figure 1.2. Effectiveness Figure 1.3. Management control Figure 1.4. Important characteristics of an indicator Figure 2.1. Customs management Figure 2.2. Main functions of customs Figure 2.3. Key areas of success in customs Figure 2.4. Trade and customs Figure 3.1. Example of an indicator report
Glossary IBD: Inter-American Development Bank. Export: For the purposes of this module export is defined as the sending of goods outside the national customs territory. Import: For the purposes of this module import is defined as the entry of goods in the national customs territory. WCO: World Customs Organization. Economic operator: Any natural or legal person carrying out international trade transactions such as importers, exporters, carriers, etc. ISP: Institutional Strategy Plan Economic procedures: Customs procedures that allow the entry or exit of goods from the national customs territory for processing. Temporary procedures: All those customs procedures used for a specified period that allow the entry or exit of goods from the national customs territory. Transit: For the purposes of this module transit or the customs transit of goods is defined as the movement of goods, which are subject to customs control, from one point to another.
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Introduction The “Management Indicators for Customs Administrations� module aims to identify tools used in organizational management which can be applied as part of customs management to establish the degree of compliance with the objectives set by seniors. If necessary, efforts can be redirected or reconsidered by establishing the extent to which the objectives are being met. While the management tools discussed in this module are widely used for different types of organizations, focus has been placed on their application in customs to gain a better understanding of how they are used in these specific types of organizations. Derived from the multiple functions national customs organizations currently perform, use of these tools has been focused on processes that generally correspond to customs services, as in the case of the import, export and transit of goods, as well as economic and temporary customs procedures.
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The module intends to proceed from a distinctly theoretical approach towards the analysis of the possibilities of their application to the tasks of customs organizations. A discussion of the theory allows us to share well-known ideas and concepts in both customs planning and management in order to apply them to the identification and development of indicators to monitor this management. Issues common to most readers will be addressed in order to offer different perspectives which day-to-day work may leave little time to reflect upon. The options and process for establishing performance indicators for customs will be discussed along with a structure that can be used as a guideline to identify and define customs indicators. We suggest the complementary and optional reading of the case study at the end of this module, which explains the system of management indicators for customs developed by the Inter-American Development Bank (IDB) along with their characteristics, methods, advantages and limitations.
General Module Aims Understand the methodology for establishing indicators, either by using an institutional strategy plan (ISP) or through the objectives recommended by international bodies such as the World Customs Organization (WCO), in order for customs to have a tool to measure the level of compliance with performance objectives and the contribution of results to the achievement of strategic objectives.
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Questions to Guide Learning Can a customs organization’s senior management control management by establishing monitoring indicators, or are they simply just another statistic obtained? Were customs administrations created to collect taxes or to control the entry and exit of goods and conveyance? Can management indicators be established if the customs organization I belong to does not have an institutional strategy plan? Is there a methodology to orderly establish management indicators to adequately monitor the operation?
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UNIT I
GENERAL THEORY OF MANAGEMENT INDICATORS
Learning Objectives Explain the usefulness and advantages of a system of indicators linked to a customs organization’s strategic planning in order to monitor and control customs management.
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Understand the application of performance indicators as a monitoring tool.
I.1. Management control: basic concepts Let’s start with a very simple concept: management control is a mechanism to monitor and measure the progress of the management process. Also, according to Ing. Cruz Lezama, “management control measures performance quality”. Measurement indicators are used in both cases. We can see that “management control” can have different meanings; the same happens when each term is treated separately (control and management). Perhaps, therefore, the simple combination of the two words falls short of defining the scope of management control. Everyday speech, in any language, provides numerous examples of syntactically correct expressions that acquire a different meaning when combined that goes beyond the simple individual definition of each word: change of address, channel of communication, brainstorming, working language, etc. This is particularly evident when a student learning a foreign language comes across technical or commonly-used expressions formed by the combining two or more words. Let’s begin by narrowing the meaning of the individual terms management and control in order to better understand the scope and scale of management control.
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I.1.1. Control The word control has many different meanings depending on the context in which it is used. The Royal Spanish Academy (RAE) dictionary provides the following definition: “1. Testing, inspection, supervision, intervention. 2. Command, control, dominance. 3. Office, agency, department, etc., where control takes place. 4. Checkpoint 5. Manual or automatic regulation of a system.” We are unable to judge the value of control based on the cold and logical objectivity of the dictionary and, of course, it depends on what and how you want to control, especially when it comes to the exercise of individual and collective freedom. But control has an overall positive meaning and relates to the idea that something is inspected, monitored or regulated to ensure it is within the corresponding limits or ranges according to its nature and the standards governing an activity or situation. Quality control, epidemic control, machine inspection; in this positive sense, emergency control (fire, flooding, hemorrhaging) carries relief or comfort to the owners of the building where the fire occurred, the citizens of the flooded area or the patient’s family members. However, in the context of an organization it may be that, when referring to control, the first reflex is to associate it with a quasi-policing concept. Control is seen as “meddling” by someone who wants to control us, whether they are persons or agencies within the organization itself or external persons or agencies. With this definition of the word, the first meaning given in the dictionary, control is seen as an investigation (“testing, inspection, supervision, intervention”) in search of errors or inappropriate activities for the purpose of informing the competent authority to impose the appropriate sanctions. Obviously, this idea of control produces fear —justified or not — and rejection of any cooperation with the supervisory bodies, as occurs in many the internal control areas of our organizations, also known as internal audits, when auditors show up to control our work. Yet, aside from this bias, control usually has a positive effect in relation to the majority of human activities such as science, industry, economy, sports, etc. We would say that control is the exercise of a person, group or mechanism’s capacity to keep a situation or activity within previously established channels or ranges. For example, there are control parameters to determine whether a person’s blood pressure is in a safe range; in this case a range, rather than a point value, is used, as it is when measuring blood glucose.
A similar idea has been adopted in the field of engineering and business administra-
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tion to develop and incorporate management control theory in companies. Tools to measure the values of the parameters or factors to be controlled are necessary to exercise control and to know whether a situation or a machine is within the established ranges and, if they are not, to make the necessary adjustments to bring them within those ranges. These measuring instruments are INDICATORS. The thermostat, for example, would be the (automatic) indicator which ensures that the temperature of an environment will remain constant by activating the source of heat (or cold) when a change is made with respect to the selected temperature.
I.1.2. Management Literature and academia, especially in the field of economics, have devoted much time and effort to discussing the meaning of terms such as management, administration, etc. The scope of these terms is usually narrowed to incorporate what kind of administration or management it refers. Therefore, terms like business administration and management, risk management, project management, human resources, etc., are discussed. It is not uncommon to use either one or the other as if they were synonyms.
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Meanwhile, the Royal Spanish Academy (RAE) dictionary defines management as “the action and effect of managing” which, in turn, means “making arrangements which lead to business achievement or the achievement of any other desire”. Management also as a wider scope as it can refer to a person occupying a position (manager), the duties and scope of that position, a place (the manager’s office), and is also related to the time period called a “term of office”, during which someone holds the position or performs the duties of a manager. Performance is a term that is often used as a synonym, and can be defined as “those actions that are relevant to achieving the organization’s objectives and which can be measured in terms of contribution to the company’s goals”. However, as we will discuss, there is a nuance that differentiates performance and management, one that is orientated more towards measuring and evaluating management results than the development of these results. Other words commonly used in this field, such as administration and directing body, have such different meanings that no one definition can be given. We will try differentiating them as much as possible using comprehensive criteria to establish an order or relationship between administration, directing body and management. From among all of these terms we take the concept of administration as the most far-reaching; it encompasses the entire set of bodies and functions aimed at planning, managing and controlling the availability and use of the resources in the management process to achieve the company or organization’s objectives.
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Planning is the administration’s most important function, as this organizational level is assigned the task of establishing where the company wants to go and how to get there. This includes “assessing changes and internal and external constraints, setting goals, developing strategies and policies and developing action plans”1. The directing body decides what to do and when to do it, defines resources and activities and assigns responsibilities. Control is the function that monitors compliance with the directing body’s instructions, resource use and the implementation of activities under the established strategy and action plans. Management executes activities and uses resources according to direction’s instructions as expressed through the strategy and action plans.
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Source: Prepared by the authors
Figure 1.1. Administration diagram
Indicadores de gestión (Management Indicators). Beltrán Mauricio Jaramillo. 3R Editores. Temas Gerenciales (Management Subjects). Second Edition. 2000. 1
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These functions integrate the main scope of administration and, from the organizational point of view, are normally distributed among the strategic, tactical and operational levels. The operational level may participate in control but at the same time is an essential part of management. Therefore, according to the RAE, we define management as “the action and effect of managing”. It is twofold: as an action it is the established process (the “how”) for developing activities in which some or all of the resources aimed at achieving the objectives are used. At the same time, it is the effect obtained during and after the management process. This dual scope of management can serve to better explain the difference between management and performance. The latter is identified with “the effect of managing”; performance is more the “search for results within established guidelines” than the “control of activities in progress”.
I.1.3. Management Control
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Process implementation (management) and, of course, its results largely depend on achieving the organization’s objectives. Therefore, the monitoring and control of the management process becomes an important tool to ensure that the company or organization is correctly doing what the administration planned as an objective for a period of time. We can say that process management control, or simply management control, are the actions implemented to measure and evaluate results at a specific point in the process, compare them with the established plans and goals and, if necessary, adopt or propose corrective measures. If we accept this definition control is specified, within the management cycle, in the monitoring, measurement and correction of the implementation (management) to ensure that the organization’s objectives and the plans to achieve them are met.
I.2. Management indicators Before moving on to discuss indicators, remember that: Management is the process established to develop activities and use resources to achieve the planned objectives. This process is the purpose of control: to measure and evaluate results, compare them with the established plans and goals and, if necessary, adopt or propose corrective measures. Indicators play an important role in this management control process as tools to measure the results of the management process. Thus, we can anticipate that: An indicator is the result of a measurement.
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However, despite the fact that an indicator serves to measure and evaluate the results of management, the following must be kept in mind: 1. You cannot measure all of the organization’s activity: in addition to absorbing a lot of resources, many of the measurements would fail to provide value and relevant information to the directing body. It will therefore be necessary to choose the aspects of management that may be considered critical to the success of the overall process and select variables whose measurement provide more valuable information on a specific management area at a reasonable cost. 2. We have seen in the previous section that management control is a process designed to support the achievement of the objectives set by the directing body and prevent actions that could jeopardize the attainment of those objectives. That is, management control and the tools used, such as indicators, are instruments for management evaluation and, ultimately, the achievement of the objectives set by management and administration. Therefore, we must always remember that “INDICATORS ARE A MEANS, NOT AN END”. Sometimes, especially when an organization starts to use indicators, it may be that employees see the values set by the indicators as goals to be achieved at all costs if they want a positive evaluation. In such cases, the indicator loses its essential purpose as a guide on the path to achieve the organization’s objectives, which is what truly matters. Next we take a look at some of the most common misconceptions about indicators, their importance, characteristics and the elements that define them.
I.2.1. Common misconceptions It seems appropriate to review some misconceptions or attitudes about indicators that are common in both businesses and the public sector. The list composed by Beltran Jaramillo on page 34 of Indicadores de gestión (Management Indicators) needs no further explanation as it includes familiar expressions that we have all likely heard at work: “This will have consequences” or measurement comes before punishment. There is no time to measure. Measurement is difficult. There are things which are impossible to measure. It takes longer to measure something than to do it. Perhaps the ones which seem more objective at first glance are those which say that “Measuring is difficult” and “There are things which are impossible to measure”, both of which refer to activities that are intended to measure indicators. The mea-
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surement does not have to be difficult but it can be as complicated as you want; it can also be more difficult because of insufficient knowledge of the activity or indicator. The calculation for an indicator of “percentage of state revenue provided by customs revenue� can be expressed as follows, where A is customs revenue collection and B is the revenue collection shown as income in the state budget: A/B X 100 But a more complex indicator might be one that measures customs revenue collection on goods entered by X customs authority in the region and the country for the breach of a certain rule from a specific trade agreement. While it may be true that there are things that cannot be measured, perhaps the effect or impact of that process can be calculated. The remaining misconceptions are sentences incorporated into the body of state bureaucracy for their tireless repetition and a lack of self-criticism.
I.2.2. Indicator data We have established that an indicator is the result of a measurement that is compared to a previously-determined baseline. The measurement can be expressed in units of time, money, weight, numbers, rates, percentages, etc.
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Indicators are not merely data but provide information regardless of the unit of measurement used and therefore can and should be required to meet certain requirements: Indicators should be true as to reflect the examined situation under the measurement criteria established without adjustments or adaptations to embellish results. They should be presented in the way that best adapts to the needs and abilities of those who require them. Indicators can be expressed in different ways (quantitative or qualitative, numerical or graphical, printed, generic or detailed). They should be clearly expressed, brief, accurate and understandable. They should be relevant, i.e. indicators that are necessary for monitoring a process or for decision making or both. They should be timely, providing updated information in the required time frames. An indicator should not demonstrate unrealistic data, since its purpose is not to deceive but to establish the degree or level of compliance with a certain goal. If the indicator aims to compare the same variable at different times, perhaps the best way is through a graph and not simply as hard and pure data. The relevance of an indicator usually lies in the degree senior management places on measuring a specific action, so it must be timely because, for example, it is little to no good knowing to what
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extent a goal has been reached two weeks before the close of the revenue collection year, because if the customs organization’s was still far from achieving said goal there would hardly be any time left to achieve it.
I.2.3. Elements that define an indicator We said earlier that it would not be relevant nor profitable to identify indicators to measure all aspects of the management process and that is necessary to choose the most suitable points to measure from the point of view of obtaining data on the progress of the process and its correlation with the forecasts and established goals. We must not confuse the measurement of all the steps of a process with the record of the individual steps that make up a process. Once the critical aspects or factors to measure in a process have been selected, it is necessary to define each indicator with its features and “instructions”, documenting technical specifications that address, among other things, the purpose of the indicator, the method of calculation, the parameters to consider, etc. The main elements that define an indicator are: Name: This is the term or phrase that exclusively identifies the indicator and should refer to its purpose or usefulness. The name should describe what the indicator measures as best as possible, avoiding as far as possible long texts as names. For example: “Cost of customs revenue”. Framework: This places the indicator in the context of planning through the action corresponding to a program or strategy related to an organization’s strategic objective. Thus, we have a broader picture of the indicator and its contribution to the evaluation of the objective’s performance. Method of calculation: When it comes to quantitative indicators the mathematical formula that expresses the relationship between the variables taken into account to define the indicator should be very clear. The scope of the factors involved in calculating the indicator should also be specified. For example, under the “Average clearance time” indicator, the point at which customs clearance is initiated should be clarified, at least for the indicator, as well as the point when it is considered completed. Description: This provides an extension and an explanation of the indicator name, including how to calculate the indicator when the included factors so require. For example, if all customs procedures or only permanent import should be taken into account.
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Purpose: The purpose defines what you want to measure with each indicator and generally aims to assess efficacy, efficiency or the achievement of goals using the previously defined quantities. Units: The units of measurement in which the indicator is expressed depends on its nature and the data to be obtained from the measurement. These are usually relationships in terms of percentage, units of weight, time, currency, etc. Measurement frequency: This simply sets the time period between one measurement and the next. There is no optimal or recommended frequency and it depends on multiple considerations from the point of view of the company or organization’s activities, the nature of the process and of the indicator itself. In general, the frequency should be often enough to provide timely information at a reasonable cost. For example, customs revenue could be measured monthly. Goals: In the event that the objectives and/or strategic programs are quantified in the corresponding goals the indicator definition should include them.
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Trends: This refers to the expected trend in the indicator results from the “baseline� or starting point and considering a record of measurements. There are indicators that should show a downward trend when the baseline is at an undesirable level above the intended goal and, conversely, the indicator should show an upward trend when the goal has a desirable level higher than the baseline. For example, the average time for the clearance of goods should ideally have a downward trend, while customs revenues should have an upward trend. Range: Range expresses the maximum and minimum values within which the indicator is expected to be situated. In an upward trend indicator, the maximum value can match or exceed the set goal and the minimum value must be greater than the baseline and below the goal. The opposite occurs with a downward trend indicator. Ranges and goals can be set by taking into account the behaviors of similar companies or organizations in the industry or geographic areas or comparable economy. For example, central banks usually announce a range in which they situate the expected annual rate of economic growth. Type of indicator: If the indicator is a strategic or program indicator; if it measures efficacy, efficiency, or compliance; and if it is temporary or permanent. Managers and users: The areas that should provide the data needed to calculate the indicator and the main direct users and beneficiaries of the measurement (or more) are indicated.
I.2.4. Indicator classification The criteria for classifying management indicators are multiple and the following can be considered the most important: a) Indicators, depending on their nature, can be indicators of efficacy, efficiency, effectiveness and productivity.
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As there is often a bit of confusion about the use of these concepts we will try to distinguish their meaning as simply and clearly as possible. Efficacy refers to the achievement of a planned objective; efficiency relates to the most appropriate use of resources to achieve the desired objective. So subtle is the distinction between efficacy and effectiveness that some think they are almost the same. The RAE dictionary does not help us much in distinguishing the two, since the first meaning given for effectiveness coincides with the definition provided for efficacy: ability to achieve the desired or expected effect. Based on this common meaning —to achieve the intended objective— some authors often differentiate them by stating that efficacy cannot always be quantitatively calculated while effectiveness can. This questionable position leads us to adhere to the terms suggested by Carlos Alberto Mejia C2. to differentiate these concepts more clearly: Efficacy: the degree to which a plan’s goals and objectives are achieved. Efficiency: the achievement of an objective at the lowest unit cost possible; it seeks the optimal use of available resources to achieve the objective. Effectiveness: combines efficacy and efficiency to achieve planned results, in the most “reasonable” time frame and cost possible. It involves implementing the right actions, doing what is expected according to plan, without redundancy or loss of time or money.
Source: Prepared by the authors
Figure 1.2. Effectiveness b) In terms of time frame, indicators can be: Temporary: those which are set for a specific period of time after which they are eliminated. For example, in a project to register customs carriers for the first time. The indicator could be “% of carriers registered with customs”, and once registration is complete using this indicator no longer makes sense. Permanent: those which are continually included among management tools and are related to the processes required to develop the company or organization’s business. For example, the monthly FOB value of exports.
Indicadores de efectividad y eficacia. Documentos Planning. (Indicators of effectiveness and efficacy. Planning Documents.) Medellín. Colombia. 2
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c) By indicator origin and/or destination, which can be strategic, tactical or operational depending on the organizational level from which information is received (source) or the level at which the information provided by indicators is used.
I.3. Advantages of management indicators Notwithstanding that discussed in the third chapter below, here we note a few of the advantages that the implementation and use of a system of indicators can provide a customs organization. These generally reflect the lists created by BeltrĂĄn M. Jaramillo cited above: Provide an information tool for determining the capacity and quality in achieving proposed objectives and goals.
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Encourage members of the organization or project team to achieve challenging goals that can lead to a process of continuous improvement. Encourage and promote teamwork. Generate a process of innovation and enrichment of daily work. Promote efficacy, efficiency and effectiveness in process implementation. Identify opportunities for improvement and strengths that can be used to stimulate proactive behavior. Establish management based on data and facts. Reorient policies and strategies related to the management of the organization or company. These advantages can be summarized as changes in the organization’s attitudes and participation as a result of the use of indicators: Capacity and need to set goals, activity implementation times and resources allocated. Concern about the most appropriate use of resources. Knowledge of the criteria the organization uses to evaluate objectives. Incentives to improve competency and competitiveness, etc.
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SUMMARY CONTROL is the exercise of a person, group or mechanism’s capacity to keep a situation or activity within previously established channels or ranges. MANAGEMENT CONTROL is the process implemented to measure and evaluate results, compare them with the established plans and goals and, if necessary, adopt or propose corrective measures. Figure 1.3 illustrates.
Source: Prepared by the authors
Figure 1.3. Management control The important characteristics to remember about an indicator:
Source: Prepared by the authors
Figure 1.4. Important characteristics of an indicator
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Remember: The key elements that define an indicator are: indicator name, framework, method of calculation, description, purpose, units in which it expressed, measurement frequency, goal, trend, measurement range, type of indicator and managers and users. Indicators are classified by their nature, time frame and origin or destination. The main benefit of indicators in management is the availability of an information tool for determining the capacity and quality in achieving the proposed objectives and goals.
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UNIT II
CUSTOMS MANAGEMENT
Learning Objectives Understand the main aims and purposes of customs as a basis for establishing strategies and how they should be measured through indicators. Identify the key areas of success in customs management in order to focus control efforts on those areas.
II.1. Customs administration Henceforth, the terms customs and customs administration will be used interchangeably to refer to the government entity responsible for the control of foreign trade in order to raise the applicable custom taxes and check compliance with the requirements for these operations. Customs goes by different names within the organizational structure of the public sector in each country (Directorate General of Customs, Customs Service, Customs Administration, National Customs Authority, etc.) and is governed by or relies on the Ministry of Treasury and Finance or works as an independent agency. If we focus on the nature of administration in the sense that we saw in the previous chapter (1.2), customs is the entire set of bodies and functions aimed at planning, managing and controlling the availability and use of the customs resources to achieve customs objectives. How to implement planning, management and control depends on the degree of autonomy that the law grants customs administrations: The ability to plan objectives, strategies and action plans can be assigned to customs or can be handled, or at least supervised, by the Ministry of Finance or Treasury.
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To a lesser extent something similar can be said about the role of the directing body: the Ministry’s involvement tends to affect the scope and the execution time of certain actions and the definition of resources; in these cases, customs is responsible for implementing activities and assigning responsibilities. The function of control fully corresponds to customs management: monitor compliance with instructions from the directing body, the use of resource and implementation of activities which comply with the strategies and action plans approved by the Ministry or Customs Authority). These three functions (planning, managing and controlling) are part of administration’s essential role as head of customs. And, as we saw in the first chapter, the remaining responsibilities of administration is included under the concept of management which is, according the definition given by the RAE dictionary, “the action and effect of managing”.
II.2. Customs management
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Customs, as an administration, has the authority to plan, manage and monitor either as a fully independent organization or under the supervision or oversight of the Ministry to which it belongs. Of course, it also has the competencies to develop the activities that constitute the core of the management process and are necessary for achieving the objectives. But to fully understand customs management it is helpful to identify the premises and the limits established in the area to be managed and the purpose of the customs activities that comprise management. These premises are grounded in law and refer to the aims and purposes of customs and are the source of primary and fundamental management regulation; immediate or forthcoming regulation corresponds to the administration’s definition of the objectives, strategies and action plans and the managers who monitor and manage the processes and allocate available resources.
II.2.1. The aims of customs Aim is not to be confused with objectives or management. We define aim as that which defines the customs organization’s scope of action in the same way that the corporate aim defines a company’s framework for action. A company’s corporate aim as well as its scope is defined in a company’s articles of association. For example, the corporate aim of the company “Alimentos Ricos, S.A.” is to “buy and sell industrially processed agricultural products in the domestic and international market”. Once the company is incorporated it may begin to develop the activities necessary to purchase products, process them industrially and sell them, which is what constitutes its
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corporate aim. And we call management the process or set of processes under which those activities take place. Customs is the state agency to which the law assigns the oversight and control of the entry and exit of goods and vehicles across borders. This is the aim of customs as a state authority. But it is not enough to simply determine the scope and direction of customs management because there are other bodies that can also inspect goods entering or leaving the country (Ministries of Agriculture, Health, etc.) or control vehicles to check that their weight is within the authorized limits on a highway. Each one of these bodies carries out these tasks for their own reasons or aims: to prevent the introduction of species or products that endanger national crops, protect the health of consumers or prevent the deterioration of the country’s highways and roads. The definition of the aim identifies what customs does (or what it has to do) but that is not enough: now we need to know who this is done for and why.
II.2.2. The purposes of customs What is the purpose that explains and gives meaning to the control customs enforces over vehicles and goods that cross borders? Without prejudice to later explanations, we can say in advance that customs enforces these controls to raise the taxes levied on foreign trade and to protect certain national and international interests. Thus, the purpose of customs is to collect and protect, as provided for by law and corroborated by history. However, we must recognize that there is some reluctance to accept this purpose in circles close to customs. The idea of customs as a “collection agency” (as opposed to a facilitator) was stigmatized for quite some time, but the reality is that countries cannot afford to give up this rather significant share of tax revenues. In terms of protection, the idea had a negative connotation during the last decade of the last century, particularly in Latin America, as a result of the failure of protectionist policies that had served from 1960 to 1980. In contrast, both the United States and Canada focus on protection as one of the fundamental roles of customs. The United States Customs Service3 describes their main purposes as follows: “Recover and collect duties, taxes and fees on imported goods; Protect the domestic industry and American workers against unfair competition from foreign producers and manufacturers; Protect Americans and their environment against the introduction of harmful or dangerous products; Prevent drug trafficking and smuggling of other products; etc.” Customs Modernization Act. 1993. The idea of protection is not only maintained but is enhanced in the new “U.S. Customs and Borders Protection Agency”, as seen in the 2009-2014 Strategy Plan. 3
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Collection as a purpose of customs is unquestionable since it is included explicitly in customs legislation. Less explicit is the recognition of protection as a purpose of customs, yet it becomes clear when the legislation that customs must enforce to protect intellectual or industrial property rights or the environment, historic and artistic heritage, endangered species, etc. is reviewed. We are talking about the purpose of customs as if all customs administrations had the same purpose. Is this true? Some customs may also have other purposes but we can say that all include collection and protection. Two features of these purposes of customs: Their universality: they are a given in all countries. Their permanence over time. Customs have always been assigned the same purposes, although the exercise of these duties has been modified in step with the changes in international trade and technology. The purposes have also evolved with changes in political and economic ideas and new social demands: The relative importance of the contribution of customs revenues to the national budget has changed as a result of more open international trade, the creation of areas of integration and trade agreements.
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Trade facilitation has been a central objective of customs management since the late twentieth century. The interests to protect have also changed. The most visible example is that security has become a primary concern to the extent it can be considered a purpose in and of itself. But collection and protection remain the main purposes of customs management.
II.2.3. Customs management This is where important changes have taken place: in the way of exercising control over the goods and vehicles crossing the border or, what amounts to the same, the set of activities, techniques and resources that form customs management. Customs management is the set of activities, techniques and resources organized to achieve the purposes and objectives of customs in the time and manner set by the directing body.
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And these changes are manifested in both the orientation and intensity of controls and the techniques they use. The customs management definition given by the World Customs Organization (WCO) echoes the political demands of governments to secure and facilitate global trade, “to provide greater security to the global supply chain and to promote socialeconomic development by collecting tax revenue and facilitating trade”. The recommendation to increase customs control while promoting trade facilitation seems contradictory. It certainly is a major challenge and necessarily leads to a change in traditional control techniques and methods, replacing them with techniques and methods able to reconcile these two objectives. The World Customs Organization has developed a system to increase the security and facilitation of international trade. This is the WCO “Framework of Standards to Secure and Facilitate Global Trade”. The WCO framework establishes principles and standards and presents them so that WCO members can adopt them as a minimum guideline for action. The basic elements of the Framework of Standards includes the use of non-invasive detection equipment, the harmonized exchange of information, the application of methods of risk analysis and collaboration with other agencies and economic operators4. Internally, governments have instructed customs administrations to adjust their programs and processes to the new reality. Moreover, demands for greater efficiency and rational use of resources and to increase transparency across the public sector have led to a thorough review of the objectives and methods used in implementing customs-related tasks. Customs administrations began to define and publicize their objectives and design strategies and action plans to achieve them. And the immediate result of these profound changes at the strategic level is that it has been necessary to review the processes that direct customs activities to adapt to the new demands for efficiency, efficacy, facilitation and transparency. In addition and closely related to processes and techniques are the major changes that have been produced in the resources that customs should use to support and ensure the implementation of new technologies and the efficacy of those processes. The following figure summarize what we have discussed about customs management and the aims and purposes of customs:
“Standards to Secure and Facilitate Global Trade”. World Customs Organization. Brussels. May 2005. http://www.wcoomd.org/home_pfoverviewboxes_safepackage.htm 4
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Source: Prepared by the authors
Figure 2.1. Customs management In the figure above we can see that: The aim or function delimits the scope of customs activities: the control of goods and vehicles crossing the country’s borders. The purposes define the customs organization’s reason for existing.
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Objectives are defined for periods of time in order to channel the function and direct it towards some particular and purpose-related aspect. For example, increasing collection in 2012 to a specific point of GDP or increase protection of intellectual property. Objectives are specified in the corresponding strategies and action or operational plans. For example, to increase the protection of intellectual property, risk analysis will be targeted at reviewing goods from certain origins or sent to specific importers. Customs develop their management based on these elements and guidelines, implementing the adopted processes, adjusting strategies and action plans and striving to achieve the objectives with the most efficient use of available human, technical and financial resources. We will discuss the processes and resources below. II.2.3.1. Processes REMEMBER that management is both the action and the effect of managing and, as an action, is the process established for developing activities in which the allocated resources are used to achieve the planned objectives. A process consists of: Standards that determine who performs the activities, what activities should or can be performed and how and when, what we call procedures. Activities or actions performed mainly by customs together with others related to users or operators.
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Resources that enable the implementation of activities. First, human resources, without which the process would simply not exist; but also information and communication technologies and financial resources, among others. A customs process begins on the initiative of the customs administration or following the request of an operator or user. In the first case, customs expects to obtain a result from the implementation of the process; in the second, the user requests the start of the process expecting to receive a service or authorization if they meet the obligations established by law. (In this case, the scheme is similar to that of a company which provides services: there is a request from the customer which the company seeks to respond to by offering the best quality in the requested time frame and at the lowest possible cost for both parties). And these key factors that determine the success of a company can also apply to customs efficacy (quality of service), efficiency (lowest cost) and effectiveness (efficacy plus efficiency). We will discuss these issues further in unit three when we identify and establish indicators for customs management. We can identify the main customs management processes by considering the aim and purpose of customs and their permanent and universal nature. Customs employ the power conferred them to exercise oversight or control of goods and vehicles that cross the country’s borders in all processes. This control is not literally limited to the moment at which these goods or vehicles cross the border; it is the journey which triggers the authority and duty of customs control, which remains in effect until the import or export of goods is authorized. Therefore, customs standards establish that goods are “under customs control” from the time of their entry until customs authorizes their free circulation. We will discuss the main customs management processes in the following section (2.3. Key areas of success). II.2.3.2. Resources Implementing the activities that constitute an essential part of the management process would not be possible without the range of resources that management allocates to the process. As mentioned earlier, human, technical and financial resources are required. a. Human resources are the main asset for management performance. The most obvious proof is that, in the past, customs performed its role without the technical or financial resources that they have today and yet fulfilled their duties as the result of the staff’s work. Think, for a moment, about a customs administration without computers. It is not so far in the past: just forty years ago customs had no computers and functioned, in many cases, quite well. We cannot say the same for a customs organizations without civil servants or employees. Human resources are the main asset for customs to perform their duties. Trained and motivated human resources committed to customs objectives produce better results than when they are not.
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b. This does not mean that technical resources are unimportant. Without them many changes in the way control is exercised would not have been possible. For example: process information prior to the arrival of the goods to the country, performing risk analysis for selecting the operations for oversight, electronic payments, non-intrusive inspection of vehicles and goods, to name only a few parts of the process which are now performed more efficiently. c. Financial resources are important to the extent that they enable the recruitment of quality human resources and their training, the acquisition, maintenance and replacement of equipment, etc. The allocation and integration of resources into custom also takes place in the context of certain staff recruitment, hiring and training processes, purchase and maintenance of equipment, etc. But these processes are not included within the concept of customs management and are not going to be considered among the key management areas. They are unquestionably important and necessary but, as processes, they are not carried out within the framework of customs’ control of goods. They are instrumental in providing resources but can be performed by either customs or by the company that manages human resources or information technology services. This points to a feature of customs management: the activities that form part of customs management are assigned, exclusively, to the customs authority that represents the State.
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II.3. The key areas of success in customs management The functions exclusively assigned to customs characterize the scope of customs management and, by definition, all are related to the exercise of control which is the aim of customs activities. This is a supervisory control that includes tax audits, verification, inspection and investigation according to different situations and circumstances. Customs also use different procedures, techniques and resources according to the type of activity, which together constitute the scope of the control exercised by customs. Perhaps it should be noted that customs exercises a dual control: a direct one that it exercises itself under its exclusively assigned functions; and another indirect control focused on ensuring that the competent agencies (other than customs) have performed the interventions or inspections that goods may be subject to before authorizing entry or exit from the country. Control is enforced over the arrival or entry goods and conveyance inbound from another country5; similar control is exercised over outbound goods and conveyance sent to destinations abroad. The control also extends to the movement of goods in transit and the custody of goods still under the “customs control”6. These are the Conveyance includes both vehicles and transport units (containers are the most common transport units used in international trade). 6 Being “under customs control” does not mean they are held by customs. In several countries custody is handled by private operators. 5
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main customs management processes: import, export, transit and economic and temporary procedures. The majority of customs activities focus on these processes; attention is focused here because the quality of the management of these processes affects objectives and, ultimately, the purposes of customs. Achieving the collection goal and the protection of national interests depends, in large part, on the proper management of the import process and the effective control of transits.
Thus, we can say that these processes are the key to successful management of customs areas. They depend on a management which can be rated as good, fair or poor. Not all affect the success of management equally and we could say that the order in which they are discussed corresponds to the level of importance or potential impact on management results.
II.3.1. Import There is no intention here to explain the import process nor the others that follow. It is assumed that readers –who work for customs organizations or a closely related professional field– are familiar with all of them. We will simply refer to the scope of the process and set out the most relevant or critical aspects. The import process begins with the arrival at the first point of entry of the vehicle transporting the goods from abroad and ends with the customs authorizing the importer his agent to withdraw the goods from where they are deposited for free circulation. Critical points of control refer to the cargo manifest and the import declaration. II.3.1.1. Import General Manifest (IGM) The Import General Manifest (IGM), or simply manifest, is the document that the carrier or his agent must present to customs authorities (and other agencies) and states the details about the amount and type of inbound cargo at one or various entry points (ports, airports, borders) from a foreign country. Controlling cargo manifests during the process of arrival or entry of goods is essential and determines the quality of other custom controls that can be implemented: from the outset they give customs information about the generic quantity of goods being imported and, therefore, ensure that all steps are followed until the duties are paid and the goods cleared. It is similar to inventory control in a company: if you do not
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know what your suppliers are delivering it is impossible to know if the stock in storage is at the right level or not, if they match orders; you cannot know when to reorder nor can you estimate the company’s production during a given period. If customs fails to determine exactly how many containers and goods arrive and are unloaded at a point of entry and check that they match the information stated on the manifest, it will be impossible to determine how many goods actually arrive or if all the goods that arrive have been declared and the applicable duties paid. REMEMBER THE PRECISE CONTROL OF THE IMPORT GENERAL MANIFEST IS VITAL FOR THE OPTIMAL CONTROL OF THE REST OF THE PROCESS The quality of the rest of the customs management process depends on the precise control of the import manifest. II.3.1.2. Customs declaration The customs declaration is a statement of intention to obtain customs authorization to allow the goods described to permanently or temporarily enter the country by requiring the applicant to comply with the obligations enforced at the requested destination.
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At this stage customs control results in verification, inspection and oversight and is based on the analysis of the customs declaration as a document in which all the characteristics necessary are detailed in order to: Identify the goods described in the declaration. Decide if it complies with the requirements for authorization at the requested destination. Determine the corresponding tax regime. It is at this stage where major changes have taken place in the way control is exercised by customs authorities. Cursory checks of customs declarations are a thing of the past due to their incompatibility with the volume of declarations and the agility requirements of international trade and also for reasons of efficiency and effectiveness in the use of public resources. Customs sought a way to select the least reliable operations or ones which could pose certain risks to focus inspection resources on in order to achieve their goals. The selection has evolved from initial empirical methods to methods that incorporate risk analysis to a greater or lesser extent.
II.3.2. The customs transit of goods The customs transit of goods, in a broad sense, is the entire procedure used to move goods while they are still under customs control. Transit operations, if not properly
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controlled, can pose a serious risk to general and public interests (because customs duties have still not been paid nor their free circulation authorized) as well as private interests because they can involve unfair competition in terms of compliant traders. Therefore, the necessary measures to eliminate or minimize those risks within the principles of freedom of transit and the facilitation of customs procedures should be taken. These measures include the use of seals to prevent the conveyance from being opened, the setting of authorized routes and deadlines for goods to reach their destination, etc.
II.3.3. Economic and temporary customs procedures In these types of procedures, the control process does not end until the deadline granted by customs and the compliance with the procedures’ inherent obligation (processing of goods in cases of inward processing, re-exportation or issue to a final customs destination in the case of temporary procedures). In these cases, although the goods are held by their owners, they are “under customs control�, which means that the owners can only dispose of the goods within the time limit for the use authorized by customs according to the type of goods and the customs procedure.
II.3.4. Export The import process is reversed when goods exit a country as exports and begins with the detailed knowledge provided by the customs declaration. Customs receives information about the manifest after the departure of the goods. While export is not usually subject to taxes, control is justified by the potential risk to national interests (tax breaks, unauthorized departure of works of historical or artistic heritage) or to the destination countries (food or other products in inadequate conditions, goods which pose a safety risk, etc.).
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SUMMARY Modern customs authorities have various roles, and some of the main functions include:
Source: Prepared by the authors
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Figure 2.2. Main functions of customs Points to remember The way planning, management and monitoring is performed depends on the degree of autonomy that the law grants customs administrations. The aim of customs should not be confused with its objectives nor with management. Customs is the state agency responsible for controlling the entry and exit of goods and vehicles. The purposes of customs is to protect and to collect taxes. Customs management is the set of activities, techniques and resources organized to achieve customs goals and objectives in the time frame and manner that the directing body has established. One of the biggest challenges is to exercise customs control while facilitating trade.
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Source: Prepared by the authors
Figure 2.3. Key areas of success in customs Customs has increasingly more responsibilities but fewer resources, which tips the balance between control and facilitation towards the increasing flow of trade.
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Source: Prepared by the authors
Figure 2.4. Trade and customs
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UNIT III
MANAGEMENT INDICATORS FOR CUSTOMS ORGANISATIONS
Learning Objectives Identify appropriate indicators for customs management control. Understand the methodology for establishing indicators.
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Introduction Some questions that we have asked ourselves on more than one occasion often arise before starting this unit: Can management control be applied to public administration and, more specifically, to customs? Why the interest in having indicators of customs management? If the indicators measure the values of certain parameters, what we can measure in customs performance, which parameters, who decides the processes that are to be measured, and how often? We will try to answer these and other questions. We will revisit the concept of customs management and its relationship to customs purposes and objectives in order to develop the process of identifying indicators. The analysis of the key areas of success in which customs control processes are specified will be helpful in identifying quality indicators. In this unit we will first discuss the factors or events that are the basis for the current importance of management indicators for customs. We will then discuss several ways to approach the identification of indicators and the methodology to establish
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and implement indicators in customs organizations. The purpose of presenting various options for identifying management indicators is to encourage reflection and further discussion during the week (forum or exchange of views) in such a way that everyone can have a better idea about the elements that may best apply to their own country.
Management indicators for customs Can management control be applied to public administration? If we review the concepts of administration, planning, control and management, we see that there are many differences between the administration of a public entity and that of a private organization or company. Among other reasons, public agencies differ from business organizations because of their different purposes and because they are governed by a set of rules that place certain limits on their activities in defense of the general interests and the public resources they use. But this does not impede management from being planned and monitored. Customs organizations and public administration in general have little experience in applying the concepts of administration and management in the sense that we have seen in the first unit. Until recently, most customs lacked strategy or organizational plans with objectives and strategies and used even fewer indicators. Once customs began working with the concepts of mission and vision plans, sometimes ambitious, were drawn up, but with a lack of specific content.
III.1. Importance of management indicators Surely we all have an explanation for the importance of management indicators not only within a company but in public administration as well, most likely more than one. Maybe we can share them later, but focusing them on public administration and on customs in particular. It is also likely that our answers have much to do with the significant changes that have occurred over the past two decades, a short period of time considering the magnitude of the changes and the long history of customs. These are some of the changes that form the foundation for the need for management indicators for customs: The democratization of society: the advancement of democratic societies entails greater participation by civil society and the exercise of a number of rights which, in authoritarian or dictatorial regimes, have no proper channel to freely express themselves. Among others, the right to information – how our taxes are spent– and the right to demand better services. Conversely, or in response to the exercise of these rights by citizens, public administration –in its different levels of government– becomes aware of the obligation to improve its services and profitability.
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For years streamlining was an attribute required for an administration seeking effectiveness and efficiency in the use of resources and also accuracy in the destination of these resources and their allocation. Continued advances in information technology makes obtaining and processing huge amounts of data relatively easy and makes it instantly available to interested persons. Customs organizations are important components of a country’s competitiveness: the degree of customs efficiency of may be reflected in the operating and financial costs of economic operators. It is important to have some indicators that allow us to identify our customs organization’s efficiency with greater accuracy and compare it to other countries.
III.2. Methodology for establishing indicators Imagine that the Director of Customs asks us to design a set of indicators to measure customs performance. We certainly face a massive challenge, especially if this is the first time that we take on this task. A number of thoughts, reflections and questions come to mind:
36 <What can we measure in a customs administration?
We can measure parts or areas of management, the progress in achieving certain goals, etc. We can measure whether the actions taken are effective, efficient, accepted by the users and economic operators in general. We can measure results (reduced clearance time) or we can measure impacts or effects of an outcome or a set of outcomes. For example, the economy generated for importers by reducing customs clearance times of goods. Letâ&#x20AC;&#x2122;s go back to the first idea: Some parts or areas of the organization can be measured. But which ones and how should we choose them?
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Those that directly affect revenue? Those that contribute to trade facilitation? Those that improve the controls on foreign trade that customs must enforce? Those that create more problems for management, that generate the most complaints from users? All these are valid criteria. Do we use them all? What argument could we use to eliminate some? Should we include additional criteria? All these questions and others are summarized in a fundamental question: who and what decides what needs to be measured in a customs organization? You can find at least three types of responses: 1. The first, people-centric and more or less authoritarian, is the Director of Customs, who will decide the issues considered priorities which should be measured by the respective indicators. This has the “advantage” of immediacy and closeness to the decision and the “risk” of the decision changing each time a new Director is appointed. 2. Another, linked to the institutional strategic plan (ISP), which includes the custom organization’s mission, vision, values and strategic objectives for a given period. 3. Lastly, in the absence of an institutional strategic plan or to supplement it, we could turn to an external option which would follow the most advanced guidelines and best practices used in other countries or recommended by the World Customs Organization (WCO) and other international organizations. With all due respect, we set aside the first option because it is not possible to establish a methodology to identify and define indicators for the objectives developed by the Director. We will discuss option number 2, which is based on the ISP, and briefly discuss option number 3 as a subsidiary or supplement to that alternative.
III.2.1. National option: the institutional strategic plan In this option, the management indicators are designed by relating them to the custom organization’s institutional strategic plan (ISP). As we saw when discussing customs as administration, this plan may be developed by and for customs or be included in a broader plan for the entire Ministry or for the tax and customs administrations, particularly when both institutions are merged into a single entity. The strategy plan is a leadership tool normally developed in three levels, each of which is differentiated by the scope and level of detail it considers. The three levels of planning together determine the overall functioning of the organization.
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III.2.1.1. Participation in planning The following can be considered a type of planning outline: The first level is strategic and its scope covers the performance of the entire organization. It is formulated by the General Director and the Board of Directors (or similar directing body) composed of Assistant Directors and Department Heads. The general policies and objectives that guide the actions of the entire organization, which should be taken into consideration by those responsible for developing plans in the subsequent levels, are established by this level. The second level is tactical and designs, within the guidelines established by the strategic level, operating programs and instructions for the main areas of customs management (collection, control and security, human resources, administration, etc.). Responsibility for program development normally falls on the General Sub-Directorates and certain areas which report directly to the General Director. The final level of planning is operational and is comprised of the units responsible for providing the necessary human and material resources as well as the units or areas responsible for implementing programs and strategies designed by higher levels to achieve the institutionâ&#x20AC;&#x2122;s strategic objectives.
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By itself, this outline does not guarantee that the different levels of the institution work together towards the same objectives and, in fact, may result in a certain lack of coordination in implementing strategies and plans. To avoid this risk, planning should be done so that strategies designed to achieve the organizationâ&#x20AC;&#x2122;s goal become objectives for the next level (tactical) which, in turn, creates its own strategies to achieve its objectives, and these strategies will become objectives for the operational level, which will develop its own strategies. Thus, planning permeates the entire organization and the objectives set at the different levels are shared. The objective in each level defines what it intends to achieve and strategies determine how to achieve them. III.2.1.2. Executing objectives: plans and goals Simply listing the objectives and strategies is not enough to make them effective. Sometimes, stating objectives becomes nothing more than a statement of good intentions. It is necessary to execute them with their corresponding numbers or values and time frames, thus turning them into goals. The goal is the quantification of an objective for a certain period of time. In turn, the goal should be as accurate as possible. Each goal should be assigned: The name must be related to the objective. For example, increase the percentage of GDP from customs revenue. The scale or unit of measurement; in the example, the percentage. The baseline or starting point.
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The expected result to achieve. The expected time frame in which to achieve the goal, which may be a year or longer. The goal for an objective can have a horizon of several years and be distributed quantitatively in the strategy and action plans for each year or less depending on the type of operations involving. Depending on the periods determined, we develop short, medium or long-term plans with the objective’s values which must be met in each of those periods. Goals should be set for each action plan based on the achievements of the previous plan and identify the outcome expected at the end of the plan’s execution. The action plan is a set of activities based on the objectives and their related strategies. The plan includes or specifies the goals, the resources to use, indicators, the type and frequency of measurements, time frames and expected outcomes. An example is found in the following table: GOALS Quantifiable and measureable objective.
ACTIONS RESOURCES INDICATOR
MEASUREMENT TIME FRAME
Actions to achieve the strategy.
Type and Execution frequency of indi- time for the cator measure- activities. ment.
Amount and type of resource to use.
Enables the monitoring of the implementation of the strategy and the achievement of objectives.
RESULT What is hoped to be obtained.
Source: Manuel Castilla Domingo, Planificación Estratégica y Gestión de Aduanas en Centroamérica (Strategic Customs Planning and Management in Central America). 2nd Edition.
Now that the objectives with their goals and strategy plan have been established, the identification and definition of the indicators will be discussed in section 3.3; first, however, let’s look at another option for identifying and organizing indicators.
III.2.2. International option In the event that a customs organization does not have defined objectives in its strategy plan this option offers the ability to compensate for this limitation by using objectives taken from the recommendations and guidelines of international organizations, particularly the World Customs Organization (WCO). For example, well-known is the WCO’s position on the functions that customs should carry out today, which are described in the Regulatory Framework and the recommendations of the revised Kyoto Convention and more recently the WTO’s trade fa-
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cilitation agreement known as the Bali Declaration. We can construct a set of assumable objectives for the country and a strategic plan to achieve them based on this set of recommendations. The rest would follow practically the same guidelines we have seen in the previous option and the objectives and plan developed based on WCO standards and recommendations would be incorporated into customs planning in the absence of the organization’s own objective and plan. The following elements of a plan can be established based on these WCO documents and guidelines: Objectives: 1. Improve control of the entry and exit of goods to/from the country to ensure safety and compliance with current regulations. 2. Facilitate trade by simplifying customs procedures. 3. Improve the effectiveness of duty collection. 4. Strengthen customs’ institutional capacity. 5. Promote institutional transparency and integrity.
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These objectives form part of the foundation that the Inter-American Development Bank (IDB) considered when developing their system of management indicators for customs, to which the case study at the end of this document is devoted. Strategies: 1. Promote the use of information technologies and the advance submission of manifests. 2. Use risk analysis methodologies to select declarations and manifests. 3. Enable Authorized Economic Operators (AEOs) and use of non-intrusive inspection technologies. 4. Promote the “virtual” completion of customs transactions. 5. Reduce clearance times. 6. Improve control of warranties (collection). 7. Increase the effectiveness of the inspections of declarations and goods. 8. Etc. The possibility of “building” a set of objectives and a strategy plan for customs should not to be confused with the use of other tools that the WCO offers customs administrations and which have been designed for customs to make their own diagnostic of certain aspects, for example, the “Customs Diagnostic Framework” and “Self-Assessment Checklist”. They are useful tools but cannot be considered management indicators in the sense we are discussing here.
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III.3. Identifying management indicators for customs Choosing the second or third option when establishing management indicators: Reduces dispersion when identifying valid indicators and forces us to work around the set objectives and the strategic plans designed to achieve them. Gives the set of indicators a systematic structure. The process for identifying a set of indicators to measure customs management involves several steps that we will discuss below.
III.3.1. Identify key areas of success In the previous unit we said that the key areas for successful customs management are found in the main processes through which customs management is carried out. These processes, through which customs performs its control function, are mainly processes of: Import Export Economic and temporary customs procedures Customs transit It is in the execution of these processes where the result of customs management is defined. The processes are relatively stable but, not surprisingly, they have to accommodate the institutionâ&#x20AC;&#x2122;s objectives and strategy plan. As we said above, the purpose and objectives of customs are basically the same in all countries. However, some put more emphasis on other objectives depending on the circumstances of each country, its level of development, openness and characteristics of its trade or its own interests and needs. Thus, while for some collection remains a priority others focus more on trade facilitation and security of operations, yet the key areas are still those we have outlined above.
III.3.2. Identify key factors of success As we saw in the second chapter, all customs organizations perform similar steps in terms of their function (control) but not all do so with the same degree of efficacy, efficiency or effectiveness. These are the factors of success and the level they offer depends on the evaluation of customs management.
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As discussed in the first unit, efficacy aims to achieve objectives and goals while efficiency emphasizes the optimal use of available resources to achieve the objective. Effectiveness combines efficacy and efficiency to achieve planned results in the most reasonable time frame and cost possible. According to Jaramillo, effectiveness is “doing the right thing, doing what is expected according to the plan, without redundancy or loss of time or money.” Approached from another angle, this brings us closer to productivity: use minimum resources to achieve the expected product in terms of quality and features. Suppose an objective is to improve control of the entry and exit of goods and vehicles to/from the country. What are the key factors? It would be desirable to adequately combine efficiency and efficacy because, if we control all goods by using all the organization’s civil servants, we might be effective but would be very inefficient in terms of resources and time.
III.3.3. Establish indicators for each factor of success The following table includes a pair of indicators for each of the factors of success (efficacy and efficiency); the same table is included in the following section (3.3.4) with the values and ranges for each indicator.
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Factor Efficacy of risk analysis
Meeting of collection goal Average cost-efficacy of collection Average declarations viewed per civil servant
Indicator
Baseline
Goal
Min.
Satisfactory
Max.
Number of findings / Number of inspections X 100 Actual collection / Collection goal X 100 Customs Budget / Customs collection X 100 Total declarations revised / Civil servant workdays
Source: Manuel Castilla Domingo, Planificación Estratégica y Gestión de Aduanas en Centroamérica (Strategic Customs Planning and Management in Central America). 2nd Edition
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III.3.4. Set the indicator range It is necessary to define the range of values for each indicator once we have the indicators for these two factors. This should be done by or with the participation of people who know the organization and its processes and internal and external factors that influence the behavior of the variables included in the indicator. Theoretical or idealistic approaches should be avoided when setting these values. Take the first indicator in the table. It is an indicator of efficacy which measures the success in the application of risk analysis to select declarations for physical inspection. The success rate is given by the ratio, in percentage terms, between the number of findings and the number of declarations selected and inspected. Factor Efficacy of risk analysis
Indicator
Number of findings / Number of inspections X 100 Meeting of collec- Actual collection tion goal / Collection goal X 100 Average cost-effi- Customs Budget cacy of collection / Customs collection X 100 Average declaTotal declararations viewed tions revised per civil servant/ / Civil servant officer workdays
Baseline
Goal
Min.
Satisfactory
Max.
6%
25%
15%
20%
30%
-2%
10%
5%
7%
12%
2.3%
1.6%
2%
1.7%
1.5%
5
12
8
10
14
Source: Manuel Castilla Domingo, Planificación Estratégica y Gestión de Aduanas en Centroamérica (Strategic Customs Planning and Management in Central America). 2nd Edition
Baseline: The value of the indicator at the initial diagnosis or measurement. In the example, this value is 8%. Goal: It is the value set to be achieved by the end of the duration of the strategic plan. The proposed goal is 30%. Minimum value: The minimum degree of improvement expected by the end of the period. In the example, at least 15% of findings in the inspections performed. Satisfactory value: Even though this value remains below the maximum level or goal that was set for the indicator, it is a value that represents huge progress from the indicators baseline and is closer to the goal. In the example, 25% of findings would be satisfactory. Maximum value: This is the value which occupies the highest range. It can match the goal but is usually positioned as an ideal level that could be achieved by the end of the
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period. In the example, the maximum value of findings would be 35% for this upward trend indicator: it aims to improve from an 8% baseline to 30 or 35%. The difficulties in setting ranges and values for indicators primarily come from the absence of reference values (â&#x20AC;&#x153;benchmarksâ&#x20AC;?) accepted by customs organizations which enables them to establish the range for an indicator. Therefore, we must pay close attention to the first measurements, which can provide valuable information to determine the suitability of the values and ranges set and make adjustments. The exchange of information with other customs authorities can also be of great mutual aid.
III.3.5. Design the indicator measurement The indicators, as part of the ongoing evaluation and monitoring of customs management, should be measured as often as is deemed appropriate and using the most appropriate sources of information. The measurement design takes into account the following aspects:
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Information source: refers to records which contains information related to the indicatorâ&#x20AC;&#x2122;s variables. For the first indicator of efficacy that we have included in the table (percentage of findings from the inspections of declarations and goods), the information of both variables are normally found in the custom management computer system. All declarations selected for physical inspection (denominator) are added to those in which some adjustment has been made as a result of the inspection (numerator). In other indicators, the information will be found in the financial management record systems, human resources management record systems, etc. Measurement frequency: depends on the time horizon set in the strategy plan and annual action plans. The nature of the indicator may determine the measurement frequency: an indicator which measures the efficacy in achieving the annual revenue limits the measurement to the year taken into consideration. The frequency also depends on the ease of data collection. Most data can be obtained almost immediately due to the level of customs automation, but the collection and presentation of all indicators should be reviewed, whenever possible. In any case, at least three measurements would be required: one at the beginning of the period to determine the initial state or baseline value; another, at some intermediate time during the execution of the plan and another measurement at the end of the period considered by the strategic plan. Depending on the nature of the indicator several intermediate and periodic measurements can typically be made. They can also be made after the end of the measurement period in order to measure the impact produced by the implementation of a particular strategy and to monitor them over time and verify the sustainability of the impact or effects produced.
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Representation of the indicators: establishing the way or ways to represent the indicators is recommended as an element to finish their design. The most common ways are different models of graphics or tables that summarize data over time. Users should be able to choose the representation that best suits the use to be made of the indicator data. The following figure, taken from the set of indicators developed by the Inter-American Development Bank (IDB), demonstrates the possibility of obtaining the indicator data in graphs ( icon), tables (Consult button) or export it to Excel.
Source: The Inter-American Development Bank (IDB) system of indicators
Figure 3.1. Example of an indicator report
III.3.6. Test and adjust the system of indicators The difficulty in assigning an indicator’s ranks and values discussed in section 3.3.4 makes it advisable to pay close attention to early measurements and make adjustments, if necessary. Adjustments should also be agreed upon with those people who are familiar with and participate in the evaluated processes in order to ensure that the deviations are due to the ideal assignation of values and not deficiencies in the execution of processes. Adjustments, if necessary, should be made as early as possible, by the end of the first two measurements. Even without the difficulty mentioned (because of the absence of accepted reference values), it is hard to establish a perfect system of indicators on the first try. Typically, ranges, sources of information, and the frequency of measurement, including the indicator’s validity and contribution, must be revised.
III.3.7. Define indicators We have almost all the necessary data to define an indicator at this point in the process. In subsection 2.3 of the first unit, “Elements that define an indicator”, we discussed the information that defines the profile and characteristics of an indicator; to refresh your knowledge you only need to check those paragraphs. Here we present, by way of example, a document drawn up by the Costa Rica Customs Authority in collaboration with the IDB.
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Indicator 1S1 Description: Clearance time of import declarations. 1. Definition/meaning This is the time that customs takes to perform the actions necessary to verify the declared items in order to ensure that the goods meet import requirements and to determine the customs duty. The time that elapses from the moment the declaration is assigned an inspection level (channel) until the clearance or removal of the goods is authorized will be calculated. The indicator will be expressed in hours. 2. Purpose The indicator measures customs efficiency and agility in executing the import process, which depends exclusively on its decisions. 3. Method of calculation Average duration of time between registry in TIC@, where the inspection channel will be assigned (AUT status), and the authorization for the release of the goods (DEC status on the SAD).
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4. Characteristics Type of indicator Focus Processes Measurement frequency Measurement unit Trend Minimum range Maximum range
Strategic Efficiency and facilitation Import Bi-monthly Hours Downward 72 1
5. Source and users Information source Responsible area Reference User
TIC@ Support and Services Customs Directorate General of Customs and Customs
Source: Manuel Castilla Domingo, Planificación Estratégica y Gestión de Aduanas en Centroamérica (Strategic Customs Planning and Management in Central America). 2nd Edition.
III.3.8. Incorporate indicators in customs administration Once we have defined the management indicators for customs, with their ranges, sources of information, frequency of measurements and other characteristics that appear on the example file, the directing body must foresee the necessary measures to ensure that the system of indicators do not float aimlessly in the organization as something that exists and functions outside of customs. In the same sense that it is advisable to have the participation of people who have indepth knowledge on the management process when establishing indicator ranges, it is also highly advisable that these people and/or those who implement the processes also participate in measuring indicators. It is normal that the work team be comprised of a reduced number of staff in the early stages of establishing indicators, but it is the
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participation of the institution’s employees which contributes most to the consolidation of the system and a culture of measurement and use of management indicators. It is better to not create an administrative unit or “ad hoc” group with specific or consulting resources to carry out the measurements and data consolidation, except in the early stages of system implementation. It will be much more inclusive if the measurements and monitoring of indicators is carried out with the resources (human, technical and financial) allocated to execute the process that is being measured.
III.4. Advantages of management indicators for customs At this point, we should clearly understand the advantages that a system of indicators provides to customs management. We can summarize some of the advantages that using a system of indicators provides to customs management and the institution as a whole: Extensive knowledge of the performance of the main functions through the measurement of the objectives, programs and indicators and the monitoring of their progress over time. Changes in the attitude of civil servants (greater participation and awareness of the importance of processes) that engender changes in the organizational culture. Places focus on certain aspects of management to which perhaps not enough attention has been paid. For example, the control of warranties and their execution when operators fail to meet the guaranteed obligations, the cost of collection in relation to the resources used, the control of transits that do not arrive at their destination and manifests which are not cancelled on time, the duration of the process to transfer or dispose of abandoned goods, etc. Generates new and objective data on important areas of management. The use of the system of indicators provides custom an array of information that was previously unavailable, and with objective and quantifiable data on performance in the key areas of management. Enables the identification of management “benchmarks” based on the ranges and references used to develop the system compared with the indicator measurements. Helps to improve the design and monitoring of institutional strategic plans.
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SUMMARY The identification of management indicators for customs is based on: The key areas of success in customs management. The linking of management indicators to factors of success (efficacy, efficiency, effectiveness). Two methodologies are used to elaborate management indicators: National, linked to strategic customs planning. International, based on guidelines from the World Customs Organization (WCO). There are a number of steps to establish and implement indicators in which the participation of customs managers is IMPORTANT: The definition of indicators.
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The setting of indicator ranges and goals. The design of the measurement of indicators. The tests and adjustments. The incorporation of the system of indicators into the customâ&#x20AC;&#x2122;s structure. The implementation of management indicators provides advantages for customs and users: Streamline management (goals, implementation times and resources). Positive changes in the organizationâ&#x20AC;&#x2122;s attitude and culture. Incentives for improving competencies and competitiveness.
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References Beltrán, J. Mauricio. “Indicadores de gestión (Management Indicators)”. Second Edition. 3R Editores, 2000. Mejía, Carlos A. “Indicadores de efectividad y eficacia (Effectiveness and Efficacy Indicators)””. Medellín, Colombia. Planning Documents. www.planning.com.co World Customs Organization (WCO). “Customs Diagnostic Framework” and “Self-Assessment Checklist”. www.wcoomd.org Inter-American Development Bank (IDB). “Management Indicators for Customs”. Available online at: http://84.77.45.68/comalep/Corporativa/Default.aspx
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CASE STUDY
THE IADB INDICATOR SYSTEM
In 2009 the Inter-American Development Bank (IDB) developed a system of performance indicators for customs administrations. The project initially involved three countries —Honduras, Peru and Uruguay — and later incorporated Costa Rica and the Dominican Republic. The application that receives, stores and processes data from the indicators is hosted on a server that supports the Agreement on Mutual Assistance for Directors General of Latin America, Spain and Portugal (COMALEP) website at http://194.30.47.5/comalep/Corporativa/Default.aspx. The system must be accessed with an authorized username and password.
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1. The IDB system of indicators The system offers two versions, one national and another international. Both have common features and significant differences. The common features are: The indicators are constructed as an integrated system based on strategic customs planning for the specific administration and the guidelines from the World Customs Organization (WCO) incorporated into planning and achieving objectives; When possible, indicator data is automatically extracted from customs computer systems and sent electronically to the application or software that receives, processes and presents the information on the network where the data is found in order to provide information that is the most objective and up-to-date as possible. They are the only systems operating in the region, although still limited to a few countries. The difference between these two versions are: Centralized or international: it is based on the “International option” discussed in section 3.2.2, in which the objectives were set based on WCO guidelines, althou-
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gh some adjustments were made to account for input to the strategic plans from customs organizations from a number of countries who participated in the project. This version enables the measurement of customs performance in several countries by sharing indicator data. To this end, uniform criteria and methodologies are defined so that all countries calculate the values of the indicators in the same way. The national version: this version is developed from each country’s objectives and strategic plan. It enables customs in each country to track the performance of each customs administration and those relevant aspects included in the country’s strategy plan. The main differences between the two versions are summarized in the following table: International version • Records customs indicators from different countries. • Indicators based on agreed objectives based on the WCO. • Biannual measurement frequency. • Enables the comparison of customs performance in different countries. • The indicator template can only be modified by consensus of the participating countries.
National version • Records indicators of the country’s customs. • Indicator template adapted to the National Strategy Plan. • Bimonthly measurement frequency. • Enables the comparison of the country’s customs performance • The indicator template can be modified by the country.
Source: Manuel Castilla Domingo, Planificación Estratégica y Gestión de Aduanas en Centroamérica (Strategic Customs Planning and Management in Central America). 2nd Edition
Otherwise, the two versions follow the same pattern in terms of how indicators are organized, the methodology which has been used to integrate values of several indicators, the graphical and numerical representation of values and, finally, the “consult” options that customs has to monitor the progress of its objectives and programs.
2. System structure The structure of the international version of the system of indicators is based on the selection of five strategic objectives that were taken into account, essentially the WCO guidelines for a twenty-first-century customs organization, with some contributions from the organization’s own institutional plans. These are the five chosen objectives:
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Objective 1: Improve control of the entry and exit of goods to/from the country to ensure safety and compliance with current regulations. Objective 2: Facilitate trade by adopting measures that simplify foreign trade operations and improve competitiveness. Objective 3: Improve the efficacy of customs management to provide the resources required by the state budget. Objective 4: Improve the efficiency of customs resources. Objective 5: Promote customs transparency and the predictability of customs operations. Each objective has one or more strategic indicators directly related to the measurement of the achievement of objectives. A total of thirteen (13) strategic indicators were identified. In addition, each objective is assigned strategic programs and actions that contribute to the achievement of the objectives. The programs have a set of thirty-five (35) operational indicators linked to specific actions. This structure has been the basis for the applicationâ&#x20AC;&#x2122;s development, so that both the templates and the forms to fill out for indicators and consultations repeat the same order: Strategic objective 1 (1SO)
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Strategic indicator 1 (1SO1) Strategic indicator 2 (1SO2), etc. Strategic program or strategy 1 Indicator 1P1 Indicator 1P2, 3, 4, etc. Strategic program 2 Indicator 1P7, 8, 9, etc. Strategic objective 2 (2SO) Strategic indicator 1 (2SO1), etc. Indicators are identified with a combination of numbers and letters: the first number always represents the strategic objective (SO) to which it belongs and the letters identify it as a strategic (SO) or operational (P). The numbers below the letter are sequential, in two different series depending on whether it is a strategic or operational indicator.
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3. System methodology Customs calculates the values of the indicators in the measurement units the system establishes for each indicator. The units used are mainly relationships between two values expressed in percentage and also in number of days, monetary values, number of interventions, etc. Indicators are not isolated measurements but are structured in a system based on the five strategic objectives and the programs, as explained above. The system design was intended to provide customs managers the possibility of having a synthetic or comprehensive vision of how the set of indicators behaved. To that end, the indicators linked to a program were consolidated into a single representative number of the program (CP, consolidated program); the same with the strategic indicators linked to a goal (CO, consolidated objective). And finally, the CP and CO values are integrated into a single representative number of the objective. Thus, the five objectives can be represented in five numbers in a type of dashboard, as seen in the following figure.
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Source: The Inter-American Development Bank (BID) System of Indicators
Yet since they are expressed in different units of measurement the values of the indicators are not consistent; not even values expressed in the same unit of measurement can be combined. If we look at indicators expressed as a percentage, we see that one cannot work with these percentages because in each has a different meaning: it all depends on the goal or range set for each indicator. The scale of 1 to 100 cannot be taken as a range for indicators expressed as a percentage because the value of some indicators is never expected (nor is it desirable) to reach 100, or even a value close to 100. For example, the indicator which measures the â&#x20AC;&#x153;Percentage of inbound cargo inspectedâ&#x20AC;? should not approach 100% because the inspection of all cargo would be poor practice. An indicator with a value of 15% can indicate outstanding performance while the same value in another indicator could mean poor performance. Two criteria were used to make these values consistent and workable:
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One, speculative or subjective, which consists of assigning a probable reference or range to each indicator. Another, mathematic, which consists of dividing the maximum value for an estimated range for each indicator in fractions of ten. Thus, all values are expressed in base 10. Ranges or references are assigned considering the region’s international experience and the contributions of the participating customs organizations. The maximum value of the estimated range for each indicator is taken as a reference and can be considered the maximum value this indicator can reach. Since the IDB sought to build a system of indicators to serve any number of countries, efforts were made to ensure the indicators have enough margin to not hinder the goals of improving customs performance in the future. Each range is divided into as many fractions of 10 as the maximum value of the range or reference indicates (10/n), and this fraction is multiplied by the value which customs obtains for the indicator according to customs management and record systems. For indicator 1SO1, the reference is 15 and would have a multiplier of 0.667 (= 10/15). If a customs organization inspects 11% of inbound cargo, its value in base 10 would be 7.3 (= 11 x 0.667). This is repeated with each and every indicator.
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From this point, the values of all indicators which refer to a strategic program can be added together to provide a more comprehensive and summarized idea of the progress of the program (PC). Similarly, the sum of the strategic indicators can provide better data on the achievement of the strategic objective to which they relate (OC). In turn, the combination of the average of all the programs of each strategic objective (PC) and the average of this objective (OC) obtains the “consolidated” objective value. +
4. Available consultations When customs accesses the computer application a menu of operations to operate the system (create users, send template, queries, etc.) appears. By clicking on the option “consult” the following forms of consultation appear: 7 My indicators: allows you to consult a customs organization’s own exclusive indicators not accessible to other customs. In this mode you only have access to your indicators but not those from other customs and therefore cannot compare these indicators with other organizations (with all other options you can compare the values of one or more indicators from one or more custom organizations). Benchmark: compares the values of each indicator with the reference value (benchmark) set for this indicator in the system. You can consult and compare the values of numerous customs organizations. The following graph shows the fictitious values of the three participating customs for the “Percentage of declarations selected for red and yellow channels” indicator. 7
All data shown is fictitious and corresponds to tests performed during system development.
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Source: The Inter-American Development Bank (BID) System of Indicators
By customs: the indicators from one or more customs organization can be searched by each objective and by six-months periods in the year selected. The following is an example of a check on Honduras that might be requested by another participating country or by Honduras itself:
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Source: The Inter-American Development Bank (BID) System of Indicators
By indicator: provides numerical and graphical information from all customs for the selected year and six-month period as shown in the following figure. The graphical information is obtained by pressing the icon.
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Source: The Inter-American Development Bank (BID) System of Indicators
By performance (only in the national version for now): allows you to consult the key factors of success (efficacy, efficiency) and areas of success (facilitation, collection, transparency, etc.). In the figure, the performance of Caldera Customs Agency in Costa Rica is given in terms of efficacy in a given period.
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Source: The Inter-American Development Bank (BID) System of Indicators
The experience has been very interesting and will be useful for the next update and modernization of the system currently implemented by the Inter-American Development Bank.