Trade and Commercial Law Assessment - Honduras - Economic ...

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS There is no regional food or agricultural agency, so harmonization is difficult. For Central American goods, three levels of risk have been identified. By the end of the year, the need for import country registration of the 440 products identified as low risk should be eliminated. F. RECOMMENDATIONS The following major recommendations must be addressed to lower trade transaction costs and increase Honduran competitiveness. (Some of these may repeat recommendations presented in previous sections.) ♦ Professionalize trade-related public agencies. The Customs authority must become a professional organization and develop a personnel policy that provides for a professional workforce. Customs officers should be hired with an expectation that this will be a long- term career, not a short-term job (i.e., for the duration of the current administration). Customs must be perceived to be professional, employing skilled personnel who are well trained in the complexities of Customs laws and procedures. A workforce where political patronage exists will not be as competitive as a merit-based workforce. As the gatekeeper for international commerce, the quality of the Customs employees will have a direct impact on trade, thus Customs reform should be a top priority. ♦ Implement the Customs Union. This will increase private sector involvement in the decision-making process through establishment of a private sector group that will be involved in planning future modifications. This group could than act as a vehicle for notifying its sector of upcoming changes and training. A common Web site should be established for this purpose. ♦ Improve security. Because of the efforts of a special unit handling kidnapping, such incidents are down sharply. The unit handling these crimes was specially formed, recruited, and trained (by the U.S. FBI) to handle kidnapping cases. The unit has been very effective, resulting in dramatic improvements in personal security. Three years ago, there were as many as 40 kidnappings per year, mainly targeting businesspersons near San Pedro Sula. In 2003, the number of kidnappings dropped sharply down to three, and there have been none in 2004, as of October. ♦ Streamline trade-related processes. It is necessary to review all Customs procedures and begin the process of benchmarking to identify redundancies, unnecessary review, and unnecessary steps and start to remove these from the process. Currently, procedural change is very slow. If required, the Committee on Customs Modernization can oversee and review the process. ♦ Crack down on trade-related smuggling and fraud. Develop and provide for support within the trade community for criminal prosecution of major customs violations. Currently, there appears to be no political will to prosecute parties involved in defrauding the government through improper goods declaration or for failing to declare goods to Customs. Honduras also should establish a special anti-smuggling and fraud unit, using a XI-31
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS combination of officers from Customs and the Special Investigations Unit of the National Police. The staff would be carefully selected and subject to random drug testing and polygraphs. This unit would develop a threat assessment and a corresponding action plan to combat smuggling and set specific priorities and goals. Training in examination and interview techniques and the legal requirements for building a criminal case would be required. In addition, the team would have to be equipped with contraband detection kits with fiber-optic scopes and density meters and be trained in their proper use. A vital link and partnership with the trade community would also have to be established to develop sources of information. ♦ Implement the risk management system. Risk management is the foundation of a modern Customs agency. Honduran Customs has undergone some training by Canadian Customs, but additional training is required, particularly in the analysis of risk commodities and high-risk traders or filers, so that appropriate profiles and criteria can be created and monitored. It makes little sense to rely on nonproductive, costly physical examinations. Honduran Customs should also perform analyses to ensure that all goods destined for national use are properly declared and are not entering Honduras without Customs clearance. A well-developed risk system would identify areas of concern that could easily be developed into specific enforcement actions with the National Police. In addition, a risk management system should identify areas of continued noncompliance or error rates and provide a methodology to take corrective action through specific seminars. ♦ Modernize export process/CENTREX. The government should expand the functions of CENTREX, automate the export process, and allow more private industry participation in CENTREX operation. It should also consider implementing the Chamber of Commerce’s proposal to assume oversight of CENTREX and expand its service beyond export processing. There have been proven successes when private industry has increased control of processes involving business and international trade. Honduras also should consider adopting the “best practice” from CENTREX in El Salvador, which has completely automated the export process, with links to the pertinent public agencies and the trade community, and is expanding this effort to imports. ♦ Upgrade the express consignment system. Honduras should review, with a view toward adopting an express consignment process. When fully implemented in 2004, that process may provide an express consignment best practice to be reviewed and possibly adopted in neighboring countries. The Inter-American Development Bank has funded software development and renovation in Honduras to promote an efficient model based on WCO Express Consignment guidelines. ♦ Improve laboratory facilities and analysis. The Customs authority needs to upgrade such facilities and capabilities as the Customs laboratory, examination equipment, personnel skills, and resources. To provide the capability to build a modern Customs service there must also be a stable source of funding. It is recommended that Customs receive the revenue due by law and also initiate a WTO-compliant service fee for declaration processing that would be used specifically for upgrades. ♦ Streamline customs processing and costs in free trade zones and bonded warehouses. According to Customs officials, there are now approximately 200 Customs XI-32
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