ICAO-WCO JOINT-CONFERENCE ON ENHANCING AIR CARGO SECURITY AND FACILITATION

KUALA LUMPUR, MALAYSIA26-28 JULY 2016

RISK MANAGEMENT IN AIR CARGO PROCESSING

Delivered by:

Dato’ Zulkifli bin YahyaDeputy Director General of Customs (Customs & GST)

Royal Malaysian Customs

• Evolving Role of Customs• The Risk Management Process• Managing Risk• Treatment of Risk by Customs• Benefits of Risk Management• Royal Malaysian Customs’ Experience

• Risk Management Tools• Salient Points

CONTENTS

DEFINITION OF RISK

“The likelihood of an event occurring thatwill lead to a breach of the law / regulationand as consequence exposes to thepossibility of a loss in revenue or threatensnational security [public health and wellbeing of society]”.Source: Harry Wiskovic.

In short, it is the potential for non-compliance with Customs laws.

“Effect of uncertainty on objectives”.Source: WCO Customs Risk Management Compendium.

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EVOLVING ROLE OF CUSTOMS

• In the olden days, the traditional role of Customs was to collect revenue.

• In modern times, Governments and traders demand that Customs clear cargo at a fast pace to facilitate trade. But at the same time, Customs have to ensure security and public safety.

• Only a very small percentage of cargo processed by Customs does not comply with Customs law. The majority of the cargo are compliant.

• Customs world-wide practise Risk Management to identify the small proportion of high-risk cargo for document checking and physical inspection. The rest of the cargo is released quickly without physical inspection.

EVOLVING ROLE OF CUSTOMS

• This guiding principle is known as balancing between facilitation and control, also known as the Customs Dilemma.

EVOLVING ROLE OF CUSTOMS

THE RISK MANAGEMENT PROCESS

National Security

Unfair Competition

Revenue Leakage

Public Health & Safety

Well being of society

Supply Chain Security

Effective customs control & trade facilitationOptimal use of resources

MANAGING RISK

MANAGING  RISK

TREATMENT OF RISK BY CUSTOMS

Type of Control Terminology

Release with no physical intervention Green Channel

Review of declaration and the supporting documentation

Yellow Channel

Physically examining the cargo Red Channel

Post Clearance Audit Blue Channel

Investigations Referral

BENEFITS OF RISK MANAGEMENT

• Achieve an optimum balance between facilitation and controls

• Identify and quantify risk using scientific methods

• Efficient and effective utilization of resources

• Enhance efficiency and effectiveness of Customs controls

• Ensure all employees assume responsibility for managing risks

ROYAL MALAYSIAN CUSTOMS’ EXPERIENCE

AIR TRANSPORTATION : INTERNATIONAL PASSENGERS, CARGO AND MAIL HANDLED

(YEAR 2014)

6  INTERNATIONAL AIRPORTS – KLIA, LANGKAWI, PENANG, SENAI, KUCHING, KOTA KINABALU

16 DOMESTIC AIRPORTS

39.984 MILLION INTERNATIONAL PASSENGERS  HANDLED

805,884 METRIC TONS INTERNATIONAL CARGO  HANDLED

32,117 METRIC TONS INTERNATIONAL MAIL HANDLED

Source: Malaysian Airport Holding Berhad statistics

RISK MANAGEMENT TOOLS

• Air Passengers

• Drug sniffer dogs• Rovers (undercover officers)• X-ray Scanners (baggage)• X-ray Scanners (body)• Interview and Observation

• Letters & Postal Parcels

• X-ray Scanners • Electronic selectivity system (Customs

Verification Initiative) (CVI)

• Courier

• Pre-alert Manifest checking • Electronic selectivity system (Customs

Verification Initiative) (CVI)

• Air Cargo

• Electronic selectivity system (Customs Verification Initiative) (CVI)

• Post Clearance Audit

RISK MANAGEMENT TOOLS

DRUG DETECTOR DOGS

NUMBER OF SCANNERS

STATESBODY BAGGAGE CARGO POSTAL 

‐AIR  TOTALAIR LAND SEA AIR LAND SEA AIR*** LAND SEA

F.T. KUALA LUMPURKLIA 3 24 2 29SELANGOR 2 4 4 10JOHOR 2 1 4 7 1 * 4 5 1 25PENANG 4 2 4 10SABAH 8 4 1** 1 14SARAWAK 2 1 1 1 5PERLIS 2 1 3KEDAH 1 2 1 4KELANTAN 3 3LABUAN 2 2PERAK 1 1 2TERENGGANU 1 1MALACCA 1 2 3PCKP, SINGAPORE 2 2SUB‐TOTAL 3 0 2 45 13 24 2 4 16 4 113GRAND TOTAL 5 82 22 4

* Senai, Johore** Kota Kinabalu, Sabah*** Other international airports will be installed with air cargo scanners by end of year 2016

X-RAY SCANNERS (BAGGAGE)

HANDHELD NARCOTICS ANALYZER (TRUNARC)

X-RAY SCANNERS (BODY OF PASSENGER)

DRUG SEIZURES FROM AIR PASSENGERS01 JANUARY 2015 – 30 JUNE 2016

STATES NO. OF CASES NO. OF PERSONSARRESTED

QUANTITY VALUE (MYR)KG TAB

KLIA 43 23 166  ‐ 24,520,892 

NARKOTIK 8 1 22  ‐ 857,374 

KEDAH 2 1 46  2,345  4,514,312 

PULAU PINANG 3 5 272  ‐ 63,174,112 

SARAWAK 7 1 3  55  613,933 

SABAH 7 5 50  600  8,864,969 

JOHOR 1 2 ‐ 11,894  244,456 

PERAK 2 1 3  7  336,734 

PERLIS 4 4 187  ‐ 329,900 

TOTAL 77 43 749  14,901  103,456,682 

X-RAY SCANNERS (FOR POSTAL PARCELS)

ELECTRONIC SELECTIVITY SYSTEM

• Cargo screening was started in 2002 at RMC Selangor and later expanded nation-wide

• At end of 2007, risk-based cargo screening was centralised at Headquarters with the setting up of the Customs Verification Initiative (CVI) Unit. However, the states of Penang and Johore perform their own cargo screening

• Makes use of risk indicators to identify cargo risk level as follows:

• High Risk - Physical Inspection• Medium Risk - Document Examination• Low Risk - Direct Release

• Companies with Authorized Economic Operator (AEO) status including those under Mutual Recognition Agreements (MRAs) with other countries, are generally accorded low risk level

FUNCTIONS OF THE CVI UNIT

Perform risk analysis, identify risk indicators, and establish risk profiles for detection of high-risk cargo suspected of revenue evasion and fraud

Report the effectiveness of the Risk Management process to top management and seek directives

Ensure all traders comply with the law and regulations administered by Customs

SALIENT POINTS

• Wide use of Non-Intrusive Inspection (NII) techniques (X-ray scanners)

• Usage of multiple tools (e.g. detector dogs, interviews, observations, x-ray, selectivity system, etc.)

• Electronic risk-based selectivity system

• Minimum disruption to air cargo and passenger movement

• Effective in detecting contraband and revenue leakage

ROYAL MALAYSIAN CUSTOMS

THANK YOU