FBR has no contingency plan to replace PaCCS: Customs cargo clearance system approaching failure: World Bank

The World Bank (WB) has expressed serious concern over the functioning of the Pakistan Customs Computerised System (PaCCS) with the comment that the Federal Board of Revenue (FBR) has no contingency plan in place to deal with the termination of PaCCS. The WB warned the tax authorities that, "the customs cargo clearance is in all likelihood approaching a system failure".
The WB review mission has conducted a detailed study of the PaCCS and submitted a detailed report to the FBR on the working of the customs clearance systems in Pakistan. Sources told Business Recorder here on Saturday that the WB report has pinpointed flaws in the PaCCS. According to the WB report, customs cargo clearance is in all likelihood approaching a systems failure that could lead to extended outages.
With 64 percent of the country's cargo being processed by a system that cannot have any bug-fixes or upgrades applied to it because of a disputed contract, PaCCS will become increasingly unstable. The remaining 36 percent of the cargo is handled by the 'One Customs' system that within a year will be running on a hardware platform that is no longer under active vendor support. Probably, within 12-24 months, both of these systems will have significant outages that will affect customs ability to clear cargo for an extended period of time.
The continued use of multiple custom goods declaration processing systems by FBR introduces several problems into the system. Three different customs systems are in use for goods declaration processing: PaCCS (Pakistan Customs Clearance System) at the Karachi container ports, 'One Customs' (an in-house product) at all other customs freight locations including the Karachi container ports, and WeBOC (Web based One Customs, also developed in-house) which is completing its development and is to be piloted at the Karachi Airport during this calendar year.
The use of three different systems by traders and agents complicates their business as they need to know which system is to be used for which Goods Declaration (GD). It dilutes customs ability to concentrate their IT development efforts and affects the ability of customs officials to deliver quality service that they are targeting to attain.
The PaCCS is a vendor-developed software package that was initially deployed in one container terminal in 2005, and subsequently in all three Karachi container terminals by 2007, and now processes approximately 64 percent of the commercial cargo traffic that is imported or exported. The vendor--Agility--does not have a maintenance agreement with FBR, nor has FBR been licensed to use the PaCCS product. This situation has resulted in the elimination of any updates to the system and Agility turned off PaCCS for two days earlier this year which caused significant disruption at the ports and limited both imports and exports during the disruption, the WB report said.
The trading community reports that PaCCS has improved the processing of goods through its electronic linkages to them and the container port systems. However, use in its current format is risky: (a) the code base of the software has not been updated by the vendor since 2007-08 and no user requests for bug-fixes have been supplied by the vendor; (b) the product is in a unique contractual situation where the vendor has identified the wish to terminate the pilot and proceed with a full commercial licence, but the Government of Pakistan has not yet decided.
There is no FBR contingency plan in place to deal with the termination of this system in an orderly way beyond forcing all transactions to be handled by the other currently available system--'One Customs'.
The WB has observed that 'OneCustoms' is an internally developed (in-house) legacy system used at all customs locations and now processes approximately 36 percent of all commercial cargo traffic that is imported or exported. Although an electronic linkage with the declarants is in place, it does not provide an electronic linkage to the terminal operator. During the goods declaration processing within customs there is significant transcribing of information from paper into the system, making it manually-intensive and not as timely as required. 'OneCustoms' utilises a very old non-web enabled interface for customs staff which, according to its users, makes it difficult to use and requires significant manual interaction with the system. It is supported by PRAL, but is not being actively enhanced to incorporate new functionalities such as an automated flexible risk management module nor any post-clearance audit elements.
The WB said that the hardware that 'OneCustoms' is running on is approaching its commercial end-of-life. Within a year, it would need to be upgraded to remain under vendor support.
About the new customs clearance system, WB said that the WeBOC (Web Based One Customs) is a new product that is being developed by PRAL, with participation of a customs business development team. It uses an electronic messaging system to process information from declarants and port authorities. It shares a common database with 'OneCustoms' and is web-based. An initial version of it was piloted in a proof of concept implementation at the Islamabad airport, with a very limited number of declarants participating in its operation.
The WB said that a pre-production version of the software is being finalised and is targeted for pilot implementation at Karachi international airport later this calendar year, once the customs business team accepts the product as ready for piloting. If the pilot is successful in Karachi, there are plans to deploy it first to the other airports in the country and then to all remaining locations. The WeBOC is fully compatible with 'OneCustoms' and can read most of the electronic messaging processed by PaCCS. It was reported there is good support for participating in the pilot in Karachi airport as the declarants and their agents see it as a way to improve processing times. There appears to be limited formal acceptance documentation available on this project, nor is it clear whether the Customs Wing fully supports this initiative as a way forward.
The current state of commercially available customs software is characterised as a maturing industry. With the increased standardisation of customs information being supported through the WTO and WCO, several commercial customs software solutions have been developed that support the 'Revised Kyoto Convention'. Based upon a recent procurement by Saudi Arabia of a commercial customs solution, it is estimated there are several viable vendors, which indicates there is significant competition available, the report said.
Several of the vendors are promoting a new sales contract whereby they propose entering into a form of private-public partnership (PPP) where their software is provided under contract without cost but they are paid based on a transaction fee. This option would minimise the government's upfront spending but potentially increases the government's annual expenditures if the negotiated transaction fees are not passed back to the declarants. The contract is normally in place for multiple years with options to extend and usually includes a fee-for-service clause for customising the software for local requirement. The source code for the software is retained by the vendor, although some vendors provide a full description of the underlying database which allows the customs IT team to extract data from the operational database for use in other systems. Usually, during the period of the agreement the vendor provides software upgrades (eg as new versions of the software are developed and released for general use).
The negotiations to determine the transaction fee structure are the key to these PPP relationships. In most new PPP fee based engagements, there is a benchmark of the fee structure done once the initial contract period (no more than 3-5 years) has elapsed to determine if the vendor's fee structure is still reasonable. This benchmark is difficult to obtain as there is limited public information about these contracts available unless a government-to-government agreement is in place to share information about their contracts.
The WB has recommended that there should be only one IT system in use for customs goods declaration processing in Pakistan. The process used to move from the current situation requires crucial decisions by the FBR.
The decisions will be based upon a number of factors such as: the completeness of the solution offered (eg: modules for goods declaration processing. accounting for credit and collection of penalties and fees, adaptive automated risk management capability for targeted inspection profiles, valuation, duty assessment, revenue calculations, transit cargoes, management reporting, and ease of use for post-clearance audit and customs intelligence and investigate activities, etc), vendor sustainability in terms of capitalisation, ease of extracting data from the system for use in other applications, compliance with WTO/WCO standards and how frequently updates are provided, responsiveness of the vendor to bug-fixes and localisation requests, the number of sites running this software and, ultimately, how affordable the solution is.
If a commercial product is not to be used, continue development of WeBOC and deploy it as the customs solution for goods declaration processing. The timeline to complete the development of the WeBOC software has not been established, and must be done as quickly as possible. The features of the system need to be stabilised (eg: define what the remaining modules must do such as the risk-management module) and the customs task force responsible for its functionality must ensure it will handle land, rail, sea and air transactions.
When WeBOC successfully passes its piloting at land, rail and airport locations, its pilot at a containerised sea cargo terminal must be carefully planned and executed as this transport mode is the most used and will have the most impact on the declarants. Current information from customs indicates that a multi-month transition plan would need to be developed for each container terminal to ensure a smooth transition to the new software minimising any impact on freight processing. Any attempt at a 'big bang' conversion to WeBOC at any location is not recommended by the WB. Rather, for a period of time (probably several months), customs and declarants will use the old and new systems concurrently clearing existing declarations from the old system and processing all new declarations in the new system.
If the functionality of the remaining modules required to complete WeBOC are defined by the customs business team by mid-October it is estimated by PRAL that the production grade version of WeBOC would be fully deployed at all customs locations within two years.
The WB has raised a question that if a commercial IT system is acceptable, what is the future status of PaCCS? The current status of PaCCS should be resolved as quickly as possible. If the decision by FBR is to retain PaCCS, then FBR would negotiate with the vendor to procure sufficient licences of their product. Also, adequate training for all customs staff who will be using the product, for those who will be maintaining it day-to-day and to the trading community should be assured.
Any computer system supporting customs operations should provide access to the underlying database(s), including scheme and element definitions. Negotiating a new contract and deploying the upgraded software to customs locations is estimated to take a significant amount of time (ie more than one year).
If FBR decides that a competitively procured vendor-supplied product is to be used, then it would initiate the procurement process as quickly as possible. As seen by the RFP in Saudi Arabia, there appears to be sufficient competition in the marketplace to assure competitive pricing. Care needs to be taken in the RFP process to ensure the total cost of ownership of the products is evaluated and clearly understood by all concerned. Expect to see the vendors provide the product for free and use a transaction processing fee as one element of their pricing structure. Ensure all necessary support fees are included in the bid, the WB said.
While the competitive procurement process is underway, the FBR should replace the ageing in-house developed 'OneCustoms' system as quickly as possible. It has been recommended that if the WeBOC (being developed by PRAL) system successfully pilots for air, rail, land, and maritime consignments, that it be deployed to minimise the risks associated with existing systems.
Running an international RFP and deploying the resultant product at all customs locations is estimated to take a total of five years to complete (3 years for the RFP based upon the last international RFP run by FBR for a software solution and 2 years to deploy the product).
According to WB Recommendations, the FBR should finalise the WeBOC system specifications by mid-October, and pilot it at an appropriate operational site. The pilot must include adequate hands-on training for traders, agents/brokers, and customs operational staff.
Secondly, the FBR should gradually pilot WeBOC at customs locations which are currently using the 'OneCustoms' solution (eg air, sea (breakbulk), rail, and land). Then, at the smallest container terminal, replace the current systems with WeBOC. Subsequently, convert all remaining locations to WeBOC. An unsuccessful pilot of WeBOC will require the procurement of a commercial product, the WB report added.