Think of a country having over a 100 insurance companies
and all have at least 3 or more offices in all the 26 states of the federation.
As a federal policy, in order to release any import goods
from the port, the importer of the goods need to pay the appropriate custom
duty as specified by the enforced law.
The procedure is to first get the goods imported insured from some insurance
company. For this,
- The importer takes the import documents to an insurance company
- Insurance Company will work out the premium to be paid based on
a percentage of the value of the goods, as on the import paper.
- This value is generally in USD or Euro currency which is converted
to local currency Naira.
- On payment of insurance premium, a paper certificate is issued by
insurance company to the importer.
- The importer now takes the certificate papers to a designated bank
to pay his custom duty.
- Without insurance of the goods imported, custom duty is not accepted
by the banks and hence goods are not released from the ports.
- Once custom duty is paid, certificate of payment of custom duty
is issued to the importer by the bank.
- Importer presents the custom duty payment documents to the ports
authorities, who after verification release the goods.
Business Problems
Though there are various gray areas in implementation
of the system, the biggest problem is Loss of Insurance Premium due to
forged documents, which is huge. This problem persists due to ability
of importers to produce fake paper document.
The problem is exponentially escalated by the fact that
custom duty paid to the state is also evaded.
It becomes difficult for bank officers, insurance agents,
and custom authorities to verify the documents presented and to authenticate
the same.
For importers doing fair business, the problem does not
get over. They have to manage a whole lot of paper documents, prove their
authenticity, and have to protect themselves against forgers.
Cross-checking documents issued by insurance companies
against the certificates issued by banks, for custom duty paid, is a difficult
to conclude exercise, especially when so many certificates piles up with
different values for same import.
A need is felt to have a common, small sized, self-authenticating,
non-forgeable instrument.
This instrument shall be machine readable, secured,
verifiable, only authentically accessible, durable, should work as common
document, and easy to carry and check.
Once such instrument is discovered and put in place,
shall eliminate most, if not all, of the identified and non-identified
problems of the system under discussion.
Entities
System will be used by various people in their different
roles and capabilities. Each role constitutes an entity of the system.
Entity as referred here, is any user or system which is not part of the
proposed system but interacts
Importer
An importer is the person in whose name the consignment has arrived.
He is the person who will get the possession of the goods after insuring
the goods and paying the custom duty.
Card Issuer
Issuer is the person or company that takes the responsibility
of issuing the cards to the importer, on which he can get various certificates
loaded.
It is recommended that Mr. David and company shall work
as Card Issuer on Application Service Provider model, and issue the cards
to the importers.
However, system will impose no such condition. Anyone,
including the insurance companies can work as the card issuer.
Insurance Company
This is an affiliated company that can insure the goods
arrived at the port. Importer shall pay appropriate premium to get the
goods insured and pay custom duty on its basis.
Bank
Bank is an organization in commercial banking business that is
listed by custom offices, and can collect custom duty on behalf of the
custom authority. Bank shall first check the insurance payment certificate
before accepting the custom duty, and after acceptance of custom duty,
shall issue a binding certificate.
Custom authorities
These are port authorities who deal with the importers, check
if they have paid custom duty for the goods imported, and issue the goods
if custom duty is duly paid.
Type of Cards
The system will use various types of cards for different
purposes. Here is a list of all the possible cards used inside the system.
F- Card
Certificate card, or F-Card in short, is the end-user card that
will contain various certificates issued to the importer.
This will be the most important card in the system and
will be used as the instrument that holds the certificates in an un-forgeable
way.
I- Card
Insurance Company SAM card will be used to enable digital signing
of certificates issued by the insurance company. This card will be embedded
in the terminal issued to the insurance company. The card will contain
all the details of the company, and branch, to which the card is issued.
B- Card
Bank SAM card will be used to enable verification of certificates
issued by the insurance company. These cards will also be used to digitally
sign the certificate that will be issued by the bank possessing this certificate.
This card will be embedded in the terminal issued to the bank. The card
will contain all the details of the bank, and branch, to which the card
is issued.
C- Card
Custom office SAM card will be used to enable verification of
certificates issued by the insurance company and banks. These cards will
also be used to update the certificate-Card and mark the consignment for
which certificates were issued, as released.
Solution
Having looked at the background of the problem, and strength
of the Smartcard technology, needless to mention, Smartcard provides the
most appropriate and suitable solution to address the observed problem.
It is proposed to use Smartcard as an Instrument that
will carry certificate of insurance premium, certificate of custom duty
paid, and various level of authentication and verification certificates.
The following process shall, if adopted, resolve all the problems with
paper document and shall remove forgery of documents thus giving a climb
to exchequer’s income.
The Process
- On arrival of goods on the port, importer shall present the import
document to an affiliated insurance company.
- Insurance company, after calculating the insurance amount and the
premium to be paid to insure the goods, shall charge the appropriate
amount.
- Once premium is charged, a certificate is issued. Smartcard shall
be used as the instrument to contain the certificate of insurance
premium paid.
- Besides insurance paid, the card would also contain import goods
amount, premium paid, and legitimate custom duty.
- This information shall be written on the chip and dully digitally
signed by the issuing insurance company.
- A terminal, equipped with SAM card uniquely identifying the insurance
company and designated branch, will be used to write details on the
card and to sign the details stored. The digital signature establishes
the authenticity of details written and can not be forged.
- A printed receipt of the amount received along with other details
shall be printed by the terminal. A copy of this receipt can be kept
with the insurance company while one copy of this receipt shall be
handed over to the importer.
- Company shall charge for the card issue and handover the card to
the importer. Details of certificates issued shall be downloaded to
the insurance company’s server for data availability and analysis
purpose.
- Once certificate is issued, importer can go to a designated bank
and present the card containing certificate of insurance paid.
- Bank shall use another terminal issued to her containing their
personalized SAM card to read the certificate from the card.
- Only if a genuine certificate is present, the amount of custom
duty will be displayed on the chip, and optionally printed on a paper.
- Bank shall charge the amount read from the card as custom duty,
and make an entry to that effect on the card using the terminal.
- Terminal will load another certificate of custom duty paid digitally
signed with its SAM card on the card issued to the importer by the
insurance company.
- Another set of receipt will be printed by the terminal, a copy
of which shall be retained by the banker, while another copy should
be handed over to the importer.
- Bank terminal shall dial to the bank server at the end of the day
and dump all the details of tax collected on the bank server for bank’s
usage.
- Bank terminal shall also dial into the Custom Office Server and
dump the details there also. This will help the custom department
to know custom duty collected, and for their other record purposes.
- Once custom duty paid certificate is issued to the importer on
its card, he can come to the custom authorities to claim the goods
imported.
- Custom officers can easily verify the certificates on the card
using specialized terminals issued to them.
- After, and only after, successful verification of the certificates
on the card, goods shall be released and handed over to the importer.
- Smartcard with the importer shall be updated to mark the date and
time of release of goods. This release certificate shall be dully
digitally signed by the SAM card of custom office terminal, and shall
render card useless for further release of same consignment.
- Importer can keep the card along with him as proof of import for
future use.
- Optionally, insurance companies can re-use the cards on which certificate
was issues and the goods have already been cleared by authorities
and received by the importer.
The New System
Here is the solution that mitigated the then existing
problems.
The Modules
The system will consist of several interrelated and integrated
modules of varying degree of coupling.
Some crucial modules that will be important part of the
system are outlined here.
Card Issuance
- In order for an importer to get certificates, he must have a blank
card issued in his name.
- The issuance will be done by the Card Issuer and all details pertaining
to the importer will be captured.
- These details will be written on the chip of the card digitally
signed with the Issuer Card.
- This will be a PC based module that will provide a well-defined
Graphical User Interface to the user for easy data capturing.
- USB Card readers shall be used to update information on the chip.
Insurance Premium Collection
- Once the premium is collected, a signed certificate is issued using
this module.
- This will be a terminal based module.
- Terminal will take help of SAM card to produce digital signatures.
Custom Duty Collection
- This will be a terminal based module.
- These terminals will be installed at banks.
- They will very the insurance premium certificate
- After verification, they will load custom duty paid certificate
- Certificate will again be signed using SAM card
- Signatures will also be loaded onto the card
Duty Payment Verification
- This will be another terminal based module.
- Terminal will take help of SAM card to verify various certificates
loaded.
- Once certificates are verified, goods are cleared and release certificates
are generated and loaded on the card.
Data Communication
- This will be another most crucial module of the system.
- This will bind all the scattered modules
- Using this module, terminals will establish communication with
the server over the phone line
All the data pertaining to certificates verified, generated, and loaded
on the cards shall be dumped in the server
- It shall be activated once each day on every terminal
- Server will have another contrasting software that will be listening
to all incoming requests from various terminals
- Server will accept the dump of data files transferred form the terminals,
read them, analyze them, correct any communication errors, and store
the details in an RDBMS
Data Analysis
- This module will run on various servers
- It will consolidate all the incoming data as per user choice
- Consolidated data shall be graphically and pictorially presented
for easy analysis and comparisons
The Benefits
Along with the aforementioned benefits that come along
with using smart card as instrument for loading various certificate and
keeping signed information on it, there are numerous advantages of the
system.
Mentioned are a few categorized benefits of the system
to different entities of the system.
From Government Perspective
- Dropped custom duty evasion
- Increased tax collection
- Fair collection, proper system in place
- Law enforcement
- Just-in-time available accurate reports
- No manual compilation of collection
- Available logistics of imports in the country
- Ready to analyze data and better planning and forecasting
From Insurance Companies’ Perspective
- Increased revenues
- Fair dealings
- Reduced verification time, effort, and cost
- No forged documents possible
- Improved image
- Better processes in place
From Importers’ Perspective
- Fast approval and clearance of consignment
- No need of proving authenticity of documents presented
- Reduced paper-work
- Convenient record keeping
- Electronic records available on request
- Easy payment mechanism
- Simple system in place
- Easy maintenance of records
From Banks’ Perspective
- Fair duty collection
- Reduced paper-work
- Shorter payment collection time
- Ready availability of authentic records
- Electronic database readily available
- Reduced cost of operations
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