## tarea2024061

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---

### Objectives of the STX mission
- Support the Cambodia General Department of Customs and Excise (GDCE) from 18 to 29 March 2024.
- Review the progress of reform in the GDCE on Special Economic Zone (SEZ) management along the Fiscal Affairs Department (FAD) advice provided in 2023 and provide advice for implementation.
- Review customs management on Qualified Investment Project (QIP) and provide advice.
- In support of the long-term expert (LTX), review and provide advice to the GDCE to improve the screening process of SEZ/QIP investor application, particularly how to engage with the CDC process.

### Key Findings — A. Progress of reform in GDCE on SEZ management
- Overall assessment
  - The GDCE has improved management of SEZs based on FAD advice.
- Non-intrusive inspection and targeting
  - The Department of Free Zone Management (DFZM) commenced conducting random checks on cargo by utilizing non-intrusive investigation (NII) equipment.
  - Two to three percent of all cargo brought into SEZ is inspected by X-ray machine.
  - STX suggested that risk-based selection be utilized as a supplementary measure to increase detection rate.
- Outreach and communication
  - The DFZM conducted ten seminars for SEZ companies in 2023 to explain related laws and regulations.
  - STX suggested producing and posting a brochure to introduce customs procedures to SEZ companies more widely and clearly with limited human resources.
- Reporting and digitalization
  - Some SEZ companies still do not submit quarterly reports to the DFZM even though a quarterly report is a regulatory requirement.
  - Submission of a documentary report in paper form with excessive data elements may cause non-submission.
  - STX suggested digitalizing the report including reviewing the data elements to ensure the minimum data elements allow customs to analyze the risk.
  - Organizing more seminars for SEZ companies also contributes to addressing this challenge.
  - Noncompliance with reporting requirements should be addressed during discussions with relevant parties in SEZ management.
- Post-clearance audit (PCA)
  - The Department of Customs Audit (DCA) commenced conducting post clearance audits for SEZ companies in January 2024.
  - Around ten percent of all SEZ companies will be subject to the audit this year.
  - Auditee companies are selected based on risk analysis and company compliance ranking established by the GDCE’s Risk Management Office.
  - DCA does not manage yield rate of companies but has knowledge of the calculation of the yield rate.
  - There is room for improvement in cooperation between DFZM and DCA in dealing with noncompliance by investors; necessary information should be shared between these two Departments.
  - The assessment of the yield rate should be incorporated in future audits.
- E-seal pilot and SOP
  - GDCE found a vendor for e-seal which has a GPS tracking function and plans to launch a pilot project to use the e-seal for cargo monitoring within the Kingdom of Cambodia.
  - The signing ceremony with vendor may be organized in the second quarter of this year.
  - Department of Information Technology will develop the SOP for using e-seal before launching the pilot project.
  - The SOP should include establishment of a system to report any suspicious movement of cargo to related parties including the DFZM and the Department of Prevention and Suppression in a timely manner.
- ASYCUDA World and recommendations
  - All import clearance procedures and transit document (application of land transportation of goods) have been digitalized since January 2024.
  - Reporting to the DFZM and record keeping by SEZ companies is not digitalized.
  - Digitalization using ASYCUDA World improves record keeping and contributes to facilitating trade and enhancing risk management based on electronic data.
  - Given WCO Guidelines on Free Zones, information submission should be digitalized, and customs administration should have full access to this information for customs procedures and control.

### Key Findings — B. Approval procedures related to QIP including SEZ/QIP
- Role of GDCE and DCP
  - The GDCE (Department of Customs Procedures (DCP)) involves in verification process of the application for QI except SEZ/QIP which is involved by the DFZM through SEZ Zone Administration.
  - The DCP attends the meeting organized by the Council for the Development of Cambodia (CDC) to discuss whether the QIP should be approved with relevant ministries.
- Master List (ML) verification
  - The DCP involves in verification process of the Master List (ML) (except for the Master List submitted by SEZ/QIP) before approval by the CDC.
  - The DCP can provide comments on the ML; however, if CDC approved ML includes Goods which are not subject to duty and tax exemption, the GDCE seeks approval from MEF whether duty and tax paid or exempted.
  - Whilst the ML can be submitted online, there are still MLs being submitted by paper.
  - To manage good data in all MLs in the National Single Window (NSWs), STX suggested online submission should be the requirement to be approved.
  - CDC should encourage QIPs to request for ML in the NSWs.

- Qualified Investment Project (QIP) — definitions and procedures (as provided)
  - Definition and categories
    - A QIP is an investment project that has received a Registration Certificate (RC) from the Council for the Development of Cambodia (CDC).
    - QIPs are entitled to receive fiscal and non-fiscal incentives from the Cambodian Investment Board (CIB). (Ministry of Economic and Finance Prakas No.1127 refers)
    - Three categories of QIPs in Cambodia:
      - Domestic qualified investment projects
      - Export qualified investment projects
      - Supporting industry qualified investment projects
  - Procedures for duty/tax-exempt imports (as described)
    - Investors or their representatives shall apply for a ML of imported goods in paper or online via National Single Window to the Council for the Development of Cambodia (Cambodian Investment Board-CIB).
    - After getting approval from CDC or CIB in paper, the above master list shall be submitted to GDCE (Department of Customs Procedure). In case ML is approved online by CDC, there is no need to submit ML to GDCE.
    - When goods in the above master list are imported, investors or their representatives shall apply for Customs Permit through National Single Window, attaching supporting documents such as invoices, packing lists, transportation document, authorized letters, and other related documents if necessary.
    - After obtaining Customs Permit, investors or their representatives shall complete the procedure of Customs Declaration as the procedure in force.
    - (Source) GDCE

### Key Findings — C. Standard Operating Procedures (SOP) for compliance verification and reporting
- Draft SOP development
  - STX provided support to DFZM for developing the SOP for verification of compliance of SEZ companies and the report format (first draft referred to Annex II).
  - The draft was produced at a two-day workshop organized by the STX (workshop program in Annex III; presentation slides in Annex IV).
  - The DCA attended the meeting for developing the draft SOP and indicated concerns; DCA requested further discussion with DFZM and DCA.
  - Sentences needing further discussion are indicated as “pending” in the draft SOP.
  - Assessment criteria and types of verification based on risk (e.g., simplified verification, usual verification, etc.) need to be discussed during future consultations.

- Key elements of the Draft SOP (Annex II)
  - Definition of verification: visit to premises by DFZM staff to verify compliance of SEZ companies.
  - Objectives of verification:
    - Verifying compliance
    - Combating smuggling
    - Combating terrorism
    - Providing recommendations/incentives (e.g., reduction of verification for high compliant)
  - Responsible departments and cooperation:
    - DFZM in cooperation with DCA and other Departments conducts verification.
    - Cooperation includes information sharing, sharing yearly verification plan, etc.
  - Categorization of SEZ companies:
    - Three categories based on duration of operations: I: New SEZ companies, II: SEZ companies which have operated for one to five years, III: SEZ companies which have operated over 5 years. (Pending)
    - Four categories based on verification results: 1: compliant with all requirements, 2: compliant with most of requirements, 3: compliant with only few requirements, 4: non-compliant. (Pending)
    - Frequency of verification according to categories and specific assessment criteria are noted as (Pending) and referred to appendices.
  - Verification process (plan, preparation, verification, report and follow-up):
    - Yearly plan developed in the fourth quarter; monthly plan development and approval referenced as (Pending).
    - DFZM collects/checks documents such as Master list, contents and flow of manufacturing, past report of verification/inspection, internal audit report, compliance program (some elements marked (Pending)).
    - Notification to SEZ company: DFZM may notify at least one week prior to verification (Pending).
    - Verification checks include inventory reconciliation, records of manufacturing/processing, cargo movement and ledger, methods to store cargo, internal audit report, production plans, reports of operation and output, in-house training, improvements since previous verification, and information that may affect yield rate (many items marked (Pending)).
    - At the end of verification, DFZM orally notifies SEZ company of results and provides recommendations; company may explain mistakes/non-compliance and provide information on identified risks.
    - Reporting: DFZM sends completion notification to SEZ company (Pending), sends notification about further improvement when required (Pending).
    - DFZM makes verification report and submits it to DG of GDCE; inputs information into database (Pending); shares verification results including suspicious incidents with DCA.
    - Categorization based on results: individual evaluation on three-point scale (a: Very effective, b: Effective, c: Ineffective) and comprehensive evaluation on four-point scale (A, B, C or D) leading to categorization into 1, 2, 3, or 4 (all marked (Pending)); DFZM shares category with DCA.
  - Code of conduct and confidentiality:
    - SEZ officers must avoid arrogation, respect human rights and private life, comply with GDCE Code of Conduct and Ethics.
    - SEZ officers must keep secrecy of both SEZ companies and Customs; be wary of leaking business/personal secrets and of disclosing Customs confidential information.
    - Verification may be conducted with consent of the SEZ company; cooperation and understanding of SEZ company are important.
    - Required knowledge for SEZ officers noted as (Pending. Based on PCA manual in GDCE).

### Next steps
- Continue discussions to finalize the draft SOP for compliance verification with the DFZM and the DCA; detailed SOP will contribute to enhancing compliance of SEZ companies and strengthening standardized customs SEZ management.
- FAD will continue to support the GDCE initiative to reform SEZ and QIP management through the LTX.

### Rights and obligations of SEZ officer (Pending. Based on PCA manual in GDCE)
- Rights of SEZ officer
  - Entry to and perform the verification fieldwork at any time (normally 6:00 AM-6:00 PM) at, premises or places in SEZ, where documents, records or other information are kept
  - Examination of imported and exported goods, business records, business systems and commercial data relevant to customs declarations that made during the verification period
  - Conduct the actual auditing (verification) of the exported or imported goods as stipulated in the provisions of the Law on Customs
  - Issue a Notice which states re-determine the declared customs value and the reason for the decision.
  - Inquiry of SEZ companies
  - Temporary retention of SEZ company’s books and records
  - Obtain information necessary for the enforcement of verification from other relevant Ministries and governmental agencies.
  - Request the SEZ companies to present the Master List, the ledger, inventory, and other related documents.
  - Apply measures to deal with administrative offences in accordance with the provisions of the Law on Customs
  - SEZ officers report to the DCA, if:
    - Despite persuasive efforts, SEZ officers remain unable to enter the place or space that is suspected to keep books, records and documents, and goods.
    - There are indicators that an act of crime has been committed.
- Obligations of SEZ officer
  - Present the decision on auditing (verification) and customs ID cards to SEZ companies.
  - Comply strictly with the order and procedures of inspection.
  - Observe the law, to ensure objectivity and accuracy.
  - Not to compel fulfillment of illegal requirements, thereby causing difficulties and troubles to the SEZ companies as well as concerned organizations and individuals
  - Not to make intentionally any untruthful conclusions
  - To report to the persons who signed the decision on auditing (verification) and propose measures to deal with the results of verification.
  - To bear responsibility before the law for the minutes on conclusions of the verification
  - To comply with the regulations on confidentiality, to manage and use vouchers and documents as provided for the proper purpose.
- Rights of SEZ companies
  - Request SEZ officers to show the notification on auditing (verification) and customs identity cards.
  - Refuse the auditing (verification) if the decision on auditing (verification) does not comply with the provisions of the law.
  - Lodge complaints and denunciations in relation to conduct in breach of the law by SEZ officers during the course of an auditing (verification)
  - Provide explanations in the minutes on conclusions of the auditing (verification) and on the proposals for measures as prepared by the SEZ officers.
  - Object to the decision by writing to the DG of GDCE within 30 days from the date SEZ companies receive the Notice of the re-determination, according to article 24 of the Law of Customs
  - Request the customs officer to compensate for damages caused by any unlawful manner as the results of verification.
- Obligations of SEZ companies
  - Appoint competent persons to cooperate with the SEZ officers.
  - Create good environment for the SEZ officers to perform their tasks.
  - Provide all accounting vouchers and books and other documents relating to the exported or imported goods and copies of those materials at the request of the SEZ officers.
  - SEZ companies shall be required to comply with the regulations on SEZ, decisions on auditing (verification) and instructions on conclusions of auditing (verification)
  - Not to obstruct the auditing (verification) activities in any way
  - Receive a notice on conclusions of the auditing (verification)

### Appendices to this annex (to be Refined by GDCE with the support of the LTX)
- Appendix 1: Category based on the duration of operation (only for customs use)
- Appendix 2: Category based on the audit results and criteria for assessment
- Appendix 3: Frequency of verification
- Appendix 4: Notification of verification (Pending. Based on Japan Customs’ practice)
- Appendix 5: Yearly plan format (Pending. Based on Japan Customs’ practice)
- Appendix 6 : Monthly plan format (Pending. Based on Japan Customs’ practice)
- Appendix 7: Notification of verification (TBD)
- Appendix 8: Report format (Pending. Based on Japan Customs’ practice) (TBD)
- Appendix 9: Format of notification of completion of verification (TBD)
- Appendix 10: Format of notification of further necessary improvement
- Appendix 11: Evaluation criteria for individual evaluation (TBD)
- Appendix 12: Evaluation criteria for comprehensive evaluation (TBD)

- Appendix 1: Category based on the duration of operation (only for customs use) (examples)
  - Duration of operation / Category
    - New SEZ company I
    - SEZ companies which have operated for 1~5 years II
    - SEZ companies which have operated for over 5 years III

- Appendix 2: Category based on the audit results and criteria for assessment (examples)
  - Assessment criteria / Category
    - AEO/Best Trader company S1
    - Comprehensive risk rating evaluation was A at least X times in the past verification.
    - (Record keeping) There were minor errors found less than X times in the past verification.
    - (Cargo management) There were minor errors found less than X number of times in the past verification.
    - There was no record of non-compliance 1
    - The company is not categorized as risk A, C or D.
    - There was no record of non-compliance 2
    - Comprehensive evaluation was risk rated C more than X times in the past verification.
    - (Record keeping) There were serious errors found more than X times in the past (verification)
    - (Cargo management) There were serious errors found more than X times in the past verification.
    - There was no record of non-compliance 3
    - Comprehensive evaluation was risk rated D more than X times in the past verification.
    - (Record keeping) There were serious errors found more than X times in the past verification.
    - (Cargo management) There were serious errors found more than X times in the past verification.
    - There was(were) record(s) of non-compliance 4
    - There is information/intelligence provided by the other Department or private sector.
- Appendix 3: Frequency of Verification (examples)
  - Category based on the duration of operations / Category based on the verification results / Frequency of audit
    - I / S1 / Once in XX years
    - II / S1 / 1
    - II / 2
    - II / 3
    - II / 4
    - III / S1 / 1
    - III / 2
    - III / 3
    - III / 4
- Appendix 4: Notification of Verification (Pending. Based on Japan Customs’ Practice)
  - The DFZM notifies the SEZ company of the following information:
    - Date and time of verification provided in writing to the SEZ company (before notification, there is a need to discuss the suitable date and time with SEZ company)
    - Request the responsible person to be present during the verification.
    - Duration of verification
    - Request the preparation of documents including ledger and inventory.
    - Records of internal audit and in-house training
- Appendix 5: Yearly Plan Format (Pending. Based on Japan Customs’ Practice) (examples)
  - Columns/suggested fields include:
    - Date of audit
    - Target company: Month, Duration, Name, Location, Cargo stored, Duration of operation, Audit results
    - Reason for selection
    - Others
- Appendix 6: Monthly Plan Format (Pending. Based on Japan Customs’ Practice) (examples)
  - Fields and checklist items include:
    - Target company: Name, Location
    - Date of verification: From / Until (multiple entries)
    - Officers: Leader, Members
    - category: Based on duration of operation; Based on verification results
    - Points to be verified; Points to be noted
    - (Reference) Previous verification: Date of verification
    - Categories / Evaluation: Comprehensive evaluation; Individual evaluation; Cargo management; Storage of cargo; Production of cargo; Record keeping; Others
    - Records of non-compliance: Yes or No (repeated for items)
- Appendix 7 to 12 and other report formats (TBD or Pending)
  - Appendix 7: Notification of Verification (TBD)
  - Appendix 8: Report Format (Pending. Based on Japan Customs’ Practice) — suggested contents:
    - Name of bonded area
    - Location of bonded area
    - Date and duration of audit
    - The number of officers and their names
    - Name of the representative of company who is present at verification.
    - Category of company
    - Comprehensive evaluation
    - Evaluation of each item according to assessment criteria
    - Date of next audit
    - Non-compliant facts (if any)
  - Appendix 9: Format of Notification of Completion of Verification (TBD)
  - Appendix 10: Format of Notification of Further Necessary Improvement (TBD)
  - Appendix 11: Evaluation Criteria for Individual Evaluation (TBD)
  - Appendix 12: Evaluation Criteria for Comprehensive Evaluation (TBD)

*IMF Technical Assistance Report — tarea2024061 (STX report summary)*

### 1.          This report summarizes the short-term expert (STX) work undertaken by Ms. Yuko Mamiya

### tarea2024061 - 1.          This report summarizes the short-term expert (STX) work undertaken by Ms. Yuko Mamiya

### Objectives of the STX mission
- Support the Cambodia General Department of Customs and Excise (GDCE) from 18 to 29 March 2024.
- Review the progress of reform in the GDCE on Special Economic Zone (SEZ) management along the Fiscal Affairs Department (FAD) advice provided in 2023 and provide advice for implementation.
- Review customs management on Qualified Investment Project (QIP) and provide advice.
- In support of the long-term expert (LTX), review and provide advice to the GDCE to improve the screening process of SEZ/QIP investor application, particularly how to engage with the CDC process.

### Key Findings — A. Progress of reform in GDCE on SEZ management
- Overall assessment
  - The GDCE has improved management of SEZs based on FAD advice.
- Non-intrusive inspection and targeting
  - The Department of Free Zone Management (DFZM) commenced conducting random checks on cargo by utilizing non-intrusive investigation (NII) equipment.
  - Two to three percent of all cargo brought into SEZ is inspected by X-ray machine.
  - STX suggested that risk-based selection be utilized as a supplementary measure to increase detection rate.
- Outreach and communication
  - The DFZM conducted ten seminars for SEZ companies in 2023 to explain related laws and regulations.
  - STX suggested producing and posting a brochure to introduce customs procedures to SEZ companies more widely and clearly with limited human resources.
- Reporting and digitalization
  - Some SEZ companies still do not submit quarterly reports to the DFZM even though a quarterly report is a regulatory requirement.
  - Submission of a documentary report in paper form with excessive data elements may cause non-submission.
  - STX suggested digitalizing the report including reviewing the data elements to ensure the minimum data elements allow customs to analyze the risk.
  - Organizing more seminars for SEZ companies also contributes to addressing this challenge.
  - Noncompliance with reporting requirements should be addressed during discussions with relevant parties in SEZ management.
- Post-clearance audit (PCA)
  - The Department of Customs Audit (DCA) commenced conducting post clearance audits for SEZ companies in January 2024.
  - Around ten percent of all SEZ companies will be subject to the audit this year.
  - Auditee companies are selected based on risk analysis and company compliance ranking established by the GDCE’s Risk Management Office.
  - DCA does not manage yield rate of companies but has knowledge of the calculation of the yield rate.
  - There is room for improvement in cooperation between DFZM and DCA in dealing with noncompliance by investors; necessary information should be shared between these two Departments.
  - The assessment of the yield rate should be incorporated in future audits.
- E-seal pilot and SOP
  - GDCE found a vendor for e-seal which has a GPS tracking function and plans to launch a pilot project to use the e-seal for cargo monitoring within the Kingdom of Cambodia.
  - The signing ceremony with vendor may be organized in the second quarter of this year.
  - Department of Information Technology will develop the SOP for using e-seal before launching the pilot project.
  - The SOP should include establishment of a system to report any suspicious movement of cargo to related parties including the DFZM and the Department of Prevention and Suppression in a timely manner.
- ASYCUDA World and recommendations
  - All import clearance procedures and transit document (application of land transportation of goods) have been digitalized since January 2024.
  - Reporting to the DFZM and record keeping by SEZ companies is not digitalized.
  - Digitalization using ASYCUDA World improves record keeping and contributes to facilitating trade and enhancing risk management based on electronic data.
  - Given WCO Guidelines on Free Zones, information submission should be digitalized, and customs administration should have full access to this information for customs procedures and control.

### Key Findings — B. Approval procedures related to QIP including SEZ/QIP
- Role of GDCE and DCP
  - The GDCE (Department of Customs Procedures (DCP)) involves in verification process of the application for QI except SEZ/QIP which is involved by the DFZM through SEZ Zone Administration.
  - The DCP attends the meeting organized by the Council for the Development of Cambodia (CDC) to discuss whether the QIP should be approved with relevant ministries.
- Master List (ML) verification
  - The DCP involves in verification process of the Master List (ML) (except for the Master List submitted by SEZ/QIP) before approval by the CDC.
  - The DCP can provide comments on the ML; however, if CDC approved ML includes Goods which are not subject to duty and tax exemption, the GDCE seeks approval from MEF whether duty and tax paid or exempted.
  - Whilst the ML can be submitted online, there are still MLs being submitted by paper.
  - To manage good data in all MLs in the National Single Window (NSWs), STX suggested online submission should be the requirement to be approved.
  - CDC should encourage QIPs to request for ML in the NSWs.

Box: Qualified Investment Project (QIP) — definitions and procedures (as provided)
- Definition and categories
  - A QIP is an investment project that has received a Registration Certificate (RC) from the Council for the Development of Cambodia (CDC).
  - QIPs are entitled to receive fiscal and non-fiscal incentives from the Cambodian Investment Board (CIB). (Ministry of Economic and Finance Prakas No.1127 refers)
  - Three categories of QIPs in Cambodia:
    - Domestic qualified investment projects
    - Export qualified investment projects
    - Supporting industry qualified investment projects
- Procedures for duty/tax-exempt imports (as described)
  - Investors or their representatives shall apply for a ML of imported goods in paper or online via National Single Window to the Council for the Development of Cambodia (Cambodian Investment Board-CIB).
  - After getting approval from CDC or CIB in paper, the above master list shall be submitted to GDCE (Department of Customs Procedure). In case ML is approved online by CDC, there is no need to submit ML to GDCE.
  - When goods in the above master list are imported, investors or their representatives shall apply for Customs Permit through National Single Window, attaching supporting documents such as invoices, packing lists, transportation document, authorized letters, and other related documents if necessary.
  - After obtaining Customs Permit, investors or their representatives shall complete the procedure of Customs Declaration as the procedure in force.
  - (Source) GDCE

### Key Findings — C. Standard Operating Procedures (SOP) for compliance verification and reporting
- Draft SOP development
  - STX provided support to DFZM for developing the SOP for verification of compliance of SEZ companies and the report format (first draft referred to Annex II).
  - The draft was produced at a two-day workshop organized by the STX (workshop program in Annex III; presentation slides in Annex IV).
  - The DCA attended the meeting for developing the draft SOP and indicated concerns; DCA requested further discussion with DFZM and DCA.
  - Sentences needing further discussion are indicated as “pending” in the draft SOP.
  - Assessment criteria and types of verification based on risk (e.g., simplified verification, usual verification, etc.) need to be discussed during future consultations.

- Key elements of the Draft SOP (Annex II)
  - Definition of verification: visit to premises by DFZM staff to verify compliance of SEZ companies.
  - Objectives of verification:
    - Verifying compliance
    - Combating smuggling
    - Combating terrorism
    - Providing recommendations/incentives (e.g., reduction of verification for high compliant)
  - Responsible departments and cooperation:
    - DFZM in cooperation with DCA and other Departments conducts verification.
    - Cooperation includes information sharing, sharing yearly verification plan, etc.
  - Categorization of SEZ companies:
    - Three categories based on duration of operations: I: New SEZ companies, II: SEZ companies which have operated for one to five years, III: SEZ companies which have operated over 5 years. (Pending)
    - Four categories based on verification results: 1: compliant with all requirements, 2: compliant with most of requirements, 3: compliant with only few requirements, 4: non-compliant. (Pending)
    - Frequency of verification according to categories and specific assessment criteria are noted as (Pending) and referred to appendices.
  - Verification process (plan, preparation, verification, report and follow-up):
    - Yearly plan developed in the fourth quarter; monthly plan development and approval referenced as (Pending).
    - DFZM collects/checks documents such as Master list, contents and flow of manufacturing, past report of verification/inspection, internal audit report, compliance program (some elements marked (Pending)).
    - Notification to SEZ company: DFZM may notify at least one week prior to verification (Pending).
    - Verification checks include inventory reconciliation, records of manufacturing/processing, cargo movement and ledger, methods to store cargo, internal audit report, production plans, reports of operation and output, in-house training, improvements since previous verification, and information that may affect yield rate (many items marked (Pending)).
    - At the end of verification, DFZM orally notifies SEZ company of results and provides recommendations; company may explain mistakes/non-compliance and provide information on identified risks.
    - Reporting: DFZM sends completion notification to SEZ company (Pending), sends notification about further improvement when required (Pending).
    - DFZM makes verification report and submits it to DG of GDCE; inputs information into database (Pending); shares verification results including suspicious incidents with DCA.
    - Categorization based on results: individual evaluation on three-point scale (a: Very effective, b: Effective, c: Ineffective) and comprehensive evaluation on four-point scale (A, B, C or D) leading to categorization into 1, 2, 3, or 4 (all marked (Pending)); DFZM shares category with DCA.
  - Code of conduct and confidentiality:
    - SEZ officers must avoid arrogation, respect human rights and private life, comply with GDCE Code of Conduct and Ethics.
    - SEZ officers must keep secrecy of both SEZ companies and Customs; be wary of leaking business/personal secrets and of disclosing Customs confidential information.
    - Verification may be conducted with consent of the SEZ company; cooperation and understanding of SEZ company are important.
    - Required knowledge for SEZ officers noted as (Pending. Based on PCA manual in GDCE).

### Next steps
- Continue discussions to finalize the draft SOP for compliance verification with the DFZM and the DCA; detailed SOP will contribute to enhancing compliance of SEZ companies and strengthening standardized customs SEZ management.
- FAD will continue to support the GDCE initiative to reform SEZ and QIP management through the LTX.

*IMF Technical Assistance Report — tarea2024061 (STX report summary)*

### 7. Rights and obligations of SEZ officer (Pending. Based on PCA manual in GDCE)

### 7. Rights and obligations of SEZ officer (Pending. Based on PCA manual in GDCE)

### Rights of SEZ officer
- Entry to and perform the verification fieldwork at any time (normally 6:00 AM-6:00 PM) at, premises or places in SEZ, where documents, records or other information are kept
- Examination of imported and exported goods, business records, business systems and commercial data relevant to customs declarations that made during the verification period
- Conduct the actual auditing (verification) of the exported or imported goods as stipulated in the provisions of the Law on Customs
- Issue a Notice which states re-determine the declared customs value and the reason for the decision.
- Inquiry of SEZ companies
- Temporary retention of SEZ company’s books and records
- Obtain information necessary for the enforcement of verification from other relevant Ministries and governmental agencies.
- Request the SEZ companies to present the Master List, the ledger, inventory, and other related documents.
- Apply measures to deal with administrative offences in accordance with the provisions of the Law on Customs
- SEZ officers report to the DCA, if:
  - Despite persuasive efforts, SEZ officers remain unable to enter the place or space that is suspected to keep books, records and documents, and goods.
  - There are indicators that an act of crime has been committed.

### Obligations of SEZ officer
- Present the decision on auditing (verification) and customs ID cards to SEZ companies.
- Comply strictly with the order and procedures of inspection.
- Observe the law, to ensure objectivity and accuracy.
- Not to compel fulfillment of illegal requirements, thereby causing difficulties and troubles to the SEZ companies as well as concerned organizations and individuals
- Not to make intentionally any untruthful conclusions
- To report to the persons who signed the decision on auditing (verification) and propose measures to deal with the results of verification.
- To bear responsibility before the law for the minutes on conclusions of the verification
- To comply with the regulations on confidentiality, to manage and use vouchers and documents as provided for the proper purpose.

### Rights of SEZ companies
- Request SEZ officers to show the notification on auditing (verification) and customs identity cards.
- Refuse the auditing (verification) if the decision on auditing (verification) does not comply with the provisions of the law.
- Lodge complaints and denunciations in relation to conduct in breach of the law by SEZ officers during the course of an auditing (verification)
- Provide explanations in the minutes on conclusions of the auditing (verification) and on the proposals for measures as prepared by the SEZ officers.
- Object to the decision by writing to the DG of GDCE within 30 days from the date SEZ companies receive the Notice of the re-determination, according to article 24 of the Law of Customs
- Request the customs officer to compensate for damages caused by any unlawful manner as the results of verification.

### Obligations of SEZ companies
- Appoint competent persons to cooperate with the SEZ officers.
- Create good environment for the SEZ officers to perform their tasks.
- Provide all accounting vouchers and books and other documents relating to the exported or imported goods and copies of those materials at the request of the SEZ officers.
- SEZ companies shall be required to comply with the regulations on SEZ, decisions on auditing (verification) and instructions on conclusions of auditing (verification)
- Not to obstruct the auditing (verification) activities in any way
- Receive a notice on conclusions of the auditing (verification)

### Appendices to this annex (to be Refined by GDCE with the support of the LTX)
- Appendix 1: Category based on the duration of operation (only for customs use)
- Appendix 2: Category based on the audit results and criteria for assessment
- Appendix 3: Frequency of verification
- Appendix 4: Notification of verification (Pending. Based on Japan Customs’ practice)
- Appendix 5: Yearly plan format (Pending. Based on Japan Customs’ practice)
- Appendix 6 : Monthly plan format (Pending. Based on Japan Customs’ practice)
- Appendix 7: Notification of verification (TBD)
- Appendix 8: Report format (Pending. Based on Japan Customs’ practice) (TBD)
- Appendix 9: Format of notification of completion of verification (TBD)
- Appendix 10: Format of notification of further necessary improvement
- Appendix 11: Evaluation criteria for individual evaluation (TBD)
- Appendix 12: Evaluation criteria for comprehensive evaluation (TBD)

### Appendix 1: Category based on the duration of operation (only for customs use) (examples)
- Duration of operation / Category
  - New SEZ company I
  - SEZ companies which have operated for 1~5 years II
  - SEZ companies which have operated for over 5 years III

### Appendix 2: Category based on the audit results and criteria for assessment (examples)
- Assessment criteria / Category
  - AEO/Best Trader company S1
  - Comprehensive risk rating evaluation was A at least X times in the past verification.
  - (Record keeping) There were minor errors found less than X times in the past verification.
  - (Cargo management) There were minor errors found less than X number of times in the past verification.
  - There was no record of non-compliance 1
  - The company is not categorized as risk A, C or D.
  - There was no record of non-compliance 2
  - Comprehensive evaluation was risk rated C more than X times in the past verification.
  - (Record keeping) There were serious errors found more than X times in the past (verification)
  - (Cargo management) There were serious errors found more than X times in the past verification.
  - There was no record of non-compliance 3
  - Comprehensive evaluation was risk rated D more than X times in the past verification.
  - (Record keeping) There were serious errors found more than X times in the past verification.
  - (Cargo management) There were serious errors found more than X times in the past verification.
  - There was(were) record(s) of non-compliance 4
  - There is information/intelligence provided by the other Department or private sector.

### Appendix 3: Frequency of Verification (examples)
- Category based on the duration of operations / Category based on the verification results / Frequency of audit
  - I / S1 / Once in XX years
  - II / S1 / 1
  - II / 2
  - II / 3
  - II / 4
  - III / S1 / 1
  - III / 2
  - III / 3
  - III / 4

### Appendix 4: Notification of Verification (Pending. Based on Japan Customs’ Practice)
- The DFZM notifies the SEZ company of the following information:
  - Date and time of verification provided in writing to the SEZ company (before notification, there is a need to discuss the suitable date and time with SEZ company)
  - Request the responsible person to be present during the verification.
  - Duration of verification
  - Request the preparation of documents including ledger and inventory.
  - Records of internal audit and in-house training

### Appendix 5: Yearly Plan Format (Pending. Based on Japan Customs’ Practice) (examples)
- Columns/suggested fields include:
  - Date of audit
  - Target company: Month, Duration, Name, Location, Cargo stored, Duration of operation, Audit results
  - Reason for selection
  - Others

### Appendix 6: Monthly Plan Format (Pending. Based on Japan Customs’ Practice) (examples)
- Fields and checklist items include:
  - Target company: Name, Location
  - Date of verification: From / Until (multiple entries)
  - Officers: Leader, Members
  - category: Based on duration of operation; Based on verification results
  - Points to be verified; Points to be noted
  - (Reference) Previous verification: Date of verification
  - Categories / Evaluation: Comprehensive evaluation; Individual evaluation; Cargo management; Storage of cargo; Production of cargo; Record keeping; Others
  - Records of non-compliance: Yes or No (repeated for items)

### Appendix 7 to 12 and other report formats (TBD or Pending)
- Appendix 7: Notification of Verification (TBD)
- Appendix 8: Report Format (Pending. Based on Japan Customs’ Practice) — suggested contents:
  - Name of bonded area
  - Location of bonded area
  - Date and duration of audit
  - The number of officers and their names
  - Name of the representative of company who is present at verification.
  - Category of company
  - Comprehensive evaluation
  - Evaluation of each item according to assessment criteria
  - Date of next audit
  - Non-compliant facts (if any)
- Appendix 9: Format of Notification of Completion of Verification (TBD)
- Appendix 10: Format of Notification of Further Necessary Improvement (TBD)
- Appendix 11: Evaluation Criteria for Individual Evaluation (TBD)
- Appendix 12: Evaluation Criteria for Comprehensive Evaluation (TBD)

*tarea2024061 - 7. Rights and obligations of SEZ officer (Pending. Based on PCA manual in GDCE)*

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_Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024061.pdf_