SIGARdSpecial Inspector General forAfghanistan ReconstructionSIGAR 14-47 Audit ReportAfghan Customs: U.S. Programs Have Had SomeSuccesses, but Challenges Will Limit CustomsRevenue as a Sustainable Source of Income forAfghanistanAPRIL2014SIGAR 14-47-AR/Afghan Customs RevenueSIGARAPRIL 2014Special Inspector General forAfghanistan ReconstructionSIGAR 14-47 Audit ReportWHAT SIGAR REVIEWEDSince 2009, the United States hasallocated at least $198 million towardefforts to assist in developing the capacityof the Afghan government to assess andcollect customs revenue. The U.S. Agencyfor International Development (USAID)administered the Trade Accession andFacilitation for Afghanistan (TAFA) I andTAFA II programs from November 2009through August 2013. These programswere followed by the Afghanistan Tradeand Revenue (ATAR) program as a followon activity beginning in November 2013.The Department of Homeland Security’sCustoms and Border Protection (CBP) hasoperated as the administrator for theBorder Management Task Force (BMTF)since its inception in 2006. Through theseprograms, the government has worked todevelop and reform Afghanistan’s laws,policies, and procedures for customsprocesses operating at the AfghanCustoms Department (ACD) headquartersand customs locations throughoutAfghanistan.This audit (1) assessed the extent towhich these USAID and CBP programsachieved their intended outcomes, and (2)examined challenges to creating a stableand lasting source of customs revenue forAfghanistan.To accomplish these objectives, SIGARreviewed Afghan customs law, policies,and procedures; examined USAID andCBP contract documents and programfiles; interviewed ACD, USAID, CBP, BMTF,U.S. Embassy, and other officials; andvisited customs locations in Afghanistan.Afghan Customs: U.S. Programs Have Had Some Successes, butChallenges Will Limit Customs Revenue as a Sustainable Source ofIncome for AfghanistanWHAT SIGAR FOUNDA nation’s ability to control its borders is essential in controlling the flow of licitand illicit goods and assessing appropriate tariffs and customs duties.Customs revenue is a major component of Afghanistan’s national budget,which is currently funded through a combination of domestic revenuecollections and aid from international donors. For Afghanistan’s 3 most recentfiscal years, customs revenue collections produced $698 million-$1.1 billionannually, accounting for 44-48 percent of total domestic revenue collection.However, domestic revenues continue to fall short of expenditures, andinternational assistance is expected to decline in coming years. As a result,increasing the Afghan government’s collection of domestic revenues is a mainobjective of both the U.S. and Afghan governments.The U.S. government—through programs run by the U.S. Agency forInternational Development (USAID) and the Department of HomelandSecurity’s Customs and Border Protection (CBP)—has provided funding andexpertise to assist the Afghan government in developing and reforming itscustoms assessment and collection capabilities. USAID has administeredmultiple projects designed to improve the trade and customs environment,including two Trade Accession and Facilitation for Afghanistan (TAFA)programs—called TAFA I and TAFA II—between November 2009 and August2013, and their successor program—the Afghanistan Trade and Revenue(ATAR) program, which started in November 2013. CBP has administered theBorder Management Task Force (BMTF), a program that mentors AfghanCustoms Department (ACD), Afghan Border Police, and Afghan Customs Policeagents at border control points and inland customs depots.USAID’s two TAFA programs resulted in some successes. Among theiraccomplishments, the TAFA programs assisted the Afghan government intrade negotiations and significantly reduced customs processing times and thenumber of steps required to trade across Afghanistan’s border. Specifically,they reduced the number of customs process steps at nine inland customsdepots and the Kabul International Airport—customs locations that account for98 percent of Afghanistan’s customs revenues—reportedly resulting in annualcost savings to importers and the Afghan government of $39 million.CBP’s BMTF also had some successes. For example, the BMTF upgraded theKabul Airport Customs Yard, which, according to CBP officials, reducedcustoms processing time from 10 to 2 days and created a 37 percent increasein customs revenue at that location. BMTF reports show that BMTF mentorsheld more than 7,000 training sessions between 2010 and 2013, andassisted the ACD in conducting more than 670 seizures during that sameperiod.Nevertheless, SIGAR found that BMTF mentors operate under contracts andsubcontracts that do not contain performance metrics. Specifically, theFor more information, contact SIGAR Public Affairs at (703) 545-5974 or sigar.pentagon.ccr.mbx.public-affairs@mail.mil.contract documents for BMTF activities do not include a single metric that defines specific, measurable goalsfor the BMTF mentors to achieve or performance metrics to measure the program’s success.According to USAID, CBP, and TAFA officials, corruption impacts all levels of the customs process and is thebiggest problem affecting Afghan customs processes and revenues. The scale and impact of corruption inAfghanistan’s customs process is difficult to quantify. Nevertheless, USAID and ACD officials hypothesize thateliminating or significantly reducing corruption in the customs process could potentially double the customsrevenues remitted to the central government. The BMTF also noted that criminal networks use intimidation tosmuggle commodities, resulting in the estimated loss of approximately $25 million annually for wheat and riceimports at a single customs location. In a separate estimate, TAFA officials stated that approximately $60million is lost annually to commercial smuggling. Further complicating efforts to combat criminal andpatronage networks are reports from BMTF advisers that Afghan employees are being kidnapped andintimidated because they are listening to the BMTF advisers and properly collecting customs duties.To help reduce corruption, the Afghan and U.S. governments proposed streamlining and automating customsprocesses. Two major innovations in the automation of customs processes—a risk management system and anelectronic payment system—were started under TAFA. The risk management system, created to facilitate thetargeted inspection of imported cargo, is designed to optimize the use of limited security resources anddecrease transit times. While the ACD accepted the risk management system in principle, it reportedlyconsidered it too difficult to operate and chose to adopt a scaled down approach, with the successiveimplementation of specific parts of the risk management system over a period of years.Similarly, progress in implementing an electronic payment system for customs duties has been slow. Currently,customs fees in Afghanistan are processed in cash at the inland customs depots where the imported cargo isinspected and assessed customs duties. This system can lead to customs brokers traveling long distances withlarge quantities of cash to pay customs fees assessed on imported goods. The current cash-based paymentsystem is inefficient, leaves customs brokers vulnerable to theft, and increases the opportunities forcorruption. According to USAID and TAFA program officials, at the conclusion of the TAFA programs in August2013, the ACD had the equipment and technical knowledge needed to launch a pilot system. However, USAIDofficials stated that the electronic payment system was delayed, due in part, to a proposal by an Afghan officialto allow only one Afghan bank to process all of the electronic customs payments. This arrangement would havegiven the selected bank a significant and improper advantage over its competitors. Although the riskmanagement and the electronic payment systems are highlighted in the TAFA and ATAR contract documents asimportant anti-corruption measures, SIGAR found that the ATAR contract does not require the implementingpartner to meet annual targets for implementing these systems.The future of customs revenues as a stable source of income for the Afghan government remains unclear. TheTAFA and BMTF programs achieved some successes in reforming and developing Afghan customs law, policies,and procedures; but, larger issues concerning questionable customs data, the withdrawal of internationalforces, and corruption remain.WHAT SIGAR RECOMMENDSSIGAR recommends that the CBP Commissioner instruct the CBP attaché in Afghanistan to develop clearperformance metrics for BMTF mentor operations and submit such metrics to DOD/CENTCOM for incorporationinto any future BMTF contracts or task orders. SIGAR also recommends that the USAID Administrator instructthe USAID Mission Director for Afghanistan to (1) direct the ATAR implementing partner to continue to workwith Afghanistan’s Tariffs Statistics Unit to reduce discrepancies in customs data and make the reduction instatistical discrepancies a requirement of the contract for the ATAR program, and (2) ensure that annualtargets for implementation of anti-corruption measures, such as the electronic payment system, are includedas performance requirements in the ATAR program contract. CBP concurred with the single recommendationdirected toward it, and USAID partially concurred with both recommendations directed toward it.For more information, contact SIGAR Public Affairs at (703) 545-5974 or sigar.pentagon.ccr.mbx.public-affairs@mail.mil.April 15, 2014The Honorable John F. KerrySecretary of StateThe Honorable James B. CunninghamU.S. Ambassador to AfghanistanDr. Rajiv ShahAdministrator, U.S. Agency for International DevelopmentMr. William HamminkMission Director for Afghanistan, U.S. Agency for International DevelopmentMr. R. Gill KerlikowskeCommissioner, U.S. Customs and Border ProtectionThis report discusses the results of SIGAR’s audit of the U.S. Agency for InternationalDevelopment’s (USAID) and the Department of Homeland Security Customs and BorderProtection’s (CBP) programs designed to assist in the development and reform ofAfghanistan’s customs laws, policies, and procedures. The report recommends that the CBPCommissioner instruct the CBP attaché in Afghanistan to develop clear performance metricsfor BMTF mentor operations and submit such metrics to DOD/CENTCOM for incorporation intoany future BMTF contracts or task orders. The report also recommends that the USAIDAdministrator instruct the USAID Mission Director for Afghanistan to (1) direct the AfghanistanTrade and Revenue (ATAR) implementing partner to continue to work with Afghanistan’s TariffsStatistics Unit to reduce discrepancies in customs data and make the reduction in statisticaldiscrepancies a requirement of the contract for the ATAR program, and (2) ensure that annualtargets for implementation of anti-corruption measures, such as the electronic paymentsystem, are included as performance requirements in the ATAR program contract.We received written comments on a draft of this report from CBP and USAID. With regard to ourrecommendations, CBP concurred with the single recommendation directed toward it, andUSAID partially concurred with both recommendations for the agency. CBP’s and USAID’scomments are presented in appendices VI and VII, respectively.SIGAR conducted this audit under the authority of Public Law No. 110-181, as amended; theInspector General Act of 1978, as amended; and in accordance with generally acceptedgovernment auditing standards.John F. SopkoSpecial Inspector Generalfor Afghanistan ReconstructionTABLE OF CONTENTSBackground .................................................................................................................................................................. 2 TAFA and BMTF Programs Achieved Some Positive Results, but USAID’s Implementing Partner Did Not Fulfill AllContractual Requirements and BMTF Contract Documents Lack Performance Metrics ........................................ 6 Questionable Customs Data, Drawdown of Coalition Forces, and Systemic Corruption Will Likely HinderDevelopment of Customs Revenue as a Sustainable Source of Funds ................................................................. 10 Conclusion.................................................................................................................................................................. 16 Recommendations .................................................................................................................................................... 16 Agency Comments ..................................................................................................................................................... 17 Appendix I - Scope and Methodology ....................................................................................................................... 18 Appendix II - Anticipated Results of Trade Accession and Facilitation for Afghanistan and U.S. Agency forInternational Development Response ...................................................................................................................... 19 Appendix III - Trade Accession and Facilitation for Afghanistan Program Indicators............................................. 21 Appendix IV - Afghanistan Trade and Revenue Program Contract Review ............................................................. 38 Appendix V - Additional Objectives for the Border Management Task Force ......................................................... 39 Appendix VI - U.S. Customs and Border Protection Comments .............................................................................. 41 Appendix VII - U.S. Agency for International Development Comments ................................................................... 44 Appendix VIII - Acknowledgements ........................................................................................................................... 47 TABLESTable 1 - TAFA Contract Indicators and Results ......................................................................................................... 7 Table 2 - USAID’s Contractually Identified Anticipated Results for the TAFA Program and Completion Status ... 19 Table 3 - TAFA Program Indicators............................................................................................................................ 21 FIGURESFigure 1 - Map of Afghan Customs Locations ............................................................................................................ 3 PHOTOSPhoto 1 - Cargo Truck Passes through Border Crossing at Weesh-Chaman Border Crossing Point ....................... 1 Photo 2 - Commercial Vehicle at the Weesh-Chaman Border Crossing Point........................................................ 14 SIGAR 14-47-AR/Afghan Customs RevenuePage iABBREVIATIONSACDAfghan Customs DepartmentASYCUDAAutomated System for Customs DataATARAfghanistan Trade and RevenueBCPborder crossing pointBMMBorder Management ModelBMTFBorder Management Task ForceCBPCustoms and Border ProtectionCENTCOMU.S. Central CommandDHSDepartment of Homeland SecurityDODDepartment of DefenseISAFInternational Security Assistance ForceTAFATrade Accession and Facilitation for AfghanistanUSAIDU.S. Agency for International DevelopmentWTOWorld Trade OrganizationSIGAR 14-47-AR/Afghan Customs RevenuePage iiA nation’s ability to control its borders is essential in controlling the flow of licit and illicit goods and assessingappropriate tariffs and customs duties. Customs revenue is a major component of Afghanistan’s nationalbudget, a budget funded through a combination of domestic revenue collections and aid from internationaldonors. Domestic revenues continue to fall short of expenditures, and international assistance is expected todecline in coming years. As a result, increasing the Afghan government’s collection of domestic revenues is amain objective of both the U.S. and Afghan governments. For Afghanistan’s 3 most recent fiscal years,1customs revenue collections produced $698 million to $1.1 billion annually,2 accounting for 44-48 percent oftotal domestic revenue collection.3 Further, according to the U.S. Department of Defense (DOD), revenuegeneration at the borders will increase if border management improves and the various Afghan governmententities responsible for implementing reforms to customs legislation, regulation, and procedures improve theirorganizational operations and reduce corruption.4The U.S. government—through programs run by the U.S. Agency for International Development (USAID) and theDepartment of Homeland Security’s (DHS) Customs and Border Protection (CBP)—has provided funding andexpertise to assist the Afghan government in developing and reforming its customs assessment and collectioncapabilities.USAID has administered multipleprojects designed to improve thetrade and customs environment,including two Trade Accessionand Facilitation for Afghanistan(TAFA) programs—called TAFA Iand TAFA II—between November2009 and August 2013, and theirsuccessor program—theAfghanistan Trade and Revenue(ATAR) program, which started inNovember 2013.The CBP has administered theBorder Management Task Force(BMTF), a program that mentorsAfghan Customs Department(ACD), Afghan Border Police, andAfghan Customs Police agents atborder control points and inlandPhoto 1 - Cargo Truck Passes through Border Crossing atWeesh-Chaman Border Crossing PointSource: SIGAR, August 26, 2013Afghanistan follows the solar Hijri calendar, which began in 622 A.D. in the Gregorian calendar. SIGAR converts Hijri solaryears to Gregorian equivalents.1Total domestic revenue: Afghanistan collected 100 billion Afghanis in its fiscal year 1390 (March 21, 2011 throughMarch 20, 2012), 81.4 billion Afghanis in the 9-month fiscal year 1391 (March 21, 2012 through December 20, 2012),and plans to collect 128 billion Afghanis in fiscal year 1392 (December 21, 2012 through December 20, 2013). Customsrevenues: Afghanistan collected 48.1 billion Afghanis in fiscal year 1390, 35.8 billion Afghanis in the 9-month fiscal year1391, and plans to collect about 61.2 billion Afghanis in fiscal year 1392.23 The following Afghani to U.S. Dollar exchange rates were utilized. Fiscal year 1390: 48.28 Afghanis per U.S. Dollar as ofMarch 20, 2012; Fiscal year 1391: 51.22 Afghanis per U.S. Dollar as of December 20, 2012; Fiscal Year 1392: 56.12Afghanis per U.S. Dollar as of December 20, 2013.4U.S. Department of Defense, Progress Toward Security and Stability in Afghanistan, July 2013.SIGAR 14-47-AR/Afghan Customs RevenuePage 1customs depots. (See photo 1 of a commercial vehicle passing through the Weesh-Chaman BorderCrossing Point between Afghanistan and Pakistan.)This audit (1) assessed the extent to which these USAID and CBP programs achieved their intended outcomes,and (2) examined challenges to creating a stable and lasting source of customs revenue for Afghanistan.To accomplish these objectives, we reviewed relevant Afghan laws, policies, and procedures related to theassessment and collection of customs revenues, as well as contract and performance documents from USAID,DOD, and CBP contract files. To assess the extent to which TAFA and BMTF programs, operating betweenJanuary 1, 2010, and November 07, 2013, achieved their stated objectives, we conducted program filereviews and interviews with Department of State, USAID, CBP, International Security Assistance Force (ISAF),an implementing partner,5 a contractor, and ACD officials familiar with the U.S. programs and visited customslocations throughout Afghanistan. Additionally, we reviewed Afghanistan’s customs laws, processes, andprocedures to identify reforms and developments attributable to the efforts of the U.S. funded programs. Toexamine challenges to creating a stable and lasting source of customs revenue for Afghanistan, we reviewedAfghanistan’s customs data from January 2010 through November 2013, as provided by the ACD through theBMTF, and conducted interviews with Department of State, USAID, CBP, ISAF, an implementing partner, acontractor, and ACD officials familiar with Afghanistan’s customs capabilities. Additionally, we reviewed theACD customs data for statistical anomalies and data reliability. We conducted our audit work in Washington,D.C., and Kabul, Mazar-e-Sharif, Hairatan, Spin Boldak, and Weesh, Afghanistan, from July through February2014, in accordance with generally accepted government auditing standards. Appendix I contains moreinformation on our scope and methodology.BACKGROUNDThe ACD is responsible for assessing and collecting customs duties in Afghanistan and for operating a networkof border crossing points and inland customs depots. Under the current system, vehicles crossing intoAfghanistan must pass through a border crossing point before being allowed to travel farther into Afghanistan.Once in the country, commercial vehicles must proceed to the nearest inland customs depot to undergo acustoms inspection, during which the value of the transported goods is determined and the customs duty isassessed and paid.See figure 1 below for a map of the locations of Afghanistan’s 11 border crossing points and 17 inlandcustoms depots.5“Implementing partner” is a term USAID uses to mean contractors and recipients of cooperative agreements and grants.SIGAR 14-47-AR/Afghan Customs RevenuePage 2Figure 1 - Map of Afghan Customs LocationsSource: Afghan Customs DepartmentAfghan Efforts to Develop and Reform Customs CapabilitiesRecognizing the importance of customs revenues for its sustainability, the Afghan government has made anumber of commitments to reform and enhance its customs collection capabilities. These commitmentsinclude reforming processes to align with the World Customs Organization’s Revised Kyoto Convention6concerning customs processes and procedures; an attempt to gain admittance to the World Trade Organization(WTO); and promises made during the conclusion of the Tokyo Mutual Accountability Framework7 to create amore efficient, transparent, and accountable customs and tax system. Further, the Afghan government hasdemonstrated the importance of customs collection by developing formal plans to bolster the capability andcapacity of the ACD and giving customs collection a prominent place within the Afghanistan NationalThe Revised Kyoto Convention is a blueprint for international modern customs procedures providing internationalcommerce predictability and efficiency in customs operations.67 The Tokyo Mutual Accountability Framework establishes mutual commitments of the Afghan government and theinternational community to help Afghanistan achieve its development and governance goals.SIGAR 14-47-AR/Afghan Customs RevenuePage 3Development Strategy.8 The ACD’s plans for developing its customs capabilities focus on collecting revenuewith maximum efficiency and facilitating trade through faster clearance of goods while preventing smuggling.The Afghan government has made some achievements in these areas, including passing more moderncustoms legislation, simplifying customs procedures, and constructing new customs facilities.USAID and CBP Programs to Develop and Reform Afghanistan’s CustomsCapabilitiesGiven the importance of customs revenue to the stability and sustainability of the Afghan government, the U.S.government has implemented several programs designed to assist the Afghan government in developing andreforming its customs collection capabilities.USAID’s TAFA ProgramsSince 2002, USAID has administered programs to enhance the Afghan government’s ability to generatedomestic revenues by focusing efforts on improving conditions for international trade and transit. To achievethose goals, USAID most recently administered two TAFA programs. The TAFA I program ran from November2009 through November 2012, and the TAFA II program ran from November 2012 through August 2013.Major initiatives of the TAFA programs included efforts to facilitate international trade, reform customs laws,procedures, and revenue collection capabilities at the ACD, and to reduce the time and expense of customsclearance and transport for imports and exports.Together, the TAFA I and TAFA II projects, both awarded to Chemonics, Inc., were carried out from November2009 through August 2013, at a cost of $83.8 million.9 USAID awarded TAFA I in November 2009,10 as a costplus-fixed-fee contract11 that included three broad components: (1) trade policy liberalization, (2) tradefacilitation, and (3) public outreach on trade-related issues. TAFA I sought to reform Afghanistan’s customscapabilities by improving processes and minimizing roadblocks to Afghanistan’s institutional capacities relatedto trade policy and execution, customs processes and procedures, and public outreach on customs relatedissues. In August 2012, USAID awarded TAFA II as a time and materials contract, with a start date in October2012.12 TAFA II focused on improving the same processes specified in TAFA I, with the addition of improvingrevenue collection and strengthening links between field offices and the ACD headquarters.Both the TAFA I and TAFA II contract documents state that the projects“will result in the Afghan Government’s improved capacity to negotiate and implementregional and international trade agreements and progress toward World Trade Organization(WTO) accession; . . . increased cooperation on trade and customs issues within the region;increased transparency and reduced obstacles to trade, including areas such as customs,transport/transit, and border crossing operations; increased Customs revenue collectionThe Afghanistan National Development Strategy serves as a framework for poverty reduction and economic growth effortsin Afghanistan. The Strategy is divided into three pillars of security, governance, and development and provides metrics tomeasure progress in each area.89The TAFA I project was obligated $63,962,156 and the TAFA II project was obligated $19,791,053.10USAID contract number 306-C-00-09-00529-00, signed November 18, 2009.FAR 16.306(a) describes a cost-plus-fixed-fee contract as “a cost-reimbursement contract that provides for payment tothe contractor of a negotiated fee that is fixed at the inception of the contract.”1112 A time-and-materials contract provides for acquiring supplies or services on the basis of (1) direct labor hours atspecified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and, (2) actualcost for materials. See FAR 16.601.SIGAR 14-47-AR/Afghan Customs RevenuePage 4returning to the Central Treasury; increased investment, exports, and market-basedopportunities; improved ranking on the World Bank’s trading across borders indicator as partof the annual Doing Business survey.”13CBP’s BMTF ProgramCBP oversees the BMTF, a U.S. Central Command (CENTCOM)-funded14 task force started in 2006.15 TheBMTF’s primary goal is to assist the Afghan government in securing its borders by providing expertise related tocustoms and border operations—primarily in counternarcotics. While the BMTF’s mission is not specifically toreform Afghanistan’s customs laws, policies, and procedures, many of the techniques and much of theequipment provided by the BMTF can be used not only for counternarcotics activities, but also for efforts toreduce commercial smuggling, which may result in increased efficiency in customs processes and higherdomestic revenue collections. Further, the BMTF provides advisers at border crossing points and at inlandcustoms depots, allowing for mentoring that can positively affect the execution of customs procedures andreduce opportunities for corruption.CBP submits personnel and operational requirements for the BMTF to CENTCOM, which then submits requestsfor funding to DOD. BMTF advisers are currently funded through a contract executed by the Army AcquisitionCenter.16 This contract, awarded to CACI, Inc., provides for a wide range of counternarcotics activities in avariety of countries, including the activities of the BMTF in Afghanistan.17 CACI, Inc., in turn, has subcontractedresponsibility of providing advisers for the BMTF to Fedsys, Inc., at a cost of approximately $36.5 million.18While the BMTF is funded by DOD through CENTCOM, its operations are supervised by CBP personnel underU.S. Embassy Chief of Mission authority. Additionally, U.S. Forces-Afghanistan previously had military membersembedded in the BMTF to ensure the strategic integration of BMTF activities into the military campaign plan.USAID contract number 306-C-00-09-00529-00, signed November 18, 2009, and USAID contract number AID-EEM-I-0007-00008, signed August 15, 2012.1314 In 2007, the CBP and Department of State requested DOD counterdrug support to fund the creation and activities of theBMTF. The DOD responded to this request by providing counterdrug funding managed by CENTCOM under section 1004 ofthe National Defense Authorization Act for Fiscal Year 1991, 104 Stat. 1629 (1990) (codified as amended at 10 U.S.C. §374 note), and section 1033 of the National Defense Authorization Act for Fiscal Year 1998, Pub. L. No. 105-85, 111 Stat1629, 1881-84 (1997), as amended.15 The BMTF evolved from the U.S. Embassy in Kabul’s Border Management Initiative. The Border Management Initiativewas created from a joint request from the U.S. Ambassador to Afghanistan and the U.S. Forces–Afghanistan Commander in2006. The purpose of the Border Management Initiative was to assist the Afghan government to develop a comprehensiveborder security strategy that would promote stability by combating the flow of illicit narcotics and contraband acrossAfghanistan’s borders.16BMTF mentors operate under contract number W15P7T-06-D-E402, task order 0127 and task order 0096.Other support activities for the BMTF, such as the provision of armored vehicles for the use of the advisers, are fundedthrough contracts executed by the DOD’s Counter-Narco Terrorism Program Office/Acquisitions Management IntegrationsCenter.1718 At the conclusion of task order 0096 in June 2013, Fedsys Inc. had been paid $17,689,597. As of June 2013, FedsysInc. had been paid $18,850,894 under task order 0127.SIGAR 14-47-AR/Afghan Customs RevenuePage 5TAFA AND BMTF PROGRAMS ACHIEVED SOME POSITIVE RESULTS, BUTUSAID’S IMPLEMENTING PARTNER DID NOT FULFILL ALL CONTRACTUALREQUIREMENTS AND BMTF CONTRACT DOCUMENTS LACK PERFORMANCEMETRICSUSAID’s two TAFA programs implemented between November 2009 and August 2013 resulted in somesuccesses. For example, documentation from USAID and its implementing partner show that the programssuccessfully persuaded 10 customs facilities to reduce the number of steps in the customs process. Accordingto USAID officials, the global standard of customs processes for importing goods into nation states is 13 steps,but, prior to the TAFA programs, ports in Afghanistan followed more than 30 steps to accomplish the sametasks. TAFA was able to reduce the number of customs steps at these 10 facilities with varying degrees ofsuccess, for example, TAFA recommended removing 18 of 33 steps at the Jalalabad inland customs depot, butwas only able to secure the elimination of 13 steps. According to TAFA implementing partner officials, reducingthe number of customs process steps is often met with resistance because each step allows for the associatedofficial to demand payment from an importer. Further, a BMTF official told us that the inclusion of so manysteps in the customs process is used as a tool to create more jobs at customs locations, which provides anadditional avenue for corruption. Although TAFA was unable to reduce the number of steps at all Afghancustoms locations to 13, the programs assisted the Afghan government in reducing the number of customsprocess steps at nine inland customs depots and the Kabul International Airport—customs locations thataccount for 98 percent of Afghanistan’s customs revenues—resulting in a reported annual cost savings toimporters and the Afghan government of $39 million.19TAFA also helped the Afghan government implement the Border Management Model (BMM), which providesguidelines for the roles and responsibilities of Afghan agencies operating at customs and border locations, atfive border crossing points across Afghanistan. For example, according to the TAFA final report, the TAFAprograms designed and developed the concept for the BMM, including drafting the relevant processes andprocedures to support the BMM, thereby creating a formal partnership between Afghanistan’s two leadingborder agencies, the ACD and the Afghan Border Police. The BMM establishes the ACD as responsible forcross-border trade and the Afghan Border Police as responsible for immigration and national security at theborders, while encouraging information sharing between the two agencies to stem corruption, smuggling, andother illegal activities. The implementation of the BMM should allow for more efficient operations at borderfacilities because the precise duties of each Afghan agency are more clearly defined.However, while we found that the TAFA programs made some achievements, we also determined that USAID’simplementing partner only met two of the contractual performance requirements. The TAFA contracts includedsix performance requirements—what USAID termed “progress indicators”—to gauge the implementing partner’sprogress towards achieving the programs’ goals of trade policy liberalization, customs reform, and tradefacilitation. These progress indicators, detailed in Table I, include, among others, reducing customs processingtimes, holding a certain number of public events to discuss trade and business policy matters, and reducingthe number of documents/procedures required to import and export goods. According to the TAFA II contract,“USAID will judge the implementer’s success or lack thereof under the contract based on whether or not thetangible results…are achieved.”20To monetize cost savings, USAID calculated the time and expense related to each step of the customs process, thensummed the total cost of the eliminated steps. Examples of time costs include wages of customs inspectors and brokers,examples of fees include processing fees paid to complete a customs process step.1920USAID contract number AID-EEM-I-00-07-0008, signed August 15, 2012.SIGAR 14-47-AR/Afghan Customs RevenuePage 6Table 1 - TAFA Contract Indicators and ResultsSource: SIGAR analysis of TAFA Final Report, USAID contract documents, and supporting documentationOf the six progress indicators, USAID and the implementing partner reported that the TAFA programssuccessfully met or exceeded two targets in each of the program years. Targets were met or exceeded incustoms processing time and the number of public events held to discuss trade and business policy matters.In the case of customs processing time, the implementing partner reported that it successfully reducedprocessing time from an average of 8 days in 2009 to 3 hours and 27 minutes in 2013. However, USAID,BMTF, ACD, and U.S. Forces-Afghanistan officials with responsibilities at several of these border crossingpoints stated that the TAFA-reported reductions in processing times may be overstated and the actual timerequired varied widely depending on location. USAID’s own documents on improved processing times are alsoinconsistent. Where the final report on the TAFA program claims a reduction from 8 days to 3 hours and 27minutes, the contract for TAFA’s follow-on ATAR program cites a reduction in customs processing times from 7days to 1 day. We were unable to independently verify the actual average time required to process throughcustoms locations because the inaccessibility of many locations prevented us from visiting them in person andsecurity restrictions prevented us from performing the necessary observations at other sites.For the remaining four progress indicators, the implementing partner either failed to meet its targets for atleast 1 year or failed to track the data necessary to determine whether targets were met. For example,although the implementing partner met its targets in 2011 for reducing the number of documents required fora trader to present to complete the customs process to import or export goods, it failed to meet its reductiontargets in 2012. For two requirements—change in public perception toward trade and the number of tariffbands21 and average tariff level—USAID was unable to provide us with data to show whether targets had been21Tariff bands are tariff rates for specific categories of goods.SIGAR 14-47-AR/Afghan Customs RevenuePage 7set and whether the implementing partner had achieved those targets. In the case of public perception towardtrade, the implementing partner did not conduct required annual assessments to measure the Afghan public’sview of international trade. USAID officials told us that the requirement may have been determined to beunnecessary because a negative perception of international trade was not a problem that the TAFA programsneeded to address. Regarding the number of tariff bands and average tariff levels, USAID was also unable toprovide us with data to show whether targets were established and whether the implementing partnerachieved the required results. In December 2013, USAID officials told us this requirement had been removedas a performance indicator because it was not a valuable indicator of trade facilitation and that Afghanistanalready had a “reasonable” number of tariff bands. However, USAID did not provide us with evidence thateither of these requirements had been formally removed from the contract with the implementing partner.In addition to the six progress indicators specifically cited in the TAFA contract documents, USAID had eightoverall goals—what it terms “expected results”—of the TAFA programs. These eight overall goals were to:strengthen the institutional capacity of the Afghan government to conclude international tradeagreements,work with the Afghan government to implement a master plan to gain ascension to the World TradeOrganization (WTO),streamline customs processes and procedures leading to a rise in Afghanistan’s ranking in the WorldBank’s “Doing Business, Across Borders” index,improve transit of goods through key ports into Pakistan and neighboring countries,increase institutional capacity of the ACD to collect customs revenues and strengthen linkagesbetween Kabul, Afghanistan’s provinces, and border crossings,improve transit of goods through Pakistan to reach market destinations,increase involvement and awareness of Afghanistan’s customs process by private sector individualsleading to increased Afghan exports, andincrease understanding of the benefits of regional and bilateral trade agreements and WTO accession.USAID officials told us that although there have been successes achieving some of these overall goals,progress on others has been limited. For example, the conclusion of the Afghanistan Pakistan Transit TradeAgreement and Afghanistan’s joining of the South Asian Free Trade Area demonstrated progress towardstrengthening the Afghan government’s ability to conclude international trade agreements. However, theAfghan government still requires external assistance to independently negotiate these agreements, asdemonstrated by the assistance the TAFA programs have provided the Afghans in their efforts to join the WTO.Moreover, the programs’ goals to improve transit through key ports into Pakistan and to improve the transit ofgoods through Pakistan to reach market destinations has been difficult to achieve due to security concernsand other impediments imposed by the Pakistani government. For example, trade with India is more expensivethan necessary because trucks delivering Afghan goods are not allowed to bring back Indian goods throughPakistan. USAID informed us that the Afghan government, the TAFA implementing partner, and the U.S.Embassy in Kabul continue to engage Pakistan concerning trade issues. Nevertheless, Pakistan continues toshut down the border to Afghanistan at certain times and impose restrictions on trucks passing through bordercrossings. Appendices II and III present additional information on the TAFA programs’ overall goals and theresults the programs have achieved.TAFA was unable to achieve the overarching goals of increased customs revenue collection and a reduction inAfghanistan’s ranking in the World Bank’s Trade Across Borders index due to a combination of factors. Whilecustoms revenue collection did remain relatively stable from 2010 through 2012, customs collections declinedsteeply in 2013. This decline may be due to a variety of factors, including changes to Afghan tariff law, theregional macroeconomic environment, and the withdrawal of international forces. Similarly, the failure toimprove Afghanistan’s ranking in the World Bank’s Trade Across Borders index may have been due tomacroeconomic factors and regulatory factors beyond the TAFA program’s influence. With the end of the TAFASIGAR 14-47-AR/Afghan Customs RevenuePage 8II program in August 2013, USAID created a follow-on program to continue the work of a number of tradeactivities begun under the TAFA programs. According to contract documents, the ATAR22 program “will continuework on improving the environment for trade, thereby fostering increased investment, exports, cross-bordertrade and transit, and market-based opportunities” for Afghanistan. For additional information on ATAR, seeappendix IV.Measuring Success of BMTF Is Difficult Due to A Lack of Performance MetricsCBP’s BMTF also appears to have had some successes. For example, the BMTF cleaned and upgraded theKabul Airport Customs Yard, which, according to CBP officials, resulted in increased efficiency at the CustomsYard that reduced customs processing time from 10 to 2 days, which created a 37 percent increase incustoms revenue at that location. Afghan officials we spoke with at inland customs depots and at ACDheadquarters praised the BMTF for its efficiency, mentoring capabilities, and the equipment it provides. BMTFreports show that BMTF mentors held more than 7,000 training sessions between 2010 and 2013, andassisted the ACD in conducting more than 670 seizures during that same period. A DOD report states thatBMTF mentors at Kabul International Airport taught classes to improve airport security in customs authorities,search techniques, targeting, money laundering, fraud, narcotics enforcement equipment, ethics, andintelligence, among other topics.23 In addition to providing training and assisting in seizures of smuggledgoods, in 2010 and 2011, the BMTF completed a border needs assessment at 30 customs-related locations.In conjunction with these assessments, BMTF provided a variety of equipment for the ACD, including nonintrusive inspection devices for use in detecting smuggled materials, upgraded living facilities, and otherborder facility infrastructure improvements. A DOD official told us that the BMTF operations at border crossingpoints (BCP) have caused a positive impact on ACD operations at those BCPs. The DOD official specificallycited improvements in operations at the BCP in Torkham due to the BMTF’s provision and operation of a nonintrusive inspection scanner, which gave the BCP the ability to electronically scan cargo for illicit materials atthat location for the first time. This official also stated that the BMTF assisted in negotiating a settlementbetween the ACD and the DOD of issues surrounding outstanding import documents for goods imported for theuse of the U.S. military.24Nevertheless, we found that BMTF mentors operate under contracts and subcontracts that do not containperformance metrics. Specifically, the contract documents for BMTF activities do not include a single metricthat defines specific, measurable goals for the BMTF mentors to achieve. The prime contract, issued by ArmyContracting Command to CACI, Inc. does not contain performance indicators—only standardized contractuallanguage without specific direction for the operation or expected outcomes of BMTF mentors or performancemetrics to measure the program’s success.While the subcontracts between CACI, Inc., and Fedsys Inc., outline a number qualifications to be met andtasks to be performed by the BMTF mentors, they do not provide for any performance metrics to assess mentoractivity, leaving performance of these duties up to the mentor, with minimal contractual oversight. Withoutconcrete performance metrics, oversight of the day-to-day and long term activities of an individual mentor isThe ATAR implementing contract was awarded to Chemonics Inc. on November 7, 2013, as a time and materialscontract with a maximum value of $78 million and a 4 year period of performance.2223U.S. Department of Defense, Progress Toward Security and Stability in Afghanistan, November 2013.SIGAR Alert 13-3, Afghan Government Levying Additional Fines, Fees, and Penalties that May Cost U.S. GovernmentMillions of Dollars, June 28, 2013, details the issues surrounding outstanding import documents for goods imported for theuse of the U.S. military.24SIGAR 14-47-AR/Afghan Customs RevenuePage 9difficult to achieve or measure in a meaningful way. See appendix V for a discussion of the mentor dutiesdescribed in the subcontract documents.QUESTIONABLE CUSTOMS DATA, DRAWDOWN OF COALITION FORCES, ANDSYSTEMIC CORRUPTION WILL LIKELY HINDER DEVELOPMENT OF CUSTOMSREVENUE AS A SUSTAINABLE SOURCE OF FUNDSQuestionable ACD Customs Data Make Accurate Determination of Revenues andOther Trade Information DifficultOur audit identified a number of potential issues that raise questions about the accuracy of the ACD customsrevenue data. While analyzing the customs data, we noted missing figures for various months at multiplecustoms locations, as well as unusual trend lines and a number of questionable monthly figures. Regardingtrend lines at certain major border points, including Kabul and Kandahar, the data shows a peak-and-valleytrend, with customs revenue peaking every other month and dropping significantly during the off months. Wewere unable to obtain explanations from ACD officials for this abruptness and lack of consistency. Some borderpoint data also show anomalous spikes—for example, an October 2011 jump in Kandahar customs revenues200 percent over previous figures—that are not explained by external factors or expected seasonal fluctuation.BMTF and USAID officials suggested to us that the spikes in customs revenues could be partially due toholidays or weather events. However, while some of the monthly data seem to be consistent with contextualevents like attacks and sanctions, other data shed doubt on the overall reliability of the numbers. For example,the data show normal customs revenues for Kandahar province and increasing revenues for Paktya province—two provinces that inspect and collect customs duties on goods entering Afghanistan primarily from Pakistan—during a period when the Pakistan border to Afghanistan was reportedly closed.The ACD relies on the Automated System for Customs Data (ASYCUDA) to track customs data. Developed withthe assistance of the United Nations, ASYCUDA is an electronic system designed to reduce transit times,encourage trade, and aid in tracking customs collection through the electronic collection of customs data.According to the ACD, ASYCUDA expedites the processing of customs documents and reduces physicalinteraction between customs officers and traders, reducing opportunities for corruption. Additionally, accordingto the ACD, all customs declarations are automatically consolidated into the ACD central ASYCUDA systemdatabase and subsequently used to produce accurate and timely trade statistics.However, according to U.S. officials, there have been electrical and connectivity problems with the ASYCUDAsystem at some of the border crossings, and the database is not a reliable source of information on goodsmoving in and out of Afghanistan. Further, according to BMTF representatives, there is limited oversight of theASYCUDA system and customs officials may not be entering accurate information. USAID officials also statedthat issues with ASYCUDA are likely to increase because the ACD possesses limited institutional capacity tooperate the system and lacks the training capabilities to sustain the ASYCUDA system as the transitioncontinues.In an effort to increase customs data reliability, the TAFA programs worked with Afghanistan’s Tariff StatisticsResearch Unit to establish a sound method for the collection, validation, analysis, and reporting of nationaltrade statistics related to import, export, and transit. According to the TAFA final report, as a result of this work,statistical discrepancies in trade data produced by the Afghan government dropped from more than 75percent to less than 30 percent over the life of the TAFA programs. While a 30 percent discrepancy in tradestatistics is a significant improvement from 75 percent, the data remain unreliable.Without reliable data, it is difficult to assess the true quantity of goods transiting Afghanistan, observe patternswithin international trade, and determine the correct level of customs revenue to be collected. However, theSIGAR 14-47-AR/Afghan Customs RevenuePage 10contract document for USAID’s new ATAR program does not hold the contractor accountable for addressingthis problem. Specifically, while the ATAR contract includes “aid in developing and managing sustainableinformation technology systems that meet international standards, including automation of businessprocesses through the Automated System for Customs Data (ASYCUDA) system, tracking of customs revenuecollection, and statistical data collection and reporting” as an “illustrative implementation activity,” it does notrequire continued work with the Tariff Statistics Research Unit or include a reduction in statistical errors as aperformance indicator.Drawdown of Coalition Forces Will Restrict Future BMTF and ATAR Operations andMay Limit Program EffectivenessAccording to an official with the BMTF, the drawdown of coalition forces and the closure of forward operatingbases throughout Afghanistan have already begun to restrict U.S. government activities—such as BMTFmentoring activities—in those areas.25 According to U.S. Embassy officials, to address the challengesassociated with Afghanistan’s borders, the U.S. Embassy in Kabul created the Borders Working Group—apermanent working group within the Embassy’s Coordination Directorate to coordinate interagency civilian andmilitary efforts involving customs and border issues in Afghanistan.A July 2013 memo from the U.S. Embassy in Kabul to the State Department headquarters outlined a plan forBMTF operations for the end of 2013, and continuing into 2014. This plan called for the gradual reduction inBMTF mentors beginning in 2013, and for positions to be eliminated as the military withdrew or BMTF projectswere completed. According to CBP personnel, this plan also called for the reduction of DHS personnel at theEmbassy from 26 to 8 and would have hindered CBP’s oversight capabilities of BMTF operations.Following resistance from key stakeholders, including the CBP, in December 2013, the Borders Working Groupand CBP, in close coordination with interagency partners, revised the plan for BMTF operations in fiscal years2014 and 2015. The revised drawdown plan calls for the continuation of BMTF mentor operations at key BCPsfor as long as military operations are able to support mentor activities. Further, the revised plan allows forcontinued BMTF operations at Afghanistan’s major airports, as well as the ISAF Regional Commands, andprovides for a focus on high level advising by BMTF mentors, allowing operations at Afghan border agencyheadquarters. While the revised drawdown plan keeps the number of DHS personnel stationed at the Embassyat eight, a CBP official stated that it was an acceptable option that had been developed jointly with otherborder stakeholders.26As acknowledged in the plan, the future of BMTF operations, as well as their efficacy, will depend on the finalU.S. troop numbers and enduring locations in Afghanistan following the drawdown, which is already underway.As the coalition military forces continue to withdraw, the BMTF’s access to border crossings and inlandcustoms depots, and its apparent positive effect on process and procedural enforcement, will likely be injeopardy.In addition to complications arising from the decrease in personnel at the embassy, recent security concerns atkey locations expected to have an enduring BMTF presence have complicated the BMTF’s ability to mentor atcustoms locations outside of Kabul. Numerous security incidents and concerns over the course of this auditcaused BMTF mentors to withdraw from key customs locations. In November 2013, BMTF was not providingSIGAR 14-4-SP, Oversight Access Inquiry Letter to Department of Defense, Department of State and U.S. Agency forInternational Development, October 10, 2013.2526 Because of the sensitive nature of CBP and BMTF personnel locations and other information that may impact security,this report only discusses the general themes, rather than the specifics, of the 2014-2015 plan.SIGAR 14-47-AR/Afghan Customs RevenuePage 11mentoring at any border crossings and was only conducting mentoring missions at the Kabul and Kandaharairports.27 According to Borders Working Group officials, border crossings needed for the retrograde of U.S.military equipment from Afghanistan are the most important crossings; however, as a result of securityconcerns, the BMTF has had its access interrupted at these pivotal border crossings.ATAR will likely face security-related challenges similar to those of the BMTF over the planned 4-year life of theprogram. ATAR contract documents note that the program “will occur during the transition of Afghanistan fromNATO led counter-insurgency to an Afghan led transformation” and that “the implications of this transition arethat military force-protection for project support will be considerably decreased, if not entirely absent.”28 Thismay result in the alteration of ATAR initiatives as security realities on the ground overcome planned programactivities. As coalition military support in Afghanistan diminishes, BMTF mentors and ATAR programs may haveto be pulled back from less secure customs locations and focus on sites within secure areas. This withdrawalwill likely result in customs locations receiving varying levels of mentoring, support, and training, allowingopportunities for corruption to go unchecked at customs locations that do not have BMTF mentors or ATARprogram support.Corruption Continues to Put Customs Revenues at RiskCorruption has been a major obstacle to customs reform, as well as a source of lost customs revenue. In2008, the Afghanistan National Development Strategy outlined the goals of the Afghan government and statedthat by the end of 2013, corruption at all levels of government, but especially concerning customs, would besignificantly reduced. To reduce that corruption, the strategy proposed streamlining and automating customsprocessing procedures.Contract documents from both TAFA and ATAR emphasize the importance of anti-corruption efforts andhighlight specific anti-corruption measures promoted under each program, including streamlined customsprocedures, events held to educate businesses about customs regulations, and increased automation incustoms processes.Two major innovations in the automation of customs processes—a risk management system and an electronicpayment system—were started under TAFA. The risk management system, created to facilitate the targetedinspection of cargo based on the type of cargo being carried, broker behavior, and other intelligence sources isdesigned to optimize the use of limited security resources and decrease transit times. As early as 2010, TAFAworked with the ACD to establish a risk management system and had implemented this approach at onecustoms location by June 30, 2012. However, while the ACD accepted the risk management system inprinciple, it reportedly considered it too difficult and chose to adopt a scaled down approach, with thesuccessive implementation of specific parts of the risk management system over a period of years. Althoughthe risk management system is highlighted in the TAFA and ATAR contract documents as an important anticorruption measure, we found that the ATAR contract does not require the implementing partner to meetannual targets for implementation of the system.Like the risk management system, progress in implementing an electronic payment system for customs dutieshas been slow. Currently, customs fees in Afghanistan are processed in cash at the inland customs depots,where the imported cargo is inspected and assessed customs duties. This system can lead to customs brokersBMTF has been active at the Kabul inland customs depot, Kabul Airport, Torkham, and the provinces of Mazar-e-Sharif,Herat, Kandahar, Jalalabad, Andkhoi, and Kunduz. As of November 2013, BMTF was only providing mentoring at the Kabuland Kandahar airports, and was providing oversight of equipment at the Weesh border crossing point in Kandahar.2728USAID contract number AID-OAA-I-12-0035, signed November 7, 2013.SIGAR 14-47-AR/Afghan Customs RevenuePage 12traveling long distances with large quantities of cash to pay customs fees assessed on imported goods.29 Thecurrent cash-based payment system is inefficient, leaves customs brokers vulnerable to theft, and increasesthe opportunities for corruption to occur within the customs process.According to USAID and TAFA program officials, at the conclusion of the TAFA programs in August 2013, majorcustoms brokers at the Kabul International Airport—the planned pilot location—had been briefed on theproposed electronic payment system, and the ACD had the equipment and technical knowledge needed tolaunch it. However, according to USAID and implementing partner officials, the ACD had not yet implementedthe electronic payment program. USAID officials said the implementation of the electronic payment system wasdelayed, in part, because the TAFA programs expired and the associated pressure on the Afghan governmentto implement the system was temporarily relieved. USAID officials also stated that implementation was delayeddue to a proposal by an Afghan official that would allow only one Afghan bank to process all the electroniccustoms payments. This would have given the selected bank a monopoly on this revenue stream and asignificant, and improper, advantage over its competitors.Although implementation of the electronic payment system is one of the deliverables required by the ATARcontract, and an expected result of the ATAR program is for the implementing partner to increase the amountof customs revenue collected electronically from zero (currently) to 75 percent by the end of the 4-yearperformance period, the ATAR contract does not contain annual targets for the implementing partner to meetin achieving this goal, as it does for other contract requirements, limiting USAID’s ability to assess theimplementing partner’s progress in this area.The BMTF attempted to reduce corruption through mentoring at customs locations and the provision ofadvanced equipment and training classes focused on professionalizing ACD officers. While some progress wasmade, pilferage, corruption, and patronage networks continue to be a concern within both the ACD and theborder police in Afghanistan.30 For example, DOD found that Afghan officials at border crossing points are“particularly vulnerable to criminal [or corrupt] influence…because of the lucrative financial opportunitiesinvolved in cross-border smuggling, especially from the collection of illegal taxes and the theft of state customsrevenues at border crossing points and airports.”31 In addition, DOD found that “most data indicates thatcorruption is still widespread and that patronage networks are one of the main ways to get promoted in theABP [Afghan Border Police].”32 BMTF and CBP officials stated that when there is a U.S. presence at the border,the BMTF mentors are able to provide additional oversight and advisory services to Afghan officials, whichhelps to stem corrupt activities. These same officials noted that when BMTF officials are not physically presentat border crossings, corrupt and criminal activities often resume.Similarly, according to USAID, CBP, and TAFA implementing partner officials, corruption impacts all levels of thecustoms process and is the biggest problem affecting Afghan customs processes and revenues. TAFAimplementing partner officials stated that the levels of corruption are such that only highly visible and rapidprosecutions for corrupt activities will have an effect on the systemic corruption in the customs process. Thescale and impact of corruption in Afghanistan’s customs process is difficult to quantify. Nevertheless, USAIDCustoms brokers are private individuals, partnerships, associations or corporations who assist importers and exportersin meeting requirements governing imports and exports. Brokers submit necessary information and appropriate paymentson behalf of their clients and charge them a fee for this service.2930 Patronage networks exist where services are provided in return for favors. For example, according to U.S. officials,Afghans will often pay for their positions within customs. Patronage networks are often linked to corruption. Pilferage is thetheft of part of the contents of a package.31U.S. Department of Defense, Progress Toward Security and Stability in Afghanistan, July 2013.32U.S. Department of Defense, Progress Toward Security and Stability in Afghanistan, November 2013.SIGAR 14-47-AR/Afghan Customs RevenuePage 13officials hypothesize that eliminating or significantly stemming corruption in the customs process couldpotentially double the customs revenues remitted to the central government.Pilferage and criminal and patronage networks also affect the efficient and effective assessment andcollection of Afghan customs revenues. According to USAID and BMTF officials, goods transiting from theborder to the inland customs depots may be, and often are, stolen and/or misrepresented on customs forms.For example, BMTF officials noted that wheat and rice are often smuggled and misrepresented to customsofficials when entering Afghanistan. Photo 2 shows a commercial vehicle moving goods through the bordercrossing point in Weesh along the border with Pakistan.The BMTF also noted that criminal networks use intimidation to smuggle these commodities, resulting in theestimated loss of approximately $25 million annually at a single customs location.33 In a separate estimate,TAFA implementing partner officials stated that approximately $60 million is lost annually to commercialsmuggling. BMTF advisers also report that efforts to combat criminal and patronage networks are beingundercut by kidnapping and intimidation of Afghan employees for listening to the BMTF advisers and properlycollecting customs duties.U.S. officials have stated that, while the currentACD leadership appears to be a positive influenceon reducing corruption within Afghan customs, thedepartment remains “personality-driven” andpermanent cultural changes are elusive. Moreover,U.S. officials have stated that although the currentACD leadership is supportive of customs reforms,if ACD leadership changes, these reforms could bein jeopardy. USAID, TAFA, CBP, and BMTF officialsall stated that reducing corruption withinAfghanistan may be an endeavor that takes ageneration to succeed. In fact, ATAR’s contractdocuments note that “the younger generation ofAfghans holds the key to the sustainability of amarket-oriented economy and a democraticpolitical system.”Photo 2 - Commercial Vehicle at the Weesh-ChamanBorder Crossing PointSource: SIGAR, August 26, 2013Despite the $83.8 million USAID already spent onthe TAFA programs, the ATAR contract documents note that Afghanistan remains poorly positioned to develop aself-sustaining economy because of corruption, mismanagement, and continuing instability along its borders.In addition, USAID and TAFA officials told us that without continued international support and assistance,programs such as the electronic payment system are unlikely to move forward. CBP, USAID, and TAFA programofficials all noted that without U.S. pressure, decisions to reform processes within the ACD are often delayed orhalted due to cultural and institutional roadblocks within the Afghan government.ATAR contract documents further state that, “A major predictor of sustainability is [Afghanistan’s] political willto implement reforms and combat corruption.” The ATAR contract goes on to call for “increased automationand standardization of customs processes to expedite trade and narrow the space for corruption” as an33Approximately 1.377 billion Afghanis.SIGAR 14-47-AR/Afghan Customs RevenuePage 14anticipated outcome and decreasing revenue leakages due to undervaluation of cargo as an expected result ofthe program.34Customs Revenues Sustainability Remains UnclearThe future of customs revenues as a stable source of income for the Afghan government remains unclear. TheTAFA and BMTF programs achieved some successes in reforming and developing Afghan customs law, policies,and procedures; but, larger issues surrounding questionable customs data, the withdrawal of internationalforces, and corruption remain. The ACD’s ability to create and disseminate accurate and reliable customs datawill continue to grow in importance as international aid is reduced and Afghanistan is forced to rely upondomestic revenue collections to sustain its government. Without accurate customs data, the ACD will beunable to reliably collect customs revenues and ensure they reach the Afghan treasury. The ACD will also beunable to reliably track international trade entering and leaving the country.According to Afghanistan’s national budget reports, customs revenues remained relatively stable between2010 and 2012, but experienced a sharp decline in 2013. This reduction coincides with the drawdown ofinternational forces and demonstrates the importance of trade related to the international presence tocustoms revenue collection. As international forces continue to withdraw, and international aid is reduced,customs revenues may decline as fewer customs fees are paid by those forces and fewer imports aredemanded due to reduced economic activity within Afghanistan.35The TAFA programs’ success in beginning to integrate Afghanistan into the regional economies may reduce theimpact of the decline in international assistance on Afghanistan’s economy. According to DOD, increased tradeand regional economic integration are important for sustaining Afghanistan’s economic development past2014. According to a 2013 DOD report, domestic Afghan revenue generation is increasing and Afghanistanmay be able to reach its International Monetary Fund-mandated revenue generation target of $2.04 billion36for 2013,37 despite the continued reduction in international assistance and military presence. Afghanistan’scontinued integration into regional and global economies could increase trade across its borders and customsrevenue collections.However, according to ATAR contract documents, Afghanistan remains “…ill positioned to transition to a selfsustaining economy without painful readjustments. Corruption, mismanagement, and continuing instability inthe border regions have made the trade regime fractured and inefficient.” As such, ATAR aims, in part, “tobuild [Afghanistan’s] capacity to generate revenue, through both tax and customs revenues mechanisms, in amanner that facilitates sustainable economic growth and trade and reduces [Afghanistan’s] dependence ondonor funding.”38 As the military transition in 2014 continues, reforming and enhancing the Afghangovernment’s process and capacity to assess and collect customs revenues remain primary objectives of theU.S. government.34USAID contract number AID-OAA-I-12-0035, signed November 7, 2013.35 For additional discussion of customs process fees paid by the U.S. government on exempt goods, see SIGAR Alert 13-3,Afghan Government Levying Additional Fines, Fees, and Penalties that May Cost U.S. Government Millions of Dollars, June28, 2013.36114 billion Afghanis.37U.S. Department of Defense, Progress Toward Security and Stability in Afghanistan, November 2013.38U.S. Department of Defense, Progress Toward Security and Stability in Afghanistan, November 2013.SIGAR 14-47-AR/Afghan Customs RevenuePage 15CONCLUSIONCustoms revenue is a primary component of Afghanistan’s domestic revenue and is essential for the long-termsustainability of the Afghan government. Since 2009, the United States has allocated at least $198 milliontoward efforts to assist in developing the capacity of the Afghan government to assess and collect customsrevenue. While these efforts had some positive effects, other factors have tempered these successes. Forexample, the TAFA programs failed to meet all of their benchmarks and were unable to implement theelectronic payment system or fully implement the risk management system, and a lack of clear performancemetrics and unreliable data make it difficult to assess the impact of development and reform efforts. Further,economic uncertainty surrounding the withdrawal of international forces and the elections in 2014 will have animpact on custom revenue collections. Corruption is the biggest factor that could undermine the success ofU.S. efforts to develop the capacity of the Afghan government to assess and collect customs revenues.Regardless of the amount of funds expended or the number of programs and initiatives implemented, revenuecollection at Afghanistan’s borders will continue to be subject to graft and pilferage unless the government isfully committed to anti-corruption measures. While the amount of corruption was somewhat lowered by thepresence of U.S. personnel working at the border and mentoring directly with ACD personnel, it may rise as U.S.forces withdraw from the country and financial assistance decreases in the near future. Gains made over thepast few years may be irrevocably lost.RECOMMENDATIONSTo help CBP assess if the BMTF program is achieving its intended outcomes, we recommend that the CBPCommissioner instruct the CBP attaché in Afghanistan to:1. Develop clear performance metrics for BMTF mentor operations and submit such metrics toDOD/CENTCOM for incorporation into any future BMTF contracts or task orders.To ensure that USAID’s goals in reforming Afghanistan’s customs collection capabilities are met and contributeto the fiscal sustainability of the Afghan government, we recommend that the USAID Administrator instruct theUSAID Mission Director for Afghanistan to:2. Direct the ATAR implementing partner to continue to work with Afghanistan’s Tariffs Statistics Unit toreduce discrepancies in customs data and make the reduction in statistical discrepancies arequirement of the contract for the ATAR program.3. Ensure that annual targets for implementation of anti-corruption measures, such as the electronicpayment system, are included as performance requirements in the ATAR program contract.SIGAR 14-47-AR/Afghan Customs RevenuePage 16AGENCY COMMENTSWe provided a draft of this report to CBP, USAID, and CENTCOM for their review and comment. We receivedwritten comments on a draft of this report from CBP and USAID, which are reproduced in appendices VI and VIIrespectively. CENTCOM provided technical comments, which we incorporated into our report, as appropriate.In its comments, CBP concurred with our recommendation that the CBP attaché in Afghanistan develop clearperformance metrics for BMTF mentor operations and submit such metrics to DOD for incorporation into anyfuture BMTF contracts or task orders. CBP stated that it would complete the implementation of therecommendation by September 30, 2014. CBP also provided technical comments, which we incorporated intoour report, as appropriate.In its comments, USAID stated that it agreed with the findings in the audit report and partially concurred withthe two recommendations directed to it. Regarding our recommendation that USAID direct the ATARimplementing partner to continue working with Afghanistan’s Tariffs Statistics Unit to reduce discrepancies incustoms data and make the reduction in statistical discrepancies a contractual requirement, USAID statedthat, while it considered the recommendation, it “finds it impossible to do so because the discrepancies incustoms data are often driven by factors outside the control of the project, which does not manage the data.”However, USAID stated that it will issue a letter to the implementing partner directing it to continue working todecrease discrepancies between the Central Statistics Office and the ACD. In addition, USAID stated that it seta target for a reduction in the discrepancy between Central Statistics Office and ACD statistics to 20 percentfor 2014, down from 30 percent in 2013. While we are encouraged that USAID will write a letter to theimplementing partner directing it to continue to work with the ACD to decrease discrepancies in customs data,we continue to believe that contractually requiring the implementing partner to continue these efforts is animportant step in working to reduce the discrepancies.Regarding our recommendation that the agency include annual targets for anti-corruption measures, such asthe implementation of the electronic payment system, in ATAR’s contract language, USAID stated that it cannotinclude anti-corruption system performance requirements in the contract because the ACD is ultimatelyresponsible for institutionalizing these systems, not the ATAR implementing partner. However, USAID alsostated that timelines for the development of systems that facilitate trade and curb corruption at the ACD, suchas institutionalizing the BMM, implementing the risk management system, and implementing the electronicpayment system, are included in the ATAR annual work plans. Given that USAID officials stated they includedthese key anti-corruption steps into the ATAR annual work plans, it is unclear why associated targets cannotaccompany the institutionalization and implementation of these projects. Finally, USAID stated that it will issuea letter by May 2014, instructing the implementing partner to continue to work toward implementing anticorruption measures. While we welcome USAID’s decision to write a letter to the implementing partnerdirecting it to continue to work with the ACD to implement anti-corruption measures, we maintain that includingannual targets for the implementation of anti-corruption efforts in the ATAR program contract is needed toensure the adoption of critical anti-corruption measures, such as the electronic payment system.SIGAR 14-47-AR/Afghan Customs RevenuePage 17APPENDIX I - SCOPE AND METHODOLOGYThis audit focused on U.S. efforts to develop and reform Afghanistan’s ability to assess and collect customstariffs. Specifically, our objectives were to (1) determine the extent to which the U.S. Agency for InternationalDevelopment (USAID) and Department of Homeland Security’s Customs and Border Protection (CBP) programsthat were designed to reform Afghanistan’s customs laws, policies, and procedures, from January 1, 2010, toAugust 31, 2013, achieved their intended outcomes, and (2) examine challenges to creating a stable andlasting source of customs revenue for Afghanistan.Our methodology to determine the extent to which efforts to reform Afghanistan’s customs laws, policies, andprocedures achieved intended outcomes included reviewing the relevant Afghan laws, policies, and proceduresrelated to the assessment and collection of customs revenues, as well as contract documents and operationalhistories of the USAID Trade Accession and Facilitation for Afghanistan (TAFA) and Afghanistan Trade andRevenue (ATAR) programs and of the Border Management Task Force (BMTF). We reviewed contractdocuments and the operational history of the TAFA program, as provided by USAID officials managing the TAFAcontracts and by the TAFA implementing partner. We reviewed contract documents related to USAID’s ATARprogram from USAID officials involved in awarding and overseeing the execution of the contract; we alsoreviewed contract documents and the operational history of the BMTF mentors, as provided by the ArmyAcquisition Command, the CBP, and the BMTF contractor. In addition to the document review, we conductedinterviews with Department of State, USAID, CBP, International Security Assistance Force (ISAF), implementingpartner, the BMTF contractor, and Afghan Customs Department (ACD) officials familiar with the U.S. programsand visited customs locations throughout Afghanistan. Finally, we reviewed Afghanistan’s customs laws,processes, and procedures as codified for reforms and developments attributable to the efforts of the U.S.funded programs.To examine the challenges to creating a stable and lasting source of customs revenue for Afghanistan, wereviewed Afghanistan’s monthly customs revenue data from January 2010 through November 2013, asprovided by the ACD through the CBP. We conducted interviews with Department of State, USAID, CBP, ISAF,implementing partner, contractor, and ACD officials familiar with Afghanistan’s customs capabilities.Additionally, we utilized computer processed data showing monthly customs figures received from the ACD andconcluded that the data may not be reliable. While this audit did not specifically review the internal controls ofthe Automated System for Customs Data (ASYCUDA) system, we did find a number of possible internal controlweaknesses related to data input.During the course of our audit, we visited a number of locations within Afghanistan including Kabul, Mazar-eSharif, Hairatan, Spin Boldak, and Weesh. We were unable to accomplish our planned visits to Torkham Gateand Herat due to security concerns; however, we were able to successfully communicate with key personnelfamiliar with Afghan customs issues from Herat.We conducted our audit work at various locations throughout Afghanistan, and Washington, D.C., from July2013 to February 2014, and reviewed documents dated from September 2004 through December 2013, inaccordance with generally accepted government auditing standards. Those standards require that we plan andperform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings andconclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basisfor our findings and conclusions based on our audit objectives. This audit was performed by SIGAR (code083A), under the authority of Public Law No. 110-181, as amended, and the Inspector General Act of 1978, asamended.SIGAR 14-47-AR/Afghan Customs RevenuePage 18APPENDIX II - ANTICIPATED RESULTS OF TRADE ACCESSION AND FACILITATIONFOR AFGHANISTAN AND U.S. AGENCY FOR INTERNATIONAL DEVELOPMENTRESPONSETable 2 identifies the eight anticipated results contained in the Trade Accession and Facilitation forAfghanistan (TAFA) contract documents, as well as information the U.S. Agency for International Development(USAID) provided us about the status of each indicator.Table 2 - USAID’s Contractually Identified Anticipated Results for the TAFA Program and Completion StatusNumberAnticipated ResultUSAID Response1Strengthened institutional capacity ofgovernment and affiliated organizations toeffectively and properly implement tradepolicy reform, prepare negotiationdocuments, and negotiate regional termsof trade—specifically starting withimplementation of the AfghanistanPakistan Transit Trade Agreement (APTTA)between Afghanistan and Pakistan andcross border trade agreements withTurkmenistan, Tajikistan, and the KyrgyzRepublic.Progress has been made in strengthening staff capacity andorganizational capacity at the Ministry of Commerce andIndustry, but capacity building is a longer term process.2Implementation by the Afghan governmentof Afghanistan of a World TradeOrganization (WTO) Accession Master Planto move forward with the WTO accessionprocess.During TAFA and TAFA II, developing and following a masterplan was key to achieve the efficiency with which the differentactivities have moved forward in order to comply with WTOrules.3Streamlined processes and reduced costsfor importing and exporting goods,translating into an improved ranking on thetrading across borders indicator of theWorld Bank’s “Doing Business” survey—atthe least, Afghanistan should improve tocome in line with at least the regionalaverage (if not exceed) for the time, costs,and number of documents required fortrading across borders.Trading across borders improved 2 ranks in 2012 to 178. Thisis a significant accomplishment, especially if compared to theother 9 topics included in the “Doing Business Indicator”many of which actually went down or stayed the same.Rankings of countries around Afghanistan: Tajikistan–184;Turkmenistan–no data; Uzbekistan–185; Kyrgyzstan–174;Kazakhstan–182; Pakistan–85 (Although Pakistan has beena difficult trade partner for Afghanistan).Average (excluding Afghanistan): 162. Afghanistan comparesfavorably to the countries to the north. Still, of course, there isvast room for improvement.4Specifically, improved transit of goodsthrough Pakistan to reach destinationmarkets through joint cooperation withPakistan at key border crossings such asTorkham Gate, Chaman, and other keyports of entry; and cooperation with otherneighboring countries along Afghanistan’sborder.Transit of goods through Pakistan continues to be a challenge.Despite signing a trade and transit agreement (APTTA),Pakistan continues to insist in redundant security measuresand insurances that are not part of the agreement, andcontainers have been stranded for one or another reason inKarachi, once for several months. Transit of goods to India isalso a challenge since trucks are not allowed to bring backIndian goods and therefore they are empty coming back,making transportation more expensive than it should. TheAfghan government with TAFA and State Department supportSIGAR 14-47-AR/Afghan Customs RevenuePage 19continues engaging Pakistan on APTTA. There are signs thatthe new Pakistani government is more open to work out tradeissues plus Pakistan is interested in reaching the Central Asiamarket. USAID will continue support of APTTA under theAfghanistan Trade and Revenue (ATAR) program.5Increase institutional capacity of theAfghanistan Customs Department (ACD) tocarry out essential Customs administrationfunctions and further revenue generation;with strengthened linkages between thecapital, regions, and border crossingpoints.TAFA and TAFA II developed and supported an AfghanCustoms Department (ACD) structure reorganization (which,among other things, lowered the number of staff at ACD andwhich is in the latest stages of completion); defined a systemfor pay scales, the Salary Improvement Program (notimplemented due to issues with the Civil ServiceCommission); and developed work load indicators for staffingneeds, developed a training assessment matrix and carriedout numerous trainings for ACD personnel, at ACDheadquarters and in the field.6Improved transit of goods through Pakistanto reach destination markets.See answer to anticipated result Number 4.7Increased awareness and involvement ofprivate sector stakeholders at the central,provincial and local levels in the process oftrade-related strategy and policyformulation and in accessing and takingadvantage of new opportunities affordedfor trade-related business development.This translates into increasingAfghanistan’s overall trade export volumeseach year.TAFA and TAFA II provided extensive training on trade,customs, advantages of WTO membership, in Kabul and themain cities around the country. The projects also supportedthe creation of public-private coordination groups like theCustoms and Trade Consultative Council (CTCC) at ACD, andthe WTO consultative group at the Ministry of Commerce andIndustries. During TAFA I, several public campaigns weredeveloped to educate the public and different sectors in thegovernment (the parliamentarians, for example) on WTO andregional and bilateral trade agreements.8Increased understanding of the benefits ofregional and bilateral trade agreementsand WTO accession and identification ofWTO process milestones by political,public, and private sector stakeholders.See answer to anticipated result Number 7.Source: TAFA Contract documents and USAID responses to SIGAR inquirySIGAR 14-47-AR/Afghan Customs RevenuePage 20APPENDIX III - TRADE ACCESSION AND FACILITATION FOR AFGHANISTAN PROGRAM INDICATORSTable 3 idenitifies the 56 program indicators, including targets and results, where appropriate, tracked by the U.S. Agency for International Development’s(USAID’s) Trade Accession and Facilitation for Afghanistan (TAFA) implementing partner throughout the life of the program.39Table 3 - TAFA Program IndicatorsBaselineIndicatorType ofIndicator2010201120122013DefinitionYearDataTargetResultTargetResultTargetResultTargetResultProject Objectives: Improved Trade for Afghanistan, Fostering Increased Investment, Export, and Market-Based Employment OpportunitiesGrowth in tradeTAFA I/volumeTAFA II2009$5.7Tracking$7.04Tracking$7.8Tracking$7.6Tracking$1.7 billionTrade volume is defined as the licitbilliononlybillion inonlybillion inonlybillion inonlyin firsttrade value of goods and servicesquarterbrought into the country (import) and1392the value of goods and services sold in138913901391the foreign country or countries(export).Calculation: Total value of exports +total value of imports in a year.Value of exportsTAFA I/2009TAFA II$316Tracking$388Tracking$375Tracking$318.1Tracking$76Value of exports here refers to the totalmilliononlymillion inonlymilliononlymillion inonlymillion invalue of Afghan licit goods and servicesfirstsold in the foreign country or countries.1389in 13901391quarter1392Value of importsTAFA I/2009TAFA II$5.63Tracking$6.8Tracking$7.4Tracking$7.25Tracking$1.6 billionValue of imports here refers to the totalbilliononlybillion inonlybillion inonlybillion inonlyin firstvalue of goods or services brought intoquarterAfghanistan from other countries.138913901391139239TAFA Final Report, August 31, 2013.SIGAR 14-47-AR/Afghan Customs RevenuePage 21BaselineIndicatorType ofIndicatorChange in WorldTAFA I/Bank’s DoingTAFA II2010201120122013DefinitionYear2009Data183TargetTrackingResult183Target179Result179Target177Result178Target177Result178onlyThe annual World Bank Doing Businessreport presents quantitative indicatorsBusiness Tradeon business regulations and protectionAcross Bordersof property rights that can becompared across 185 economies overtime.Intermediate Result (IR) 1: Trade Policy LiberalizedSub-IR1.1: Improved Government Interagency Coordination to Advance and Implement Consistent Trade and Tariff PolicyNumber ofTAFA I/consultativeTAFA II200904715161061017Negotiating and implementingagreements requires intenseprocesses withcoordination and cooperation amongprivate sector as aministries and state bodies, as well asresult of U.S.with private sector and civil societygovernmentstakeholders. Working groupsassistance(involving public and private sectorstakeholders) for consultations ondeveloping trade policies, negotiationsstrategies, streamlining tradeprocedures, and on preparing draftlegislation were captured under thisindicator.Reduction inTAFA I/discrepancyTAFA II200960%Decrease50%10%3%10%Data notIt is crucial to have reliable trade-import;10%importexport;export;export;providedrelated data for policy and planning.between the80%importand 60%10%15%10%by CentralTAFA supported the ACD and CSO toCentral StatisticsexportandexportimportimportimportStatisticsharmonize trade-related data betweenOffice and thedecreasemeet theOffice inthe two organizations. When TAFAAfghan Customs20%targettwostarted, the discrepancy between theDepartment (ACD)exportquarters ofCSO and the ACD on trade-related data2013was 60% for imports and 80% for00on trade statisticsexports.SIGAR 14-47-AR/Afghan Customs RevenuePage 22BaselineIndicatorPreparation time ofType ofIndicatorTAFA II2010201120122013DefinitionYearN/AData0Target0Result0Target0Result0Target2 monthsreplies to WorldResult2.5Target2 monthsResult1 monthmonthsPreparation of negotiation documents,particularly replies to questions byTrade OrganizationWTO members, is a major challenge. It(WTO) questionsrequires significant coordination anddecreasedcooperation among state bodies. Thisindicator reflects progress madeamong ministries and state bodies inresolving issues more quickly and inresponding more rapidly to WTOquestions through increasedcoordination and cooperation informulating trade policies.Trade-relatedTAFA IIN/A00000YesYesYesYesMost trade procedures (includingprocedures andrequired documents) and fees are notfees by ministriespublicly available for traders. Aand state bodiescomprehensive inventory published onavailable online ona single website will ensure greatera single website fortransparency and reduce the cost oftraderstrade. This initial step is an indicationthat ministries are willing to cooperateon publicly sharing information on theimplementation of trade policy.Tariff-settingTAFA IIN/A00000YesYesYesYesThe Minister of Finance is in charge ofmechanismsetting tariff rates with no consultationinvolving keywith stakeholders. It is critical tostakeholdersinvolve other ministries and ensureproper consultations with stakeholders(including the private sector) beforethe determination of tariff rates.Putting such a mechanism in place willensure greater cooperation andcoordination.SIGAR 14-47-AR/Afghan Customs RevenuePage 23BaselineIndicatorType ofIndicator2010201120122013DefinitionYearDataTargetResultTargetResultTargetResultTargetResultIR 1.2: Assist Afghanistan and Other Countries in the Region in Negotiating and Implementing Bilateral and Regional Trade Agreements and WTO Accession RequirementsNumber ofTAFA IIN/A000000020Afghanistan is interested in deepeninglaunched or signedand expanding regional integrationinitiatives onthrough negotiating new and joiningregional integrationexisting agreements (bilateral andregional) related to trade, investment,economic cooperation, transport, andtransit. This indicator capturedinitiatives (agreements andmemorandums of understanding(MOUs)) launched (or signed) in thisregard during TAFA.Volume of trade$1.95%$1.95%$489Trade here refers to export/import ofwith South AsianTAFA IIN/A0000billion inincreasebillion inincreasemillion ingoods and services by SAFTAFree Trade1390in trade1391in tradefirstcountries. This indicator covered theAgreement (SAFTA)quarterincrease in value of Afghanistan’smember countries1392trade with SAFTA member countriestaking advantage of SAFTA.Weighted averageTAFA IIN/A000006.20%5.80%6.20%5.50%Weighted average tariff is share oftariff level withtotal duties collected to total value ofSAFTA countriesimports. This indicator measuredimports from SAFTA countries byAfghanistan. The lower the tariff, themore imports are coming.SIGAR 14-47-AR/Afghan Customs RevenuePage 24BaselineIndicatorNumber ofType ofIndicatorTAFA II2010201120122013DefinitionYearN/AData0Target0Result0Target0Result0Target800Result850Target800Result850Goods on the sensitive list are exemptsensitive tariff linesfrom the free trade agreement withof AfghanistanSAFTA countries. Broader, deeperunder SAFTAtrade liberalization is achieved byreducing the number of goods on thesensitive list. TAFA assisted in reducingthe list in 2011–2012 from 1,072 to857.Number of WTOTAFA IIN/A000008688Holding working party meetings andworking partybilateral/plurilateral negotiations isbilateral andindicative of progress made towardplurilateralWTO accession, greater liberalization,meetings heldand improvement in the policy, legal,toward accessionand institutional aspects related toto WTOAfghanistan’s foreign trade regime.Number ofTAFA IIN/A0000010131012This indicator captured the effort madedocumentsby Afghanistan to support its WTOsubmitted to WTOaccession process. This includesin support ofreplies to questions/enquiries,accessionconformity charts, notifications, offersand revised offers, special documents,and legislation (including drafts).SIGAR 14-47-AR/Afghan Customs RevenuePage 25BaselineIndicatorNumber of WTO-Type ofIndicatorTAFA II2010201120122013DefinitionYearN/AData0Target0Result0Target0Result0Target10Result10Target10Result15Bringing the legal framework in linerelated legal actswith WTO agreements is a pre-advancing throughcondition for becoming a WTOthe legislativemember. Legal reform in line with WTOprocessrequirements will establish aconducive environment for trade andinvestment, reduce the cost of doingbusiness, and lower opportunities forcorrupt practices. It also will providebusinesses with guaranteed and rapidaccess to administrative appeals andjudiciary. This indicator capturedprogress in the legislative processwhen draft laws (includingamendments) and sublegal acts(regulations, orders) move from onestage to another.Number of draftTAFA IIN/A000005459This captured the number of new draftlawslaws and sublegal acts (includingprepared/finalizedamendments) that were prepared withat ministerial levelTAFA assistance.with TAFA supportNumber of WTO-TAFA IIN/A00005457Acceding to the WTO requiresrelated institutionalestablishment of new institutionsreforms launchedrelated to customs, trade, sanitary andwith TAFA supportphytosanitary, technical barriers totrade, and intellectual property. Thiscaptured institutional reformslaunched by Afghanistan with TAFAsupport.IR 2: Customs Reforms InstitutedSIGAR 14-47-AR/Afghan Customs RevenuePage 26BaselineIndicatorType ofIndicatorGrowth in customsTAFA I/revenueTAFA II2010201120122013DefinitionYear2009DataTargetResultTargetResultTargetResultTargetResult$741Tracking$946Tracking$993Tracking$894Tracking$434A customs duty and tax refers to tax onmilliononlymillion inonlymilliononlymillion inonlymillion inthe import and export of goodsfirstcollected by customs houses.1389in 13901391quarter1392Sub-IR 2.1: Improved Customs Procedures to Reduce Delays and Costs for Compliance with Customs RequirementsNumber of InlandTAFA I/Customs DepotsTAFA IIN/A0000010110Customs streamlined procedure refersto simplification of customs clearance(ICDs)adoptingprocess for imports and exports bycustomseliminating unnecessary steps,streamlinedprocedures, and documents andproceduresimproving and streamlining clearanceprocedures. In 2013, the resultingnumber refers to ICDs at whichstreamlined procedures had alreadybeen implemented and at which TAFAmonitored compliance. The resultingnumber is not new ICDs, but ratherthose which enforced the procedures.CustomsTAFA I/processing timesTAFA II20098 daysreduced (overall6 days5 days3 days3 days6 hours3 hoursThis indicator refers to the number ofand 493 hours6 hoursand 27days required for Customs processingminutesminutesof goods (import and export at keyand at key ICDs)borders). It is required by contract, buthas been slightly reworded for greaterclarity.SIGAR 14-47-AR/Afghan Customs RevenuePage 27BaselineIndicatorType ofIndicatorNumber of stepsTAFA I/eliminated at ICDsTAFA II2010201120122013DefinitionYearDataTargetResultTargetResultN/ATarget5Result0Target5ResultImport–3Elimination of customs proceduresmeans time and cost savings forand Borderexporters. Elimination here refers toCrossing Pointswhen a step is removed from customs(BCPs )procedures and no longer practiced atthat ICD or BCP.Monetized value ofTAFA IN/A000reduced stepsTracking$3.7Tracking$7.5Tracking$10.2TAFA monetized the benefits ofonlymilliononlymillion atonlymillion atstreamlined procedures at six ICDs.at KabulHairatan;Herat; $1.1The dollar values indicate the value ofICD;$24.8million atsavings of the stops removed that are$1.4million atKandahar;not aligned with the national blueprint.millionJalalabad$0.8at Kabulmillion atAirportKIA(KIA)Number of ICDTAFA IN/A51 (Herat)53Monetized value is a financiallocations and keymeasurement of a reduced stepsborders monetizeddocument or procedure.Number of BCPsTAFA IIN/A00000where BorderTracking3Trackingonly(Hairatan,only2The Border Management Model (BMM)allows for information-sharing betweenManagementSherthe ACD and the Afghan Border PoliceModel is rolled outKhanand establishes roles andBandar,responsibilities for both agencies in theIslamcustoms and immigration processes.Qala)Number of ICDsTAFA IIN/A000004042Risk management in the cargoadopting riskverification process will enhancemanagementcustoms compliance measures withoutsystem in customsunfairly impeding legitimate traders.clearances processThis activity started in 2012.SIGAR 14-47-AR/Afghan Customs RevenuePage 28BaselineIndicatorNumber ofType ofIndicatorTAFA I2010201120122013DefinitionYearN/AData0Target0Result0Target0Result0Target4Result0Target4Result0TAFA reached an agreement with theintelligence unitsACD Enforcement Directorate toestablished at ICDsidentify regional intelligence officersfrom mobile verification teams in fourmain locations: Herat, Jalalabad,Mazar, and Kandahar. Please seesection above on challenges for anexplanation of why TAFA did not meetthis target.Number ofTAFA IN/A0000050608090Intelligence profiles are an importantintelligence profilestool that aids trade facilitation whilegenerated by theensuring compliance.ACDNumber ofTAFA IIN/A00000200201In line with the Tokyo MutualpermanentAccountability Framework and theprofessionalNational Action Plan for Women, TAFApositions allocatedsupported the ACD in meetingfor women at thebenchmarks related to increasingACDfemale participation in elected andappointed bodies at all levels ofgovernance to 30 percent by 2020.Number of femaleTAFA IIN/A000002002020TAFA partnered with the USAID-fundedinterns completingWomen in Government program toa six-monthimplement an internship program atinternship at thethe ACD for university women.ACDValue of goodsexported to theTAFA I2009$1.5Trackingmilliononly0Tracking$2.2Trackingonlymilliononly$4 million00The Generalized System of Preferencesis a scheme where a wide range ofUnited Statesindustrial and agricultural productstaking advantageoriginating in certain developingSIGAR 14-47-AR/Afghan Customs RevenuePage 29BaselineIndicatorType ofIndicator2010201120122013DefinitionYearDataTargetResultTargetResultTargetResultTargetResultof Generalizedcountries are given preferential accessSystem ofto the U.S. market.PreferencesNumber of newTAFA IN/A0000041000A new request, offer, revised offer, orrequests, offers,other format text submitted by a hostrevised offers, orcounty represents significant progressother format textstoward WTO accession. Data werethat are submittedmaintained on each type of newby a host countryrequest or offer. This indicatesprogress made in negotiations towardliberalization.Number of trade-TAFA IN/A0021200relatedIn 2010, Afghanistan signed the APTTAand SAFTA agreements.internationalagreements and/orMOUs signedSub IR 2.2: Improved Speed and Efficiency of Transit and Transportation of GoodsNumber of ICDsTAFA IIN/A000004040TAFA implemented solutions to use e-where e-moneymoney for automated payment ofpayment systemtransit fees and guarantees, to quicklyintroducedfacilitate trade while removingredundant steps for cash payments.See challenges section above for anexplanation of this missed target.Number ofTAFA IIN/A000003031USAID and TAFA visited Pakistan,impedimentsTajikistan, and Uzbekistan to identifyeliminated to cross-potential regional cooperation,border trade withharmonization, and integration. TAFASIGAR 14-47-AR/Afghan Customs RevenuePage 30BaselineIndicatorType ofIndicator2010201120122013DefinitionYearDataTargetResultTargetResultTargetResultTargetResultPakistan and othercontinued to find impediments tocountries in thecross-border trade with these countriesregionand suggest solutions for elimination.Number ofTAFA IIN/A000004141The initial council meeting was inCustoms and TradeDecember 2012 with the AfghanistanConsultativeChamber of Commerce and Industries,Council meetingsto confirm the terms of reference forheld to providefuture meetings.interaction withinprivate sector,including womenowned businessesand customsIR 3: Trade Facilitation StrengthenedIncrease in tradeTAFA IIN/A0with Central Asian0000Tracking$1.1Tracking$271This includes the total value of tradeonlybillion inonlymillion inwith Kazakhstan, Tajikistan,firstTurkmenistan, and Uzbekistan.Republic countries1391quarter1392Sub-IR 3.1: Increased Management Capacity of Private Sector Production and Marketing EnterprisesSIGAR 14-47-AR/Afghan Customs RevenuePage 31BaselineIndicatorValue of exportType ofIndicatorTAFA II2010201120122013DefinitionYearDataTargetResultTargetResultN/ATargetNotsales increased byResult0Target5%Result$673,450reportedExport sales value based on what isinvoiced to the client; value ofproject-supportedexecuted contracts. The target of 5%firmswas set before identification of firmsto be included in specific activities. Inthe end, these firms were willing toshare the value of resulting exportsales, but not the size of their overallrevenue due to considerations relatedto security and competition.Number of firmsTAFA IIN/A00000receiving project-Not020115reportedAny firm participating in any exportpartnership activity.supported capacitybuilding assistanceto increase exportsNumber ofTAFA IIN/A000005159Market research, short-term technicaltechnicalassistance to government and/orassistance andprivate sector beneficiaries, studycapacity buildingtours and international tradeactivities providedfairs/exhibitions, exporter trainingto firms and tradesessions.promotionagenciesSub-IR 3.2: Improved Coordination and Collaboration of Private Sector Engagement through Central and South AsiaSIGAR 14-47-AR/Afghan Customs RevenuePage 32BaselineIndicatorNumber of newType ofIndicatorTAFA II2010201120122013DefinitionYearN/AData0Target0Result0Target0Result0contracts betweenTargetNotResult0Target2Result0reportedTAFA supported participation of Afghanfirms in Agro World and the World Foodlocal producersExhibition on April 3-5, 2013 inand Central AsianTashkent, Uzbekistan. As a result,Republic vendorsmore opportunities were created forAfghan producers and Central AsianRepublic vendors to start businesses.Number of TAFA-TAFA IIN/A00000sponsoredNot031reportedActivities include grants, technicalassistance, research papers, businessactivities aimed attraining, trade fairs, and conferences.engaging CentralAsian and Afghanwomen in theeconomyNumber of regionalTAFA IIN/A000002023TAFA identified regional trade events intrade eventsthe Central Asian republics that Afghanattended by Afghanfirms can attend, offering opportunitiesfirmsfor networking and identifying possiblebusiness partners. These eventshelped identify new markets for Afghangoods and give Afghan businesses theopportunity to identify the standardsthey need to compete in the CentralAsian republics.SIGAR 14-47-AR/Afghan Customs RevenuePage 33BaselineIndicatorNumber ofType ofIndicatorTAFA I2010201120122013DefinitionYear2009Data12Target0ResultTargetResultTargetResultTarget0Result1210109 import;10documentsexport;export;import;import;9 exportimport;0Based on the World Bank’s DoingBusiness 2010, in Afghanistan 11required for1111101010 exportdocuments are required for import andimport/exportimportimportexportexport12 for export. TAFA found that moredocuments were required for importand export than Doing Businessreported. This component worked withgovernment counterparts to come upwith a list of documents required forimport and export. This list was used asthe baseline, and targets were setaccordingly.Number of trade-TAFA IN/A000002000There are no specific laws andrelated public-regulations in Afghanistan that enableprivate partnershippublic-private partnerships and ensureprojects developedprotection for private investors.for government toimplementNumber ofTAFA IN/A000exporters usingTracking7501,250000onlyThis means the number of exportersthat take advantage of one-stop shops.services of the one-The targets are not cumulative.stop shopNumber of licensedTAFA I20090080401310000Licensed freight-forwarders refers tofreight-forwardersthe number of freight-forwardersthat take part inregistered with the Afghanistan Freighttransport capacityForwarding Association.buildingCross-Component IndicatorsSIGAR 14-47-AR/Afghan Customs RevenuePage 34BaselineIndicatorNumber of U.S.Type ofIndicatorTAFA I2010201120122013DefinitionYearN/AData0Target20Result21Target40Result103Target33Result51Target33Result39Training is defined as a TAFA-ledgovernment-training activity that is related tosupported trainingimproving the trade environment. Itevents held thatrefers to an activity in Afghanistan orrelate to improvinganother country that is intended forthe tradeteaching or providing knowledge andenvironmentinformation on a specific topic.Number of person-TAFA IN/A0001,7304,0801,4001,4891,400542Key personnel are defined as femaledays of training ofand male personnel who are targetedkey personnel infor training and receive training. Atrade and customsperson-day is a 7-hour day of trainingregulationreceived by one person.Number of publicTAFA IN/A05052808460653041A public event is defined as a TAFA-ledevents held toand/or -supported trade-related activitydiscuss trade andsuch as a conference, seminar,business policycoordination meeting, working groupmatters withmeeting, trade-related fair, roundtable,stakeholders andconsultative process, forum,publicpresentation to major gathering ofuniversity students, public-privatepartnership event, launch of tradecampaign, presentation to NationalAssembly members or ministries, otherkey events that stakeholders attended.SIGAR 14-47-AR/Afghan Customs RevenuePage 35BaselineIndicatorNumber of newType ofIndicatorTAFA II2010201120122013DefinitionYearN/AData0Target0Result0Target0Result0Target10Result25Target13Result12Policy, procedures, and managementpolicy, procedures,tools developed for the ACD with TAFAand managementtechnical assistance for managementtools developed forpractices.the ACD with TAFAtechnicalassistance formanagementpracticesNumber of vehiclesTAFA I2009entering/exiting1,500Trackingper dayonly0000000Definition and methodology is basedon the number of declarations by thekey bordersnumber of vehicles paying customsduties. The key borders included Herat,Jalalabad, Kandahar, Mazar, andNimroz (not including InternationalSecurity Assistance Force goods).Public OutreachNumber of mediaTAFA I2009260871001700000This indicator refers to the number ofarticles publishedtrade-related articles published in dailyon tradenewspapers.Number of trade-TAFA IN/A000430000“Campaigns” refers to majorand customs-campaigns, such as those to reachrelatedstakeholders in provinces on tradecommunicationagreements.campaignsconducted withcounterpartsSIGAR 14-47-AR/Afghan Customs RevenuePage 36BaselineIndicatorNumber of publicType ofIndicatorTAFA I2010201120122013DefinitionYearN/AData0Target0information printedResult6,605Target11,000Result10,355Target0Result0Target0Result0copiesInformation and materials printed anddistributed to the public.materialsdistributedChange in people’sTAFA IN/A91%00000000Change here refers to the change inperception towardpositive viewthe public’s attitude toward trade.tradein trade/The2010 survey on Afghans’knowledge,knowledge, attitudes, and practicesattitudes,related to trade and its potentialpracticesbenefits for Afghanistan.surveySource: TAFA Final Report, August 31, 2013Note: N/A = Not Applicable.SIGAR 14-47-AR/Afghan Customs RevenuePage 37APPENDIX IV - AFGHANISTAN TRADE AND REVENUE PROGRAM CONTRACTREVIEWThe Afghanistan Trade and Revenue (ATAR) program contract states that, “The purpose of ATAR is to providetechnical support and assistance aimed to strengthen the business climate of Afghanistan to enable privateinvestment, enhanced trade, job creation, and fiscal sustainability through the critical Transition period andcontinuing into the Transformational Decade.” The ATAR contract further states that the program will achievethese goals by“1) improving the capacity of the Government of the Islamic Republic of Afghanistan toformulate and implement a liberal policy framework for trade and investment in accordancewith international standards; 2) enhancing integration in the regional and world economythrough the promotion of trade agreements, enhanced economic corridors governance, andprivate sector linkages throughout South and Central Asia; and 3) strengthening revenuegeneration for fiscal sustainability and trade facilitation through reforms and anti-corruptionmeasures in customs and taxation.”Finally, the contract requires the implementing partner to provide: “1) technical assistance on tradeagreements, WTO accession, and rules compliance; 2) organization of regional trade fairs and privatesector matchmaking events;40 and 3) capacity building for the implementation of reforms in customs,and for Value-Added Tax implementation.”41 Specific customs reforms include continued work on theBorder Management Model,42 risk management, customs procedures modernization and streamlining,and customs procedures harmonization with customs of other countries—all initiatives begun underthe TAFA programs.40Private sector matchmaking events aim to connect Afghan business with potential international trade partners.41USAID contract number AID-OAA-I-12-0035, signed November 7, 2013.The Border Management Model provides guidelines for the roles and responsibilities of Afghan agencies operating atcustoms and border locations.42SIGAR 14-47-AR/Afghan Customs RevenuePage 38APPENDIX V - ADDITIONAL OBJECTIVES FOR THE BORDER MANAGEMENT TASKFORCEThe subcontract executed between CACI, Inc. and Fedsys, Inc. for task order 0096, signed on December 19,2012, states that the purpose of the Border Management Task Force (BMTF)“Is to assist and provide guidance to the Government of Islamic Republic of Afghanistan(GIRoA), in the development and operation of a sustainable, strategic, integrated bordermanagement program by improving operational processes within the international recognizedports of entry and inland customs depots, as well as between GIRoA border agencies anddepartments. In addition the BMTF assists with the Afghan Border Security Mission throughthe integration of the Civilian, Military and GIRoA goals, while coordinating with Internationaland Regional Partners combating the transnational issue of narcotics and smuggling.”43More specifically, the subcontract between CACI, Inc. and Fedsys, Inc. for the provision of BMTF services inAfghanistan lists the following objectives, stating mentors must assist the Afghan government:“Develop inspection and reporting strategies for dealing with cross-border trade and customsviolations, to include smuggling of narcotics, explosives, and other illicit materialsImprove cooperation and coordination with other regional customs and border management agenciesIdentify training needs for inspection and detection techniques for the on-site Afghan BorderManagement personnelIdentify techniques to assist in the inspection of immigration documents and recording and reportingimmigration dataCoordinate meetings with GIRoA [Government of the Islamic Republic of Afghanistan] ministries anddepartments, foreign government organizations, and key U.S. Government civilian and militarypersonnel and contractorsIdentify training needs for inspection and detection techniques for the on-site Afghan BorderManagement personnelProvides technical and policy expertise to the Combatant Commander and his staff concerning portand border security operations, domestic and international customs procedures, and other issuesconcerning immigration, smuggling, and traffickingEstablish proper controls for importation and exportation on foods entering the country. The controlsensure that no narcotics leave the country and no pre-cursors enter the country, by helping instill acompliance and enforcement regime in AfghanistanIdentify and articulate white paper for potential immediate, impact projects that would enhance andsupport the processes at POE [points of entry]; to include potential small scale capacity buildingconstruction projectsWill be required to undertake various administrative tasks in support of both individual and missionactivities.”44The subcontract further provides a list of items that the subcontractor’s monthly status report must detail.These requirements include a summary of the work being performed under the task order, a detailed43 Prime contract number W15P7T-06-D-E402, Subcontract number S13-126600, signed on December 19, 2012. Thesubcontract lists several border management mentor objectives more specifically, but still lacks clear metrics or indicatorsagainst which performance can be measured; see appendix V for a complete list of the BMTF objectives contained in thesubcontract.44 Prime contract number W15P7T-06-D-E402, Subcontract number S13-126600, signed on December 19, 2012.SIGAR 14-47-AR/Afghan Customs RevenuePage 39description of each month’s accomplishments, the subcontractor’s plan for the next month, any significantdevelopments from the prior month, descriptions of any problems encountered, and a description of thefinancial status of the project.The subcontract executed between CACI, Inc. and Fedsys, Inc. for task order 0127, signed on October 11,2011, provides even less guidance to BMTF advisers than the subcontract for task order 0096. Thissubcontract simply states that Fedsys, Inc. should“Provide In-Country C4ISR [Command, Control, Communications, Computers, Intelligence, Surveillanceand Reconnaissance] experts to station/deploy into USCENTCOM [U.S. Central Command] and othercountries to perform C4ISR [Command, Control, Communications, Computers, Intelligence,Surveillance and Reconnaissance] and Counter Narcotics communication systems quality assurancetasks, witness testing, assist in training events, NIU [National Interdiction Unit] firing and trainingrange management, and provide liaison/coordination between customer nations, embassies and C2D[Command and Control Directorate]. The C2D Counter Narcotics Program Coordinators shall reportback to CENTCOM HQ [Headquarters], as well as the C2D task leader to ensure current projects aredelivered on time and within budget.Oversee the design, installation and integration of all C4ISR equipment (to include existing equipment,Furnished equipment (CFE), Government Furnished Equipment (GFE), etc.) being fielded to the hostnations.Develop detailed plans, goals, and objectives. Analyze, balance, and reconcile program requirementswith available resources.Provide the analysis of user requirements, preparation of plans and other associated documentation,on-site supervision, risk assessments, mission analysis, and any other similar activity relevant to C2Devents. The subcontractor may be required to perform test and/or inspection activities in support ofC2D.”45In addition to the above requirements, the subcontract states that Fedsys, Inc. “shall support the Governmentin identifying C4ISR training requirements and shall support the Government in obtaining or developing trainingpersonnel.” The subcontract goes on to state that the training programs to be provided by Fedsys, Inc. inAfghanistan will include the BMTF. Finally, the subcontract for task order 0127 states that the subcontractorshall provide a summary of work performed, progress achieved and any applicable milestones, potentialproblems and solutions, and what work will be performed over the next period on a monthly basis.45Prime contract number W15P7T-06-D-E402, Subcontract number S12-120216, signed on October 11, 2011.SIGAR 14-47-AR/Afghan Customs RevenuePage 40APPENDIX VI - U.S. CUSTOMS AND BORDER PROTECTION COMMENTS1300 Pc1msylvania Avenue NWWashington. DC 20229U.S. Customs andBorder ProtectionMarch 31,2014Mr. John F. SopkoSpecial Inspector General for Afghanistan Reconstruction400 Army Navy DriveArlington, VA 22202Re: Draft Report SIGAR Audit 083A: "AFGHAN CUSTOMS: U.S. Programs Have HadSome Successes, but Challenges will Limit Customs Revenue as a Sustainable Source oflncomefor Afghanistan"Dear Mr. Sopko:Thank you for the opportunity to review and comment on this draft report. The U.S. Customsand Border Protection (CBP), Office oflntemational Affairs (INA) appreciates the SpecialInspector General for Afghanistan Reconstruction's (SIGAR's) work in planning and conductingits review and issuing this report.CBP/INA is pleased to note that many successes by the Border Management Task Force (BMTF)were included in the report. SIGAR also found the Department of Defense (DOD) contractlacking for specific metrics for the program. While CBP does not fund or manage thecontractual aspects of the BMTF program, a recommendation will be made from CBP to DOD,U.S. Central Command (CENTCOM) to incorporate metrics into the contractual language of anyfuture BMTF contracts or task orders.CBP has led the BMTF program since its inception in 2006. The primary mission of the BMTFis to build strategic and operational capacity of the Afghan Border Police (ABP), AfghanCustoms Department (ACD) and Afghan Customs Police (ACP) to enable them to gainoperational control of their borders while facilitating legal trade and travel. While the contractedmentors have passed through a number of contracting companies, CBP has consistently managedand improved the perfo1mance metrics, both qualitatively and quantitatively, used to monitor theeffectiveness and impact of the BMTF Program.There are a number of qualitative measures employed to monitor the overall performance of thecontract. These include such items as the weekly reports completed by each mentor andsubmitted to the CBP Attache, twice weekly conference calls with the Attache to discussprogress and issues, semi-a1mual team leaders' conferences, and regular site visits and interviewsconducted by CBP personnel at each location. Additionally, a CBP representative is deployedforward, to each regional command, to monitor and direct the mentors in that specific region.SIGAR 14-47-AR/Afghan Customs RevenuePage 41There are also quantitative measures employed to measure the effectiveness of the program.These include the following:•••Mission Essential Capabilities (MEC). This program, begun in 2011, meas ured standardsnecessary to conduct baseline operations at the respective Border Crossing Point (BCP)and Ports of Entry (POE). The MEC measured the Afghan's ability to achieve a level ofoperations to deny the entry of unauthorized goods and people, facilitate legal travel andmigration, and maximize revenue growth and commerce.Borders Efficiency and Capabilities Assessment (BECA). The MEC was expanded in2013 and became the BECA. The BECA expanded the MEC concept, measuring thefollowing:o Equipment shortfall and surplus for resupply and re-allocationo Agency progress towards operational goalso Skill deficiencies or proficiency in mission essential taskso Effective/Ineffective implementation of policy and proceduresIn 20 14, the BECA was refined again, this time creating an Afghan lead for the program.This will allow for shared responsibilities for improvements while transferring theprogram to a sustainable Afghan lead. The program was also simplified to make an"Afghan Right" pro~:,rram that could be sustained upon CBP/BMTF departure.These measurements are shared with CENTCOM as they are reported. They are also discussedwith CENTCOM during semi-annual reviews where the allocation of resources is reviewed foreffectiveness. Additionally, CENTCOM also uses these metrics to adhere to their own DODmetrics reporting requirements.There are a number of issues that will affect metric achievability to include:• Limited and varying site access due to security issues.• A second and third order effect such as a change in leadership, affecting seizure numbers. by the ABP/ACD.• Reduction in Customs revenue due to a reduced foreign presence at the same time ofpossible increasing efficiency by the ACD.The report contained one recommendation addressed to the CBP Commissioner to help assess ifthe BMTF program is achieving its intended outcomes.Recommendation 1: Develop clear perfom1ance metrics for BMTF mentor operations andsubmit such metrics to DOD/CENTCOM for incorporatio n into any future BMTF contracts ortask orders.CBP Response: Concur. The CBP attache in Afghanistan will develop clear performancemetrics for BMTF mentor operations, and will submit such metrics to DOD/CENTCOM forincorporation into any future BMTF contracts or task orders.Estimated Completion Date: September 30, 20 14SIGAR 14-47-AR/Afghan Customs RevenuePage 42CBPITNA remains committed to continui ng its work with the U.S. Department of State and otherrelevant stakeholders in efforts to assist in developing the capacity of the Afghan govemment toassess and collect customs revenue. During a recent visit to the United States by the ACDDirector General, it was revealed that the ACD was developing a Five-Year Strategic Plan. TheDirector General stated that he would provide CBP with a copy of the strategy in the near future.CBP looks forward to continuing its close working relationship with the ACD, ACP, and ABP.Thank you again for the opportunity to review and comment on this draft report. The U.S.Customs and Border Protection (CBP) appreciates the Special Inspector General for AfghanistanReconstruction's (SIGAR's) work in planning and conducting its review and issuing this report.Technical comments have been submitted under separate cover. We look forward to workingwith you on future Homeland Security issues.Sincerely,~~James F. TomshcckAssistant CommissionerOffice oflntcmal AffairsSIGAR 14-47-AR/Afghan Customs RevenuePage 43APPENDIX VII - U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT COMMENTSMEMORANDUMDATE:March 3 1, 20 14TO:John F. Sopko, Special lnspector Genera l for AfghanistanReconstruction (SJGAR)FROM :Will iam Hammink, Miss ion Director for the U.S. Agfor Tnrernational Development (USA ID) AfghanistanSUBJECT:The Mission Response to Draft SlGAR Report, "AfghanCustoms: U.S. Programs Have Had Some Success, ButChallenges Will Limit C ustoms Revenue as a Susta inableSource oflncome fo r Afghanistan" (S IGA R Audit 14-XXAR)REF:SIGAR Transmitta l ema il dated 03/0 1/20 14Thank you for providing USAID w ith the opportunity to respond to thereferenced audit repo n , examining U.S. Government efforts in assessing andco llecting custo ms revenue in Afghanistan. The audi t repon covers programsimplemented by US A ID and the Department of Homeland Securiry Cus tomsand Border Protection (CPO) and includes rwo aud it recommendationsaddressed to USAID.We appreciate SIGAR' s acknowledgement of USA TO accomplishments inimproving the trade and customs environment in Afghanistan. T he TradeAccession and Facilitation for Af ghanistan (TAFA I and / /) programs havecontributed significantly to reduc ing the customs processing tim es and stepsrequired to trade across Afghanistan 's borders. Despite th ese successes, majorchallenges rema in, as a lluded to in the rep01t, w ith transforming processes andprocedures relating to custo m revenue collection.USA lD agreed w ith the find ings in the audit repo rt and has presented below itsresponse to the recommendations.Tel: 202·216-6288/ 0700.108-001U.S . Agency for International DevelopmentGreat Massoud RoadKabul. AfghanistanSIGAR 14-47-AR/Afghan Customs RevenueEmail: kabulusaidinformation@usaid govhtto·//afghanistan usaid govPage 442RECOMMENDATION:2. Direct the Afghanistan Trade and Revenue .(ATAR) implementingpartner to continue to work with Afghanistan's Tariffs Statistics Unit toreduce discrepancies in customs data and make the reduction instatistical discrepancies a requirement of the contract for the ATARprogram.USAID COMMENT:USAID partially concurs with this recommendation. While USAID hasconsidered SIGAR's recommendation to include in the contract a performancerequirement relating to statistical discrepancies, USAID finds it impossible todo so because the discrepancies in customs data are often driven by factorsoutside the control of the project, which does not manage the data."Reduction in discrepancy between the Central Statistics Office and the ACDon trade statistics" is currently a USAID requested indicator. The target set for2014 is a reduction to 20% discrepancy between CSO and ACD statistics.There are two types of discrepancies in customs data that ATAR wiii continueto address in the future:A. Discrepancies between data reported by the Afghanistan CustomsDepartment (ACD) and by the Central Statistics Organization (CSO), andB. Anomalies in ACD collected data due to technical and other difficulties.USAID continues to ensure that ATAR works with ACD to improve theaccuracy, completeness and reliability of data it collects. Anomalies andmissing data will decline as more staff and institutional capacity building isprovided to ACD by ATAR.To address this recommendation, USAID will issue a letter directing theImplementing Partner (IP) to continue to put forth efforts to decreasediscrepancies between Central Statistics Organization (CSO) and AfghanCustoms Department (ACD) statistics.Target Closure Date: May 2014SIGAR 14-47-AR/Afghan Customs RevenuePage 453RECOMMENDATION:3. Ensure that annual targets for implementation of anti-corruptionmeasures, such as the electronic payment system, are included asperformance requirements in the ATAR program contract.USAID COMMENT:USAID partially concurs with the recommendation. USAID cannot include inATAR's contract the use of ACD's anti-corruption systems as performancerequirements because the ACD is responsible for institutionalizing thesesystems, not ATAR.ATAR included in its annual work plan targets with timelines for developmentof systems that facilitate trade and curb corruption at ACD, such asinstitutionalizing the Border Management Model (BMM), strengtheningcustoms code and policies, implementing risk-management systems, andimplementing electronic payment of customs debt. These systems were chosenin close coordination with ACD officials and USAID expects that they will beemployed by ACD. USAID will closely monitor the IP and continue toencourage ACD to use these systems.In response to the audit recommendation, USAID will issue a letter directingthe Implementing Partner to continue to put forth its best effort in implementinganti-corruption measures.Target Closure Date: May 2014Cc: U.S. Embassy KabuVCoordination DirectorateSIGAR 14-47-AR/Afghan Customs RevenuePage 46APPENDIX VIII - ACKNOWLEDGEMENTSMatthew Dove, Senior Audit ManagerChristopher Borgeson, Senior Program AnalystMartin Wilson, Program AnalystThe following staff provided additional support:Mia Bonarski, MethodologistSIGAR 14-47-AR/Afghan Customs RevenuePage 47This audit report was conductedunder project code SIGAR-083A.SIGAR 14-47-AR/Afghan Customs RevenuePage 48SIGAR’s MissionThe mission of the Special Inspector General for AfghanistanReconstruction (SIGAR) is to enhance oversight of programs for thereconstruction of Afghanistan by conducting independent andobjective audits, inspections, and investigations on the use oftaxpayer dollars and related funds. SIGAR works to provide accurateand balanced information, evaluations, analysis, andrecommendations to help the US Congress, US agencies, and otherdecision-makers to make informed oversight, policy, and fundingdecisions to:improve effectiveness of the overall reconstructionstrategy and its component programs;improve management and accountability over fundsadministered by US and Afghan agencies and theircontractors;improve contracting and contract managementprocesses;prevent fraud, waste, and abuse; andadvance US interests in reconstructing Afghanistan.Obtaining Copies of SIGARReports and TestimoniesTo obtain copies of SIGAR documents at no cost, go to SIGAR’s Website (www.sigar.mil). SIGAR posts all publically released reports,testimonies, and correspondence on its Web site.To Report Fraud, Waste, andAbuse in AfghanistanReconstruction ProgramsTo help prevent fraud, waste, and abuse by reporting allegations offraud, waste, abuse, mismanagement, and reprisal, contact SIGAR’shotline:Public AffairsWeb: www.sigar.mil/fraudEmail: sigar.pentagon.inv.mbx.hotline@mail.milPhone Afghanistan: +93 (0) 700-10-7300Phone DSN Afghanistan: 318-237-3912 ext. 7303Phone International: +1-866-329-8893Phone DSN International: 312-664-0378US fax: +1-703-601-4065Public Affairs OfficerPhone: 703-545-5974Email: sigar.pentagon.ccr.mbx.public-affairs@mail.milMail: SIGAR Public Affairs2530 Crystal DriveArlington, VA 22202