This is the transcript of my Pencast with Dr. Kunio Mikuriya, former Secretary General of the World Customs Organization, and high-level member of the Japanese Ministry of Finance. Earlier in his career, Dr. Mikuriya served as Counsellor in Japan's Mission to the WTO, and as a negotiator for Japan during the GATT Uruguay Round negotiations. Our conversation is full of insights from a career at the highest levels of the customs landscape.
Tom Mueller
You're listening to Pushing the Envelope: Life at the Cutting Edge of Customs Innovation. I'm Tom Mueller with the Cross Border Research Association. On this show, we explore the frontiers of customs creativity, in conversations with customs and logistics experts, technology innovators, research scientists and other leaders in the field. Industry insiders call the show “the Pencast,” because it's part of PEN-CP, a network for boosting customs innovation funded by the European Union under the Horizon 2020 program.
Today, I'm very honored to be speaking with Dr. Kunio Mikuriya, longtime Secretary General of the World Customs Organization, who concluded his distinguished career at the WCO just a few weeks ago. Hello, Dr. Mikuriya, and welcome to Pushing the Envelope!
Kunio Mikuriya
Hello, thank you very much, Tom. And it is a pleasure and honor for me to speak with you.
Tom Mueller
Thank you. To start off with, could you give our listeners a word on your background and what brought you to the field of customs work and eventually to the head of the WCO?
Kunio Mikuriya
Well, in my younger days, I worked in the Ministry of Finance in Japan. And as customs is attached to the Ministry of Finance, so it is one of the areas. But in 1990, I was sent to Geneva to represent the Minister of Finance at the then Brunei Rounds negotiation, at the then GATT (General Agreement on Tariffs and Trade). And prior to that I was totally in the domestic field of finance, banking policy and fiscal policy. So it was nearly the first time that I saw trade and customs. And at that time, at that GATT, both tariffs and customs as an important area. So I was a trade negotiator. And well, the rounds negotiation was started much earlier, but it would end in 1994. And by that time at the end of 1993, in June, I went back to Japan but I became Tokyo based tariff negotiator. And then I knew how the GATT functioned, and then supported the establishment of the World Trade Organization. Therefore, I was dealing as specialist expert in the area of trade negotiation.
I finished my job as tariff negotiator, and then I went to the Diet, or Japanese Parliament, to pass the package of the outcome of the Uruguay Round negotiation. Then I went back to the domestic area, as a budgetary supervisor for industry and diplomatic and also official aid policy -- so that was helpful later. And then I was called back to customs, because they wanted to reform customs more in tune with the risk management and innovation, but also the international dimension has become very important. Therefore I worked there from 1997. And for that I went to the WCO, to see how other customs administrations are functioning, in the area of compliance and enforcement. And I learned a lot and I implemented the new policy in Japan Customs. Also, as my background was a fiscal finance, I became the Japanese representative to WCO’s Finance Committee. And then they asked me to become the chairperson of the Finance Committee, which was an honor, but that was really incorporated formally in the WCO. And at the same time in 1999 WCO's Regional Intelligence Liason Office – RILO -- in the Asia Pacific moved from Hong Kong to Tokyo. And as I was supervisor of that enforcement and the intelligence area, I supervised that Tokyo RILO’s movement. So on the international front, for the RILO, and the WCO Finance Committee, I was deeply involved. And in 2000, and then Secretary General of WCO asked me to join the WCO. Because I have expertise, not only in customers, but trade negotiation and finance. So in 2001, I was elected as Deputy Secretary General of the WCO. And then, well, as you know, I started my career in the WCO in 2002. And then 2008, there was an election for Secretary General, and I was elected on the basis of what I had achieved as a Deputy Secretary General. So this is a how I joined the WCO and became a secretary.
Tom Mueller
This is fascinating. And yes your expertise that you bring, not only in finance and banking, but also fiscal policy and trade negotiations made it made it a very, very good package for you to join the WCO. Culturally, your home country Japan, obviously an island nation and industrial and commercial powerhouse, a global trading hub. As a Japanese citizen, what traditions, history and unique perspectives do you think you brought to your customs work?
Kunio Mikuriya
Well, it's an interesting question, because this is an island country. So it's more on the seaport -- maritime -- and air transport that Japan was specialized. And perhaps these are the easier areas for introducing IT technology, or computerization, compared to land borders. In the 1970s, Japan had already started the computerization of customs procedures, so in that sense, Japan was well advanced in using technology. But also well another thing that I was able to bring was integrity, because in terms of anti-corruption, Japan has a strong culture of integrity. So that was another good area. And also, at that time, Japan had been a big donor, one of the biggest donors for the world economy for developing countries. And as I was budgetary supervisor for aid policy, I think I was able to bring that capacity-building, how to implement it on the ground. So these are the areas that I was able to bring. And also in Japan, customs is not only revenue collection, because as a developed country, the share of revenue was not that high – though of course still important -- but more on facilitation and compliance: facilitation to support more trade, and compliance to protect citizens in the island. Those were the major functions. So I think this was beneficial for me to bring that contribution to the WCO.
Tom Mueller
Just as a side note, why is it easier to implement new technology in sea and air borders than it is in land borders?
Kunio Mikuriya
Because the trade volume [. . .] In early 1970s there was containerization. I often call the later 20th century “the era of containerization.” And why did globalization occur? Because of the containerization which started after the 1960s, 1970s, and also IT technology, because in that way, communication had become easier. So in terms of logistics, at that time, just in time, was really Japan’s strength in industry. Therefore, customers should adapt to tha reall fast clearance, but also protecting compliance: that means use of technology and containerization. Whereas land borders, yes there are containers, but a rather small quantity by trucks, not huge container ships. And the same applies to air cargo. So I think that is why, in a way, Japan was able to implement, to focus of its technological advancement to maritime and air transport.
Tom Mueller
Understood, that's excellent. You mentioned the delicate balance between facilitation -- in other words, making more trade happen -- and compliance -- protecting citizens from wrongdoing, dangerous materials and so on. And that obviously requires customs administrations on the one hand, but also corporations and even national governments, all to cooperate, to collaborate openly and transparently. And that's an incredible challenge to make that happen, isn't it? What are the challenges that you ran into in getting all of these different parties to trust each other and to collaborate? And what are some of the cases in which they refused to do so?
Kunio Mikuriya
My experience is based on national experience in Japan. And for facilitation, I talked about the early use of information technology. But in facilitation compliance, you said the “balance,” but we call it more the “integration” of trade facilitation and trade compliance into one procedure. Risk management is the key, and also compliance of traders is another key. Therefore, how to nurture compliance culture in the private trading sector is important. And fortunately there was a kind of trust between the private sector and the public sector at that time. And also, you talked about other government agencies. Well, Japan had implemented the single window approach at a very early stage, and as usually customs, not only Japan, but globally, customs is most advanced in introducing information technology, therefore, the Japan's case was extending its computer system to other government agencies and offering the service to them.
Of course, at the outset, it wasn't that easy. And because other government agencies -- I'm talking specifically about regulatory agencies, transport and trade and health, etc -- they are suspicious that accepting a customs extension of IT system might well affect their capability to do their own computerization. But we said “No, no, you can develop your own system, but we do the interface. So that your purpose of facilitating legitimate trade will be honored, but at the same time, detecting illicit trade or suspicious or irregular items, there you will really benefit.” So, this is on the regulatory agency / ministry side. Another is law enforcement agencies: police etc. Customer and police, in general, in many countries, there is a cooperation, but also tension or competition, because whenever there are seizures, and also arrests, it is important, who gets the credit -- is it customs or police? So what I have done as head of enforcement was to visit as many local, prefectural, police heads, and try to nurture trust. This is how I tried to get them on our side. And of course, this is an ongoing process.
I talked about the case in Japan, but when I visited other countries, I always observed the same challenges. So, this is rather universal. And this is why I try to get better cooperation with, for example, Interpol, the police and international maritime organizations, or international civil aviation organizations – that’s the transport area -- and the trade area of course, WTO, but other UN-related agencies, WHO and others, we try to get coordination and cooperation with those international organizations to encourage our members, customers and their clients or their partners, to hold more dialogue and cooperation.
Tom Mueller
Yes, nurturing trust and overcoming suspicions is a recurrent theme, isn't it? When you go from private to public sector and from different agencies, as you say – law enforcement and customs. So having you be a diplomat of cooperation and coordination and nurturing trust is an invaluable one. And we need more of those diplomat who build bridges rather than walls.
Speaking of bridges and walls, another theme of PEN-CP is to try to bridge the gap between public and private spheres in technology development. In other words, finding ways to reach researchers in academia or in tech startups, and have them work on the biggest customs innovations and the biggest challenges to customs. Do you have tips for how to encourage cooperation and coordination between customs administrations on the one hand, and research in academia or startups on the other?
Kunio Mikuriya
Yes, sure. And customs should be always vigilant and looking at what kind of technology is available. So we constantly view, initially we call it a “disruptive technology,” disruptive in the sense of disrupting the usual business model. But once the disruptive model has emerged, we call it more on emerging technologies, and how we see the potential for customers to use those technologies. And usually technologies come not from customers, but first from the private sector. So we have to address that issue with a private sector, and in the end, what we need is private sector’s cooperation, and also how to bridge the private sector’s technology to public sector’s technology. For that, we encourage researchers, at universities and institutes and also at startups.
One example is that now, we are implementing our data strategy. And one pillar is that the collaborative approach between startups, universities, research institutes and customs, how to use the data and what kinds of technology can help? Speaking of technology, there are many disruptive or more emerging technologies. At first we looked at blockchain technology, and we encouraged the members to go to private sector, that the private sector world forms its own blockchain, but how can customs have access to that? Because from the customs point of view, what we need is data -- because our risk management is based on data. Therefore, how to get data from a blockchain is important. And of course, more recently, in ecommerce -- for customs, how to get the data from e-commerce is important. Because unlike containers -- I said that the late 21st century was the era of containers, but the 21st century increasingly it is the era of smaller and smaller packages and parcels. And those who are involved in those small packages or parcels are consumers, small and medium sized enterprise. So, how to get them on board and try to ensure their compliance, by getting data, is very important. And therefore, in this area as well, we try to use as many technologies as possible.
For example, when small packages arrive, the usual huge X ray machines is not necessary designed for that purpose. So we work with the private sector, those in the scanning sector, to come up with new solutions, but also how to use that image data for risk management and risk analysis, using AI? Because at one time I saw that all scanners and scanned images behind the scenes, there are many officers and experts watching the monitors, but that is not a very efficient. AI by machine learning understand that and then just eliminate the which are totally no problem, low risk, and just focus on targeting high risk ones, bringing them in front of more human eyes -- that is what we want. So there are many areas of technological application to that new era of customs and trade flow.
Tom Mueller
Yes, you know the words AI and machine learning – one hears those a lot, and as you say, their promise in improving the way in which customs is done, speeding it up and making more accurate, is incredible. But there are also times when I think those terms there's kind of thrown around without a lot of rigor, and a lot of understanding.
Another buzzword I hear a lot is blockchain. And I was wondering, you know, the recent Trade Lens, the IBM Maersk, blockchain-enabled global trading platform, which didn't work out -- the failure of this project, despite major partners and despite an obvious need for such a platform -- what can we learn from this, and what should we do the next time around to make that such a project work?
Kunio Mikuriya
Well, had several elements that we learned. First, blockchain is a distributed ledger. So that means it's a decentralized system. Whereas customs is one of the central authorities. So how to make it functional, I discussed with the many heads of customers that I asked to look at blockchain. And they came back and said that is difficult, and there’s also trust issue, because data must be high quality. But if that data going through the blockchain is not a quality one, that causes a problem: garbage in, garbage out. And obviously the private sector had merit in using blockchain. But if customs want to increase the benefit of using a blockchain in logistics, how can customs support? Or if customs have problems -- that is what we have to identify, more talk would be necessary. And also, in general, there are many blockchains, and what are the harmonized data that the customs want? How can they harmonize data within blockchain? That was another issue that occurred.
In a way, we are waiting for blockchain to be widely used, WCO can contribute with standardization of data sets for blockchain. But as you've said, didn't occur because, before that, there are so many questions and problems. And also blockchain itself causes problem. Quite often, when we hear about blockchain it is about cryptocurrency, and nowadays, they mention the problem of effects on the environment etc. So, blockchain in the future will be a very helpful vision, but in the short time we encountered problems. I see that many customs are now using underlying block chain technology -- but not blockchain itself, but underlying blockchain technology to connect those partners. It is a usable one, so we can use that. But customs didn't really adhere fully to the proposed blockchain, because the benefit for customs and also the customs’ mission is not only facilitating but also compliance. How blockchain can help the compliance part was another question that was raised.
Tom Mueller
Do you have thoughts on the new EU Customs data hub and the EU Customs Data Authority that's being rolled out? What potential does that have, and potential challenges do you see in reaching its full potential?
Kunio Mikuriya
Well, EU’s customs reform proposal is an interesting one. Because it's tried to respond to the challenge of e-commerce to start with, because in e-commerce there are so many customs frauds. And although we know that there are many customer frauds, we don't know what is the magnitude of that fraud, to start with. Also, the problem of getting quality data from the private sector – traders, business is a real challenge. So this is why the EU has come up with a solution, to make sure that they get the data even from platforms. But the in getting the data, I think they thought about well facilitation side that each trader was to submit data. And if this is only one data hub, that could be helpful, but that has, as you suggested, far reaching effects on national customs – on the 27th national customs.
The concept of EU customs reform, and their proposed new legislation is fine, but the how will it be used by each national Customs Administration is something that they have to come up with better, because risk management . . . I'm sure that the EU is providing basic risk management tool, but each port each port of entry has different risk environment. Therefore, how to use that central hub data to match with their own customs environment at the entry point would be an [interesting] discussion, and some improvement might be necessary. All in all, the EU wants to have data driven customs -- that I agree with. But quite often, the devil is in the detail, so I'm watching how EU customs reform will progress not only at the Commission, but now more on the Council, the Parliament, is what I'm interested in.
It's also about the implementation of technology. Because in the past the EU had customers codes, but to implement customs codes, it is information technology, and each national customs administration should invest in their own IT system, which was very costly. So this is why, initially, when the EU customs reform was presented, some administrations responded “We invested so much!” But overall a platform for investment and sharing data and intelligence? That could help 27 customs administrations.
Tom Mueller
Yes, as you say, the devil is in the details. And we'll see. We'll see how it rolls out. But it's interesting to have your thoughts on the overall challenges faced. Do you think that the creation of regional data hubs and customs data authorities is the way of the future? Will we see more regional customs authorities in the coming years?
Kunio Mikuriya
Well, customs’ Holy Grail is always sharing data, and how to have access to data. So whatever scheme gives customs access to data, while at the same time fulfilling the national requirement of data protection -- that is always the challenge for the global customers community. Therefore I see that customs administrations in some regions, have that scheme of sharing the data, but what kind of data and what conditions? That differs from region to region. So I'm looking at that, and in the end, of course, they should be connected, and that WCO should support and facilitate that data sharing, while fully addressing the concerns of the private sector.
Tom Mueller
Understood. Shifting gears a little bit, I'm looking at the recent huge disruptions in our world, in our trade, in our societies. Wars in the Ukraine, and Gaza, the blockage of the Suez Canal, the pandemic, of course. How have these huge disruptions changed the priorities of customs work, do you think? What lessons have they taught us?
Kunio Mikuriya
Well, it's an interesting point. Because in the 1990s, and the first ten years of the 2000s, it was the era of hyper-globalization: it was really how to facilitate trade, looking at cost efficiency and more low-cost production locations, and outsourcing has been very prevalent at that stage. That is where there were high expectations for the WCO and customs, and the WTO's trade facilitation agreement was a response to that need for hyper-globalization. Because for globalization outsourcing, the border should be really efficient and low cost. But then came the 2001 terrorist attacks in the US, and there was talk that although we were pursuing “just in time,” but maybe “just in case” might be a better requirement to aim for. Well, it didn't happen, as you know, and we just continued globalization. 2001 is also the year that China joined the WTO. So all those implementations of container IT technology, technological innovation, was there, and big, low labor cost countries have joined in global trading system. And the WTO system was sufficiently robust at that time.
But now, I would say there is a kind of paradigm shift. It was most visible in the pandemic: the pandemic caused supply chain disruptions, and people noticed that (for example) the production of medical supplies was concentrated on very few, if not one, country. So, how to make sure that the production of those the essential goods should have multiple sources? That was one area. And also actual disruptions have happened, so if the source was disrupted in terms of transport, the global economy had a problem. So this is one side. And another side is geopolitical consideration. As you know, US-China trade tension really started in 2018, especially in the high tech area. There was not just innocent globalization, but de-shoring, friendly-shoring, etc -- that was there. And then came war in Ukraine and in Gaza. So those were the disruptive forces. And you say the blockades, but sanctions were there, and therefore customs are the implementation agency of sanctions in international trade. So, they need to well factor in those new requirements. So technology-wise, container and IT system, as I said, there are ecommerce and small parcels packages coming in, and also AI and other technology coming in.
So what new environment will that bring to customs? Already it brought new challenges to customs, but how will it move forward – how can customs address that issue? Well, EU customs reform is one answer, but other countries are looking at how to respond to those challenges. But at the same time, when we look at the globalization, there are many emerging economies, but production factors of low labor costs -- is it still valid? And also consumption power of new emerging economies, how will this evolve? And then finally, that multilateral WTO system -- what is going on? And therefore, for the WCO we are trying to look at those disruptors: one side is technology, and another in the end, as we agreed, it is trust in the world trading system. Even if the high tech area is de-coupling or derisking, customs should really be careful about that. And when it comes to globalization, the innocent globalization has finished, but I see increasingly regionalization. And when it comes to regionalization – the free trade agreement, the customs union -- customs has been the core, the driving power. How to make sure that those regional integrations are in compliance with and supporting the multilateral system in the future? So this is what customs should prioritize. And how we can support this movement is we are looking at. It will be a challenging and interesting era for the WCO, as they lead customs administrations in the world.
Tom Mueller
Fostering the combination of technology on the one hand and trust on the other, and ensuring that regionalization is a healthy regionalization, rather than a protective and exclusive one. Those are some those are indeed some big challenges for the WCO, and for a lot of other players in the customs world. To take the example of PEN-CP, which as we've said is funded by the EU Horizon program, what roles should internationally funded projects in customs like PEN-CP be playing in accelerating customs innovation, improving customs inter-communication and cooperation, breaking down the public and private barriers, instilling as you say the trust of the different players at the table? What do you think the role of such projects should be?
Kunio Mikuriya
Well, first sharing what is happening, including best practices. Because during the COVID-19 pandemic, what we did was, now that communication has become difficult, what we should do is that, especially vis a vis the private sector, we have to share the procedure and best practices of customs. We published national customer administrations’ best practices. And other customs administrations look at that and are inspired by other customs administrations’ experience, and they do their own customs reform. And also the private sector is thinking and asking for customs administrations. So first, that sharing what is happening in the world, and what are the best practices, is important.
And also, I hope that the your podcast is not limited to interviews of the public sector interview but the private sector as well, and how to encourage engagement and dialogue between the private sector and public sector. This is very important. Again during the pandemic, I set every week Zoom meetings with the private sector. And I received feedback from our members, the public sector – customs -- but from the private sector point of view, what are your problems, and how can we help? That helps a lot in coming up with more definition of essential goods like a harmonized system. But they also pointed out is that there is a lack of strategic coordination at borders that's a problem. It's not only customs -- at the borders there are many other agencies. So this is why I started talking to trade, transport and other international organizations, to issue a joint letters, joint statements, to ensure that this is the important area where we need to enhance collaboration and overcome those challenges. So that kind of dialogue is very much needed. And knowledge-sharing and instilling that dialog.
And also it’s important to provide the basis for professional pride for customs and people in other sectors – to assure them that their voices heard, and they receive the opportunity to explain what they are doing and how they can help. So communication is so important – and I look forward to your further contributions in this area.
Tom Mueller
To clarify, this podcast is indeed involving the private sector as well as the public sector. I'm speaking with university researchers, private tech entrepreneurs, and startup companies and so on. But yes, that enhancing professional pride and ensuring that all voices are heard -- those are critical parts to making everyone sit down at the table and share information productively. Just getting people in the same room, virtually or in reality, is a valuable first step.
This is this is a conversation that has been an incredible education for me, and I think for our listeners as well. Your experiences really comes through, and your analysis of what you've seen. To begin to wrap up our conversation, looking back over your long and distinguished career at the WCO, first as deputy Deputy Secretary General and then for three terms as Secretary General, what do you feel have been your biggest achievements while at the WCO? What have been the biggest surprises, and what have been the biggest disappointments or regrets -- things you wish you had done, or done more of?
Kunio Mikuriya
Well, first I’ve tried to improve the visibility and understanding of customs, because people often don't understand what customs do. They think, those are the people at the airport who are searching our packages, this is a typical view on customs. So, I tried to raise the visibility of customs. And the first five years, I tried to come up with a vision -- that is, “Borders divide, customs connect,” that is what we are doing. And for that, we came up with tools like a revenue package, because when I became Secretary General, it was amid the global financial crisis and decreasing customs revenue. And then an economic competitiveness packages, because customers can contribute to competitiveness through trade facilitation. And then a compliance package, to make sure that the customs role is protecting society. And of course, for that we need an organizational development package. So, with that we made clear function, mission and vision of customs. Fortunately many customs administrations and their members appreciated that, and they took the WCO vision into their own national vision and mission. So I am proud of that.
Another area is that the customs are an implementation agency of any government’s policies, and therefore, they should remain agile and responsive to all the changing environment. So every year we try to see what other problems have arisen – was it natural disasters, of course a health crisis was the recent one. But also, now the world is moving towards more green/sustainable -- how can customs contribute to this sustainability? It’s important to have that kind of mindset, that we are at the forefront of implementing government policies, that we have the tools and the willingness to respond to the global issues. This will also raise the visibility of customs. Also inclusiveness is very important. Therefore capacity-building activities in general, but I also launched programs for landlocked countries or small island economies, to make sure that all our members take the inclusive approach.
So those are the main areas that WCO achieved. And also, as “top salesman” of WCO, I visited 168 member nations among 185 total, and talked to political and economical leaders to advocate and explain why customs is important -- why it’s important to invest in customs, and what customs can do for your country. So at a political and economic level, that dialogue was also what I am proud of. Well, do I regret anything? No, no, I don't regret anything, but we have to continue this journey for the customs community. And I'm confident that the next generation of WCO leadership and members are very keen on moving forward, and they look back with the pride on what they have achieved.
Tom Mueller
168 visits out of a total of 185 members -- that is an impressive record! Your airmiles accounts must be robust at this point (laughs).
Kunio Mikuriya
(Laughs.) Often people ask how many times around the earth I traveled. But I always try not to think about how long I traveled, because I really wanted to concentrate on our individual members’ needs and advocacy.
Tom Mueller
Your contribution to that job, and your dedication to getting the word out, and being an in-person advocate and diplomat for world customs is impressive. And obviously people around the world are grateful to you for that work. You've contributed so much to customs, but you have so much more to contribute, in your analysis and your historical view of customs development and innovation. What's next for you? What are your upcoming projects?
Kunio Mikuriya
58:18
Well, up to December 31 I had been running, running, so I didn't really have time think about the next step. And I thought that I shouldn't think about that, so I could focus on my current job. And January was really sending out all my goods to Japan -- moving. I came back to Japan and 10 days ago, and now I have to well set up my life in Japan. So I don't have that new project that I can tell you – sorry!
Tom Mueller
Well, you have earned the right to take a rest and reflect, and enjoy next month -- cherry blossom time in Japan. I'm sure ideas will come! After a very intense period of many years, you’ve earned the right to take it easy and not plan for the future.
Kunio Mikuriya
Well, thank you for your advice!
Tom Mueller
For what it's worth! (Laughs.) Thank you so much, Dr. Kunio Mikuriya, for sharing a few of your insights from your decades of high-level work and customs, finance, fiscal policy, technology, and the politics of customs. It's been a real pleasure speaking with you, and I'm grateful for your time.
Kunio Mikuriya
Well, thank you very much. I enjoyed talking to you. You are very good at extracting what I have been thinking. So I appreciate that! Thank you very much.
Tom Mueller
You've been listening to Pushing the Envelope: Life at the Cutting Edge of Customs Innovation, a podcast that profiles customs leaders, highlighting their views, ideas and inspirations about the future of customs innovation. Join us soon for our next Pencast, and another insightful conversation with customs trendsetters and forward thinkers. Thank you!
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