[nixon_why69]

The story is from the 15-1600s. I imagine it working like things generally worked in that time period which is with quite a lot less bureaucracy than today.

The cleverness of the idea is it leverages fear to prevent ships from declaring "wheat" for their ship full of diamonds. You can make some sporadic, random inspections, just enough to keep the fear up, instead of having to inspect every single ship.

[Bratmon]

The idea of "Wait, we can just make sporadic random customs inspections" is way older than this law. I suspect it was invented by the first ever customs inspector. (At a minimum, Plutarch at one point described it happening at a checkpoint between Roman provinces)