Understanding the operations of special economic zones in Jamaica


Understanding the operations of special economic zones in Jamaica

Wednesday, February 19, 2020

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SEZs and their Oversight

The Jamaica Customs Agency (JCA) plays a crucial role in the regulation and monitoring of special economic zones (SEZs) in Jamaica, and works closely with the Jamaica Special Economic Zones Authority (JSEZA) in this respect.

Special economic zones are geographically demarcated areas within countries where special tax benefits and fiscal incentives are provided to companies operating in these zones.

The JSEZA has oversight of the SEZ regime, and all SEZs activities are governed by the Jamaica Special Economic Zones Act (2019) and the Special Economic Zones Regulations (2017), as well as guidelines issued by JSEZA. Additionally, the laws that govern other government entities, particularly the JCA, are applicable in these zones.

Partnership and Collaboration

The JSEZA regulates SEZs in Jamaica in collaboration with other government entities such as Jamaica Customs, Tax Administration Jamaica (TAJ) and municipal corporations, which monitor compliance within these zones.

In an effort to strengthen cooperation for the development of SEZs, the Special Economic Zone Authority, as part of its business acceleration services, is actively engaging other government entities — through the signing of memoranda of understanding (MOU) and service level agreements, including the signing of a tripartite MOU with the JCA and TAJ — to establish standard operating procedures and protocols for information-sharing, due diligence, investigating, monitoring, general cooperation, among other things.

Governance, Applications

The commissioner of customs is a named member of the JSEZA board, as stipulated in the SEZ Act. Therefore, the JCA, through legislation, is part of the JSEZA governance structure and participates in the review and recommendation for approval of SEZ developers to the minister with responsibility for SEZs, and the direct approvals of occupants. The authority engages in a risk-based approach in its evaluation of companies seeking SEZ status, which is done in collaboration with the JCA and other agencies.

Additionally, within the due diligence process, special attention is paid to excise goods as mandated by the SEZ legislation. Excise cargo are goods of a sensitive nature that attract special taxes and generate high revenue, such as cigarettes and alcohol. Excisable goods carry with them a high level of risk and susceptibility to smuggling, which potentially fuels organised crime (local and transitional) and terrorism financing. The JSEZA and JCA are very cognisant of these associated risks and ensure that there are logistical and security arrangements in place by every applicant seeking to handle excise goods (Section 36 of the SEZ Act).

The new Customs Act (2019), now before Parliament, includes international best practices which promote the efficient operations of SEZs. Running parallel to this process is a joint JSEZA-JCA effort to put in place a framework of procedures in an effort to simplify and harmonise SEZ/Customs procedures and documentation.

Accountability and Transparency

Both the JSEZA and JCA, as part of the SEZ monitoring framework grounded in accountability and transparency, have the right to inspect the physical premises as well as audit the books of any SEZ company. This is part of a check and balance system that allows the JCA to verify data in its ASYCUDA System and reports generated by the JSEZA. The JCA mandates to facilitate trade, collect revenue and protect Jamaica's borders are reflected in the SEZ Regime (Section 43 of the SEZs Act), and Regulation 55(3) which outlines the responsibilities of Customs in facilitating the efficient operations of SEZs in Jamaica.

The JCA has a key role to play in mitigating tax leakage by monitoring the entry, admission, transfer, exit and other movements of merchandise in all SEZs, as well as in all SEZ/Customs- controlled areas. A Customs-controlled area is a restricted access area within an SEZ that is subject to the control and supervision of Customs (that is situated outside the Customs territory), for purposes of exempting the assessment or imposition of Customs duties.

These areas are controlled by Customs in accordance with the SEZ Act and Regulations, the Customs laws, and any other applicable laws.

Additionally, the JCA monitors the transfer of goods from an SEZ to the Customs territory for sale or destruction. In the event where an SEZ entity intends to destroy goods that are deemed unfit for its operations, permission has to be sought from the Special Economic Zone Authority, and the destruction must be performed under Customs supervision.

The JSEZA and the JCA will continue to collaborate with the aim of advancing our special economic zones, ultimately attracting more investments and contributing to the growth and development of the Jamaican economy.

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