Commissioner of Customs, Danville Walker, has confirmed that under-invoicing is ravaging some of the most prominent local businesses.

Items targeted by criminals range from poultry and tyres to appliances and clothing, which are smuggled into the country illegally to gain a compe titive advantage over tax-compliant businesses.

Port... items targeted by criminals range from poultry and tyres to appliances and clothing, which are smuggled into the country illegally to gain a compe titive advantage over tax-compliant businesses.

According to a reliable source, corruption at the port has been increasing at a rapid pace since current security minister, Colonel Trevor MacMillan, stepped down as head of the Revenue Protection Division (RPD) in the 90s, and has reached "epidemic proportions" within the last three years. The source, who only consented to an interview on condition of anonymity, said that the reason behind the spate is a customs system which, through several loopholes, facilitates its manipulation.

"When Colonel MacMillan was in charge of RPD, corruption was quite widespread and he made some serious attempts at dealing with it and it decreased greatly," he told the Business Observer. "The problem is that when he left, because of the system that is in place, it reached right back to where it was.

"It has never been as bad as it is now," he acknowledged. "The reason for that is the system of tax collections that is in there. the very system is what makes the corruption possible."

The most clear-cut loophole at customs, he disclosed, is the fact that there are over 200 rates of duties with different tariff codes. This, he said, creates an environment at the port where unscrupulous business persons, including high-profile "corporate-heavyweights", are motivated to profit from "under-coding" higher rated products. He said that the aforementioned type of businesses are some of the more popular with tiered tariff-coding systems, thus attracting smugglers to those markets.

The chicken industry paints a daunting picture of how easily the customs system is exploited. The fact that chicken neck and back attracts a lower duty than regular chicken parts, results in a "whole heap" of chicken neck and back being "deceitfully recorded" as having gone through the port.

"For example, chicken pays 200 per cent duty to bring it in if you code it as 'chicken', but if you code it as 'chicken neck and back' it pays zero per cent," said the informant hypothetically. "So right away you giving anybody in the chicken business the incentive to smuggle chicken because they can undersell (Jamaica) Broilers and CB (Caribbean Broilers) if they don't pay the duties on it."

Jamaica Broilers and Caribbean Broilers, producers of Best Dressed Chicken and CB Chicken respectively, are the two largest local processors of the bird, accounting for a combined 65 per cent of the home-grown produce. However, cheap imports, catalysed by smuggling of the product through customs, have threatened the local industry.

According to the Statistical Institute of Jamaica (STATIN), in 2007, just over a million kilograms of 'poultry cuts' (ie chicken leg quarters, chicken leg drumsticks) were imported at a value of J$91 million, compared to 18 million kilograms of 'backs and necks of fowl' at a value of J$575.1 million.

According to our source, "Some of the biggest meat distributors are involved; some of the people who pretend to be big and mighty."
Christopher Levy, senior vice president at Jamaica Broilers, said that this type of corruption by some players in the industry has indeed affected his company's business.

"When I bring in meat and burgers for example, you see a man selling it here for 20 to 30 per cent less and you wonder how they do it," said Levy. "When I buy it where he buys it and I am buying more than him, he still sells it 20 to 30 per cent less than me.

"Jamaica Broilers has been impacted by this tremendously over the years," added the company's vice president.

According to Dr Keith Amiel, CB's manager of corporate affairs, going back a few years ago, as many as 40 forty-foot trailers per month were allowed in Jamaica duty-free on the grounds that the invoice was in chicken neck and back. Dr Amiel noted that these containers were usually not inspected, and acted as more than enough incentive for white collar criminals.

"This was the problem," argued Dr Amiel. "The assumption was that the invoices were correct and pure...They could have put in M-16s and it wouldn't have been inspected."

Tyre imports attract a similar type of "bandoolo", this newspaper was told. In terms of the tyre business, car tyres pay one duty, truck tyres pay another duty and tractor tyres pay the least duty. Therefore, many regular 'motor vehicle tyres' are being disguised as 'tractor tyres'. Last year Jamaica imported a little over a quarter million tractor tyres at a value of J$100.5 million; 4.6 million motor car tyres at J$1.1 billion; and 5.1 million bus or truck tyres at J$1.2 billion.

According to our source, tax-compliant clothes and appliance traders face the biggest threat from smugglers. Although crooks use a similar method to smuggle into these two more complex industries, money launderers with the sole intention of breaking even have further cut into market prices.

"What has snuck into it over the last couple of years is the money laundering, and what is happening is that people are now using 'legitimate' types of businesses to wash the money," revealed our source. "For instance, they open a store and sell clothes and appliances at half the price below anyone else.

"This is because they smuggled it into Jamaica and are not on a level playing field to start out with, then they sell the merchandise at only 10 per cent over the cost -- which is only to cover overheads," he reasoned.

The net impact of all this corruption is hundreds of millions of dollars being steered away from the coffers of the Jamaican government annually, and is the primary reason why the new administration appointed Walker as Commissioner of Customs last month. Walker had previously spent 11 successful years overseeing reform of the Jamaican electoral system as director of elections
In an interview with the Business Observer, the newly appointed Commissioner said he is aware of all the methods of 'beating the system' at customs, and has vowed to be relentless with the criminals.
"We are aware of it. The idea of corruption is simply to pay less duties or pay no duties at all, whether it is in terms of the tariff code used, taking containers off the wharf without it being checked or undervaluing of invoices from the point of origin," he said. "We are aware of all of them and we will be putting in place the steps to make it much more difficult and when we find those persons we will be bringing them to book."

Our source said that perpetrators are undeterred because of the fact that the law is not harsh enough in dealing with those persons who are caught, with their names being kept private.

"On the other side of the coin, the punishment is not enough to make people not do it," he said. "If you get caught, all you have to do is sign something saying that you did it, but they can't go public with the information.

"I could do it every day, and when they catch me once in a blue moon, I just sign the paper and pay the fine, which is three times the amount of what they have caught, they give me back the goods and I make back the money down the road," he explained.

However, Walker, at an address last week said that this will change and vowed that perpetrators will now be exposed publicly.
"I am going to catch you and I am going to embarrass you," he warned. "I want you to know that I am giving you fair warning because I am going to expose you and you are going to be embarrassed, and the little flimsy excuses wont work."

The commissioner, aware of constitutions in the law which prohibit the department from making public disclosure of offenders, said that he is hoping that the investigative media will highlight such information.
"When I say that the public will know is because I am relying on the press to find out this information with me and I am sure they will because the things I know that the press finds out, not even the constitution can stop them," he said.

Both Levy and our source, expressed confidence in Walker's ability to fight corruption.

"We are very encouraged by the stance Mr Walker has taken to deal with corruption," said Levy. "It's very refreshing for us to hear the commissioner of customs be so resolute in his approach."
Our source added: "Mr Walker is going to go there and run up into a stone wall but there are some good people in customs still...He is the type of man with the backbone and determination to get it done which is why the Chamber (Jamaica Chamber of Commerce) has supported him; he is not the type of man you can bribe."

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