Customs crisis!

Fears that Jamaica could lose revenue to other countries which charge less

BY VERNON DAVIDSON Executive Editor Publications

Sunday, October 30, 2016

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Jamaica Customs Agency’s apparent single-minded focus on raising revenue is said to be stifling businesses, leading to growing concern that the island could lose a significant chunk of shipping and logistics revenue to other countries, particularly Panama, where rates are half those being charged here.

At the same time, the agency has been asked by the finance ministry to explain why it has not yet provided justification for charging Customs Administration Fees (CAF) at twice the maximum designated by the Cabinet in 2013.

Finance Minister Audley Shaw wrote to Commissioner of Customs Major Richard Reese recently after it emerged that Reese had not responded to a November 17, 2015 query from then Financial Secretary Devon Rowe.

Rowe, in that letter, had said that it was brought to the attention of the ministry that the CAF being charged was $2,500 per piece, up to a maximum of $40,000.

"This is in contravention to Cabinet decision #29/13 dated July 29, 2013 which provides for $2,500 per piece, up to a maximum of $20,000. Please provide an explanation for this digression by November 20, 2015."

On October 20, the Jamaica Observer, acting on complaints from shippers about the fees, as well as the Automated System for Customs Data (ASYCUDA) system, sought to get a response from Reese.

At the time, he said he was overseas, but acknowledged that "CAF rates have not changed" but are "being reviewed".

He directed the Observer to e-mail questions to Karlene Henry and Patrick Chambers at Customs. The questions were sent the following day. Six days later, having not received a response, the newspaper resent the questions, but up to press time yesterday there was still no response.

Earlier this month, a highly placed source in the shipping industry confirmed to the Sunday Observer that representatives from a number of foreign shipping lines serving Jamaica, as well as local entities, met with Shaw at the end of September to air their concerns.

"We had about 10 entities, including Kingston Wharves, Montego Bay Airport, all of them had the same complaint that the facilitation and growth of the logistics side is being stifled by the commissioner," said the source, who spoke on condition of anonymity.

In August this year, Reese told journalists that Customs earned net revenue of $44.136 billion for the first quarter (April to June) of the 2016/17 financial year.

This, he said, surpassed the agency’s target of $2.183 billion or 5.2 per cent.

Reese said that when compared to the first quarter of financial year 2015/16, Customs recorded growth in net revenue collection by 13 per cent or $5.120 billion, up from $39.016 billion in 2015.

He said that major tax items, including Import Duty, General Consumption Tax and Special Consumption Tax performed positively relative to the targets for the quarter and prior year.

"At the end of June, collection in respect of Import Duty was 5.4 per cent above the target, while General Consumption Tax and Special Consumption Tax were 9.35 per cent and eight per cent, respectively, above the targeted collection," Reese said.

"He’s excellent at collecting revenue, nobody can fault him for that, but what it is doing is stifling the growth of business," our source said.

According to the source, when goods are taken off a ship in Jamaica and sent to the free zone for inspection, the charge is $20,000 per container. "By the time everything is done, that container is ending up costing $50,000 for Customs alone. That’s nearly US$400 more than it costs to take it off the ship and put it back on. To load and discharge a container doesn’t cost US$400. It’s lower in Panama," he said, pointing out that the cost there is US$45.

A flow chart of the costs for the movement of cargo from the port to the economic free zone in Panama obtained by the
Sunday Observer shows that the total charge amounts to US$620 compared to US$934 in Jamaica.

The source also confirmed complaints from shippers that ASYCUDA – the web-based system designed to transform Customs to a paperless operation through the use of electronic documents – was allowing competitors to see each other’s information.

"Agents have been putting this to the Customs since February and they haven’t fixed it. But guess what, since the meeting in September, it has been fixed, but let’s see if it’s permanent," he said.

Last week, another industry source told the Sunday Observer that, while the system was not showing such data now, other problems have surfaced and meetings have been taking place to find solutions.

That second source, responding to Reese’s recent interviews in which he spoke of Customs’ revenue increases, and the success of ASYCUDA, said the commissioner "is patting himself on the back a little too hard".

"On one hand he has fulfilled one of the requirements of the Government — to collect revenue — but all he’s done is replace one computer system with another one," said the source.

"The entire implementation process has been handled poorly. ASYCUDA is allowing competitors to see each other’s information, despite Customs saying they have fixed the problem. Now, customers have very little confidence in Customs to keep their data confidential," said source who also spoke on condition of anonymity.

"While people are willing to co-operate and support changes at Customs, it has become apparent that the great thrust at Customs is to raise fees. Customs has not been transformed, it is the same old organisation with a new computer system and a new designation — executive agency. The transformation that needs to take place to air and sea freight business has not taken place."





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