FOR the first quarter of the financial year (April to June) the Jamaica Customs Agency has already grossed $44.1 billion, surpassing its year-to-date target by 18 per cent. But the department is defending the source of those earnings, on the grounds that not all the fees some stakeholders are lamenting come from Customs.

The sentiment among some stakeholders involved in import/export operations is that Customs is stifling business in its zeal to extract as much revenue as possible for the Government’s coffers.

Officials of operations mainly involved in shipping and logistics, representing large international companies, say Customs needs to focus on facilitating trade, and must slash the red tape if the Government has any hope of attracting investors for its much-touted logistics hub initiative.

They say the authorities must accept that while Jamaica’s geographical location makes it favourable, the island faces stiff competition from countries in its front and backyards, such as The Bahamas (Free Port), the Dominican Republic (Causedo), Colombia (Cartagena), and Panama. The sentiment is that with these countries having already bolted out of the gate in anticipation of the completion of the widening of the Panama Canal next year, one of Jamaica’s only saving grace is lower transaction costs at Customs.

“What we are trying to have Customs do is to facilitate us. There are some disadvantages that we have in Jamaica compared to other countries doing the same thing that we are doing. One of the major impediments would be a cost,” said a representative of one logistics operation, who asked for anonymity.

“The cost is much lower to do the same thing that we are doing, in countries like Panama, which on average would range about US$900 less. What we have tried to tell the minister is that in order for us to really move this logistics centre forward, we have to find ways to bring down the cost of doing this, because no one will come here,” he added.

He said that while the Government is bragging about the coming of the hub and prospective investors, the local companies that are already operating in Jamaica are struggling to compete with similar operations in the region, chiefly because of the costs associated with doing business with Customs.

“Everyone is now doing what we have said we wish to do. Everybody has a logistics centre. There is nothing new about what we are trying to do,” the businessman said. “Start with your own people. We are here fighting and struggling.”

At the same time, he acknowledged that compared with other countries Jamaica has an advantage where freight costs are concerned, but attributed this to low export volumes.

“We don’t export anything. Everybody bring their containers here, but then there is nothing leaving from Jamaica going anywhere,” he stated.

Chairman of the logistics hub task force sub-committee on education, Dr Fritz Pinnock, also alluded to this in a previous Jamaica Observer interview when he stated that: “The traditional role of ports — to receive cargo, to store them, and deliver them — in this (Jamaican) context is now a cost to shipping lines, because nine out of every 10 containers coming out of Jamaica go out empty. Our exports are services. That’s the reality. Only 10 per cent of the cargo that passes through our ports is for domestic consumption. The rest is trans-shipment.”

The exporter further asserted: “Apart from being strategically located, our freight rates are better. We have no other advantage. Absolutely none, there is nothing that could distinguish us from anybody else.”

But while Customs accepts that there is room for greater efficiency, which Commissioner of Customs Major Richard Reese argues is an ongoing phased process, it does not accept that trade is being burdened by the cost of Customs. He insisted that it is unfair to view fees in a vacuum.

“What constitutes fees is not just Customs. Doing business, whether by air or sea, involves the shipping line, the port, the freight forwarder, security — everybody charges for services along the way. So when any stakeholder raises the flag about fees, fees must be looked at holistically and in totality,” Reese told the Sunday Observer.

“We have challenged the private sector to give us comparative figures. Don’t tell me that it’s US$1,100 to ship a container out of Dom Rep, and the same container is US$1,400 out of Jamaica; show me the breakdown. When you do the breakdown, you can make a more informed decision as to where maybe each stakeholder can reduce their cost. But usually the revenue collector is the one they would want to take the hit,” Reese added.

Deputy Chief Executive Officer for Operations at Customs Karlene Henry further contended that the only fee outside of taxes and duties is the Customs Administration Fee (CAF) which, when compared with similar fees in the region, is less than the actual cost that is commensurate with the service.

She noted that for containers, the cost range is $35,000 to a maximum of $60,000, dependent on where the clearance is done, adding that Customs receives numerous letters asking for site examination, because the port fees for stripping and stuffing are too exorbitant.

“That is why we talk about a breakdown of the costs, so that you can see why some persons are saying the fees are too high. I guarantee you, it is going to be the port fees, rather than the Customs fees,” she said.

Henry also cited the flat rate of $6,500 charged to clear a commercial barrel, regardless of the size or its contents.

Reese further argued that the Government gave up $9 billion in revenue, mainly to the productive sector, last year under the CAF facility, which is supposed to be a more affordable option for importers, when compared with its predecessor — the Customs User Fee (CUF).

For example, the commissioner said, for a shipment of one container with a cost insurance and freight (CIF) value of $18 million, the importer would have paid $360,000, but the CAF caps that at $60,000.

The Customs authorities argue that apart from a particular segment of the industry which has these ongoing concerns, generally, there is no such cry from importers. “They are happy when they do the comparative analysis of what they used to pay for a Customs User Fee, versus what they are paying for the CAF,” Henry said, while pointing to reprieves such as the 50 per cent discount in CAF rates for manufacturers and charities.

She insisted that decisions and changes are not made behind closed doors, and that in fact, stakeholders have an opportunity to make an input at Customs’ monthly tariff classification meetings. “We don’t just venture out there and craft things without consultation,” Reese said, explaining that, as logistics activities increase, higher volumes could lead to lower rates.

Overtime remains another niggling issue for some stakeholders, who lament that because of the haphazard variation in rates charged for the service of Customs officers to examine and release a shipment, they are unable to predict what they will have to pay from one day to the next.

That, according to Group Chief Financial Officer at Lannaman and Morris William Brown, results from the fact that the regulation gives Customs the option to assign any number of officers of varying ranks.

He further complained that neither the agents nor the shipping lines have a say in the number of officers assigned, the purpose of those officers, nor the charges, “because the law protects Customs. The law says if you have activity on the port, then Customs officers are supposed to be available. We accept that, but there are no set fees. So the shipping lines can’t plan on what the cost is. So we have asked them to redefine how this is calculated. In this modern era you can set rates based on hours”.

Not so, said Henry. She said that the majority of the approximately 30 officers on the ports have been there for an average of at least three years. “They are not rotated. If you get a bill every month with basically the same circle or cadre of officers… so therefore if you want stability, you can look at those same invoices, because you know the officers and you know their rates. It’s also to be noted that the overtime is paid by the shipping lines, not the agents,” she said.

Reese said that Customs has an obligation to protect against smuggling and other illegal activities, and that an essential service is being provided in this regard. He said what has been put forward to the players is that Customs incurs monitoring costs, which must be covered, and that if they insist on a flat rate, then there should be a willingness to pay at the higher end of the scale.

“Jamaica has a very serious problem with the illegal importation of firearms, pharmaceuticals, and a whole range of products,” the customs boss said. “Vessels come in, crew smuggle off cigarettes, liquor, all of those things. We have an obligation to protect our borders. So we can’t just say we are going to charge you a flat rate, unless you agree to pay at a level that will cover our costs.”

Last year, the department’s gross collections totalled $158.7 billion, or 11 per cent above its annual target.