EDI to curb collusion between importers and officials

EDI to curb collusion between importers and officials

By Riyadi

JAKARTA (JP): Importers, after subscribing to the customs
electronic data interchange (EDI) system, would meet customs
officials only once to clear imported goods.

All previous procedures within the customs clearance process
could be carried out electronically through EDI system. That is
the concept which has been promoted by the customs service.

Directorate General of Customs and Excise Soehardjo Soebardi
said the EDI therefore would automatically reduce possible
collusions between businessmen and customs officers.

"With EDI, everybody must be transparent. If all parties
involved are transparent, there will be no more collusion,"
Soehardjo said at a recent the House Budgetary Commission
hearing.

The customs office plans to launch the paperless customs
service through the EDI system as a pilot project at Jakarta's
Tanjung Priok port and Soekarno Hatta airport on April 1, when
the 1995 customs law comes into effect.

The pilot project would connect the customs office to port and
airport authorities, shipping lines and airlines, importers,
freight forwarders and banks.

However, only 31 companies consisting of 223 importers, five
shipping and airline companies and three banks, have thus far
been included in the pilot project.

Other importers and related parties, who are not taking part
in the pilot project, including those outside Jakarta, will have
to process their documents manually and to meet personally with
customs officers.

The EDI system would not only reduce physical contact between
importers and customs officials but also cut time in processing
importers' documents.

With EDI, document processing by the customs office could be
completed in one hour, provided there were no irregularities,
Soehardjo claimed last week.

With its current Customs Fast Release system, the customs
office promises to process import-related documents within four
hours. The system is currently applied to sea-cargo imports worth
less than US$5,000 or air-cargo imports.

"We have not heard any major complaints or criticism
concerning our airport services. The main complaint we have heard
is that importers often have difficulties finding their cargo.
So, the problem is in the cargo terminal," Soehardjo said.

The document processing by customs, however, is only one of a
string of lines needed by importers to release imported goods
from customs areas.

Procedures

The following are the current procedures of clearing imported
goods from customs areas:

Importers must settle all duty and tax obligations, involving
physically traveling to their banks, bringing with them physical
documents, including customs declarations and accompanying
documents including invoices.

Banks then check all documents and verify taxes and duties
due. The bank then accept payment, and give importers tax and
duty payment receipts. This process may take only one day.

Bank counters for importers are usually open only half-days,
as they have to process all physical payments and then deliver
them to the customs office, tax office and state treasury.

Importers then submit payment receipts and all accompanying
physical documents to the customs office. Customs officials
process the documents by physically rekeying all data in the
documents to the customs office database.

This document processing by the customs office theoretically
takes only four hours provided importers have recorded all data
in their documents in computer diskettes. But in reality, it can
take a day or more.

The customs office then verifies the imported goods' prices
and the duties importers must pay.

If there are large discrepancies, the customs office returns
the documents to importers to make necessary changes.

If there are no discrepancies, the documents are recorded. The
customs office then decides whether the goods mentioned in the
documents need physical inspections.

Physical inspections should be done only if the goods are
subject to random inspection or if an intelligence note
necessitates physical inspection.

The customs office then decides whether the goods need to be
held up or not. The goods can be held up only if the result
requires importers to pay more duties and taxes or if there are
discrepancies between the actual situation and those reported in
the documents.

The fastest process following these procedures would be three
days.

Following the implementation of the 1995 customs law on April
1, the customs office will introduce a combination of self-
assessment (in duty payment), on-arrival inspections and post-
release audit.

Customs director Permana Agung said the process in the customs
office would be much quicker than the current system because
customs officials would not be dealing with documents.

Physical inspections are to be done sparingly and only if
there is a random inspection or if an intelligence note
necessitates physical inspection.

Eddy said that if importers were connected to the EDI system,
all documents could be processed within minutes -- or even
seconds.

Importers can electronically send their customs declarations
to the customs office and banks simultaneously. They can also
send electronically debit advice to their banks.

Banks then electronically send credit advice to the customs
office, informing it that certain importers have paid all duties
for their goods.

After advising their banks, importers exchange the bill of
loading on their imports for a delivery order from shipping lines
carrying their imports.

With such delivery orders, importers come to a customs gate to
clear their imports. Customs officials at the customs gate check
at the importers' mail box whether they have settled duty
obligations.

When there is no random inspection or an intelligence note on
the imported goods, the goods must be cleared.

However, if there is a random inspection, or if an
intelligence, the customs office can bring the imported goods to
a "red" lane for closer inspection. After the inspection, customs
officials will allow importers to clear goods from the port area,
even if irregularities are found.

Further verification on the prices and amount of duties will
be carried out at the customs verification section, while the
goods have been cleared from customs areas.

The new import clearance system stipulates that customs
officials have 30 days from submitting documents to verify the
imported goods' prices.

Whenever customs finds under-invoicing within the set time,
they may penalize importers.

But if they find the discrepancy after 30 days, they cannot
impose penalties. They could only audit imports, and if they
discover discrepancies they could demand the duty shortfall.

Document verification is also applied to look for possible
commercial frauds such as the misdescription of goods, under and
overvaluation, false declarations of quantity or quality, the
abuse of import or export licensing requirements and the like.

If possible commercial fraud is detected, the verification
section is to inform the auditing section and advise it to audit
the importers.

Maman Surachman, head of EDI project at Bank Bali, said the
process would be quick, but banks still have to submit physical
documents to state treasury.

"We hope the EDI pilot project also links with the state
treasury to make the overall process much faster," Maman said.

Eddy, also chairman of the pilot project, said the EDI system
would ideally connect the customs office to all related parties,
including the tax office, Ministry of Industry and Trade, the
Investment Coordinating Board and the Export Service Facilitating
Agency.

"At least, we have initiated the program. Yes, it would need
some time to be complete, to cover all related parties," Eddy
said.

Even to connect the system with major importers and 109
recipient foreign exchange banks, it needs some effort. The large
number of recipient banks will make it more difficult to
implement the EDI in the banking community.

There is also a perception of "no benefit" in some areas; for
example, the shipping companies are expected to submit an
electronic declaration of goods held, which involves considerable
effort and cost, and many see no benefit to themselves.

Small and medium importers do not see the benefit of joining
the EDI. For automotive firms, which import many spare parts,
they would have to enter all data in invoices into their customs
declaration.

Eddy said cases like automotive firms would be rare. Moreover,
if importers had keyed their data into their customs
declarations, banks and the customs office would not need to
rekey the data into their data base.

Both Eddy and Soehardjo said the government was committed to
making the EDI system a success by providing subsidies for one
year.

The subsidy is to include the provision of translator
software, applications (importer, shipping or bank modules),
training, hardware installations and one year free-of-charge
traffic use.

Soehardjo said the government has earmarked Rp 30 billion
(US$12.5 million) for the subsidy.

"It's now up to the market forces. If they want us to serve
them better, they should subscribe to the EDI," Soehardjo said.
(rid)