Foreign businesses ask for review of customs law

Rendi A. Witular, The Jakarta Post, Jakarta

Foreign business groups have said a revised customs law is a necessary part of the government's efforts to reform the country's customs service.

Speaking on behalf of the business groups, Phil Bell, a technical adviser for consultancy firm PriceWaterhouseCoopers (PWC), said the customs law should be revised to enhance accountability within the country's customs service and reduce the opportunity for corruption.

"Customs modernization and reform is used as the platform to achieve structural changes and efficiencies in the whole import and export process, and deliver significant economic benefits," said Bell.

PWC is a member of the Customs Advisory Committee set up by the finance ministry with the main task of developing, evaluating and supervising customs policy and administration. PWC was included on the committee to represent the International Business Chamber of Indonesia, which groups all foreign business chambers in Indonesia.

The establishment of the advisory committee was part of the government's ongoing efforts to reform the country's customs service, which is notoriously riddled with corruption.

There are at least seven articles in Law No. 10/1995 on customs that require revision, Bell said in a e-mail to The Jakarta Post.

One of them is Article 16, which regulates tariffs and import taxes.

Bell said there was no simple and clear mechanism in the article for importers to report honest errors in underpaying import duties and to settle the payment.

At present, in case of underpayment the customs office will audit the company in question to confirm the underpaid amounts and then issue an underpayment notice. In some cases, the office imposes penalties.

The good reputation of an importer can be tarnished once it receives the underpayment receipt, as customs personnel will make of record of the error, which can deny a company the opportunity to receive special facilities in the future.

"There are therefore no incentives to a company reporting and settling honest mistakes," said Bell.

Several importers said that due to the complex bureaucratic process of settling underpayments, many companies would rather pay kickbacks to customs personnel than try to settle the matter legally.

Bell added that Article 16 also caused uncertainty for importers as it states that the customs office can provide a tariff classification ruling before or after goods are imported, but can only provide a valuation ruling after goods have been imported.

"Customs valuation is a complex issue, and the inability to gain a valuation ruling prior to entering into binding contractual arrangements does not provide a company with certainty," said Bell.

He also recommended for revision Article 93 and part three of Chapter VI of the customs law, which includes articles 30 to 35.

Article 93 deals with the formalities for lodging an objection to a customs assessment in relation to tariff classification and valuation.

Part three of Chapter VI of the law deals with customs declarations and liabilities for import duties.

When asked to comment on these suggestions, the head of the Customs and Excise Division at the Directorate General of Customs and Excise, Agus Sudarmadi, said thus far the directorate general saw no reason to review the customs law.

"We shall not recommend the revision of the customs law to the Ministry of Finance as the law can still adequately accommodate the interests of all customs stakeholders," Agus said.