Import inspection system

The customs and excise duty directorate general has stepped up its lobbying for the restoration of its customs inspection authority stripped 10 years ago in coincidence with the introduction of pre-shipment inspection of imports. Now, the debate over that system has resurfaced during the current House of Representatives deliberations on the bill on customs and excise tax.

Because the issue is often seen within the context of the hiring of a foreign company, the Geneva-based Societe Generale de Surveillance (SGS), "at the expense" of a national institution (customs and excise directorate general), the arguments are based not only on economic benefits but also, and sometimes more, on the sense of national pride.

But it is actually not entirely correct to see the issue as solely a controversy between SGS and the customs and excise tax directorate general because the pre-shipment inspection system is now conducted by PT Surveyor Indonesia, which is 76 percent owned by the government. SGS acts only as subcontractor for the company.

On the basis of that trend toward increased Indonesian involvement in the process, an increasing number of officials consider it high time now to restore the authority of the customs service to inspect and clear imports at the points of unloading. Their main arguments are that the pre-shipment inspection system has been quite costly. For fiscal year 1994-1995 alone, for example, the government paid a total fee of Rp 122 billion (US$54.8 million) to SGS and PT Surveyor Indonesia. Moreover, as director general Soehardjo claims, his office is now ready to handle import inspection and clearance in an efficient manner.

The blunt fact, though, is that almost all importers, still haunted by the trauma of dealing with corrupt customs officers in the period before May, 1985, prefer the continuation of the pre- shipment inspection system because of its great contribution to facilitating import flow.

Also, the finance ministry itself has been impressed by the success of the system in minimizing under-invoicing and over-invoicing of import prices, which before May, 1985, had been quite extensive, thereby inflicting major losses on the government.

To clarify the matter further, it should be recalled that the primary objectives of the pre-shipment inspection system are to facilitate the flow of imports, to inspect the quantity and quality of imports and to verify the prices of imports in light of assessing the applicable duty value on the basis of the correct tariff classifications.

True, the series of training and education programs conducted since 1986 in cooperation with SGS have greatly improved the technical skills of customs officers to inspect the quantity and verify the prices of imports. Irrespective of our high level sense of national pride we are still doubtful that the customs officers will be able to perform the service as efficiently and expediently as that done by Surveyor Indonesia and SGS. The problem is not hardware (computerized administration), which can simply be bought, but mainly the mentality and the poor coordination of services at seaports.

Minister of Transportation Haryanto Dhanutirto's recent observations about the lack of coordination between the port administrator and the Port Management Company at Tanjung Priok harbor have added to our doubts about the merits of post-shipment inspection. Last week's disclosure of how a ruling, issued by the Attorney General's Office in the early 1980s without the knowledge of the trade ministry, has increased the import cost of waste paper by 40 percent further increased our worries about the bureaucratic barriers to be encountered under a post-shipment inspection system.

Another problem to be encountered if the present system is replaced completely by a post-shipment inspection service, is the fate of the large investments the government has made in PT Surveyor Indonesia and its branch offices in 18 countries. It is really impossible for this state company to survive without a job contract from the government. And it will take several years to make PT Surveyor Indonesia internationally competitive.

We think, therefore, it is more sensible economically to maintain the pre-shipment inspection system for a few years more to allow more time for the customs and excise tax directorate general to increase the skills of its personnel and improve its computerized administration system and intelligence information system to prevent smuggling.