Importers doubt efficacy of antismuggling body

Importers doubt efficacy of antismuggling body

The Indonesian Importers Association (Ginsi), which claims
around 3,300 members across the country, is the most vocal critic
of the customs service for its miserable failure to curb
smuggling. Ginsi chairman Amirudin Saud shared his views about
the government's decision to set up an interministerial
antismuggling team and about customs service problems in an
interview with The Jakarta Post's Vincent Lingga.

Question: How do you view the Cabinet's decision late last
month to set up an interministerial team to combat smuggling that
will also include the National Police?

Answer: I think the team would not be effective because the
main problem is not physical but rather administrative smuggling,
whereby crooked importers collude with customs officials to
underinvoice their import prices, thereby slashing their duties
and taxes, or customs officers lack the technical competence to
assess real import prices. The police are certainly not trained
to assess customs duties. So the root problem is mentality or the
high venality of customs officials. I am even afraid that the
customs service would simply use the team to validate or endorse
whatever decisions it would take.

Doesn't the Customs Law stipulate that the basis for valuation
of customs duties is the import transaction value?

You are right. The Geneva-based World Trade Organization also
stipulates such a provision. But that does not mean that
importers are free to declare any value they choose, nor is the
customs service relieved of the responsibility to determine
import prices on a shipment-by-shipment basis. Professional
customs valuation is still needed, especially when importers can
easily manipulate their invoices in cooperation with companies
overseas.

This is the main reason why we have strongly urged President
Megawati Soekarnoputri to take contingency measures to
reintroduce a preshipment inspection of imports (PSI) as Soeharto
boldly did in 1985. Many industries that are our export leaders
have been crying out over unfair competition from smuggled or
underinvoiced imports.

But how would preshipment inspection help reform the allegedly
crooked mentality of customs officials?

No, PSI would not directly help reform the customs service.
Yet we need PSI right now as many industries are dying. People
tend to see the impact of smuggling or underinvoicing only in
terms of the loss of state revenues from import duties, value-
added tax and income tax. The most damaging effect is the unfair
competition imposed on our manufacturing industries. The reform
of the customs service, like the development of good governance
in the public sector, will take more than five years. We cannot
wait that long.

The Cabinet's decision on the antismuggling team is a
magnanimous acknowledgement that the customs service has
miserably failed to reform itself over the past five years after
it regained its import inspection authority in April, 1997
simultaneously with the termination of the PSI system. Then by
all means, let the duty valuation be given to a third party under
PSI until the customs service completely reforms its organization
and mentality.

Don't forget, besides its devastating impact on domestic
industries, state revenue losses caused by underinvoicing of
imports are also huge. We estimate them at Rp 33.3 trillion
(US$3.1 billion) in 1998, Rp 27.4 trillion in 1999, Rp 37.1
trillion in 2000 and Rp 34.9 trillion in 2001. The University of
Indonesia estimated that loss at about $610 million in 2000
alone.

Why do you put the blame entirely on customs officials for
underinvoicing? Shouldn't crooked importers, who may also belong
to your association, should also be held responsible for that
collusion?

That is entirely nonsense. I have always asked customs
officials to notify me on what they call bogus importing
companies with unknown addresses so that I can deal with them
myself. But the customs service has never come up with a clear
reply. Why? Because what they call crooked importers are really
their stooges involved in the contraband trade. Problems such as
the existence of bogus importing companies never occurred under
the PSI system in 1985-1997.

Moreover, retired senior customs officials often are engaged
in forwarding services. Why don't you investigate, for example,
who owns or manages PT Swakarsa Bhakti Mandiri, a major
forwarding company?

Customs and duties director general Permana Agung claims there
are more than 30 state and private institutions involved at
seaports so the customs service should not be held solely
responsible for things that go wrong with imports or exports.

That is another big nonsense. True, there are many
institutions engaged at ports but when it comes to the clearance
of goods from ports it rests primarily with the customs
authority. The port administrator cannot release goods from the
port without the prior approval of customs.

Permana's statement late last month at the Jakarta port of
Tanjung Priok that the port administrator had released two luxury
cars from the port without clearance from the local customs
service was strange and entirely questionable. How could imports
or exports get out of the port terminal without clearance from
the customs service? If such a thing did happen, the only
explanation is that some customs officials colluded to make it
possible.

Some industrialists claim that smuggling has also been rampant
through the duty rebate system for the importation of inputs for
export-oriented factories, after the customs service took over
the export inspection service from state-owned PT Sucofindo last
August. How could that happen?

Export-oriented companies can get reimbursement of the duties
paid on basic materials imported for processing into export
goods. So, for example, a garment exporter can import fabric
duty-free if it can be proved that the fabric will subsequently
be processed into garments for export.

The problem is that, after the customs service took over the
inspection of exports from Sucofindo, which had done the job
professionally for more than a decade, there has been as yet no
adequate technical capacity at the customs service to verify
whether the volume of duty-free materials imported by export
companies is really used wholly for producing goods for export.

Specific skills are needed to determine the coefficient of
inputs into final products, and there are numerous industrial
products that have to be verified. Without verification
competence, quite apart from collusion, a factory can import
basic materials duty-free to a much greater extent than it
actually needs for production. It can then sell the balance to
the domestic market.