Plan for new customs inspection draws fire

Plan for new customs inspection draws fire

JAKARTA (JP): The government's decision to possibly end pre-
shipment inspection of imports by April 1, 1997, and replace it
with a post-audit system of on-arrival inspection has drawn harsh
criticism from importers and exporters.

The Indonesian Importers Association, traumatized by the
corrupt practices of the customs service before the
implementation of pre-shipment inspection in 1985, has repeatedly
called on the government to maintain the current system.

It contends that pre-shipment inspection is corruption-free
and the most efficient way of handling the flow of imports into
Indonesia.

An efficient import flow is vital as more than 85 percent of
Indonesian imports consist of basic and intermediate industrial
materials and capital goods. An estimated 75 percent of imports
are used in manufacturing goods for exports.

The association's tough-talking chairman, Amirudin Saud, said
the customs office was currently not yet ready to resume its
inspection works.

"We propose the government better maintain the current pre-
shipment inspection system until the year 2000 while preparing
the customs office to eventually take over the inspection,"
Amirudin said.

He said, if necessary, its members were willing to pay the
inspection fee, estimated at over US$100 million a year. The
government currently bears all inspection costs.

Vocal opponents of the post-audit system are not just
importers, but also exporters and ship owners -- all have day-to-
day contact with customs officials.

"Visions of congested seaports, countless signatures on
endless paperwork, unjustifiable delays and customs kickbacks are
foremost in the minds of those who fear a return to post-audit
days," said London-based The Economist Intelligence Unit in its
4th quarter, 1996, report.

Under the pre-shipment inspection system, goods worth US$5,000
or more imported to Indonesia are inspected at loading ports and
then sealed. Unless a seal has been broken, no further inspection
is necessary.

The system was introduced in 1985, by presidential decree, in
an attempt to curtail the corruption and inefficiency associated
with customs inspections.

Geneva-based Societe Generale de Surveillance (SGS), the
world's largest goods inspection service company, was the
original sole contractor for the pre-shipment inspection. In
1991, state-owned PT Surveyor Indonesia took over the role and
the SGS has since served as a subcontractor.

The government, however, appears deaf to the pleas of
importers and exporters. It continues to push for the
implementation of a post-release audit.

The government has decided to terminate the contract with
Surveyor Indonesia on April 1, 1997, to coincide with the
implementation of the 1995 Customs Law.

Although it has yet to decide whether the pre-shipment
inspection system will be continued under the new customs law, it
has indicated it will again empower the customs office to inspect
imports.

Minister of Finance Mar'ie Muhammad told the House of
Representatives budgetary commission earlier this month the
government would no longer include pre-shipment inspection fees
in the budget.

Instead, the government will increase the budget for the
Directorate General of Customs and Excise to implement the
customs law.

Minister Mar'ie, however, has cautioned the customs office not
to fumble with the post-audit system, warning that any failure
would be a political embarrassment for the government.

He also advised that trial operations self-assessing the
system should begin two months prior to the April deadline, in
order to ensure a smooth transition.

Minister of Trade and Industry Tunky Ariwibowo said last week
importers should not be prejudiced against a post-release audit.

"Let's wait and see how the system works. If there are
irregularities, I promise I will take those irregularities to my
regular meeting with the finance minister and the central bank
governor," Tunky said.

The Directorate General of Customs and Excise is not under The
Ministry of Trade and Industry, but under the Ministry of
Finance.

Chairman of the Indonesian Chamber of Commerce and Industry
Aburizal Bakrie agreed Indonesia should adopt a post-audit system
of on-arrival inspection to anticipate the increasing flow of
goods in the era of free trade.

The volume of cargo handled at Jakarta's Tanjung Priok port --
the country's largest port -- is projected to grow to almost 2.5
million 20-foot equivalent units (TEUs) in the year 2000, from an
estimated 1.37 million TEUs in 1995.

Director General of Customs and Excise Soehardjo Soebardi has
said the post-audit system of on-arrival inspection was necessary
to bring Indonesia into line with guidelines of the Association
of Southeast Asian Nations.

Customs officials have been lobbying businesspeople to
exercise their authority efficiently and effectively.

They say the corruption-ridden customs service is now history.
They promise a smoother flow of imports when they assume the
post-release audit.

They talk about using electronic data interchange to process
documents, electronic scanners to check containers, the
introduction of green lane for bonafide importers and the sparing
use of physical inspections and concentrating on post-release
audits.

Amirudin, however, questioned customs officials' integrity and
readiness to resume post-shipment inspections. "Facts show that
they are not ready."

He said even in the current pre-shipment inspection system,
many customs officials had violated the rules by issuing so-
called "memos" to summon importers and demand bribes to release
the goods.

Although the issuance of such memos is legal under the current
system, customs officials have been accused of abusing this
procedure and issuing false intelligence notes to extort money or
hassle importers.

Amirudin said the planned post-audit system would open many
ways for customs officials to extort more money from importers.
Customs officials would have more power to hassle importers as
they would be authorized to inspect any imports at points of
unloading.

Besides, customs officials might contest the transaction value
of goods, and verification of such value could be difficult and
would lead to delays.

Valuation in the current pre-shipment inspection system is
based on the minimum value of goods in the international market.
The valuation in the planned post-release audit will be based on
the transaction value.

The post-release audit system would certainly result in a
decline in government revenue from import duties and taxes due to
potential undervaluation of imports. (rid)