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)