Problems of the post-shipment import system

Beginning next month, the inspection of imports will change from pre-shipment inspection to on-arrival inspection. Economist Hartojo Wignjowijoto, president of PT Aspecindo Kreasi, a business consulting company examines the shift.

JAKARTA (JP): The preconditioning campaign for the implementation of the new customs law (No.10/1995) seemed to focus on the electronic data interchange or on speeding up the paper flows, rather than on the physical flow of goods and its associated potential problems and external transaction costs.

The extra and uncertain size of the transaction costs of clearing the release of goods out of the port seem to have preoccupied importers' minds. This is the logical consequence of the shift from pre-shipment inspection to post-shipment or on- arrival inspection combined with post-audit documents by customs officers beginning in April.

The trauma of excessive charges, legal and illegal, at Indonesian ports long before the Presidential Instruction No.4/1985, still bothers importers. The idea of this instruction which introduced the pre-shipment inspection system was to uproot rampant corruption within the customs service.

Under both Presidential Instruction No.4/1985, which was amended by Presidential Instruction No.3/1991, on the pre- shipment inspection service for imports, both state-owned PT Surveyor Indonesia and its subcontractor, the Geneva-based Societe Generale de Surveillance (SGS), have been doing an excellent job.

The physical flow of imports have been smooth and transparent and the handling costs have been certain.

Now, the pendulum is about to swing back to post-shipment inspection.

This change has had an important bearing on the prospects of our exports which depend mainly on imported basic and intermediate materials. The efficiency by which imports are handled and cleared directly influences the competitiveness of our exports.

It should be remembered though that the pre-shipment inspection service also has costs of its own -- fees paid to PT Surveyor Indonesia and SGS. But this service has created certainty with regard to transaction costs.

Of no less importance is the pre-shipment inspection system's contribution to preventing congestion at Indonesian ports and minimizing handling and clearance costs. One may not realize that this system actually utilizes the port capacity of the countries of origin of imports to minimize the risks of congestion at poorly-equipped Indonesian ports.

The arguments against pre-shipment inspection include the inspection fees and the nationalistic pride of returning the inspection authority to the customs service.

The customs service has insisted that the EDI system would be able to overcome all potential problems. But this is a matter of trust, not a matter of technical sophistication of handling both the paper shuffle and the flow of goods.

Judging from their past dismal record (before June, 1985), why should we trust the customs officials? Should we trust the customs officials at the risk of slowing down imports, and thereby adversely affecting our export competitiveness?

The answer to these questions lie with the big money involved. The large fees under the pre-shipment inspection system have been flowing into the pockets of state-owned PT Surveyor Indonesia and its subcontractor SGS.

The big money involved in the post-shipment inspection service would, hopefully, go to the state coffers. But the big tips (mostly untaxed), to be charged illegally by customs officers on importers, will be enjoyed by officials individually or in a group.

But the biggest potential problem is the uncertainty to be faced by businessmen regarding the size of the side-payments and the delivery schedule of their imports. The final victim will be our export competitiveness.

Further down the line, this also means that our national economic interests will be at stake, since our current account deficit has been increasing steadily almost to a critical level.

The government is indeed faced with a difficult choice. But the alternative is not so complicated if the primary parameter is national economic benefits and not the financial costs of either pre-shipment or post-shipment inspection.

The choice should be based on the following objectives, including minimizing the risks of congestion at Indonesian ports, abolishing the uncertainty regarding the physical clearance of imports and minimizing the opportunity for malfeasance by customs officials.