Amending Customs Act for greater global integration

Every plant has a growth pattern and a fledgling plant needs to be pruned in places to allow it go grow taller and stronger. The businesses also need the regulatory support of the government in order to ensure that the private sector is on its best growth trajectory. In some cases, it needs a regulatory environment to influence business decisions in favour of much-needed sectors and linkages, and in other cases, it requires fiscal support and protection. The Customs Act of Bangladesh (1969) is one such very important vehicle of government regulation which influences every decision made regarding international trade in Bangladesh, and the Act has gone through several revisions and is set to be wholly amended by June 2014.
The Customs Act administers the overall customs systems, provides the regulatory details of imposition and collection of import tax. It also deals with matters concerning taxpayer's rights, procedures for filing objections, managing bonded area, clearance procedures, and punishment of  customs criminals.
Developing countries such as Bangladesh are in constant efforts to update age-old customs laws in order to align the role of agencies from being a revenue collector to a trade facilitator. Bangladesh has acceded to the Revised Kyoto Convention or the RKC (for simplification and harmonisation of customs procedure). Furthermore, the Trade Facilitation (TF) Agreement has been signed in the ninth WTO Ministerial conference at Bali to expedite the process of trade facilitation among WTO member-countries of which Bangladesh is a part.
The National Board of Revenue (NBR) had taken an initiative to review the existing Customs Act to align it with the general annex of the RKC, the TF agreement of the WTO and established best practices so that they can best serve the interests of the private sector as well as the revenue collection process of the government. They have also chalked out their 'Modernisation Plan (2011-2016)', of which the Customs Act 1969 Amendment is a part.
Bangladesh has been persistently liberalising trade and tariff policies in keeping with the global scenario of trade regulations and in further integrating with the market economy. But in order to develop the right environment for greater trade, Bangladesh needs to upgrade its infrastructure - a bottleneck cited by numerous sources. Infrastructural deficiencies are often termed as an implicit tax that increases costs of businesses participating in international trade. Improvement in infrastructure can increase competitive advantage of a sourcing destination, in addition to shortening of delivery time and better enabling entrepreneurs to cater to buyers who operate in shorter time frames.
The single most important task right now is to align Bangladesh's policy with the main objectives of the RKC, bring transparency and predictability of customs actions, simplify the goods declaration process and apply information technology where appropriate. These are all targeted at eventually reducing the cost of trade. A number of amendments to the Customs Act 1969 have already been proposed so far. These have increased the responsibilities of the NBR. The Board needs to develop certain key skills and capabilities in order to accommodate these changes.
The alignment of local policies and regulations with the RKC can result in faster processing of international merchandise and lower trade costs, boost trade volumes, increase revenue for the government in the process, and attract more FDI in export-led sectors. But, the benefits do not stop at greater economic competitiveness, non-economic benefits (such as protection of security, society and human health) etc can also be attained. An Assessment Committee in the NBR supported by the ADB in this regard is now working. Before the new system is in place, a full-fledged projection of impact assessment needs to be conducted in order to estimate the extent to which the administrative cost will be reduced, and the magnitude of benefits that could potentially accrue to business.
The revised law will include options necessary for trade facilitation, security of supply chain, advance ruling, authorised economic operator, risk management policies, etc. These management tools will be crucial in facilitating trade by making customs processes faster and easier to comply with the needs. Prior to the finalisation of the draft law, the NBR sought the private sector's feedback on the proposed amendment of "The Customs Act 1969".
Business Initiative Leading Development (BUILD) started coordinating this immediately. It organised a focus group discussion on March 13, 2014 to discuss the proposed changes and the process of changing the current policy. A core committee has been formed to discuss the details of the Act and the amendments, including representatives from the private sector and the public sector. The core committee met eight times to thoroughly discuss the amendments.
As per the new amendments, the NBR will organise a number of stakeholder consultation sessions (mentioned in 12 chapters; in about 28 points) since stakeholder consultations and opinions will be at the core of making the Act private sector friendly. In the existing provisions (Sections 291B, 204A) and in the proposed provisions (Sections 16 and 17), there is a generalised statement of a regular consultation. In response to this, the private sector proposed an institutional mechanism for such consultations and also mentioned that such consultations should take place once every quarter.
The amendments very clearly mention electronic records and payments which are aligned to Bangladesh's Information & Communication Technology Act, 2006. The law generally authorises the use of electronic records and payments under any law of Bangladesh where a paper document or manual payment is required. However, Section 11 of that law states that no government ministry or department is compelled by that Act alone to accept such electronic forms. This new section provides the NBR with that authority to allow the use of electronic forms. Unless the country's policies can fully harness the benefits of using modern applications of information technology, the benefits of the changes will be stymied.
The private sector also is reflected in the volume of the proposed amendments. Out of 324 clauses, 163 new amendments have been proposed. With half of the act being rethought, shouldn't this be a new act altogether rather than an amendment to the old one, as was in the case of the VAT Act and SD Act 2012?
Advance Cargo Declaration and Notification of Arrival is an important issue (existing provisions) (Sections 43-46, 205) and Proposed Provisions (Sections 66 and 69). This is a mandatory provision which will need a bit of time for implementation. But the implementation process is to be managed through a well-thought-out process and needs time. These are also a part of implementation of the ASYCUDA World system.
As per existing provisions (Clause 21(c)), designated hours of business of customs stations will be fixed after having consultation with the private sector and in coordination with other competent authorities.
It is the opinion of the private sector and BUILD that the working hours should take into account the particular requirements of regional and global trade, and the relevant clause of the RKC. Both the existing provisions (Sections 13, 79F, 180), and proposed provisions (9 to 12) call for 'Standard Procedures' to be included in the 'Rules'. Stakeholders feel that these Rules should be discussed openly at consultations as soon as they are prepared. With regard to customs clearance of goods, the private sector feels that a Form/Format should be developed for a single 'goods declaration' in order to speed up the process.
The existing provisions (Section 95) mention that licensed customs warehouse may be used for manufacturing operations subject to rules prescribed by the NBR. In the proposed provisions (Chapter XVI), processing for export procedure has been added to allow Bangladeshi manufacturers to import parts, materials and components duty-free for use in processing operations, subject to prior authorisation and obligation to export finished goods. Processing is not required to be undertaken in a licensed warehouse (warehouse and processing procedure separated).
For time limit for clearance of goods, the existing provisions (Section 79(2) and 82) mention that goods not entered and cleared within 21 days of the date of unloading at an airport and 30 days at other customs stations shall be subject to confiscation. The proposed provisions (Section 103 and 113) allow the Board to define the period of time (in the 'Rules') for submission of a declaration after unloading of goods.
With regard to Re-Testing of Goods/Accredited Labs, there is no existing provision. The new provisions (Section 107) state that a declarant shall have the right to a re-test of goods if the initial test results are adverse to him. The Board may accredit and authorise private laboratories to carry out this testing. The NBR should publish a list of 'accredited and authorized private laboratories' in this regard, and develop a simple process by which private laboratories can be assigned the task. The BSTI, as the national testing authority, could be involved in the pre-selection of private labs.
Stakeholders raised several questions about procedural issues in this regard. The number of days needed in these processes, and time and documents required to comply with the law were among the issues they brought up, as was the value and effective rate of duties, date of determination of value of exchange rates, re-importation of goods, general power of the Board to exempt from customs duties, simplification of ADR policies, publication and free flow of information policies, etc.
In the meeting of the Trade Facilitation National Committee, stakeholders placed their opinions on these amendments and discussed them with the NBR officials and consultants of the International Finance Corporation (IFC). At the meeting, the NBR presented the 2nd draft of the proposed amendments and led the consultation with stakeholders.
LDCs are subject to certain exemptions with regard to capacity building interventions, which are specifically mentioned in multilateral documents. But at the same time, it is also true that no country can develop itself in isolation. Enhancing trade and business runs both ways: you have to open your doors if you wish for your trade partners to open theirs. Bangladesh, while an LDC, is also the second largest exporter of readymade garments in the world. Being about 70 per cent integrated with global trade, the country cannot remain aloof and isolated from international best practices.
In order to take full advantage of international opportunities, and unlock the growth potential of the private sector of Bangladesh, we must be able to work together in implementing appropriate reforms to make customs processes and procedures business friendly. That is how Bangladeshi businesses will be able to remain competitive, create the image of a safe and sound global trade partner, and ensure that weak links in the value chain of every export product's trade cycle is strengthened, creating uninterrupted flows of resources and goods to and from the manufacturing plants across the country.
The writer is CEO, Business Initiative Leading Development (BUILD)            ceo@buildbd.org