Pre-shipment inspection in Bangladesh: outsourcing customs efficiency to foreign companies
Wednesday, 26 September 2007
Rashid ul Ahsan Chowdhury Ph.D THE Multilateral Trade negotiations launched in Punta del Este in Uruguay in 1986 resulted in a series of trade agreements. These agreements were embodied in an act and signed by ministers of participant countries in Marrakesh in 1994. This is known as the World Trade Organisation (WTO) agreements and is considered as the final act of the 1986-1994 Uruguay Rounds of trade negotiations. In addition to the text of the agreements, the final act also contains texts of Ministerial Decisions and Declarations, which further clarify certain provisions of some of the agreements. One important agreement embodied in the final act was the Agreement on Preshipment Inspection.
For more than 100 years, private sector buyers and sellers have resorted to the practice of inspecting goods before their shipment. This was done to ensure that the quantity and quality of goods to be traded conform to the specification of the sales contract. During the last quarter of the twentieth century, this purely commercial practice in some importing countries was made an official requirement, particularly in countries where it was felt that Customs and other official agencies were incompetent. This practice was given a legal endorsement by the WTO agreements in1994.
Preshipment inspections are required when mandated by the government of the importing country. The argument put forward is that, preshipment inspections are necessary in order to ensure that the price charged by the exporter reflects the true value of the goods. In addition, preshipment inspection would prevent substandard goods from entering the importing country and thus deflect attempts on the part of unscrupulous importers to avoid the payment of customs duties. In a PSI shipment, the importer is responsible for arranging the preshipment inspection, while the exporter must make the goods available for inspection in the country of origin. Preshipment inspections are performed by contracted private organisations.
In the early nineties, with liberalisation of trade making strides all over the world, the clamour for simplification of Customs procedures and fast track clearance of imported goods became a genuine demand of the business community of Bangladesh. At this time customs formalities and procedures in Bangladesh were cumbersome and disadvantageous, leading to inordinate delays in the release of goods from Customs custody. There were too many duty slabs in the Customs tariff along with multifarious complex rates of duties on almost all importable items. Most consignments were examined on cent per cent basis and assessment procedure slow and painstaking. A floodgate was opened for complaint against the Customs authority for highhandedness and arbitrary decisions along with allegations of corruption and delay in clearance. Such a situation was not congenial to the industrial development of the country or for facilitation of external trade of Bangladesh. A serious thought was in the air for an alternative approach to the existing customs assessment procedures and there were repeated demands from the business community for immediate introduction of the preshipment inspection system in Bangladesh. Against this backdrop, preshipment was introduced in Bangladesh in the year 1994.
There were several objectives behind the introduction of the PSI system in Bangladesh. Out of these, most important were drastic reduction in the number of consignments to be examined, simplification of assessment procedures, faster clearance of consignments, implementation of the GATT valuation principles, creation of a valuation database and full automation of the Customs processing system. It was believed that introduction of preshipment inspection would give the customs administration enough breathing space to fulfill these objectives which, in turn, will result in considerable increase in the collection of revenue for the government. With these goals in mind, preshipment inspection was introduced in limited form and on voluntary basis in Bangladesh. As it was kind of an experimental policy and importers could opt for the scheme on a voluntary basis, the number of importable items brought under this scheme was restricted in number too. Under this system there was little scope to monitor the work of the PSI companies or keep a close watch on the activities of the importers; and there were still serious allegations of misdeclaration and undervaluation of goods. On investigation, some of the allegations were found to be true and considered to be serious risk to potential revenue collection by the government. It was felt that to secure government revenue the option for voluntary PSI inspection should be replaced by the introduction of mandatory preshipment inspection along with close monitoring of the work of the PSI companies.
In order to give a legal basis to the PSI system, required amendments were made to section 25 of the Customs Act 1969 and under the powers envisaged in section 25A, the Preshipment Inspection Order, 1999 was brought into force. Under the same order, mandatory PSI scheme was introduced in Bangladesh from February 15, 2002. Three blocks called A, B, and C were created on regional and geographical basis and later international tender invited for contractual agreement. An agreement was signed with three lowest bidders (BSI Inspectorate Griffith, Intertek Testing Services and Bureau Veritas Bivac) for a three year contract to carry out PSI inspection on consignments to be imported into Bangladesh. The contract period for the agreement was renewed several times until August 31, 2005. The PSI companies were authorised to issue Clean Report of Findings generally known as CRF certifying the value, HS code, quality; quantity and importability of the goods. Under this agreement all importers were subject to the payment of a PSI fee for imported consignments which was collected by the government and then paid to the PSI companies as service charge. The amount accounted for 1.0% of the total trade volume. Under this agreement, all commodities except a few like perishable items, zero rated goods, government imports, donor grant commodities, relief materials and the like, were subjected to compulsory PSI inspection. During this period the total number of Clean Report Findings issued by these three companies were 4,18,988 out of which 8695 CRFs were found through risk based analysis to be defective and irregular for which an amount of Taka 26.9 million (2.69 crore) was imposed as fine on the PSI companies. For the service rendered, the PSI companies were given a fee amounting to Taka 3.12 billion (312 crore) over a four year period.
On the basis of the experience gained, necessary fine tuning was done in the PSI order and a second PSI rule inclusive of a number of amendments was introduced in 2002. The rule was further modified in 2005. Under this rule, the number of regional blocks was extended from three to five and four PSI companies were given the contract through an open international tender. The four PSI companies named Cotecna Inspection SA, Intertech Testing Limited, SGS(Bangladesh) and Bureau Veritas Bivac(Bangladesh) Limited have started work from September 01, and their contract will expire in June 2008.
It is very difficult to make an empirical analysis of the impact of introduction of the PSI system on Bangladesh Customs. No study has as yet been conducted to examine how far PSI has enabled the Customs to reduce fraud and eventually to collection of higher revenue for the government. It has also not been ascertained so far whether the introduction of such a system has ensured expeditious clearance of goods and brought considerable relief to the importers. But generally guessed, PSI as an independent source of information collection on goods has enforced the monitoring abilities of Customs officers. It has helped Customs officers in identifying fraudulent import documents. In the absence of PSI, uncovering such fraud would have been time consuming because of the presence of large number of separate import transactions. By monitoring and certifying valuation of goods, it has to a considerable extent reduced the long practiced formula of undervaluation of goods. It has also reduced misdeclaration in quantity, description and quality of goods by having examination made at the premise of the supplier, before export of the goods. A primary tactic used by some customs officers to exact bribes from importers is to delay the clearance of shipments from customs, often on the pretext that there is some discrepancy between the importer's customs declaration and the shipment's actual contents. The independent information on the contents of a shipment generated by preshipment inspection has increased importer's bargaining power vis-à-vis a corrupt customs officer, potentially reducing customs clearance time.
In a recent study on "Tax and Tariff Measures, PSI and Customs Valuation" prepared by the FBCCI, it has been reported that "comparing the collection ratios of the PSI period with pre-PSI period, all collection rates show improvements indicating that PSI has successfully arrested the decline in government revenue collection. The most significant improvements are in the areas of supplementary duties, local VAT and income tax. The PSI programme on track insofar as government revenue collections are concerned." The study further claims that the PSI programme as successful in meeting the challenge of offsetting the fall in revenue caused by the shifting to transaction value from normal value. The findings of the study however relate only to the period from April to June 2000.
However, introduction of the system should not be seen as an absolute blessing. Although after arrival of the goods the clearance procedure has expedited, the validation of an LC, the examination of goods and issuing of a CRF still take considerable time. The PSI companies lack competence on the innumerable rules and regulations guarding imports into Bangladesh and very often CRFs issued are flawed leading to complications in the release of goods. One important bone of contention between the Customs and PSI companies is the valuation of goods. Although the PSI companies repeatedly insist that valuation of goods is performed according to the GATT valuation method, their valuation certificates are pretty often challenged by the Customs authority. HS classification of goods is a highly technical customs matter and it has been noticed that PSI companies in general lack expertise in classification of goods. Wrong classification leads to bitter dispute between the Customs authority and the PSI companies causing good deal of suffering to the importers.
As per the principles of the WTO agreement on preshipment inspection, there is an independent review committee to settle disputes between the PSI companies, the Customs authority and the importers. During the year 2005, 2006 and 2007 the total number of disputes raised before the review committee were 45, 204 and 78 respectively. Again, many importers resort to the court for settling disputes instead of appealing to the review committee as they find that an interim decision of the court can be obtained with ease leading to less hassle and less delay. In the years 2005, 2006 and 2007 the number of writ petitions filed in the court was 65, 245 and 108 respectively. Obviously the number of such appeals and writs indicate that everything is not going well with the PSI system.
In a way introduction of the PSI system meant that the government had hired integrity in an effort to cleanse the Customs work. But the number of misdeclaration and under or over valuation detected by the Customs authorities in PSI certified consignments in the last couple of years raises questions on the level of integrity of some PSI companies. In 2006 a number of consignments certified to contain touch lamps were detained by the Customs authority on the basis of secret tip-off. On examination of the consignments, contents were found to be cigarette and liquor, which are not only high duty items but also prone to smuggling. Again, from December 2006 to March 2007, eighty five consignments of chemicals of different nature certified by the PSI companies were subjected to laboratory test by the Customs authorities and found to contain different kind of chemicals than those certified by the PSI companies. The items found were actually high duty items attracting large revenue. In recent times, a number of motor vehicles with brand names such as hummer, porche, mercedes, etc., were seized by the Joint Task Forces. On investigation of the declared value, which has been certified by a PSI company, they were found to be grossly under-valued. One vehicle, however, had an overvalued PSI certified price, which obviously raises suspicion of money laundering in the given case. However, the trend of detection of such cases on an average does not exceed 3.0%. The number of CRFs issued in 2005 was 15,411 and discrepancies found were 134. In 2006 and 07, the number of CRFs issued was 95,895 and 27839 and discrepancies found were 874 and 842 respectively.
The National Board of Revenue pays a staggering sum of money as fee to the PSI companies. The amount paid during the last three years to four PSI companies is given below:
The eulogists for the Customs department are harsh critics of such massive payment to the PSI companies. They claim that the payment is not only excessive in comparison to the service rendered but also drains huge foreign exchange reserve of the country. The certification procedure of goods creates inordinate delay because the importers as well as exporters have to go through a number of paper processing steps both in the liaison office at home and at the PSI offices in the exporting country. At some places of export the PSI companies do not have office or staff to examine goods which further adds to the delay problem because examination inspectors have to be flown in from some other points. They also claim that because of the inexperience of the PSI companies on import rules and regulations of Bangladesh, CRFs issued are often found to be faulty and challenged by the Customs authorities. There is also serious complaint about wrong classification and arbitrary valuation of goods. The eulogists also assert that in most cases the Customs authorities do not accept the classification or valuation of goods as certified by the PSI companies which renders the CRFs ineffectual and useless and thus jeopardises the basic concept of fast track clearance through the PSI system. Moreover, the importers have to bear 1.0% service charge for preshipment inspection that adds to the cost of import and thus creates excessive burden on them.
There is also serious criticism against the appeal procedures. When an importer is dissatisfied with a PSI certification or against any decision of the Customs authority with regard to a PSI certificate, he has the right under section 23 of the PSI rules to file an appeal against such certificate or decision of the Customs authority to the review committee headed by the Commissioner, Customs Appeal. Since quasi-judicial power and administrative power are not separated and both are implemented by the Customs authority, it is often alleged that decisions taken by the appellate body are discriminatory, arbitrary and serves the interest of the Customs authority only. It is also stated that the primary goal for introduction of the PSI system was elimination of corrupt practices within the Customs system; however, the goal has boomeranged with corruption still rampant as the Customs officials have too much discretionary power to challenge and alter the PSI certificates.
Revisionist Customs officials also bear opinion which is not much different from the eulogists. In their opinion, outsourcing Customs integrity to private companies has not borne out the desired effect. The PSI companies are corrupt and inefficient and their ignorance of prevailing rules and regulations has considerably delayed the clearance procedure of imported consignments. They have never been supportive of the infrastructural development of Customs in order to ensure the continuation of the PSI system in Bangladesh. Due to under-valuation and wrong classification of goods, too many PSI certificates are required to be amended causing delay in the clearance of goods and definitely ensuring confrontation with importers. The penal provisions against wrong-doing by the PSI companies are too lenient and even if they are penalised, the companies have the habit of filing writ cases in the High Court to stall the payment. On the whole, in their opinion, the introduction of the PSI system has not delivered the desired benefits as expected.
They also opine that the huge sum of money spent to fund the PSI service should instead be spent for infrastructural development of the Customs department. Revenue administration modernisation should be the core principal of such infrastructural development. The infrastructural development goals should aim at turning the National Board of Revenue into a corporate body, separate policy making from functional activities, introduce full automation of the clearance system, simplify and harmonise Customs procedures, set up a sound recruitment system, and provide extensive training in risk management, valuation and post-clearance audit. The government should fund for the introduction of the Capacity Development Programme of the World Customs Organisation in Bangladesh Customs and the money required for the programme would be insignificant compared to the money spent for procuring the service of the PSI companies. They are also of the view that Customs officials should be posted in Bangladesh embassies abroad to monitor exports to Bangladesh and ensure proper valuation and classification of goods. In short, capacity building in the Customs department could be an alternative to the PSI system. In their view, this will not only safeguard government exchequer but also make the Customs management efficient and modern.
Whatever said, it is now high time for the government to review its policy of outsourcing efficiency to foreign companies. The term of contract with the PSI companies will expire in June 2008 and before the expiry date, a decision requires to be taken whether to sustain the system for another term. While reviewing the policy, it has also to be considered that capacity building in the Customs which is now in its rudimentary stage will take some pick-up time and a one year period will not be enough to develop the capacity strength of the Customs administration. Given this situation, the simple choice would be to renew the contract with the PSI companies for another term. But if seriously considered and issues in question are delved into, the idea of prolonging the contract for a further one more term may not be tenable. The system of preshipment was introduced in 1994 and since then more than a decade has passed. In spite of break and breathing time provided, the Customs administration has so far failed to gyre itself into a transparent, modern and efficient corporate organisation. On the other hand, the support provided so far by the PSI companies has not been much conducive to the development of the Customs. It is, therefore, required that responsibilities should be thrust upon the Customs administration to promote its own resources to amplify the organisational structure instead of allowing foreign companies to handle its own works. If the contract with the PSI companies is not renewed, the Customs administration will automatically be faced with the challenge to untie the Gordian knot to improve performance and efficacy and thereby turn itself into a modern corporate organisation.
The contributor is a free-lance writer
For more than 100 years, private sector buyers and sellers have resorted to the practice of inspecting goods before their shipment. This was done to ensure that the quantity and quality of goods to be traded conform to the specification of the sales contract. During the last quarter of the twentieth century, this purely commercial practice in some importing countries was made an official requirement, particularly in countries where it was felt that Customs and other official agencies were incompetent. This practice was given a legal endorsement by the WTO agreements in1994.
Preshipment inspections are required when mandated by the government of the importing country. The argument put forward is that, preshipment inspections are necessary in order to ensure that the price charged by the exporter reflects the true value of the goods. In addition, preshipment inspection would prevent substandard goods from entering the importing country and thus deflect attempts on the part of unscrupulous importers to avoid the payment of customs duties. In a PSI shipment, the importer is responsible for arranging the preshipment inspection, while the exporter must make the goods available for inspection in the country of origin. Preshipment inspections are performed by contracted private organisations.
In the early nineties, with liberalisation of trade making strides all over the world, the clamour for simplification of Customs procedures and fast track clearance of imported goods became a genuine demand of the business community of Bangladesh. At this time customs formalities and procedures in Bangladesh were cumbersome and disadvantageous, leading to inordinate delays in the release of goods from Customs custody. There were too many duty slabs in the Customs tariff along with multifarious complex rates of duties on almost all importable items. Most consignments were examined on cent per cent basis and assessment procedure slow and painstaking. A floodgate was opened for complaint against the Customs authority for highhandedness and arbitrary decisions along with allegations of corruption and delay in clearance. Such a situation was not congenial to the industrial development of the country or for facilitation of external trade of Bangladesh. A serious thought was in the air for an alternative approach to the existing customs assessment procedures and there were repeated demands from the business community for immediate introduction of the preshipment inspection system in Bangladesh. Against this backdrop, preshipment was introduced in Bangladesh in the year 1994.
There were several objectives behind the introduction of the PSI system in Bangladesh. Out of these, most important were drastic reduction in the number of consignments to be examined, simplification of assessment procedures, faster clearance of consignments, implementation of the GATT valuation principles, creation of a valuation database and full automation of the Customs processing system. It was believed that introduction of preshipment inspection would give the customs administration enough breathing space to fulfill these objectives which, in turn, will result in considerable increase in the collection of revenue for the government. With these goals in mind, preshipment inspection was introduced in limited form and on voluntary basis in Bangladesh. As it was kind of an experimental policy and importers could opt for the scheme on a voluntary basis, the number of importable items brought under this scheme was restricted in number too. Under this system there was little scope to monitor the work of the PSI companies or keep a close watch on the activities of the importers; and there were still serious allegations of misdeclaration and undervaluation of goods. On investigation, some of the allegations were found to be true and considered to be serious risk to potential revenue collection by the government. It was felt that to secure government revenue the option for voluntary PSI inspection should be replaced by the introduction of mandatory preshipment inspection along with close monitoring of the work of the PSI companies.
In order to give a legal basis to the PSI system, required amendments were made to section 25 of the Customs Act 1969 and under the powers envisaged in section 25A, the Preshipment Inspection Order, 1999 was brought into force. Under the same order, mandatory PSI scheme was introduced in Bangladesh from February 15, 2002. Three blocks called A, B, and C were created on regional and geographical basis and later international tender invited for contractual agreement. An agreement was signed with three lowest bidders (BSI Inspectorate Griffith, Intertek Testing Services and Bureau Veritas Bivac) for a three year contract to carry out PSI inspection on consignments to be imported into Bangladesh. The contract period for the agreement was renewed several times until August 31, 2005. The PSI companies were authorised to issue Clean Report of Findings generally known as CRF certifying the value, HS code, quality; quantity and importability of the goods. Under this agreement all importers were subject to the payment of a PSI fee for imported consignments which was collected by the government and then paid to the PSI companies as service charge. The amount accounted for 1.0% of the total trade volume. Under this agreement, all commodities except a few like perishable items, zero rated goods, government imports, donor grant commodities, relief materials and the like, were subjected to compulsory PSI inspection. During this period the total number of Clean Report Findings issued by these three companies were 4,18,988 out of which 8695 CRFs were found through risk based analysis to be defective and irregular for which an amount of Taka 26.9 million (2.69 crore) was imposed as fine on the PSI companies. For the service rendered, the PSI companies were given a fee amounting to Taka 3.12 billion (312 crore) over a four year period.
On the basis of the experience gained, necessary fine tuning was done in the PSI order and a second PSI rule inclusive of a number of amendments was introduced in 2002. The rule was further modified in 2005. Under this rule, the number of regional blocks was extended from three to five and four PSI companies were given the contract through an open international tender. The four PSI companies named Cotecna Inspection SA, Intertech Testing Limited, SGS(Bangladesh) and Bureau Veritas Bivac(Bangladesh) Limited have started work from September 01, and their contract will expire in June 2008.
It is very difficult to make an empirical analysis of the impact of introduction of the PSI system on Bangladesh Customs. No study has as yet been conducted to examine how far PSI has enabled the Customs to reduce fraud and eventually to collection of higher revenue for the government. It has also not been ascertained so far whether the introduction of such a system has ensured expeditious clearance of goods and brought considerable relief to the importers. But generally guessed, PSI as an independent source of information collection on goods has enforced the monitoring abilities of Customs officers. It has helped Customs officers in identifying fraudulent import documents. In the absence of PSI, uncovering such fraud would have been time consuming because of the presence of large number of separate import transactions. By monitoring and certifying valuation of goods, it has to a considerable extent reduced the long practiced formula of undervaluation of goods. It has also reduced misdeclaration in quantity, description and quality of goods by having examination made at the premise of the supplier, before export of the goods. A primary tactic used by some customs officers to exact bribes from importers is to delay the clearance of shipments from customs, often on the pretext that there is some discrepancy between the importer's customs declaration and the shipment's actual contents. The independent information on the contents of a shipment generated by preshipment inspection has increased importer's bargaining power vis-à-vis a corrupt customs officer, potentially reducing customs clearance time.
In a recent study on "Tax and Tariff Measures, PSI and Customs Valuation" prepared by the FBCCI, it has been reported that "comparing the collection ratios of the PSI period with pre-PSI period, all collection rates show improvements indicating that PSI has successfully arrested the decline in government revenue collection. The most significant improvements are in the areas of supplementary duties, local VAT and income tax. The PSI programme on track insofar as government revenue collections are concerned." The study further claims that the PSI programme as successful in meeting the challenge of offsetting the fall in revenue caused by the shifting to transaction value from normal value. The findings of the study however relate only to the period from April to June 2000.
However, introduction of the system should not be seen as an absolute blessing. Although after arrival of the goods the clearance procedure has expedited, the validation of an LC, the examination of goods and issuing of a CRF still take considerable time. The PSI companies lack competence on the innumerable rules and regulations guarding imports into Bangladesh and very often CRFs issued are flawed leading to complications in the release of goods. One important bone of contention between the Customs and PSI companies is the valuation of goods. Although the PSI companies repeatedly insist that valuation of goods is performed according to the GATT valuation method, their valuation certificates are pretty often challenged by the Customs authority. HS classification of goods is a highly technical customs matter and it has been noticed that PSI companies in general lack expertise in classification of goods. Wrong classification leads to bitter dispute between the Customs authority and the PSI companies causing good deal of suffering to the importers.
As per the principles of the WTO agreement on preshipment inspection, there is an independent review committee to settle disputes between the PSI companies, the Customs authority and the importers. During the year 2005, 2006 and 2007 the total number of disputes raised before the review committee were 45, 204 and 78 respectively. Again, many importers resort to the court for settling disputes instead of appealing to the review committee as they find that an interim decision of the court can be obtained with ease leading to less hassle and less delay. In the years 2005, 2006 and 2007 the number of writ petitions filed in the court was 65, 245 and 108 respectively. Obviously the number of such appeals and writs indicate that everything is not going well with the PSI system.
In a way introduction of the PSI system meant that the government had hired integrity in an effort to cleanse the Customs work. But the number of misdeclaration and under or over valuation detected by the Customs authorities in PSI certified consignments in the last couple of years raises questions on the level of integrity of some PSI companies. In 2006 a number of consignments certified to contain touch lamps were detained by the Customs authority on the basis of secret tip-off. On examination of the consignments, contents were found to be cigarette and liquor, which are not only high duty items but also prone to smuggling. Again, from December 2006 to March 2007, eighty five consignments of chemicals of different nature certified by the PSI companies were subjected to laboratory test by the Customs authorities and found to contain different kind of chemicals than those certified by the PSI companies. The items found were actually high duty items attracting large revenue. In recent times, a number of motor vehicles with brand names such as hummer, porche, mercedes, etc., were seized by the Joint Task Forces. On investigation of the declared value, which has been certified by a PSI company, they were found to be grossly under-valued. One vehicle, however, had an overvalued PSI certified price, which obviously raises suspicion of money laundering in the given case. However, the trend of detection of such cases on an average does not exceed 3.0%. The number of CRFs issued in 2005 was 15,411 and discrepancies found were 134. In 2006 and 07, the number of CRFs issued was 95,895 and 27839 and discrepancies found were 874 and 842 respectively.
The National Board of Revenue pays a staggering sum of money as fee to the PSI companies. The amount paid during the last three years to four PSI companies is given below:
The eulogists for the Customs department are harsh critics of such massive payment to the PSI companies. They claim that the payment is not only excessive in comparison to the service rendered but also drains huge foreign exchange reserve of the country. The certification procedure of goods creates inordinate delay because the importers as well as exporters have to go through a number of paper processing steps both in the liaison office at home and at the PSI offices in the exporting country. At some places of export the PSI companies do not have office or staff to examine goods which further adds to the delay problem because examination inspectors have to be flown in from some other points. They also claim that because of the inexperience of the PSI companies on import rules and regulations of Bangladesh, CRFs issued are often found to be faulty and challenged by the Customs authorities. There is also serious complaint about wrong classification and arbitrary valuation of goods. The eulogists also assert that in most cases the Customs authorities do not accept the classification or valuation of goods as certified by the PSI companies which renders the CRFs ineffectual and useless and thus jeopardises the basic concept of fast track clearance through the PSI system. Moreover, the importers have to bear 1.0% service charge for preshipment inspection that adds to the cost of import and thus creates excessive burden on them.
There is also serious criticism against the appeal procedures. When an importer is dissatisfied with a PSI certification or against any decision of the Customs authority with regard to a PSI certificate, he has the right under section 23 of the PSI rules to file an appeal against such certificate or decision of the Customs authority to the review committee headed by the Commissioner, Customs Appeal. Since quasi-judicial power and administrative power are not separated and both are implemented by the Customs authority, it is often alleged that decisions taken by the appellate body are discriminatory, arbitrary and serves the interest of the Customs authority only. It is also stated that the primary goal for introduction of the PSI system was elimination of corrupt practices within the Customs system; however, the goal has boomeranged with corruption still rampant as the Customs officials have too much discretionary power to challenge and alter the PSI certificates.
Revisionist Customs officials also bear opinion which is not much different from the eulogists. In their opinion, outsourcing Customs integrity to private companies has not borne out the desired effect. The PSI companies are corrupt and inefficient and their ignorance of prevailing rules and regulations has considerably delayed the clearance procedure of imported consignments. They have never been supportive of the infrastructural development of Customs in order to ensure the continuation of the PSI system in Bangladesh. Due to under-valuation and wrong classification of goods, too many PSI certificates are required to be amended causing delay in the clearance of goods and definitely ensuring confrontation with importers. The penal provisions against wrong-doing by the PSI companies are too lenient and even if they are penalised, the companies have the habit of filing writ cases in the High Court to stall the payment. On the whole, in their opinion, the introduction of the PSI system has not delivered the desired benefits as expected.
They also opine that the huge sum of money spent to fund the PSI service should instead be spent for infrastructural development of the Customs department. Revenue administration modernisation should be the core principal of such infrastructural development. The infrastructural development goals should aim at turning the National Board of Revenue into a corporate body, separate policy making from functional activities, introduce full automation of the clearance system, simplify and harmonise Customs procedures, set up a sound recruitment system, and provide extensive training in risk management, valuation and post-clearance audit. The government should fund for the introduction of the Capacity Development Programme of the World Customs Organisation in Bangladesh Customs and the money required for the programme would be insignificant compared to the money spent for procuring the service of the PSI companies. They are also of the view that Customs officials should be posted in Bangladesh embassies abroad to monitor exports to Bangladesh and ensure proper valuation and classification of goods. In short, capacity building in the Customs department could be an alternative to the PSI system. In their view, this will not only safeguard government exchequer but also make the Customs management efficient and modern.
Whatever said, it is now high time for the government to review its policy of outsourcing efficiency to foreign companies. The term of contract with the PSI companies will expire in June 2008 and before the expiry date, a decision requires to be taken whether to sustain the system for another term. While reviewing the policy, it has also to be considered that capacity building in the Customs which is now in its rudimentary stage will take some pick-up time and a one year period will not be enough to develop the capacity strength of the Customs administration. Given this situation, the simple choice would be to renew the contract with the PSI companies for another term. But if seriously considered and issues in question are delved into, the idea of prolonging the contract for a further one more term may not be tenable. The system of preshipment was introduced in 1994 and since then more than a decade has passed. In spite of break and breathing time provided, the Customs administration has so far failed to gyre itself into a transparent, modern and efficient corporate organisation. On the other hand, the support provided so far by the PSI companies has not been much conducive to the development of the Customs. It is, therefore, required that responsibilities should be thrust upon the Customs administration to promote its own resources to amplify the organisational structure instead of allowing foreign companies to handle its own works. If the contract with the PSI companies is not renewed, the Customs administration will automatically be faced with the challenge to untie the Gordian knot to improve performance and efficacy and thereby turn itself into a modern corporate organisation.
The contributor is a free-lance writer