Advance Ruling has been included in the Article 3 of the World Trade Organisation (WTO) agreement on trade facilitation with the aim of providing stakeholders with predictable information in advance in order to facilitate compliance with customs requirements and simplify export and import procedures. The Trade Facilitation Agreement (TFA) was adopted at the WTRO's 9th Ministerial Conference in Bali, Indonesia, in December 2013 as the first major agreement to have reached by the member states since the conclusion of the Uruguay Round 20 years ago.
In keeping with the WTO agreement, the National Board of Revenue (NBR) implemented an act titled the Customs Ruling (Advance) Rules, 2016, on June 2, 2016(S.R.O No. 188-Act/2016/37/Customs). As part of its customs modernisation programme, the NBR implements the system. The facility was initially available only for classification of goods and then amendments were brought to the act in 2017 to include origin of goods.
An entrepreneur faces cumbersome process in releasing goods from the port. One of the causes is HS (harmonised system) code clarification. The Advance Ruling System (ARS) helps expedite the process of releasing consignments and avoiding demurrages in an accountable way. Once an entrepreneur gets a ruling it will stay valid for the next 18 months unless there is any change in policies.
The advance ruling, issued by the Advance Ruling Unit (ARU) of NBR on a written request from an applicant, is a written and binding decision.
The ruling provides binding advice on the classification of a certain good before its import and the Customs has to follow that.
So far, ten rulings have been issued and posted on the website of the NBR, but in most cases the requested HS codes have not been agreed by the NBR and thus applicants requested for reviews. One of the examples is cutting wall clock glass (HS Code 7015.90.00). While the NBR categorised the product under the HS code of 7015.29.00 and tax burden raised from 56.69 per cent to 127.84 per cent, there is valid reason for the applicant to request for review. The same happened with T8 tube light (8539.31.10) and panel light (9405.40.20). Applicants propose for duties at 58.69 per cent but a ruling was given under HS codes of 8539.31.90 and taxed at 127.84 per cent for these two items. A review was sought. Thus a good system proves difficult for implementation. Before issuing the ruling the NBR can request for further information from an applicant in order to narrow down the differences in viewpoints. Otherwise, it would give a wrong signal to the private sector.
The objective of the Advance Ruling is to modernise the Bangladesh Customs, reduce hassles importers and exporters face, ensure certainty and predictability of the policy for clarification of HS codes classification and putting in place a transparent and formal process whereby exporters and importers can obtain rulings from the Customs prior to import or export of goods.
An advance ruling also helps a trader reap benefits of efficiency and cost-effectiveness by allowing time to make decisions at the stages of planning, such as during manufacture, import and business plans.
An importer, exporter or any person with a legitimate interest regarding this issue or a person authorised by a registered party are eligible to apply for advance ruling. At present ARU is issuing advance ruling only on the classification of a good before its import. A person may submit more than one application at a time. Each application can include only one good or item. Most importantly, applying for advance ruling is not mandatory for importers and exporters. Importers and exporters causing slip-ups regarding the HS code may apply for an advance ruling to resolve the problems.
An applicant has to submit an application for advance ruling at least 60 (sixty) working days prior to the submission of a Bill of Entry at any customs house or customs station.
After receiving an application for demand draft along with all the required documents, the Advance Ruling Unit starts examination and verification of the received documents. In cases of examination and verification of the advance ruling application and attached documents, the Advance Ruling Unit may, if required, obtain opinions from a third party or an expert or a specialised institution. The ARU issues an advance ruling within 45 (forty five) working days of the receipt of the application.
On completion of examination and verification, if the advance ruling is issued by the ARU, the advance ruling for tariff/HS classification of goods will remain valid for 18 (eighteen) months from the date of its issuance unless the law, rules or any decision of the government is changed. Advance rulings issued by the ARU are binding upon AR holders and all customs stations.
Now, can a third party other than the ruling holder get the benefit of advance ruling? The answer is no. An advance ruling is binding on the import of goods only by the ruling holder. However, any other importer, exporter or person may use the advance ruling only as a 'reference' in the assessment of identical goods. Customs is not bound to adhere to the ruling content with regard to import/export by a third party.
If an applicant is dissatisfied with an advance ruling issued by the ARU, she or he may request a review of the decision to the unit in writing. If the ARU is unable to determine the classification of goods, it will inform the applicant within 15 (fifteen) working days of reaching such conclusion. In that case, the ARU will have to provide reasons for the inability.
Different customs houses follow different kinds of HS codes for classifying a single product and create severe problems for businesspeople. So gradual use and implementation of the advance ruling can help obtain a ruling on HS classification and simplify export-import procedures. A number of products have not got any HS classification, making classification a bit difficult both for NBR and private sector.
HS code switching facilitates some business people to evade tax. Consumer rights cannot be protected for reason of HS code switching. The customs advance ruling policy has been initiated by the government to avoid this. Experts from accounting, management, economics, engineering and other disciplines are needed for the purpose.
HS code classification is a difficult task but it is a binding one. There is a need for a provision for online submission of AR application aimed at reducing time requirement for awarding the HS code for an individual entrepreneur seeking a ruling. Review on AR should be placed on a separate committee. Judicial review is required to ensure fairness and capacity building has to be enhanced.
Neutral parties would need to be engaged for delivering impartial judgement on HS codes and duties. The decision-making time of the ARU regarding the AR must be reduced from 45 working days. A database on advance ruling can be established so that traders can use the database for import and export and they and customs authority get benefits of the system.
The Customs Ruling (Advance) Rules, 2016 is in Bangla. An official English version can be published to make the rules easy for foreign investors. A judicial review and appeal system need to be introduced for review and appeal of AR.
The NBR should take an initiative to mitigate the problems raised because of the problems on account of the last 2 digits of HS Code Classification involving export.
Variations in classifications of HS codes by different customs houses are a serious problem. Implementation of the advance ruling is crucial to resolve this problem. It can help ease doing business and the NBR needs to deliver impartial ruling so that businesses become gradually interested in using the policies of AR.
The writer is the CEO of the Business Initiative Leading Development (BUILD).
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