The Import Section of the CCC organized a seminar to discuss the proposed new customs law and the change in the current customs ordinance focusing on areas such as how the new law will cover online payments and e-document submissions, how it will boost international trade, what changes will be imposed on investigations and penalties and also discuss whether the new law is aligned with modern world business.
Government has taken a policy decision to enact a new Customs Act in place of the existing customs ordinance of No 17 of 1869 as amended to suit the present day requirements in international trade activities and there by this new Law will be presented to the Parliament.
The Cabinet Committee on Economic Management – (CCEM) chaired by Hon. Prime Minister Ranil Wickremesinghe has granted approval for this enactment of the proposed new Customs Act through the decision No. 25/05/2016/05.
Accordingly this new Customs Act shall come into force on such date determined by the Minister and announced by a notification in the Government Gazette
Speeches given at the Seminar
The Address by Mr. Dinesh De Silva, Chairman Import Section of the Ceylon Chamber of Commerce
Good morning, ladies and gentlemen. Firstly I warmly welcome all of you for today’s gathering, for coming here despite all your busy schedules with today being a Friday. We all know how busy these trade activities are. Members at the head table, we have also invited the Director General of Customs, but unfortunately he is unable to be with us today due to some urgent commitments.
Experts, officials from the Ministry of Finance, officials from other government authorities, members from the private sector. As you are aware, we have gathered here today to discuss an important topic which is really close to international trade. And already you might be aware that there is a proposed customs law by the government in place of the existing customs ordinance.
No other Sri Lankan government has taken this initiative and it appeared in their budget proposal as well. In fact from the trade for many past years, we have proposed this from previous regimes, there were work done but we had certainly not come to an end, I think we are still going on this journey. And in this process this government sent invitations through media asking for proposals and to all the private sector associations, through chamber and so on and so forth.
Calling for proposals which will be required in the eyes of the private sector where the private sector is the party that deals with this act so when we are doing our operations we clearly come across the factors and points that hinder our work. So taking those views, the government has appointed a Cabinet Committee on Economic Management chaired by honorable Prime Minister has granted approval for the enactment of the new proposed customs act. We at the private sector strongly endorse and welcome those initiatives as this will no doubt will have a huge step towards trade facilitations and it will also improve ease of doing business.
The main focus of the policy makers here is to change the laws to suit the modern day business. I am sure everyone who is involved in the international trade realizes how difficult the regional and global environment is to do what we are doing In that space, the government has established three committees in this broad operation structure; there is a steering committee to guide the drafting process of this act, another technical committee of officials to facilitate the steering committee as well as the drafting committee. There is also a team of consultants for the drafting of the proposed act and they are functioning as the drafting committee. It is during this time that the government called for proposals from public through media through paper advertisements and we believe they’ve got responses.
From the private sector point of view, it is of paramount importance for us to be competitive in the international markets. As of now, our private sector main focus is a fully automated environment and we lag far behind when compared to other countries. Also we need a complete single window system with customs integrated with all boarder agencies. We know that there is a lot of work being done but when we analyzed our journey we saw that they were no firm timelines, no dates. And also private sector needs e-documents with e-signatures, no paper to go paperless. Also we are fully focused on a national information/trade portal where anyone those who are in the business or plan to do, like young people who are going to be entrepreneurs should have information. If I am going to import or export, or contra port, you name it there are lots of trading modes, in the trade, so that they will upfront know what their requirements are, what have they got to do if they are going to do business. That clarity is critically important for the trade. Recently we had a workshop conducted by USAID and there were other countries who shared their examples of a national trade portal in their own countries. It was amazing how countries who were not as developed as Sri Lanka and the extent that they had gone to. So these things have become key priorities in our trade.
We cannot do business in isolation. Sri Lanka needs to get involved with other countries around the globe. We are a member of the WTO which has set trade regulations among its members. The main function is to ensure that trade happens smoothly, predictably and fairly. The WTO which presently has a membership of 163 countries. So WTO had recommended some trade facilitation methods and when two thirds of the membership ratifies their local requirements those proposals will come into effect. Already 91 countries have done it and we expect 20 plus to complete by the end of the year. Then all the WTO proposals will come into effect for trade and we from Sri Lanka will have to comply with that. Otherwise your buyers will look at other countries that are giving simpler situations. So are we ready? I think that’s the major challenge which the private sector is faced with today. So in this context the customs ordinance plays a very vital role. And it has to be changed to suit the modern way of doing business. It has helped trade for the last 150 years like others change; I think everything has to change according to the needs. And as it is. Are we actually happy with the current customs ordinance? I think looking at it dealing with the operations day in day out, looking at the issues around it, we certainly have a long way to go to achieve what we want.
But we are happy with the things that the government together along with customs is doing to facilitate trade and now they are thinking of changing laws. So we as the private sector must support and fast track this process fully. It’s no doubt that it will reduce huge amounts of cost and it will increase speed of operations. Just to mention a benefit, OECD, the organization for economic cooperation and development which is a 34 country group that discuss and develop economic and social policies said that one percent decrease in global trade cost will yield an increase globally income of USD 40 Billion at the minimum level. So I think it’s not that hard for us to understand simplification and how it gives the trade and business community returns. So we have a few more hours to go and I would like to invite you all to raise your concerns, discuss and clarify other matters during the Q&A session. And this step is going to benefit the trade. And if someone asks me there is a huge portion of efficiency in our system and that is adding a tremendous cost to the cost of living, no businessmen or person will bear any additional cost. That directly or indirectly goes to the consumer. So without further delay I am sure every one of us who is involved in international trade and dealing with customs procedures will need to do things differently. So I will set the stage as it is and after me all the stakeholders who are similar dealing with this law or this industry will give their comments and share their experiences and members can speak during the discussion time. We will not limit this to any particular language. In case if someone wants to say something, we welcome that. I will invite Mr. Sean Van Dort from the Shippers Council to share his comments.
THE SPEECH OF MR. SEAN VAN DORT, CHAIRMAN SRI LANKA SHIPPERS’ COUNCIL (SLSC)
Thank you Dinesh, apologies for the late arrival. When I think of customs, I think of my mother in law. She had given me a beautiful wife but I have problems. I think Sri Lanka customs has always been looked as a very draconian initiative which is still driving on fear psychosis and the service element which the private sector wants is not visualized in their day to day dealings. I think it’s a tremendous step by the government to see how to change these laws. Of course not forgetting that the work the customs does which you and I forget, as we tend to see the bad side. The good side is that they keep us safe in some sort of way. Our idea as the Shippers Council is that we don’t want to see customs as pruning their powers. Customs needs to have the powers which can keep us safe, from every aspect from boarder protection to health and safety and environment. So what are we looking for from the Shippers Council, we are looking for speed of transaction. We want speed to be the most important thing, how many hours it takes for you to pass something. Do you have first hand information? Do you know that Sri Lanka Customs is the first customs in the region to have a 24/7 export facilitation centre. Are you aware of it? A lot of good work is done but unfortunately as Sri Lankan’s we see the dark side of things. We need the customs, without the customs we cannot move.
Speed and cost, it is estimated that Sri Lanka spends more than 4 USD just for export processing whereas Singapore is at 1.28 USD. How do we reduce this? So we want electronic documentation. We’ve had bottlenecks in this because the customs ordinance does not permit electronic signatures; we are now working with the legal department of the government or the legal draftsman of the government to see how that has progressed. We are working with the customs to see how we can do panel examinations on the system so that no exporter will be required to come to customs and say that a panel examination is to be done. We wanted it to be generated from the system. I have been working with the Director General of Customs, Dinesh is also aware since he is also part of the committee of that how we are pushing Sri Lanka customs to give us this speed of transaction. We’ve had excellent progress but because of this ordinance which Customs has which is very old, about 200-years-old I assume. There are bottlenecks for which you cannot blame the individuals there. You can’t blame the customs officers there because they are working according to the rules of their organization. So this is why we are pressurizing the government to change these rules not to belittle the customs officers’ responsibilities or their powers. We are working with Singapore, Dubai, they are our competitors. If you look at the Indian trading and forwarding process today I was amazed that they do pre-clearance one month before vessels arrivals. I was at a conference with the Indian Freight Forwarding Association and they do one month prior, which means that the documents are submitted to the customs one month before. And we don’t have that facility in this country. We don’t even have pre-clearance for one week. So we need this.
Do you and I like to waste time in organizations. No you and I don’t want to waste time with customs. So the two things I want you to take away from here is speed and cost of transaction. We’ve come a long way however in any good organization, there’s good, bad and ugly. Even in the private organizations we have that. The ugly does not want this electronic transactions to happen, because there is the wharf clerks one side they have their association, the transports have their association, all of them have vested interest in this whole game.
In Dubai there was a study on ports and it said that it took one lorry 45 minutes to turn around in the port. That means when the container lorry comes in, drops the export cargo, takes the import cargo and goes out. They brought it down to 12 minutes. How? They were conscious of time and transaction cost. In Sri Lanka they can get the container out of the terminal in 10 minutes the driver, wharf clerks all on their Shangri La time and they come out from the terminal at 6pm and we curse the traffic. The traffic police says the containers cannot move out. Who is suffering? The Football world cup, we had a container load of fabrics that came in and we couldn’t clear it on time. Three hours it got delayed, people were waiting in the factory to sew the Mexican jersey, we couldn’t give the cargo on time and we lost the order. That’s the apparel industry. Time is of the essence here. We don’t want to belittle the customs officers; we want to change this system. We can’t wait for you to have your lunch and come, we can’t wait for you to come at 9am in the morning. But when the systems work, you can still come on your own time and the system works. We want system generated customs procedures so that we can get working. We are working 24/7. I come from the apparel industry we are the largest industry in this country. Last time it was 4.8 Billion USD last year, we want speed. If we can get that and if the transactions speed to 50 percent of what we are today we’ve achieved something. But don’t forget, I know the hard work that the customs go through. They ensure our security, boarder protection, but we need error proof systems. So with that I want to say thank you to Dinesh for organizing this. That’s the wish list of the Sri Lanka Shippers Council. Everyone says that customs officers are corrupt but we are more corrupt than them. That’s a fact. Company managing Directors and Chairman’s you are the people who sign the invoices and cheques of all the transactions, you and I are more corrupt than them. If you and I don’t give they don’t take. If they don’t take we complain. 10 years ago when I joined MS I stopped paying. I used to pay where I previously worked. I had some problems but today my cargo goes smoothly. So don’t bother pointing the finger and them. Remember when you point a finger at them, three points back at you and one at god. We are also part and parcel of this game if you think this game is corrupt. So thank you. May God Bless you and May the devil not kiss you.
Thank you Sean, now I will invite Mr. Chrisso De Mel to speak a few words on behalf of the exporters association of Sri Lanka.
THE SPEECH OF MR. CHRISSO DE MEL, VICE CHAIRMAN EXPORTERS’ ASSOCIATION OF SRI LANKA (EASL)
Good morning ladies and gentlemen. I want to thank Dinesh for giving me the opportunity to share my views with all of you. I think the first two speakers have very well explained where we are today. And I think if there was one thing that cannot be changed, its time. And also one of the world’s most successful companies, Apple, launched their latest product the day before night. And my son was very keen to see it off at the time it was happening. And yesterday he shared with me saying that ‘thathi you know what is the most important thing, it’s that they offer it at the same price’ now that endorses what Sean mentioned about Dollars and Cents, Rupees and Cents, that we would incur in our transactions, that would eventually decide how competitive we are going to be.
In this very demanding day and age, the corporate world knows best that there is no room for excuses. There are no rooms for ifs and buts and some passage where you can slip out and say that piece of legislation or whatever we are holding, an ordinance is 100 years old. I think there is something radically wrong in this.
Today’s example we talk about very famous topic of sport and cricket. A game is played with an understanding of rules. The rules are meant for different purposes, primarily for a fair game. So that if there are two people competing, it has to be fair. So you know in fairness to both teams, the rules are common. There are also some rules to protect. We have rules to protect our land and economy. In cricket you can’t have a very fast bowler bowling more than two full tosses at the batsman because he will be asked to stop bowling. For example if it’s the first two deliveries of the test match if he bowls the first one, it’s a warning and the second will be the last ball he bowls. Similarly we need to have rules that are changed. Continuously things are reformed. Where customs are concerned, we need to look at what needs to be changed. So that brings me to my first point.
The need of the hour needs to be found out. And I think we have around this place and at the chamber and all these stakeholder meetings enough brains to work out the need of the hour. We all know but one thing I think we are pretty messed up in this country is that we are sometimes not real. We are fantasizing things, we like to catch on to nice words like ‘single window’, ‘ease of doing business’ but if you go down to the wharf clerks and others who are putting their neck to the wheel, they will tell you that this is far from the reality. And I am sure in our panel also we have people like Nalin for instance, who is still having his hands on the job. Who will be able to tell you without hesitate this is what happens. And also as professionals be it the corporate sector or customs, I think as Sri Lankans we have to be proud about what we are doing. I think it’s not the day and age where you want to hear, although politically it will take us a time to disown the word corruption, but as corporate and individuals we can if we make an attempt to do so. I think a person working for Singapore customs would never associate with the word corruption.
Sometimes in Germany even in the corporate world you don’t hear corruption, because that is something they detest for them but for us it is something we embrace. We’ve got to be real and embrace and know where we are. And most importantly all these politicians who come behind our boats, who are policy makers but we are still waiting for the policy. Once the policy is out we need to hold them accountable to walk the talk. Like somebody said that they are supposed to be serving us but we are serving them.
Find the errors in the past, look around, we know several things for example in this ordinance and the proposed amendments, when you talk about disputes settlements, you know it’s not a fair game. If you have an encounter with the customs and if the customs system operates in a system where there is reward. The person residing by the examination or arbitration cannot be one of them. Just imagine if you are playing with Australia, and if it’s an Australian umpire, you have a problem. So one thing is I don’t need to go into detail but I am sure during the Q&A most of you all will be share knowledge.
The next point immediately is while we find errors it is important that we look around. Like Sean said we know what is happening in Singapore, honestly I was surprised that India was miles ahead of us. What happens when the value changes by the time you order and when you get it? We can lodge it with customs and we are certain of the duty we are going to pay. There are a lot of reforms we need to make. We need to move with time, because the single buyer is not going to give the chance for you and me to get our act together and be ready for business. If you are not ready they go somewhere else.
The third point I want to mention is that unless we know the demands of the future, we are nothing. We are nothing. We’ve got to formulate these not for today but for tomorrow as well. If we don’t think ahead, we will be far behind from what is required. So we need to listen to everyone, understand the real situation, otherwise we cannot compete. It is such a pleasurable thing for us to go and speak about what we have achieved with Sri Lanka customs for exports. I know it was many meetings, it was not perfect understanding but that dialog was the key and the intent of everyone to make it happen has brought us to a situation where people are not wasting time on the road. You know our parliament wakes up one afternoon and they have funny discussions going on. Why is there traffic on the road? Some of the answers to these questions were because of bad decisions that had been made in the past. How did some container terminal get installed in the middle of a city? I am sure some of us would understand, I reside somewhere close to Gansabha junction and from there to before Kirulapone, there are 16 or 17 schools, small and big on the middle of the road. And what was the policy that was going on. Are we talking about traffic? There can be school in a by lane. For instance look at Thalakotuwa Gardens, there are three internationals schools there. Now there are shuttle buses. So similarly when we plan things, weather it is customs way of doing business, you need to hold people for the policy document that they have created.
And finally we need to do the necessary changes, we all talk about demands that come up daily internationally and unless we change we are going to perish. Sometimes we talk about environment but all of us are driving vehicle mostly run by petrol and diesel. But what happened to electric vehicles. The duty on those went up. We threw that option. What happened to people who invested in solar power to charge their vehicles, now they cannot buy their vehicles because it’s too expensive? But we love our environment. So on that note, I leave room for questions to be asked during Q&A session.
Thank you very much for that Chrisso. I think all of us understand the need for change. Now I call upon Mr. Iqram from CASA to address the gathering.
THE SPEECH BY MR. IQRAM CUTTILAN, TREASURER CEYLON ASSOCIATION OF SHIPPING AGENTS (CASA)
Good morning Ladies and Gentlemen, I will quickly get down to the points the shipping industry is facing and the need for change in the regulations. Well, there was a change t hat was brought in where we had to report maliface 72 hours ahead while the industry has no problem with that, the issue is pertaining to the fines and penalty the industry has to go through. Specially the embezzlement laws which are totally draconian. For a mistake which had been made at the port of origin, or some other place, the agent in Sri Lanka has to be penalized and the customs tend to use that as a threatening factor in imposing arbitrary fines. Once the industry has addressed it with the authorities, the amendments had not been done. Also what we find is that in respect of the arbitrary fines and the amendments, I think there should be standardized process for the amendments. Otherwise at the whims and fancies of certain individuals arbitrary fines are being imposed. We also have issues with regards to the electronic transmission of maliface bias which in fact the electronic transmission we also asked to report hard copies. Why? Because I suppose that needs to be addressed.
And then we have issues pertaining to detention of uncleared cargo. Some of our members had containers kept for as long as 7 years for customs inquiries. Shouldn’t there be a process where the inquiry should be completed within a certain period. As long as we keep the containers, the shipping lines are losing money, the ports are losing revenue and the consignee is also losing out on their cargo. There should be a process where the inquiry can be timeline and the inquiry should be completed within these timeline.
Sri Lanka is a transshipment hub, and we should facilitate transshipment and multi country consolidation. 75% of the cargo handled in Colombo is transshipment cargo. So if we dot help that process how can the port grow. There is huge investment that is coming up in terms of terminal, development, so we the authorities need to facilitate the cargo movement and the multi country and the hubbing concept for the cargo in Sri Lanka.
Then also we found that even through the electronic manifestation has been done, there are certain issues, because the shipping agents are being malifaced, the traders are being malifaced. The system seems to be having a problem in accommodating all at the same time. Once the forwarders submit a maliface the shipping agents cannot submit a maliface. I don’t understand why that is not being eased up. We have taken this up but unfortunately it is not being resolved. And also irrespective of voyage numbers, and if there change in the voyage number how can report that to customs. That system also needs to be adjusted.
Additionally we also find that a number of customs officers holding vessels and harassing the officers on board the vessel which is something that needs to be addressed. There should be some regulation taken so that if you want any documents the agents can submit it.
And the whole customs ordinariness regarding quantities that are being shipped to us need to be facilitated. What they are saying is that a person can have a quarter bottle of alcohol, a few cigarettes per day which generally is inadequate in today’s day and age. So these are some of the issues the shipping agents face. But I am sure if the authorities and new regulations can consider these and adjust this, I am sure the shipping agents and lines can increase and doing business would be easier.
Now I will call upon Mr. Niral from Sri Lanka Freight Forwarders Association
SPEECH OF MR. NIRAL KADAWATHARATCHIE, ADVISORY COMMITTEE
SRI LANKA LOGISTICS & FREIGHT FORWARDERS ASSOCIATION
Good morning ladies and gentlemen. Dinesh thank you very much for the opportunity given to our association. Needless to say that the previous speakers, the head table and all of us in the audience agree that we need to change the whole customs ordinance to a new one which is more palatable to a new trends in trade.
So I won’t elaborate much on that but on the onset I want to state that my complements to Sri Lanka customs. I do a lot of business in the Indian sub-continent and dealing with those customs I find that Sri Lanka customs are more approachable, their attitude is right, open and flexible. In that respect I think they are the best customs in the Indian sub continent. I agree with Chrisso, the Indian are much more technologically advanced, but their approach and their attitude is no where the gentlemen who are seated here. So hats off to you gentlemen for having that attitude. Of course know w that there are good things and bad things happening. It’s natural. In my presentation here I would like to take the focus away from technical points and talk about a little more on economy. We had 10 years of a previous era, where there were lot of investments and infrastructure but I didn’t see a proper economic policy to steer this country to increase our GDP or exports. But I am seeing that it is being covered by this current regime. So if I go into bit more details I think Sri Lanka survival as a country, we don’t have as much natural resources and numbers like India and Pakistan. We had an open economy in the 70s and we attracted the industrialists to come here and invest. But we have gone away from that. We are neither an agricultural country nor an industrial country today. Our energy costs are one of the highest in the world, our labor is more expensive so we cannot compete with India, Vietnam or Cambodia. So I don’t think Sri Lanka can be an industrial country. I also don’t think we can be an agricultural country because we have moved away from agriculture.
So if you look at the figures in 2014 that’s the latest available, agriculture contributes 7.8% of GDP, industry contributes 26.7% services including ICT, banks, financials, shipping, logistics, freight forwarding contributed 47.5% of our GDP. So ladies and gentlemen where are we heading? We are a service oriented economy. We are not an agricultural or industrial economy.
So our focus has to be on services like in Singapore, Dubai, because of their approach. Dubai was a desert country and see where they are today. Dubai is what it is today because of trade facilitation and customs. They have a very liberal approach. They allow traders to do trading. They don’t block. If they find rouge involved, they go after the rouge, they don’t police the rest of the group. If they find a contraband trade, they go after them. They don’t go after the whole trade and buckle the whole show for all of us. And that is what is happening here unfortunately. We try to serve everybody from the same spoon. So we need to have two spoons, one for the contraband and one for the guys who are helping the economy to grow.
We have been talking about Sri Lanka’s geographical location for three weeks now; unfortunately we have not been able to fulfill these dreams. I see even this government talking about it. We are naturally an excellent maritime and logistics hub and we are an excellent located in a place where it is ideal to have this hub concept. Why are we unable to achieve this? Because of customs. Customs do not understand the free movement of goods. Why Singapore and Dubai are in an excellent situation today. They don’t have anything. They don’t have oil and gas. Oil is only 6.5% of Dubai’s GDP. These two countries, good parallels, how have they come up so well. Both are two service centers. So in order to achieve the dream of becoming economic prosperity, we have to excel in the service sector. It is evident, 45.7% of the GDP comes from the service sector. So ladies and gentleman, my request to all of you, to the customs, the government to find a solution to these problems. We need to increase external trade. Why are we suffering? Why are we having VAT problems today? Why does the government want to increase the percentage of VAT, because the treasury does not have money. How do we get money into the treasury by external trade. Every country in the world, including Germany, UK, USA, they all balancing budget deficit from external trade. Our budget deficit is expanding rapidly because our external trade is going down. It is the external trade which brings the hard currency. So the moment we don’t have enough dollar, the rupee gets depreciated, cost of living goes up, basic requirements rise so the consumer is affected.
This is the country’s agenda; I don’t want this to be anyone’s agenda. We need to increase external trade. This is the best for the people of our country. We bring the budget deficit to a manageable label and prosperity will prevail. So my request to customs department and the government, find the solution for us to trade more often. Economy will grow and people in this country will be happy.
MR. NALIN DHARMAPRIYA, ASSOCIATION OF CLEARING AND FORWARDING AGENTS (ACFA)
Members of the head table, ladies and gentlemen. In the absence of the Chairman, I will be addressing you this morning. ACFA is the association of clearing and forwarding agents, our members do the majority of imports and exports and clearance and forwarding. So we feel the heat from the services given by the government authorities. The most important authority we deal with is Sri Lanka customs, for the last many years, we have been addressing several issues which we see as hampering a smooth or consistent service. We are under pressure from importers and exporters to perform a duty within a specific time limit. Because at customs, seniors’ officers go for international conferences, seminars, training and they are made aware that within 24 hours the work can be given. There are instances where the system prevents you from taking a single day clearance. But the next day you will not be able to do it for the next shipment because another officer will stop it. The consistency does not prevail. So we have been insisting on documented guidelines to the trade, that is informed compliance as far as logistics is concerned.
If you go to the US customs website you can see the publications of any importer and exporter when dealing with US customs. In the absence of those guidelines we have requested in our proposal to at least reply to our letters. Even the public service guidelines say so and I think the right to information act talks of the same.
I have come cross for an instance where a tractor has been approved for a certain project has been approved by the department, the additional registrar general of customs but after performing this for two years, one department stops it. You see as a laymen the importer writers to the head of the department, she approves, which we have in writing. What is acceptable to this division is not to him. What is acceptable to this officer is not to the next officer. We have written in our proposal that this present ordinance gives immunity to the officers. Certain officers can abuse that. They can harass you. I had a situation where when it was released by one division it was held up by another. I complain to the DGC, and within one week time, I was told that I have not violated the ordinance so I can get the goods, but I have been prevented from getting the compensation from customs because the present ordinance says any cost incurred during customs examination has to be borne by the importer or exporter. So those things we have addressed. Because we have experienced these things our proposals are practical in nature. And they don’t talk of big concepts. Within the existing resources we can implement it. Our proposals are based on the Vienna convention and WTO agreements. So with my conclusion of the speech I think we can directly go into technical matters which are proposed for today.