CCC proposes amendments to Sri Lanka’s customs ordinance

Sep 12, 2016 (LBO) – The Ceylon Chamber of Chamber has made several proposals for the amendment of Sri Lanka’s Customs Ordinance.

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 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

The CCC proposed amendments are listed below:

Introduce provision to ensure that authorities are not permitted to impose penalties on Fridays or any other day before a holiday in such a way that Companies do not have adequate time before closing of day, to make suitable arrangements to comply with orders.

Ensure that the provisions of the new Customs law is in alignment with the provisions of other Acts which are relevant, eg. BOI Act, Hub Operators Regulations made under the Finance Act, Import & Export Control Act and other Acts relating to international trade.

An immediate amendment to section 12 published in the Gazette Notification No.1886/55 dated Friday, October 31, 2014 is required by deleting the underlined text–
“ Section 12 . Any cargo reporter who contravenes the provisions of these regulations shall be guilty of an offence and shall on conviction after summary trial by a Magistrate be liable to a fine not exceeding twenty five thousand Rupeesor in imprisonment of either description for a term not exceeding three months or to both such fine and imprisonment.”
[PLEASE NOTE:Although Customs have agreed to amend section 12 of the Gazette Notification, up to date it has not been done.]

In the event of any enquiry connected to late manifest reporting, Customs should permit an authorized officer of a Company to record a statement and should not insist on that being done by a Director of the Company.
The following text in the current Ordinance should be deleted –
“After the statement is recorded and after accepting the Manifest will file Court action”.
Further, the proposal of Customs to levy a maximum fine of Rs. 500,000/- for contravening these regulations is just not acceptable to all cargo reporters.

Provision should be included to have representation from among the Trade experts in the Customs Appellate Tribunal currently established under Chapter 17.

The draft Bill includes provision empowering Customs to declare free ports and Hubs. This provision should be deleted. The declaration of a free Port and/or Hub has no connection to SL Customs and is currently provided for in the Commercial Hub Regulation No. 1 of 2013 dated 11 July 2013 made by the Minister of Finance and Planning under Part IV of the Finance Act No. 12 of 2012 as amended by Finance Act No. 12 of 2013. Accordingly, matters regarding Free ports and Hubs operations should be independent from the Customs Law.

The new Law should provide for the submission of import and export declarations electronically.
Currently, even for a minimum correction in a manifest, the fine that can be imposed is Rs. 100,000/=. The fine for a minimum correction should be reduced to Rs. 1,000. The fine for a major correction may be retained at Rs. 100,000/=

The acceptance of an Electronic signature should be recognized in the new Law.

CHAPTER 3 of CUSTOMS COMPLIANCES RELATING TO ARRIVAL OF AND DEPARTURE OF VESSELS

a) Master of arriving vessel to present inward manifest Section 16 of the current Ordinance states as follows-
“16.The master or agent of every vessel, other than a local craft, shall present the manifest of the vessel in English containing all particulars of containers andmarks, numbers and contents of packages if any, and if the goods carried in such vessel are bulk cargo, detailed description of such cargo, with the certification by the master or the agent of the vessel electronically or otherwise transmitted to the proper officer of Customs not later than 72 hours beforethe arrival of the vessel.

It is recommended that the following text be added at the end of the above section-
“Provided however that in the case of short sea routes, the manifest of the vessel may be transmitted immediately upon the vessel sailing the last Port and prior to arrival at the Port in Sri Lanka.”

b) Freight Forwarder, NVOCC topresentmanifest. Section 17 of the current Ordinance states as follows-
“17. Freight Forwarder, Non-vessel operating common carrier (NVOCC) of every container, parcel or consignment of goods in a vessel, other than a local craft, shall presentthe manifest of the cargo consigned to him in the prescribed form containing all particulars as to marks, numbers and contents of each package consigned to him in the vessel, electronically or otherwise transmitted to the proper officer of Customs not later than 72 hours of the arrival of the vessel. In the case of short sea routes, transmission of manifests to be done soon after vessel sails the last port.”

The recommendation above (in respect of short sea routes) is recommended for inclusion in section 17 as well.

c) Goods for transshipment
The transshipment manifest should be permitted to be transmitted electronically as well, in the prescribed form.

Shipping lines use different voyage numbers during voyages. It is recommended that Customs should accept the different voyage numbers as this is the practice in other countries / ports.

The current law requires that the Manifest be submitted in electronic form as well as in hard copy form. It is recommended that the mandatory submission of hard copies should be dispensed with, and that only electronic versions be accepted.

In many other Transshipment Ports, the need for submission of a Transshipment manifest is not required. It is recommended that this be adopted in the new law and that the need for the submission of Transshipment manifests be dispensed with, and in lieu that only a Discharging and Loading list be required.

In the event that an investigation under the Customs law is required to be conducted, provision should be included to complete the investigation and to release the detained containers, within a reasonable deadline (of five (05) working days).

Alternatively, if the deadlines cannot be complied with for good reason, the Customs should be required to de-stuff the cargo and return the empty container to the consignee, immediately upon the expiration of the deadline.

Provision should be included to permit Importers to process Pre-arrival and Pre-Clearance documentation. Submission of cusdecs prior to arrival of vessel should be permitted. In this process,the risk of paying taxes in advance is assumed by the Importer. This includes the risk of amending the cusdec and or preparation of additional cusdecsto be permitted legally without any constraints.

Customs refunds system should be in place online. This refund should cover all dues, or credit to be maintained against the Importer / ExporterTIN number for future use.

Implementation of Electronic Manifesting should be permitted.

The new law should provide that, as done in India, manifesting be permitted to be done at the time of clearance of cargo.

The new law should permit valuation for customs duty based on copies of documents, up to the time that a sample is required.

Transshipment and Entrepot cargo [EPT], under no circumstances should be examined unless an AUTHORIZED OVERSEAS alert is made. This alert should be shown to local handler and the investigation needs to be completed within 24 hours without any disruption, as goods are not entering the country. The detention of TS and EPT will discourage international traders using SRI LANKA as a logistics hub and it will hamper the Government effort to gain the LOGISTICS HUB image.

No fines should be imposed on “LOCAL HANDLING AGENTS OF TS AND EPT cargo, unless connivance is proved. The goods are not orders or purchases to Sri Lanka , hence local handlers have no knowledge of the same. Fear of IMPOSITION OF FINES should not be a reason to REJECT the business offered to Sri Lanka.

The new law should include provision to fully streamline Entrepot cargo operation. A single Form similar to TS cargo should be introduced. The payment mechanism should be monitored through the banking channels.
Provision should be included to ensure that where a party has supplied all relevant documents and complied with statutory requirements, no penalty should lie in respect of the period where the customs authorities have delayed action due to no fault of the party.
The new law should include provision to make it mandatory for customs officers to acknowledge correspondence on all official matters.
Provision should be included to provide that the Orders, advance rulings and Minutes of Customs officers should have a minimum validity period of one year. Any revision should give Importers/Exporters a minimum of six months to ensure continuity of business and to enable Importer/Exporter to re-plan their business.
Provision should be included to make it mandatory to give adequate publicity (including via the Customs department website) to all statutory orders etc made by the Director General/Customs, so that there is transparency and affected parties/stakeholders are able to readily access this information.
Provision should be included to state that in the event that Customs authorities fail to respond to a communication of a party with regard to a matter relating to imports/exports, within a stipulated period of time, it must be accepted that the contents of the letter are acceptable to Customs and under no circumstances should the authorities be permitted to challenge or penalize trade activities or other action in relation to the consignment to which the letter relates.
All activities such as Entry passing, investigations, examination, valuation etc. must be performed withintime limits and provision should be included to ensure that these time limits are strictly enforced. If the officers fail to complete any such function, the goods MUST be released and the importer/exporter should have a right to be compensated for additional costs incurred including costs on account of levies by other functionaries.
Investigations carried out by “ON INFORMATION“ must be completed and goods released within 24 hours. This will prevent malicious and false complaints being made by competitors with the intention of gaining an unfair advantage to stop a consignment of a competitor being released unjustly.
Detention notices or raids or authority for any search in business premises should only be issued by the DGC or any ADGC.

Regarding Penalties/Fines- Once the ‘due revenue’ to the Government is recovered, the Importer/Exporter should be given the opportunity independently access courts and settle the case. Since Customs authorities are entitled to a% of the fine, there is a conflict of interest situation if they sit in judgment over the quantum to be imposed as penalties/fines.

When a case is presented to courts, only the revenue loss to the Government should be shown. The provision which requires that three times the value of the goods should be shown to be deleted. The higher value results in the offence falling into the category of an unbailable offence. The value of the goods should not be a reason until the case is proven the company or individual should be able to continue business.

When post clearance investigations are done, all officers involved in Cusdec processing, valuation, examination etc should be summoned to give evidence in the case and in their respective roles and then violations need to be established . If proven guilty, the fine to be equally shared by Customs and importer/exporter.

The new law should include provision for a suitable Corporate Guarantee (CG) instead of a Bank Guarantee which is legally accepted.The Customs policy planning division with the participation of representatives of the trade should determine the Format/criteria that must be satisfied for acceptance of the CG.

Provision should be included to provide that Guidelines must be mandatorily published for each and every activity that Customs authorities handle. Any amendment or update should be immediately published. No penalties should be imposed under any Guideline unless such Guideline has been published as required by law.
The Best practices adopted by the Customs authorities of the USA (published in their website), should be adopted by SL Customs (Preventive Unit).

Where authorities other than Customs authorities (eg. Import Export Controller) are vested with the function of imposing penalties/punishments in respect of violations of statutory provisions, there should be no provision to vest Customs authorities also with the power to deal with those same offences.

Since Customs officers are Law enforcement authorities, all violations should be decided by the relevant authority vested with power and customs should not be allowed to confiscate and impose penalties.

Principles set out in judgments of the Supreme Court should be made applicable to real timeactivities.
It is recommended that a Customs Ombudsman be appointed with power to look in to trade complaints/disputes in connection with all matters with Sri Lanka Customs, together with other connected authorities.

Other recommendations

It is also recommendedthat the levels of competence of the Customs officers to handle the relevant subjects be enhanced, in order to avoid unnecessary queries on item descriptions which will allow faster transactions.