Corruption in CUSTOMS DEPARTMENT

Corruption in CUSTOMS DEPARTMENT

Corruption in the Assessment of Goods

Evasion of custom duty by a dishonest importer is the most common form of corrupt transaction in the customs department. In most cases this is done with the active connivance of customs officials, who allow the misdeclaration of value or quality or quantity of goods, smuggling or other commercial fraud.

The basic function of the customs involves the assessment of value and collection of duties and other taxes at the customs ports, airports, and land stations. The customs officers are the kingpin in the entire process. The present regulations pertaining to valuation provide a high degree of discretionary powers to the officers. Not surprisingly, an officer interprets and enforces the law in such a manner as suits his or her convenience.

The process of appraisement involves the examination of the imported goods to ascertain the correctness of the declaration made by the importer in the Bill of Entry. The procedure of 'first appraisement', where the goods are examined before making an assessment, is time consuming. The 'second appraisement' system, where assessment is made first and examination carried out later, is more convenient to the trade and conducive to the expeditious assessment and clearance of goods. However, the existing legal framework identifies the first appraisement as the standard method to follow, leaving the use of the optional second appraisement to the discretion of customs officers. To avoid delays, importers will often pay a bribe to ensure the use of the quicker method.

Corruption in the Detention of Goods During Assessment

The law requires customs officers to complete assessment and clearance "without undue delay". However, this phrase is not clearly defined and is open to subjective interpretation. In practice, delay is the order of the day. To avoid this, importers pay "speed money" as a matter of routine. If the customs officer causes due or undue delay in assessment, the goods remain virtually detained for a period which is decided by the officer and as a result the importer is bound to suffer financial loss.

Corruption in the Valuation of Goods

Valuation is a critical factor in the customs assessment procedure since duties on imported or exported goods are calculated in terms of a percentage of value (ad valorem). Until recently, the valuation method used was based on the concept of "normal price", which is the estimated price (in the opinion of the assessing officer) which the goods would fetch at an open market sale at the time of delivery. Valuation based on normal price is often arbitrary, fictitious and unfair.

The use of normal value has been the main bone of contention between the customs authority and the importers. However, the system can be mutually beneficial to corrupt officers and dishonest importers since it encourages under-invoicing of high tariff items. The loser is the government which receives a lower revenue as a result of the under-valuation. Corrupt officers can extract bribes by threatening to assess goods at a higher value on the basis of the recorded price in their possession.

In contrast, the "transaction value" system conforms closely to commercial realities and prohibits the use of arbitrary value. Under the terms of the WTO agreement, Bangladesh must eventually switch to this system, but exactly when it will do so no one knows. The use of transaction value is likely to reduce corrupt practices connected with valuation of imports.

The pre-shipment inspection (PSI) procedure for assessing imported goods has some merit in breaking the monopoly power of the customs department in matters of valuation, thereby reducing the scope for corruption. Such a system was introduced a few years ago for limited categories of import goods. But it was withdrawn because dishonest importers were able to get grossly under-valued certifications by unscrupulous PSI agents, who had no legal liability for the valuations they certified. A mandatory and hopefully legally sound PSI system based on the WTO agreement is expected to be implemented from early 2000. Three international PSI firms have already been selected using a competitive bidding procedure.

Corruption in Adjudication and Appeal Systems

Senior customs officers enjoy absolute discretion in deciding the fate of customs cases which are under investigation. Under such circumstances, they often abuse their powers of adjudication, and can very easily pass an order for confiscation of goods or imposition of penalty. Orders and decisions passed in adjudication are not supported by written reasons or documentary evidence. Thus, the doctrine of natural justice is not followed. The adjudication process can be lengthy as there is no legally provided time frame for deciding a case. This provides a scope for illegal gratification to expedite a case. After an order is passed, the actual issuance of the order can be subject to unusual delays. Here too incentives are required to get the order issued.

In 1995, the entire appellate jurisdiction of the National Board of Revenue was transferred to an Appellate Tribunal and the revisional power of the government was repealed. As a result, the tribunal's judgment in an appeal case is treated as final, unless the case is referred by the Tribunal to the High Court for determination of any question of law related to any order of the tribunal. There is, to date, no record of any application for reference to the High Court on any question of law. The finality of the Tribunal's order is effectively absolute, a situation which is bound to result in corrupt practice in the event of the Tribunal being constituted by persons of doubtful integrity. The Tribunal also handles cases relating to valuation or classification of assessment, even though it does not have jurisdiction over such matters. There are strong grounds to suspect ill motive behind such actions of the Tribunal.

Causes of Corruption in the Customs Department Sweeping discretionary powers bestowed upon customs officials by the authority of the law allow endless opportunities to engage in corrupt transactions. The absence of clearly established departmental guidelines governing recruitment, postings, transfers and promotions of officers, has resulted in a work-force of low ethical and moral standards and in an absence of institutional discipline. An assessment system which uses a highly subjective valuation method to determine the amount of duties and taxes to be paid by importers provides the corrupt officer with the perfect tool to extract bribes with. The absence of clear-cut time frame for completing the tasks of assessment and clearance encourages widespread bribery to expedite the customs procedure.. The adjudication and appeal procedures applicable to customs offences are characterised by high discretionary powers in the hands of the adjudicators and a departure from the norms of natural justice. The presence of significant anomalies in the tariff structure provides incentives for evasion of revenue through methods of misdeclaration and underinvoicing of imported goods.. Why Does Corruption Continue in the Customs Department? Corruption in the customs department takes place in such a subtle way in the regular performance of statutory functions by the customs officers that it becomes almost impossible to prove a charge of corruption against a particular officer. It is very difficult to gather the required evidence since usually only two or three persons are involved in the transaction. Given that accountability of officers is conspicuous by its absence, departmental anti-corruption measures are non-existent. The few, token efforts at tackling corruption have come from without, in the form of the Anti-Corruption Bureau (ACB). However, the ACB, which is manned by enquiry officers who have little undertanding of the legal environment in the customs department, finds it very difficult to make any headway in corruption investigations against customs officer. Even if an officer is caught red-handed at the time of taking a bribe, the corruption charge does not get proved as such. The ACB investigator has to establish that the amount involved in the corruption offence constituted an "illegal gratfication", which is not very easy to do in practice. The mere exchange of money does not automatically mean that an offence has been committed. The ACB's impotency is reflected in the fact that not a single procesution has resulted in a successful conviction. There is thus no reason why corrupt customs officers should take the available anti-corruption measures very seriously. Suggested Remedial Measures The main thrust of corrective action should clearly target the reduction of the discretionary and monopoly powers vested in customs officers by appropriate changes in the legal and procedural system relating to assessment, appraisement, and detention of goods. At the same time, a departmental control system must be introduced to make officers accountable for any misuse of of power for gainful purposes. New officers should be recruited through competitive examinations and put through planned training course. Subsequent promotions should be based on written or oral tests to determine efficiency and merit, with minimum dependence on annual confidential reports. A transparent system should be introduced for keeping officers informed about their position and standing in matters of transfers and postings, promotion, and training abroad. The incidence of "speed money" could be reduced by cutting down the redundant steps in a Bill of Entry's journey, without compromising the safeguards of revenue interest, and by setting down time limits for the completion of each stage of the assessment procedure. When goods are detained, the detaining authority should follow a specified time schedule by which the detention and disposal procedure is completed. This is necessary to protect the rights of the importer, who must be informed of the fact of detention of his goods under a written order indicating the reasons for such detention. There should be scope for making an appeal to the Appellate Division of the Supreme Court. The Appelate Tribunal should not meddle in matters of valuation and classification, which is best dealt by Commissioners as executive authority. Tariff anomalies should be removed. This will not only reduce opportunities for corruption but in many cases will actually increase the government's revenue collection from import duties and taxes.