Importers, clearing agents hang G-CNET

By Peter Kojo Apisawu

The chickens have come home to roost! Some groups of importers, clearing agents and freight forwarders have started singing and singing very fast.

They have roundly accused the Destination Inspection Companies (DICs) of “colluding with” some of their colleagues to dupe the nation in trillions of revenue to the state. They further accused the Ghana Community Network Services Limited (G-CNET) of “operating a very relaxed, inefficient, ineffective and unintelligence system” thereby aiding some of their unscrupulous colleagues to perpetrate fraud on the good people of this country, the consequence of which is the loss of gigantic revenue. They claim that to the extent that the G-CNET system has no intelligence and so could not detect fraudulent documents that are fed into it, it is non-performing and therefore irrelevant to the needs of Ghana.

For now, the Daily Post is withholding the names of these people who, in an exclusive interview, confessed that they had actually indulged in “migration and shopping” (which are criminal under the DI scheme laws) but claimed that they did these sometimes with the tacit, overt and covert connivance of the DICs. According to them, they had been encouraged by a particular DIC (name withheld for now), who pledged its support to, and actually reduced the values of the assessed imported goods to a ridiculously low figure. According to them, this made a lot of importers and clearing agents migrate to the company in question.

This phenomenon has therefore led to a huge loss of revenue to the nation, running into trillions of cedis at the ports. They claim that going by the current system being operated by the G-CNET, “there is no way these revenues leakages can be plugged.” However the G-CNET claims that it is introducing a new concept to address the problems of “inconsistencies between key Final Classification and Valuation Report (FCVR) and the Bill of Entry (BoE) parameters…”

According to Mr Jonathan Ofori, Trade Net Manager of G-CNET, the new concept would “correct the poor reconciliation between DICs, Ministry of Trade and Industry and CEPS and wrong FCVR numbers quoted on declaration,” (Daily Guide, Friday, May 14,2010,pg 12). Currently, the DICs are mandated to advise Customs, Excise and Preventive Service (CEPS) on the values of all imported goods coming into the country. For rendering this service, a fee equivalent to one percent (1%) of Cost Insurance and Freight (CIF) value of the imported items is paid by the importers to the DICs. In 2008, an amount of some USD $50 million was paid by importers, as fees to the DICs. The collection and disbursement of these fees are under the control of the Ministry of Trade and Industry (MOTI). Payment of fees at this level has long been a bone of contention with the importers.

In January of that year, CEPS developed a plan to retake leadership in classification and valuation activities in a phased manner as the contracts of each DIC expired. This plan was reviewed with Ministry of Trade & Industry (as the party responsible for the DICs) and within Ministry of Finance and Economic Planning (MOFEP). CEPS indicated to Government that they would require a software system including communication links and a facility to accommodate some 70 officers required to man the systems.

CEPS reviewed the software system being used by the DICs and found shortcomings. It conducted an international search and identified software of its choice to enable it perform the role envisaged. In 2008, MOFEP facilitated CEPS to acquire the software, undergo the required training and acquired suitable premises to house an enlarged classification and valuation office that could accommodate some 70 officers.

CEPS spent time in 2008 customising and enhancing the software to meet its peculiar requirements and then performed a series of live tests using the new system (the Ghana Customs Secure Document Management System: GCSDMS). These tests allowed CEPS to satisfy themselves as to the readiness of the system for use, and found evidence that CEPS could identify revenue leakages overlooked by the DICs. The evidence of the latter came from a comparison of goods valued by CEPS using GCSDMS and the values given for the same consignments by the DICs in their FCVR (Final Classification and Valuation Report) reports. The FCVR reports were scanned and uploaded into the GCSDMS by the importers. The following points can be made; *50% of the consignments were under-valued by the DICs, with most of these being under-valued by more than 20% (average of 24%). The under-valuation of consignments represents a direct loss of revenue to government in duties and taxes on imports (loss of US$462,911.01 on 17% of consignments for one day, equates to potential loss of taxes of US$55,460,118.80 per month of imports), quite aside from additional losses to other revenue agencies such as IRS and VAT that stems from the under declarations of values. *The reduction in fees payable by importers would facilitate trade by lowering the cost of imports into Ghana, and would engender greater compliance among importers, so facilitating collection of the appropriate duties and taxes.

Thus, a take-over of the lead role in classification and valuation by CEPS would allow the government to collect its duties and taxes at a lower cost (0.46% as opposed to 1% fee paid to DICs), to collect more duties and taxes (taxes on an additionalUS$55,460.118.08 of imports per month), and additionally provide MOFEP with a new revenue stream that can be applied as appropriate to aid government finances.