Sri Lanka to slash customs inspections after blocking identity theft
ECONOMYNEXT – Sri Lanka Customs will halve the number of physical inspections at the border but all importers, exporters, forwarding and clearing agents must re-register in their new computer system prevent rampant fraud and identity theft that is now taking place.
Officials plan to cut delays at the border slashing paper work and physical examinations.
"Once everyone registers and comes online, and e-signatures are widely used, I also believe we can reduce the number of physical examinations by half in six months," Sudath de Silva, a Director of Customs and head of the Risk Management Unit said at a forum in Colombo.
"This will be a huge savings for traders and consumers. Time is money," he said.
"At present, we can’t even offer green-channel facilities because we have no way to verify who is importing and trading".
Sri Lanka Customs is proposing to identify highly compliant and low risk traders and provide them preferential treatment during cargo clearance.
Customs wants to connect all traders and agencies to its Asycuda online customs management system for better visibility, which they hope will stop identity theft that is now taking place.
Shippers and agents with a good record will benefit most from the new hi-tec system, which will be able to red flag bad eggs.
"Traders, wharf clerks and shipping agents failing to re-register with Customs via our Asycuda system will not be able to engage in import and export activities from 1 July", de Silva warned.
Re-registration, in tandem with online document processing and e-signatures (please click here for more on this) will minimize the misuse of Trader Identification Numbers (TINs) by third parties.
"This is a big problem not just for Customs, but impacts legitimate traders and consumers. The current system has too many loopholes we will now close," de Silva said.
According to de Silva, Customs officials have nabbed around 500 containers since 2014 with illegal goods but couldn’t identify who the importers or exporters were.
At the moment, around 100 containers lie in the customs examination yard like orphans with no claimants.
Third parties using TINs of other companies for fraud is rampant, de Silva said.
Over a period of a few years one individual had illegally imported 300 containers of furnace oil without even a customs house agent pass to operate in the wharf. The consignments were found to be made in the name of a well-known firm that was in the dark.
In a separate instance, 11 containers of illegal goods for export were detected at the yard, but it was found that the exporting company had no knowledge of these.
In another instance, 10 containers of ethanol were illegally imported under the name of a registered company unaware of them.
Wharf clerks are in a position to forge documents to clear goods without their clients suspecting anything, de Siva said.
Forwarding agents are also in the habit of booking container boxes over the phone. They make release orders over the phone and then send someone with the bills-of-lading draft. The export is cleared but when stopped at the border for inspection, there is no one responsible for the consignment, he said.
Forwarding agents will now have to register through the Director of Merchant Shipping.
"We are asking shipping lines not to deal with unregistered forwarding agents, they will do so at their own risk," de Silva warned.
"These are a just a few examples. Third parties can and have used names of import and export firms to illegally push their goods through the border.
"We accept some responsibility for this, which is why the Customs Risk Management Unit has come up with the solution to re-register all traders and service providers, so that everyone has better visibility," de Silva said.
Re-registration will be a tedious process, de Silva acknowledges. But he says it is necessary.
There is a large number of documents to be filed along with finger printing.
In Sri Lanka, due to lack of prosecution of fraud in the past, – especially of officials who collude in fraud – there is ‘collective punishment’ through excessive regulation in many government departments, critics say.
Some of the documents to be supplied to customs are already available at other registries.
Participants in the system must fill document online and several supporting documents to be uploaded to the Custom’s online system and there’s also finger printing.
Some of the supporting documents include scanned copies of National Identity Cards of directors, partners, proprietors, Business Registration Certificate and related documents, Tax Identification Number Certificate, VAT Certificate, Articles of Association and Memorandum of Association, Shipping Agents License, Deed or Lease Agreement and registration from land registry, proof of address (utility bills), Google location map or street view, address confirmation from local government officials, and police reports of directors, partners and proprietors of customs house agencies.
Around 20 Customs officials will dedicate their time to validate the registration documents and will liaise with Registrar of Persons, Elections Commission and other agencies to validate identifications.
"The registration process will begin on 22 May and end in June. By 1 July, anyone not registered will not be able to trade," de Silva says. "They will be on a separate platform called sorry dot com," he joked.
Those who wish to engage in one-off export or imports have a separate process.
The Customs Department is committed to cutting delays and costs at the border, but de Silva is a disappointed with the lack of private sector support.
"We offered an SMS alerts facility to let traders know when customs declarations are filed, duties are paid and goods are cleared, but the response has been poor. We will soon make this facility compulsory and will get the authorized phone numbers at the re-registration," de Silva said.
There around 25,000 importers, 5000 exporters and 3,000 clearing house agents. But less of than 100 of these had applied for digital signatures from LankaClear, a firm linked to the Central Bank of Sri Lanka.
Each authorized signatory of customs documents will get a token which is password protected containing the signature which can be electronically placed on PDF documents. The system is designed to prevent third parties from forging signatures and submitting bogus documents to clear goods.
There will also be fewer disputes, when the system comes online.
Customs officials had reported 834 cases in 2017, according to the latest available annual report, down sharply from 5,234 in 2015.
In 2017, 734 cases were finalised. Around 108 of these were dismissed without offence while 496 ended with penalties and forfeitures, up from 234 in 2015.
The value of goods forfeited amounted to 188.2 million rupees while penalties imposed amounted to 716 million rupees. In 2015, total collections from penalties and forfeitures amounted to 1.4 billion rupees. (COLOMBO, 18 April 2019-SB)
– Picture courtesy Sri Lanka Customs –