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Sri Lanka customs: money talks!
It’s true. Despite Sri Lanka’s Police force being crowned as the most corrupt government institution in the latest survey done by Transparency International, a visit to the country’s import and export hub in Colombo port could definitely cast a cloud over that conclusion.

Better pay the answer
Association of Clearing and Forwarding Agents Chairman M.S.M Niyas said there was a need to remunerate Customs officers at private sector wage rates, which would help in motivating them to perform their tasks more efficiently without having to resort to corrupt practices.

“We need to cultivate a culture that would instill noble principles,” he said. There was an urgent need to recognise and reward all honourable officers who refuse such incentives”
The simplification of procedures as far as possible and setting high license registration and renewal standards for Clearing Agents, unnecessary examination of all goods, and making channel selectivity criteria on a risk analysis basis for examination of cargoes, can contribute to eliminate delays and speed up cargo clearance.

“Our system today must be able to efficiently process documents and release cargo within minutes, as that is the pace in which world trade is moving at present.”

In the wake of the reforms being introduced to both the country’s port and Customs, including the advent of the Electronic Data Interchange (EDI), we felt the need to assess the present realities on ground, and judge for ourselves as to the extent which the proposed reforms would help curb the current cargo delays.

Just a short walk from the main entrance to the port is a building, almost 100 years old, belonging to the Sri Lanka Ports Authority, but shared with the Sri Lanka Customs. On the first floor of this crumbling building is the Customs Import Documentation Centre, which is popularly known as the “Long Room’, partly because of the never ending queue of clearing agents and partly because of the enormous delays that the Customs takes in processing Custom Declaration forms. (Cusdec)

The ‘Long Room’ is the first point of contact for a clearing agent. The room has to be the most depressing site that one could set eyes on. The area is relatively dark and gloomy and swamped with hundreds of clearing agents, some scrambling to get their documents processed before the scheduled close at 4.30pm, and others just slovenly seated on chairs, waiting patiently for their documents to be processed.

As I watched the proceedings, my attention was immediately diverted by the outstretched hand of a Customs officer at the counter, who casually took a one hundred rupee note from a clearing agent, before attending to his Customs Declaration. My eyes lit up. I was not too sure whether my eyes were playing tricks on me. As I coolly watched the proceedings at the counter, every single clearing agent was oiling the palm of the Customs officer with a hundred rupee note, which was carefully put away in the officer’s drawer before he paid any attention to the job at hand. I found it hard to believe that such practices were the norm at the Customs. The clearing agents in the queue had fistfuls of 100 rupee notes.

After the initial processing is done, clearing agents begin to form another queue, inside the Customs office, where certification and signatures need to be obtained, from the relevant Customs officers. Of course, the same procedure of corruption continues, with senior Customs officers demanding a slightly higher rate than the officers at the counter.

To enter the interior of the Customs office, each authorised agent is given a special ID, without which entry is strictly prohibited. I understand that such measures have been taken to prevent visitors to the port from entering the Customs office and exposing the realities of its activities to the media. I didn’t have an ID, but I relied on the saying that fortune favours the brave.

I, an undercover reporter, managed to pose off as a clearing agent, and walked straight through with no questions asked by the three security men posted at the entrance. Each Customs officer, be it senior or junior, had their drawers opened, almost overflowing with 100 rupee notes.

The office was terribly noisy with several clearing agents bargaining with the Customs officer to reduce their fees. A senior Customs officer, upon seeing my unfamiliar face, shut his over flowing drawer in embarrassment. Believe it or not, I can safely vouch that except for one or two persons, every other officer including the highest ranking officer in the ‘Long Room’ is corrupt.

As I climb down the stairs of the ‘Long Room’ in disbelief, my eyes are immediately drawn towards a Customs yard in which seized vehicles have been parked. I was told that these brand new vehicles are seized, when the Customs has evidence that the goods were under valued or were not imported with the correct documents.

The vehicles ranged from brand new Suzuki Vitaras to 40 KIA Sephia’s and a whole host of Japanese cars and vans. Some of the vehicles were showing signs of rust due to the close proximity to the sea. I learned that the Customs was not paying the SLPA any rent on acquiring land for such purposes, and usually hold such vehicles for a maximum of three years, after which they are sold through a public auction. Once a vehicle is seized, the owner would usually abandon it due to the decaying condition of the vehicle and the heavy Customs duty and port charges which are payable on retrieval.

Inspection and samples
Once the initial documentation is completed, each consignment must be inspected by the Customs to ascertain whether the goods match the items that have been listed in the relevant documents. During this process, Customs officials who inspect the goods usually demand a sample of every consignment that is imported, which customarily ends up being a gift. Having arrived at one of the warehouses at around 4pm, in which LCL (Less than Container load)cargo was being inspected, I was able to catch a glimpse in to the office premises of some of these Customs officials, which were stacked high with all types of goods including electrical appliances such as hair dryers and mixers, which is taken for domestic use by these officials.

In fact, when I visited Grayline, where the Customs inspects all FCLs (Full Container Load) containers, I happened to overhear a telephone conversation in where a high ranking Customs official was making arrangements with a friend to hire a van to transport a Chinese vase, which he had taken as a sample. He went on to explain to his friend, that usually he managed to put all these samples in his car, but the vase was unfortunately too large. Clearing agents told me that a sample, once given to the Customs can never be retrieved, unless an importer demands that it be given back, which then means that the clearing agent has to once again allow money to do the talking.

The Red Channel
With the new WTO Customs valuation scheduled to be implemented by Sri Lanka Customs in January 2003, in which, arbitrary and fictitious customs values are to be outlawed, conforming to commercial realities, visiting the red channel was an opportunity that would sadly be missed by many. Currently, Customs can withhold any goods on any suspicion, causing severe trade losses to the importer.

The goods that end up going through the red channel extend from food items to poly-seeds, and is proof of the amount of power that the Customs wields. On the day I visited the port, a container of poly-seeds, which is used to manufacture plastic chairs, was withheld by the Customs on ‘suspicion’. However, the clearing agent was given an option to pay Rs.4000 if he wanted the goods released immediately, or face the wrath of the Customs.

Having realised the amount of mental anguish the Customs officers could cause, the clearing agent had addressed the issue to the company concerned, asking them to pay the relevant amount. However, the company informed the agent that it would not pay the additional amount, and would take up the matter with the Ceylon Chamber of Commerce. The cargo still remains in the custody of the Customs, and it appears that even the high profile chamber officials will not be able to change an ancient culture. However, the WTO agreement is expected to gradually abolish the process of detaining goods for examination to determine values, allowing goods to be moved out on a bank or corporate guarantee.

Leaving the port at 4.30pm was the most difficult part of my visit. The line of container lorries leaving the port stretched to almost a kilometre. The Customs levies an additional sum of Rs. 1,200 as overtime on all containers that leave the port or its examination points after 4.30pm. I’m told that 95 percent of all containers leave the port or Customs examination points after 4.30pm, and therefore are forced to make this additional payment. At the final point of departure, each container is halted for approximately eight minutes, at which point Customs verify the delivery document for the umpteenth time, as to whether the container is carrying the correct consignment. Given the impracticality and the absurdity of the endless questioning, the clearing agent has to bribe the officer, and the eight minutes is spent on negotiating the amount the officer should receive.

The corruption at the Customs is somewhat mind boggling in this day and age where traditional forms of generating efficiency have been replaced by the use of technology. The fact is that these bribes have a direct effect the prices of imports. Consider the amount of bribes that are paid to each institution. It is also puzzling as to how the efficiency of the Customs has not increased despite the volume of bribes that is paid on a daily basis. A rough estimate done by an industrialist states that Sri Lanka Customs earns Rs.900,000 in total overtime, and “speed money” amounts to another Rs 1,100,000 a day alone, which roughly amounts to five billion rupees a year. Sri Lanka is a nation that is heavily dependent on imports, be it food and clothing or industrial raw materials. This means that every single citizen in this country is paying a price for corruption!