Nigel Clarke | New Customs Act: enhancing economic activity

Jamaica’s trade in goods and services accounts for approximately 80 per cent of GDP. As such, there are few single pieces of legislation that have a greater impact on economic activity than the Customs Act. Yet, Jamaica’s Customs Act dates back to 1941. It is complex, uses language that is out of step with modern trade terms and is not easily understood. The Customs Act is also antiquated, with cumbersome procedural requirements which do not readily facilitate the global, interlocking, just-in-time nature of modern international commerce and supporting logistics. Further, with scores of amendments over decades, the Customs Act and its schedules do not exist in any single compendium.

One therefore has to reference many separate documents, which are not always readily accessible, to gain a full understanding of Jamaica’s customs laws, regulations and procedures. For these and other reasons, Jamaica’s 83-year-old customs legislative regime has long been suboptimal. Jamaica is one step closer to a transformed customs legislative architecture with the passage in the Lower House of Parliament last Tuesday of The Customs Act, which is designed to repeal and replace the 1941 Customs Act. It now goes to the Senate.

The proposed new Customs Act which benefited from a vigorous, consultative and collaborative joint select committee process consists of just under 300 clauses, across 200 pages, with a further 800 pages of schedules, all in a single document. The consolidation of all this legislative material into a single publication is enormous even without considering the updating of the substance of the law. The custom rates applicable to every conceivable product are included in the schedules, organised by logically arranged categories, and prefaced by an easy-to-understand table of contents. This levels the playing field between large, well-resourced businesses and micro-enterprises with respect to the ability to independently navigate Jamaica’s customs laws and to reference customs rates.

The existing customs legislation dates back to the Second World War and uses outdated language that often alienates the 21st century Jamaican. The proposed new Customs Act, by comparison, introduces modern terminology with simple, clear language which will make Jamaica’s customs law accessible to every Jamaican. In addition, the updated language in the proposed new Customs Act uses internationally accepted terms and definitions which will facilitate Jamaica’s improved interaction with the international trading community. More specifically, the UN sponsored global integrated customs management system for international trade (ASYCUDA) enshrines internationally accepted customs terms which our proposed new Customs Act incorporates. This promises to make our customs architecture more globally compatible.

MORE EFFICIENT, PREDICTABLE AND PRODUCTIVE CUSTOMS REGIME

The proposed Customs Act is forward-looking and promotes efficiency, predictability, transparency, and accountability, principles which align and advance Vision 2030. For instance, the pre-adult-suffrage customs law was designed for a pre-electronic and pre-digital era. By contrast, the new act lays a robust foundation for a range of electronic customs systems which will save time, enhance transparency, reduce the cost of paper, and significantly reduce crowding in physical facilities, thereby improving efficiency and productivity.

Predictability in customs procedures lowers transaction costs. The proposed new Customs Act includes a procedure through which an importer may receive a binding decision regarding how Customs will treat their goods before those goods are even imported. This is a significant step in advancing trade predictability. The bill also improves customs clearance processes, which will allow goods to be cleared through Jamaica’s airports and seaports with enhanced efficiency.

The new Customs Act also creates a framework for voluntary disclosure. Under this framework, under specific terms and conditions, a person who voluntarily discloses non-compliance and pays any outstanding duty and tax, will legally avoid penalties or prosecution. This will allow Jamaicans to quickly move on from genuine mistakes.

In addition, the new customs legislation includes mechanisms that reward those who comply with the customs laws through enhanced application of risk management and audit-based controls. Specifically, a person’s or entity’s record of compliance may result in the grant of special authorizations and pre-approvals which may enable goods imported by that person or entity to be cleared with reduced Customs interventions.

Further, in the new customs architecture, the posting of security will be risk based instead of rigidly and inflexibly determined. Accordingly, the amount of security that a person would be required to provide will depend on their record of compliance, and any risk factors related to the specific type of goods. It is also proposed that the Jamaica Customs Agency facilitates a wide range of security. The intention is to ease the burden faced by some members of the trading community regarding the obligation to provide bonds and bank guarantees when doing business with Customs.

SUPPORTS GROWTH OF NEW INDUSTRIES

Importantly, the proposed new Customs Act facilitates the growth and development of Jamaica as a destination for globally connected logistics activity. Jamaica’s geographic position, in relation to global trading routes, has long made Jamaica an ideal location for logistics-related economic activity. This requires goods, or parts of goods, to be able to enter Jamaica’s borders through one transportation modality, e.g., sea, be processed, altered and/or stored in Jamaica, and then leave later through the same, or another, transportation modality, e.g., air, all in a seamless fashion, with minimal regulatory transactions costs. This is challenging to achieve with our existing antiquated customs framework that could not, and did not, anticipate the intricacies of modern global supply chains. By contrast, the proposed new Customs Act explicitly provides for a range of processing and storage procedures under which goods may be seamlessly imported, stored and then re-exported; or imported, processed in Jamaica and then re-exported. As such the new customs framework is specifically designed to support the growth of Jamaica’s logistics industry.

Similarly, there is huge scope for growth of Jamaica’s tourism in the under-tapped segment of meetings, incentives, conferences and exhibitions known by the acronym of MICE. In this segment, scores or hundreds of individuals travel to attend a seminar, conference, meeting, trade show or exhibition in a convenient, attractive destination. While Jamaica has the hotels, atmosphere and people to compete in this market segment, our outdated customs laws represent an inhibiting factor. It is cumbersome to obtain the permissions to import the pens, writing pads, memorabilia and paraphernalia, which are not intended to stay in Jamaica, but which are essential to these events, without payment of duties. This makes Jamaica a less attractive destination for MICE activities than it would otherwise be.

The new Customs Act provides a simple incentive structure to support Jamaica’s ability to compete in and grow the MICE market segment. Goods imported for a MICE event approved by the tourism ministry that are “imported for consumption, otherwise than by sale, at a meeting, incentive, convention or exposition” will be imported free of duty. This will allow for Jamaica to be promoted as an ideal destination for MICE activities and will set the stage for the growth of the MICE tourism market.

Similarly, promoters of music festivals, and the consuming public, also stand to benefit from these provisions. Today it is exceedingly complicated to bring equipment into Jamaica, that is not intended to remain in the country, for music concerts, music festivals, and the filming of movies. Under the new Customs Act the procedures for importing and re-exporting equipment for these purposes will be greatly simplified. This will make Jamaica a more attractive and convenient location for hosting international music festivals and concerts and for filming movies.

The Customs Act is, simply, transformative.

Dr Nigel Clarke is minister of finance and the public service, and member of parliament for St Andrew North West. Send feedback to opedjamaica@gmail.com or columns@gleanerjm.com