Billion-dollar Customs red flag

Auditor General Pamela Monroe Ellis has reported that a major importer of bunker fuel into Jamaica (BFO1) failed to declare a total of 50.08 million litres (315,268.67 barrels) of imported fuel on five shipments, with a cost, insurance and freight (CIF) value of nearly $2 billion and estimated duties of $2.1 billion between June 2018 and February 2020.

These entry declarations were outstanding for periods between one and three years after the date of importation.

In this regard, the auditor general has recommended that the Jamaica Customs Agency (JCA) establish detailed procedures to independently and routinely record all movements of bunker fuel imported, sold, or exported to ensure that duties and fees are paid immediately when they become due.

In a special audit report tabled in Parliament on Tuesday, the auditor general said there were deficiencies in JCA’s controls, which led to the $2.1 billion in financial exposure related to duties payable for fuel imports.

In relation to the import entries for 50.08 million litres of bunker fuel processed up to three years after being imported, Monroe Ellis said that the JCA failed to ensure that exports from the bunker fuel importer’s special economic zone (SEZ) were authentic.

She pointed out that under the SEZ, the JCA is required to arrange for the availability of customs services on a continuous basis to meet the needs of the developer and occupants “in order to facilitate the efficient operation of the zone.” This includes “arrangements for customs procedures and systems that enable electronic transactions and payments and pre-arrival clearance of goods”.

However, the auditor general said that the JCA did not ensure that import entry declarations for SEZ operators were processed on or before the goods entered the Zone in compliance with the SEZ and Customs Act. According to the auditor general, the appropriate fees and duties remained uncollected during the intervening period.

Giving details, the auditor general said that the JCA failed to authenticate that those exports from BFO1 were valid, as it did not enforce strict adherence to the “previous customs procedure”.

International fuel trade requires that a professional surveyor, contracted by both parties to the transaction, certifies the type and volume of fuel transacted and these are included in the Customs procedures.

The auditor general’s review of JCA’s ASYCUDA revealed that this independent verifying mechanism provided by the surveyor was in place for Petrojam’s imports but was missing in the transaction involving the bunker fuel importer.

ASYCUDA is the Automated System for Customs Data, a web-based integrated customs management application system for international trade and transport operations. It allows clients of the JCA, including customs brokers and shipping agents, to undertake e-transactions such as the submission of manifests, declarations, payments, and documents.

Additionally, the surveyor certificate was signed by the ship captain for Petrojam’s imports and exports.

“We were unable to determine that the exports of fuel from BFO1 were valid. This highlights a deficiency in JCA’s internal controls which heightens the risk of non-collection of duties from BFO1,” the auditor general said.

Following the auditor general’s enquiry into the matter, the importer prepared the SEZ (IM9) entries during January and February 2021.

The JCA did not provide a reason for the prolonged delay in the importer submitting the IM9 entries, despite numerous requests from the AuGD.

The special audit report said that the JCA maintained that the importer was advised to finalise both import and export entry declarations, as they recognised that the fees remained unpaid.

JCA further indicated that they had to resort to “severe action” by closing both inlet and outlet valves to prevent the importer from “engaging in any sales transaction” to force the importer to finalise the entries.

On October 29, this year, the JCA, in a response to the AuGD, indicated that it has since reconciled and accounted for the payment of the export fees and duties for 98 per cent of the entries.

However, it did not provide reconciliation for the disposal of the fuel from the SEZ until November 2, 2021.

The first reconciliation was provided by JCA on February 8, 2021, with subsequent reconciliation on March 1, 2021.

However, the auditor general raised a red flag in relation to the latest reconciliation that was provided by the JCA in November. The auditor general argued that this was materially different from that presented to the department eight months prior on March 1, 2021, which included non-fuel items, such as soybean meal and bulk golden dried distillers grain.

“The first reconciliation was provided on February 8, 2021. Therefore, the continual revision by the JCA to the information provided cast doubt on accuracy of reports so provided. Therefore, we could not place any reliance on the information submitted,” the auditor general stated.

Monroe Ellis contended that the discrepancies reinforced her department’s concern that the JCA did not faithfully monitor the movements of fuel in and out of the SEZ to ensure that all duties and fees were duly collected in accordance with the SEZ Act, policies, and procedures.

BFO1 is the designation used in the auditor general’s report to describe the importer of bunker fuel as the AuGD does not name companies or individuals in its reports.

edmond.campbell@gleanerjm.com

Bunker Fuel Operator 1, Bunker Fuel March 1, 2021 Reconciliation Issues

· The schedule included ADO fuel not used in bunkering.

· IM4 entries listed were unrelated to fuel (e.g. bulk corn, molasses, etc).

· Port of entry was Rocky Point instead of SEZ – Port Esquivel in some instances.

· Some IM4 entries had quantities in excess of the fuel imported.

· The schedule included entries with a registration date of over two years after the importation date.

· Incorrect price per unit, resulting in loss of revenue.