Thursday, 16 November 2017 http://today.thefinancialexpress.com.bd/views-reviews/advance-ruling-by-nbr-needs-to-be-well-defined1510755911
Advance Ruling by NBR needs to be well-defined M S Siddiqui | November 16, 2017 00:00:00
Customs officials and traders often have differences of opinion regarding the treatment of goods for Customs purposes - determination of value, classification of goods, and determination of rules of origin etc. Such disputes arise mainly due to lack of legislation and legal guidelines, lack of technical expertise, ineffective management controls, and poorly defined compliance requirements. These obstacles are compounded by complex or inadequately publicised guidelines and poorly designed declaration processing systems and practices, which coupled with unfettered discretion among customs officials facilitates questionable and corrupt practices that foster mutual distrust. This is an acute p roblem in most developing countries. Wrong valuation and classification decisions may constitute a non -tariff barrier to trade.
WTO tried to address the issue through guideline of Advance ruling or biding ruling incorporated in standard provision 9.9 of Th e International Convention on the Simplification and Harmonisation of Customs Procedures (Revised Kyoto Convention). Article 3 of the Trade Facilitation agreement (TFA) has provision of advance ruling and Bangladesh gave its accent to TFA.
The proposed WTO text on advance rulings stipulates the following requirements: (1) the authority must publish the information that should be provided in a request for a ruling; (2) the issuing authority must publish the deadline by which it will issue advance rulings an d the length of time rulings will be valid; (3) rulings must be binding for a "reasonable" period of time unless facts or circumstances supporting the original rulings change; (4) if a ruling is modified or revoked, the issuing authority must notify the ap plicant promptly in writing explaining the basis for its decision in writing; (5) if an applicant requests, the issuing authority must provide an administrative review of a ruling or decision to revoke or modify a ruling; (6) the issuing authority must try to make available information on advance rulings that it
considers to be of significant interest to other traders, taking into account the need to protect commercially confidential information.
An advance ruling on the criteria for Customs valuation is a useful facilitation measure, as traders are aware of the supporting documents they have to present to justify the value of the goods. If the value of goods is questioned by Customs, the responsibility of proving it otherwise lies with the importer. Regardless of whether technical competencies are consolidated or dispersed, Customs administration must be able to coordinate actions and structure the interactions of technical personnel and the systems that support and inform them. Modern Customs administratio ns developed advance ruling to reduce the traditional control systems. These systems have made compliance with Customs requirements easier. In developing an advance ruling process, the customs administration must deepen its relationship with the trading community and its understanding of the trading community's practices and concerns. Adversarial relationships must be replaced by working relationships characterised by mutual respect and partnership.
A well designed and regulated advance ruling systems can p rovide certainty to traders and their agents about how their goods will be treated at the time of import, promote consistent application of Customs rulings and law, foster trust between customs and trade, and provide a transparent framework that encourages compliance.
Customs officials responsible for implementation of advance ruling process consider issues such as: classification, valuation, duty drawback and application of quotas and rules of origin.
Classification is usually the primary determinant of th e duty to which imports are subjected, and most requests for advance rulings relate to classification. The task of ascertaining the correct tariff classification of merchandise entering or exiting the country is a critical function of any Customs administration, because tariff classification affects the revenue of the government and the private sector and because valuation has a direct and potentially significant impact on the cost and conditions of import and is often the subject of advance ruling requests. An effective advance ruling process, therefore, requires specialists who can conduct valuation correctly and uniformly. Database of valuation and classification is a major instrument of advance valuation both for valuation department and for Customs assessment officials.
A data base of law and regulation related to import and export are also stored for regulating the import and export of different products. To develop an audit unit of trained officers who would examine the financial and other business records and practices of importers to ensure compliance with Customs recordkeeping requirements and generally accepted accounting principles, and to verify information presented for purposes of customs valuation, is important.
Customs department has a law of duty draw back for export products collected on raw materials during import. The VAT is also refundable for export and re-export of products. Duties may be refunded along with certain other taxes and fees collected at the time of importation. A successful duty drawback programme is to be developed on the basis of legislation and regulations and the precise procedural guidelines require publication. The rules of origin are a very critical issue in an era of globalisation and integration of countries into the global supply chain. The WTO and its members commonly distinguish between preferential and non -preferential rules for determining country of origin. The preferential rules pertain to whether the goods qualify for free or reduced duty rates under bilatera l or multilateral trade agreements to which a country is a party.
Businesses and economy very often suffer due to uneven competition. Any arbitrary determination of Customs duty at entry points with the discretion of Custom officials may impact upon the co st of imported materials. An effective advance ruling process can make customs' actions transparent and costs of international trade predictable, and facilitate the processing of declarations. An Advance ruling department should include experts in the fol lowing fields: legal and policy, tariff and valuation, information technology, statistics, and public information. Even experts from some other disciplines may also be included for correct and efficient decision. The process of implementing an advance ruling programme should also involve someone from human resources and training departments to ensure that the implications of the advance ruling programme for staffing and skill requirements are reflected in recruitment, training, and staffing. Their involveme nt will ensure that the classification and valuation departments have the training necessary to review and apply advance rulings.
The National Board of Revenue (NBR) issued SRO on Customs Ruling (Advanced)-SRO No. 188-AIN/2016/37/Customs on June 2, 2016. T he SRO stipulated that the Ruling Board would be headed by a Member of the NBR. The Ruling Board, according to the SRO, would only provide classification of the products but no other services. It has no provision for inclusion of co -
opting experts on regular basis from the disciplines of legal and policy, tariff and valuation, cost accountancy, information technology, statistics, mechanical, engineering and chemical technology. It has no provision for maintaining the database of court decisions and conventi ons of Bangladesh and other countries in order to take guidance and reference for correct decision. These appear to be some of the major deficiencies which would create problems for smooth and efficient functioning of the Ruling Board. The writer is a Legal Economist. shah@banglachemical.com