By NEIL HARTNELL
Tribune Business Editor
The Bahamas Chamber of Commerce’s (BCCEC) vice-chairman says new and increased Customs fees have “absolutely destroyed” both his business and hopes of developing Freeport into a logistics/distribution hub.
Robert Myers, head of VTrade Company, said the firm’s business model had been rendered unworkable by fees that were now equivalent in value to 37 per cent of a $500 order.
Warning that customers simply would not pay for products attracting such a high taxation level “before they’ve left our building”, Mr Myers warned that the combination of increased costs and reduced efficiency would kill hopes of making Freeport into the Caribbean’s transhipment hub.
“It’s terrible. It absolutely destroys logistics and distribution,” Mr Myers said of the increased Customs fees. “If you have a $500 order, in total you’re adding about $185 in fees to that alone, and it hasn’t left your back door.
“It’s a 37 per cent increase to the cost of goods before it has left your building. When you add it all up it’s $185 on a $500 order. It used to be $45, and at $45 we wanted that eliminated.”
The BCCEC vice-chairman said that apart from the new 1 per cent administrative processing fee, of greater concern to him is the increased $50 per man, per hour fee for a Customs officer to attend “a place they do not normally attend”.
Given the frequency of incoming/outbound orders a company like VTrade would hope to process, this means Customs officers would be regular visitors to its offices at the former Associated Grocers warehouse in the Sea Air Business Centre.
The company will thus be incurring huge Customs ‘attendance’ fee costs, and Mr Myers pointed out that this meant Freeport would never attract major distributors that fulfill - and ship - thousands of orders per day. Indeed, Customs would be unable to keep up.
And once this is out of the way, VTrade and its customers then have to deal with brokerage fees; trucking the order to the port; ocean freight fees; and then inland transportation (trucking fees) in the destination country to get it to the purchaser.
“Forget it,” Mr Myers replied, when asked about VTrade’s prospects in the new environment. “Until that’s removed, who is going to place an order with me? I can’t do it. They’ve destroyed our business. I’m furious. They’ve [the Government] certainly heard from me.
“There’s no way I can do the transaction, and no way the customer is going to pay the cost. Who’s going to pay the extra 37 per cent before it leaves the back door? No matter how good my prices are, they’ve just whacked them.
“I don’t understand why they don’t think these things through. Crisis management; it’s pathetic.”
Prior to the Budget, VTrade was in talks with electric car and modular home firms to further expand its light manufacturing capabilities, with its workforce “potentially doubling” by year’s end.
The company had added light manufacturing as the third element to its business in April this year, via energy efficient light bulbs, following its hardware products distribution business and third party logistics arm. It was focusing on export markets, but all of this now appears to be in jeopardy
And Mr Myers’ analysis of the so-called ‘bigger picture’ was equally bleak.”How on God’s green earth do you expect to create a logistics business in Freeport when you’re going in the other direction?” he asked.
“We’ve been talking about going the other way, increasing efficiency and reducing costs, and now they’re going the opposite direction. You can’t put Freeport on the map without greater efficiency, and you’ve just whacked it again.”
Summing it up with a sporting analogy, Mr Myers added: “You can’t want to win a football game and tie all your players’ hands behind their backs.
“We’ve built that stadium, and have got this massive asset in a transhipment hub and the Hawksbill Creek Agreement.
“The problem is that the Government and the Grand Bahama Port Authority say they want to create a logistics and transhipment hub, and manufacturing facilities, but it seems they’re focusing on everything but efficiency and how to win that game.
“You either want a logistics and distribution industry or you don’t. You can’t have your cake and eat it. You want that, spend advertising dollars talking about doing that, and that Freeport is open for business, and on the other side nails are put into the coffin.”
Mr Myers described the manner in which the Government implemented the new and increased Customs fees as “wrong”, and said: “Everybody’s furious. There was no forewarning.
“We all understand there’s a necessity to raise revenue, but you’ve got to be careful you don’t throw the baby out with the bath water. There’s a lot of upside to being here,.but you’ve got to be careful.”
The BCCEC vice-chairman said it would be “physically impossible” for Customs officers to visit every company, and inspect every order shipment, in a thriving Freeport-based logistics and distribution industry.
“You don’t have to be in the business to recognise that it’s not going to work,” Mr Myers said. “The speed of business, the efficiency, the cost is everything.
“How many more jobs and people are going out of business? I’d park my car and go and lie in the garage. I don’t see how they expect to run a logistics and distribution centre in a free trade zone. If you’re talking about trying to encourage that kind of industry and have got multiple orders, forget it.
“Really, the message you’re sending is that we have no interest in this business. That’s the message I’m hearing now. It’s in big, bright lights.”
Implying that Customs’ manual processes would be ill-suited to supporting a logistics and distribution industry, Mr Myers urged it to follow the lead set by its US counterparts, where everything was online.
US importers had to lodge a bond with customs there, and rather than visit warehouses officers performed inventory spot-checks. Fines were levied for wrongdoing, and more serious offences were punished by licence and ond revocations.
Mr Myers said Freeport was competing against the likes of Panama, Jamaica, the Dominican Republic and Florida for logistics and transhipment business, and the Budget’s tax rises would give those destinations a competitive advantage