The Tribune

• Customs’ system roll-out pushed to September

• Fears it may cause ‘death of shopping locally’

• And breach Hawksbill Creek; court judgment

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport yesterday escaped “another nail in the coffin” after private sector lobbying persuaded the government to delay implementation of Customs’ new system until September 2021 at earliest.

Glennett Fowler, president of the National Import Export Association of The Bahamas (NIEA), told Tribune Business that the plan to introduce the Click2Clear online portal with effect from today would have meant “the death of shopping locally” in The Bahamas’ second city.

Customs’ Electronic Single Window (ESW) has been rolled out throughout The Bahamas with the exception of Grand Bahama due to fears it would undermine, and conflict with, Freeport’s long-standing over-the-counter bonded goods regime and the rights Grand Bahama Port Authority (GBPA) licensees enjoy under the Hawksbill Creek Agreement.

Besides potentially violating Freeport’s founding treaty, Ms Fowler and others have also voiced concerns that Customs’ bid to require both sellers and purchasers to submit monthly bonded goods reports breaches a Supreme Court verdict and injunction won by Kelly’s (Freeport) in early 2017 that found there was “no legal basis” for demanding such documentation.

Ms Fowler, also president and chief executive of Fowlco, in a letter outlining the concerns of NIEA members and other businesses, warned that the original Click2Clear implementation plan’s demands for such reports would increase the red tape and manpower required to administer Freeport’s bonded goods regime, and resulted in raised costs and delays for the private sector.

She added that this burden would ultimately result in companies electing to pay duty on items they should be entitled to tax-free under the bonded goods regime, since the hassle and expense associated with reporting to Customs will simply outweigh the concession’s benefits.

And, in turn, GBPA licensees will “abandon” buying from other local businesses in favour of importing all the goods they need themselves, reducing local commerce and the amount of money circulating within the Bahamian economy.

Tribune Business understands that the Government and Customs previously sought to implement Click2Clear in Freeport when the system was rolled-out nationwide several years ago, but ultimately backed off when the issues surrounding violations of the Hawksbill Creek Agreement and the Kelly’s Supreme Court judgment were raised.

However, Ms Fowler said Customs suddenly sent out a communication in March 2021 that training on the Click2Clear system would begin for the likes of freight forwarders, couriers and brokers. In her letter, a copy of which was obtained by Tribune Business, she warned that the move “is set to cause disruption to licensees of the GBPA” when it comes to processing bonded goods.

As set-up, the Fowlco chief said the system would require GBPA licensees to file a month-end report on the bonded goods sold to each over-the-counter bonded purchaser. And the purchaser will likewise have to complete an entry declaring their bonded goods buys broken down by purchase order.

Bonded goods entries will thus incur a $10 processing fee per customer purchase, Ms Fowler warned, while brokers would have to be enlisted to complete the purchase entries. “Both seller of bonded goods and purchaser of bonded goods will now have to consider an increase in labour to enhance accuracy in reporting and data entry with the added feature,” she wrote.

“The seller of bonded goods would also have to transmit the details of the declaration for the input on the purchasers’ side to be correct. Again, this is a specific role and can add to the headcount for a business. This results in payroll, various contributions and operational cost increases.

“Local bonded purchases due to the regulatory facets will dwindle due to the overall burden and cost associated. Many persons will opt to purchase dutiable items over bonded goods. Local shopping will decrease in this area and increased importation will take place to minimise the red tape and the other considerations already laid out.”

Then there are the violations of the Hawksbill Creek Agreement and previous Supreme Court ruling. Justice Estelle Gray-Evans found in April 2017 that the right of Kelly’s (Freeport) - or any other GBPA licensee - to sell ‘over-the-counter’ bonded goods did not depend on submitting a monthly report on such sales to Customs.

Fearing that Customs was preparing to ignore this ahead of yesterday’s last-minute reprieve, Ms Fowler warned that the businesses likely to be most affected “are the very ones that have keep some semblance of hope on the island and its economy” since Hurricane Dorian and the COVID-19 pandemic.

“We understand the need to ensure the accurate and proper collection of the country’s revenue, but it cannot come at this high price to business owners,” Ms Fowler wrote. “

“This FTZ (free trade zone) section will create increased hardship on the business community and strain the consumers that purchase under the provision of the GBPA licensee. We assert this adds another ‘nail in the coffin’ for Freeport, and dampens the hope laid out in 2021 Budget debates. We also view this as a subtle way of doing away with this provision for GBPA licensees under the Hawksbill Creek Agreement.

“The business owners should not have to execute data entry on behalf of the Bahamas Customs Department in any event. If they wished to enact this modification in the execution of this process, they should open a unit for this and carry the burden of cost associated with regulating bonded entries.”

Freeport’s ‘over-the-counter’ bonded goods regime has been a key feature of the city’s business environment for almost three decades, and is now an established practice under the Hawksbill Creek Agreement.

It allows GBPA licensees to sell goods duty-free (bonded) to fellow companies within the Port area for use in the latter’s own business. But any sales to a consumer or household do attract duty, and these taxes have to be submitted in a report - together with the full tax owed - to Customs by the 15th of the following month.

While post-paid duty sales have to be reported, there had never been a similar requirements for so-called ‘bonded’ sales. Ms Fowler, though, confirmed yesterday to Tribune Business that the private sector appeared to have persuaded the Government to rethink at the 11th hour amid reports that Click2Clear would launch for commercial airlines with effect from today.

“Kwasi Thompson [minister of state for finance] has been in communication with me, and has listened to the concerns of business owners,” she explained. “Mr Thompson called me today to advise that based on the letter submitted they’ve decided to put the launch of Click2Clear back until September 2021 pending a meeting with industry stakeholders to see how they can find a mechanism to sort through what needs to take place.”

Ms Fowler also urged the GBPA “to take a very strong stance on this matter”, given the implications for its licensees and Freeport’s founding agreement, and “speak on behalf” of the city’s estimated 3,500 businesses.

“I don’t believe, and I’m being fully transparent, that Customs really thought about the end user based on the requirements for this facet of entry processing, and they’ve not looked back at the Hawksbill Creek Agreement or that particular court matter,” she told Tribune Business.

“If, in fact, Customs is going to do away with a large portion of the over-the-counter bonded goods sales and those particular aspects of the Hawksbill Creek Agreement, that’s going to drastically impact individuals operating in the Freeport areas as businesses. Grand Bahama cannot take on any further cost burden. That’s what is happening with bonded goods.

“I imagine this is the beginning of this particular topic. We’ll see what happens. If there stance is September 2021, and it continues as laid out, we still have issues and need to address the changes taking place and come to some agreement on the way forward. The remainder of the country is on Click2Clear, and we’ll ultimately be on it, but this part of it is up for question.”

Acknowledging that Mr Thompson had pledged to meet with the NIEA, Grand Bahama Chamber of Commerce and GBPA on the matter, Ms Fowler said Freeport businesses were due to have a “town hall meeting” last night on the bonded goods matter to obtain feedback, as well as feelings and perceptions, on the best way to resolve the matter.

She added that organisations such as the Association wanted to work with Customs to improve cross-border trade and commerce, plus the Government’s revenues, rather than have an adversarial relationship. However, the agency had “failed to communicate with the wide public” on the matter.

Marlon Johnson, the Ministry of Finance’s acting financial secretary, told Tribune Business that Customs still plans to implement Click2Clear in Grand Bahama although the “timing” is still being discussed. He pledged that there would be full dialogue and consultation with the island’s private sector beforehand “to ensure a smooth transition”.

“There are some peculiar situations because of Grand Bahama and its ‘free port’ status,” Mr Johnson added. “These are some of the things we have to discuss with the business community to ensure it operates consistently with the law and provisions of the Hawksbill Creek Agreement. We are aware of some of the matters brought by the business community, hence it’s the intent to engage in dialogue to talk about these things.”