Broker integration vital to end $50m Customs loss


EAST Grand Bahama MP Kwasi Thompson. (File photo)



Tribune Business Reporters

The Ministry of Finance yesterday asserted that broker “integration” with Customs’ systems is vital to eliminating more than $50m in annual revenue losses amid a continuing dispute over whether such requirements are lawful.

Kwasi Thompson, former minister of state for finance, reiterated his argument that the Customs regulations must first be amended to mandate that all brokers connect to its Electronic Single Window (ESW), known as Click2Clear, via electronic data interchange or EDI.

This, though, contradicted the Ministry of Finance’s position that the Customs comptroller has wide-ranging powers to determine the manner and format in which import/export entries are submitted. “The Customs Management Act explicitly gives the comptroller the authority to require the submission of Customs documents in a format designated by him or her. This means that there is clear legal authority for this requirement,” it argued.

Mr Thompson, though, remained unconvinced. While acknowledging that the Customs comptroller “does have wide powers”, he argued these still did not extend to where he/she could mandate that brokers “integrate” with Click2Clear unless the Act and accompanying regulations were changed to require it/

“Their powers clearly are subject to the regulations and are exercised by the regulations,” the Opposition’s finance spokesman said. “Has the comptroller or the minister amended the regulations? The changes described can only come if the regulations are amended.... The previous government in 2019 amended the regulations to mandate the use of Click2Clear. If the Government wants to change that, amend the regulations.”

The Ministry of Finance, meanwhile, denied that it was directing brokers and importers to use specific third-party software providers to fulfill the “integration” requirements or that the cost involved would force small operators out of business. It added that too many persons were submitting erroneous entries via Click2Clear and, in so doing, were costing the Public Treasury significant revenue.

“The Click2Clear system is designed to facilitate electronic data interchange or EDI,” the Ministry of Finance added. “EDI or the sending of an electronic file for processing dramatically lowers the cost of operation for both the broker and Customs. As of June 2022, less than 10 percent of the transactions submitted to Click2Clear were by EDI.

“Instead, they were submitted by way of the user interface (UI). A UI entry is a time consuming and error prone way of submitting entries. Independent estimates have placed the potential annual revenue loss from errors in submitting entries by UI at more than $50m.

“The most recent estimate was provided by a consultant firm engaged by the previous administration, so the need to improve Customs processes to eliminate leakage is non-political and has bipartisan support. The Government must act to recover this lost revenue, and recovering this revenue loss by administrative means, in a high inflation environment, is more practical than simply just increasing import duty rates.”

Suggesting that EDI “integration” will also produce greater efficiencies and reduce the cost associated with clearing imports, the Ministry of Finance said: “EDI submissions, while reducing revenue losing errors, are also quicker, which means that the importer can get his goods released by Customs much faster. A submission, which can take days to prepare under UI, can be done in hours through EDI.

“This is why Bahamian software vendors have been building EDI systems for Customs brokers and importers for a number of years prior to the full automation of the Customs processes. Many of these systems are now so sophisticated that no manual intervention is required for the import clearance process with invoices being submitted into the company or broker’s EDI electronically.

“As part of this transition, the Ministry of Finance previously advised the broker and import community that it would be making available free two different versions of an EDI system. A version for licensed brokers, which is now being rolled out, and a simplified version which would focus on commonly imported consumer goods, which is designed for persons who seek to do their own customs entries.”

However, Customs brokers yesterday said that while there may be no mandate to use certain software providers, the limited time, complexity and cost meant they had little choice but to turn to one of those recommended by the Ministry of Finance.

Kenneth Gibson, chief executive of Five Star Brokers, told Tribune Business the “system is not a plug and play” and finding his own software developer is too-time consuming. “It is what it is. They’ve been saying that we are not mandated to purchase one of their preferred vendors, but what other options are there at this point?” he asked. “We didn’t have enough time to find one and there are only three providers in the market when they announced it to us.

“We just didn’t have time to find one at this juncture, and I have been doing my own research since October of last year, so we are stuck with one of their vendors.”

Antoine Brooks, managing director at Island Traders Shop & Ship, said he had chosen one of the Ministry of Finance’s preferred software vendors and had scheduled training yesterday. “I’m wondering where is the free system the Customs Department promised us? We have no choice now other than to buy one of their preferred vendors because at this stage we have to or close up shop,” he added.

Mr Thompson, meanwhile, said the Ministry of Finance statement had ignored the costs that will be incurred by Customs brokers as well as the monthly fees that they will have to pay to use the software. “Many brokers complain that the ‘free version’ is not workable,” he argued.

“The ‘free’ integration system means nothing to a licensed broker because a broker who uses this ‘free’ system will not be able to service their clients adequately as it cannot accommodate the average home consumption declaration which is 30 or more lines. The simple fact us that they are requiring Customs brokers to implement a computer system. The fact of the matter is that the Ministry of Finance’s implementation has lacked clarity and caused much confusion.”

Commenting has been disabled for this item.