CIMA Mastercourse on ‘Customs Laws & Regulations – Informed Compliance and Shared Responsibilities’

The CIMA Mastercourse on ‘Customs Laws & Regulations – Informed Compliance and Shared Responsibilities’ was held recently. 

The presentations on the subject were presented by Suresh R.I. Perera, Principal – Tax & Regulatory, KPMG and Ravindrakumar Muthucumarasamy, Consultant – Trade & Customs. The presentations was followed by an enlightening panel discussion, moderated by Rifka Ziyard, Senior Manager – Tax & Regulatory, KPMG. The Panelists joining the discussion was Mr. T. Kananathalingam (Senior Consultant of Customs, Trade & Logistics), Dinesh De Silva (Chairman of the Import Section of the Ceylon Chamber of Commerce) and Peter Jasinghe (Head of Sales & Marketing of XPO Logistics Sri Lanka).

Perera delivered the opening presentation, wherein he enlightened the audience on the history of the customs ordinance, provisions related to offences, penalties and rewards. Sri Lankan tax system has over 26 different taxes out of which six are charged at the point of importation of goods into Sri Lanka. Mr Perera emphasized that in order to ensure certainty an Advance Ruling mechanism has to be introduced into customs law and that countries such as India, Australia, New Zealand, Taiwan, Thailand, Malaysia, etc. have such mechanism in place.

In relation to the Appellate Procedure, Perera explained that up until 2013 the Sri Lanka Customs Law did not have any provisions for an appellate procedure and it seems many importers are unaware of their rights with regard to this. Therefore one can see that although a person has the right to appeal to the Director General Customs (DGC) and thereafter Tax Appeals Commission (TAC) against any determinations by the DGC. However there have been no cases lodged with the TAC against the DGC to date. He also pointed out that in Philippines and Morocco after the introduction of customs reforms efficiency of clearing times increased drastically.

The next presentation was focused on Informed Compliance and Shared Responsibilities and was presented by Ravindrakumar Muthucumarasamy. Muthucumarasamy is a former Director of Custom and has more than 38 years of experience at the Customs Department. He explained as per the World Trade Organization Trade Facilitation Agreement, an order to facilitate proper trade and customs law and procedures should include appeal/review procedures, advance ruling mechanisms, publications to increase awareness, etc. 

He also stressed the importance of importer and exporters taking advantage of opportunities catering to them through various schemes for e.g. TEIP, etc. FTA, bilateral, multilateral schemes, etc. He referred in his presentation to the new Customs draft Act and considers the changes proposed in the WTO Trade Facilitation Agreement. Penalties will be imposed based on three categories, i.e. No reasonable care, Gross negligence and Intentional non-compliance.

Moderator Ziyard mentioned that Sri Lanka is ranked 107 in the World Bank’s Ease of Doing Business and while Sri Lanka is ranked 158th in the ease of paying tax, it is noteworthy to note that Sri Lanka is ranked 90th out of the 189 countries in the ease of trading across borders. She mentioned Sri Lanka has done well to be ahead of India and Pakistan in ‘trading across borders’ but still there is lot more to improve.

In response to a question by the moderator on the expectations of the new act and the key issues that need to be resolved, de Silva said that although the customs system has improved form when it was first introduced, but the system still requires major changes to accommodate substantial international trade transactions. In order to improve the GDP of Sri Lanka a, changes need to be introduced in order to facilitate trade. Mr De Silva mentioned that automation is the key change required and “full automation, single window, national portals are of vital importance and such key areas should be addressed in the new Customs Act”.

Jasinghe stated that as the customs system still includes archaic procedures and methodologies reforms need to be introduced. Customs is a major part of the entire trade system and efficiency in the customs department will have an overall improvement in the entire trading system.

Kananathalingam in responding to a question said that the process for the new draft Customs Act started in the last Budget where the Finance Minister read that the archaic Customs Ordinance requires change and will be replaced with a new Act. He mentioned that the ordinance of 1869 was actually based on a law much earlier and had seen almost 46 amendments up to 2013. However the use of the language and the latest changes in the trade platforms require a robust, simplified and up to date Customs Law. He also mentioned that automation is key and that the new Act concentrates on digitalization and reducing the man to man relationship.

Kananathalingam mentioned that chapter 2 of the new draft customs act has a Director for handling grievance. He explained that in order to facilitate the Appellate Procedure an independent Appellate Tribunal will also be introduced.

At the discussion, Suresh Perera explained that there is a lack of awareness in relation to laws both Customs and others, which is why even when tax incentives are introduced there are many who are unaware of such incentives. There should be a clear effort taken to make the General Public aware of the changes introduced in order to make avail of it.

In the panel discussion, Ravindrakumar reiterated that “in order to be complaint one needs to be informed of the compliance requirements. The new concept of Customs law is about the partnership between the Customs department and importer or exporters”. Ravindrakumar mentioned that concept of self-declaration, advanced rulings mechanism, changes to the appellate procedure has been proposed in the New Act due to the concept of ‘Informed Compliance and Shared Responsibilities’.