Business

Interview: Customs Authority Chairman Mohammed Zammam

National Yemen

Mohammed Zammam

“The deception in the bills is not a Yemeni phenomenon.”

“The customs Exemptions have decreased largely during the previous period.”

“More than 58 billion Riyals is the real customs revenues during the previous nine months of the current year.”

“We have a plan which will be implemented soon. This plan includes full operating for the entire customs authority.”

Many countries depend on their customs and tax revenues for their general budgets. The customs and tax revenues, in fact, differ in size among different countries and are dependent on the countries’ economic power. In Yemen, customs and tax revenues represent 25% of the country’s entire budget, which has been estimated to amount to 2 trillion Yemeni rials thus far in 2012. Recently, the country has undertaken efforts to increase customs revenues, which have seen a notable increase in the present year.

In the following interview with the Chairman of the Customs Authority Mohammed Zammam, he attempted to clarify a number of issues. These same tax-related issues have been the subject of a great many debates in newspapers and on political websites.

The interview was conducted by Fuad Al-Gadi and Abd-Alhameed Al-Hayjazi

NY:  We’ll start with the recently-raised issue the customs authority being accused of losing 90% of its revenues due to certain traders’ use of forgery on bills of purchase. What is your reply to that accusation and what strategy will you follow to calculate customs values?    

MZ:  It is well known that customs value is the result of contracts between the trader importing the goods and the external manufacturer. Since our country has not completed procedures required to join the World Trade Organization, we are still working in accordance with the Brussels Agreement, which legally allows for the customs worker to specify the customs value. However, after we join the WTO, we will be committed to applying the system for the previous term of the General Agreement on Tariffs and Trade, GATT, which provides us with six ways to calculating customs value.

At the present time, we have many ways to calculate customs value. These include building a database for different goods and taking goods’ data from the manufacturers or the official agent. Until now, we have calculated some goods’ customs value as 95% of the real prices. Besides, there are still some goods which we are late in calculating customs values for, and which we have big problems with. However, those goods represent only a very small percentage in comparison with ones with real prices which are known.

At the Customs Authority, we have goods called high-revenue goods. The highest revenues among those goods are cars, which reached a very high percentage during the calculation of their customs value. Then comes construction materials, with include items like iron, cement, etc., and whose customs values are satisfactory. Other goods like frozen poultry and its derivatives we have customs values for from the manufacturing companies and agents. On the other hand, our prices change according to price alterations. But often there is a problem with price generalizations, since they represent a useless strategy and one which should be changed. However, this strategy cannot be changed before a customs value database is finished – we are still making calculations for one, and that is what we are working on at the present time.

Spare parts

NY:  What about spare parts which enter the country in large amounts but for which customs value is calculated at specific prices for every container?   

MZ:  Regarding spare parts, there are two types:  the first type is new spare parts whose customs value is calculated according to category and type; the second type is used or old spare parts. Those kind of spare parts cause a big problem since they are like heaps of garbage inside a container. Therefore, the amount of spare parts which fit in each container has been studied [to have a standard measure]. Recently, the value from customs calculations has risen, which has provoked complaints from the union used spare parts importers.

Deception

NY:  How can you explain high prices differentials between the prices for some goods, excluding cars and certain other goods, at customs stations and the market, which has reached more than 200%?

MZ:  The phenomenon of deception and decreasing prices is not only a Yemeni phenomenon. This phenomenon, in fact, exists in most of the world’s customs authorities and it differs according to the abilities of those countries to eliminate the phenomenon. In that regard, we basically focus on goods with high customs revenues so we will then be able to move on to the goods with low customs revenues which have an effect on people. Besides, honestly, we have problems with soda beverages, clothes, cellphones and small electrical devices. In fact, we aspire, by increasing our operations, to reach 60-70% as a satisfactory number. That is because the customs tariff on a price differs from the final value of the goods. That is since there are some additions which are added to the price of the goods. Those additions include the customs tariffs, shipping taxes, taxes for the transportation of goods from ports to the city markets, in addition to including profits, which translate to a rising value. What concerns us at the Customs Authority is reaching a suitable percentage to guarantee that the trader’s profits will be at a reasonable level.

Additionally, we have special problem with clothes and calculating customs values because of the big differences in price caused by the multiplication of services. In fact, we don’t claim to have high qualifications for every type and piece of clothing. However, we are trying in every period to increase prices, especially for those that make most of their purchases from countries with which we have problems with. Moreover, The Arab Free Trade Area provides a 48% discount on goods with which Arab League members are dealing, and today it must be a matter of standard values.

Copies of bills

NY:  As a part of the problem, what about the issue with copies of bills being accepted and depended on at customs clearance, a practice which opens the door to deception – is this a form of corruption?

MZ:  According to the law, original bills are required, except those big companies which are usually given two weeks to present the original bills. Besides, there is a term in the law which states that if these companies fail to bring the original bills, they will have to pay a 18 to 260 thousand YR fine. However, unfortunately, some have considered this to represent a rule. As a result, such circles will be focused on and it will be demanded that they not only pay fines – the company or trader will be stopped until there is a commitment to bring the original bills.

X-ray checks

NY:  What about the use of x-ray and modern technical devices for restricting customs smuggling?

MZ:  There are two ways to use x-rays. The first is to use them for security, and the second is for customs. For security, the x-ray has succeeded in discovering many arms and drugs even when advanced methods of smuggling them have been used. In the customs aspect, the x-ray is very useful in cases when containers are of the same type and have the same type of goods. However, most traders don’t bring in one type of goods in the same container and each container will contain more than 150 types of goods. Besides, sometimes three or four traders share the same container and each one of them has different types. In this case, the use of x-rays seems to be useless except to discover specified materials like drugs, arms, etc.

Zero tariffs

NY:  Regarding your speech about the 48% discount provided by the Arab Free Trade Area and the implementation of this agreement for Arabian products, how do you deal with changes to the data of some goods which are imported from non-Arabic countries and which enter the country under the name of an Arab institution?  

MZ:  This is one of the problems which occur continuously with some Arabic countries with which we have not transferred to zero tariffs. Many such cases have been discovered. An example is the case of goods discovered in the Free Trade Area, large amounts of aluminum which went out with doubtful official documents. After launching a tracing system for the container which was loaded, it was discovered that the load didn’t come from the Arab countries which provided it with the documents, but rather came from China and to a specific place before it entered the Free Trade Area in Aden. In such cases, the trader is arrested and it is demanded that he pay the complete customs difference. But this practice still exists and there are some difficulties in discovering it, especially after documents were completed in Arab countries, excepting cases in which customs stations have received notifications concerning the practice.

Customs Smuggling

NY:  Smuggling is one of the problems for the Customs Authority. Is there anything new on eliminating this phenomenon?

MZ:  Smuggling from customs and non-customs stations is an existing phenomenon. However, through fruitful cooperation with military forces and the Defense Minister, who does his best in this regard, we were recently able to establish some centers at the entrances to main cities. Besides, some samples were taken from goods released at the customs offices to be checked again. At that point, many big differences in the calculation of taxes were found. Because of this, some traders are focused on and included on the black list. Also, some procedures have been implemented against customs offices that participate in such crimes and those connected with those crimes are held responsible and punished. In addition, there is the observation of land stations and the fight against smuggled goods which come in from official stations. On the other hand, numbers have shown that efforts by the Customs
Authority to fight smuggling resulted in notable increases in revenues during the nine months of the current year, and especially at land customs offices where revenues have doubled.

The exemptions problem

NY:  Have you noticed that customs exemptions are used for customs evasion, at a percentage which has affected the country’s revenues?

MZ:  We have many types of oil, investment and value exemptions, exemptions stated in the zero tariff law. Those exempt goods represent are the basic goods which parliament exempted in 2005. These goods include wheat, rice and medicine and there is a large percentage of such goods. Oil exemptions, on the other hand, have not changed, except for those concerned with new explorations and company requirements – and such exemptions are issued via parliament. The Customs Authority has a limited role in field observance with the oil ministry.

The third kind of exemptions is given for certain investing projects. In case that the exempted goods have been misused, the customs authority is the last authority to be responsible for following those projects.  On the other hand, the general institution for investment is the one which bears the direct responsibility for misusing exemptions.  The total exemptions are estimated to be about 45%, and those are investments, oil exemptions or other. This percentage is large and the customs authority since 2010 has tried to provide project for changing the investment law to a customs law. Then in September 2010, those changes began to be carried out with some shortcomings in the text of the law, which cannot be implemented for previous investment projects until they are finished. But some of those projects are for more than ten years, and then there is the problem of those projects being renewed and added to.

Through our observation of exemptions in the last period, we have noticed a clear decrease in their number.

Sana’a Airport

NY:  The Sana’a Airport station is one of the most successful when it comes to capturing large numbers of smuggled goods; its good performance is what has made it an ideal station. Why isn’t the Sana’a Airport Customs Authority’s experience taken advantage of at the rest of the stations, and especially the land stations? 

MZ:  Of course, in leading the Customs Authority, we have principles and guidelines when it comes to evaluating the success of any customs station. At Sana’a Airport, we have three customs offices and they are Goods General Management, Passengers’ General Management and the Customs Port. Moreover, I think that most of the successes about which you are speaking come in the passengers’ customs – since 95% of security procedures are carried out by the Customs Authority at Sana’a Airport and all the devices at Sana’a airport are run by customs employees. Those employees were selected from the best Yemeni youths, university graduates and specialists who have been trained and qualified. So they become an example for customs employees who should be like them at other customs stations. The reason behind Sana’a Airport successes amid the events 2011 was a belief held by some who thought that they could damage this this country since there wasn’t observation or security institutions at the airport to stop them. Therefore, 2011 was full of many captures of drugs and other such things. For that, we consider Sana’a Airport an example which should be imitated at the other stations. Also, successes have been achieved at goods customs, since most of the goods which come through the airport are European. Shippers of European goods are committed to sending the original bills with goods, so the specific prices are provided for us and eliminate instances of price deception.

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Bad practices

NY:  Many immigrants complain of some problems at customs stations; is there any new solution or new direction in this regard?    

MZ:  We at the Customs Authority pay our full attention to land customs since it represents the first image and view of the Republic of Yemen. However, those customs stations have more than 14 sections, in addition to the Customs Authority itself. So I don’t deny that there are some bad practices, which we are trying to resolve. But not all of those wrong practices are customs practices, since there are security and censorship sections related to the ministries of agriculture, health and the standards authority. Moreover, despite the presence of all these institutions at the stations, the Customs Authority is the only one which bears all the expenses for electricity, water, cleanliness, food etc. This, despite the decision to establish a transportation affairs general authority to take administrative responsibility for customs stations. We agreed on that decision and we are ready to hand over administration to them. However, the problem is that our colleagues at the Transportation Authority want only to pay rent and unofficial fees and leave customs station expenses for the Customs Authority. That is not logical, and the transportation general authority should meet its responsibilities when it comes to services, administration, and their expenses.