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Thursday, 16 November 2017

Advance Ruling by NBR needs to be well-defined

M S Siddiqui | November 16, 2017 00:00:00

Customs officials and traders often have differences of opinion regarding the
treatment of goods for Customs purposes - determination of value,
classification of goods, and determination of rules of origin etc. Such
disputes arise mainly due to lack of legislation and legal guidelines, lack of
technical expertise, ineffective management controls, and poorly defined
compliance requirements. These obstacles are compounded by complex or
inadequately publicised guidelines and poorly designed declaration
processing systems and practices, which coupled with unfettered discretion
among customs officials facilitates questionable and corrupt practices that
foster mutual distrust. This is an acute p roblem in most developing countries.
Wrong valuation and classification decisions may constitute a non -tariff
barrier to trade.

WTO tried to address the issue through guideline of Advance ruling or biding
ruling incorporated in standard provision 9.9 of Th e International Convention
on the Simplification and Harmonisation of Customs Procedures (Revised
Kyoto Convention). Article 3 of the Trade Facilitation agreement (TFA) has
provision of advance ruling and Bangladesh gave its accent to TFA.

The proposed WTO text on advance rulings stipulates the following

requirements: (1) the authority must publish the information that should be
provided in a request for a ruling; (2) the issuing authority must publish the
deadline by which it will issue advance rulings an d the length of time rulings
will be valid; (3) rulings must be binding for a "reasonable" period of time
unless facts or circumstances supporting the original rulings change; (4) if a
ruling is modified or revoked, the issuing authority must notify the ap plicant
promptly in writing explaining the basis for its decision in writing; (5) if an
applicant requests, the issuing authority must provide an administrative
review of a ruling or decision to revoke or modify a ruling; (6) the issuing
authority must try to make available information on advance rulings that it
considers to be of significant interest to other traders, taking into account the
need to protect commercially confidential information.

An advance ruling on the criteria for Customs valuation is a useful facilitation

measure, as traders are aware of the supporting documents they have to
present to justify the value of the goods. If the value of goods is questioned
by Customs, the responsibility of proving it otherwise lies with the importer.
Regardless of whether technical competencies are consolidated or
dispersed, Customs administration must be able to coordinate actions and
structure the interactions of technical personnel and the systems that support
and inform them. Modern Customs administratio ns developed advance ruling
to reduce the traditional control systems. These systems have made
compliance with Customs requirements easier. In developing an advance
ruling process, the customs administration must deepen its relationship with
the trading community and its understanding of the trading community's
practices and concerns. Adversarial relationships must be replaced by
working relationships characterised by mutual respect and partnership.

A well designed and regulated advance ruling systems can p rovide certainty
to traders and their agents about how their goods will be treated at the time
of import, promote consistent application of Customs rulings and law, foster
trust between customs and trade, and provide a transparent framework that
encourages compliance.

Customs officials responsible for implementation of advance ruling process

consider issues such as: classification, valuation, duty drawback and
application of quotas and rules of origin.

Classification is usually the primary determinant of th e duty to which imports

are subjected, and most requests for advance rulings relate to classification.
The task of ascertaining the correct tariff classification of merchandise
entering or exiting the country is a critical function of any Customs
administration, because tariff classification affects the revenue of the
government and the private sector and because valuation has a direct and
potentially significant impact on the cost and conditions of import and is often
the subject of advance ruling requests. An effective advance ruling process,
therefore, requires specialists who can conduct valuation correctly and
uniformly. Database of valuation and classification is a major instrument of
advance valuation both for valuation department and for Customs
assessment officials.
A data base of law and regulation related to import and export are also
stored for regulating the import and export of different products. To develop
an audit unit of trained officers who would examine the financial and other
business records and practices of importers to ensure compliance with
Customs recordkeeping requirements and generally accepted accounting
principles, and to verify information presented for purposes of customs
valuation, is important.

Customs department has a law of duty draw back for export products
collected on raw materials during import. The VAT is also refundable for
export and re-export of products. Duties may be refunded along with certain
other taxes and fees collected at the time of importation. A successful duty
drawback programme is to be developed on the basis of legislation and
regulations and the precise procedural guidelines require publication.
The rules of origin are a very critical issue in an era of globalisation and
integration of countries into the global supply chain. The WTO and its
members commonly distinguish between preferential and non -preferential
rules for determining country of origin. The preferential rules pertain to
whether the goods qualify for free or reduced duty rates under bilatera l or
multilateral trade agreements to which a country is a party.

Businesses and economy very often suffer due to uneven competition. Any
arbitrary determination of Customs duty at entry points with the discretion of
Custom officials may impact upon the co st of imported materials. An effective
advance ruling process can make customs' actions transparent and costs of
international trade predictable, and facilitate the processing of declarations.
An Advance ruling department should include experts in the fol lowing fields:
legal and policy, tariff and valuation, information technology, statistics, and
public information. Even experts from some other disciplines may also be
included for correct and efficient decision. The process of implementing an
advance ruling programme should also involve someone from human
resources and training departments to ensure that the implications of the
advance ruling programme for staffing and skill requirements are reflected in
recruitment, training, and staffing. Their involveme nt will ensure that the
classification and valuation departments have the training necessary to
review and apply advance rulings.

The National Board of Revenue (NBR) issued SRO on Customs Ruling

(Advanced)-SRO No. 188-AIN/2016/37/Customs on June 2, 2016. T he SRO
stipulated that the Ruling Board would be headed by a Member of the NBR.
The Ruling Board, according to the SRO, would only provide classification of
the products but no other services. It has no provision for inclusion of co -
opting experts on regular basis from the disciplines of legal and policy, tariff
and valuation, cost accountancy, information technology, statistics,
mechanical, engineering and chemical technology. It has no provision for
maintaining the database of court decisions and conventi ons of Bangladesh
and other countries in order to take guidance and reference for correct
decision. These appear to be some of the major deficiencies which would
create problems for smooth and efficient functioning of the Ruling Board.

The writer is a Legal Economist.