Multilayered control fails to prevent misuse of rice imports

Multilayered control fails to prevent misuse of rice imports Vincent Lingga  ;   Senior Editor at The Jakarta Post

JAKARTA POST,  18 Februari 2014

                                                                                                                        

                                                                                         

                                                                                                                       

Since rice is classified as one of the nation’s strategic commodities, its import is severely restricted and subject to multiple layers of control under the regulations of several ministries. The import of medium-quality rice for domestic price stabilization can be made only by the state-owned State Logistics Agency (Bulog) and the imports are based on the volume set annually by an inter-ministerial rice task force chaired by the chief economics minister.  Only rice of premium quality and for special purposes can be imported by private companies (non-Bulog).  But imports of both medium-quality and premium-quality rice can be made only by companies that have both general import licenses and special rice-importer licenses. Imports should be endorsed by a letter of recommendation from the Agriculture Ministry which clearly stipulates details on the quantity and the quality of rice, the countries of origin and the seaports of unloading in Indonesia. The Trade Ministry (directorate general of foreign trade) can issue import licenses only on the basis of the letter of recommendation from the Agriculture Ministry and the import specifications must also conform to those stipulated by the latter. Copies of rice-import licenses are sent to 11 parties, including senior officials at the customs offices at the designated seaports of unloading in Indonesia (mainly Tanjung Priok, Tanjung Perak, Tanjung Emas and Belawan), to the Agriculture Ministry, the Office of the Coordinating Economic Minister and the trade office of the Jakarta municipal administration. Before imports can be realized, importers must notify state-owned surveyor companies, either PT Sucofindo or PT Surveyor Indonesia, in Jakarta about their import plans, complete with technical specifications. This surveyor company will inspect the technical specifications of the rice at the seaports of loading overseas or the warehouses of the rice suppliers overseas. Rice imports can be cleared by the customs service in Indonesia only if they are supported by a surveyor’s verification report certifying that the imported rice fully conforms to the specifications as stipulated in the import license. Importers also must have a Rice Import Control Card which must be filled out by the local customs service each time imports are realized stipulating such details as the volume and classification of imported rice. And importers must report to the Trade Ministry the import realization, supplemented with the Rice Import Control Card bearing the signature and stamp of the local customs service. The question is then why after all this elaborate bureaucratic procedure and multilayer supervision, misuse of rice import license still takes place? Furor broke out over the past two weeks after it was discovered that more than 17,000 tons of medium-quality rice had been brought in by private (non-Bulog) importers by manipulating their quality and their harmonized-system (HS) tariff codes. Deputy Trade Minister Bayu Krisnamurthi cried foul, pointing out that if the rice was medium-quality it would have entered the country illegally, because his ministry issued import licenses to private importers only for premium-quality rice and only on the basis of letters of recommendation from the Agriculture Ministry. This started a heated blame game. The Agriculture Ministry vehemently defended its position, stressing it never recommended imports of medium-quality rice to private importers. Likewise, the customs service, seemingly “burned” by Krisnamurthi’s tirade, said it only cleared rice imports supported with approved documents from the ministries of trade and agriculture. The Supreme Audit Agency (BPK), the customs service and the ministries of trade and agriculture are still digging into the alleged rice-import scandal. The manipulation of the quality of the imported rice did not cause any state losses because all grades of rice are subject to a fixed, specific import duty of Rp 450 (4 US cents) per kilogram and the impact was negligible as the volume involved was a mere 0.0005 percent of the national rice production.  But the controversy conveyed a strong warning. The government is acutely short of adequate technical competence and integrity in managing such trade-protectionist measures through the distribution of import quotas of basic commodities. Just look at the recent wave of sugar- and beef-import scandals.  Such import irregularities never happened between 1985-1997 when Indonesian imports were subjected by then president Soeharto to pre-shipment inspection at the countries of origin by the global surveyor company, Geneva-based Société Générale de Surveillance (SGS). Part of the problem should be blamed on the vague HS classification of tariff codes for rice in place since 2012. First of all, the import-tariff book does not mention such terms as medium or premium quality for rice but classifies this commodity only using 10-digit codes for its specific characteristics. When the government changed the import-tariff book in 2012, medium-quality rice, which under the old tariff regime had been under a separate HS tariff code (1006.30.90.00), was classified in the same tariff code (1006.30.99.00) together with such premium-quality rice as Basmati and Japonica. Thai Hom Mali rice was moved from the 1006.30.15.00 to the 1006.30.40.00 code. Futher complicating the matter, such rice trademarks as Japonica (formerly Japan), Basmati (India) and Thai Hom Mali (Thailand) can currently be imported from anywhere, as these rice varieties are now grown outside their native countries. Just like Thailand’s Munthong durian, which is now planted in Bogor.  These rather blurred tariff classifications seem to open loopholes for manipulation by importers who exploit the inadequate technical competence of officials or in collusion with corrupt officials. The clearest and loudest warning from this controversy is that the government should improve its institutional capacity and the internal control of officials directly involved in managing import-restrictive measures, especially as regard to such basic commodities as rice, sugar, beef and horticultural products. The future challenges are even tougher because the new Trade Law which was enacted last week vests ever broader authority in the government to control the import or export of certain commodities considered vitally important to the basic needs of the people. This means the government will be involved directly in the trading of many more commodities through the distribution of quotas, special import licenses and other restrictive measures.  A corrupt bureaucratic and political system crowded by greedy businesspeople could “creatively” exploit and turn such import-restrictive measures into cash cows. ●

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