To Broker or Not To Broker

Comment

Economy
Customs

Recently, a friend of mine had to take trips to the customs office at the Tribhuvan International Airport, one of the 31 main customs offices across the country, for receiving a boxful of miscellany from the land of the eagle. After getting her authorization number from DHL, she, along with two others, went to TIA one fine day to claim her package. A haranguing encounter then unfolds. She describes with ill-disguised unease the sheer number of brokers, almost all men, swarming towards her in hoards to ‘help her’ get through the further nightmare of going through the customs office. They willingly offered their services for a fee; the nominal of which was Rs.500. Anyone else may have cowered, but this lady friend was a feisty one, a journalist no less, thus she fought her way into the customs office through the crowd and asked to see an official who would help her get her package. How hard could it be, really?

Turns out, very. What was unprecedented was that the customs official would send her back into the crowd of brokers outside. She recounts him telling her, ‘Tapaile broker ko sahayata liani parcha baini’ (Read: “No way are you getting through this without a broker”). The procedure apparently warranted the need. The Customs Act 2064 (2007) does not mandate the need of a broker. The Trade Facilitation Agreement of the World Trade Organization as of 2013, also termed the ‘Bali Package’, is the most recent of its documents that states explicitly under sub-heading 6 of Article 10: Formalities Connected With Importation and Exportation and Transit, that ‘Without prejudice to the important policy concerns of some Members that currently maintain a special role for customs brokers, from the entry into force of this agreement, Members shall not introduce the mandatory use of customs brokers.’ Nepal has been a member of the WTO since April 23, 2004.

In continuation of my friends’ anecdote, she and her two friends then had no other option but to return to the chaos that awaited outside. The inevitable swarm took them in again and they emerged harassed with one man promising to get all three people’s packages out for a well-bargained fee of Rs.500. The minute money changed hands, the broker took over. He filed for them the Customs Declaration Form that allowed officials to charge duty based on the transaction cost. He would also smooth-talk officials into letting his ‘customers’ in line first for other associated form fillings. Everything seemed to be going according to plan until the broker got into a final cabin with a computer to get the last of the deal off their backs, came back with a computerized note and said, ‘Hernu na baini, computer le ta ajhai 565 rupiyaa magyo’ (“So the computer just asked me to rip you off an extra Rs. 565 even though you’ve already paid me”).

Brokerage is a legal profession in the country but the way it is implemented at the TIA is only exemplary of the fact that because rules are laid down in such a way that we are barely able to conceive it, brokers happily devour the chance to act as fee-carrying middlemen. Even if there is a certain duty for the imports, there should really be no demand of a fee to claim that which you are rightfully filing and paying in excess for. International bodies have time and again called for a ‘simplification, harmonization and standardization’ of trade and custom laws. But what do these words truly mean? Simplification involves the removal of all unnecessary and repeated laws, processes and procedures. Harmonization is setting national plans and policies in line with resolutions of international forums and conventions. Standardization is developing universally understood and agreed upon codes of conduct. Simply put, in this instance, the laws need to be put in a language more easily conceivable by the general public and the use of brokers should be completely optional and not enforced by practice. For a well-educated person to be turned away from simple formal inquiry and being told to resort to a middle-man only highlights the levels of lethargy of these bureaucrats.

The Doing Business Report 2015 by World Bank Group ranks Nepal at 171 among 189 economies under ‘Trading across Borders’, a further drop from the 2014 rank of 169. A comparison between Singapore, which is ranked at the top stop, and Nepal reveals a frustrating gap and evident bureaucracy when it comes to trade. Looking at imports only, document preparation, customs clearance and inspection, ports and terminal handling and inland transportation and handling take a mere total of 4 days with a total cost of 440$ in Singapore, whereas the same procedures take a total of 39 days in Nepal with a reported cost of 2650$. An argument for the recognition of Nepal as a landlocked country may come into account when talking of days taken to import/export, but Austria, another landlocked economy takes a total of 9 days for imports handling. Even India has a much lower total cost, though not ideal, of 1250$ for import procedures. The number of documents to be filed for imports alone is 11 in Nepal compared to 3 of Singapore.

The customs department needs to look at international good practices of trade and follow from instances of Greece and the US, who allow electronic submission of forms and processing, use risk-based inspections and have a single-window policy.

The Customs Reforms and Modernization Strategies and Action Plan Nepal, 2013, outlines wanting to come up with a ‘Broker Management System’, the details of which are few and sketchy. It is ironic that the document begins with the Department of Customs’ supposed mission statement which states, ‘We strive for customs services to respect clients’ time and value for money’.

Labisha Uprety

About Labisha Uprety

Labisha Uprety is a Research and Communications Officer at Samriddhi. She enjoys debating and likes her tea black with a little sugar.