Hummer hums graft galore in imports
WAITING TO BE AUCTIONED… Like this awe-striking abandoned Hummer SUV, at least 60 other seized luxury vehicles are gathering dust at different police stations in the capital since early last year, belying army chief General Moeen U Ahmed's pledge to raise funds for hospitals for the poor through auction.Photo: STAR
Few sports utility vehicles attract as much as attention rolling down the road as the Hummer. With its robust shape, iconic look and US military Humvee-inspired styling, the Hummer SUV stands out like a sweaty heavyweight prizefighter. The Humvee was used in US's Operation Desert Storm in Iraq, but the vehicle jumped in popularity after macho Hollywood actor and California governor Arnold Schwarzenegger had one converted for civilian use. And, it was Ellen Bhutto, a former BNP lawmaker from Jhalakathi, who introduced the prized vehicle to Bangladesh using her MP privilege of duty-free import. It didn't take long bedore a few influentials became eager to match Ellen on the street despite the fact that Hummer looked rather odd on the crammed streets of Dhaka. So, six more awe-inspiring Hummer SUVs arrived, captured the imagination of passers-by and left the country's customs department on the trail of about Tk 7.40 crore of alleged duty dodging by the importer, Auto Museum Ltd.
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Like many other instances of glaring grafts involving imports, it took a cocktail of four elements. The greed of the importer, the endorsement of a pre-shipment inspection (PSI) company, the help of the exporter, and the convenient ignorance of the National Board of Revenue (NBR) and its customs wing. But when the scam was exposed, NBR came down hard on one element-- the PSI company in question.
The board washed its hand of the corruption by canceling the license of Cotecna Inspection SA for numerous irregularities including the Hummer scam, letting related customs people off the hook and allowing the importer to keep penalty at bay.
The irregularities were detected along with many others once the military-backed government came into power last year, with its National Coordination Committee (NCC) against Grievous Offences launching a crackdown on high-profile corruption suspects in February.
Owned mostly by politicial families and purchased largely through illigal income, a fleet of exotic SUVs turned a lot of heads on the Dhaka streets during the last few months of the BNP-led alliance rule. But all those exclusive vehicles suddenly disappeared from streets, and owners openly disowned their once proud possessions amid anti-graft drive by taskforces under NCC.
Joint forces picked up the lead from an abandoned Hummer H3 SUV, the smallest of the three models introduced by the US automaker General Motors in 2006, inside an under-construction Kakrail house. NBR was asked to probe the matter as startling finds started to come out after initial investigation.
NBR noticed a gulf of difference between purchase and sale prices after carrying out some intelligence works on Auto Museum, whose import of 6 Hummer vehicles also included a H2 model that offered something a bit more practical than the designed-for-military-use H1. Auto Museum stated the new SUVs were imported from Thailand, declaring value of Hummer H3 $18,500 and Hummer H2 $31,000.
Formed on July 19 last year, the five-member NBR probe committee, led by a first secretary, Dr Md Khairuzzaman Majumder, went through all documents certified duly by Cotencna, realising that it was a plain case of gross under-invoicing of Hummer to evade customs duty. Under-invoicing or over-invoicing of products is a common fraudulent practise to dodge customs charges or siphon off money abroad. Exporters see no harm to entertain importers as they get actual payment or refund excess prices through money-laundering tool.
The probe got a new twist when the Square Toiletries Limited submitted import documents of a new Hummer H2 from the UK, stating its price four times higher at $1,20,987 (GBP 60,586) than Auto Musuem's.
The PSI company this time was Bureau Veritas Bangladesh Ltd, and the import was initially considered as a case of over-invoicing to siphon off money abroad. Puzzled, NBR finally tried to know about the actual price by asking two other PSI companies-- Intertek Testing Service (ITS) International Limited and Societe General de Surveillance (SGS)-- for counter price and by doing the simplest job of checking the website of General Motors. Having analysed the information on prices, the probe body concluded that the approximate unit price, including costs of freight and conversion from right-to-left-hand drive, of Hummer H3 should be $35,215 and H2 $62,895. Cotecna, which was warned several times in the past for widespread irregularities, stuck to its pricing, certification and inspection.
But sensing NBR determination this time, it changed its story, claiming it was unaware of the fact that vehicles were 'new but damaged.' But its bid to clutch at a straw in defence of low pricing was rejected by NBR.
"As per import policy 2003-2006, used or damaged cars are only importable from the country of origin (US) and not from any other country (Thailand)," stated NBR in its reply, slapping Cotenca with a fine of Tk 7.40 crore after canceling its license.
But Dermot A. Jennings, general manager of Cotecna, told The Daily Star, "Those six Hummer vehicles were the first of their kind to have been imported in the country. We as the PSI agent, accepted the declared price under the transaction value system. That is the rule. The NBR or anybody else has not said anything to the contrary."
The cars were new as per definition but were damaged and repaired and consequently the valuation had to reflect that fact, he argued, adding that NBR remained silent to their offer to facilitate its verifying the truth by visiting the countries concerned, at Cotecna's expense.
Cotecna, however, challenged the hefty fine in the court. NBR, meanwhile, found no way but to accept the apparent over-pricing by the Square Toiletries, which claimed that it bought the new Hummer H2 at a higher price from the UK as there was a restriction then in the US on the sale of new vehicles. Besides, the price also involved extra fittings and accessories, the importer argued in an NBR hearing.
Unable to verify the claim, NBR eventually settled the matter accepting arguments of Square and Bureau Veritas. Curiously though, four out of five-member probe committee were from customs. And the committee found no reason to hold responsible the customs authorities, which allowed Auto Museum to get away with grossly manipulated under-invoiced Hummer vehicles.
PSI companies concerned are to provide Clean Reports of Findings (CRF) certifying prices, quantity, description, HS (harmonised system) Code and importability of goods, pointed out the probe body in its report, adding that customs authorities only can investigate CRF-certified prices if instance of higher price is there or if valuation appears suspicious. "As the vehicles were absolutely new in Bangladesh, there was no idea about prices.. there was no chance to suspect," the probe report stated in support of related customs people. As logistics required for investigation (e.g. internet based search) in such cases are not available at appraiser/principal appraiser level, it would not be logical to hold anyone responsible, it added.
But many in the sector found this excuse hard to accept. Customs people should have been cautious or suspicious about prices as the vehicles were very new to Bangladesh, they argued. "The price information was just a few clicks away on the website of General Motors for all the people in the world," quipped a PSI specialist from the rival camp of Cotecna.
Corruption by customs is no new issue and the PSI system has been introduced to curb grafts by customs. A recent follow-up study of the Transparency International Bangladesh stated "corruption has assumed an institutional shape in Chittagong Port Authority and the Customs.... The rules of law and accountability have been almost non-existent here."
Business people still claim bribes have to be paid at least 30 spots for releasing a consignment from the customs and the port.
"I am not surprised at all why customs has never got rid of corruption as departmental inquiries have always found corrupt staff innocent," says a leading importer, wishing not to be named.
The probe committee, meanwhile, asked the Customs House (Import), Chittagong to take legal steps for realising evaded duty from Auto Museum and for penalising the company over false declaration.
Customs sources in Chittagong said the importer, who in its August 29 letter last year insisted that the declared price was true, is skipping customs hearing under different excuses, let alone paying the penalty. But when contacted, Auto Museum refuted the customs version, claiming that it submitted its version in written and its officials also attended hearings in person.
"We did nothing to violate the import policy of the government," Auto Museum authorities told The Daily Star. "So, we requested the customs to drop charges against us." The matter is however yet to be settled.
The Auto Museum authorities also binned the NBR claim of about Tk 7.4cr duty-dodging, saying it would not exceed Tk 2 crore even as per the customs assessment.
As per the investigation, it could be known that at least 15 Hummer vehicles were imported so far, of which at least seven vehicles were duty paid.
According to sources, Auto Museum already sold five out of six Hummers SUVs to Bashundhara Group, Sagufta NM Housing Ltd, Narayanganj-based industry Knit Concern, STS (pvt) Ltd (as confirmed by Ascent Group MD Syed Maher Murshed) and a Chittagong businessman. Rest of the vehicles were imported through duty-free privillege of lawmakers and industries at Export Processing Zones.
According to investigators, the government lost around Tk 211 crore in taxes as at least 303 cars were imported by the lawmakers of the eighth parliament under the duty-free privillege. And around 200 lawmakers did not even import cars but sold their permits to car importers as soon as they got those, prompting the caretaker government to cancel the privilege in April last year.
Taskforce and police sources said three Hummer vehicles were seized during anti-graft drive.
Vehicles of ex-BNP lawmaker Harunur Rashid and businessman Shoaib Akhter Nizam was seized over illegal sale after import. But Shoaib later got back his Hummer, which was seized under the suspicion that it was duty-free purchase.
Meanwhile, a black-coloured Hummer vehicle that was left abadoned in Kakrail was learned to imported by Abdul Alim, another former BNP MP from Joypurhat.
Police said Alim sold the vehicle to a businessman Mohammad Ali.
Former lawmaker and Islami Oikya Jote leader Mufti Shahidul Islam and ex-BNP MP from Savar Dewan Mohammad Salahuddin are among others who imported duty-free Hummer vehicle.
Most of the privilleged purchases are learnt to have ben sold to others. Hummer is just one case of under-valuation to dodge customs duty. There are thousand other mind-blowing instances of corruption.
Rolls Royce, Mercedes Benz, sophisticated photocopier, contraband cigarettes, electronic goods, duty-free industrial machinery and whatnot landed in Bangladesh under false declaration or through price-manipulation. And each story of grafts turned few people filthy rich overnight, depriving the government coffer.
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