Wed | Nov 21, 2018

Shaw orders ‘forensic’ monitoring of refined sugar diversions

Published:Friday | September 21, 2018 | 12:00 AM

Shaw orders 'forensic' monitoring of refined sugar diversions

SIA wants power tool to get the job done

George Callaghan, CEO of the Sugar Industry Authority, SIA, said Tuesday that if it were to play a role in monitoring leakage of imported refined or granulated sugar from manufacturing activity to the retail market, the Government would have to again centralise all sugar imports under the authority.

Jamaica does not produce granulated sugar, so all its needs are fed by overseas supplies. Manufacturers are allowed to import the product duty free for use as raw material, while supplies imported for retail sale incur duty of 129 per cent on the value of the shipment.

However, two successive ministers in charge of commerce, first Karl Samuda and now Audley Shaw, have said that the duty-free sugar ends up being distributed locally, a practice that breaches import licences and robs the Government of revenue. But after talking tough and promising to reform the sugar import regime, both eventually retreated from that course of action, having caved under pressure from businesses who want the status quo maintained.

Still, the current minister in charge of the Ministry of Industry, Commerce Agriculture & Fisheries, MICAF, has not yet totally given up on ending the illicit practice.

Shaw said at an SIA seminar last week that he had instructed the sugar regulator to establish a "forensic monitoring" system to detect the leakages, and promised severe penalties for importers found in breach, but otherwise the minister offered no specifics about the plan.

Recentralise

sugar marketing

Asked this week how the SIA would go about setting up the monitoring system in order to carry out the minister's directive, Callaghan said it would require policy changes to recentralise sugar marketing, which itself would roll back more than two decades of market policy.

"The SIA has no jurisdiction in law over the import and distribution of refined sugar for manufacturing. This mandate was removed from the SIA in 1994. Since then, the issue of diversion of imported, duty-free, refined sugar has surfaced multiple times," said CEO Callaghan.

"In our opinion, the only sure way to remove the threat to the local sugar sector posed by diversion of imported refined sugar for manufacturing into the retail trade is to recentralise all imports under the SIA. The authority will then permit genuine manufacturers to import their own sugar under a monitoring arrangement to prevent diversion of supplies to retail and ensure collection of duty, where required by law," he said.

Callaghan was effectively asking for the Government to execute a plan that was initially under consideration last year.

Last September when Karl Samuda was still in charge of MICAF, he announced that a Ministerial Order was pending that would pave the way for a major shake-up of the system.

Under the current import regime, anyone can apply to the Trade Board for a permit to import granulated sugar for retail use, which attracts duty of 129 per cent. However, for manufacturers who use the sweetener as input for their products, there is no additional charge.

Samuda's order would have given the SIA jurisdiction over the permits to import refined sugar for the retail trade, through its three market agents - Pan Caribbean Sugar Company, Golden Grove Sugar Company, and Jamaica Cane Products Sales - that were already licensed to market brown sugar, and which would continue to import on behalf of the Appleton and Worthy Park sugar estates.

Samuda said at the time that the SIA itself would not import any sugar, but instead grant licences to the three agents to source the refined product, import, market, and distribute it to other companies. The bulk supplies would be repackaged for retail shelves, in the same manner that retail brown sugar is currently distributed.

MICAF at the time was also looking into additional strategies to end the diversion of supplies from manufacturing to retail.

Callaghan said all the measures announced by Samuda regarding retail sugar were implemented, including the sugar packaging and labelling standards, but there has been no curtailment of the refined sugar problem.

"As anticipated, the control of imports of refined sugar for the retail trade will not resolve the issue of leakage of duty-free, imported refined sugar into the domestic market," he said emphatically.

"As I indicated, we are of the opinion that only centralised management of all imports of sugar and artificial sweeteners as obtained up to 1994, will fix the problem."

avia.collinder@gleanerjm.com