Customs to police leakage from auto SEZs
Jamaica has opened up its special economic zones, or SEZs, to car importers, but is offering assurances that it comes with safeguards to prevent leakage of uncustomed vehicles into the local market.
The May 9 decision by Minister of Industry Karl Samuda will allow dealers to import vehicles into a SEZ duty-free and without a licence from the Trade Board.
SEZ-stored vehicles are mainly meant for trans-shipment, but the policy does not bar SEZ-designated cars from being sold in Jamaica. To emerge from the SEZ and into the local market, the vehicles would then have be to assessed for tariffs by the Jamaica Customs Agency and obtain the requisite import permit from the Trade Board.
Kent LaCroix, chairman of the Automobile Dealers Association (ADA), is suggesting that bonded storage areas are needed at the wharf to facilitate the migration of autos from the SEZ into the local trade.
CEO of the Jamaica Special Economic Zones Authority (JSEZA), Dr Eric Deans, in seeking to allay fears of potential leakage, says vehicles destined for the Jamaican market but arriving through the SEZ would get the standard treatment that applies to all imports.
“Since vehicles or any other goods within an SEZ have not entered the domestic Customs territory, the same import processes would apply, such as needing an import licence and paying the relevant customs fees, etc,” Deans said.
Monitoring of zones
Commissioner of Customs Velma Ricketts Walker came a little closer to outlining the policing mechanisms in place, saying that while the SEZ operates extraterritorially, Jamaica Customs Agency (JCA) monitors the boundaries of the zones to ensure all the rules are followed.
“The JCA also conducts periodic audits on the occupants of the zones to ensure compliance,” said Ricketts Walker.
But she also noted that her agency is working with the JSEZA to ensure that regulations being developed for the zones not only serve the policy’s trade facilitation mandate, but is married with securing the borders.
JCA is also in the process of modernising the Customs Act to include international best practices on its interaction with SEZs, the Customs commissioner said.
It’s unclear just how welcome the policy change is in the broad auto sector. Most of the players to whom the Financial Gleaner reached out said they would not offer a view right now.
However, ATL Group CEO Adam Stewart, whose company operates as a master dealer for the BMW and Mini brands across several Caribbean markets and distributes other brands in Jamaica, said it would be good for his business.
“Defining locations as economic zones is a hugely positive move by the Government and will free up significant resources such as cash flow, lands, warehousing and so on for more productive and immediate uses,” Stewart said.
“It also provides for the expansion of business specifically involved in the logistics business to grow on the ports and across the country. It will allow us to better focus on our core business of sales within Jamaica and see us paying all duties, taxes and fees at the time of a confirmed sale to a Jamaican customer,” he added.
The policy change was announced by the JSEZA via a press release in which it touted the change as a boost for the business prospects of the automotive sector.
Need for wharf space
LaCroix said that in reality, the facility always existed but that vehicles for the local market would now be covered.
"All that is different is that it will allow for cars that are destined for Jamaica. Prior to that, it was not allowed, but rather, it covered cars for further export," said the ADA chairman.
"The only thing is that there is a need for a so-called bonding area on the wharf. Now, how effective that's going to be, we don't know. Hitherto, people would have put them [auto imports] into a bond store, but we don't know what the charges are going to be for the special economic zone," he said.
LaCroix says it's up to each dealer to weigh for themselves whether it would be more economical for them to operate from an SEZ.
Stewart has already come to a conclusion on that front, saying the facility will make it easier for ATL Automotives to do business.
"As the regional master dealer for BMW and Mini, we may consider now holding all our cars in Jamaica's economic zones, from which some of those cars will be sold into Jamaica's local market with the payment of the requested duties, etc, while others can be legitimately trans-shipped to other Caribbean territories for which we have responsibilities without unnecessary bureaucracy or charges that ought not to be paid in Jamaica," he said.
Prior to May 9, cars destined for regional and/or the domestic market were barred from free zones if the requisite licence was not obtained prior to entry into the country.
It was Samuda himself, then as a member of the opposition, who had raised concerns about potential leakage of uncustomed Hyundai vehicles from Kingston Wharves Limited's free zone operation into the local market in 2015. He contended it would be unfair competition for local dealers, who were required to pay duty on their imports. Hyundai dealer Magna Motors denied it was happening, insisting that the consignment of about 250 motor vehicles were destined for regional trans-shipment.
JSEZA Chairman Metry Seaga said the policy change positions Jamaica to build out a logistics and trans-shipment hub for the storage and distribution of vehicles and auto parts, as well as vehicle assembly that serves markets within the Americas.