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Tuesday, Jul 30, 2002

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Under-invoicing in soyabean oil imports

G. Chandrashekhar

MUMBAI, July 29

IF you thought under-invoicing in edible oil imports had come to an end, think again. Invoice manipulation continues to be practised and Government continues to lose revenue; but this time it is on soyabean oil.

Customs authorities at the Nhava Sheva port (JNPT) have found wide variation in the invoice price declared by importers of soyabean oil. The oil bears the lowest rate of customs duty, 45 per cent ad valorem.

Several shiploads of soyabean oil arrived at the port in recent weeks and the documents of various importers filed with the Customs showed prices ranging from $340 to $440 a tonne, a variation as high as $100 a tonne even in case of oil in the same ship.

Customs authorities at JNPT have launched an investigation into the matter as there is strong suspicion of under-invoicing by some importers. Of course, the standard explanation trotted out is that contracts were entered into at different dates and that the soyabean oil market had been volatile.

But revenue officials are said to be of the view that lower priced contracts were pre-dated so that the burden of duty was lower. It is known that importers have not only been buying generally on spot basis, but also reluctant to enter into contracts for forward shipment in view of several uncertainties in the domestic market over the last few months.

The Customs Commissioner has issued instructions that all import contracts for edible oils, especially soyabean oil, should be registered with the Customs department within five days of the importer entering into them.

Following rampant under-invoicing in the import of various palm oils (refined palmolein, crude palm oil, crude olein) that led to massive loss of revenue and distortion of the market, the Government specified tariff value for each of the oils in the palm group.

This was done in August 2001. Since then, from time to time, the tariff values have been revised on the basis of international market conditions, with the last one done on June 13.

How the Government addresses the problem of invoice manipulation in soyabean oil remains to be seen. It is not unusual to find traders indulging in invoice manipulation when the rate of customs duty is high. But soyabean oil bears a relatively lower duty and indeed the lowest in the vegetable oils group. With adverse market conditions and poor import parities, many are willing to do anything to stay afloat.

With drought looming large over the country and serious setback to oilseeds crop imminent, the demand-supply gap— large even in good times— will widen further. The Government needs to bestow serious attention to the issues of the vegetable oil sector.

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