The Hindu Business Line : Under-invoicing continues in edible oil imports

IF you thought invoice manipulation in edible oil imports stopped with the imposition of tariff values, you are mistaken. Ingenious importers seem to be able to find loopholes in the Government regulations with unfailing regularity and are able to defraud the exchequer, causing loss of revenue.

The latest one to come to notice is the suspected under-invoicing in import of crude palmolein consignments that do not meet the carotenoid and acid value standards. The market is talking about cases of imports that are under-invoiced by $80-100 a tonne to take advantage of confusion in Government notifications of October 17 and 29.

Irrational classification of various oils in the palm complex, the non-transparent manner of fixing tariff values and lack of uniformity in assessment among various customs houses have all combined to encourage unscrupulous importers even while driving away the genuine ones.

On August 1, the Ministry of Finance notified that crude palm oil and its fractions of edible grade should have minimum acid value of 2 and carotenoid value (as beta carotene) in the range of 500-2500 mg/kg. The notification was intended to prevent import of processed or refined palm oil under the garb of crude and thereby attract lower tariff value.

This, however, created another category of imports — crude palm oil and fractions that do not meet the revised quality standards. To address this, the Finance Ministry, while revising the tariff values on October 17, added a new category called "Others Palm oil" under which goods that did not meet the revised specifications were to be assessed.

However, customs houses at ports such as Kakinada and Kandla started to demand duty at the transaction value (much higher priced) and not at the tariff value in case of crude palmolein that did not meet the new norms. While the latest tariff value for crude palmolein is $497 ($450 until October 17) a tonne, actual prices are much higher at about $530-550 a tonne following a firm trend in the palm complex.

This has created an opportunity for some enterprising importers to pre-date import contracts and show invoice prices much lower at say $450-480 a tonne and pay duty at the lower transaction value. Revenue officials at some ports seem to be unconcerned about the fact that the differential between genuine crude palmolein (the one that meets the quality specifications) and others can at best be marginal and not as large as $80-100 a tonne as shown by some importers.

The entire edible market is becoming increasingly vitiated because of the malpractices of a few players. Most important is the need for uniformity of assessment among various customs houses.

The Finance Ministry should take a serious look at the entire mechanics of edible oil imports including current rates of customs duty, tariff values, classification of goods, uniformity in assessment among customs houses and so on, so that business takes place under normal conditions.

Instead of complicating the tariff regime with new classification of goods, there is strong need for rationalisation of the existing duty structure with a view to making it simple, transparent and importer-friendly, without compromising revenue interests.

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