Comptroller must be satisfied engine is to be used in fishing industry

Outboard engines meeting certain specifations, may be imported into the country free of duty and exempt from value added tax (VAT), once the Comptroller of Customs is satisfied that they will be used exclusively in the fishing industry.{{more}}

SEARCHLIGHT contacted the Customs and Excise Department on Wednesday to determine what concessions exist for the importation of outboard engines and what procedure should be taken by those seeking to import engines duty and VAT free.

We spoke with Deputy Comptroller (Administration) Samuel Thomas, who provided us with the legal basis for the concessions and the procedure for tax free importation of outboard engines.

According to the second schedule of the Customs Duties (Amendment) Act # 25 of 2008, marine engines, outboard and inboard of 55 hp or less, will be exempt from import duties, “provided these are articles or goods which the Comptroller of Customs and Excise is satisfied will be used exclusively in the fishing industry.”

The exemption from VAT is found in # 23 of the fourth schedule of the VAT Act #25 of 2006 and states that outboard engines up to 75 hp, inboard diesel engines, winches, and propellers will be exempt from VAT, but “only if the goods are to be used in carrying out a taxable fishing activity…”

Thomas said additionally, marine engines are free of import duties by tariff under tariff numbers 8407.21.00 and 8407.29.00.

“Therefore where the concessions are not applicable, only VAT and customs service charge is payable.

“The concessions given under this regime apply to persons or entities that are directly involved in a taxable fishing activity. In this case, the concessions specifically target fishermen. As it is the responsibility of the Comptroller of Customs to ensure only persons entitled or entities entitled to the concessions benefit, the concessionaire must be identified for the concessions to be effected,” Samuel said in a written statement.

He said any fisherman who wishes to access these concessions may: (a) Import an engine within the specification directly through the Customs by himself or through an agent or (b)purchase an engine within the specification from a local supplier provided that that supplier has an arrangement with the Customs Department which enables him to import and stock the engines without payment of duties.

“If he imports the engine either by himself or through an agent, he is required to obtain and fill in a standardized concession form. This form captures particulars of the person applying for the concession including the name and a declaration stating that the engine will be used solely for the purpose of the concessions. Provision is also made on the form for a certifying authority to sign, in this case the Fisheries Officer. The form is then taken to the Fisheries Officer whose responsibility it is to certify that the person seeking the concessions is a bona fide fisherman since the concessions are not available to persons with pleasure crafts,” Thomas said.

“Once the Fisheries Officer is satisfied, the form will be certified by him and the fisherman or his agent will take the concession form along with the other import documents associated with the engine including the invoices and bills of lading to his customs broker who will prepare the customs declaration or entries and submit the documents to the customs department electronically.”

He said after checks are done by the customs concession unit, the fisherman will obtain clearance of his engine.

“He would only be required to pay a 4% customs service charge. Customs service charge is not normally exempt,” Thomas said.

“For a purchase to be made from the stock of a local supplier, that supplier … must have an arrangement with the Customs department which enables him to import the engines without the payment of duty since concessions are not available to a normal or ordinary retailer per se. And, once the duty is paid the general policy is that no refund of duty will be authorised.

“The arrangement may be in the form of the establishment of a bonding facility or private warehouse which enables the owner/warehouse or bond keeper to import and store marine engines paying only the customs service charge upfront. With this type of facility a double locking system is effected where the two parties, namely the Customs and the warehouse or bond keeper maintain separate locks and access can only be done with the consent of both parties.

“Where a purchase is made from the stocks of a local supplier who has a bonding facility with customs, the bond keeper normally prepares the documentation. The requirement of the concession form and the procedures following certification by the Fisheries Officer is basically the same with some minor differences. For example, the customs declaration will be an entry ex-warehouse rather than a direct import entry.

“An importer who does not have a bonding facility with the customs, importing marine engines whether or not of the specification consistent with the concession may have to pay the full duties, in this case, the VAT and customs service charge, on the engine,” Thomas explained.

While Thomas agreed to provide us with the procedure to be followed to access concessions on the importation of outboard engines, he however declined to speak specifically about the case of businessman Keith Howard.

Howard claims he had, for years, been allowed to import outboard engines of 75 hp or less VAT free, without operating a bonded warehouse and without identifying a fisherman for whom the engine was being imported. That privilege came to an end two weeks ago, when Howard tried to import two engines – one 40 hp and the other 30 hp. Howard told SEARCHLIGHT that engines of 75 hp or less are rarely used by anyone other than fishermen or water taxi operators.(See related story)