Transit system is a trade facilitation tool that allows goods
to move across borders without paying duties and taxes at
the port of entry, provided that they are destined for
another country and are not consumed or used in the
transit country.
However, this customs transit system can also be
exploited by unscrupulous traders who declare their goods
as being in transit to another country, but in fact consume
or use them in the transit country, or divert them to the local
market. This way, they avoid paying customs duty and
taxes, and gain an unfair advantage over their
competitors. Transit fraud also deprives the transit country
of its legitimate revenue, and undermines its fiscal and
economic stability.
In Zimbabwe, fuel is one of the most imported commodity
and very expensive, due to high taxes and levies imposed
by government. Therefore, fuel is a lucrative target for
smugglers who want to make huge profits by avoiding
customs duties and taxes.
According to reports at hand, the smugglers engage in
organized crimes with clearing agents, customs officers,
some law enforcement officers and transporters. The
smugglers obtain transit documents and seals from
ZIMRA and other authorities and place them on their
trucks.
The smugglers offload and sell the fuel
in Zimbabwe at higher prices than the
official price. The smugglers then load
the trucks with water and proceed to
Chirundu One Stop Border Post for
acquittal process purpoting to be
carrying fuel, where they remove seals
and presents their transit documents.
The smugglers enter into Zambia where
they will drain the water and buy
cheaper fuel for delivery to their
customers or even come up with
fictitious transactions and make a u-turn
to Zimbabwe. Because of the different
taxes and prices, such a deal would
make the smuggler an undeserved
profit with the consignment.
ZIMBABWE RIT CLEARANCE PROCEDURES PORT OF ENTRY
When a truck arrives at the entry point, the driver
hands over all documentation to a registered
Clearing Agent who has an RIT bond with ZIMRA
who then prepares a Bill of Entry for the
consignment. The bill of entry should clearly
specify the port of exit, the registration number for
the truck, correct tariff code for the goods, correct
valuation and the correct identification number of
the Clearing Agent as he will be responsible for the
consignment from the time he submits the
documents until it leaves the country. After data
capture the bill of entry and all the attachments are
submitted to ZIMRA for processing through
ASYCUDA (Automated System for Customs
Data).The bill of entry is examined, assessed and
handed over to a ZIMRA Bonds officer who will
transmit the bill of entry to the declared or intended
port of exit by generating a document known as a
T1 using the Transit module (MODTRANS) of
ASYCUDA. This process by the Bonds officer will
deduct an amount equal to the duty at stake from
the agent’s bond and will alert the intended port of
exit that the consignment will be passing through
their exit point within the next three days. The T1
reference number is endorsed on the bills of entry
and all documents are stamped and released to
the Clearing Agent who will then hand them over to
the driver to proceed to the port of exit.
At this point if the consignment is classified as
risky, papers are withheld and arrangements are
made for the truck to be escorted by the ZIMRA
escort team until it leaves Zimbabwe through the
intended port of exit. If the consignment is
containerized or is a fuel tanker, and there is no
need for escort, the container or tanker is sealed
with an electronic seal before leaving the customs
yard at the Port of entry and the seal numbers are
endorsed on the bill of entry and truck manifest
before the truck is allowed to proceed. The
Customs seals that are used by the ZIMRA are the
mechanically strong bolt type that can only be
opened using a bolt cutter or cutting torch.
Port of Exit
At the port of exit the truck driver submits
documents to ZIMRA or a representative of the
Clearing Agent who cleared him at the port of
entry and avails his truck for examination if
required. The ZIMRA officer will check if the
truck arrived on time (within 3 days), truck
registration numbers against the bill of entry,
seal numbers and description of goods. If
everything is correct the details are entered in
the RIT exit register and a running number is
given to the manifest and endorsed on all
documents including the bill of entry. After this
the ZIMRA officer will remove the electronic seal
before acquitting the bill of entry in the
MODTRANS module of the ASYCUDA system
using the T1 reference number generated by the
Bonds officer at the port of entry by capturing
the manifest running number in the system and
transmitting it to the port of entry. This process
releases the guarantee amount that was held by
the bill of entry when the truck entered the
country. When this is done the truck is allowed
to leave Zimbabwe and proceed to the next
country.
ZIMRA CONTROL
The main control features of the Zimbabwean RIT
system against RIT abuse are the online acquittal
system, strong electronic seals, escorting the vehicles
and enforcing the Bond Guarantee system.
HOW FUEL RIT FRAUD IS BEING DONE ON FORBES-CHIRUNDU ROUTE.
According to ZIMRA’s Head Corporate Communications representative, talking to social media on 263Chat, he highlighted how the fuel RIT fraud is being done as follows;
- The smugglers scout for ports in the region with the weakest controls, where they can declare falsely low values or quantities for their fuel imports.
- The smugglers obtain transit documents and seals from ZIMRA or other authorities, and place them on their trucks.
- The smugglers offload and sell the fuel in Zimbabwe at higher prices than the official market prices.
- The smugglers load the trucks with water and proceed to Chirundu for the acquittal process, where they remove the seals and present their transit documents.
- The smugglers enter Zambia where they drain the water and buy cheaper fuel for delivery to their customers or they come up with fictitious transactions purpoting to have sold fuel outside Zimbabwe.
Existing Customs Transit Fraud Fighting Procedures
Electronic Cargo Tracking System (ECTS) was
rolled out (one of the best under WCO).
Sealed fuel trucks that transit through
Zimbabwe, are monitored by an Electronic
Cargo Tracking System (ECTS) operated by
ZIMRA’s Customs and Excise Division. The
trucks use dedicated routes and any departure
from these routes attracts a fine of US$2 000.00.
Removal of seals is a serious offence, which also
attracts a hefty fine. ZIMRA has been trying to
combat transit fraud by leveraging on technology
and data matching. ZIMRA uses an Electronic
Cargo Tracking System (ECTS) to monitor the
movement of sealed transit trucks across the
country. The ECTS uses GPS devices that are
attached to the trucks and transmit real-time
information on their location, speed, route, etc.
The ECTS alerts ZIMRA if there is any tampering
with the seals or deviation from the designated
routes. ZIMRA also uses data analysis tools to
identify any anomalies or discrepancies in the
declarations or documents of transit trucks.
Goods removed in transit are expected to make
exit within three days. The bill of entry will be
acquitted in the system as proof that the goods
have made exit. Otherwise, they should be
delivered to ZIMRA customs within that period
and failure to do so attracts a fine.
Most of the systems of managing and processing removals in transit that are in use today follow major guidelines from the World Customs Organization (WCO) in the Revised Kyoto Convention (RKC) under transit guidelines (2017 publication). According to the RKC, the transit guarantee and strict security measures such as Customs convoys
or escorts are mutually exclusive practices –whenever a guarantee is provided, Customs convoys or escorts should not be applied. In exceptional cases, or at the request of the operator, Customs convoys and escorts can be applied. TIR Convention under Transit Guidelines provide recommendations for the following matters related to the customs seals and other security measures:
- General principles for the use of Customs seals
and other security measures; - Specific provisions on Customs seals;
- Electronic Customs seals (not covered by the RKC);
- Security measures for loading units (not covered by the RKC);
- Prescribed time limit and transit itinerary;
- Customs convoys and escorts;
- Road checkpoints.
How these measures affect clearing agents operations
- Delays
The proposed procedure is tiresome, the challenge may start with the depositing of funds which sometimes take time to reflect. Already sometimes there are long queues here and there experienced at Forbes and Chirundu and this will add disaster. - Additional Costs,
The clearing agent who are clearing these fuels already have RIT Agent bond with ZIMRA on which they are paying insurance to insurance companies, so now
introducing new procedure means that they have to make an arrangement to deposit money into their prepayment account for them to do fuel RIT. Therefore additional funds are needed. - Refund processes
Although, the minister directed the Zimbabwe Revenue Authority to manage the duty refund process efficiently through dedicated bank accounts, when it comes to Zimra refund process, it has always
been a battle. It is highly likely that these refunds will take time to be reversed back into agent’s prepayment accounts. This will further disrupt business, causing delays and congestions at ports of entry, thereby increasing cost of doing business.
Recommendations
The new proposed duty depositing procedure is likely to fail because, the procedure is targeting the duties in ASYCUDA rather than the actual product. In a coordinated smuggling, the money can be deposited and acquitted very easily, purported fuel which in many cases is the water, can be acquitted. The issue is to strictly keep the eye on the product from the port of entry and port of exit by, improving on IT tools.
The information at hand is pointing to the fact that the major weaknesses of the RIT system used by ZIMRA
are connectivity lapses, poorly developed RIT modules for use by staff and clearing agents, poor record
security/data security, integrity issues or challenges, corrupt business community, lack of support systems to complement the existing system like the cargo monitoring systems and effective risk management systems, weak monitoring systems, fraudulent Guarantors and too much human
intervention/interference in the system.
I can recommend that ZIMRA can improve its RIT
system through implementing transit escorts,
prescription of transit routes (modern E-Customs
seals are based either on radio frequency
identification (RFID) or global positioning system
(GPS) technology) and check points along those
routes (Customers officers should be dotted along
the routes deemed to be high transit fraud risk),
registration of guarantors (should be able to refund
in case of risk), improvement in network
connectivity (real time tracking), effective risk
assessment and profiling system (AEO), effective
use of approved seals, improved communication
between stations, adopting regional modules such
as Carnet, SADC transit Module and COMESA
transit system and involve importers and other
stakeholders in compliance management and
education. Another remedy is effecting punitive
measures to convicted fraudsters and smugglers
through a professional judicial system.
About the Author
Trythanks Taona Nyikadzino,is a Lecturer, the
President and Founder of Freight Architects and
Treasurer of PCBAZ,a highly skilled and
experienced Management Professional who
brings invaluable insight into the world of
International Trade. He has an extensive work
experience in the arenas of Customs, Cargo,
Freight Forwarding, Imports and Exports.
