Rajesh Rai
The Anti-Corruption Commission (ACC) has interrogated 61 individuals and collected 87 statements so far as it investigates alleged corruption at the Mini Dry Port (MDP) and truck parking (temporary) port in Phuentsholing.
The ACC has detained eight people but four have been released. Of the other four, three are customs inspectors and a businessman. They are still under detention for further investigation. The businessman runs a hardware shop, sources said.
An official from the commission said, “The ACC is fully aware that customs officials who are yet to be investigated are already fabricating stories to cover up their ill-gotten gains using their relatives and friends.”
The official said that anyone who is trying to interfere and frustrate the investigation will face rigorous examination and will not be spared from legal consequences.
Sometime in July 2021, the ACC was alerted about the possible existence of bribery and extortion by customs officials and loaders in connection to the import and transhipment of goods through the Mini-Dry Port (MDP) and other designated areas. The investigation was launched at a time when there was heightened concern about the unrelenting surge in Covid-19 cases in Phuentsholing despite being under strict lockdown.
The MDP
The Mini- Dry Port (MDP) operation started in November 2019 under the Phuentsholing thromde and was handed over to the Department of Revenue and Customs in October 2020. The port was constructed in 2017 as a South Asian Subregion Economic Co-operation (SASEC) project at a cost of Nu 166.019 million.
Before 2020, imports from India and third countries entered through the main border gate, Phuentsholing.
After the international border closed in March 2020, consignments entering Phuentsholing came through Bow Bazaar.
MDP has been designated as one of the self-containment areas. In each batch, 20 customs inspectors are placed at the MDP and truck parking on a monthly shift basis. They work in shifts every alternate day.
Importers have to register with the customs before entry. The registration officer sends the list of vehicles every evening to the Shift-In-charge for clearing on the following day. The importer is required to provide the vehicle number, clearing agent, along with invoices as an attachment. The Indian truck carrying the consignment is allowed to enter through Gate 1 and temporarily held in the holding area. The Shift-In-Charge forwards the invoices to the clearing agents to initiate the declaration process. Once the invoices are entered in the BACS, items are classified and the declaration form is printed, a temporary registration number is assigned for each declaration. The vehicle is then moved to the transhipment area where goods are unloaded from the Indian trucks and loaded into the Bhutanese trucks. Customs inspectors who are on physical inspection duty may or may not inspect the goods. Some transhipment and physical inspection take place in the truck parking. No transhipment is required for vehicles carrying single or homogenous commodities which are headed for warehouses under escort.
Upon completing the physical inspection stage, the importer is required to pay the assessed tax amount. The tax payment has to be deposited into SBA which will be verified by the revenue officer before issuing the money receipt and assigning a permanent registration number. For third-country import, the assessment and tax settlement are done at the regional customs office. For non-taxable items, the process ends with a customs official assigning the permanent registration number. Once the payment process is completed, the trucks are allowed to exit through gate 2. A form has to be sequentially endorsed and signed by the official sitting on temporary registration, physical inspection and revenue officer.
Rampant bribery
The commission’s investigation revealed the prevalence of bribery and extortionary practices mainly involving loaders and customs officials at the MDP. Loaders demanded money from importers more than the prescribed official rates. The demand went up if they came across contraband or prohibited items like tobacco, narcotics, plastic etc. a source said.
The source said that one time a group of loaders discovered tobacco products hidden inside the consignment belonging to a businessman. The loaders demanded Nu 100,000 but later negotiated for Nu 80,000. However, the man informally sought the assistance of a policeman to get back the money. Out of fear of being reported to the police, the loaders returned the money after the policeman’s intervention but, in retribution, lodged a complaint against the man for importing tobacco. He was subsequently arrested by the police in June 2021 and is being charged in Phuentsholing drungkhag court.
Earlier attempts to break into the bribery racket were not so successful since the exchange of bribes and kickbacks were done in cash. However, during the pandemic period, the situation changed. The entry of goods became regulated and the transhipment process made importers difficult to evade declarations. As the border was closed and under stringent enforcement of Covid-19 protocols followed by intermittent lockdowns, cash transactions became difficult forcing businessmen to use mobile app and RTGS. Under the new normal, person to person interface in a containment area was practically not feasible and monetary transfers had to be routed through banks. Covering the tracks of one’s misdeeds became difficult.
The source said that it is becoming clear that customs inspectors were involved in soliciting bribes from importers and suppliers in a more discreet way. They used social messaging app for surreptitious communication and to pass on bank account details where the money is to be deposited. To disguise the origin, they resorted to using bank accounts of acquaintances and business people to blend their money with normal business-related financial activities. They held their illicit fund in other people’s accounts and either moved from one account to another or invested in commercial activities or interest-bearing deposits held in the name of their relatives.
“The nexus is deep-seated, complex and exist in varied form. In general, bribe paying parties are mostly from across the border and often facilitated by a middleman (dalal) and clearing agents,” the source said.
In most cases, the bribe payer and the receiver did not have direct contact. The bribe component is built in the cost of the goods and billed to the Bhutanese importers. In one consignment, the supplier calculated Nu 30,000 as ‘customs setting’ from smuggling in 60 bags of plastic which is a prohibited item. Some Custom inspectors had set up with some suppliers in India as well as some importers in Bhutan. In such cases, suppliers sent their consignments only when the relevant customs inspector was on duty, the information which would have been already relayed in advance. An importer dealing in supply of betel nuts and leaves, who is believed to have made fortune during the pandemic, sought to establish a link with customs officials as it was unpredictably and risky for him to bring undervalued or illegal consignments with an established setting with customs, according to the source.
Officials found evidence that showed that importers arrange with suppliers across the border to undervalue their invoice by 50 percent for declaration at the customs check post. Half of the tax evaded, sometimes even more went to the customs officials whereas the remaining half remained as a benefit to the importer.
It was found that the demand for bribes mainly comes from customs inspectors whose day’s shift fell on physical inspection. The payments collected from parties are shared among themselves. However, the one who signs on the declaration forms takes a bigger cut for taking the risk.
Other suspected reasons for bribery are falsifying declaration i.e. understating quantity of higher tax items and vice versa; passing contraband items like tobacco and narcotics; arranging and certifying fake import documents for sending RTGS; facilitating the release of stranded consignments without imposing demurrage charges; assisting the movement of physical cash through the border and withholding of invoices from processing for declaration.
Corruption worsen during pandemic
Preliminary investigation revealed that two private individuals teamed up to venture on betel nuts supply business. They imported vegetables and doma using four licenses. Between 2020 and mid-September 2021, the combined value of betel nuts or leaves imported amounted to Nu 176.419 million which accounts for more than 56 percent of the total betel nut import through Phuentsholing. However, they were also involved in the smuggling of tobacco products hidden in vegetables and betel nut consignments as well as other fraudulent financial scams. They are also suspected to be sending cash collected from selling tobacco to Jaigaon through some carriers. One of them was arrested for smuggling tobacco in June 2021 and is currently released on bail.
The duo established a link with certain customs officials and paid bribes ranging from Nu 11,000 to Nu 80,000 per instance. They paid bribes to evade 20 percent sales tax on half the value of betel nut consignment. They also evaded tax by falsifying the proportion of consignment between betel nut and betel leaves because of wide differences in tax rate which means they declared more quantity of items with lower tax rates or zero tax rate and vice versa when the reality was otherwise. The pattern of their travel showed that they cleared their consignment late in the evening when the MDP is about to close its business hour.