1.  BACKGROUND

  1.1  We notice from a recent Press Release that the Treasury Sub-Committee will initiate a review of the work of HM Customs & Excise, under specific terms of reference, and would therefore like to register the Institute's interest in this inquiry by making the following submission.

  1.2  As a brief background introduction, the Institute holds Chartered Status and represents predominantly Ship's Agents, Shipbrokers and Shipmanagers, engaged in international shipping and commerce, based both in the UK and abroad. Membership is structured on two parallel levels, a professional membership consisting of private individuals, together with a corporate structure consisting of company members. The Institute has a strong representational base throughout the UK at all notable ports and harbours, our members being in regular daily contact with Customs operational and administrative staff at all levels. We confidently believe this unique position gives us a well-respected and influential voice within the Shipping Industry sector. The Institute was also one of the inaugural organisations to agree a Memorandum of Understanding (MOU) with Customs in support of their anti-smuggling campaign. Several years ago the Institute was chosen by Trinity House as its collecting agent for light dues, following the advent of the single-market when Customs began amalgamating offices and re-focusing their activities, so consequently were no longer capable of offering the same degree of UK coverage.

  1.3  This single-market rationalisation, in conjunction with expanding computerised control of freight movements, through direct trader input into CHIEF and associated developments of port based inventory linked control systems, has resulted in a drastic reduction in volumes of processed paperwork. The Customs Service has therefore undergone something of a major metamorphosis in recent years, which has enabled them to re-focus and re-target their resources perhaps to better overall advantage in this vastly different environment. This restructuring period had evidenced a gradual contraction in front-line personnel by natural wastage and re-development, and these levels are projected to fall even further during the current fiscal round.

  1.4  Continually tightening budgetary constraints inevitably create a challenging delicate balance between matching available financial resources on the one hand, while delivering the quality of service expected by business within set Charter Standards, and whilst at the same time enforcing levels of compliance in accordance within agreed Government objectives.

  1.5  Against this background, the Institute is becoming concerned with some aspects of this continued depletion in resources which might impair Customs capability to maintain a high priority for trade facilitation by responding to legitimate business needs, especially as international commerce is after all the "life-blood" of the UK economy.

  1.6  We fully agree that combating tax/duty evasion by implementing adequate anti-smuggling preventive measures are very important issues, but their primary commitment to trade facilitation must not be neglected.

  1.7  More frequent and more stringent preventive controls to combat these illegal activities are likely to have a retrograde effect by interrupting freight movements and eroding benefits of the free-market system to the detriment of UK plc which relies heavily on sea-borne trade.

  1.8  In the light of the Committee's inquiry into a possible merger or closer co-operation with the Inland Revenue, the Institute is becoming increasingly anxious that full cognisance is given to UK business needs to ensure that trade facilitation remains a high priority and a primary object within any re-vamped strategy.

  1.9  The Institute has enjoyed a long-standing and excellent co-operative rapport with Customs through the JCCC (Joint Customs Consultative Committee). As Industry stake-holders with a vested interest in any radical changes affecting operational or procedural matters, we hope that through this forum there will be an opportunity to discuss in much more detail any envisaged changes affecting our members.

2.  TRADE FACILITATION

  2.1  Regionalisation into semi-autonomous units results in fragmented approach to policy implementation—needs a more co-ordinated and more co-operative approach between regions and HMC headquarters to ensure common consistency and full harmonisation.

  2.2  Some ominous signs we suspect may be symptomatic of over-stretched resources.

3.  SHADOW ECONOMY

  3.1  We have no real substance or tangible proof/evidence to submit—can only offer conjecture and hypothesis.

  3.2  Contraband categories:

  3.3  ICS members report suspicious incidents under MOU.

  3.4  ICS members are indirectly affected when seafarers become involved in trafficking offences—supplementing their wages from low income zones.

  3.5  Governments inability to agree on tax/duty convergence prior to single market inception together with the widening gap of the duty/excise/tax rates between neighbouring states exacerbates the problem. Clearly the greater the perceived gains increases the temptation for persons and companies to take risks. The greater the number involved makes the enforcement of compliance more difficult.

  3.6  Committing additional funding and resources can only be a temporary short-term fix. In our opinion the only logical ultimate long-term solution is to tackle the real root cause of the problem and work towards harmonisation of rates with our nearest neighbours.

  3.7  After trade facilitation, anti-drugs measures must be the next highest priority as drugs are a greater social/public menace than alcohol/cigarettes etc.

1 October 1999