GUC, importers fighting over import values
Since March 1, GUC has instituted what it calls more careful clearing procedures to assess the value of imported textiles. The reason is to protect domestic textile producers from what they believe are underpriced imports.
But importers believe GUC is imposing minimum values for textiles, which would violate World Trade Organization (WTO) and General Agreement on Tariffs and Trade (GATT) agreements.
As a result, importers are beginning to hold shipments in other countries for fear of having values imposed on goods that are higher than the amount they actually paid for the garments.
In addition, GUC has allegedly sent instructions to its offices that include a list of minimum prices for a group of textile products, according to importers who refused to be named for fear of incurring the wrath of customs officers.
But GUC last week adamantly denied any attempt to impose minimum prices, saying it had only issued price guidelines, which are acceptable under WTO and GATT agreements.
"These are not minimal prices," said Krystyna Urbanska, a GUC spokeswoman. "Indeed we have distributed a list of so-called price examples and based on these prices custom officers are obliged to question textile imports if they think the value of the import was understated."
The guidelines were to take effect March 1 and apply to textiles imported from Turkey, China, South Korea, Thailand, India, Indonesia, Bangladesh, Vietnam and Taiwan.
GUC is part of a committee formed late last year to help stop the slide of the Polish textile industry. The committee includes domestic textile producers, GUC, the sector's employees and the Economy Ministry. The latter is expected to produce a report by June outlining a strategy to turn the industry around. According to the Central Statistical Office (GUS), over the first 11 months of 1998, Poland imported textiles and textile articles worth zl. 11.5 billion ($3.2 billion), an almost 20% increase over the same period the previous year. On the domestic production side, Polish companies in 1998 produced 206,463 square kilometers of cotton fabrics, which is a 52% decrease from 1990 levels.
Importers were not able to produce a copy of an internal GUC memo they said ordered officers to impose minimal prices. Several said they had been told of the memo and read its contents by sources within GUC. According to these importers, the memo reportedly said: "The prices are to be treated as a minimal value on the basis of which itemized value of a given article will be assessed."
In an interview with the Business Journal, a director of a customs office in southern Poland who refused to be name for fear of being fired said orders relating to minimum pricing were given.
"We received (the document) at the end of last month, with a clear instruction that we are to follow the regulations but we cannot tell anybody that we are following them," the director said.
The official added that while the idea of giving general pricing guidelines is a good one, the fact that the document had a fixed price for every textile mentioned was wrong. "This is what we do every day, we clear customs," he said. "And I really do know that in most cases saying that zl. 10 for a T-shirt made in China is the minimum is simply not true." According to reports of the memo, zl. 10 was the value to be assessed for imported T-shirts.
The director said that although customs officers disagreed with the idea of fixed prices, they had no choice but to question the value of the import if the declared value is below the GUC list. "It's either this or I lose my job," the official said. "You don't question orders given by your supervisors if you work in administration."
If GUC were to impose minimum values it would amount to a tariff increase. Textile importers pay a 20.8% duty on the value of goods imported from Far East countries. If the assessed value of a good increases, the amount of tariff to be paid also goes up. In this case an importer either has to charge more or make less in what is typically a low-margin industry.
"If this is really going on, the regulations seem to violate provisions of the WTO (World Trade Organization), which Poland has been a member of since 1994," said Tomasz Cecelski, the head of the import tariffs department at Deloitte & Touche and formerly deputy president of GUC.
He added that customs must have a "justified doubt" for questioning an import's value and cannot do so across the board for a group of products. "International agreements that Poland has entered provide for standardized procedures that are taken only when there is a justified doubt as far as the value declared in the invoice," he said.
Cecelski and other customs specialists said that to assess minimum values on imported products would be illegal according to GATT, one of the basis agreements within the WTO that prohibits minimum values which are arbitrary and specifically prohibits the valuation of products based on local production costs.
While importers would not openly make their charges that GUC is imposing minimum prices, some were willing to talk about difficulties that have arisen with shipments since the beginning of March.
They added that there is now a fear that legal invoices from reputable companies will not clear customs and will have values challenged. In this case it can lead to products being tied up in customs for at least a month. Ocean, a publicly listed company and one of the country's largest importers of Chinese T-shirts, could not list values that are lower than the price paid, said Jerzy Wolak, deputy president. "Otherwise we'd just sink to the bottom," he added.
In 1998, Ocean imported 4 million-5 million T-shirts and reported 1998 net sales of zl. 91.88 million ($26.3 million). But for the past few weeks it has not been importing shirts. "Why? Because I know I would have to pay an additional zl. 100,000 per each container of T-shirts just because our prices would be below the minimum (GUC) level," Wolak said. "That why we and all the others are waiting."
GUC said such fears were unjustified, adding that only price guidelines have been issued. "The customs regulations have not changed," said Mariusz Misztela, head of GUC's value department. "We're just trying to make sure customs officers do know the value of certain textile products."
Other importers added that they had nothing against thorough clearings, but not based on arbitrary values.
"The fact that GUC has decided to do something about (illegal importers) is generally good news," said John Lynch, president of Lynka Promotional Textile, which imports shirts from both the Far East and Western Europe. "However, assessing arbitrary values to classes of products is the wrong approach."
Importers added that what GUC calls guidelines are not in line with the true value of their products. "It had already started last year and with the beginning of March it just got ridiculous," Ocean's Wolak said. Last November Ocean imported Chinese T-shirts that had an invoice value of $5,151 for which it should pay zl. 4,093 in customs tariffs. But the invoice value of about zl. 3.40 per shirt was challenged.
"We paid about zl. 3.40 per T-shirt, but customs officers decided that the real price was zl. 5.33, regardless of what the invoice said," Wolak said. As a result, the company had to pay duties of zl. 7,905 on the cargo that customs officers decided was worth $9,947. "Nobody cared that what we actually paid for it was zl. 3.40 and not zl. 5.33," Wolak said.
The company appealed the valuation to GUC, but the appeal was dismissed. The office said the higher price was based on "market research" and represented the real value of the cargo. "So it's pretty obvious that now we prefer to wait," Wolak said.
Any decision on customs valuations may be appealed to GUC, Urbanska said. A further appeal can be lodged with the Supreme Administrative Court (NSA).
"This is what we plan to do next time," said Wolak. "We'll go to NSA."
While wholesale companies like Ocean, which make money on the large turnover of low margin products, can afford to wait or appeal, smaller importers don't have the same room to maneuver and need certainty.
"When the customs office announces new duties in January of each year, importers already need to plan their imports and prices for customers," said Lynch. "When a few months into the year, like now, they change the rules, it can dramatically affect the business, and in some cases even cause companies to go bust."
But importers believe GUC is imposing minimum values for textiles, which would violate World Trade Organization (WTO) and General Agreement on Tariffs and Trade (GATT) agreements.
As a result, importers are beginning to hold shipments in other countries for fear of having values imposed on goods that are higher than the amount they actually paid for the garments.
In addition, GUC has allegedly sent instructions to its offices that include a list of minimum prices for a group of textile products, according to importers who refused to be named for fear of incurring the wrath of customs officers.
But GUC last week adamantly denied any attempt to impose minimum prices, saying it had only issued price guidelines, which are acceptable under WTO and GATT agreements.
"These are not minimal prices," said Krystyna Urbanska, a GUC spokeswoman. "Indeed we have distributed a list of so-called price examples and based on these prices custom officers are obliged to question textile imports if they think the value of the import was understated."
The guidelines were to take effect March 1 and apply to textiles imported from Turkey, China, South Korea, Thailand, India, Indonesia, Bangladesh, Vietnam and Taiwan.
GUC is part of a committee formed late last year to help stop the slide of the Polish textile industry. The committee includes domestic textile producers, GUC, the sector's employees and the Economy Ministry. The latter is expected to produce a report by June outlining a strategy to turn the industry around. According to the Central Statistical Office (GUS), over the first 11 months of 1998, Poland imported textiles and textile articles worth zl. 11.5 billion ($3.2 billion), an almost 20% increase over the same period the previous year. On the domestic production side, Polish companies in 1998 produced 206,463 square kilometers of cotton fabrics, which is a 52% decrease from 1990 levels.
Importers were not able to produce a copy of an internal GUC memo they said ordered officers to impose minimal prices. Several said they had been told of the memo and read its contents by sources within GUC. According to these importers, the memo reportedly said: "The prices are to be treated as a minimal value on the basis of which itemized value of a given article will be assessed."
In an interview with the Business Journal, a director of a customs office in southern Poland who refused to be name for fear of being fired said orders relating to minimum pricing were given.
"We received (the document) at the end of last month, with a clear instruction that we are to follow the regulations but we cannot tell anybody that we are following them," the director said.
The official added that while the idea of giving general pricing guidelines is a good one, the fact that the document had a fixed price for every textile mentioned was wrong. "This is what we do every day, we clear customs," he said. "And I really do know that in most cases saying that zl. 10 for a T-shirt made in China is the minimum is simply not true." According to reports of the memo, zl. 10 was the value to be assessed for imported T-shirts.
The director said that although customs officers disagreed with the idea of fixed prices, they had no choice but to question the value of the import if the declared value is below the GUC list. "It's either this or I lose my job," the official said. "You don't question orders given by your supervisors if you work in administration."
If GUC were to impose minimum values it would amount to a tariff increase. Textile importers pay a 20.8% duty on the value of goods imported from Far East countries. If the assessed value of a good increases, the amount of tariff to be paid also goes up. In this case an importer either has to charge more or make less in what is typically a low-margin industry.
"If this is really going on, the regulations seem to violate provisions of the WTO (World Trade Organization), which Poland has been a member of since 1994," said Tomasz Cecelski, the head of the import tariffs department at Deloitte & Touche and formerly deputy president of GUC.
He added that customs must have a "justified doubt" for questioning an import's value and cannot do so across the board for a group of products. "International agreements that Poland has entered provide for standardized procedures that are taken only when there is a justified doubt as far as the value declared in the invoice," he said.
Cecelski and other customs specialists said that to assess minimum values on imported products would be illegal according to GATT, one of the basis agreements within the WTO that prohibits minimum values which are arbitrary and specifically prohibits the valuation of products based on local production costs.
While importers would not openly make their charges that GUC is imposing minimum prices, some were willing to talk about difficulties that have arisen with shipments since the beginning of March.
They added that there is now a fear that legal invoices from reputable companies will not clear customs and will have values challenged. In this case it can lead to products being tied up in customs for at least a month. Ocean, a publicly listed company and one of the country's largest importers of Chinese T-shirts, could not list values that are lower than the price paid, said Jerzy Wolak, deputy president. "Otherwise we'd just sink to the bottom," he added.
In 1998, Ocean imported 4 million-5 million T-shirts and reported 1998 net sales of zl. 91.88 million ($26.3 million). But for the past few weeks it has not been importing shirts. "Why? Because I know I would have to pay an additional zl. 100,000 per each container of T-shirts just because our prices would be below the minimum (GUC) level," Wolak said. "That why we and all the others are waiting."
GUC said such fears were unjustified, adding that only price guidelines have been issued. "The customs regulations have not changed," said Mariusz Misztela, head of GUC's value department. "We're just trying to make sure customs officers do know the value of certain textile products."
Other importers added that they had nothing against thorough clearings, but not based on arbitrary values.
"The fact that GUC has decided to do something about (illegal importers) is generally good news," said John Lynch, president of Lynka Promotional Textile, which imports shirts from both the Far East and Western Europe. "However, assessing arbitrary values to classes of products is the wrong approach."
Importers added that what GUC calls guidelines are not in line with the true value of their products. "It had already started last year and with the beginning of March it just got ridiculous," Ocean's Wolak said. Last November Ocean imported Chinese T-shirts that had an invoice value of $5,151 for which it should pay zl. 4,093 in customs tariffs. But the invoice value of about zl. 3.40 per shirt was challenged.
"We paid about zl. 3.40 per T-shirt, but customs officers decided that the real price was zl. 5.33, regardless of what the invoice said," Wolak said. As a result, the company had to pay duties of zl. 7,905 on the cargo that customs officers decided was worth $9,947. "Nobody cared that what we actually paid for it was zl. 3.40 and not zl. 5.33," Wolak said.
The company appealed the valuation to GUC, but the appeal was dismissed. The office said the higher price was based on "market research" and represented the real value of the cargo. "So it's pretty obvious that now we prefer to wait," Wolak said.
Any decision on customs valuations may be appealed to GUC, Urbanska said. A further appeal can be lodged with the Supreme Administrative Court (NSA).
"This is what we plan to do next time," said Wolak. "We'll go to NSA."
While wholesale companies like Ocean, which make money on the large turnover of low margin products, can afford to wait or appeal, smaller importers don't have the same room to maneuver and need certainty.
"When the customs office announces new duties in January of each year, importers already need to plan their imports and prices for customers," said Lynch. "When a few months into the year, like now, they change the rules, it can dramatically affect the business, and in some cases even cause companies to go bust."
