June 2011 Report - PNG Customs Service

22 nd August 2011
Hon. Don Polye
Minister for Treasury
Department of Treasury
Vulupindi Haus
P. O. Box 710
Waigani 131
National Capital District
My dear Minister,
ACTIVITY REPORT FOR JUNE 2011
Whilst I present the Monthly Activity Report for June 2011, I wish to congratulate you on
behalf of PNG Customs Service on your appointment to the Finance and Treasury
ministry in the new government. With great pleasure we look forward to working with you
in addressing some of the critical issues relating to Customs operations.
Minister, on the revenue matter Customs revenue collections for the month of June were
lower than 2011 Budget estimate by – K5.54 million or -3%. The actual collections
totalled K165.36 million compared to an expected K170.90 million. This is a decrease of -
1% (- K1.15 million compared to K166.51 million) in the equivalent period last year.
When the June figures are added to the outcome for previous months in 2011, the
aggregate collections for the January to June period are higher than the Budget forecast
(by K85.66 million, or 9% ahead K974.35 million estimate).
The desirable collections for the month is attributed to higher import GST (K8.24 million),
import duty (K3.03 million) and export duty (K2.87 million). Nominal Revenue comprising
of foregone duties and actual collections have shown a massive surplus of K56 million.
Total collections would have reached K2826.50 million and that was well above the
expected collection of K170.90 million.
Minister, albeit shortfalls in local excise (- K14.20 million) and import excise (- K5.32
million), I am delighted to inform you that the considerable aggregate collections have
offset the deficit at a level which is higher than the equivalent end-June period last year.
Yours sincerely,
Gary Juffa
Commissioner of Customs.
cc:
Manasupe Zurenuoc
Chief Secretary
Department of Prime Minister and NEC

Activity report for June 22 nd August, 2011
Stanis Hulahau
Director General
Office of Security Coordination & Assessment
Mr. Simon Tosali
Secretary
Department of Treasury
Mr. Andrew Oaeke
First Assistant Secretary
Economic Policy Division
Department of Treasury
Ruby Zariga
Acting Secretary
Department of National Planning & Monitoring
Mr. Steven Gibson
Secretary Department of Finance
Mr. Loi Bakani
Governor, Bank of Papua New Guinea
Ms. Betty Palaso
Commissioner General, Internal Revenue Commission
Mr. John Kali
Secretary, Department of Personnel Management
2

Activity report for June 22 nd August, 2011
ACTIVITY REPORT FOR MONTH OF JUNE
A. REVENUE COLLECTION
Revenue Collection Outcomes in June 2011
Customs Actual Expected Surplus/ Surplus
Duties Collections Collections Shortfall in Shortfall
Collections (%)
Collections Import Duty 21.88 18.85 3.03 16%
in June Import GST 82.69 74.45 8.24 11%
Import Excise 11.21 16.53 - 5.32 -32%
Export Duty 20.68 17.81 2.87 16%
Inland Excise 28.75 42.95 - 14.20 -33%
Sundry Receipts 0.15 0.31 - 0.16 -52%
Total 165.36 170.90 - 5.54 -3%
Cumulative Import Duty 119.55 120.72 - 1.17 -1%
Collection to Import GST 504.26 430.06 74.20 17%
end - June Import Excise 103.04 99.91 3.13 3%
Export Duty 121.07 90.11 30.96 34%
Inland Excise 209.66 231.12 - 21.46 -9%
Sundry Receipts 2.42 2.43 - 0.01 0%
Total 1,060.01 974.35 85.66 9%
* (Collections expressed in 'Millions of Kina)
Total Collections in June 2011 – K165.36 million
Summary collections for the month of June 2011 were K165.36 million. This is K5.54
million or 3% lower than the 2011 Budget expectation of K170.90 million. Compared to
the equivalent prior-year month of June 2010, the result is 1% lower than the K166.51
million collected in that month.
The following duties collected were above projected receipts for June 2011; Import gst,
import duty and export duty. On the contrary local excise and import excise recorded
deficits. Significant variations in total Customs duties comprise stronger than expected
import gst (K8.24 million), import duty (K3.03 million) and export duty (K2.87 million)
whilst local excise (-K14.20) and import excise (-K5.32 million) were lower than expected.
3
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
Surplus of K8.24 million – June 2011 Import GST Collections
Import gst collections for the month of June 2011 of K82.69 million was higher than
projection, with surplus of K8.24 million (or 11%) compared to the Budget estimate of
K74.45 million. This surplus is attributed to increase in the volume of international trade
on general imports with a suspected fall in import gst concessions granted to mining
industries.
Surplus of K3.03 million – June 2011 Import Duty Collections
Import duty collections for the month of June 2011 totalled K21.88 million that was
K2.71million (16%) more than the Budget forecast of K18.85 million, and 22% higher
than the amount collected for the equivalent period last year. This increase was due to
rise in the international trade resulting in increased volume of import especially for goods
with higher tariff rates. Bigger proportion of this duty is collected from the two major ports.
Lae accounted for 36% or K7.96 million while Port Moresby collected 33% or
K7.13million. The residual (31%) was collected from other ports.
Surplus of K2.88 million - June 2011 Export Duty Collections
Export duty collections of K20.69 million in June 2011 were K2.88 million above
projections and 23% more than the collections for the equivalent period last year. The
rise in export duty was due to increase in the volume of log exports in major logging
ports. Kimbe port has collected 25% of the total exports which also means a reasonably
large quantity than expected volume was exported in the month.
The logging ports that contributed toward export duty for the month of May in descending
orders were:
• Kimbe collected K5.09 million, or 25% of total export duties,
• Vanimo collected K3.50 million, 17% of total export duties
• Rabaul collected K3.14 million, 15% of total export duties
• Port Moresby collected K3.14 million, 15% of total export duties, while
• Daru collected K2.16 million, 10% of total export duties
• The rest of logging ports collected K2.14 million, or the remaining 18%.
Shortfall of K14.20 million - June 2011 Local Excise Collections
Domestic excise collections for the month of June of K28.75 million were lower than
projection, with deficit of K14.20 million or - 33% less compared to the Budget estimate of
K42.95 million.
Most excise declarations were lodged in Port Moresby offices. Port Moresby accounted
for 99% collection or K28.43; the shortage in this collection was due to decrease in the
productions of cigarettes and alcohol with low compliance displayed by the respective
producers.
Shortfall of- K5.32 million – June 2011 Import Excise Collections
4
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
Import excise collections of K11.21 million in June 2011 were K5.32 million lower and
32% lower the amount collected for the equivalent period last year. The shortfall in this
collection was owing to decrease in the number of vehicles imported, petroleum products
and electrical machinery and equipment imported in the fifth month.
Port Moresby shift to maintain its record from last month as the highest collector from
imports excise with K6.20 million followed by Lae port with K3.77 million. Other ports
collected the remaining K1.24 million or 11%.
The revenue collection for the month of June 2011 is illustrated by the following graph
and table:-
5
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
6
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
PNG CUSTOMS SERVICE
Revenue Collection Report
June 2011
Surplus
Actual Actual Shortfall
Collections Surplus/ Surplus/ Collections
Compared
to
in June 2011 Projections Shortfall Shortfall in June 2010 May 2010
Customs
Duties (K thousands) (K thousands) (K thousands) (%) (K thousands) (%)
Import Duty 21,875,277.63 18,850,000.00 3,025,277.63 16% 16,972,465.33 22%
Import GST 82,688,159.17 74,450,000.00 8,238,159.17 11% 87,272,963.36 -6%
-
Import Excise 11,211,741.73 16,530,000.00 5,318,258.27 -32% 17,711,739.87 -58%
Export Duty 20,685,786.88 17,810,000.00 2,875,786.88 16% 16,008,770.05 23%
Inland Excise 28,752,148.17 42,950,000.00
-
14,197,851.83 -33% 28,239,466.04 2%
Sund Receipts 149,226.44 310,000.00
-
160,773.56 -52% 302,708.79 -103%
Total Cust
Duties 165,362,340.02 170,900,000.00
-
5,537,659.98 -3% 166,508,113.44 -1%
B. CUSTOMS NON REVENUE COLLECTION ACTIVITIES
Customs Activity Outcomes in June 2011
Total
Comments
Number of officers 174 Officers at operation level 31 IEOs
Officers at work 136 Exclude officers on recreational-leave
Number of import entries
& Whare house entries
10,288 Declared import entries, including warehouse
entries
Number of export entries
& Local Excise entries
1,145 Declared export entries, including local excise
entries
Import and export
examinations
22 Container inspections. 30 cargo management
officers
Number of vessels cleared 133 Inward/outward clearance, general ships, yachts,
and Foreign fishers

Activity report for June 22 nd August, 2011
Trade Facilitation
Customs efforts in upholding the mandated role in facilitating trade for legitimate traders’ in the
month resulted in a total of 11,433 entries assessed and cleared of which 10,248 is comprised
of import entries, 1,033 export entries, 112 local excise entries and 41 warehouse entries.
Suffering immeasurable constraints with manpower, customs was however able to clear 11,433
entries for the month of June. As usually entreated there is still greater need to beef up
manpower to foster efficient and effective trade facilitation.
Trade Volume
A moderate decrease was seen in the entries lodged in the month of June compared to the
equivalent period last year. In comparison to month of June 2010 there was a mere 1%
decrease. The decrease indicates June 2011 period had less entries lodged compared to June
period 2010 with little effects on increasing trend for item line imports. This means there is
increase in general trade volume in 2011 demonstrated by increased revenue collections
particularly in the areas of import and export taxes.
The declined entries have relief work load on each officer while the actual trade volume was
high due to more item lines per entry. In the month of June about 369 entries were assigned to
per invoice examining officer. On average 13 entries per day for each officer to process.
Numbers of entries per officer for the month of June have remained unchanged.
Community Protection
With only 30 cargo management officers a total of 22 containers of imports and exports have
been examined. The number of examinations has decreased dramatically during this period.
Most ports failed to report the results of examinations. Only those entries that went through red
lanes in the enhanced ASYCUDA system were subjected for inspections. The rest of the
imports were cleared through presentation of legitimate documents.
In overall 133 various vessels were cleared by 20 boarding officers around the country with 30
reported on ship search.
Total of 298 aircrafts cleared during this period and report shows a total of 25 searches
conducted including light unscheduled aircrafts. Thorough checks carried out without detecting
contrabands.
Border Control
International travellers have been carefully checked together with their personal effects.
Transactions made under suspicious circumstances were given thorough checks. Numbers of
international passengers had decreased to 34,315 during the month of June 2011. Facilitated
by 20 passenger processing officers all passengers passed clearance with no detections
PNG Customs continued to perform PNG Immigration roles at the International Airports but still
require Immigration to share the work load at the primary duty lines during passenger
processing. However, with enhanced knowledge Customs officers did passport control at
departures and arrivals at the international terminals. With shortage of manpower at the check
points compared to the influx of travelling passengers Customs has managed to check all
8
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
passengers effectively and completed necessary clearance in the month of June. This
therefore shows Customs is committed to protecting PNG borders and securing a safer
community.
Enforcement
Following are enforcement activities;
Revenue Recoveries
Two revenue recovery exercises reported in the month of June 2011 at Lae Customs
offices.
- A sum of K3,779.15 recovered through post notes issued for under payments on
various imports and detections.
Detections
Penalty for illegal entries
Two Japanese men were fined one thousand US dollars each for illegal entrance to PNG on a
fishing vessel. The penalty for illegal entrance attracts about 20 thousand US dollars. This
would be a more fitting deterrent to illegal aliens coming into PNG and engaging in illegal
activities. The two Japanese did not have valid passport and work documents. They were
working for a Japanese fishing company contracted by one of PNG's fish canneries in the
Morobe
province.
The border response unit in Lae did a search of the fishing vessel, did a face check of the crew
with the passports and documents available and realised that two of the crew did not have
passports or any travel documents and were therefore illegally in the country and were
detained. They were interviewed and subsequently arrested and charged under the Migration
Act. Each were fined and locked up at the police cells. They appeared before court where they
plead guilty and were fined two-thousand-500 kina after they were convicted. They've been
detained on the vessel until they left.
A fishing boat was detained while the owners or the contractors were fined.
For fishing there are no revenue implications as licenses are what generate revenues. So
there's no implication for customs. Customs concern is on the movement of illegals and
contraband that is being transported by fishing crew and onboard those vessels into the
country, and the smuggling of flora and fauna and other high value items out of Papua New
Guinea. Not specially the two but if any were found within the vicinity of the vessel, including
undeclared tobacco and alcohol. After the investigations they were charged under the Customs
Act for having in possession of those prohibited imports.
That was not illegal fishing that they're being charged with, they were charged for being
unlawfully in the country. So under the Migration Act the maximum penalty is five-thousand
kina, which is still not enough. They were given a lenient penalty of two-thousand-500, which is
the minimum amount applicable or even the maximum fined of K5, 000.00 is not enough. It
9

Activity report for June 22 nd August, 2011
should be more in the vicinity of 50-thousand or so with penalties being paid by the companies
and persons who are harbouring them, and they too should be charged which was something
Customs was exploring.
Vessel Impounded
Papua New Guinea (PNG) Customs have impounded a vessel in Popondetta which belongs
to a Malaysian company.
The apprehension of the Kifmet 16/17, a pontoon barge belonging to Unirise Ltd of Malaysia
The National Forest Authority confirmed that the operations permit for Unirise limited expired
in February 27 2011 and there were no authorisation and approval plans given to the
company to land the equipment.
Vessel Seized
Papua New Guinea (PNG) Customs have seized the vessel with millions of kina worth of
logging equipment, which was impounded in March 2011 for breaching Papua New Guinea
laws.
A barge, pontoon and machinery imported (significant volumes of logging equipment) into
the country by Growood (PNG) Limited impounded in Madang was seized by PNG Customs
Services. The company owned by a Malaysian was unable to fine the penalty charge of K3
million to settle outstanding duties and penalties after 30 days notice. All goods impounded
are now become property of the State.
Inspection on board the pontoon and barge by Customs officials revealed significant
discrepancies including smuggling and false declarations of various goods, which included
machinery, vehicles and fuel oil.
Customs also cited the company for failing to comply with Customs laws and committing
serious offenses in breach of the Customs Act.
“A raid of the premises of the owner by Customs and Police during investigations also
revealed several discrepancies in the importation of the machinery. “A passport and,
documents, electronic files and other evidence was seized.
Four vessels recently impounded by Customs had now being seized following the
completion of investigation into the alleged breached of the Customs Act. The items seized
on another two other vessels the tug boat and barge Kismet 18 and Kismet 19 in New
Ireland Province were all undeclared and smuggled and would become state properties
The companies were also liable to pay substantial fines imposed by Customs. The goods
will be auctioned if the companies fail to pay the fines within a specific period of time.
Substantial portion of the fuel was not declared. It was alleged the importer declared only
50,000 litres of diesel, however, upon inspection, it was found that another 100,000 litres of
diesel was not declared
PNG Customs is committed to protecting the interests of PNG and would not tolerate
businesses that attempt to circumvent.
10
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
Strongim Gavman (SGP) Activity
During the month of June, the SGP Intelligence Adviser facilitated the development of Port
Intelligence Assessments. In addition a range of Posters and brochures were designed for
release later in the year in relation to the community liaison Wasman program.
Throughout June a range of Cargo related initiatives were developed by the Cargo
Management Adviser. First, a debt management policy was developed to support the recovery
of outstanding duties/taxes and administrative penalties. Secondly, Broker Training in Lae,
Kokopo and Port Moresby was supported as part ongoing effort to support the capacity building
of Customs Brokers. Finally, a depot guideline was developed to assist in the facilitation of
cargo and reduce blockages on the wharf.
A large number of pieces of equipment were purchased under the Border Security Project.
These will be delivered over the next few months.
C. PHOTOS
Customs Activity Photos for June 2011
X-Ray Training – Lae
Customs officer receives Certificate from facilitator while the
Deputy Commissioner for Regional operation congratulates her.
Participants displaying their Certificates with cheerful smiles
backed by Deputy Commissioner. Thump up for the SGP .
11
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
Customs officers examine the machine.
An officer feeling a taste for the x-ray
machine
Officers at Customs control area with the
x-ray unit
X-Ray Training – Pom
Participants with cheerful smiles backed by Deputy
Commissioner Border Security.
Customs officer receives Certificate from Deputy Commissioner
for Border Security while facilitators look on.
Deputy Commissioner Border Security addresses the
participants after end of the training program.
An officer demonstrates to his counterparts how to operate the
machine
12
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
Operation Pukpuk
Ship search and container inspections conducted under the operation in Wewak.
Customs officers converse with trading company before the
search
Physical Container inspection
Documents verification checks
Sample and quantity checks
Seizures
Uncensored CDs and DVDs being confiscated
Confiscation of counterfeit mobile brand
13
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
Counterfeit mobile brand
Destruction of seized CDs and DVDs
Other photos
Customs Agents in a joint meeting recently
Customs Commissioner Mr. Gary Juffa with Pomat Manua
(Chairman of BDA) and Ruby Zariga (Secretary for National
Planning) at the Launching of Risk Management Plan
Confiscation of counterfeit cigarettes
SGP member shakes hand with Customs officer during the
handing over of a vehicle to from SGP Team to Customs Service
Revenue Loss
Month of June showed a hefty revenue leakage ensuing concessions granted on Customs duty
and GST. The following table illustrates the outcome.
14
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
REVENUE LOSS THROUGH CONCESSIONS
Jun-11
Customs
Duty
Actual
Collections
Loss of
Revenue
Nominal
Revenue
Projections
Surplus/
Shortfall
Surplus/
Shortfall
Import
Duty 21,875,278 9,040,806 30,916,083 18,850,000 12,066,083 64%
Import
GST 82,688,159 46,207,078 128,895,237 74,450,000 54,445,237 73%
Import
Excise 11,211,742 5,885,791 17,097,532 16,530,000 567,532 3%
Export
Duty 20,685,787 0 20,685,787 17,810,000 2,875,787 16%
Inland
Excise 28,752,148 0 28,752,148 42,950,000 -14,197,852 -33%
Sundry
Receipts 149,226 0 149,226 310,000 -160,774 -52%
Total 165,362,340 61,133,674 226,496,014 170,900,000 55,596,014 33%
A sum of K61.13 (K58.05) million was inevitably gone under the concession scheme which
should have been part of the Aggregate Revenue collections for the month of June 2011. This
is K3.08 million more than the equivalent period in 2010. The three components that suffered
under the concessions from the largest were import gst comprised K46.21 million, import duty
experienced K9.04 million loss and import excise comprised K5.89 million.
Exemptions on import gst include concessions given to goods imported by Charity
organisations, Church groups, Pharmacies, Educational Institutions and Resource Companies.
Exemptions on import duty cover goods imported under reduced rates particularly on mining
companies such as Lihir Gold Mining, Kutubu and Porgera Joint Ventures. Import excise
exemptions are the concessions sanctioned through Legislated Gazettal Notices such as
import of vehicles by foreign projects owners.
Nominal Revenue
Nominal Revenue for the month of June was K226.50. This is K55.60 million or 33% higher
than the projected receipts for 2011 Budget.
The foregone revenue figure had soared higher because of exemptions and the trend is
expected increase. Customs however intends to assess the trend and amicably apply relevant
measures with appropriate recommendations in consultations with key government line
agencies. The Government should not continue to lose such significant revenue while gaining
minimal benefit from exemption schemes in terms of National Income particularly with respect
to Gross Domestic Product.
15
Protecting Our Border
Securing Our Future

Activity report for June 22 nd August, 2011
Nominal Revenue for the month of March 2011 is illustrated by the following graph:
Overall Performance
In the month of June Customs had experienced a slight drop in its revenue collections. These
are evidently shown in the shortfall collections on import and local excise outcomes which were
discrete to improved Customs activities at the ports.
Urgent Concern
With insignificant effects in the development programs as a result of inadequacy the
government has been consistently losing considerable revenue from tax concessions.
The lost is not just millions but tens of millions over the months, as a result of such a
precedent, revenue that would be very much necessary in development of the country.
Any tax concession amendments for sub contractors in the future must be given appropriate
deliberation especially the foreign sub-contractors as they will not always work in the interest
of the people of PNG. Concessions going to giant off shore contractors are merely seeking to
hike up their profit margins so their executives can enjoy lucrative bonuses at the expense of
the people of PNG.
16
Protecting Our Border
Securing Our Future