A prominent forestry expert has warned of a massive Customs fraud taking place in exports of Wamara
logs to China.
In a letter published yesterday in Kaieteur News, Janette Bulkan said that public records available indicate systematic under-invoicing when it comes to shipping of the logs to especially China.
An Assistant Professor at a Canadian university, Bulkan is now urging for a forensic audit to be carried out in the natural resources sector.
Guyana learnt about Wamara logs last year after it was disclosed that one company, BaiShanLin, was shipping container loads of it out of Guyana every month.
It sparked an investigation by Kaieteur News which found a huge log yard in the area east of Kwakwani, Berbice River and the company benefitting from significant tax and other concessions.
According to Bulkan, BaiShanLin was under-valuing its Wamara log exports by almost US$500 ($100,000) per cubic metre, according to a Market Export Report of the Forest Products Development & Marketing Council (FPDMC).
Bulkan explained that the price range for exported Wamara logs for January to March 2015 was between US$200 and $220 per cubic metre.
However, the Cost, Insurance and Freight (CIF) import price for Wamara logs into China was US$760 per cubic metre. This can be verified in the latest edition of the Tropical Timber Market Report of the International Tropical Timber Organization (ITTO), she said.
“This difference of US$500 per cubic metre provides an indication of the scale of Customs fraud, which was estimated for Guyana at US$84 million in 2003, rising almost continuously to US$440 million in 2012,” she said in the letter.
It has long been the contention that BaiShanLin and other companies are involved in what is known in accounting terms as transfer pricing. In essence, transfer pricing occurs when a local company sells to its parent company or subsidiary overseas. The prices quoted are not necessarily the market price.
With Guyana, like other countries, basing its royalties and taxes on the prices quoted by the overseas buyers, it means that Customs would be losing millions of dollars in revenues.
Critics have accused BaiShanLin of deliberately getting its buyer(s) in China to quote low prices and keeping its profits there.
“The transfer pricing in Wamara log exports is a very good example of why forensic audits in the natural resources sector are urgently needed,” she said.
Bulkan noted that around half of the illicit flows in Guyana, someUS$1.464B for 2003-2012 were attributed to export under-invoicing. This is according to the Global Financial Integrity 2014.
It is not the first time that Bai Shan Lin would be accused of illegality in its operations and business dealings.
The company has been granted hundreds of millions of dollars in tax breaks, duty free concessions of luxury vehicles, heavy equipment and trucks, and even acres of lands in Providence for high end homes.
The new Government had vowed to examine the investment agreement of BaiShanLin to determine whether the company has lived up to its promises.
So far, it has failed to establish promised wood-processing facilities which would create jobs. Rather, the emphasis has been on the export of logs.
Bulkan in her letter also raised questions about the inspections done by the Guyana Forestry Commission, which regulates the industry.
She disclosed that Guyana is also exporting fire ants to China, according to the same ITTO report: “Fire ants found at Fujian port – Recently fire ants were found in Pau rosa [wamara] logs from Guyana for the first time by the Fujian Entry-exit Inspection and Quarantine Bureau. The batch of Pau rosa logs was sealed after fumigation treatment to prevent ant infestation. The fire ants are found in tropical and subtropical areas of South America. They can be a serious problem for livestock. It has also been found that fire ants can damage power supply systems by biting cables.”
Bulkan noted that it is the Ministry of Agriculture that provides a phyto-sanitary inspection and fumigation service, and exporters should be showing the phyto-sanitary certificate when they apply to the Guyana Forestry Commission for an export certificate.
“So how would it be possible for log exporter BaiShanLin to be exporting infested logs? Surely it could not be because they have bypassed the phyto-sanitary service and the GFC and the Guyana Revenue Authority (GRA) inspections prior to the sealing of the shipping container?”
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