Sinohydro flouting duty-free import rules

Chinese state-owned company Sinohydro Corporation Limited imported equipment, vehicles and accessories worth about $103 million or Tk 1,145 crore in the last nine years under duty-waiver facility. The condition was that the company will not sell or hand over the goods to anyone in Bangladesh without permission from the National Board of Revenue.

The NBR had allowed imports of these machinery under the River Training Works, a sub-project of the Padma bridge project. The products were brought in 1,810 shipments -- 1,171 for the company's own use and the rest 339 consignments on condition that the goods must be re-exported.

But an investigation by The Daily Star has found that Sinohydro has not taken back a single product in the last nine years. Instead, the company has sold, and is still selling, many of these construction materials and heavy machinery in Bangladesh in violation of import rules.

Through the sales in the local market, the company is making a lot of money while evading taxes and import duties. There is no official figure available.

The duty rates of these imported goods range from 25 percent to 64 percent of the import value.

Under customs rules, the company can be fined between 200 percent and 400 percent of the evaded revenue for misusing the duty-free import facility.

But multiple officials confirmed that neither the NBR nor the customs authorities have taken any step against the company.

BONANZA FOR SINOHYDRO

In response to an application by Sinohydro, the NBR in December 2014 approved the imports of 480 types of goods on 12 conditions, including re-export, documents show.

The products include dump trucks, forklifts, diesel engine, concrete mixing trucks, cable, submersible pumps, generators, truck cranes, loaders, bulldozers, road rollers, excavators, mixing plants, cylinders, steel pipes, draggers and rubber pipes.

According to the documents, most of the goods came from China, although some came from Pakistan, Hong Kong and the Netherlands.

Weighing about 41,776 tonnes, their import value stood at $10,30,47,620, customs documents show.

However, no information about the re-export was found on the NBR server under the name of the company, officials said, requesting anonymity given the sensitivity of the matter.  

Our investigation shows the company has already sold many of these products, while sales of many other products are currently underway.

On November 24, The Daily Star visited the yard of Sinohydro Corporation in the Padma bridge project area in Jazira, and found the yard abuzz with potential customers.

Md Faisal, who has been a driver at the company for five years, was seen busy negotiating with several of them.

When this correspondent approached him posing as a customer, Faisal said they are selling each dump truck for Tk 10 lakh, mixing truck for Tk 15-20 lakh, floater excavator Tk 15-18 lakh, crane for Tk 10-15 lakh, forklift for Tk 6-10 lakh. Besides, various steel structures and old equipment are being sold for Tk 70,000 to Tk 200,000 per tonne.

Faisal, 27, said he connects the potential customers with the yard in-charge, "Mr Gao," once the buyers primarily accept the offer.

NO PAPER TRAIL

Visiting the yard, The Daily Star found at least 35 tractors (Model-Eicher 5560), 34 dump trucks (Model- 25T), 78 forklifts (Model-5T, 3T and 2T), four concrete mixing trucks (Model-8m3), 12 submersible pumps (Model-150LQ-480-6), 12 generators, 43 excavators (Volvo and Hitachi) and piles of steel structures and rubber pipes were on sale.

Three mixing plants, including a new plant for making cement blocks, were also on display for sale.

The Daily Star spoke to seven potential customers who went to the yard from Dhaka, Chattogram, Barishal and Bhola to buy vehicles and equipment on November 24.

Six of them said they had previously bought various construction vehicles and machinery from the Sinohydro yard.

One of them owns a Bhola-based construction materials supplying company. In a secretly recorded video, he said he bought three concrete mixing trucks for Tk 65 lakh and 10 dump trucks for Tk 1 crore. He was seen busy installing new batteries as they got damaged since the vehicles were not in use for a long time.

He said he sells these materials to construction companies at a 20-30 percent profit margin.

He also said there are no documents with these vehicles. So, after the purchase, it costs several lakhs more to prepare the documents with the help of brokers at Bangladesh Road Transport Authority.

Four months ago, he bought 12 trucks and excavators from the yard, he said, adding that he already completed the paperwork from the BRTA.

Contacted, Mohmmad Abdur Razzak, director (enforcement wing) of BRTA, said, "We have received information about registration of different models of dump trucks, tractors, ready mixing trucks on the pretext that the documents got lost after import. We have started looking into the matter seriously as the number of such registrations has gone up recently."

He said their primary investigation reveals about 350 such vehicles have been registered this year alone.

A Dhaka-based businessman told The Daily Star at the Sinohydro yard on 24 November that all transactions are made in cash and no party keeps evidence.

He said when Sinohydro officials declined to provide any document, he did not buy any items from there.

The Daily Star has tracked down another big buyer, Nannu Mia, a businessman from Dhaka's Postabazar area.

"I bought 38 dump trucks, 36 trucks and three ready-mixing trucks. They sold out quickly as their prices are much lower than the market price. Negotiations are underway to buy three more concrete ready mixers," he said in late November.

Sinohydro project Director Qu Yan did not respond to our two emails sent to the company's official email address on December 21 and 24. The company general manager in the Dhaka office, Qiu Chenyang, also did not respond to our email queries.

However, Mr Gao, the in-charge of the Sinohydro yard in Jazira, in a WhatsApp message said, "We are handling relevant procedures for transferring temporary imports to permanent imports, which were imported under re-export conditions."

He did not respond to the question as to why the company is selling the goods already, and why the company did not seek NBR's permission beforehand. He also would not say how many of those goods have already been sold in the local market.

NBR'S CONDITIONS

Sinohydro initiated the import process in January 2015, under Customs Prosecution Code-170 (used to import capital machinery and other equipment) and IM-5 (used for re-export items), using duty waiver facilities.

Customs laws do not allow sales of capital equipment imported with duty waiver without prior approval from the customs office. Even after the NBR permission, the importer must pay the prescribed duty.

The NBR allowed Sinohydro to import the goods on 12 conditions, top among them is re-export of the products.

The re-export condition is very stringent and specific. The stipulated time for the mandatory re-export is initially six months, but this can be extended every six months until the relevant project completes.

For the time extension, the company must apply in writing and get NBR's permission in writing. But Sinohydro has never applied for time extension, multiple sources said.

Other conditions include the imported goods and machinery should be used only for the Padma bridge project, and they cannot be sold or transferred locally without NBR permission.

Documents show Qu Yan, project manager of River Training Works of the Padma bridge project, and Md Shafiqul Islam, Padma bridge project director, signed a joint undertaking for the conditional imports.

In case of failure to comply with the conditions, the company is obliged to pay the prescribed customs duty, according to the joint undertaking obtained by The Daily Star.

But the company has not done that either. There is also no official record that the customs house at the Chattogram Port, through which the products were imported, asked the company to pay the duty.

MYSTERIOUS SILENCE

Prof Moinul Islam of Chattogram University said the role of the customs is mysterious.

"Irregularities of this nature and scale can only happen when customs officials go silent," said Prof Moinul, who teaches economics.

Mohammad Fyzur Rahman, commissioner of Chattogram Customs House, said contractors of several megaprojects have taken advantage of this type of duty-free import facilities.

"Demand letters or show cause notices should have been issued to the companies concerned after six months. In this case, there may have been an oversight," he told The Daily Star.

He also said relevant officials will be instructed to look into the matter.

A customs official on condition of anonymity said if the authorities secured a bank guarantee equivalent to the revenue against the consignments, the customs authorities could encash the guarantee without serving any notice.

"The risk of not getting the evaded duties is high as it is a foreign company. So, if any company wants to take such re-export benefits in the future, the customs authorities should take a bank guarantee," the official added.

Chattorgram Customs House Deputy Commissioner AKM Khairul Basar, who took charge a month ago, said, "The National Board of Revenue provides import facilities on condition of mandatory re-export for various government projects. Sinohydro has imported various goods under this facility, but we have no information that the company returned those goods."

He added that they are looking into why the Chinese company did not seek time extension and why no action was taken against it.

"We will have the details once we have been through the official files," he told The Daily Star on Sunday.

NBR Member Md Masud Sadiq (Customs Policy) said there is no scope for selling any goods brought under re-export facility.

"In case there is evidence of selling such items before paying duty, there is a provision for collecting fines on top of the duty amount evaded," he said.