The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Freeport’s Hawksbill Creek Agreement “cannot be amended” by changes to the Customs Management Act and accompanying regulations, a leading wholesaler charging that the Government had adopted a “scattergun” defence to its Judicial Review action.

Kelly’s (Freeport), in its July 23 reply to Customs’ submissions, said the revenue collection agency had sought to avoid the challenge to its ‘bonded goods sales report’ demand “coming on for trial at all”.

Refuting the argument by Customs and the Attorney General’s Office that legislation underpinning the former ‘cannot be trumped’ by Freeport’s founding agreement, Kelly’s (Freeport) and its attorneys argued: “The Hawksbill Creek Agreement is primary legislation which cannot be amended by secondary legislation such as the Customs regulations.

“The operation of the Hawksbill Creek Agreement has also bound the Government and given rise to legitimate expectations, either of which may render the decision of Customs unlawful.”

The wholesaler and its attorneys, Callenders & Co, alleged that the laws giving effect to the Hawksbill Creek Agreement were constitutional Acts that could not be overridden.

And the repeal of rights contained in the Hawksbill Creek Agreement, and upon which 3,500 Grand Bahama Port Authority (GBPA) licensees had come to rely on, “would be unconstitutional” through “depriving them of their accrued property rights”.

Indeed, Kelly’s (Freeport) said the case would “determine the effect and extent of the exemptions from Customs’ control effected by the Hawksbill Creek Agreement and the legitimate expectations of Port Authority licensees in the context of the operation of the Hawksbill Creek Agreement”.

A ruling that the Hawksbill Creek Agreement in effect ‘trumps’ the 2009 reforms to the Customs legislation is not only key to Kelly’s (Freeport’s) challenge to Customs’ demand that it produce monthly reports on ‘over-the-counter’ bonded goods sales, but also for Freeport’s business climate. If the Government wins, it would force all businesses to submit such monthly reports to Customs.

Apart from the extra expense and inconvenience this would cause, it would also be one of the first occasions that the Government (and Customs) have managed to pierce the Hawksbill Creek Agreement.

This would further add to the uncertainty affecting commerce in Freeport and potentially deter local/foreign investment. While the Government has promised to roll back the new taxes/fees introduced in the 2013-2014 Budget, it has yet to formally state whether it will renew the city’s real property tax exemption and a slew of other business incentives set to expire next year.

Kelly’s action centres around Customs allegedly “unprecedented demand” on August 5, 2010, for it to submit a report on monthly ‘over-the-counter’ bonded goods sales to the revenue agency.

Kelly’s (Freeport), in its June 10, 2014, submissions to the Supreme Court, alleged that the demand was made with no prior notice or consultation and, moreover, it had no basis in “lawful authority”.

Yet the Attorney General’s Office, on Customs’ behalf, is arguing that such monthly reports are “a lawful requirement” under Regulation 24 (3) that accompanies the Customs Management Amendment Act 2009.

It describes this regulation, which sets out the demand for a monthly over-the-counter bonded goods sales report, as “binding” and “a complete answer” to Kelly’s challenge.

Freeport’s ‘over-the-counter’ bonded goods regime allows GBPA licensees to sell goods duty-free (bonded) to fellow companies within the Port area for use in the latter’s own business. But any sales to a consumer or household do attract duty, and these have to be submitted in a report to Customs - together with the full tax owed - to Customs by the 15th of the following month.

But, while post-paid duty sales have to be reported, there has never been a similar requirements for so-called ‘bonded’ sales. This is the crux of Kelly’s (Freeport’s) complaint.

However, in its July 23, 2014, filing, the wholesaler argues that there are two key issues - the “unlawfulness” of Customs’ demand, and the Department’s subsequent response to “enforce compliance with its demands”.

This response had allegedly seen Customs detain 11 of Kelly’s (Freeport’s) imported containers and refuse to accept its processing documents because it had not submitted the ‘bonded good’ sales report.

The wholesaler alleges that Customs has “still not put forward any serious justification” for this action, either factual or legal.

“Customs cannot now blow hot and cold,” Kelly’s (Freeport) alleged. “It is clear from the lack of evidence from Customs of what actually occurred, and the lack of any particularity in its assertions that Customs’ actions were lawful, that in fact Customs has no proper explanation or defence to this part of the application.”

It warned that Customs would “continue to demand” monthly ‘bonded goods sales reports’ from itself and other GBPA licensees without a court verdict in its favour, and that the seizure of goods for non-compliance could also be repeated without being restrained by the courts.

“Customs has sought to avoid this matter coming on for trial at all by taking an unmeritorious, technical points against the applicant,” Kelly’s (Freeport) alleged.

“Now that Customs has filed its submission, it is plain that it has sought to avoid a final determination on the merits because it has no good answers to the matters raised by the applicant.”