The Tribune

By NEIL HARTNELL

and YOURI KEMP

Tribune Business Reporters

An ex-prime minister yesterday warned Bahamians will have to pay increased costs to import goods via air freight from New Year’s Day due to a $25m outsourcing deal struck by the Government.

Dr Hubert Minnis told Tribune Business that JDL’s $25m agreement to transform the Government’s air freight terminal, the final terms for which are still being worked out, has also sparked fears among Bahamian courier companies that they will either have to close or lay-off staff.

This, he argued, is because JDL is charging 40 cents per pound to scan imported air cargo for contraband before it is released to the relevant broker or client. Besides increasing air freight-related costs for Bahamian consumers at a time when they are still grappling with the cost of living crisis, Dr Minnis said the plan will also impose extra strain on couriers because they must pay JDL’s handling fee upfront.

The industry will thus be faced with having to reclaim this outlay from its clients, some of whom will likely decline to pay, thus leaving couriers exposed financially. Dr Minnis, who tabled several questions on the JDL arrangement in Parliament yesterday, also argued that it violates the Customs Management Act because Customs is the only entity lawfully able to clear and inspect incoming cargo.

Simon Wilson, the Ministry of Finance’s financial secretary, told Tribune Business that JDL’s fees were still being negotiated and the Government is hoping the final figure will be less than 40 cents per pound. However, he confirmed that the Davis administration hopes the arrangement will take effect early in the New Year if not from January 1, 2024 (see other article on Page 1B).

Disclosing that the Government has been seeking a solution for the “compromised” Lynden Pindling International Airport (LPIA) air freight terminal, which he branded “a disgrace”, for some ten years, Mr Wilson said the JDL deal was designed to develop the property into a modern building while addressing the present security and revenue leakage woes. He described fears over the fees as “disingenuous”.

Troy Strachan, JDL’s chief operating officer, was yesterday said to be out of office and did not respond to a Tribune Business message seeking comment before press time. However, a JDL presentation, which has been obtained by this newspaper, and was given to Customs and the private sector earlier this month, reveals that it plans to invest $25m “over the course of the project” to transform the terminal.

It pledged that 100 jobs would be created for the scanning and sorting of air cargo, while a “multi-million dollar investment” will be made in x-ray scanning equipment and security upgrades. The air freight terminal’s construction overhaul will take between 12-18 months to complete, with some remedial work having already started.

To finance and pay for the $25m redevelopment, the JDL presentation speaks to the introduction of a “new security facility fee for January 1, 2024”, although the size of this fee is not specified. Detailing how the new scanning and cargo system will work, JDL said freight forwarders will “barcode and scan” packages for upload into its system, containing details on the weight and owner.

Once cargo arrives in The Bahamas, it will be transported by ground handlers such as Nassau Flight Services (NFS) to JDL at the new air freight terminal, where it will be broken down and x-rayed (scanned) for contraband such as firearms and narcotics. Any illegal discoveries will be handed to Customs.

Once cleared, couriers/brokers will be notified that their imported shipments are in a holding area. JDL will release them once paid its handling fee, and the goods will then undergo a second inspection by Bahamas Customs.

Dr Minnis, though, raised multiple questions about the agreement before the House of Assembly yesterday broke for Christmas. “Can the Prime Minister [Philip Davis KC] please confirm for this honourable House that he has given a company a contract when he gave them permission to operate the private package consolidation and scanning system to the detriment of Bahamian people, under the name JDL, in breach of the Customs Management Act,” the Killarney MP asked.

“And will he also confirm, one, the names of the true beneficial owners of JDL, since the Bahamian people need to know who is that the Government is permitting to bill them. Two, that the contract with this private company, JDL, was never put out to tender.

“That as a result of this contract, Bahamians will now have to pay an extra mandatory fee which, depending on the weight of the package, could amount to hundreds, if not thousands, of dollars for every shipment that they import into the country,” Dr Minnis added.

“And that, in order to import goods into the country, beginning next month on January 1, Bahamians will now have to pay this exorbitant fee plus VAT on top of the charge in addition to shipping costs, VAT on the shipping, VAT on the overall cost of the item as well as other fees, Customs duty and Customs processing fees for every package that they import.”

While none of his questions were answered, Dr Minnis subsequently told Tribune Business: “A number of couriers came and spoke to me. They are very concerned because the costs will go up 40 cents per pound, and add hundreds of dollars on the consumer or customer.

“And because it becomes cost prohibitive a lot of the couriers will have to close or lay-off people. The extra cost they will incur must be passed to the consumer.” Whether JDL’s fee adds “hundreds of dollars” to Bahamian import bills will depend on the size and weight of what is being imported, although Mr Wilson yesterday downplayed the charge and resulting extra cost as minimal.

Dr Minnis, though, reiterated: “Quite a number of couriers have called me. They are concerned this is coming into effect in January and, to their knowledge, it has not gone out to consumers.

“Customs is also the legal port of entry. Customs is now giving this legal port of entry to a private company. That’s the job of Customs. They are the official legal entity in the Government, not this private entity [JDL]. Under the Customs Management Ac, Customs is responsible. They’re the first legal entity to deal with cargo coming into the country, not a private entity.

“It’s going to be an additional 40 cents per pound on the cost that will be passed on to consumers, which is at a time when the cost of living has increased drastically. There are a lot of couriers who feel they will have to close as they will not be able to pay it upfront and then hope they get reimbursed by the consumer. The couriers are very upset.”

Dr Minnis also asserted that the JDL deal will “cost the Bahamian taxpayer dearly” while also adding to still-high inflation by raising import costs. One courier company, speaking on condition of anonymity, backed the ex-prime minister’s assertions and said a ‘40 cent per pound’ charge will $280 to the costs of importing a pallet of goods that typically averages 700 pounds in weight.

Confirming that they had attended JDL’s presentation, they said of the company: “They are scanning goods before it even gets to Customs. They screen and scan it, and then they hand it over to Customs, but at the same time they are charging 40 cents per pound to scan and screen.”

They added that most couriers bring in an average of seven pallets of goods per day, with the average weight being 700 pounds. That is an additional $280 per pallet, which equates to $1,960 for seven pallets. “Obviously the courier is going to pass this on to the customer, and this is what they are making noise about,” the source said.

The courier said there were also concerns that, via this process, goods will bypass Customs, resulting in revenue leakages and security concerns. And they questioned whether the JDL scanning and inspection was even necessary given that exactly the same process and scrutiny was applied before goods were placed on the plane.

“All the freight is going to this company first, and they will do the scanning and then charge the importer, and then they had it over to Customs. But the thing about it is that airlines like British Airways, Air Canada and Delta and other international carriers, they scan their stuff before it gets here,” they said.

“What’s going to happen is that you are going to charge people for screening and scanning goods that have already been done.” The courier also voiced concerns that JDL will raise rental costs at the air freight terminal to help generate a return on its investment, thus pricing some firms out of the building.

“The building was controlled by the Bahamas government, and each company had a lease with them and the rent was quite reasonable,” they said, “but these guys claim they are going to be putting $25m into the renovation and refurbishment of this building, so obviously they have to recoup that and that means that the rent will have to skyrocket. This is one of the concerns of persons who rent offices in the building.”

Ralph Munroe, Customs comptroller, seemed uneasy and reluctant to comment on the JDL deal when contacted by Tribune Business. He said “you can go with that” when informed this newspaper had JDL’s presentation, and directed it to speak with Mr Wilson.