US$500 variance in price of exported wamara logs points to Customs fraud

– Bulkan urges forensic audit

Wamara logs exported from Guyana earlier this year were priced between US$200 and US$220 per cubic metre but were priced between US$757 and US$773 in China, a difference of over US$500 and forestry expert Janette Bulkan says forensic audits in the natural resources sector are urgently needed.

According to the Forest Products Development & Marketing Council of Guyana Inc (FPDMC) Market/Export Report for April 2015, the price range for exported wamara logs was reported as being between US$200 and US$220 per cubic metre during January to March 2015. In the latest edition of the Tropical Timber Market Report of the International Tropical Timber Organization (ITTO), wholesale prices per cubic metre of Wamara at the Guangzhou Yuzhu International Timber Market in China was reported as being between US$757 and US$773. Bulkan highlighted the figures in a letter to the Stabroek News yesterday.

The forestry expert said the 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. Citing the Global Financial Integrity 2014 report, Bulkan said that around half of the illicit flows (US$1,464 million for 2003-2012) were attributed to export under-invoicing.

“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 emphasised. Bulkan has for years called attention to this practice. According to Transparency Institute Guyana Inc, transfer pricing means that when logs are exported from Guyana, their value is declared at a very low level and far below the price that they command on the world market. When these same logs are valued in China at the time of import, their declared value rises to a much higher level that exceeds the CIF (cost, insurance and freight) value.

Last year, TIGI had said that the “pervasive practice” of under-declaration of value is consistently dismissed by the Guyana Forestry Commission (GFC) in spite of the voluminous evidence presented to demonstrate its existence, “which points to corruption in the forest sector and the tragic haemorrhaging of a precious natural resource.”

Meantime, China continues to be the top destination for Guyana’s logs. According to the FPDMC report for April, logs continue to be in high demand by the Asian market and for the month of April, Asia was the leading market for logs accounting for 97.10% of logs exported.

For this year overall, log exports continues to rise compared to last year. For the period January to April this year, 46,037 cubic metres of logs with a value of US$9 million were exported compared to the same period last year when 31,375 cubic metres of logs with a value of US$4.2 million were exported. Exports of dressed and undressed lumber also rose slightly for the period while exports of plywood dropped.

Meantime, the recent ITTO report also said that 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 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, the report said.

Bulkan noted that the Ministry of Agriculture provides a phytosanitary inspection and fumigation service, and exporters should be showing the phytosanitary certificate when they apply to the GFC for an export certificate.

“So how would it be possible for log exporter Bai Shan Lin to be exporting infested logs? Surely it could not be because they have bypassed the phytosanitary service and the GFC and the GRA inspections prior to the sealing of the shipping container?” she asked.

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