By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Auto dealers believe it will be "good business all around" if recent Customs visits mark the first step towards being able to establish bonded warehouses at their properties.

Fred Albury, the Bahamas Motor Dealers Association's (BMDA) president, said the initiative - long urged by the industry - would boost business cash flow and eliminate any impact on existing inventory from Budget tax changes.

"If we can get it off the ground it will help considerably for convenience and cash flow savings," he told Tribune Business. "There are a number of benefits. It will be a good item if we can get it in place."

Mr Albury was speaking after Customs personnel visited several auto dealerships within the last 10-14 days to assess the suitability of their premises for hosting bonded warehouses.

Such facilities would enable auto dealers to defer paying Excise Tax at the border, and instead move imported vehicles swiftly from the dock into a bonded warehouse. They would only become liable to pay these taxes once the vehicle is removed from bond and sold.

The 'bonded warehouse' initiative, if it comes to fruition, will effectively be modelled on the system that already works in Freeport under the Hawksbill Creek Agreement.

"Customs sent their people out for quick inspections of different facilities," Mr Albury confirmed. "There's a few more to be looked at, but the process is moving along.

"The big benefit is to make our inventory that is not sold duty neutral. In the event the Government decides to lower duties, the impact would be lessened for us."

He explained: "When the previous government came into power, duties on trucks were 85 per cent. They reduced the duty to 65 per cent and, having already paid the 85 per cent on vehicles in existing inventory, had to eat the 20 per cent.

"This would allow us to have inventory and, no matter what the tax rate will be, we're not impacted by any decrease or increase."

Mr Albury added that bonded warehouses would also eliminate the frustration currently associated with applying for Excise Tax refunds on vehicles leased to the Government, due to the deferral of payment at the border.

"There'd be a lot of savings to certain clients," he told Tribune Business. "The buses we import, mainly for jitneys, taxis and tour buses, they are basically sold duty-free

"For the last few years I've taken these vehicles to Freeport, put them in bond there and then, when the customer wants them, taken them to Nassau.

"You would have that transport fee savings to pass on to the customer. It lessens the chance of damages and makes for speedier delivery."

Mr Albury said the 'bonded warehouses' proposal would bring the Bahamas into line with other Caribbean territories, such as Jamaica and Barbados, where taxes such as import duties were only paid when the vehicle was sold.

He added that the need to obtain verification from Customs that all due taxes had been paid, before a new vehicle can be licensed and registered at the Road Traffic Department, would prevent tax evasion and fraud.

The BMDA president said auto dealers would also be able to take new inventory off the dock much more quickly with bonded warehouses, as there would no need to wait until brokers had completed entries and paid the appropriate Excise Tax.

"There are a number of benefits, but the main one to me is if the Government decides at some point in time to change the duty on vehicles, it puts us in a position where we will not lose money, and in the past we've lost money," Mr Albury said.

Rick Lowe, Nassau Motor Company's (NMC) director/operations manager, shared Mr Albury's cautious optimism while explaining that much remained to be done to make bonded warehouses an auto industry reality.

"The only progress that has been made is that Customs has come and examined our sites to make sure we meet their requirements, and we've heard no more," he told Tribune Business. "Supposedly they're considering it; that's all they're saying.

"There'd be reporting requirements, but all that's to be decided, including what bonds we'd set up and what forms we'd have to do. Obviously, it's a lot for them to consider. They have to have standards to accommodate it, but they do it in Freeport."

Both Messrs Albury and Lowe said the auto 'bonded warehouses' discussion had begun under the former Christie administration, with the industry now asking Customs and the Minnis administration to 'follow through'.

"Maybe they see the wisdom in encouraging business rather than discouraging business," Mr Lowe said. "We've been asking for this for many years. Cash flow would be tremendously improved, and we might be able to stock more inventory, things like that.

"The way it works now, we're floating government taxes, and when we have write-offs we can't claim duty back. Whereas if we had bonded warehouses, if we have write-offs we wouldn't have paid the duty. It's good business all around; for them and us."