Trade and Commercial Law Assessment - Honduras - Economic ...

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TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS narcotics interdiction; contraband; and fiscal fraud, including IPR, border patrol, and money laundering. Salaries are higher for this department but are still relatively low at $300 per month. Protection of the border, particularly the blind spots, is extremely challenging in Honduras. The country has major land borders with three countries; two sea borders; and the largest Central American port on the Atlantic, Puerto Cortez, which is heavily used by Honduras’s neighbors. About 200 officers are assigned to the borders, including the blind spots. In addition to patrolling the blind spots and reviewing shipments at the border posts for possible fraud and undervaluation, police conduct road stops. They will pull trucks aside to review the declaration, and if, in the officer’s opinion, the cargo has not been not properly declared to Customs, the truck must proceed to the importer’s warehouse, police headquarters, or the Customs warehouse for further review. Customs is then notified, because the examination must be conducted in the presence of a Customs officer. Such inspections are conducted even when Customs has previously examined the shipment. Smuggling and undervaluation are major issues. Private sector representatives interviewed for this assessment estimate that up to 80 percent of imported merchandise is either undeclared or falsely declared. The threat is greatest at the point where the borders of Honduras, Guatemala, and El Salvador meet. Smuggled commodities including coffee, livestock, and potatoes, head to El Salvador and Guatemala where growers can get higher prices, and Nicaraguan cheese is smuggled into Honduras. In addition, fuel smuggling, related to the tax on fuel in Honduras, is a serious problem. Estimates are that up to 50 fuel trucks from Guatemala and El Salvador enter Honduras illegally every day through official border points. Last year about 8,000 road stops were conducted, with about 10 percent proceeding to further inspection. These, in addition to detections at the borders, resulted in the collection of approximately $500,000 in additional revenue. Approximately, 30–35 cases were referred to Customs for appropriate action. Customs is the final authority on whether a case warrants a civil penalty or criminal action. If a transgression constitutes a crime, the matter is forwarded to the Revenue Transparency Department of DEI, which prepares the case for prosecution, making recommendations to the court as to dispositions. Since 2002 only five cases have been referred to this office for criminal action. The current Customs administration has not forwarded any cases during its 2 years in office. The National Police is aware of the situation and is displeased with Customs’ failure to forward criminal cases. 1) National Police Operations That Support Trade Facilitation This agency plays a significant role in security by combating fraud and smuggling; these efforts encourage and facilitate legitimate trade. Actions of the agency that support this function are as follows: ♦ Border police activities have strengthened trade security on Honduran roads. Two years ago, as many as 2–3 containers were stolen per month. In 2004 there have been no container thefts. (Some question the police’s role in this improvement, believing that XI-19
TRADE AND COMMERCIAL LAW ASSESSMENT DECEMBER 2004 HONDURAS security has improved mainly due to private efforts, i.e., additional private security for transporters.) ♦ Recently, an agreement was implemented at Puerto Cortes between the police and port authority that allows police access to the port facilities. Now police are entering facilities and doing a good job of inspecting and seizing illegal goods and narcotics. ♦ The division devoted to combating fraud and detecting IPR violations is recognized as an important force for economic growth and has been rewarded with higher pay. The division’s special recruitment and selection process, along with the higher salaries, has resulted in greater integrity and higher performance for this division. In addition to being specially recruited and carefully selected, the police in this division are well trained and are required to take random drug tests and polygraphs. ♦ The IPR unit has been active recently and has seized and destroyed infringing articles. The police can only initiate action upon receipt of a judicial order, issued as the result of a complaint filed by the owner. The police have been effective in following up on about 30 such orders in the past 6 months and are now involved in an ongoing project with the Business Software Association to combat illegal use of software products, based on complaints from Microsoft. 2) National Police Issues to Address To improve the actions of the National Police in interdicting the flow of illegal goods across the borders, the following issues deserve attention: ♦ Corruption within the police is still perceived as a major problem. Although some steps have been taken to address this issue, more efforts must be made to demonstrate that the agency is serious about addressing it. In 2003 an internal affairs unit was created in the police. This has produced some positive results, but the unit’s actions have been circumscribed by legal restraints. As a result, criminals have been able to penetrate public institutions to bribe officers to allow their illegal activities to go undetected. ♦ The police lack personnel; equipment, especially in the area of communications systems; and training in investigative, examination, and surveillance techniques. Although the United States has assisted in upgrading National Police capabilities to combat the flow of narcotics, money laundering, and illegal immigration, the criminals still appear to be better equipped, organized, and funded. ♦ Although smuggling and false declarations are recognized by all parties as major threats to the economy, discovery of such transgressions and effective punishment that would act as a deterrent are lacking. Customs claims that it cannot rely on the courts to administer fair justice, and thus settles such cases administratively. A recommendation to establish a special court for resolution of fiscal/Customs crimes is now being considered by Congress. Customs has no authority to disregard the criminal code that clearly defines what constitutes a criminal action in regard to smuggling and contraband. The issuance of administrative penalties and settlement of cases with payment of loss of revenue create an environment that encourages smugglers to continue and expand their activities. XI-20
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