Cuba’s Customs Office Tightens the Screws

Fernando Ravsberg*

Most of the clothing sold in the streets of Cuba arrives on the island as personal baggage carried by “mules” in duffle bags like these.” Photo: Raquel Perez

HAVANA TIMES — The Customs law that goes into effect in September is one that will have the most social impact, since in one way or another it will affect the majority of Cubans, making everyday life a little more difficult and a lot more expensive.

“Luisa” assured me that if the government raises customs tariffs, her business will collapse since all of her merchandise is brought over here from Ecuador. (I don’t want to give her real name because the license only authorizes her to sell clothes that she makes herself.)

At present, official Cuban commerce is practically stagnant since many people opt for the parallel import market, which has better products at lower prices, with everything from washing machines to deodorant, including catalog sales from Miami.

The new Customs Law will significantly raise taxes on these imported goods and will also limit the quantity. Therefore the expectation is that shipments through “mules” will be dramatically reduced, as will parcels disguised as family assistance.

Restrictions

Cubans residing in the country pay their customs duties in pesos. The new law will maintain the payment in pesos for residents but only on their first trip in any one year; after that, the duty will be paid in CUCs – a convertible currency that is 24 times more expensive.

Like in this cafe, many private workers have set up their businesses by buying equipment from abroad, even including the decorations. Photo: Raquel Perez

When it comes to clothes and shoes from their second trip, only 30 kg per passenger will be exempt, the rest will require payments of $10 USD per kg. This rate will apply regardless of what the traveler has already paid the airline for luggage transport costs.

Parcel shipments will also be limited. This is a means through which TVs, refrigerators, washing machines and even tools, toasters, juicers, irons and deep fryers have been brought in — from Panama and Miami — for sale to the new self-employed workers.
This year the state again started collecting customs duties on people bringing in food, which had been exempt from taxes since 2008, the year when Cuba was hit by three hurricanes that swept across the island causing heavy damage.

Clothes “Made in Cuba”

The island has few clothing options. One can buy expensive clothes in state-run stores or buy Chinese clothes that are a little cheaper and are sold in the doorways of private homes. In these stoops, tens of thousands of “timbiriches” (vending stands) have flourished since private work was authorized.

Since self-employment was authorized in Cuba, tens of thousands of porches and porticos have been converted into stands for selling clothing that comes mainly from Ecuador. Photo: Raquel Perez

The license is actually for selling clothing made by the vendor themself, but most of the clothes and shoes that are offered in the streets come in bags or bales from Ecuador and Cancun. These are brought into the country by “mules” who are very well “connected” with the customs office at the airport.

Clothing and better quality electronic equipment arrive in the suitcases of Cuban pilots and flight attendants. In this way they get bonuses, which is much more necessary now that the fight against corruption has derailed the major illicit businesses that operated in that industry.

“Abel” is an engineer who lives in Miami and travels twice a month to spend his weekends in Cuba. He is a “mule” whose ticket is bought for him in exchange for him bringing in 90 kg of goods. “I don’t make a penny, but I can travel for free whenever I want,” he said.

Online sales

Despite the disappearance of the underwater cable and other limitations, internet sales in Cuba are growing. The website “Revolico” offers Cubans appliances, homes, cars, furniture, computers, animals, jewelry and much more.

“Revolico” is the Cuba’s most popular online classified ads site. Through it, one can buy all sorts of appliances and even order them by catalog from stores in Miami. Photo: Raquel Perez

The site has the ability to sell what many want to buy, even deodorant. “Luis,” for example, acquired his espresso machine through that site. He selected it from the online catalog of a shop in Miami, and a month later it showed up at his door.

In the meantime, products in government-owned stores go old for a lack of buyers. The main reason is that their prices are inflated by a 240 percent sales tax, to which some managers will add a “commission” that goes straight into their pockets.

It’s logical for the government to want to protect domestic trade, but the truth is that their stores typically lack products, and when they do have these their prices are completely out of whack with people’s wages. But what’s most serious is that this end of the importing of contraband will leave tens of thousands of families without incomes.
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(*) An authorized translation by Havana Times (from the Spanish original) published by Cartas Desde Cuba.

 


14 thoughts on “Cuba’s Customs Office Tightens the Screws

  • May 3, 2013 at 11:02 pm
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    Real world reminder: The most powerful military and corporate entities are hell bent on making the Cuban socialist experiment fail – if they can’t destroy it completely. You want to argue that the “embargo” is not a “blockade” and is just about consumer goods? You forget how the U.S. set up and maintained the most vile dictatorships throughout the Americas, Asia and Europe. And when they fell, it was in spite of the CIA, US military, corporate hit me, etc. So it is easy to fault Cuban government and it’s efforts to survive, but if for one moment, you think the average Cuban, or any average citizen in any of the ex-colonies or US invaded countries would be better off if things returned to the “good old days” you’re living a self-deception. If by success, freedom and democracy you mean the chance to win the lottery, than at least your just selfish and math-challenged.

    The day the US has to stop trying to take over in Cuba once again, then we might see Cuba’s talents flourish unfettered. Meanwhile climate change caused by the mindless and destructive exploitations of world-wide corporate dominance may prevent all human efforts to live in some harmony with each other and nature. Right now the odds seem to be worsening rapidly as we waste what time we have.

  • July 20, 2012 at 6:14 am
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    The October elections in Cuba can be a good way of punishing the government (or the party, which is ultimately the same). Let’s not vote for anyone who’s already in the government and who has shown us that they won’t do anything to affect change. Let’s not vote for the slate.

  • July 20, 2012 at 6:13 am
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    The question of taxes imposed by the customs office is simple.

    The generals, with their little business of selling to Cubans, were losing the entire market to the “mules,” which had better assortments, better quality and better prices. Therefore the officialdom couldn’t sell their expensive but poor quality products to the Cuban people at astronomical prices.

    They can’t compete in a market, so they’re doing what they can. Since they hold the power, it’s easy for them to eliminate competition. Those who end up losing are the people. We’re back to the same old thing.

  • July 19, 2012 at 6:36 pm
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    We will have to wait days or months to really see the effect of this new restriction, to find out clearly how all of its aspects will affect people in one way or another, including those who travel once or twice a year for work reasons.

    The hierarchy isn’t affected by this. The customs office must be in a good mood thinking about how much they will be able to collect in bribes from their fellow citizens, without the slightest contemplation… because the customs officers have to cover their families and have to live as well.

    Exiting the airport arrival hall was already complicated… hopefully they’ll say how much of a delay there will be in processing to finally leave the international airport in Havana.

    Surely the self-employed sector will be affected, as well as the option of occasionally purchasing one or the other product at a cheaper price.

    It’s the same old story, with the people getting screwed.

  • July 19, 2012 at 6:26 pm
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    And the regulations in the diplomatic sector? Aren’t they contemplated in the new law?

    Worldwide, the charge for overweight luggage is paid to the airline for one simple physical reason: the plane has a weight limit for flying and therefore they limit what each passenger can bring aboard. If Cubana Airlines charges $50 per kilo more, or Iberia charges $100, it’s the problem of the airlines, while passengers are free to choose which company they travel with.

    What I don’t understand is why a tax is applied to overweight luggage by the customs office!

    It’s clear that they can place certain limits or control certain items, whether for national security or to protect domestic products. But the problem is that Cuba doesn’t produce anything, so what are they protecting?

    More important than continuing to foster corruption in customs is creating mechanisms whereby Cubans can import what they want, for example, cars, tools, etc. It could be that the importing entity is the government, but that it functions properly and doesn’t need to be monopolized by CIMEX, as others have explained above. Self-employed workers are “businesses” now and they must have the necessary freedom of operation, for example, to import a truck for their work, or an oven for their private restaurant, just as they should create mechanisms for wholesale purchases.

    In the end, all of these changes are purely cosmetic… it shows in every step they make that there’s no genuine effort being made to move things forward; it shows that they’re only giving the crumbs.

  • July 19, 2012 at 6:22 pm
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    A boycott is the solution.

  • July 19, 2012 at 6:01 am
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    Cimmaron, the problem with your argument is that it is based upon the same old tired response to every problem that the Cuban dictators choose not to resolve head-on. Blame the embargo. If Cuba were to allow for a more transparent accounting of its purchases, something as simple as using GAAP (Generally Accepted Accounting Principles) method accounting and make those numbers public, then someone undecided such as myself could make up my own mind as to whether or not the 240% markup was justified or not. To me it seems to be just a ploy to milk the emigrant market for all they can. You have no proof that your argument is indeed the truth only the word of a regime bent on self-preservation even at the expense of their own people. Besides, even if Cuba’s decision to further squeeze the cuentapropistas is within international norms, it is still a policy not right for Cuba. Other countries, as mentioned, allow for a wholesale market. Castro simply does not want competition, especially from his own people.

  • July 19, 2012 at 5:58 am
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    First of all, air-tight is far from the truth. Cuba has the opportunity to purchase the same Chinese and other products as other countries. It also purchases hundreds of millions of dollars of food products per year from the United States, “the enemy”. Yes it would be less expensive to buy other things from Miami but that’s not in the cards because of the embargo. And it would also be able to sell its few exports in the US. In Cuba there are resident business people from several countries who sell to the cuban government businesses and institutions.

    This issue of being able to purchase products or not has nothing to do with not having a proper wholesale market for private businesses to buy their supplies. It only reflects either poor organization or a desire for the small businesses to go broke, or an insensitivity of what it means for the general population to have to compete for short supply on the retail market with the small business people.

    And remember that while small private business was bad according to the government yesterday, today, they, not me, are billing it as the way towards a brighter future for the country.

    Even if the Cuban gov. sees fit to charge exhorbitant customs duties, note I say “exhorbitant” not the right to charge a duty, that has nothing to do with setting up an effective supply network system that benefits small businesses and in the end the general consuming public.

    Keep in mind there are two blockades, the one imposed by the US government to try and hurt the Cuban economy and the other by the Cuban government that can’t seem to get out of the total control mode that has proved a failure in economic terms.

  • July 18, 2012 at 11:01 pm
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    Rafael,

    Your argument about other countries made a highly convenient omission (otherwise known as blockade denial). “Every other country” (excluding about 3 countries – N.Korea, Syria & Iran) does not have an airtight blockade and other extra-territorial measures against doing business there from the US. If any of those “every other country in the world” had to purchase goods from halfway around the world, pay for high freight and insurance and special fees for any transactions done in US dollars, the markup would be quite a different figure than that which you assert.

    Be that as it may, your point is a diversion from the subject of import taxes /customs duties/tariffs as it pertains in every country. You did not debunk their universal existence.

  • July 18, 2012 at 8:54 pm
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    Damned Embargo.

    Oh wait, this has nothing to do with the Embargo.

    Raul just doesn’t like the competition and he needs the money.

    The government giveth and the government taketh away.

    Same stuff, different day in Cuba.

    Time to turn in the cuentapropista license… after you pay the taxes of course.

    What a great system.

  • July 18, 2012 at 2:45 pm
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    Cimarron, every other country I’ve been to in both the developed and underdeveloped world has wholesale markets where small businesses (and large too) can purchase in quantity at a lower price and then provide their retail services and sales. Likewise, the mark up at state run businesses in Cuba of 240% and up is outrageous, although I’m aware it’s the only way they can “sort of” stay in the black with all the theft and corruption that plague the state sector. If they really want small private businesses to be an alternative for shrinking government jobs than conditions have to exist for them to succeed. Measures like this new customs law seem geared to ensure their failure. And then what will happen when a good share of the small businesses fail and the government no longer has even its terribly low paying jobs to offer?

  • July 18, 2012 at 2:24 pm
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    The author of this report may not have meant it but it does appear rather disingenuous to report this situation as something unique to Cuba. I urge Fernando Ravsberg to follow up with a comparative analysis of import duties and customs regimen in other developing countries as well as in the advanced countries. Some issues are beyond ideology. An objective understanding and honest application of economics will make it clear that Cuba cannot afford NOT to collect customs duties on imported items (in commercial quantities). This is the norm in every other country! The situation will be difficult for Cuba’s nascent small private businesses because of the distortion of the Cuban economy by the US blockade and other US extra-territorial sanctions against doing business in Cuba. Cuba does not have access to a “free” market. It has blockaded markets. There would be no need for mules and smuggling of goods, if Cuba had access to its most economically logical trading partner the USA, and particularly the state of Florida. Imports would be cheaper than now, and so would be import taxes. The second problem, however, is that no country can afford to let its citizens patronize foreign goods and services more than the same from local businesses. One way to discourage this type of consumption is through the levying of tariffs etc. Has Fernando Ravsberg heard of the controversy and political fallout over the US Olympic team’s clothing having been made in China?

  • July 18, 2012 at 1:20 pm
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    I don’t understand any of these changes by the customs office. In a normal country it makes sense to protect domestic production with measures like these. But in Cuba, where there’s no production? One of the things, among many, that I think will happen is that paladars are going to replace their imported products with ones of lesser quality than can be found on the black market. That means that even fewer products will be found on the market for the public. Like what’s happened with eggs.

    This kind of change makes me believe that those who decide don’t have the slightest notion of these effects. If they did, then they are very very evil people, and want to make life difficult for all of us.

  • July 18, 2012 at 8:33 am
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    Sometimes you have to wonder if these “adjustments” are made to make people suffer? Who are the persons behind them and are they completely unaware of the situation in Cuba?

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