Last of four parts
LUXURY VEHICLES are not uncommon at the Bureau of Customs (BOC), where officials and employees like to drive fancy cars, even if most of them cannot explain how they bought these, given the salary scales at the BOC.
But assistant customs section chief Ildefonso Almero does not even have a car. Just five years away from retirement, he also does not own a house, but rents an apartment where he lives with his family.
Almero also seems bent in making sure the government collects the right duties and taxes — something that businessmen and Customs insiders alike say no longer interests many bureau personnel.
For years, Almero has been calling the attention of his superiors to review the bureau’s 1998 reclassification of two petrochemical products, low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE), as copolymers. Both had been classified as homopolymers for more than 20 years, he argued in a position paper.
The 1998 reclassification, however, subjected the two kinds of imported petrochemicals, specifically the Dow Chemical Co. and Elite brands, to a lower tariff rate of three percent, instead of the 15-percent duty they merited under the original classification. As a direct result of this misclassification, wrote Almero, the government has run up huge revenue losses amounting to millions, if not billions, of pesos in the last six years.
The resulting loss, he argued, is “so massive it has contributed to the impending collapse of our $1-billion local (petrochemical) industry.”
Jose Sereno, executive director of the Association of Petrochemical Manufacturers of the Philippines (APMP), and who read Almero’s paper just recently, describes the Customs official’s analysis as “excellent.” Yet Almero’s own agency seems less impressed and so far has been unmoved by his arguments.
Business groups are not surprised. They say they have had to endure the same lack of enthusiasm whenever they ask Customs to implement specific reforms to curb smuggling. “Very slow ang response time,” complains an industry representative. “You cannot but suspect if delay is deliberate. You can’t readily point an accusing finger. Administrative lapses, yes.”
Other observers, though, are more forthcoming in pointing out what they believe to be the real reason behind the bureau’s foot-dragging. Says one: “They (the smugglers) are always one or two steps ahead of us, and part of the syndicates are the personnel of the bureau. They are the ones advising importers what to do.”
Customs insiders themselves admit as much, adding that some technically smuggled goods are “packaged from the top,” involving no less than powerful politicians or their cronies.
This may help explain why it took the Federation of Philippine Industries (FPI) years before it gained access to the inward foreign manifests (IFMs), the shipping documents containing all the vital information about the cargo that comes into the country. The information in the manifests include the description of the goods contained, the names of the consignees, the ports of lading, and destination.
Access to these documents, the FPI believed, would enable it to assist the bureau in preventing smuggling, since it would allow detection of any irregularity in a foreign shipment even before the goods reach the Philippines.
“FPI has contended that these documents are public and should be accessible. We submitted our legal arguments to the Bureau of Customs but our request was turned down for the reason that access to these might give an undue advantage to some companies,” wrote FPI secretary general Joseph Francia. “The reply to this argument is that if everybody had access to the shipping manifests, no one would have undue advantage over anybody else.”
Customs eventually did release the manifests to the National Anti-Smuggling Task Force (Nastaf), which was created last March. The task force headed by current local governments secretary Angelo Reyes promptly allowed industry organizations to view the electronic copies in its headquarters, since it needed their expertise to make sense of the data.
An industry representative says this proved to be a big help in their efforts to curb smuggling and protect local industries. Using the data from the IFMs, they were able to alert Nastaf about incoming vessels with questionable cargoes. But then technical smugglers began diverting their shipments from the two Manila ports covered by the IFMs to other ports such as Subic. Volumes of resin shipments, for example, went down significantly in the Manila port even as, an industry representative says, “they were having a deluge (of resin) in Subic.”
Access to the IFMs meant that some of the affected industries no longer had to rely too much on insiders to get confidential information on irregular shipments. In the past, that information was obtained in exchange for an outright fee or some favors.
The fee, says one businessman, amounts to “a few thousand pesos,” which is handed out if the information is proved to be correct. Businesses also had to keep their contacts happy by small tokens of appreciation such as cell-phone loads or pocket money if the Customs insider was traveling abroad.
But the industries’ access to IFMs was short-lived, lasting only until Nastaf was dissolved last August upon President Arroyo’s oral instructions for it to cease operations. “Now we have to rely again on our contacts inside the bureau,” says an industry representative, acknowledging that Customs insiders providing them with information are not exactly doing it out of goodwill and probably have their own vested interests and other groups to protect.
Industry groups hit hard by technical smuggling lost access to the IFMs when Nastaf was dissolved. They also lost the momentum brought on by the task force’s efforts to bring about coordination among the various government agencies whose functions are vital in containing smuggling.
“Before Nastaf (was created), we just wound up frustrated because everything was piecemeal,” says an industry representative. “If the agency will not cooperate, nothing more can be done.”
Indeed, some agencies sometimes act as if they are not part of the same government as the other state bodies. Earlier this year, for example, Columbian Grains Foods Corp. was found to have misdeclared 180,000 bags of iodized salt as natural salt. Yet it claimed to have secured an Authority to Release Imported Goods or ATRIG from the Bureau of Internal Revenue (BIR). The issuance of this authority exempts an importer from payment of VAT and facilitates the release of the shipment.
When asked by the Anti-Smuggling, Intelligence, and Investigation Center (ASIIC), Nastaf secretariat, for a certified true copy of Columbian Grain’s ATRIG, the internal revenues bureau invoked Section 70 of the National Internal Revenue Code in its refusal to release the document. “We will be able to affirm the authenticity of the ATRIG in a proper forum like a court of competent jurisdiction which subpoenas us to testify,” BIR deputy commissioner Jose Mario Buñag said in a letter to ASIIC.
A government official would later observe that the BIR had granted the ATRIG without first checking with Customs regarding Columbian’s shipment. “Instead of protecting government’s interest, it’s compromising (it),” he said.
The accumulation of huge uncollected customs bonds (the figures vary: P5.7 billion as of September 2003, as reported by Customs to Nastaf; P1.27 billion covering the period 2000-2003, based on Customs-furnished data) also highlights the absence of coordination among government agencies.
It was only recently that the Insurance Commission announced that it would issue a circular saying it would not renew the Certificates of Authority to issue surety bonds of companies with unsettled accounts of at least 70 percent of their outstanding obligations to the customs bureau. It was also only recently that the issue of getting the Commission on Audit to do an audit of all outstanding customs bonds came about.
It seems only now, too, that the Department of Finance, given its oversight functions over Customs, has seen it fit to look into the customs-bond issue through a subcommittee on unliquidated bonds headed by Undersecretary Noel Bonoan. In addition, the finance official heads the subcommittee on customs-bonded warehouses, yet another source of massive technical smuggling at Customs. Both subcommittees were created as a result of the regular meetings of the Cabinet Oversight Committee on Anti-Smuggling.
There is actually supposed to be a Congressional Oversight Committee for Customs, the creation of which is mandated by Republic Act No. 7650 to monitor the implementation of this law on the physical examination of cargo. The committee is supposed to be composed of the chairpersons of the committees on ways and means and both houses of Congress, plus four additional members from each house. A check with the two chambers indicated that the committee does not exist. RA 7650 was enacted in 1993.
Such legislative aberration may also be seen in the newly enacted Republic Act 9280, which has not been fully implemented to this day in the absence of approved implementing rules and regulations. This after many legitimate brokers waited some 25 years, according to Vis-Min Customs Brokers Association president Felix Romano, before the law was finally passed last March.
The law, “An Act Regulating the Practice of the Customs Brokers Profession” is expected to professionalize the ranks of brokers, often tagged as principal accomplices in the commission of technical smuggling. Among others, it requires customs brokers to sign import entry declarations under oath. This measure is designed to put a stop to some of the malpractices among brokers, including signing of blank entries and connivance with non-brokers to facilitate the irregular importation of goods, thus abetting technical smuggling.
Romano says that because of the law, “brokers will have to think twice before conniving with importers” in making irregular shipments. Romano is among those actively pushing for the approval of the draft implementing rules and regulations for the law.
Another legislative measure deemed vital to discouraging smuggling is a law that would declare smuggling, whether technical or outright, a heinous crime and an act of economic sabotage. As of September 3, 2004, three bills that would more or less do this have been filed in Congress. Similar bills had been filed in the previous Congress, though, and nothing ever came out of those.
Many industry representatives note that no one has been convicted of smuggling despite the damage it has wrought on local industries and the tremendous amounts of potential revenue the government has lost because of it.
Recently, Customs released a list of 112 names of individuals it claims to have sued, including suspected smugglers. But a broker who claims to be an expert in “facilitating” the importation of “problematic” cargo scoffs at the list, saying that the number one “is not even a small fish.” Conspicuously absent in that list at least is a name that an industry source recalls was mentioned specifically by President Arroyo in a 2002 meeting with the business groups. According to an industry source, the president told those present, “We know who the smugglers are,” and cited one particular smuggler by name.
In the meantime, amendments to the Tariff and Customs Code are also being sought, since many believe it is no longer responsive to the needs of the times, especially where smuggling is concerned.
But some industry representatives and government officials say other state agencies besides Customs to be stricter in issuing the various permits needed by traders to bring in goods, and to scrutinize more closely all the documents presented by importers.
Last August, Mount Zion Cargo Express (Mozex) was found to have obtained import permits from the Plant Quarantine Service of the Department of Agriculture by using fake documents. Mozex had been regularly importing broccoli from Australia, supposedly from a company called Scholastic Australia Pty. Ltd. To facilitate the release from the port, Mozex presented phytosanitary certificates, which are guarantees issued from the exporting country that an agricultural product is free from pests and diseases.
Acting on tips that the company was bringing in “questionable cargo,” ASIIC wrote to the Australian Quarantine Inspection Service (AQIS) regarding the authenticity of 12 phytosanitary certificates supposedly issued to Mozex. AQIS denied having issued them and added that it had no record of Scholastic P/L exporting farm produce. Scholastic Australia turned out to be a children’s book publisher.