The Bureau of Customs (BOC) has suspended the operation of Mighty Corp.’s customs bonded warehouse in Bulacan for violation of the Tariff and Customs Code.
In a memorandum dated January 17, Customs Commissioner John Sevilla directed the Port of Manila district director to immediately implement the suspension of Mighty’s license to operate the warehouse.
Sevilla, citing initial report by a BOC special task force, said that the Bulacan-based firm owned by the Wongchuking family committed serious violations of Tariff and Customs laws, rules and regulations resulting in huge revenue losses for the government.
“Consequently, there is a need to suspend the operations of the customs bonded warehouse of Mighty Corp. to prevent revenue leakages while further investigation is being conducted,” the commissioner said.
The BOC task force was created pursuant to a memorandum issued by Finance Secretary Cesar Purisima dated August 15, 2013, ordering a probe into the alleged illicit trade practices of Mighty which may have resulted in the noncollection of P4 billion to P5 billion in excise taxes last year.
The BOC task force noted that initial review of the import entries of Mighty for 2011 and 2012 showed that the company imported tobacco regardless of type and country of origin at $0.68 a kilo.
In his memorandum, Purisima noted that the price of Mighty imports is “much lower” compared to the prices of other tobacco importers, which ranges from $3 to $8 based on data from the National Tobacco Administration (NTA).
It was also discovered that Mighty also imported acetate tow, the raw material used for filters, at $0.30 to $0.32 a kilo. Other importers declared amounts ranging from $4.93 to $7.45.
The task force also discovered “unauthorized” use of bonded raw materials intended for exports for domestic production without proper payment of customs duties.
For tobacco leaf and acetate tow, Mighty indicated that most of their imports are intended for export. But based on the export commodity clearance issued by the NTA, the imported raw materials do not match the volume of finished goods actually exported.
“Simply put, there is significant unaccounted tobacco leaf and acetate tow that have not yet been exported by Mighty within the allowable period,” the task force noted.
Earlier, local tobacco growers led by the Ilocos Sur-based Banayoyo Reforestation and Tobacco Growers Credit Cooperative asked the Department of Agriculture and the Tariff Commission to investigate Mighty over possible violations of the anti-dumping law, which ultimately would adversely affect the country’s tobacco industry.
Francisco Gamboa, president of the Ilocos Sur cooperative, said that Mighty had been importing tobacco leaf at rates way below the floor price mandated by the NTA —making it liable for violation of Republic Act (RA) 8752, or the Anti-Dumping Act of 1999.
Gamboa recalled that the government-mandated floor price in 2011 was P58.69 a kilo for flue-cured tobacco and P38.42 for burley. For 2012, the floor price was P75 for flue-cured and P61 for Burley.
Mighty imported at a price equivalent to only a little less than P30 a kilo during these periods.
Based on the provisions of RA 8752, dumping occurs when a foreign producer sells its products to an importer at prices lower than those prevailing in the local market or at prices below the cost of production, which, in turn, threatens a domestic industry making like or comparable products.