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By Tess B. Bacalla, Philippine Center for Investigative Journalism
Second of four parts
WHEN new Customs Commissioner George Jereos
appeared before a Senate committee hearing on smuggling in
September, he made no mention of technical smuggling, which the
agricultural and industry sectors say is fast killing them. Instead,
Jereos talked about traditional or pure smuggling, in which
imported goods do not pass through the Bureau of Customs and enter
the country illegally through private ports.
Jereos said Customs did not have the required
manpower or “even a motorized banca to run after the smugglers in
the open seas or the sea around the Philippines. Without stressing
the obvious, of course, we all know that the coastline of the
Philippines is longer than that of the United States. So that is
really our problem.”
Jereos is a veteran at Customs. But
representatives of several industry organizations, brokers and
Customs insiders alike say his assessment of the country’s
smuggling problem was inaccurate. Technical smuggling, or the use of
fraud to bring in goods through legitimate ports, has always existed
side by side with pure or outright smuggling, they point out.
But in recent years this has intensified due to
a combination of persistent laxity and corruption in state agencies
and the growing inventiveness of wily businessmen who come up with
newer ways to hoodwink the government. For Jereos not to mention
technical smuggling at the Senate hearing was, therefore, a gross
oversight—and that is putting it kindly, they say.
Customs insiders and industry organizations say
catching some technical smugglers is actually easy since all one has
to do is to check official records to see if they are registered
importers or not. Routine checks are also all that are needed to
find out if all the information on submitted documents—such as
names and addresses—is real. The evidence shows that many
fictitious firms without proper import papers are able to ship in
goods without much trouble.
Indeed, Jereos himself was, wittingly or
unwittingly, a tool in the perpetuation of technical smuggling by a
company found by the Association of Petrochemical Manufacturers of
the Philippines (APMP) to have been illegally importing resins, the
ingredient for making plastics.
On January 30, 2003, the Customs Bonded
Warehouse Committee, then headed by Jereos, approved the application
of Travel Master to renew a license to operate Customs Bonded
Warehouse 1656. The approval was given although Securities and
Exchange Commission records showed that Travel Master had been
dissolved six months before, on July 15, 2002.
The APMP, which had been monitoring the firm,
says that even after it had informed Customs of the violation on
February 9, 2004, Travel Master continued to be allowed to import
goods. The bureau itself had given the APMP a list of
Customs-certified importers that did not include Travel Master, but
the company was apparently still importing resin and using its
customs-bonded warehouse between March and April 2004, based on
import entries obtained by the APMP.
Armed with these data, the APMP on April 2,
2004, wrote to then-Customs Commissioner Antonio Bernardo, pleading
action on the matter.
P1.6-billion loss
“The continued operation of this dissolved
company is contrary to law, is against the interest of the Bureau,
and is injurious to domestic producers of the commodities being
imported,” said Jess Aranza in the letter as president of the
Federation of Philippine Industries, of which the APMP is a member.
Today, Travel Master has stopped importing, but
not without defrauding the government of its lawful revenue and
causing damage to the resin industry. The petrochemical industry
reports that some P1.6 billion in duties and taxes for imported
resins could be lost to technical smuggling every year.
That a company could pull off such a scheme is
not unusual in Customs. Furious over the proliferation of cheap
imported tiles in the market, the Ceramic Tile Manufacturers
Association (CTMA) has been doing its own spadework in tracking down
importers who do not have the proper papers or may have used
fraudulent means to bring in tiles from abroad.
The ceramic tile industry says some P446 million
in potential taxes was lost to smuggling last year. It arrived at
this figure by using an estimated 4.33 million square meters of
ceramic tiles that were supposed to have been shipped to the
Philippines from other countries, but mostly from China, according
to the July 4, 2004, issue of the Asian Ceramics Trade Magazine. Of
this reported volume, only 397,345 square meters were accounted for
by the Bureau of Customs.
‘No one can beat our price!’
“Where did the 90 percent of Chinese tiles
go?” asked the CTMA in its presentation in one of the sessions of
the Cabinet Oversight Committee for Antismuggling, which was under
the now defunct National Antismuggling Task Force (Nastaf). That,
however, was a rhetorical question, since the CTMA believes it knows
where many of the tiles from China eventually landed: in Floor
Center stores, which usually have banners proclaiming, “No one can
beat our price!”
Floor Center has branches all over the country
and is acknowledged by industry insiders as having retail prices
that are lower by P2 to P3 a tile than the locally manufactured
ones. “These guys are moving 400 containers a month!” says a
ceramic industry insider.
The CTMA says that the Floor Center was not a
registered importer until the association pointed that out to the
stores’ lawyer. Its mother company registered it the next day,
says CTMA. Before that happened, the association had asked Customs
to inventory some Floor Center stores.
Not one of the five stores visited by Customs in
Metro Manila and Cavite in June could show proof of payment of
duties and taxes when asked to do so in the presence of a CTMA
representative. Instead, they all claimed that they were sourcing
from local suppliers, although many of the tiles were marked with
names like Valentino and Karen, known Chinese tile brands. The
stores also failed to show any documentary proof that they had local
sources.
Floor Center counsel Lito Mondragon denies that
his client is involved in smuggling. He says his client was included
on the list of ceramic-tile importers investigated by Customs
because it was importing from China and carrying the same Chinese
brands the other companies are selling. Anyone can import from
China, says Mondragon. He adds that the complaint against Floor
Center came from Mariwasa, a local manufacturer whose tiles are
priced higher than those sold by his client’s stores.
‘Identity theft’
The CTMA, meanwhile, hints that companies that
are not registered importers but are able to do so could only have
had help from inside Customs. Most likely, it says, fictitious names
were used, including fake consignees and brokers, although some
firms have also resorted to illegally using registered names.
The scheme, which some industry organizations
and government officials have taken to calling “identity theft,”
is not confined to spurious tile imports. For instance, JMD
International Trading Corp., a registered importer of computer
peripherals, was made to appear as the consignee of 11 x 40
container vans containing tires from China that arrived at the
Batangas port on September 13, 2003. Based on its investigation, the
Antismuggling, Intelligence and Investigation Center (ASIIC)—actually
the Nastaf secretariat—found that JMD had never imported tires.
The company’s counsel also said so in a September 22, 2003, letter
to ASIIC, and denied having authorized anyone to import tires on its
behalf.
The tire shipment was issued a warrant of
seizure and alert order on September 26, 2003, on the recommendation
of ASIIC, preventing the cargo’s release. Hearings were later
conducted by Customs on the motion of ASIIC to forfeit the goods in
favor of the government.
The case was still unresolved when on June 21,
2004, someone claiming to be JMD president Jovita de Guia wrote to
District Collector Napoleon Morales of the Port of Batangas, saying
the company was endorsing the cargo to the “ultimate consignee,”
New Century City Marketing Corp., whose name did not appear on the
import entry filed. The same letter was faxed to ASIIC by Atty.
Willy Sarmiento, a Customs employee.
When ASIIC referred the letter to JMD, the
company’s counsel denied that de Guia had sent the letter or
authorized anyone to do so on her behalf. JMD’s lawyers said they
intended to file criminal charges against the broker and her
“cohorts”—that is, if Customs could help them identify who
that was. When ASIIC asked for a certified true copy of the letter
from Morales’s office, it was told that Customs could not oblige,
“as the copy given to us was a mere xerox copy.”
But the bureau said the person “who brought
the document promised to bring the original during the scheduled
hearing, scheduled [for] August 4, 2004.” But Customs never
disclosed who that person was; ASIIC, which is still functioning
although Nastaf has been dissolved, is still waiting to see whether
the Bureau of Customs will sue the importer and broker.
Accredited companies, however, are not the only
ones whose identities are used without their knowledge. A licensed
broker, Ivy Sarad, for example, was surprised to find that she was
made to appear as the broker for the illegal shipment initially
declared as “frozen foodstuff” and amended to “general
goods” of Von Way Trading at the Port of Batangas, which arrived
sometime between December 2003 and January 2004. Sarad says she did
not renew her accreditation in that port during that year. (Under
Customs rules, brokers are required to renew their accreditation
with the bureau every year, specifically in every port where they do
business.)
A Customs employee says the use of spurious
import documents has become all too common, since “nobody’s
doing the verification.” The bureau “has its own mechanism to
check,” says the employee, but it seems it has been lax about this
duty.
“It has all the information,” says one
observer. “The question is what is the bureau doing about it?”
Customs said that its “first line of
defense” in dealing with identity theft and fake importation
documents “is the accreditation process conducted by [its]
Accreditation Unit.” It also says the Unit continuously
reengineers itself to discern the ever-changing schemes of technical
smuggling. Part of its “cleansing process,” says the bureau, is
random verification of even accredited importers, of which there are
more than 16,000, to determine if these are still in their listed
addresses.
Dubious addresses
Customs may want to check out the work already
done by private investigators commissioned by the CTMA. The
association had some registered importers it suspected of technical
smuggling investigated and found all the addresses to be fictitious.
Columbia Sports was among these companies. Its
address, according to records filed with the Securities and Exchange
Commission (with registry number 164566) is 5 Miller Street, San
Francisco del Monte, Quezon City. The investigators found no such
street exists in that part of Quezon City. Its accredited address
with the Customs bureau’s Central Intelligence and Investigation
Service, Jenny’s Avenue, Pasig City, bore no postal number.
Flame Inc., meanwhile, listed its address as 65
Marcos Sumulong Highway, Mambugan, Quezon City, in its
registration papers filed at Customs. But the investigators found no
such postal address; no company by that name was also doing business
in the area.
Official documents show Mitsuko Phils. Corp.’s
address as 304 Santolan Pawnshop Building, Manggahan, Pasig City,
with telephone numbers 895-1362 and 896-1432. The team that
conducted the investigation called this office and was told the
numbers were those of Mercedes International Export. Whoever replied
refused to talk any further to the team.
Nitoka Industrial Corp. was also nowhere to be
found in its listed address at Customs: 29 F. Sumulong Highway,
Antipolo. Even the SEC-registered address—38K A. Florentino
Street, Santa Mesa Heights, Quezon City—of one of the
incorporators/stockholders/directors, Jimmy Ang, does not exist.
“What exists is P. Florentino Street, which adjoins Talayan Road
and is inhabited mostly by squatters,” says the investigation
report.
From these findings the hired private
investigators concluded that the firms “deliberately were set up
to engage in technical smuggling.” They also said that besides the
dubious addresses the firms were using, the capital stock of some of
the companies was also not commensurate with their volumes of
importation while the others were engaged in businesses different
from what was declared in their registration papers with the SEC.
Industry groups have identified these companies,
based on documented cases, as among the biggest importers of
petrochemicals and ceramic tiles using illegal means. They are all
reportedly owned by one businessman who has also been said as being
behind companies illegally importing textiles.
(To be continued)
Part 1 |Part
3 |Part 4 |
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