Technical smuggling costing govt billions

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Billions of pesos in revenues due to the government are being lost to rampant technical smuggling taking place at the Ninoy Aquino International Airport (NAIA).

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A source recently told The Manila Times that highly taxable items, particularly “high-value, low-volume” merchandise such as watches and jewelry, were being slipped right under the noses of Bureau of Customs (BOC) personnel through parcel packages from abroad passing through NAIA.

On condition that his identity will not be revealed, the source detailed the modus operandi of crooked traders to avoid payment of proper taxes.

He said the illicit operation hinges on under-declaring the value of the items so that the shipper will pay lower Customs duties.

“Actually sa phase pa lang ng CMEC [Central Mail Exchange Center] at Paircargo, ang ginagawa ng importer ay magpaparating ng mga kargamento na alahas at relo, pero ang totoo, iba ang contents na idineklara niya sa manifest kaya mas mura ang binabayaran na Customs duties [The importer would under-declare the value of the cargo starting at the CMEC and Paircargo phase. They would declare the items to be of low value so that the importer would pay lower Customs duties],” according to the source.

Paircargo is the official cargo handler at NAIA.

The source pointed out that undervaluing or misdeclaring cargos has been the practice of some importers for a long time.

“Usually sa CMEC lagi ang parating through parcel kasi kaya hindi halata at hindi ito magaganap ng walang pakikipagkutsaba sa mga ibang awtoridad [Usually shippers would pass their cargo through the CMEC. The importer would not be able to do this without the knowledge of certain Customs personnel,” he said.

Some of the smuggled items land on shelves of department stores or in Internet retail virtual market places.

The source said such activities constitute “technical smuggling,” which is illegal under the country’s laws.

Section 3601 of the Tariff and Customs Code of the Philippines states, “Any person who shall fraudulently import or bring into the Philippines, or assist in so doing, any article, contrary to law, or shall receive, conceal, buy, sell, or in any manner facilitate the transportation, concealment or sale of such article after importation, knowing the same to have been imported contrary to law, shall be guilty of smuggling.”

Economic sabotage
The BOC said its collections account for 20 percent of government revenues and any act of large-scale technical smuggling could be considered economic sabotage as it not just robs the state of income, but is also detrimental to other businesses operating legitimately.

Thousands of tons of cargo are shipped by air to the Philippines through NAIA, the main international gateway.

To provide a perspective of the cargos shipped by air through NAIA, the airport is considered as among the three the top sources of revenues for the government.

From January to October 2014, it earned P23.49 billion, according to BOC records.

The source said the revenues could have been significantly higher if shippers paid the right taxes and duties.

NAIA is next only to the Port of Manila and Port of Batangas in earnings.

In comparison, the total BOC collections for January-October 2014 amounted to P299 billion.

According to a Ford Foundation-funded study, the Philippine economy has lost an estimated $277.6 billion in illicit inflows, “primarily due to trade under-invoicing, also known as technical smuggling.”

“The vast majority of money flowing illicitly into and out of the Philippines is accomplished through the misinvoicing of trade, rather than through hot money flows such as unrecorded wire transfers,” says the 1960-2011 report by a Washington-based research organization, Global Financial Integrity.

Smuggling is one of the biggest breeders of corruption in the country, according to Customs Commissioner John Sevilla.

“Some importers and brokers would resort to bribery just to make their transactions with the bureau faster, and at the same time, with little or no knowledge of the import process, traders are often victimized or exploited by unscrupulous Customs employees,” he said.

In a bid to address technical smuggling, outright smuggling and similar practices, the BOC has come up with a master list of all of the regulated import products in the country and their corresponding import requirements.

The list of imports, which can be downloaded, comes in three versions: by specific product, by broad category product and by the regulating agency.

The list contains information on over 7,400 regulated products ranging from basic commodities like rice and sugar to vehicles, iron and steel products, oil, and electronic goods, among others.

The Manila Times had repeatedly attempted to download the list, but the BOC website http://customs.gov.ph/ had been inaccessible for the past three days.

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