FEDERATION OF PHILIPPINE INDUSTRIES The Voice of Industry ANATOMY OF SMUGGLING ‘FEDERATION OF PHILIPPINE INDUSTRIES Sat 701 Aa Center, Ampats Sec Geel San an, MevoMault Te! 722-3409; 72.9737 Fue 72-9602 ‘ama hihi Webstats line com histAnatomy of Smuggling CONTENTS kn What smuggling is all about’? fajor contributors to smuggling a. Valuation b. CBWsCBTWs €. Special Economic Zones/Free Ports 4. Duty Free Shops Kinds of Smuggling a. Outright smuggling b. Technical smuggling ‘The devastating effects of smuggling A. OnGovernment revenues © Customs Revenue Collections and Targets ‘+ Philippine imports versus exports of Philippine Trading Partners (NASTF Reports) . Special Economic Zones/Freeports = PEZA/SEZs as conduits to smuggling a Clark Development Authority Reports B. On Philippine industries (This section provides some highlights on the adverse effects of smuggling to selected industries) Testile Industry Petrochemical industry Shoe Industry Beye What has been done and still to be done in curbing smuggling? Proposed Solutions to have more effective anti-smuggling campaign‘What smuggling is all about? Smuggling, as defined under Section 3519 of the Tariff and Customs Code of the Philippines, “is an act of 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, ot sale of such article after importation, knowing the same to have been imported contrary to law. It includes the exportation of articles in a manner contrary to law. Articles subject to this paragraph shall be known as smuggled articles”. Kinds of Smuggling Briefly, there are two kinds of smuggling: outright and technical, Outright smuggling means that there are no documents involved: no import entries, etc. Outright smuggling takes place, not only in isolated beaches of our archipelago or through the southem back door, but also in our ports of entry, through the so- led “swing operations”, where containers are spirited out with the connivance of Customs personnel, for a fee e.g.. PhP200,000.00 per container. Recently, this fee, with leaks from textile/garments, has gone down to PhP80,000 per container, indicating that the domestic market is already flooded with contraband. In order to stop these “swing operations”, FPI has been asking for access to the Inward Foreign Manifests (IFMs) of the carriers which will indicate what cargo was brought in and its volume and value, ete. 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 tumed down for the reason that access to these might give an undue competitive advantage to some companies over others as one can have some idea of others’ volume and cost of production from the volume and value of imports, ete. The NASTF was able to get access to the manifests. However, the FPI may no longer be able to continue accessing because NASTF was already abolished. We are again back to square one. Technical smuggling takes place through undervaluation, underdectaration of the volume shipped, misclassification, and diversion of cargo. To solve the problem of undervaluation, the FPL was successful in having a Customs Administrative Order (CAO) signed by the Secretary of Finance creating a Customs Valuation Team which includes industry representatives. These representatives can contest the valuation of imports and the CVT, which meets weekly, can issue its recommendation. However, these are, to be repetitive, merely recommendatory. In the final analysis, the Port Collector has the final say. and more often than not, he disregards the recommendation of the CVT. A partial solution is to have Customs officials accept import prices published in trade journals as reference values by which transaction or invoice values can be compared with. Underdeclaration of volume shipped can be remedied by access to the inward shipping manifest.