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Deputy Speaker Sergio Apostol

Cargo firm, multinational linkup in smuggling bared

By Luis Leoncio

The unholy alliance between a huge freight/cargo forwarding firm and a multinational tobacco company has been defrauding the government of billions of pesos in taxes, but despite documents detailing the collusion, the government has not lifted a finger to stop it, Deputy Speaker Sergio Apostol has told The Market Monitor in an interview.

He tagged Airfreight 21,000, or Air21 Inc., and Philip Morris Fortune Tobacco Corp. Inc. Philippines, Inc. (PMFTCI). Air21 is one of 19 firms belonging to the Lina Group of Companies owned by Customs Commissioner Alberto Lina.

When he first became Customs chief in 2010, Lina divested himself of his companies, as is required by law. But after he and the so-called Hyatt 10 Cabinet officials resigned following allegations of poll fraud against then-President Gloria Macapagal-Arroyo, Lina returned to the private sector and retook control of the Lina Group of Companies.

According to a report, Air21 also figured in a controversy in the last elections over an alleged anomalous contract with the Commission on Elections for the deployment of election paraphernalia.

In a recent television interview after his reappointment to the Customs bureau, Lina said he would again divest himself of his companies. The television host was able to exact a promise from him that, after his stint in the government, he would not buy back his firms.

PMFTCI was established in 2010 after Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco Corp. agreed to combine their business operations and selected assets in a new company called Philip Morris Fortune Tobacco Corp. Inc. Philippines.

Apostol revealed that voluminous documents detailing the collusion were presented to various government agencies concerned, and that he used some of the details in the documents in a privilege speech at the House of Representatives, but the government remained unmoved.

Apostol said data from the National Tobacco Administration (NTA) showed that import commodity clearances (ICCs) were issued to some importations of PMFTCI from January 2010 to December 2012, as per summary of importations, consisting mainly of sample cigarettes, hinge lid blanks, spare parts and a few reconstituted tobaccos.

Aside from importing these products that are used to make cigarettes and few reconstituted tobaccos, the firm also brought in voluminous quantities of various kinds of highly dutiable tobacco leaves.

In 2012, PMFTCI imported more than 800 40-foot container vans of various kinds of tobacco leaves from different countries; most however, came from Switzerland. The importations cost billions of pesos.

But Apostol said the summary of the commodity clearances issued to PMFTCI that year did not show the importations of various tobacco leaves.

“Considering that there were no ICCs for imported tobacco leaves that year, by operation of law, the importations were illegal and tantamount to smuggling,” Apostol said.

“Smuggling, as defined in pertinent provisions of the Tariff and Customs Code, as amended, is the act of  ‘bringing articles into or outside the Philippines contrary to law.’

“Bringing into the Philippines any articles without compliance with certain importation requirements/clearances is an act, therefore, that is contrary to law. The law that was violated by these subject importations is the very law/regulation that requires ICC for any importation of tobacco leaves,” Apostol said.

Under pertinent provisions of the Tariff and Customs Code, as amended, those 800-plus containers of imported tobacco leaves should have been seized and forfeited in favor of the government, Apostol added.

Among several data uploaded in the Department of Finance (DOF) website, one pertained to the “Average Price of Imported Tobacco in 2013.” One of the tobacco importers listed in the cited data was Air 21 Apostol said.

The listed importations of Air21 Inc. were the following:

  •       279,279 kilograms of unmanufactured tobacco, with a dutiable value of P53.9 million; where no duties were paid.
  •       964,335 kilograms of burley-type tobacco, with a dutiable value of P178.3 million; the duties paid totalled P12.5 million.
  •       210,768 kilograms of tobacco stems, with a dutiable value of P6.8 million; no duties were paid.

Apostol wondered how Air21 became an importer of tobacco, since “it is a mere courier company.”
As a courier company, Apostol said, Air21 is solely established to deliver messages, packages, parcels and mail. It has no corporate capacity whatsoever to act as an importer; doing so would gravely violate its articles of incorporation, specifically the main purpose on why it is incorporated, Apostol said.

“Air21 has, therefore, no personality to import subject tobacco products on the following grounds: it is not incorporated as an importer, but a mere  courier company; it is not registered as a Customs Bonded Warehouse to import/handle/process tobacco as raw materials; it is not registered as a trading bonded warehouse to sell imported raw materials to manufacturers of cigarettes; it is not incorporated/registered as a cigarette manufacturer or for whatever business related to tobacco,” Apostol said.

“The subject tobacco importations of Air21, falling under the four instances cited are, therefore, illegal, constitutive of smuggling and should have been seized and forfeited outright. It is well noted that tobacco products, being articles of regulated importations, should have been imported only by those being established/authorized by law,” Apostol said.

The deputy speaker said Air21 is an affiliate of the brokerage that handles the account of PMFTCI, which is 2100 Customs Brokers Inc. (2100 CBI) which is under a broker named Teresita M. Malic, one of the top executives of Air21.

He said the House Committee on Ways and Means is also currently investigating and is expected to take other appropriate actions against traders Tina Yu and Laude Gonzales, owners and officials of Sally Star Trading, Zimmerworx Trading, Dynamycoms Trading, Wave Secure Trading, Tribal Moon Trading, Contigo Enterprises and Genels Trading Corp.

Apostol said that, based on information his office gathered, the consignee-importers cited brought into the country 2,651 40-foot containers vans of various types, grades and kinds of plastic resins for 2012 and 2013.

“All importation entries of subject plastic resins of mentioned consignee-importers were signed by Gonzales, a licensed customs broker, said to be fronting for Tina Yu, a businesswoman, who is claiming to be very close to a very powerful and influential businessman with connections in high places of the government,” Apostol said.

He said that, in 2012, Yu’s various companies had combined importations of 347 40-foot container vans of plastic resins from company-exporter Sabic Asia Pacific Pte. Ltd.

“Duties and taxes paid for the entire importations P31 million only but using an import entry filed by another importer of plastic resins, from the same company-exporter, Sabic Asia Pacific Pte. Ltd., it appeared that there is a gross undervaluation resulting in gross underpayment of duties and taxes,” Apostol said.

He said that using as reference IEIRD Number C-31694-12, which is the import entry number, it would show that duties and taxes payable for the entire shipments should be P78 million or an underpayment of duties and taxes amounting to P47.8 million.

On the same year, Yu’s companies also had a combined importation of 617 40-foot containers vans of plastic resins from company-exporter Sumitomo Chemical Asia Pte. Ltd.

Duties and taxes paid for the entire 617 40-foot container vans amounted to only P58.9 million, instead of P279.2 million, or an underpayment of duties and taxes of P220.3 million.

In all, Apostol said, Yu’s companies imported 2,651 40-foot containers of imported plastic resins.

“There is a prima facie total underpayment of duties and taxes amounting to P624.15 million in 2012,” Apostol said.

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