The Market Monitor Minding the Nation's Business
By Riza Lozada
The Bureau of Customs (BOC) and the Department of Trade and Industry (DTI) are at odds over steps the government should take to reduce smuggling in the country.
The bone of contention is a proposal of the DTI to reintroduce the hiring of a firm to conduct pre-inspection services on imports, which the BoC promptly turned down. Customs Commissioner Alberto Lina said at the Samahang Plaridel’s Kapihan sa Manila Hotel media forum that the pre-inspection shipment system has a “history of collusion” in the country.
The collusion, he said, happens at tax-exempt economic zones where imported products are not subjected to pre-shipment inspections since these are declared asraw-material inputs of products of factories in the economic zones that are meant for export to other countries.
A World Bank study on the performance of the Philippines’s pre-shipment inspection program showed that imports covered by the program were increasingly diverted to tax-exempt export processing zones, and from there are illegally brought onto the domestic market.
The study said that in the presence of tax loopholes, pre-shipment inspection seemed to have affected the form of fraud rather than its extent.
The study also showed traders attempting to evade import tariffs usually underinvoice the value of their shipments to their destination.
Lina said the reintroduction of the service “should not be considered as a solution” to the local industry’s problem of undervaluation of imports.The commissioner noted that in past administrations, the pre-inspection service provided by the Swiss firm Societe Generale Surveillance (SGS) failed to contribute to the attainment of government collection targets. Worse, it resulted in collusion in the pricing of imports, he said.
The SGS is a private firm that the administrations of President Cory Aquino and Fidel V. Ramos hired at huge costs to provide pre-shipment inspection on goods entering the country. The contract was terminated during the administration of President Joseph Estrada.
“I will not agree to that,” Lina shot back in reaction to the observation of Trade and Industry Secretary Adrian Cristobal Jr. that the pre-inspection system would complement the government’s efforts to open the economy as a result of the launching of the Asean Economic Community (AEC).
“Our direction is to open the economy and trading regime. We have an FTA (free-trade agreement) with Japan, through the Japan-Philippines Economic Partnership Agreement (Jpepa) aside from the AEC, and the country is negotiating FTAs with China, Korea, New Zealand,” Cristobal said.
The DTI secretary said pre-inspection at the port of origin would allow the immediate identification, through the bill of lading, of undervaluation.
Local manufacturers have lately raised alarm over the surge in smuggled goods mostly involving rice and substandard steel.
The Federation of Philippine Industries (FPI), which is the umbrella of local industries, has sought from the DTI and BOC stricter measures on the monitoring of imports and product standards without suggesting the revival of pre-inspection services.
The FTI said the government should particularly monitor the importation of angle bars, ceramic tiles and other consumer products.
Cristobal said anti-dumping laws and countervailing measures are the key safeguards that the government have against undervalued imports.
Lina added the BoC’s strict intelligence gathering had contributed greatly in reducing smuggling. He said his bureau, through its intelligence gathering, confiscated 118 container vans of rice shipment without import permits from Vietnam and Thailand.
The two government officials failed to reconcile their views during the forum and it is not known if they would try to do so in the future.
In the meantime, rampant smuggling continues.