ItThe Smuggling Problems In The Philippines

The smuggling problems in the philippines

Raymond Palatino (2008), reports “The extent and impact of smuggling in the Philippines” that
Smuggling is a serious problem that hurts the country in many ways. It deprives government of
revenues from uncollected taxes and customs duties. It affects local industries by distorting prices of
commodities. Smuggling causes production slowdown, which leads to mass lay-offs, reduced consumer
spending, bankruptcies, and lower tax collection. Smuggling has especially benefited from weak
governance and chronic political instability.

The author further added that when the government reduced the tariff rates on imported articles, many
economists and merchants expected a decline in smuggling activities. They believed the tariff reduction
would have discouraged illegal importation of goods since there will be fewer taxes to pay on the part
of importers. But even with reduced tariff rates, smuggling persists up to this day. From used clothing
to shoes, second-hand and luxury cars, agricultural products, garments, ceramic tiles and jewelries,
cheap smuggled contraband are flooding the local market, which wipes out the noearnings of small
honest traders.

The author compared the import-export data; Data show the disparity of import-export figures between
the Philippines and its trading partners. In 2000, trading partners reported that they exported $45-billion
worth of goods to the Philippines, but government figures registered only $34-billion worth of imports.
This means that more than $10-billion worth of goods were unaccounted, undervalued or misdeclared.

In 2002, China exported 3.9 million square meters of ceramic tiles to the Philippines, but only 600,000
square meters were recorded in the Bureau of Customs. The following year, 4 million square meters of
ceramic tiles were exported to the Philippines, but only 300,000 square meters were recorded in the
BOC.

From January 2001 to June 2003, authorities confiscated a total of 1,517,387 bags of smuggled rice
worth P1.18 billion. Since 2006, a total of 100,000 smuggled vehicles were shipped into Subic Bay
Freeport. Last year (2007), 4 billion liters of oil were lost to smuggling.

The author concluded that Smuggling clearly destroys the local economy and exacerbates poverty in
the country as manifested by the closure of local industries, decline in agricultural production,
uncompetitive agricultural products, loss of jobs, unfair competition, loss of government revenues,
heightened corruption in the bureaucracy, and risks in consumer welfare.

Milton Ayoki (2003), explained in his Paper “The hidden costs of doing business in Uganda” that the
problem of smuggling has been particularly serious for goods like petroleum fuels, cigarettes, sugar
and other highly taxed or potential revenue sectors such as steel, leather, wood, textiles, bicycles and
chemicals as major deterrents.

The author further added that apart from the huge revenue losses involved, smuggling is killing local
businesses and causing great inequality and other effect is that illegally imported goods are steadily
displacing some locally produced goods in the market place. This is adversely affecting both
employment and profit margins in domestic industries.

Luk Joossens (2003), written in his article “Vietnam: smuggling adds value” that

Internal British American Tobacco (BAT) documents have been explicit about the knowledge of
cigarette smuggling into Vietnam. 555 cigarettes is the major smuggled brand and there is no doubt it
has a tremendous image and sales potential in the country.

The author added that BAT documents describe in a detailed way the smuggling route for 555:
cigarettes were produced in the UK, shipped to Singapore, sold to importers and traders in Cambodia,
and then transported illegally across the border to Vietnam.

Joossens argued that the industry has always claimed that smuggling is the result of taxes being too
high.

UNDP (1995) viewed the taxes on opium exports to the mainstay of Taliban income and their war
economy. It revealed that Afghanistan-Pakistan drugs exports were earning some 50 billion rupees (US
$ 1.35 billion) a year. Alongside the drug trade, the traditional Afghans smuggling trade through
Pakistan and now the Gulf States, expanded under the Taliban, creating economic havoc for the
neighboring states. This trade was estimated be the largest trade source of official revenue for the
Taliban and generated an estimated US $ 3 billion annually for the afghan economy; UNDP disclosed
that through the customs officials in Kandahar, Kabul and Herat refused to disclose their daily earnings,
but with some 300 trucks a day passing through Jalalabad and Kabul to the north, daily earning were
considerable. The illegal trade in consumer goods, food and fuel through Afghanistan crippled
industries, reduced state revenues and created periodic food storages in all neighboring countries.

The World Bank (1997) report on “Afghanistan – Pakistan Trade Relations” as a part of its “watching
brief” strategy for Afghanistan, accounts for the total trade between Afghanistan and Pakistan at $2.5
billion in which the unofficial re-export from Afghanistan to Pakistan has the loin’s share. The study
assessed that the long and porous border between the two countries, the need for basic goods in
Afghanistan’s warn-torn economy, weak border controls, high import tariffs in Pakistan on goods prone
to smuggling and the low cost risks were important reasons behind the large and growing unofficial
trade between the two countries. This report further added that there was an evidence of expansion of
official and unofficial trade in locally produced goods between the two countries, which was likely to
increase substantially if there was peace and post-war reconstruction in Afghanistan. In Pakistan, the
imports competing industries have been harmed. The study also estimated that the government of
Pakistan had been loosing substantial revenues due to tax evasion and fungibility of routes through
which un-official imports enter the country.

Rashid (1999) in his book Taliban, recorded that the smuggling trade to and from Afghanistan became
the most devastating manifestation of the losses being sustained by the government of Pakistan during
the Taliban regime. According to him, this trade, which now extends to central Asia, Iran and Persian
Gulf, represented a crippling loss of revenues for all these countries, but particularly Pakistan, where
local industry has been decimated by the smuggling of foreign goods. Rashid elaborates further, “What
is euphemistically called the afghan transit trade (ATT) has become the biggest smuggling racket in
the world and has enmeshed the Taliban with Pakistani smugglers, utransporters, drug barons,
bureaucrats, politicians, police and army officers. This trade became the main source of official income
for the Taliban even as it undermined the economies of neighboring states”.

Rashid also points out that the border post between Chaman, in Balochistan province, and Spin Boldak,
in Afghanistan, is a prime location for watching the rackets at work. His estimates accounts for 300
trucks crossing from Afghanistan to Pakistan on a good day. The goods which these trucks carry, have
no invoice and cross up to six international frontiers without having route permits, driving license or
passports. The consignments on these trucks range from Japanese camcorders to English under-wear
and Earl gray tea, China silk to American computer parts, Afghan heroin to Pakistani wheat and sugar,
East European Kalashnikovs to Iranian petroleum and nobody pays custom duties or sales tax.

Inter press service, a news agency (2001), found Indian drugs to have found ways to Pakistani markets,
adding yet another dimension to the cross border illegal trade to and from Afghanistan. The agency
named aspirin, Amoxiline, Ampiciline, Corimaxazole, Laxotanill, Cyprafloxine, Renitidine,
Fametidine and Cemedtidine to be selling in prominent medicines shops of the province. The agency
further disclosed that unlike the settled areas, where the sale of Indian drugs was banned and those
found guilty of conduct were liable to severe penalties, the tribal areas were quite immune to such
repercussions. Like all other duty free smuggled goods, Indian drugs were evaluated by the agency to
be 10 times cheaper than the drugs of the same brand and effect, produced by multinational companies
(MNCs) in Pakistan.

Citing reasons for this price disparity, the agency added that unlike India, where the MNCs were bound
to use raw materials from India, the government of Pakistan allowed them to import raw materials from
their parent countries which entailed heavy tariff duties. Similarly, quoting the findings of international
regional office for Asia and pacific, the agency counted 26 commonly consumed drugs to have very
high prices in Pakistan as compared to India.

The agency while discussing the transportation of drugs, revealed that along with other goods, Indian
drugs were smuggled into Afghanistan, to Pakistan’s tribal areas and then finally to Peshawar. The
report also disclosed that Afghanistan received thousands of US dollars worth of medicines, each
month, from Indian, under a bilateral agreement, but some unscrupulous agencies in Kabul were
apparently making huge profits from selling them in tribal areas.

The report further discovered that due to the mutual collusion of the MNCs, health department
functionaries, and other government officials, the measure of the government to import drugs from
china, Bangladesh, Bulgaria, Poland and Yugoslavia to counter the smuggled and low priced Indian
drugs, has miserably failed.

Awan (2001) put the Pakistan bound transit goods to Afghanistan at Rs 14.97 billion during 1998-99.
Prominent among these goods were safety razors, worth Rs 120 million, cosmetics Rs 150 million,
minerals water, Rs 200 million, electronics worth Rs 300 million and telephone sets worth 160 million.
The report pointed out that this trade, which has been conducted for the last 50 years, fetched billions
of rupees to the tribal traders, related to the afghan counterparts and as much to the Pakistani customs
and other law enforcing agencies, who facilitated this black trade.
 Awan also disclosed that previously, for decades, these Afghanistan bound transit goods were leaked
into Pakistani markets before reaching Afghanistan. Owing to strict regulations imposed on the transit
trade, it was very recently that the Afghanistan bound goods, at least, started crossing the border and
then re-exported illegally to Pakistan. Awan pointed out that due to the high financial stakes of various
interest groups, law, customs and state machinery have lost their efficacy.

Keeping the adverse fall out of the abuse of afghan transit trade agreement on the industrial sector of
Pakistan, Awan suggested that other neighboring countries with sea-coast should also shoulder the
responsibility of transit facilities to Afghanistan.

The News, in its march 2, 2002 issue, reported that there has been an unprecedented increase in the
smuggling of tea, spices and other utilities, through the afghan transit trade, during the last two years.
This rise has been attributed to the massive under-valuation of these items at the country’s dry ports,
especially Lahore, Gujranwala, Faisalabad, Quetta and in other cities, which were basically established
for providing facilities to the local traders at their door steps.

The report added that “these smuggled items are now openly sold at the Jodia bazaar, the traders from
various parts of the country have opened their offices, which deal exclusively in smuggled items, mostly
tea and spices through Quetta dry port into the city” the dry ports established in various parts of the
country have become a major source of smuggling, mis-declaration, under-invoicing, tax evasion and
theft, detrimental to the government treasury, it alleged.

The repot revealed that since 1988, the smugglers switched to smuggling of eatable products as they
found this proposition to be highly lucrative. The smuggling of items originates from Dubai, via port
Bandar Abbas in Iran, to Afghanistan and ends up into Pakistan. Probing the matter, the report
discovered five percent increase in the custom duty during the 2001 budget, plus the total tax increase
of 70 percent, to be the main reasons for the rise in smuggling.

Daily Aaj, on 16 July, 2009 reported that during the year 2008-09, eight hundred million kg of tea is
smuggled into the country, only 4.9 million kg smuggled tea is less then from the total imported tea.
This year government losses Rs 5 billion in shape of tax evasion due to smuggling of tea.

Through reliable sources, Afghan Transit Trade (ATT) is the main source of tea smuggling in the country. The
total import of tea was 10 million kg during the period of July 2007 to June 2008. This was imported in one year
from Kenya about 53.9 % while in previous year that was 61% from the same country. Which was 7% dropped
in tea imports.

NAIA Customs confiscates guns, ammo in Pasay

warehouse
MANILA, Philippines – The Bureau of Customs in the Ninoy Aquino International Airport
confiscated a cache of firearms which were abandoned in a DHL warehouse in Pasay
City.

BOC’s NAIA District Office said the following were unattended when seized in 3 different
operations: 35 pieces of rifle parts, 1 Glock pistol, 4 units of Glock magazines, 92 pieces
live ammunition and airgun rifle.

The rifle parts were illegally imported from Hong Kong and misdeclared as general
merchandise. The pistol and pistol parts bound for Taiwan were wrongly labelled as “new
water pump.”

The airgun rifle and accessories, as well as the gun parts arrived from China.

Last February, Customs hauled some P500 million worth of guns and ammunition bound
for Taiwan also at the DHL warehouse.

The Customs Modernization and Tariff Act (R.A. No. 10863) and the Comprehensive
Firearms and Ammunition Act (R.A. No. 10591), the import and export of guns, gun parts
and ammunition without proper clearance from the government would be subject to
seizure and forfeiture.

Aside from BOC, the July 2019 was coordinated with the Philippine National Police-
Firearms and Explosive Office (PNP-FEO). – Rappler.com

Customs seizes P1.4M worth of marijuana hidden in

snack packs
MANILA, Philippines – The Bureau of Customs (BOC) on Monday, July 1, seized a parcel
that supposedly contained snacks but turned out to be over 800 grams of Kush marijuana
valued at P1.4 million.

The owner of the parcel, identified only as a San Juan resident, was arrested after
claiming the parcel at the Central Mall Exchange Center in Pasay City, the BOC said.

The marijuana weighed 847.2 grams and was hidden in tortilla chips packages. The
illegal parcel was sent from Illinois, USA.
 The owner of the parcel will be charged for violation of Republic Act No. 9165 or the
Comprehensive Dangerous Drugs Act of 2002 and the Customs Modernization and Tariff
Act.

The BOC reiterated its warning to the public against importing illegal goods, citing its
partnership with the Philippine Drug Enforcement Agency in the latter’s anti-drug
surveillance. – Rappler.com

4 luxury cars smuggled into Philippines

1Evelyn Macairan

MANILA, Philippines — Four luxury vehicles worth millions of pesos each have
reportedly been smuggled into the country, the Bureau of Customs (BOC) said
over the weekend.

In a statement, the BOC-Port of Cebu (POC) said they discovered a

Range Rover Evoque, a Porsche 911, a Mercedes-Benz and an Alfa Romeo
inside a 40-footer container van that arrived in Cebu on Dec. 19.

The shipment was reportedly declared as car accessories.

The POC discovered the misdeclaration during an X-ray of the container, which
showed images of four motor vehicles.

The shipment came from Japan and was reportedly consigned to Kylemelan
General Merchandise in Malabon City.

The port examiner and the Customs Intelligence and Investigation Service
(CIIS) recommended the seizure and detention of the shipment for alleged
violation of the BOC and tariff laws.

POC-CIIS supervisor Carlo Bautista said the vehicles could be intended for
collectors in Cebu, noting the Mercedes and the Porsche were vintage.

The consignee may have used the Malabon address to mislead authorities,
Bautista said.

P14.198 billions of smuggled goods seized

Smuggling and other acts against customs law committed by large-scale syndicates deprive the
government of the much-needed revenues to support its socio-economic programs for the Filipinos.
Recognizing smugglers’ deplorable practices, the Bureau of Customs heightened its operations against
smuggling and illicit trade which resulted in P14.198 billion worth of seized goods in 2017.

Despite the grave penalty imposed to smugglers of agricultural products, it still has the biggest cut in
the list of smuggled goods amounting to P6.399 billion, followed by the smuggling of fake products at
P6.328 billion. Smuggled agricultural products were either imported through misdeclaration or lacked
import permits from the regulatory agencies.

Among the most common smuggled agronomic products are rice, onion, garlic, carrots and apples.
Most of the counterfeit items seized came from China. This is also true with ukay-ukay or used clothing.

Republic Act (RA) 4653 prohibits the importation of used clothing, rags, or ukay-ukay in commercial
quantity to safeguard the health of the people and maintain the dignity of the nation.

The Bureau of Customs also seized P164.9 million worth of cars including luxury cars such as
McLaren, Ferrari, Lamborghini, Mercedes Benz, Chevrolet Camaro and Range Rover.

To address the incidents of smuggling, customs examiners were ordered by the Customs Commissioner
to exercise extreme caution in checking documents to prevent technical smuggling. Counterchecking
of the bills of lading and stowage plans were also taken to keep smuggling at bay.

Green Lane temporarily suspended until perfection of risk management parameters

With the growing volume of international trade and the increasing call for extensive facilitation, the
risk of smuggled goods to pass across national boundaries is high. To control the movements while
ensuring compliance with the laws, the Bureau of Customs temporarily suspended the Green Lane of
the Selectivity System until the risk indicators in the Selectivity criteria are perfected. As provided by
the system, all shipments categorized under the Green Lane will not undergo any examination of the
Bureau of Customs and will be immediately cleared after the importers pay the corresponding duties
and taxes.

The integrated Risk Management System which is said to be vulnerable to manipulation from
unscrupulous traders and their cohorts inside the agency prompted Commissioner Isidro Lapeña to
subject all shipments to pass either document check (Yellow Lane) or physical inspection and document
check (Red Lane). The temporary suspension is a preventive measure while the Risk Management
Selectivity System is undergoing evaluation and pending the issuance of new rules regarding selectivity
parameters.

At present, shipments pass through the default Yellow Lane or the Red Lane set up at a ratio of 55:45.
Once the system is established, the profiles along with other information and intelligence will provide
a basis for targeting potentially high risk shipments and travelers while not impeding the movement of
low risk cargoes and travelers. The Bureau of Customs envisions a customs administration with a
conflict-free border protection and trade facilitation

BATAS revs up fight versus smugglers

The Bureau’s Action Team Against Smugglers (BATAS) under the Legal Service is now the sole office
tasked to run after smugglers after Commissioner Isidro Lapeña ordered the abolition of the Special
Studies and Project Development Committee (SSPDC).

BATAS is responsible for the filing of cases with the Department of Justice against importers, brokers
and/or erring Customs officials and personnel for violating provisions of the Customs Modernization
and Tariff Act.

In 2017, 12 cases were filed with DOJ against CMTA violators. The apprehended goods totalled a
dutiable value of P6.5 billion.

A case against the importer and the brokers of the 605 kilos of shabu that was seized in May was filed
before the DOJ.

Customs beefs up anti-smuggling capacity

To enhance the country’s capability in monitoring and protecting the border against contrabands and
smuggled goods, 19 x-ray units were newly-installed in the Ninoy Aquino International Airport and
Davao International Airport.

Two mobile x-ray machines are now installed in NAIA terminals 1, 2, 3; seven hand-carried baggage
x-ray machines installed in NAIA terminals (3 in Terminal 1; 2 in Terminal 2; and 2 in Terminal 3);
eight fixed baggage x-ray machines installed in NAIA terminals; one unit of fixed baggage x-ray
machines installed in Central Mail Exchange Center; and one unit of fixed baggage x-ray installed in
Davao International Airport. The new x-ray units will help the Bureau of Customs detect smuggled
items in the airports where foreign travelers and balikbayan usually land. It can be recalled that on April
2017, President Duterte called on the Bureau of Customs and Bureau of Immigration to stop the opening
of baggages and balikbayan boxes sent by the OFWs.

Aside from the new x-ray units, the Bureau of Customs received from the US Embassy 20 units of
radiation detectors for the interdiction and location of nuclear materials and weapons.

WCO, UNODC sponsors BOC border protection unit

As part of the agency’s continuous effort in strengthening its campaign towards effective border
security and trade facilitation, a Container Control Unit (CCU) was created as sponsored by the United
Nations on Drugs and Crime (UNODC) in partnership with the World Customs Organization (WCO).

This unit will serve as an intelligence office that will focus on non-fiscal violations like illicit trade and
proliferation of strategic goods. It will recommend high-risk shipments to a higher authority to exercise
proper enforcement of laws, rules, and regulations, as well as to exercise any type of control in relation
to the aforementioned non-fiscal violations.

Collaborative cooperation with the ASEAN and UN is necessary in securing trade culture and in
eradicating poverty, crime, and corruption in the country. The unit also enhances the BOC’s mandate
of trade facilitation and securing the Philippine borders from smuggling and other forms of customs
fraud. The newly-created unit will operate under BOC’s Revenue Collection and Monitoring Group.

References

 2017 Annual Report of Bureau of Customs

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 Rappler.com