No Free Lunch

Customs modernization can’t wait

/ 12:08 AM September 22, 2015

RATHER THAN be seen as a hotbed of massive graft and corruption, the Bureau of Customs can actually play a key developmental role in government. But crucial to achieving such a dramatic makeover is a long-pending measure in Congress to overhaul the outdated 1978 Tariff and Customs Code of the Philippines. Having undergone piecemeal amendments, the old law has long been due for such an overhaul, which the proposed Customs Modernization and Tariff Act (CMTA) would accomplish. But can our legislators still pass this long-overdue law at this time, when they are said to be already in campaign mode for next year’s elections? Two important upcoming international events should give them the impetus to do so.

In November, President Aquino will chair the Asia-Pacific Economic Cooperation (Apec) Leaders’ Meeting in Manila. We have been hosting and chairing various Apec meetings since January, and among the most prominent items for discussion is trade facilitation, a function prominently centered on the economies’ customs agencies. The Sub-Committee on Customs Procedures (SCCP) under the Apec’s Committee on Trade and Investment has met twice so far, discussing structural and process reforms needed within customs agencies to foster the Apec’s inclusive-growth agenda. While our own Bureau of Customs has been chairing these SCCP meetings, it has had little to show on modernization efforts to be able to speak with authority and credibility, particularly on measures to facilitate trade, the committee’s primary focus.


In December, trade ministers from 161 states will meet in Nairobi for the 10th World Trade Organization Ministerial Conference, primarily to assess progress on the agreement on trade facilitation that came out of the ninth conference held in Bali in December 2013. It was proudly announced last week that the Philippines will be vice chair in this conference. But that pride must be bolstered by the ability to speak with authority on our own moves to operationalize trade facilitation, on which we have little to show so far. But the CMTA would change all that.

After the wave of trade liberalization across the world in the past two decades, the focus has shifted to trade facilitation in the work toward closer economic integration. While the former involved lowering or eliminating customs duties, the latter is focused on simplifying trade processes and procedures, and easing nontariff barriers to trade, including regulations, licenses and permits involved in the import and export of goods. All these would benefit producers, especially small ones, when they must import their inputs and export their products.


The world has in fact seen greatly diminished dependence on trade taxes as contributor to government revenues. In about two-thirds of 160 countries for which the World Customs Organization (WCO) compiled data in 2013, customs duties contribute less than a tenth of total revenues. In the Philippines, their contribution was 7.4 percent, Thailand had 5.8 percent, Malaysia 1.3 percent and Singapore had none. (There were no data for Indonesia.) Elimination of nearly all import tariffs was in fact already achieved in Asean trade since 2010, with the exception of a few commodities that the countries consider sensitive, such as rice in our case.

The WCO points out that in light of this, customs agencies have assumed less importance over time as a revenue agency, and are being measured more on their key role in trade facilitation, a crucial element in all modern international trade agreements. In the Asean Economic Community Blueprint, for example, prominent among the undelivered commitments made by member-countries in the trade pact are trade-facilitation measures primarily in the hands of their customs authorities.

The WCO defines trade facilitation as “the simplification and harmonization of international trade procedures,” with the latter referring to “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade.” It aims to lighten the burden associated with the need to provide information, submit declarations and submit to border checks, which lead to time delays, forgone business opportunities and reduced competitiveness. The goal is to maximize efficiency and reduce business costs while safeguarding legitimate regulatory objectives such as curbing illicit movement of prohibited or regulated goods.

Key to trade facilitation is extensive application of information and communication technology in trade clearance processes to achieve paperless transactions and avoid face-to-face contact, thereby curbing opportunities for corruption. Other common elements pushed by the WCO are Single Windows (online platforms that interconnect various trade regulators, allowing a one-stop clearance process), advanced ruling and prearrival clearance systems, and authorized economic operator programs that expedite clearance for traders with honest track records. The CMTA, which would instill systemic change in our Bureau of Customs to permit all these, is nearing the homestretch in both the Senate and the House of Representatives. With a determined push, it can still make it.

Can our lawmakers in the 16th Congress still deliver on the CMTA? I personally hope so. Just as they stepped up to the plate and finally passed the decades-old measure for the Philippine Competition Act, I have high hopes that they’d do the same for the CMTA. And for the sake of our credibility in leading the upcoming Apec and WTO meetings, the time to pass it is now.

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