Smuggling

The seizure last week of nearly P500 million worth of smuggled rice abandoned at the Subic free port was a big boost to the government’s war on economic crimes. But the size of the haul—430,000 50-kilo sacks of rice in about 1,000 containers—also showed how big and brazen smuggling has become.

There is no gainsaying smuggling’s enormous impact on the Philippine economy. Estimates of the potential revenues government loses yearly because of this atrocious crime range from a low of P90 billion to a high of P200 billion. This is money that could go a long way in combating poverty and financing the construction and maintenance of thousands of school buildings, hospitals, roads and bridges.

The Federation of Philippine Industries (FPI), citing records of the International Monetary Fund, noted that total exports to the Philippines between 2002 and 2007 amounted to $284.7 billion, but the Bureau of Customs’ records showed only $195.01 billion. From these figures, foregone revenues in pesos from the 12-percent value-added tax (VAT) and from an average 5-percent tariff were estimated at P127.08 billion.

Two fairly recent incidents illustrate how nothing seems to happen in high-profile smuggling cases. The first involved the disappearance in transit of some 600 containers carrying taxable goods from the Manila International Container Port to the Batangas port in the middle of last year. This resulted in the loss of P230 million in potential government revenues. Some legislators claimed that most of the items were diverted to Puregold, the retail chain of businessman Lucio Co, and other retail stores without payment of the necessary duties. Puregold strongly denied the allegation. We have heard nothing about this case since then.

The second involved the misdeclaration of imported products to avoid payment of the correct taxes. A case in point: The Swine Development Council (SDC) raised issue on the disparity between Canada’s pork exports to the Philippines in 2011 and the Philippines’ pork imports that same year. Citing data from the United Nations Commodity Trade Statistics, SDC said Canada shipped 29.69 million kilos of pork belly to Manila, but Philippine import records only showed 13.99 million kilos. SDC further noted that UN Comtrade data showed that Canada shipped 3.28 million kilos of pork offal (low-grade meat and animal parts like innards), but Philippine records showed 12.8 million kilos. This clearly indicated that shipments of imported pork belly from Canada were passed off as pork offal to take advantage of the very low 5-percent tariff on offal as against the 40-percent tariff on pork belly. Again, nothing much happened since then.

It’s not that the Aquino administration is letting smuggling go on. Its Run-After-The-Smugglers (RATS) campaign has seen the filing of 37 cases since former congressman Rufino Biazon was named Customs commissioner in September last year. Prior to this, RATS had filed 44 smuggling cases before the Department of Justice.

The problem, however, is the lack of drive to prosecute big-time smugglers. Former Customs Commissioner Angelito Alvarez was even quoted as saying that it was hard to pin down smugglers legally because, always, no paper trail would lead to them.

Yet there are a hundred other ways to control this economic malady. Just ask FPI president Jesus Arranza, an antismuggling crusader for decades. His group has long forwarded to the government a list of measures—some easy, some a little difficult to do—to combat smuggling.

Broadly, FPI is pushing the government to create an Anti-Smuggling Commission composed of the departments of finance, agriculture, trade and industry, together with other government agencies and private sector representatives. FPI also suggests that smuggling be classified as “economic sabotage” carrying the penalties under the plunder law.

The group is also asking that industries be given access to Customs documents like inward foreign manifests to enable its members to effectively detect misdeclared or misclassified shipments, and to alert the appropriate Customs personnel on time.

It has proposed as well that X-ray machines be installed in the country’s international seaports and airports to screen cargo vans and serve as significant deterrents to smuggling.

But the most crucial thing for the government to do is think of ways to stop the connivance between Customs personnel and smugglers. The shameless smuggling of rice through the Subic free port presents the government with another opportunity to work on realizing this goal—starting with an honest-to-goodness investigation.