DOF to limit use of Customs bonded warehouses

The Department of Finance (DOF) said it will ultimately limit the use of Customs bonded warehouses (CBWs) exclusively for imported raw materials used in the manufacture of export products.

The DOF said it was supporting the move by the Senate to clamp down on the use of CBWs in order to stop the uncontrollable entry of smuggled goods through the customs-bonding system.

Finance Undersecretary Gil Beltran said the proposal was contained in the proposed legislation that would rationalize the incentives for exporters.

Although the Bureau of Customs (BOC) has been clamping down on the use of CBWs, Beltran said the law needed to be amended to make the facility available only to exporters importing raw materials for their production.

"Time and again, our experience has proven that it is very difficult to regulate the use of CBWs if you have too many exceptions," he said.

Bonded warehouses were originally intended for use by exporters as part of the incentives offered by the government. The facilities are used to store and isolate tax and duty-free raw materials imported by exporters who use them to manufacture goods for export.

However, CBWs have long been tagged as the biggest conduit for smuggled goods because they have been used by unscrupulous traders who register as exporters but instead import the goods that are eventually sold in the domestic market.

Officials said this provision was rampantly abused by importers who often use fake surety bonds from companies that were often non-existent. Smugglers also use the facility for importing products that were also produced locally by misdeclaring the items as other products.

"When we run after the companies, they often do not exist at all or were no longer operating," Beltran said adding that "the simplest way to do this is to severely limit the use of CBWs. We are very much in favor of that."

The Philippine Chamber of Commerce and Industry (PCCI) earlier suggested that the BOC should reduce the number of CBWs to at least 30 percent of the existing accredited warehouses now estimated to total less than a thousand individual warehouses.

The PCCI estimated that of the total number of CBWs, only about 30 percent were being used for their intended purpose. Majority were most likely being used for smuggling.

According to the BOC, on the other hand, existing CBWs are now being required to renew their licenses and prove that the facilities are being used for legitimate imports that were being used in legitimate export activities.