Connivance continues between smugglers, Customs personnel

(Conclusion)

The World Bank estimates that P200 billion is lost annually due to tax evasion and smuggling.

Smuggling is defined as the use of illegal channels of importation and exportation.

Smuggling has existed in the country for centuries, as traders attempt to bring in goods into the Philippines and skirt around existing Customs rules and regulations.

Through the years, smuggling has evolved and has become more sophisticated.

Up to this day, the problem of smuggling remains unresolved in the Bureau of Customs, the government’s second largest revenue agency.

There are different forms of smuggling, and  connivance between smugglers and Customs insiders is at varying levels as well.

 According to former Customs Commissioner Angelito Alvarez, it’s hard to pin down smugglers legally because there is always no paper trail that leads to the smugglers.

 Alvarez revealed that he has tried to offer insiders protection and assurance to get information about smuggling activities -- but nobody is willing to squeal.

Insiders, Alvarez said, feared there was no assurance he would stay long enough to protect them.

True enough, Alvarez had to resign from his post in September, paving the way for the appointment of Ruffy Biazon, a known associate of President Benigno Aquino III, way back during their time at the House of Representatives.

In a recent interview with The STAR, Biazon said he plans a revamp of collectors and Customs executives so that operations could be more efficient.

This would help avoid connivance with smugglers, he said.

He also plans to file charges against smugglers, but has yet to file a cases against any big smuggler.

Records of the Department of Justice show the Run After the Smugglers (RATS) program of Customs has not been able to file even just one smuggling case worth at least P1 billion since former Deputy Commissioner Gregorio Chavez had been put on 90-day suspension since October.

One case filed in October against onion smugglers amounted to only P27.3 million, while a similar case filed in December amounted to an even smaller P3.7 million.

A case filed against traders of misdeclared Asus computer laptops was worth P96.8 million.

Chavez used to head the RATS program and under his leadership, the program filed at least 44 smuggling cases before the Justice department with total claims worth almost P60 billion.

In October, however, the Office of the President ordered the suspension of Chavez and seven of his men following an administrative complaint filed by Sanyo Seiki Steel Corp. (SSSC).

Executive Secretary Paquito Ochoa signed the order which placed Chavez and his men under preventive suspension for 90 days.

 The suspended members were Christopher Dy Buco, Edgar Quinones, Francisco Fernandez Jr. Alfredo Adao, Jose Elmer Velarde, Thomas Patric Relucio and Jim Erick Acosta.

Sanyo Seiki, in its complaint, said that the eight RATS officials were engaged in extortion activities and abuse of authority.

The connivance between Customs insiders and smugglers is one of the issues that needs to be addressed if a Customs commissioner wants to put an end to such activities.

Former Customs Commissioner Guillermo L. Parayno Jr., for his part, said that smuggling would remain for as long as it is profitable and that the risks perceived are manageable.

“Smuggling is a profession and a way of life for a considerable segment of our society and the number of those who would be adversely affected by programs meant to curtail it magnifies tenfold if we include the smugglers’ conspirators and supporters. These individuals will resist any diminution of their incomes or any change in their lifestyles,” Parayno said in a paper titled “The Extent of Smuggling in the Philippines.”

Parayno believes that strong political will is needed to implement laws that would drastically reduce smuggling in the country.

Insiders interviewed by The Star including customs district collectors and former customs commissioners said that pay-offs from smugglers vary, depending on the goods and the rank of the customs employee involved.

A customs police – considered a middle-level employee in the agency of roughly 5,000 employees, gets anywhere from P5,000 to P20,000 a week, insiders said.

The higher-ranking officers can get anywhere from P100,000 to at least a million pesos, insiders said.

The different methods used by smugglers are as varied as the goods that they bring in, Parayno said in his paper.

Methods Of Smuggling

The common methods of smuggling are concealment, under-invoicing, mis-declaration, use of fake documents, swings, transshipment, and illegal withdrawals from customs bonded warehouses.

Concealment is when legitimate products conceal the prohibited, banned or regulated commodity.

Mis-declaration happens because at the end of the day, the commissioner is not the one who examines each and every container.

Under invoicing is done in cahoots with Customs assessors and examiners. It involves the submission of false invoices. Through this scheme, the quantity or the price is highly understated.

Misclassification, another smuggling scheme, is when the commodity may be properly described but placed under a different heading with a lower rate of duty.

The use of fake documents is also a common method used in smuggling, insiders said.

With this scheme, smugglers submit tax exemption papers, authority to import and other exemption papers to circumvent the payment of proper duties.

Swing is when importers take out the goods from the port outright without the duly processed documents. The volume of goods taken out is usually minimal but entails the connivance of Customs policemen who are asked to turn a blind eye on the removal of the goods.

Transshipment is another form of smuggling used by big-time smugglers. Here, the goods are manifested as transshipments to other ports from a port in Manila.

Smuggling takes place on the way to the port of destination when the contents of the container are replaced or removed before proceeding to the transshipment port, or the entire shipment disappears altogether.

In transshipment procedures, Customs police must escort the goods from the port of discharge all the way to the port of destination.

Unfortunately, sometimes this does not happen.

The police are just given P500 to P2,000 to “go watch a movie, take the day off or to just go home,” said a Customs insider.

In many instances, even without a bribe, Customs are not willing to escort goods to a port outside Manila because of the distance and the time it would entail.

Illegal withdrawals from customs bonded warehouses or CBWs are also common method of smuggling goods.

CBWs allow exporters to import, duty-free, raw materials and other inputs for export production.

However, insiders said, it is common for smugglers to form fictitious CBWs just to avail themselves of the duty-free privileges. As such, the goods find their way into the local market at marked down prices.

Thus, the Government’s battle against tax evasion and smugglers remains uphill.

The Bureau of Internal Revenue (BIR) needs to collect P940 billion this year, while the BoC has a revenue target of P320 billion.

Insiders from both agencies believe that if tax evasion and smuggling are drastically reduced, it would be easier to hit the respective collection goals set by the government for its two revenue offices.