2 systems to suppress smuggling

Aside from the recent apprehensions—commendable!—done by the Bureau of Customs (BOC) and the Department of Agriculture (the latter headed by Assistant Secretary James Layug), two additional systems are needed to suppress rampant smuggling. One is curative, the other preventive. Both are essential, although prevention is better than cure. They have been proven effective, but were unfortunately terminated.

Rampant smuggling has more than doubled from 2019 to 2021. The United Nations Comtrade provides a record of the amounts exporting countries report to the Philippines versus what our government states it receives. The report covers more than 20 countries, accounting for 86 percent to 91 percent of our imports.

The difference between these two amounts is a good indication of smuggling. It showed an increase from P500 billion in 2019 to P1.2 trillion in 2021.

Smuggling deprives us of needed government revenues, causes job losses resulting in more poverty, discourages investments required for our growth, and endangers our welfare due to health and safety violations.

Cure

Last Feb. 21, the Senate identified better antismuggling measures as a critical conditionality for the Regional Comprehensive Economic Partnership (RCEP) ratification. One specified measure is the restoration of an antismuggling oversight body. But to be effective, it must have the same features of the committees implemented during the administrations of former Presidents Gloria Macapagal Arroyo and Benigno Aquino III. Smuggling was reduced by 25 percent and 31 percent, respectively.

A model to follow is the Cabinet Oversight Committee Against Smuggling (Cocas), which was composed of five department secretaries and two private sector representatives: one from agriculture (Alyansa Agrikultura) and one from industry (Federation of Philippine Industries).

This committee met with the Bureau of Customs monthly and reported to the President directly.

Comtrade figures suggested that smuggling decreased by about 25 percent, from $3.7 billion in 2004 to $2.7 billion in 2005. After Cocas was abolished, the amount more than doubled to $5.5 billion in 2006.

But instead of immediately restoring the committee, it took eight years before a lower-level committee with the same features was established. This time, smuggling was reduced by an impressive 31 percent. Thereafter, it was again abolished.

The absence of this committee with its inherent benefits of transparency and accountability is largely responsible for the rampant smuggling today.

Prevention

We must also revive a preventive antismuggling system that also showed successful results: the preinspection of imported products. It was identified in the Senate Report 649 last June 1, 2022 to curb smuggling. Over 20 countries use this system of goods being verified and tested overseas first, before they are shipped to the importing country.

Before shipment, an accredited surveyor is paid in advance to issue a technical compliance report. Among the factors the surveyor verifies are the quantity, product specifications (including sanitary and phyto-sanitary requirements), origin of the goods (to avoid misrepresentation in Fair Trade Agreements), and matching of the survey report with the customs declaration.

This independent measure done abroad prevents technical smuggling. It covers undervaluation, misdeclaration and misclassification, where most of the smuggling happens.

In a discussion with Philippine Ambassador to Indonesia Ramon Farolan, who had previously served as BOC Commissioner, in 1986, he said rampant smuggling in Indonesia was reduced significantly through this preinspection system.

We then used this system successfully, but it was again terminated. Smuggling thereafter flourished.

In the preinspection system used by many countries today, the exporter, and not the government, pays for the service. In Saudi Arabia, the government even gets one third of the surveyor’s service charge. Since this is less than 1 percent of the imported value, it has little impact on importer cost and consumer retail prices.

We must restore these two proven systems. This is urgent since the Senate has already stressed that anti-smuggling measures are a critical part of RCEP conditionalities.

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