ABOUT two months ago, the Bureau of Customs (BOC) issued an order disallowing the importation of resin through customs bonded warehouses (CBWs). Customs Memorandum Order (CAO) No. 4-2008, resulted from a presidential directive to stop the smuggling of resin in the country.
This directive from the President accordingly included an order to close existing customs bonded warehouses and just allow a few to operate. A Task Force has been created by the Department of Finance (DOF) to further study the directive for the closure of all CBWs. This early, the private sector has raised the issue of whether government can stop the operation of CBWs which are legally mandated under the tariff and customs code. Moreover, the establishment and operation of CBWs is a recognized international standard and best practice for cross-border trading activities and for customs control.
The planned closure of CBWs, except for a few, will definitely result in additional costs for businesses in the country. It will also result in inefficiencies and price manipulation given that the market will be controlled by a few providers.
Last week, the Department of Finance (DOF) reportedly approved the proposed customs order revising CAO 4-2008. The revised rules now provided for exceptions to the total ban on importation of resins through the CBWs. BOI-registered companies in particular are now exempted from the ban.
Under Executive Order No. 226, (Omnibus Investment Act), export-oriented companies registered with the Board of Investments (BOI) are given access to the bonded warehousing system. EO 226 specifically states that “registered export-oriented enterprises shall have access to the utilization of the bonded warehousing system in all areas required by the project subject to such guidelines as may be issued by the Board upon prior consultation with the Bureau of Customs”.
The revised rules recognized that the country’s petrochemical industry is not fully integrated and that legitimate importers/exporters are highly dependent on imported resin. Allowing these legitimate businesses to import through the CBWs will prevent additional costs due to the non-payment of duties and taxes on materials that will be manufactured and subsequently exported.
Under the revised rules, the following importers and entities may be allowed to import resins through the CBWs:
- BOI-registered manufacturing companies;
- Industry Specific Customs Bonded Warehouses directly supplying the resin requirements of clients involved in the semiconductor/electronic/automotive industry;
- Manufacturing Customs Bonded Warehouses or members of Common Bonded Warehouses registered as exporters by the Export Development Council; or
- Other CBWs established to be legitimate exporters after consultation with BOI, EDC, DTI, PEZA, Freeport Authorities, and other relevant agencies and stakeholders.
Conditions for Prior Disclosure
While the revised rules provided for exceptions to the ban on resin importation through the CBWs, the same rules provided for stringent controls to ensure that imported resins are not smuggled or diverted to the domestic market without the payment of the corresponding duties and taxes.
As a control measure, the rules provide that importers must submit a “Prior Disclosure Statement’ signed under oath and containing the following details and conditions:
- Maximum cubic space of applicant CBW’s raw materials and finished products compartments at any given time for manufacturing including all members for Common Bonded Warehouse and all accredited clients/end-users for ICBW;
- No Sub-contracting of the subject resin;
- Number of equipment indicating their rated and actual capacities;
- Number of factory workers directly involved in the production;
- Percentage of outright and constructive exports, indicating buyers, and respective volume and value;
- Monthly resin requirements, indicating types, grades, volume, value, as well as names of local suppliers if sourced through bonded to bonded transfer or constructive exports.
The author is an international trade consultant, and a licensed customs broker. He is a lecturer on logistics, indirect tax and customs, and a lecturer of Ateneo and BayanTrade on Supply Chain Management. Please contact firstname.lastname@example.org for your comments.