Compliance gaps in PH trade facilitation commitments to ASEAN identified

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ID-10069834Despite progress in automating operations at the Bureau of Customs (BOC), there is much room for improvement in the Philippines’ efforts to fully meet its commitments toward realizing the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC), according to a government think tank.

“Overall, the Philippines has made some significant progress in complying with its commitments related to trade facilitation,” the Philippine Institute for Development Studies (PIDS) said in its latest discussion paper entitled “Furthering the Implementation of AEC Blueprint Measures.”

The study, led by Dr. Gilberto Llanto, however, said “whilst some systems are already in place, the full automation of customs and related processes has yet to be achieved.”

Customs upgrade chinks

On customs modernization, PIDS noted “gaps in the implementation of inspection management, CBW (customs bonded warehouse) management, post clearance audit, AEO (Authorized Economic Operator) management and raw materials liquidation system.”

It said, “The full implementation of these features, whether it be through the e2m (electronic-to-mobile) system or a different system, is necessary to attain full automation and integration to the NSW (National Single Window).”

BOC will soon be migrating from e2m to AsycudaWorld to manage transactions it handles. The shift has been somewhat delayed because the bureau had initially bid out its P650-million IT project, called the Integrated Electronic Customs Processing System, only to cancel it in favor of the United Nations-developed AsycudaWorld.

READ: BOC cancels bidding for P650M computerization project

ASEAN member states are accelerating the modernization of customs techniques and procedures to enhance trade facilitation and expedite clearance of goods at customs. Under the ASEAN Trade in Goods Agreement and the World Trade Organization Agreement on Trade Facilitation, the Philippines has committed to customs modernization, implementation of the NSW, and creation of the Philippine National Trade Repository.

The PIDS study noted that a number of Philippine customs processes have already been either automated or programmed for automation. These include synchronizing the Harmonized Commodity Description and Coding System (HS) codes; tariff management; implementing a valuation system; manifest processing; goods declaration processing; risk management and selectivity; cargo release notification; appeals and arbitration; electronic payment system; and publishing customs rules.

Still in partial implementation, partly due to the lack of an IT system to support the automation, are inspection management, CBW management, post-clearance audit, AEO management, transit cargo tracking system, raw materials liquidation system, and customs integration initiatives.

Meanwhile there is no IT system supporting “inspection management for scheduling and assigning of inspectors as well as an override manual or auditing/oversight procedure.” PIDS pointed out that while e2m comes with the capability to conduct inspection management, this feature has been switched off.

As for initiatives on ASEAN customs integration, only the ASEAN Harmonized Tariff Nomenclature has been adopted, PIDS pointed out. Protocol 2 (Designation of Frontier Posts) and Protocol 7 (Customs Transit System) of the ASEAN Framework Agreement on the Facilitation of Goods in Transit (AFAFGIT) have not yet been introduced. Protocol 2 under AFAFGIT is still up for discussion and consultation; some progress has been made with Protocol 7 with the BOC merely awaiting authority to sign from the Office of the President.

Trade facilitation progress

PIDS cited other positive developments in the area of trade facilitation.

“For one, the BOC has begun implementing the ASEAN Second Pilot Project on regional self-certification, which allows exporters from participating ASEAN members to self-declare their goods without presenting a certificate of origin,” the study said.

Last June, Customs Memorandum Order No. 18-2015 came into effect, operationalizing Customs Administrative Order (CAO) No. 06-2013. The CAO activated the memorandum of understanding among ASEAN-member states participating in the second pilot of self-certification.

READ: BOC releases rules for exporters’ self-certification

Moreover, the proposed Customs Modernization and Tariff Act “is a leap forward in establishing a solid legal framework for the BOC to implement the trade facilitation measures provided for in several trade agreements where the Philippines is a signatory,” PIDS said.

Another important infrastructure for trade facilitation is the establishment of the Philippines’ NSW, which will be operationalized via AsycudaWorld.

The e2m challenge

Despite the “progress and developments, there remain challenges and issues in the current customs processes and procedures,” the study said.

“On the customs core processes, the e2m system has not yet succeeded (in simplifying) procedures.”

The study said e2m “contains many technical flaws that have resulted in more human intervention referred to by many stakeholders as ‘electronic-to-manual’ instead of ‘electronic-to-mobile’.” Some modules are not fully integrated into the e2m system, thus requiring manual intervention while others are still running on the old ASYCUDA++, resulting in an ASYCUDA++ and e2m hybrid system, the study pointed out.

“As such, users can choose to use either the manual or the electronic scheme in clearing their shipment, a process that defeats the original purpose of the automation project,” PIDS remarked.

The think tank said the involvement of value-added service providers (VASPs) under the e2m system in the goods declaration process is another issue.

“Because validation is performed by VASPs, this becomes a privacy concern because a third party (i.e., the VASP) now has access to documents (e.g., the inward foreign manifest and consolidated cargo manifest),” PIDS noted.

It added that fees charged by VASPs constitute an additional cost to traders.

The delay in the upgrade of IT infrastructure and network is likewise a problem.

“Users experience frequent downtime and the system slowdown,” PIDS said. BOC had planned on replacing the e2m, but it was “overtaken by changes in the BOC leadership”, referring to a shift in leadership from John Philip Sevilla, who resigned in April, to now commissioner Alberto Lina. It was Lina who cancelled bidding for the IT project and chose to consider AsycudaWorld.

On computerization initiatives, a former BOC official described the BOC-IT department as undermanned and underequipped to carry out the plan, the think tank said.

Moreover, BOC, like other institutions, go through organizational changes “not only amongst its staff and priority programmes but, more importantly, amongst the BOC top management itself.”

Organizational change “happens too frequently. Other internal problems such as lack of manpower resources, low compensation, budgetary constraints to IT infrastructure upgrade (i.e., in terms of number of computers and internet connection), amongst others, impact negatively on the BOC,” the study said.

Furthermore, PIDS said “a former BOC official had observed that the bureau is more focused on revenue generation. That is, it is more preoccupied with attaining its revenue targets than with the planning and conduct of its operations, particularly trade facilitation.”

Finally, “the BOC has insufficient knowledge on the relevance of risk management and concomitantly, lacks the determination to apply risk management in its border control procedures,” the study said.– Roumina Pablo

Image courtesy of nokhoog_buchachon at FreeDigitalPhotos.net