New Customs
Registration Program
AS a general rule, any article imported into
the Philippines will require the prior accreditation or registration
of the importer/con-signee with the Bureau of Customs (BOC)
before said article may be released from customs custody.
There are a few exceptions though to this rule on prior accreditation,
among them, where the importation involves ‘first and
last importation’, mails, diplomatic pouches and importations
with de minimis value.
In addition to this rule, customs brokers dealing with the
customs clearance and release of importation have to be accredited
with customs. Without such accreditation, a customs broker
professional will not be able to practice his profession with
customs.
The customs office presently handling the accreditation of
importers and customs brokers is the Customs Accreditation
Secretariat (CAS) under the Legal Service. Due to reported
complaints from the trading sector with regard to the present
accreditation system, customs is now presently reorganizing
the system.
Accordingly, the planned reorganization will involve the implementation
of the electronic profile registration of all entities dealing
with customs — customs brokers, customs bonded warehouses,
surety companies, freight forwarders, shippers, consolidators,
airlines and shipping lines.
Previous Accreditation System
Prior to the issuance of Customs Administrative Order (CAO)
No. 3-2006A, the accreditation of importers was handled by
the Customs Intelligence and Investigation Service (CIIS).
Among the requirements then for the accreditation of an importer
are the submission of certain documents (e.g. registration
papers with BIR, SEC, SSS, local government units, etc.) and
the physical inspection of the office or warehouse of the
importer.
In addition, customs brokers were required to register with
each and every collection district or port of entry. A customs
broker may only provide brokerage services in the port where
he is registered. To illustrate, a customs broker registered
with MICP will still need to register with NAIA customs.
CAO 3-2006A
The issuance of CAO 3-2006A resulted in the centralization
of the accreditation of both importers and customs brokers
under a single office — CAS, Legal Service. One of the
main considerations for the creation of the CAS then was the
need to provide a risk management and control measure for
profiling and identifying unscrupulous importers at the start
of the accreditation process.
The creation of the CAS, however, has created its own problems.
For one, the accreditation of importers has become a very
tedious and costly process. Lawyers with the CAS have been
reported to raise objections on the accreditation of an importer
based on legal and technical issues totally unrelated to existing
customs laws and regulations.
For customs brokers, the accreditation process is likewise
a very complicated process, much more difficult than renewing
one’s license with the Professional Regulatory Commission
(PRC), or registering with SEC as a general professional partnership,
or securing a tax identification number and VAT registration
with BIR.
As one customs broker said, the accreditation of a customs
broker professional should merely involve the submission of
his credentials and should not result in a separate registration
process. As is it now, accreditation to practice one’s
profession can accordingly become as difficult as taking the
customs broker licensure examination.
Client Profile Registration System
Parallel to the planned reorganization of the present accreditation
system is the implementation of the BOC Client Profile Registration
System (CPRS). This system is part of the ongoing customs
modernization program and will involve the online submission
of the profile and data of any and all entities dealing with
BOC through existing VASP providers.
BOC is expected to issue soon the necessary rules and regulations
on this new system. The new rules will likely include the
requirements for submission by the registering entity of digital
photos, electronic signatures and other necessary documents.
For custom brokers, the CPRS will mostly require the use of
the digital signature in the filing of an import declaration.
While the submission of the profile will be done electronically,
various customs offices will still conduct a review and verification
of the information submitted. When necessary and under certain
parameters, customs will still conduct physical inspection
on some of the registering entities.
We expect major improvements soon with the implementation
of the proposed changes to the present customs accreditation
system. Still, we do not foresee that everything will be done
online, or that manual intervention or unnecessary discretions
will be eliminated. In any case, this is a long overdue step
in the right direction.
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 agatonuvero@yahoo.com
for your comments.
Authorized Economic Operator (AEO)
OF late, we have been hearing a lot about
new programs on customs-business partnerships brought about
by the continuing need to secure international trade and promote
facilitation of trade. In a recent speech by Deputy Commissioner
Rey Nicolas during the Aircargo Forwarders of the Phils Inc
General Assembly, he introduced new customs programs to be
implemented in the coming months and years ¬ — the
Customs-Trade Alliance to Protect and Accelerate Trade (C-TAPAT)
and the BOC Voluntary Program for Authorized Economic Operator
(AEO).
These customs programs are part of the global initiatives
initiated by the World Customs Organization (WCO) to secure
and facilitate global trade.
WCO Framework of Standards
As early as April 2005, we wrote about the “WCO Framework
of Standards to Secure and Facilitate Global Trade”
in this column and the new paradigm to promote collaboration
between customs administrations and the trading community.
This new model and approach, if implemented, will impact specifically
on the operations of manufacturers, logistics providers, exporters,
customs brokers, carriers, consolidators, intermediaries,
ports, airports, terminal operators, integrated operators,
warehouses and distributors.
Customs reforms as provided in the framework recognize the
need to provide a seamless movement of goods across borders
through secure international trade supply chains. And this
can only happen if supported by risk management and modern
technology. Ostensibly, various customs administrations cannot
have different sets of criteria to secure and facilitate global
trade. The framework thus provides for a single set of international
standards which does not duplicate or contradict the unique
requirements of each country. The framework specifically sets
forth the principles and standards to be adopted by customs
administration with the following core elements:
a) It harmonizes the electronic cargo information requirements
on inbound, outbound and transit shipments.
b) It commits to employing a risk management approach to address
security threats.
c) It requires that at the reasonable request of the receiving
nation, based upon a comparable risk targeting methodology,
the sending nation’s customs administration will perform
the outbound inspection of high-risk containers and cargo.
d) It defines benefits that customs will provide to businesses
that meet minimal supply chain security standards and best
practices.
Standards and Best Practices
Based on the Revised Kyoto Convention, the WCO Supply Chain
Management Guidelines and the various national best practices,
the framework provides standards in the following areas:
- Integrated Supply Chain Management
- Cargo Inspection Authority
- Modern Technology in Inspection Equipment
- Risk Management Systems
- High-risk Cargo or Container
- Advance Electronic Information
- Port Security Assessments
- Outbound Security Inspections
Approved Customs Partner
To maximize scarce resources, the framework recognizes the
need to involve the private sector to ensure safety and security
in the supply chain and to provide benefits to businesses
identified to have a high degree of security guarantees in
the form of expedited processing and other measures. This
customs-to-business pillar specifically provides the standards
for the partnership resulting in facilitation for businesses
that have undergone validation and quality accreditation procedures
More specifically, the customs administration will need to
accredit the various stakeholders engaged in export and import
activities — importers, customs brokers, truckers, forwarders,
shippers, port operators and others in the gateway community.
Part of the accreditation process is the validation of the
use of advanced information technologies and the application
of standards in the operations of a company, particularly
those activities relating to the documentation, handling,
storage and transport of international cargo. Companies which
qualify will be granted the status of an “Authorized
Economic Operator” or “approved customs partner”.
An AEO will be accorded with international recognition and
reputation similar to that of having an ISO qualification.
In addition, an AEO will qualify for trade facilitation programs
(e.g. super green lane, special passes and online facilities)
and other special benefits that are not available to regular
entities dealing with customs.
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 agatonuvero@yahoo.com
for your comments.
(For additional details on the AEO, attend the AFPI 1st
National Conference on Safe Trade and AEO on May 13-14, 2008
at the SMX Convention Center — ed)
Violation of CBW Rules
Customs Bonded Warehouses, CBWs for short,
are presently under increasing scrutiny not only from customs
authorities but also from various government task forces.
The proposed anti-smuggling bills pending in both houses of
Congress have likewise proposed stringent measures on the
operation of CBWs. A recent move by customs is to limit the
number companies operating a CBW, particularly those common
types of CBWs.
The main reason for all of these moves is that CBWs have
continued to be seen as a conduit for smuggling in the country.
On the other hand, the establishment of CBWs is an internationally-recognized
system designed to provide an efficient and organized system
for customs to manage tax and duty free imports. The procedure
has been widely availed and used by thousands of legitimate
exporters but also at the same time by unscrupulous traders.
Customs Bonded Warehouse
Based on international customs practices, a CBW refers to
a designated physical warehouse under customs control, where
imported articles are allowed to be stored without payment
of duties and taxes. The maximum period for storage is generally
fixed by law or regulation but in no case should it be less
than a year for non-perishable goods.
A CBW is generally applicable for companies involved in ‘temporary
importation’ -- importations which are tax and duty
free for reasons provided by law (e.g. imports for export
production or for sale to export processing or free trade
zones). Without a CBW, an importer will generally pay taxes
and duties on those imports and upon submission of proof of
exportation, secure a tax and duty drawback for those payments.
A CBW therefore should help ease the cash flow position of
the company and also eliminate the transaction cost for securing
those duty drawbacks. In addition, a CBW should also reduce
operational costs and promote efficiencies in the supply chain
and inventory management. Thus, a CBW may result in the following:
a) direct control of the supply chain and inventory;
b) computerized and integrated supply chain and inventory
system;
c) lower administrative and financial costs;
d) efficient and cost-effective storage and distribution system;
and
e) immediate availability of raw materials and supplies on
a “just-in-time” basis.
Present Regulations
In general, CBWs may be categorized into manufacturing, public/private,
trading or regional warehouse. A manufacturing warehouse is
further sub-categorized into:
a) Garment/Textile Manufacturing Bonded Warehouse
b) Miscellaneous Manufacturing Bonded Warehouse
c) Common Bonded Manufacturing Warehouse
Other types of customs-controlled warehouses are Express
Cargo Clearance Facilities, Container Terminals, Container
Yards and Container Freight Stations. These customs controlled
and secured facilities come with a well-defined cargo flow
system and treated as an extension of the regular customs
zone.
Since 1998, however, the Bureau of Customs (BoC) has imposed
a moratorium on the issuance of licenses on all applications
for specific types of CBWs as provided under CMO 3-98 (e.g.
trading, common, public and private CBWs). But since that
time, there had been a number of instances where the BoC granted
an exception to the moratorium.
Storage and Withdrawal
Goods entered into CBWs are given tax and duty free status
by way of the special procedure. The entered goods are covered
by warehousing entries and corresponding guaranties or bonds.
When articles are withdrawn from CBWs into the customs territory,
said articles are subject to duties and taxes and are covered
by “consumption” entries. Articles may also be
withdrawn from CBWs for direct export or for transfer to another
CBW, a PEZA zone or free trade zone. In all these entries
and withdrawals, current customs procedures provide for stringent
documentation and control measures.
CBW Violations
Common violations of CBW rules normally involve (a) storage
of articles beyond the nine-month period, (b) delivery into
unlicensed extension warehouses, (c) unauthorized withdrawals
and, (d) failure to liquidate the warehousing entry and corresponding
bond after valid withdrawal from CBW. Each of these violations
may result in stiff fines and penalties. Due to ignorance
or negligence, many traders operating CBWs have been found
to have committed these violations and penalized with hefty
fines, including closure of the CBW in some instances.
For companies engaged in legitimate export or trading activities,
it is most important that rules governing CBW operations are
strictly followed. Failing that, customs will most likely
treat violators like ordinary smugglers, to be penalized with
stiff fines and closure of operations, and many times, under
the glare of the media spotlight.
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 agatonuvero@yahoo.com
for your comments.
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