WE have just finished our national elections and the results are almost done. In less than two months, we will have new officials to head the various departments, bureaus, agencies and other government offices. Expectedly, the Bureau of Customs (BOC) will have a new commissioner and, most probably, new deputy commissioners.
Running on a campaign line that corruption causes poverty, the incoming customs commissioner will be under scrutiny not only to address the perceived rampant corruption at the bureau but more importantly, to ensure that revenue collection targets are achieved given the looming budget deficit for year 2010. We have outlined below some of our thoughts on how reforms may be instituted at the bureau.
Modern Customs Administration
The mandate of a modern customs administration may be briefly summarized under the following functional areas:
– Trade Facilitation (Promotion of transparent, harmonized and simplified rules and procedures)
– Revenue Collection (Ensuring the collection of correct duties and taxes)
– Revenue Protection (Preventing smuggling and other activities)
– Border Protection (Protecting international borders from terror and other illicit activities)
Trade Facilitation
In the last three years, industry associations have observed that doing business with customs has become very costly and complicated. While the recent implementation of the e2m (electronic-to-mobile) system has substantially reduced the costs for processing regular importations, new processes have created additional burden to the trading community.
Promoting trade facilitation will not only require automation of existing customs processes. More importantly, it will require reorganizing offices and redesigning and simplifying existing customs procedures in the following areas:
– Import assessment (from manual to automated assessment process, promoting green lane processes up to 90% of shipments)
– Amendment of bill of lading / airway bill (automation of the process of amendments)
– Amendment of import declarations (automating from existing manual procedures)
– Import clearances (reduction of clearances from the various customs offices)
– Payment under protest (simplifying administrative procedures)
– Refunds (creation of one-stop shop to process refunds)
– Seizure proceedings (simplifying administrative procedures)
– Export procedures (automation; reduction of documents required, manual approvals and offices involved – one stop shops)
– Warehousing operations (automation of the liquidation process; reduction of documents required)
– Importer’s accreditation (full automation and use of third party service providers to verify importer’s information)
Revenue Collection
A modern customs administration should have a full-proof system of collecting correct duties and taxes not only at the border (upon importation) but even after goods have been cleared from customs. A risk management system must be fully implemented to flag high-risk shipments while immediately clearing approximately 90% of shipments. Those shipments cleared immediately will have to be subjected (randomly or based on informed analysis) to a post-clearance audit.
The present procedures and practices subject more than 70% of shipments under the red lane system — requiring physical and document check (resulting in delays and additional costs). Notwithstanding such practice, many importers are further subjected to the post-clearance audit by the Post Entry Audit Group (PEAG).
Going forward, customs must reorganize to create a flat organization, with most frontline officers transferred to the PEAG. With 90% of shipments under green lane, importers and traders will be no longer be at the mercy of customs officials who come in late and subject the importers to harassments.
Revenue Protection
There is a saying in customs that “shipments apprehended are those not under the protection racket of customs enforcement officials’. Meaning, smuggling remains unabated because this is actually promoted and protected not only by customs officials but even those officials in higher offices, including some in congress and senate.
The strict implementation of customs controls is more a question of “political will” rather than a lack of manpower and resources. The challenge for the next customs commissioner is how to insulate the bureau from political pressures not only from public officials but also from financial backers of these public officials.
(To be continued)
The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs & Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. He was also Bureau of Customs Deputy Commissioner for Assessment and Operations Coordinating Group (2013-2016). For questions, please email at agatonuvero@yahoo.com and agatonuvero@customstrade.asia
