There are presently pending bills in Congress (both Senate and House of Representatives) providing for measures to curb smuggling in our customs borders. While many of them are innocently entitled “Anti-Smuggling Act of 2007”, a close reading of the provisions of the proposed legislation will show that these bills, once passed as proposed, will greatly affect the trading community.
Below is a discussion of some of the proposed major changes and their possible implications.
A major concern for many importers and exporters is the proposal to reduce the warehousing period from the current 9-month period (extendible by another 3 months) to 30 days (or 6 months, as proposed in some of the bills). One bill even proposes to extend the limited storage period to PEZA locators and Free Trade Zones such as Subic and Clark.
The warehousing of raw materials for export production varies from industry to industry and from material to material. Generally, seldom-used materials are imported in bulk and stored longer as against frequently-used materials. Some industries, like semiconductor, are on a ‘just-in-time’ inventory system (meaning minimal storage period) while some others like the shipbuilding industry require a longer storage/production period.
While the intention is clearly to prevent smuggling activities through CBWs, the proposal, if not studied well, will affect many legitimate exporters particularly those in the PEZA zones.
Minimum Customs Value
In relation to the valuation of imported articles, the pending bills provide that customs may publish reference values by way of Revision Orders (ROs) and the same shall be effective within a period of time.
A major concern is that this proposal clearly violates the WTO Agreement on Customs Valuation which provides that the basis of valuation should be the transaction value (price actually paid or payable) between the seller and the buyer and that reference values are merely, as the name connotes, for reference only unless they qualify under the various alternative methods of valuation provided in said WTO Agreement and as implemented under Republic Act No. 9135 and Customs Administrative Order No. 4-2004.
The use of reference values to substitute for actual commercial values of imported articles will certainly create confusion on the importing public and will result in unpredictability when forecasting import costs and determining the domestic selling prices. These ROs will in effect be providing for a “minimum customs values” which is prohibited under the WTO Agreement.
Private Sector Representation
A proposal to allow private sector representation in the valuation function of customs is being questioned by many. Among the reasons being raised is that this may result in unfair competition and trade protectionism considering that the private sector representative may well be the competitor of the importer. Information provided to the private sector may also violate the existing law requiring the privacy of importer information. Private sector representatives must only act as resource persons in their respective areas of expertise. This is due to the fact that existing law defines customs assessment as a government function and that assessment officers are presumed to be competent to perform their functions.
There is a proposal to provide an additional “Deputy Commissioner for Audit and Transparency”. While there is no major objection to the proposal, the concern is that providing such structure in the law will constrict the discretion of the executive department to reorganize customs in the future.
Another proposal is the appointment of a private auditor to conduct an independent audit of customs audit activities. The provision for outsourcing the audit function to a private entity may not be allowed under existing laws and the same may be an undue delegation of an otherwise purely government function. In addition, private auditors may well represent companies dealing with customs, resulting in a conflict of interest.
Among the many issues raised against the Customs Brokers Act (RA 9280) is that the trading and logistics industries were never involved during the deliberation process in Congress.
To prevent such experience and to ensure that the interests of these industries are protected, it is most important for importers, exporters and logistics companies to get involved in the legislative process. Failing that, many of these provisions will negatively impact on their business at the customs border.
The author is an international trade consultant, and a licensed customs broker. He is a lecturer on logistics, indirect tax, customs and supply chain. Please contact email@example.com for your comments.