THERE are at present two proposed legislation pending in Congress which, if not studied fully, may impact nega-tively on how companies conduct their business across international borders. One is the anti-smuggling bill which accordingly will violate various Philippine commitments under the WTO, the Harmonized System and the AHTN protocol. In the guise of preventing smuggling in the country, the proposed bill has provisions that will not only cause delays in the movement of goods but will also create barriers to international trade.
Another pending legislation is the proposed fiscal reforms bill which intends to reduce certain incentives provided to the exporting community.
Amidst the growing opposition to these proposed legislation, the Philippine government recently announced its plan to accede to the Revised Kyoto Convention (RKC) by 2007 and adopt the international best practices on customs procedures. This announcement is very significant because many provisions of the proposed anti-smuggling bill are likewise contrary to the principles of the RKC. In addition, many of the best practices proposed in the RKC have yet to be adopted by the Philippines. Thus, accession to RKC will require a major overhaul of the present tariff and customs code as well as existing customs procedures and operating systems.
Revised Kyoto Convention. The Revised Kyoto Convention is more formally known as the “International Convention on the Simplification and Harmonization of Customs procedures (Kyoto Convention)” which entered into force in 1974. In order to meet the demands of governments and international trade, the original convention was revised and updated. The WCO Council adopted the Revised Kyoto Convention in June 1999 as the model for efficient and modern customs procedures in the 21st century. To date, there are 46 countries signatory to the convention.
Designed to standardize and harmonize customs policies and procedures worldwide, the RKC also serves to implement customs-related principles developed by the WTO, such as the agreements contained in Article V (Freedom of Transit), Article VIII (Fees & Formalities Connected with Importation and Exportation) and Article X (Publication & Administration of Trade Regulations) of the GATT 1994.
The RKC consists of the Body of the Convention, the General Annex, and the Specific Annexes. The Convention and the General Annex are obligatory to all signatories while the Specific Annex, which contains standards and recommended practices, is not. Accession to the Specific Annex is therefore optional.
The General Annex contains the core principles of the RKC and provides standards and transitional standards, all of which are mandatory to the signatory country. As a whole, the convention provides a comprehensive set of over 600 legal and technical provisions outlining the basic principles of modern customs procedures and practices.
Principles of the RKC. Foremost among the governing principles of the RKC is the commitment by customs administrations to provide transparency and predictability for those in the gateway community, particularly the importing, exporting, logistics, transport and forwarding industries. The convention promotes trade facilitation and effective controls through its legal provisions that detail the application of simple yet efficient procedures. The convention also contains new and obligatory rules for its application which all contracting parties must accept without reservation.
Specifically, the RKC provides core principles for the following:
- Predictability (standard principles for customs processing of goods, conveyances and persons moving across borders – clearance procedures)
- Transparency (provides all information relating to customs)
- Legal (prevents arbitrary or unfair actions by customs)
- Use of Information Technology
Benefits to Stakeholders. While it may be quite a while for the Philippines to accede to the RKC and comply with its principles and standards, many in the international trading community are already anticipating the benefits that will result from compliance and implementation of the convention.
For those engaged in international trade, compliance with the convention will result in the implementation of new rules that will effectively reduce transaction costs, avoid delays in the release and clearance process, and simplify procedures for traders with a good compliance record. For a government with very limited resources and dealing with an ever growing volume of trade transactions, it will enhance revenue collection, increase economic efficiency and, provide better security and protection. Customs authorities will also have a more effective and efficient deployment of its scarce resources.
In summary, traders will benefit from improved facilitation and reduced costs while shippers and transport providers will benefit from uniform customs controls and faster movement of people and goods. Customs will also benefit from modern controls that will plug revenue leakage and enhance border security.