(This is the first of a two-part series. )
Brief History of Philippine Customs
Customs all over the world historically serves as the state “gatekeepers”, taking jurisdiction on anything and everything that moves across the borders and serving as tax collectors, border guards, port managers and immigration agents all at the same time. Other than to ensure security at border crossings and ports, the main function of many customs jurisdictions is to protect the financial and fiscal interest of the state by ensuring the collection of taxes on both imports and exports.
During the Spanish colonial period of the Philippines, the role of customs was mainly to collect ad valorem taxes for the colonial government. At that time, the main port of entry was the Port of Manila, with a Captain of the Port as head. In many areas outside of Manila, the traditional barter system remained and it would only be in the 1800s before customs offices are established in the ports of Zamboanga, Cebu, Iloilo, Sulu, Legaspi and Tacloban.
During the American regime, the Philippine Customs Service was made a counterpart of the American Customs Service and was headed by the Insular Collector of Customs (later Collector of Customs). In 1947, Philippine customs was reorganized, with the Commissioner of Customs as head. The current customs organizational structure is still mainly based on the reorganization of the Bureau of Customs in 1975, albeit with some changes, including the recent ones under the Customs Modernization and Tariff Act (CMTA).
Customs in the Modern World
International trade, transport and travel have grown exponentially in recent decades. The globalization of trade and business has mainly been brought about by the lowering of tariff rates, reduction of trade barriers, opening of markets, efficiencies in transport and logistics (bigger planes and container ships, integration of the shipping industry, lowering of fuel and other logistics costs, etc.).
With increasing volume of trade (especially e-commerce and online purchases), growing complexity of trading rules (environment regulations, security requirements, preferential trading rules and other compliance requirements), new trading models (just-in-time, low inventory, vendor-managed inventory and multi-modal transport) and an increasingly digital supply chain, customs is being forced to adopt to this modern environment and address the increasing demands from and expectations of the trading community. Revenue collection has definitely ceased to be the major core function of customs.
Based on many research studies conducted by the World Customs Organization and other aid agencies, customs issues can be categorized broadly as follows:
- unnecessary customs control measures,
- non-transparent, complex and inadequate procedures,
- excessive processes and documentation,
- lack of automation and IT support,
- absence of a modern compliance management program,
- incapacity to use audit-based control and risk management techniques, and
- lack of coordination between agencies affecting border movement of goods.
The Evolving Role of Customs
Within the context of a globalized economy, the role of customs has evolved into a very complex environment demanding focus on wide-ranging concerns such as the following:
- protection of the economy from revenue fraud and unfair trading (over and under invoicing, origin fraud, tariff misclassification and IPR infringement),
- facilitation of legitimate trade (by expediting processes and by enhancing competition through the levelling of the playing field for traded goods),
- reduction of the cost of doing business at the border (by reducing the cost of compliance and by efficient targeting of high risk goods and traders),
- minimizing customs control by focusing on high risk areas (increasing ability to detect revenue fraud and other offenses),
- protection from illicit trade such as narcotics and weapons, and from terror activities,
- enhancing mutual recognition of customs programs and controls, and
- ensuring economic integration through implementation of bilateral, regional and other preferential trade arrangements.
PREVIOUS COLUMN: Avoiding Common Importer Mistakes
Agaton Teodoro O. Uvero is an international trade lawyer and a logistics and supply chain consultant. He previously served as Deputy Commissioner for Assessment and Operations at the Bureau of Customs and later, as Legislative Liaison of the Department of Finance. For questions, please email at agatonuvero@yahoo.com.
