Customs chief orders probe of imports wrongly given preferential tariffs

MANILA, Philippines—Customs Commissioner Angelito Alvarez said on Tuesday he has instructed the Bureau of Customs’s Post-Entry Audit Group (PEAG) to verify reports that tens of thousands of import shipments in 2010 were erroneously granted preferential tariff.

“While estimates vary, the most conservative would indicate that the post entry audit of import entries not qualified for preferential tariff could potentially yield P600 million,” Alvarez said in a statement.

The Bureau of Customs chief said he wanted the review to initially focus on shipments from China, Korea and Vietnam in the light of recent findings that even products included on the “sensitive list” from the three countries were granted reduced tariff classification.

According to the commissioner, there are two categories of products that can be granted preferential tariff under the Asean-China Free Trade Agreement (ACFTA), the Asean-Korea Free Trade Agreement (AKFTA) and the Asean Trade in Goods Agreement (ATIGA).

First are those listed under the “normal track” or “inclusion list” of a party, which are automatically granted preferential tariff. On the other hand, those that are listed under the “sensitive list” are granted preferential tariff only when the exporting party has reduced its Most Favored Nation (MFN) rate to 10-percent or less in the case of Korea and China, and 20 percent or less in the case of Vietnam.

“This is in accordance with the reciprocal treatment provisions stipulated in the free trade agreements,” Alvarez said.

Examples of commodities on the “sensitive list” of China that were wrongly classified as qualified for preferential tariff (either duty free or with reduced tariff last year) included corn flour, sweet corn powder, prilled urea, diammonium phosphate, x-ray film green sensitive, plywood veneer, cotton fiber and color television.

Alvarez disclosed that a single company saved more than P9 million from duties and taxes for one shipment of bulk urea alone.

Lawyer Louis Adviento, chair of BOC’s Ad Hoc Review Team for Preferential Certificate of Origin, reported to Alvarez that there were more than 118,000 import entries that were granted preferential tariff in 2010.

The commissioner said he had ordered customs examiners and appraisers to be guided by the reference material on products included in the “sensitive list” of China, Korea and Vietnam provided by the Bureau of International Trade Relations of the Department of Trade and Industry.