Winning the fight against smuggling

The fight against smuggling is finally winning. The table below shows how smuggling has increased over the years. The comparable 2014 numbers will be available from the UN CommTrade Statistics in September. However, there is reason to believe 2014 is the start of a winning trend against smuggling.

In 2005, the smuggling rate decreased by one fourth from 8 percent to 6 percent. This was largely because during that year, the Cabinet Oversight Committee Against Smuggling (Cocas) was created. It was chaired by former Interior and Local Government Secretary Angelo Reyes. Its members were representatives from four departments (Department of Finance, Department of Agriculture, Department of Trade and Industry, and Department of Justice), as well as private sector representatives from agriculture and industry (i.e., Alyansa Agrikultura and the Federation of Philippine Industries).

The Cocas met every two weeks. It systematically reviewed Bureau of Customs anti-smuggling activities and responded decisively and quickly to private sector complaints and recommendations.

Unfortunately, despite its significant success, the Cocas was abolished the following year. We believe this was because Cocas had become successful. It uncovered the smuggling activities of two individuals very close to the administration.

After the Cocas was abolished, with no more effective check and balance system for the BOC, smuggling consistently increased from 6 percent in 2005 to 35 percent in 2013. This may even be a conservative estimate. The numbers above reflect the reports of the top 20 exporting countries to the Philippines, which constitute only 85 percent of total exports.

The underreporting rate approximates the smuggling rate. This is calculated by considering the difference between the reporting level of exporters to the Philippines as compared to the level recorded by the BOC. This underreporting is largely due to outright smuggling, undervaluation, and misdeclaration.

The year 2014 marks the reversal of the increasing smuggling trend. Using dollar values, imports increased by 2.5 percent. However, import collections grew by 12.9 percent. Using these numbers, one estimate is that the smuggling rate has decreased from 35 percent in 2013 to less than 30 percent in 2014. How did this success happen?

In 2013, the National Competitiveness Council created a public-private sector Anti-smuggling Committee that mirrored the Cocas but at much lower levels. Instead of a secretary and undersecretaries as members, an assistant secretary and representatives with position of director or assistant division chief levels came from the DOF, DTI and DOJ. Up to now, DA sends different representatives. Unlike the other departments, the DA still has no official representative in spite of the great smuggling damage to the farmers.

Nevertheless, this lower level committee has scored important gains. Whereas BOC would generally ignore private sector complaints, it could no longer do this because it had to report to the four executive departments and private sector leaders during the committee’s regular monthly meetings.

This interaction improved when Customs Commissioner John Sevilla and Deputy Commissioner Jessie Delloza took over. Unprecedented actions such as making available import information that could prevent smuggling and seizing more than 1,000 containers of smuggled rice indicated that the fight against smuggling was finally being backed by political will.

Recent Events. Last June 3, newly installed BOC Commissioner Bert Lina approved eight anti-smuggling recommendations during his first meeting with the committee. For example, he took action to eliminate the long standing prejudice against farmers. He allowed the DA to join DTI as a member of the Customs Valuation and Review Committee. He approved the accreditation of agriculture technical experts to access import information in the same way that industry experts are accredited.

Initially, when Sevilla together with key officials such as Deputy Commissioner Aguas resigned, the Alyansa feared that the fight against smuggling would grind to a halt. But with officials like Deputy Commissioner Delloza turning down a promotion to another Bureau and instead keeping his Customs position to fight smuggling, as well as Commissioner Lina’s commitment to personally attend all future NCC Anti-smuggling Committee meetings, this fear has turned into an optimistic expectation that the fight may even accelerate its winning momentum.

The biggest challenge confronting the committee and BOC is the prevention of the usual smuggling that occurs before elections. The next twelve months will determine if the government will have the political will to continue winning the fight against smuggling.

The author is chair of Agriwatch, former Secretary for Presidential Flagship Programs and Projects, and former Undersecretary for Agriculture, Trade and Industry. For inquiries and suggestions, email [email protected] or telefax (02) 8522112