No bidders for ‘hot cars’ but BOC plans auction repeat to raise pandemic response funds

Bureau of Customs building. (Photo from the Philippine Daily Inquirer)

MANILA, Philippines — No bidder showed up during Monday’s first-ever auction of five “hot cars” but the Bureau of Customs (BOC) is not giving up and plans to try disposing of them again to raise additional money for COVID-19 response.

During the public auction which was live-streamed on Facebook, the BOC declared failed bidding for each of the five luxury vehicles: a 2008 Ferrari Scuderia 430, with a floor price of P23.23 million; a 2001 Porsche Boxster planned to be sold at P1.79 million at least; and the three Mercedes Benz units 2011 E220 (worth at least P1.49 million), 2001 SLK55 (P1.32 million), and 2001 SLK350 (P1.25 million).

Customs Deputy Commissioner Edward James Dy Buco said they will schedule a second auction, but he did not say when. The Inquirer asked a BOC spokesperson if it’s still possible to try auctioning off these same luxury cars within the year, but he did not reply.

In a press briefing held ahead of the auction, Customs Assistant Commissioner Vincent Philip Maronilla said that in case the re-bidding fails, the BOC’s rules allowed direct negotiations with interested parties.

Instead of destroying confiscated vehicles as done in the past to supposedly show that the government was serious in fighting smuggling, the BOC this time used the Bureau of the Treasury’s modern auction room — where the government sold T-bills and bonds weekly — to eke funds out for the COVID-19 war chest.

Maronilla disclosed that it was the BOC itself which proposed this change in tack, first to Finance Secretary Carlos Dominguez III, who oversaw the country’s second-biggest tax-collection agency. The BOC’s proposal eventually reached President Duterte.

“Our rule before was to really destroy [smuggled cars] — that’s the instruction of the President. We were very strict about it because it yielded good results for us — it really became a strong deterrent to luxury vehicle smuggling. But then again, because we had a pandemic, the Commissioner deemed it proper to seek guidance from our higher-ups,” Maronilla said.

The BOC official said their “bosses” — Dominguez and the President — saw the propriety of instead selling seized cars than destroying them. “This time around, because of the pandemic, we adjusted to what the government needed.”

At the height of the pandemic-induced recession last year, tax collections fell due to weaker global trade plus thousands of businesses shuttered and millions of jobs lost, especially during among the region’s longest and most stringent lockdowns imposed to contain COVID-19.

In the case of the BOC, its take of import duties and other taxes dropped to P537.7 billion in 2020 from P630.3 billion in 2019, as imports of finished goods shrank due to weaker domestic demand, while shipments of raw materials and capital goods trickled when manufacturing and construction of big-ticket infrastructure stopped due to lockdown restrictions.

It did not help that some unscrupulous traders never wavered and went on with their smuggling activities — luxury cars included. The five vehicles auctioned off, for instance, were confiscated by the BOC just last May and June.

These smugglers catered to a market which snapped up what Maronilla called as “super cars” — “when you buy them even on a second-hand basis, they’re more pricey because they run on a very limited production.”

The modus operandi of these smugglers? “They’ve been using our Port of Manila and the Manila International Container Port, hoping that they can pass [the cars] off as brand new cars of different models so that they can evade payment of the right duties and taxes,” Maronilla said.

The Ferrari Scuderia 430, for instance, was priced by the BOC at over P23 million because it was a rare car. “In that kind of [luxury car] industry, it doesn’t necessarily mean that their depreciation [of value] is the same as ordinary cars; sometimes, there’s no depreciation. Sometimes, there are even rules of appreciation for these kinds of cars,” Maronilla noted.

Maronilla said the five cars came from Japan and South Korea. “If we’re talking about luxury cars, most will come from countries that are progressive and have these cars. So they might be transshipped to some other Asian countries to avoid detection. In Asia, they usually transfer from either South Korea or Japan. If it comes from outside Asia, it’s either just Europe or the United States.”

These expensive cars which get smuggled into the country were exactly the ones that deprived the government of more foregone revenues, he pointed out.

To recall, a Supreme Court ruling a decade ago stood with Executive Order No. (EO) 156 banning second-hand and luxury vehicles from entering through free port zones like Cagayan and Subic — where smuggling had flourished in the past.

EO 156 had put in place the Philippines’ motor vehicle development program, but it had failed in growing the domestic auto assembly industry as automotive manufacturing giants set up shop in neighboring countries like Thailand, where production of car parts abound.

Maronilla said the traders who tried smuggling the luxury vehicles had already been haled to court. Also, the BOC had sought the help of the National Bureau of Investigation (NBI) to dig deeper into the personalities involved in the trade of hot cars, he added.

What if these unscrupulous car traders themselves would try to bid for the luxury cars they tried to smuggle, is there a way to find out? Maronilla said the BOC’s intelligence group will do a background check on all potential bidders using the documentary requirements they must have submitted.

“We want to avoid a situation where our manner of disposing of these items is a way [for smugglers] to circumvent the BOC process [so they could] try to get back their smuggled luxury items,” Maronilla said.

Maronilla said they expected to raise about P30-50 million from the five cars, which had a combined floor price of P29 million.

Some more seized luxury cars were in the BOC’s custody, but Maronilla said these still had pending legal issues, hence cannot be disposed of yet. “There are already instructions coming from the Commissioner of Customs [Rey Leonardo Guerrero] to fast-track” the untangling of legal obstacles and sell the other luxury vehicles, he said.

In the meantime, the BOC keeps the smuggled luxury vehicles they confiscated inside containers so the cars remain in good condition and would not depreciate in value, Maronilla said.