HB 15 – Anti Smuggling Act of 2007 (Explanatory Note)

First Regular Session


House Bill No. 15


Introduced by Representative Lorenzo R. Tañada III


This bill is a long-drawn initiative of various business and labor groups, to name a few – the Federation of the Philippine Industries, the Fair Trade Alliance, the Samahan ng Magsasapatos ng Pilipinas, among others. My office was invited in one of their technical working groups and that was how I became the principal author of this bill originally numbered HB 3715 during the 13th Congress. After several hearings conducted by the Committee on Ways and Means and several days of floor deliberations, the bill was approved on Third Reading by the House of Representatives (HOR) in June 2005. It is unfortunate that despite its early passage in the HOR, the Senate Committee on Ways and Means failed to act on this very important measure. I am therefore refilling this bill, originally entitled “Anti-Smuggling Act of 2005” with the fervent hope that it immediately gets the nod of both chambers with its new title, “Anti-Smuggling Act of 2007”.

Smuggling has become a pesky problem of our country. Some of us thought that this problem will go away with the accelerated reduction of our tariffs. So fast was the reduction of our tariffs that we went way beyond what we have committed under the WTO. Yet, outright and technical smuggling occur at magnitudes that exposed domestic producers to unfair competition and injured them in the process.

There are various estimates on how much the economy loses with both outright and technical smuggling. We have estimates coming from the Alyansa Agrikultura of about P90 billion to P150 billion by the Fair Trade Alliance and the Federation of Philippine Industries.

Even if we take the low-end estimate, P90 billion is actually about P20 billion more than the expected revenues that we were told the E-VAT would generate. But beyond the foregone revenues, we cannot put value on the jobs that were lost, farmers that lost their livelihoods and the companies that closed as a result of smuggling.

Outright smuggling is something which is known to many – – – There are no documents involved, no import entries are seen…all you see are the goods: scooters, bags of rice, second hand vehicles, garments, shoes, vegetables, etc. being sold at dirt cheap prices as they did not pay any corresponding duties at all. They are simply sneaked in through the coastlines of the country. With a coastline longer than the United States, truly, the Philippines can be a haven for outright smugglers.

Technical smuggling on the other hand, requires a greater degree of sophistication. There are import documents but the mischief happens through undervaluation, underdeclaration of the volume shipped, diversion of cargo and misclassification.

This bill increases the ridiculously low penalties for both outright and technical smuggling. But beyond that, it establishes preventive measures by providing clearer and more transparent rules for importation AND strengthening the role of the private sector in the prevention of the same.

Transshipment activities likewise provide opportunities for smuggling. This happens when goods that are supposedly in transit and destined for other foreign ports stay in our ports for a while before heading to their final destination. While in-transit in the country, some of the goods are unloaded from the vessel and are similarly sneaked into the domestic market. Two provisions are being put in place to prevent this:

First, an inward foreign manifest is required to be sent in advance before arrival and its publication three days after receipt by the Customs Collector.

Second, a certificate of discharge at the foreign port of destination should be submitted to the Bureau of Customs and/or BIR within five days from actual discharge.

With regard to technical smuggling, preventive provisions can be classified into two: One, the reduction of the discretion of Customs Officials and second, the provision of greater transparency by allowing for greater participation of the private sector in the valuation process.

As far as reducing the discretion of Customs Officials, two provisions were added in the Tariff and Customs Code:

First, two additional members of the valuation and classification review committee (VCRC) are added: one recommended by the Department of Trade and Industry or the Department of Agriculture depending on the type of good that is coming in, and another member from the private sector representing the industry affected. The VCRC is currently composed of at least 3 members at every port – the District Collector, the Deputy Collector for Assessment and the Chief of the Formal Entry Division. They are all Customs Officials. Providing for two additional members removes the sole discretion of the Customs Officials in determining values.

Two, a new section in the Tariff and Customs Code is added, Section 2503-A. It talks about the non-imposition of surcharge in cases when the declared or entered classification is based on rulings by the Tariff Commission. This new provision further removes the discretion of the Customs Collector.

As far as strengthening the role of the private sector and industry association, we have three provisions:

One, the use of revision orders as a third screen in detecting undervaluation. The revision order should be based on the latest values of a product and drawn up after consultation with industry representatives to test the truthfulness and accuracy of a given value declaration.

Two, documents, books and records of accounts concerning the operations of customs bonded warehouses shall be made available, on demand by the Secretary of Finance, to the Collector or the industry association or the sector that might be affected by its operation, for examination and audit.

And three, any affected industry may post a letter of credit or surety bond in favor of the Bureau of Customs equal to twice the declared value of the goods that are being brought in inclusive of duties, taxes, fees and other charges to assist the government to compulsory acquire undervalued goods.

There are other provisions added on to the Tariff and Customs Code such as the modes of disposition of smuggled goods, among others.

But worth mentioning is the creation and institutionalization of a special body under the Office of the President tasked to curb smuggling. It is composed of heads of relevant government enforcement agencies as well as representatives from the private sector.

I strongly feel that this bill is what is most needed by our economy, not just to beef up government coffers with revenues from increased customs collections but more importantly, to ensure that our industries are exposed to fair competition – fostering greater economic activity, job preservation and creation.

Immediate passage of this measure into law is therefore fervently prayed for.

Original Signed
4th District, Quezon





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