Table of Contents

Acknowledgment
Memorandum (Personal)
ENGAGING THE LABYRINTHS AND MAZES
OF THE CUSTOMS ZONE: a preface

Part 1
Introduction

THE CAVEAT: Never sideline security, it may prove costly.

PAX ADUANA: Pursuing Peace thru the Ports
TRIPOD OF A WORLD-CLASS CUSTOMS ADMINISTRATION
BOC IN THE LIGHT OF PHILIPPINE REALITIES: 317B initial

What Ails the Bureau of Customs?

10

collection target for 2009

Part 2

5
6

Failing No. 1
Graveyard of Careerism or Professionalism

12

Failing No. 2
Unfair Target-setting Exercise

15

Failing No. 3
Yards-Monitoring, Border-Control, and Gates-keeping Is Weak

17

Failing No. 4
Sale of Forfeited, Abandoned and Disposable Goods Is Systematically Flawed

22

Failing No. 5
Anemic Drive to Prosecute Smuggling

26

Failing No. 6
Defenseless Areas in Customs Operation Abound

29

Failing No. 7
Regulatory Capture

32

Failing No. 8
Insanity, as defined by Dr. Covey

35

Failing No. 9
Flawed Concept of Trade Facilitation

38

Failing No. 10
Technology: Misused, Abused, Confused?
Part 3
Part 4
Part 5

Doables to Address the Ten Failings

Imperatives of a Smuggling-free Philippines

42
49
58

Smuggling Alphabet For Those Who Mind

60

Matrix of Immediately Implementable Interventions

61

Acknowledgment

For Someone Up There,

my thanks and gratitude.
For those who helped me in this work in whatever measure,
my appreciation.
For the many who may have expected more,
allow me to quote Jessie Jackson:

I am not a perfect servant.

I am a public servant doing my best against the odds.
As I develop and serve, be patient.
God is not finished with me yet.

Memo to the Next

Customs Commissioner

TEN FAILINGS IN THE

BUREAU OF CUSTOMS
(the unprintable truth)

ATTY. RAMON G. CUYCO, CESO V

April 4, 2010

The incoming President will face a

tremendous challenge in stamping out corruption
with corrupt practices having been institutionalized
in the Philippines.
Transparency
International
Philippine Daily Inquirer (PDI)
February 24, 2010

(TI)

MEMORANDUM (Personal)

FOR
Cc

The Next Customs Commissioner

The 15th President of the Philippines; and

The Next Secretary of Finance

SUBJECT

TEN FAILINGS IN THE BUREAU OF CUSTOMS

FROM

Attorney Ramon G. Cuyco, CESO V

DATE

Fourth of April, 2010

_____________________________________________________________

Congratulations on your appointment!

Your job as Customs Commissioner is so important and crucial for it virtually
affects the life of our nation. After all, the Bureau which you head is responsible for the
collection of some 20% percent of the whole revenue pie of the country. Taxes
including customs duties - as we know are the lifeblood of the nation. Roads and
bridges, education, health and social services, peace and order, the defense of the
state, the economy, our foreign relations with sovereign equals, are all dependent on
the government coffers.
Ostensibly, your performance will therefore have to be measured against your

role as fiscus procurator.

In the discharge of your task, you are clothed with powers and authority that
you will need as you face the daunting task of not only collecting duties and taxes, but
of guarding our borders against the entry of anti-social goods, of interdicting smuggled
commodities, and of seizing imports that will unfairly prejudice local produce, as well.

Awesome power, enormous influence, expansive reach virtual realities which

can make or unmake an industry.
Heres a reminder though from Spiderman, With great power, comes great

responsibility.

But before you get down to business, heres a foregrounder:

In a gathering of delegates from the League of Cities of the Philippines and
The Asian Foundation, British Ambassador Stephen Lillie was quoted to have said
that [T]he issue of corruption in the Philippine government should be made the priority

of every candidate seeking the presidency in this years election in order to achieve the
countrys full potential in terms of economic growth and poverty reduction.

Lillie believes that corruption is an issue that matters hugely to foreign

investors, just as it does to ordinary citizens. So central government will need to
continue to keep counter-corruption high on its policy agenda, before and after the
elections. (Philippine Star, Saturday, February 27, 2010)
The foregoing observation is shared by many.
In his Rule of Law column (BusinessWorld, September 26-27, 2009), Augusto
R. Bundang said that if a survey were conducted today, asking people what they

think is the main cause of our economic deterioration, I would bravely opine that the
overwhelming answer would be corruption. With so much talk by politicians,
government leaders, and international organizations about corruption, it would appear
that corruption is our societys greatest evil, the removal of which will bring about the
economic renaissance we have been praying for all along.

While it is non sequitor that being able to totally eradicate corruption will mean
that we can now say goodbye to poverty in this country, it cannot be gainsaid that
corruption significantly undermines growth.
Citing a discussion presented by the World Bank during the 1998 Beijing
International Symposium on the Prevention and Control of Financial Fraud,
Bundang said that corruption, among others, increases transaction costs and

uncertainty in an economy and weakens the state and its ability to promote
development and social justice. This is the standard conclusion as well in many other
international studies and discussions on corruption and progress.

Of late, Samantha Grant, Transparency International (TI) Program

Coordinator for Southeast Asia was quoted by the Philippine Daily Inquirer
(PDI) [February 24, 2010] to have said in the Second Integrity Forum in Makati City,
that[A]ny new government has a tremendous challenge to win back the respect of the

people. To do this, they must tackle the institutionalization of practices currently

accepted that are, in a word, corrupt.

Grant further said: In any country with institutionalized corruption, integrity

pillars (the judiciary, the executive, the police, and the press) themselves are
continually compromised.
Grant also quoted the National Integrity Study of the Philippines in 2006,
saying: According to the report, collusion, state capture, and leadership incapable of

crushing vested interests are all areas that still need to be addressed.

Grant continued: There should be no nepotism in appointments and there

should be a clear will to prosecute those found guilty of corruption including the
powerful. Too often it is the small fry targeted for obvious reasons.
Former Budget Secretary Benjamin E. Diokno, in his CORE column titled
Losing the fight against corruption (BusinessWorld, February 24, 2010), observes:

[A]fter more than nine years in power, the Arroyo Administration has all but lost the
fight against corruption. The World Bank-sponsored governance indicators show that in
2000, the year before Arroyo assumed power, the Philippines was better than 36.4% of
all government in the study. In 2008, that percentile rank on control of corruption was
down to 26.1%.

Diokno also cited the 2009 Social Weather Station (SWS) survey of
enterprises on corruption. In that report, Diokno notes, that [T]here is an

improvement in agencies where opportunities for corruption are relatively less prevalent
in trial courts, the Armed Forces of the Philippines, the Department of Justice, the
Government Service Insurance System, the Commission on Elections, and the
Presidential Commission on Good Government. A second group of agencies however,

which includes, among others the Bureau of Customs (BOC), was found by the
respondents as insincere in fighting corruption, and Diokno finds it reasonable

to accept the finding that the sincerity of officials in fighting corruption has worsened
among this group.

I assume that the President must have been made aware of the BOCs insincerity
in fighting corruption even before His Excellency decided to name you as BOC Chief.
This Memo, then, will attempt to identify some ails of the agency, present some
sort of general prescriptions, and, the sequel to this memo, will attempt to conduct
customs diagnostics, recommend some solutions, as well as endorse a Roadmap
Towards
a
Transparent,
Accountable
and
Responsive
Customs
Administration.
For information.

DIR. RAMON G. CUYCO, CESO V

ENGAGING THE LABYRINTHS AND MAZES

OF THE CUSTOMS ZONE: a preface

Since my Day 1 in the Bureau of Customs (BOC) sometime in January of 2003, I

have been conscious where I am headed to. With my well-meaning friends constantly
reminding me that my transfer from the Land Transportation Office (LTO) to the BOC is
a leap from the frying pan to the fire, the natural impulse to keeping ones ears close
to the ground has not been lost in me. I have been aware of the risks, the hazards,
and the perils that lurk in the dark considering my being new in the customs zone. But
I believe that whoever forsakes the old way for the new knows what s/he is losing, but
not what s/he will find.1
Thus, in many occasions I opted to zag, when I could have just zigged. Just
like the case of the Php1.1 billion tax credit claim of a giant firm that I single-handedly
derailed, as well as the almost consumated caper on the Php48 million tax credit claim
through the use of fictitious documents, including the signature of a topnotch Makatibased lawyer.
I am aware that the advocacy for change does not come in handy. On the
contrary, it may take a lifetime or even eternity not to mention the risks to ones limbs
and life. But one should not be impatient, nor lose hope, as the road to a new
beginning is traditionally unpaved. S/he should be ready to face resistance, frustrations,
and the nauseating brickbats thrown her or his way if s/he has to stay on course.
In my case, my official functions have been grabbed, usurped, and irregularly
assigned to nios bonito albeit noticeably incompetents; my office undermined, and my
authority unrecognized even to the extent that my person is sometimes insulted. My
reforms proposals no matter how valid have ended up in the trash bins, or in the
Mona Lisa Files of the Office of the Commisioner (OCOM). Some were grafted or
cannibalized to suit selfish interests, while still some were simply ignored because
they were my proposals. Yet, when somebody liked the idea and repackaged the same
using the same technology and justifications, the entire Bureau trekked to Subic for a 2day technical presentation of a project that is no different from my Project TRAC ME
(Transport Regulatory Accreditation for Monitoring of Exports). No regrets, though.
After all, even when I was barely 2 months in the Bureau, I succeeded in introducing a
reform proposal that put an end to unconscionably low valuation of car importation
through the adoption of what is now known as the One CP, One Unit approach.
1

A Sicilian Proverb. [Note: Gender sensitivity insertions, i.e., s/he instead of simply he is supplied.]

Indeed, the road to change is not a walk in the park. One has to be prepared to
get bruised, be hurt, even for a hard fall. After all, the pursuit of good governance is
not a spectator sport it is a full contact game.
Heres a caveat from Jacob Riis, who said: When nothing seems to help, I go

and look at a stone-cutter, hammering away at his rock, perhaps a hundred times
without as much as a crack showing in it. Yet at the hundred and first blow it will split
in two, and I know it was not that blow that did it but all that had gone before.
If only for this, the author hopes to make this work as his initial road map which
he intends to regularly consult as he goes on his bivouac to a new customs
administration.

RGC
Lavezares, Northern Samar

Part 1

Introduction
In the past, the Philippines Bureau of Customs (BOC) had a very simple
mandate: collection of revenues for the government and the prevention and

suppression of smuggling and other frauds upon customs.2

The equation then was expressed in terms of assessments made, of duties and
taxes collected, as well as of arrests and apprehensions conducted as they relate to
smuggling activities.
But those days of simple concerns had gone with the winds. Times have changed
so rapidly, radically and extensively. With the advent of the World Trade Organization,
the Bureau of Customs was pressed to add Trade Facilitation into its core
competencies. Rightly so, for the faster business is done, the better it is for worlds
trade and commerce. This is the wave of the future, the demand for globalization.
Every nation wanting to keep pace with the changing world should live with this
ground-level reality. Any attempt to ignore this red flag will surely redound to
isolation. The demands of world trade have to be addressed more significantly side by
side with those of revenue collection and the suppression of smuggling. Trade
Facilitation is international, while Revenue Collection and the Suppression of
Smuggling are primarily local.

THE CAVEAT: Never sideline security, it may prove costly.

The amount of bad news over the past weeks has been bewildering for many
people in the world. Stock markets have plunged, banks have stopped lending to one
another, and central bankers and treasury secretaries looking worried appear daily on
television. Many economists have warned that we are facing the worst economic crisis
the world has seen since 1929. The only good news is that oil prices have finally started
to come down,3 wrote Joseph Stiglitz, a Nobel Laureate and a former Chief Economist

2
3

Section 602, Tariff and Customs Code of the Philippines.

TIME Magazine, October 27, 2008, p. 26;

of the World Bank sometime in the last quarter of 2008. But, it may still appear relevant
up to this writing albeit with variance in magnitude.
Against this backdrop, let me issue a caveat: Pursue all means except halfbaked and faint attempts to cushion the impact of a worldwide financial crisis; but,
not at the expense of whatever gains we have achieved in upgrading the level of
awareness in the arena of global peace and security. Let us never forget that terrorists
are todays most heartless violators of global peace and social harmony; and they
respect no time, feel no guilt, and mind nothing in carrying out their devilish design, be
it in the most unlikely places, in the most unchristian ways, and in the most immoral
circumstances. Worse, they might even be emboldened by the apparent shift in Uncle
Sams focus from protecting Americas shores to averting the economic meltdown at
home and around the world.
At a time when even the worlds number one police the United States of
America is not immune from external threats, nor shielded from ideological invaders,
and neither free from even the faintest sign of terror, it becomes highly improbable that
smaller nations with lesser capability to defend themselves, would fare any better than
the country that is equipped with the most sophisticated defense-capability that science
and technology can offer.
Without doubt, the Philippines is one of these countries with lesser defense
capabilities. Ergo, it is vulnerable in so many ways.

And, what is it for the Bureau of Customs? How can it remain relevant in the
present scheme of things? What should it do? Should it choke our ports and airports
with all border-control apparatuses; throw all the monkey wrenches so that it will be
difficult for groups to carry on with their legitimate fronts that finance their terroristic
agenda, even at the risk of causing negative repercussions on trade and commerce? Or
should it relax its border control to allow unimpeded flow of goods in response to the
demands of commerce, even at the risk of exposing our vulnerabilities to the dark
forces of terror?
Or, can we serve the requirements of trade and commerce even as we respond
to the demands of peace and security? Is it achievable? Doable?

PAX ADUANA: Pursuing Peace thru the Ports

Of late, another equally if not, more important concern is pre-occupying
everyones time, effort and money. I refer to Security.
With the 9/11 in USA having claimed some 3,000 innocent lives, the Bali
Bombing in Indonesia, the Gas Attack in Japans Subway, the carnage in Great Britain,
in Spain, in Angola, in Pakistan, as well as here in our native Philippines, the tentacles
of terrorism are all over the world. Yes, the threat to world security is real, not simply
imagined. That the Push of Bush on Iraqs producing weapons of mass destruction
(WMDs) turned out to be a hoax will not erase the vivid recollection of the Twin Towers
in New York crumbling like a deck of cards right in the heartland of the worlds most
powerful nation. Yes, Virginia, terrorists strike anywhere, any time, in any nation big
and small, and in any place hallowed or otherwise. Terrorism knows no boundaries,
and respects no metes and bounds. Countries that are rich, as well as the
impoverished; communities that are Christian as well as Islam; people at war as well as
those in peace; everyone, every creed, every race they are not immune from this
global menace.
And bombs explode in the desert, in the valleys, in the high seas. They hit
government buildings, business establishments; military installations as well as religious
sites; in highways and railways, in airports as well as seaports; they detonate, they sow
fear, instill terror, wreak havoc. They damage; they maim; and, they kill not just
people but also businesses, not just their targets, but their human bombs as well.
The need therefore to address Security Concerns especially in customs
zones can never be over-emphasized.

Pax Aduana should be among the major cogs in all customs administrations all
over the world including the Philippine Customs. Pax Aduana is more than just
revenue; it is about promoting peace and securing development.

TRIPOD OF A WORLD-CLASS CUSTOMS ADMINISTRATION

In fine, every customs administration should have a local, international, and
global perspective, if it has to make itself relevant in the worlds stage of governance.
Local perspective shall address its revenue collection activities; International perspective
shall deal with Trade Facilitation undertakings; while its Global perspective shall address
the concerns of Security.

Put differently, a world-class customs administration can be achieved and

sustained only if it rests on a tripod where the main pillars are REVENUE COLLECTION,
TRADE FACILITATION and SECURITY. I shall call this the Tripod of a World-class
Customs Administration.
In the Philippines, we cannot sacrifice REVENUE COLLECTION in the light of
present realities BOC being the 2nd biggest revenue raiser for the national
government; neither can we renege on our international commitment on TRADE
FACILITATION as it promotes and expands trade even as we make good our
membership in a league of nations pacta sunt servanda; and, more importantly, we
can never court terrorism and disaster by relaxing SECURITY screens in our ports and
airports.
Only when the tripod evenly supports our programs can we deliver a world-class
customs administration. A breakdown in any of the main pillars will have deleterious
effects not only on BOC mandate, but on the very foundation of the countrys peace as
well.
While a thorough customs examination process in the name of revenue collection
may impede commercial traffic to the detriment of free trade and commerce, an
unreasonable relaxation of our border controls in the name of trade facilitation may
abet the unrestricted entry of terrorists resources, thus sacrificing internal security and
making our country a virtual sitting duck in terroristic mal-adventures. A balance
between the fiscal requirements of our national treasury, the interest of trade,
commerce and the economy, as well as the demands of peace and security must
therefore be maintained. Yes, its a tough job, but there is no choice. We cannot
sacrifice any of the three pillars.

BOC IN THE LIGHT OF PHILIPPINE REALITIES: 317B initial

collection target for 2009
The BOC is the second tax revenue collector for the national coffers second only
to the Bureau of Internal Revenue (BIR). BIR and BOC have a combined collection
share which accounts for 80% of the total revenue collection figures of the national
government. The performances of these two agencies are therefore placed under close
monitoring by their administrative supervisor the Department of Finance, the
countrys chief fiscus procurator.

As a yearly exercise, the powerful and uncompromising Developmental Budget

Coordinating Committee (DBCC) just ram down the throat of Customs assessment
people, the Bureaus yearly collection target.
Take the case of the 2009 collection target the DBCC originally set P317B for
the BOC. Fortunately for the latter, it was trimmed down to P277B a P40B difference;
then, it was further lowered to the current P273B. In other words, a P43B off the
rightful figures that should have been initially set by the DBCC had the target-setting
exercises been ICT-aided where intelligence data are readily available from the agencys
datahouse.
Compare this with the agencys target in 2008 P254B. The initial target would
have been 63B higher or a 24.8% increase. Whew! Atta Himalayas!

Too high! No basis! No consultation! Unreasonable!

Yes, these are some of the lamentations that reverberate in the customs zone.
These can be heard not just from customs authorities but from port users and other
stakeholders as well.
The reactions to astronomical collection target are varied. Customs people are
apprehensive they might be attrited should they miss their respective targets. The
brokers and importers are worried for fear of harassment, skyrocketing tara
(whatever this means) and overzealousness of customs enforcers that might result in
unnecessary delay in cargo clearance and unwarranted increase in the cost of doing
business. Still, others are worried that even the entry of anti-social goods may be
abetted in their vain attempt to collect taxes just to meet the revenue targets.
This early, at a time when tariffs are declining, exports are affected, and the
effects of the global economic crunch will continue to be felt worldwide until the coming
months. Customs officials and employees are scratching their heads, wracking their
brains, and, drawing out plans to beat their assigned targets. After all, they have no
other choice.
There was a time when Customs was headed for the kill. It had the right mix
after all new leadership albeit ephemeral, new hope, and new slogan.
Encrusted with an air of precision, the agencys battlecry then was: Rule #1 -

Beat the target; Rule # 2 - Beat the target; Rule #3 - Beat the target.

Unfortunately, Customs did not only fail to beat its target; it crushed heavily on
the weight of the assigned target. Yes, a target it (BOC) never set in the first place, but
was just imposed upon by people in high places.
A deeper look into the Bureaus operations however will tell us that not only are
the collection targets too high, but the organizational structure is also inadequate to
respond to the grueling demands of collecting every centavo for the national
government. Add to this the hackneyed concepts of doing things that are prevalent in
the Customs bureau and you have an almost complete ingredients for failure.

So, did the BOC scale the Himalayas of P317Billion? Or, even the downscaled
P273B last year?
Of course, it didnt.
Whatever, it may be well for the BOC to harken to the forewarning of Harold L.
Sirkin who wrote: Countries and companies are facing an economic environment that
is not only borderless but also ruleless.5
4

Sirkin said, This is the future world of what we call globality, a world of
hypercompetition in which Americans and Swiss and Japanese compete with
everyone from everywhere for everything. And not just for customers and market
share: theyll compete for energy and raw materials, skilled and unskilled workers,
knowledge, patents, financing, suppliers, partners, even potential acquirers.6
Sirkin explains that Global competitiveness in the era of globality where the
new rules are no rules requires new ways, new thinking. This is a battle that any
nation dare not lose.7
He illustrates further: The road going forward is like an eight-lane highway with
no access and egress signs, no directions, no lane markings, no speed limits, no police
and no one knowing if they should drive on the left side or the right side of road. You
make your own rules and do your best to get to your destination. In the world of
globality, you cant wait for someone else to set the rules.8

Senior Partner, Boston Consulting Group, and Co-author of the book titled Globality:
Competing with Everyone from Everywhere for Everything;
5 TIME, October 27, 2008, p. 41;
6 Ibid, p. 42;
7 Ibid;
8 Ibid;
4

Is the Customs bureau primed for this kind of environment?

I doubt.
This is so because, organizationally, the BOC suffers from intrinsic flaws that
were and still are responsible for what I shall call Ten Failings in the Bureau of

Customs.

Part 2

What ails the Bureau of Customs?

A cursory examination of the ground level realities in the Customs bureau will
readily tell us some of the culprits behind the dismal showing of the agency in meeting
its revenue collection target, in its failure to address smuggling, as well as its inability to
shake off its perennial label as haven of crooks.

What then are the culprits?

GUYS ADRIFT: Ten Failings in the Customs Bureau
Without any pretense of exclusivity, the culprits are GUYS ADRIFT.
It is an acronym where G stands for Graveyard of Careerism and
Professionalism this refers to BOCs not so good reputation in the area of
compliance of civil service rules and regulations in so far as personnel management is
concerned; U stands for Unfair Target-setting Exercises for so many years,
collection targets have been set upstairs and imposed upon the front-liners without
effective consultation; Y is for Yards-monitoring, Border-controlling, and Gatekeeping Are Weak unless BOC takes control of its gates, secures its yards, and
effectively patrols the countrys porous coastlines, we cannot hope to address tax leak
as well as protect our shores from intruders; S stands for Sale of Forfeited,
Abandoned and other Disposable Goods Is Systematically Flawed unless the
rules on seizures, forfeitures, abandonment and auction are made clear and devoid of
wide latitude of discretions by customs officials, huge tax leak will remain unabated.
A stands for Anemic Drive to Prosecute Smuggling the Bureaus legal arm
has been left suffering from acute manpower anemia while the remaining lawyers have
been assigned to tasks that are alien to investigation, prosecution and litigation; D is for
Defenseless Areas in Customs Operations Abound the areas in the cargo
clearance chain where the BOC is vulnerable; R stands for Regulatory Capture a
situation where the regulator ends up being controlled, influenced, or held captive by
the sector the regulator is supposed to regulate; I stands for Insanity, as defined by
Dr. Stephen Covey who said, One of the definitions of insanity is to keep on doing
the same thing the same way and expect a different result; F is for Flawed Concept
of Trade Facilitation Oh! By the way, how many crimes have been committed in
the name of Trade Facilitation? And, finally, letter T stands for Technology: Misused,
Abused, Confused Technology for whom?
8

Put differently, the Ten Failings in the Bureau are what one might call the
Unprintable Truth.

Failing No. 1

Graveyard of Careerism or Professionalism

There are many things that are valued, treasured, cherished and held in high
esteem in the Philippine Customs Bureau, but careerism or professionalism is not one of

them.
A closer inventory of the tasking, assignment and/or deployment of people in the
Bureau will show that closeness for whatever reason or bonding (or is it funding?)
more than competence, capability, rank and employment status, is more determinative
of which assignment is going to whom, or where the official is going to be deployed.
Consequently, seniority in rank as well as employment status is made as sacrificial
offerings in the altar of friendship and vested interests.
If at all, some personnel were tapped to handle sensitive or critical assignments,
it does not necessarily manifest that careerism or professionalism played their part. In
all likelihood, kinship, friendship or other relationships spelled the difference.
One only has to watch and see the proliferation of ad hoc bodies, task forces,
special assistants, units and even committees. Most of these were created ostensibly to
perform some tasks which are reserved by law and existing administrative issuances for
regular officials, employees and/or regular organizational units to perform.
Unfortunately, these functions most of which involve the exercise of discretion are
unreasonably, irregularly, and illegally transferred to, or assumed by, these ad hoc
units, or specially privileged individuals in derogation of the powers and functions of
regular officials/employees of the organization. All of these have been done by citing
the most abused and hackneyed phrases In the interest of the service,; or, In the
exigency of the service,: as well as other whereases, most of which do not really
redound to the interest of public service, neither do they justify any deliberate or
wanton disregard of civil service rules and regulations.
As a result, any Tom, Dick and Harry can become somebody overnight, with
powers and prerogatives to decide the fate of anybody which may even include those
of their seniors in law, in position, in status, or even in intellect and competence their
only credential being their friendship, kinship or other relationships with the Head of
Office.
10

And, these unwarranted privileges extend beyond the circle of friends, kins and
associates of the Head of Office. It extends, with more viciousness, even to the
associates, friends and relatives of their Chiefs of Staff. Still, further, down to the circle
of friends of the Chief Aide of the Chief of Staff his/her driver, errand boys, body
guards, and other hao-shiaos.
In other words, their promotion is accident-driven; they got promoted no
matter how ephemeral and made substantially more powerful than they were before,
just because of the accident of closeness, bonding and association.
We can cite specific examples. Here are some:
1. A Senior Official without any criminal or administrative charge leveled against
him was placed on floating status, in derogation of his rights under the civil
service law. While this senior official has not shown any outrage over this
demeaning treatment or discrimination against his person, it does not
necessarily mean that it is acceptable. Why should the government keep on

paying the salary and other allowances of this official when he has no actual
assignment? His fault? Whose fault? Who is prejudiced? One thing is certain,
the government is not at fault, yet it suffers damage for someones wrongful
decision.

2. A Junior Officer was designated as Special Assistant to the Bossman, with

powers so vague yet so broad that even Deputy Commissioners, Directors, and
Collectors form a beeline to his office and would rather read his mood swings
than deal directly with the Boss if they want something done or undone in their
respective areas of jurisdiction. Power of the staff?

3. A Collector VI, with salary grade 26, the highest rank among the Collectors, and

who rose from the rank, was made to report to the Office of the Commissioner
without specific assignment, a.k.a. floating, without a pending administrative
or criminal case. The Collector pleaded understanding. He invoked his forty
years or so in the service. He sued for time saying he will retire by December in
preparation for his congressional dream. When told that his was non-negotiable,
he asked to be re-assigned to a Port that is at least appropriate to his rank, but
all these pleas were turned down. He had no choice, he had to report to the
OCOM, and floated.
Frustrated, he resigned.
Fortunately for him
(unfortunately for others?), he is now a Congressman. A position that allows him
to participate in the approval process of BOCs budget proposals. A poetic

justice?

11

The list is endless.9

In fine, competence, professionalism, intellectual superiority, and even CESO
eligibility are not necessarily effective passports to higher positions. These stuffs will
not catapult one to the totem pole of the organization; closeness, kinship or association
have been noticed to be more effective.

Damn professionalism, damn careerism; what matters most is materialism. After

all, you dont stay at the top for so long. So make hay, while your sun is up. (Not a
good reason though.)

As of press time, a District Collector in Central Philippines, appears to be a casualty in what is

dubbed as a political vendetta launched against former administration partymates who have
jumped into other political fences. The Collector who is a consistent topnotcher in revenue
collection, found himself removed via a CPO (Customs Personnel Order) issued last week by the
Customs Commissioner. The Collector, a brother of a Metro Manila Mayor who was a key official
of the administrations political party before the switch, is another top-rank Collector who will
have to sit it out in the Ocom in the remaining months of the Arroyo Administration despite
reported sterling performance. [Customs Chronicle, December 14-20, 2009]
9

12

Failing No. 2

Unfair Target-setting Exercise

Ask a BOC official about revenue targets Collectors and their deputies,
Appraisers, Examiners and other assessment personnel and the likelihood is great
that youll invariably get answers accentuated with expletives, protestations, and
exasperation.
They will tell you that their respective units collection quota were fixed without
consultation; that the figures were arrived at without checking with their customs
database; or, that the projections were based on galactical or outlandish assumptions.
Yes, Virginia, even the appreciation of the peso is being blamed for the mess.
I had the occasion to attend some target setting coordination meetings when I
was acting Deputy Commissioner for Revenue Collection and Monitoring Group of the
Bureau. Before the start of those meetings, we were advised strongly forewarned is
the more apt term never to question the assigned targets.
I ask myself: So why the need for these target-setting coordinating conferences?
Normally, if one is to measure how effective he has been, his report card shall
juxtapose what has been set as target with what has been actually achieved within a
certain timeframe. So, in target-setting exercises, reason dictates that the organization
and its officials should be consulted; be allowed to comment, react, or make a counterproposal. The failure to consult, smacks of unfair imposition. Unfortunately, this is what
is actually happening in the Bureau of Customs, year in and year out.
The Development Budget Coordinating Committee (DBCC) an inter-agency
forum is a very influential body that paints the fiscal and economic landscape of the
country. It is composed of the Secretaries of the Department of Budget and
Management (DBM), the Department of Finance (DOF), and the National Economic
Development Authority (NEDA). They discuss budgetary assumptions, estimates,
projections, and other fiscal and revenue related figures. The result of their discussions
will determine the amount of revenue that the Bureau of Customs shall be required to
raise. Same is true with BOCs sister agency, the Bureau of Internal Revenue (BIR).

13

In fine, target-setting is done by higher authorities, and the figures are just
imposed upon the BIR and BOC functionaries for the latter to collect. The assessment
and collection personnel of BOC are not involved during the deliberations. And, by
admission of one Finance Undersecretary, the Revenue Performance Evaluation Boards
(RPEB) a creation of the Lateral Attrition Law RPEBs macro assumptions data do
not include the individual targets of customs assessment people.
Customs appraisers and examiners lament, They set our target; they tell us
never to question it. We have no choice but to achieve it; lest, we get attrited.

Result: They unreasonably lay upon BOCs shoulders the entire weight of the
Himalayas. And with the Sword of Damocles dangling over our heads, there can
never be any rational strategic planning where revenue officials could effectively map
out the necessary revenue collection interventions.
Consequently, these BOC officials cannot be faulted if they work half-heartedly.

Ma-aatrite ka lang naman, bakit hindi ka pa magpayaman? a customs revenue

official commented albeit in jest.
Not necessarily justifiable, but not necessarily without reasons, either.

14

Failing No. 3

Yards-Monitoring, Border-Control, and Gates-keeping Is Weak

The law is clear - Section 1201 of the Tariff and Customs

Code (TCCP), declares, thus: All articles imported into the Philippines whether subject

to duty or not shall be entered through a customhouse at a port of entry.

In other words, no imported goods can legally come in contact with the
Philippine customs territory unless they pass through duly constituted ports of entry.
Otherwise, the imported goods are treated as smuggled articles.
The Bureau of Customs (BOC) has designated ports of entry all over the
archipelago. Nationwide, the BOC has 15 collection districts with designated
port/airports of entry. Only through these ports can goods be legally introduced into
Philippines customs territory. Articles and merchandise that pass through these
facilities are processed, thus: they are declared before customs authorities; examined
and classified; assessed for the imposition of corresponding duties and other taxes; and
eventually cleared or released to the consignees or importers.
A port of entry in so far as it relates to customs administration, exists for
purposes of entry and declaration of the goods, examination and classification, as well
as assessment of duties, taxes and other imposts. A port of entry is a government
facility designed to enforce customs laws, rules and regulation inside Philippine customs
territory.
These ports of entry are manned by customs authorities. They are tasked to
make sure that all goods legally allowed access to Philippine customs territory are
properly taxed. Dereliction of duty on the part of customs authorities manning these
ports of entry will naturally occasion tax leaks, worse, entry of anti-social goods.
Such is the crucial role of a port of entry. In like fashion, such is the delicate
nature of the task of the customs authorities stationed thereat.

This structure appears sufficient, adequate and functional. But, that was then,
when life was simple.
15

Today, however, this old structure is no longer working, it has become obsolete;
it has become flawed; it has become inadequate that it has become virtually inutile in
the governments effort to fight smuggling. It now abets huge tax leaks in a magnitude
that is staggering.
Heres why?
With the creation of legislated freeports, economic zones, and of late PEZA
registered buildings outside of the zones the traditional check and balance mechanism
obtaining in the old structure of the Philippine Customs is no longer functioning
effectively as it was envisioned.
This is so, because the laws that created these legislated freeports, as well as
the executive fiats that designated ecozones, have carved out by legal fiction
certain areas in the Philippines and declared them as separate customs territory,
thereby putting them beyond the reach of Philippine customs authorities. Separate
customs territories in the Philippine soil are under the contemplation of law exborder, which simply means that they are, for customs purposes, beyond the Philippine
territory. Philippine customs authorities therefore cannot discharge their functions,
namely: classification, examination, appraisal, assessment and clearance of cargoes.
This being so, the check and balance mechanism where customs authorities
guard the ramparts of every port of entry, every yard, every gate has weakened
considerably. Their authority to process importation is unavailing simply because these
separate customs territories are beyond their jurisdiction, thus: there shall be no
customs assessment, examination and clearance processes in so far as goods brought
into the country through the freeports, or intended to be brought to the freeports are
concerned. We therefore have a case where tons and tons of goods and merchandize
are brought into Philippine soil, yet customs authorities are proscribed from laying their
hands on them for lack of jurisdiction.
If the customs authorities have difficulty suppressing smuggling when imported
goods are within Philippine soil, how then can we expect them to be otherwise when
the imported goods are without Philippines soil? If customs authorities failed in abating
smuggling in areas where they have jurisdiction, how can they succeed in areas where
they are devoid of legal authority?

Yet, customs people cannot use this modern scheme of separate customs
territory as justification for their incompetence or inefficiency.
16

But, what is really the impact of this separate customs territory concept on
Customs scheme of things?
A huge number of the containerized cargo are destined to be delivered to these
Freeports, and ecozones. Currently, goods that are bound for these economic enclaves
are not assessed duties and taxes because of the legal fiction that their destinations
the freeports and ezozones are beyond the borders of Philippine customs; hence, taxfree. In other words, this huge volume of containerized cargoes are not paying
customs duties and taxes, and are not within the monitoring authority of customs
authorities.
With existing set-up and related agreements still obtaining, customs will be
helpless in so far as the collection of taxes and duties on these Freeport-bound and
PEZA-bound goods are concerned.
Unless remedied, this old structure will remain as a weak link in the Bureaus
collection efficiency. It will continue to be the source of the biggest tax leaks outright
and technical smuggling. And, it will hound the BOC as it remains to be one of the
failings in the Bureau.
But, what specifically ails the present structure of the Bureau?
There are plenty, among which are:
In the Port of Manila (POM) where 33 % of the Bureaus revenue collections
are generated the cargo-handling and arrastre services are outsourced from private
terminal operators.
Presently, access to the container yards and other facilities of the private
terminal operators even by the customs personnel is limited to a very few
(Commissioner, some Deputy Commissioners, Dist Collector, ESS, CISS, and some few
that are authorized by the Commissioner). Outside of these privileged few, access to
areas where imported goods are stored is solely dependent on the private terminal
operators assent. Consequently, tax-related vigilance by audit, monitoring and other
revenue personnel of the Bureau is effectively curtailed by the set-up.
In other words, government taxation functions examination, monitoring and
audit of imported goods are effectively curtailed by private entities whose main
business is just to provide arrastre and terminal services. Some BOC officials cannot just
have access to these facilities without their permission. We just cannot move
containers, examine their contents, or simply unlock them without being allowed to use
their equipment and other facilities. Every time we move containers, BOC has to assure
17

them of the service fees. In other words, Customs cannot just do its task
examination and monitoring unless the terminal operators grant access and allow the
use of folklifts and other equipment.

All because of existing administrative issuances.

And, in the MICP, where another 33% of the Bureau revenue is collected, the
same situation happens.
In these two major metroports, the Bureau of Customs does not have physical
control of the gates.

All because of existing administrative issuances.

Also, cargoes unloaded at these two metroports that are intended for the
ecozones are released from the customs zones without any physical control and
restrictions from the Bureau. These are released to and transported under the care of
escorts of the Philippine Ecozone Authority (PEZA) none from the Bureau of Customs.

Again, all because of existing administrative issuances.

But, can administrative issuances or agreements have precedence over Section
604 of the TCCP which provides: [T]he Bureau of Customs shall, for customs purposes,

have exclusive control, direction and management of customhouses, warehouses,

offices, wharves, and other premises in the respective ports of entry, in all cases
without prejudice to the general police powers of the city or municipality and the
Philippine Coast Guard in the exercise of its functions wherein such premises are
situated?
Unless control of the gates in all customs zones is restored back to the Bureau,
we cannot hope to answer the question: Which is more extensive, technical smuggling
or outright smuggling?
This situation, among others, is what makes our border-control, our gatekeeping, our yards-monitoring defective; unfortunately, it accounts for one of the major
failings in the Customs bureau.
By the way, if the freeports and the ecozones are treated by law as separate

customs territory or beyond the territorial jurisdiction of Philippine customs, what

then are customs offices and personnel doing in these economic enclaves? If customs
authorities do not have exercisable powers and functions inside freeports and ecozones,
what then is the purpose of establishing Subic Collection District inside this former US
military facility? Or the Port of Clark inside Clark Economic Zone? In CEZA as well as in
18

Zamboanga Free Port and Ecozone? Also with Laguna Customs Field Office in Laguna
ecozone, as well as the Cavite PEZA-Customs Field Office in Cavite ecozone? Put
differently, what are customs authorities doing inside these territories that are by law
beyond the Philippine customs jurisdiction?
My take is: A port of entry inside a Freeport is an anomaly. Anyone inside the
Freeport for appraisal and duty collection is devoid of legal authority. The only
justification for a customs official inside these economic enclaves is that of a job of a
Customs Attache.

19

Failing No. 4

Sale of Forfeited, Abandoned and Disposable Goods Is Systematically Flawed

Under the law, the customs operatives can seize cargoes, articles or commodities
that are imported into the country in violation of the Tariff and Customs Code of the
Philippines. And the law further provides that cargoes that have been forfeited or
abandoned shall become properties of the government and may be disposed of in a
manner prescribed by law the TCCP.
Yet, there is hardly any serious attempt to address the problems brought about
by seizure, forfeiture and auction of disposable imported goods. Despite the fact that
the number of abandoned and overstaying cargoes that should be auctioned off publicly
had multiplied by leaps and bounds. Unfortunately, they have remained unsold, and,
worse, unaccounted for so many years.
The TCCP, as amended, says: An imported article is deemed abandoned under

any of the following circumstances: (a) When the owner, importer, consignee of the
imported article expressly signifies in writing to the Collector of Customs his intention to
abandon; or (b) When the owner, importer, consignee or interested party after due
notice, fails to file an entry within the thirty (30) days, which shall not be extendible,
from the date of discharge of the last package from the vessel or aircraft, or having
filed such entry, fails to claim his importation within fifteen (15) days, which shall not
likewise be extendible, from the date of posting of the notice to claim such
importation.10
Said provision went further by saying: Any person who abandons an article or

who fails to claim his importation x x x shall be deemed to have renounced all his
interests and property rights therein.11
In short, the TCCP prescribes the filing of entry within a non-extendible period
of 30 days from the date of discharge of the last package from the carrier. And the
Supreme Court had occasion to clarify that the entry referred to both the IED and
the IEIRD should be filed within 30 days from the date of the last discharge of the last

10
11

Section 1801, TCCP, as amended;

Republic Act 7651, June 04,1993 amending Section 1801 of the TCCP;

20

package from the vessel or aircraft.12 Failing in this, the merchandize will be deemed
abandoned.
Said the Court: RA 7651 no longer requires that there be other acts or omission
where an intent to abandon can be inferred. It is enough that the importer fails to file
the required import entries within the reglementary period.13
And even if they have filed the required entry within the mandatory period of 30
days, if the owner or consignee failed to claim these goods within 15 days from the
filing thereof, still they will be deemed abandoned, hence, auctionable as they
become properties of the government.
Unfortunately, this provision has been observed more in the breach than in the
compliance not just by the brokers, importers or consignees, but by customs
authorities as well.
Turning a blind eye on the non-extendible period of 30 days, the BOC had the
gumption to even dish out an administrative issuance that patently contravenes this
express mandate of the law. It issued Customs Memorandum Order No. 15-94 where it
introduced the idea of requiring prior notice to the owner before abandonment can
set in. A clear case of an administrative issuance contravening the law.

Legally infirmed. Void ab initio.

Yet, since its issuance, Customs Memorandum Order No. 15-94 has been used to
defeat the prescription of the law. 14
And, they succeeded.
Resultantly, hundreds and hundreds of containers have remained unclaimed,
abandoned, yet unsold. The owners, importers or consignees of these unclaimed and
unsold cargoes posit that theirs have yet to be effectively declared abandoned. But
they aver that there cannot be any abandonment as they have yet to receive prior
notices.
Worse, some of these overstaying cargoes have been raided, divested and
molested of its contents, to the damage and prejudice of the government. And, even
Chevron Philippines, Inc., vs. Commissioner of Customs, GR No. 178759;
Ibid.
14 Fortunately, the Supreme Court has ruled in Chevron Philippines, Inc. v. Commissioner of
Bureau of Customs, G. R. No. 178759, August 11, 2008, where the High Court disagreed that
Notice to the Party is necessary, hence, no implied abandonment. However, said decision is a
subject of a Motion for Reconsideration.
12
13

21

these raiding, divesting, and molestation have not been properly addressed, both by
the government and the terminal arrastre operators.
In the two biggest ports of the country the Port of Manila (POM) and the
Manila International Container Port (MICP) which account for the more than 60% of
the Bureaus revenue collections, huge amount of revenues have been unreasonably
lost on account of overstaying, abandoned and unsold cargoes. And the volume of
these disposable cargoes is so big.
As to why the public auction is not immediately done confuses a dispassionate
inquirer. Finger pointing often ensues thus Auction authorities say they have yet to
receive the Order of Abandonment from the District Collector; the District Collector
excuses himself by saying that the Law Division has not yet submitted its post-hearing
recommendation; the Law Division in turn claims they cannot conclude the hearing yet
as it cannot even proceed because the owners, importers, consignees cannot be served
summonses as they cannot be located in their reported addresses; and, at times, the
apprehending officer or the BOC lawyer-prosecutor does not appear during the hearing.
And the resolution of the case drags to unreasonably long periods of time some even
take years.
In the meantime, the value of the goods has dissipated, with some of the
merchandize raided, divested, and molested.
Yet, the BOC organization has created so many units and tasked so many
officials, to monitor this area of concern. Conversely, it has also divested some regular
units from doing their thing in favor of privileged ad hoc bodies, or special assistants, all
because the regular units are not confidentially aligned with the bureaus leadership.
Surprisingly, every time the top honchos of the Finance Department ask the BOC
leadership on the total import volume that have been cleared by Customs, the latter
can only offer vague and motherhood statements while some are even counterintuitive to the real situation. No one seemed to have a more or less accurate figure.
In fact, during BOCs first command conference for 2008, Finance Secretary Gary
Teves can only bite his nail in exasperation when he commented: Almost all sectors

of the society even the political opposition are one in saying that the country is
having a robust economy, yet your figures on import volume is down. How can we
reconcile this? Teves asked.
Elsewhere in this work, the pitfalls in the seizure, forfeiture and auction
processes will also be discussed.
22

(Note: The author submitted an auction reform proposal some three years back.
It was simply titled 3rd Party Custodianship Program. The proposal aims to provide a
comprehensive approach toward solving the evils that are attendant to inventory,
transport, custodianship, marketing and disposal of seized, forfeited and abandoned
goods while in customs custody. Unfortunately, said proposal until now continues to
look for an audience.)

23

Failing No. 5

Anemic Drive to Prosecute Smuggling

Determination and resolve to go after the smugglers are not measured in terms
of televised crushing of seized and confiscated luxury cars. On the contrary, that
deplorable episode of wasting government property just showed the governments
ignorance on how to effectively pursue effective customs law enforcement, raise
revenues for the government, and deter the recurrence of similar customs frauds.
Neither is the seriousness to run after the smugglers measured in terms of the
number of cases that were filed, nor by the amount involved in those cases. Not even
by the hand that directs the filing of these cases, say, by the Secretary of Finance, or
by the President of the Philippines.
Yes, Virginia, the determination to prosecute smuggling is shown when an
airtight case is made on any smuggling activity, irrespective of whether the respondent
is well-connected or otherwise; when charges are initiated in the offices of the
prosecutors, and eventually filed in the courts.
We see a determined effort to run after the smugglers if those indicted are the
real big guns not just the fall guys; when they are pursued relentlessly in civil,
criminal and administrative avenues; when the progress of these cases are vigilantly
watched and monitored, not just up to judgment day but until we see culprits behind
bars. We see successful anti-smuggling campaign when illegally acquired assets of
these convicts are forfeited, attached, and/or appropriately escheated in favor of
government. We see a successful campaign against smugglers when these convicts,
their cohorts, or those acting under their employ are banned from plying their trade and
businesses in the customs zone.
Before the advent of the Run After The Smugglers (RATS) program, filing of
cases against the smugglers were observed to be limited only to those filed before the
Bureaus own Investigation and Prosecution Division (IPD) and the Internal Inquiry and
Prosecution Division (IIPD) of the Customs Intelligence and Investigation Service CIIS).
Cases that abnormally end up filed before the courts are a rarity. And, if at all, cases
are lodged in and investigated by the Justice Department, these are miserably
dismissed for lack of merit, or for insufficiency of evidence.
24

One clear indication of the lack of resolve to run after the smugglers is the
unwarranted re-assignment of lawyers in the Legal Service of the Bureau to other
assignments, leaving the supposed stable of technically capable investigators and
prosecutors turn into a virtual ghost town. Most lawyers who were appointed to the
Legal Service did not even warm their chairs prior to their getting detail assignments in
what they regard as lucrative assignments.
Today, the regular Legal Officers and Attorneys of the Legal Service are now in
the Collection Districts, in various non-investigative or non-prosecutorial assignments.
They are either tapped as Chiefs of Staff of the District Collectors a designation that is
non-existing in the Bureaus plantilla; or, as Review Attorneys or Special Assistants in an
ad hoc body normally under the beck and call of a very close associate of the
Commissioner, Deputy Commissioner or a District Collector.
There are even those who simply opt to remain organizational lightweights or
virtual non-entities for as long as they are in the good graces of the Commissioner
or somebody very close to the Commissioner or District Collector. They prefer to work
in the backgrounds, and incognito. But they know pretty well the perks that go with
working within the proximity of the Boss. As they say, out of sight, out of mind.
The Legal Service is raided empty of its warm bodies. It is now a shell of what it
should be a vibrant law office of the Bureau of Customs. This situation has been
going on for so long now. This remains to be so, even up to this day when the much
ballyhooed campaign against smuggling is supposedly shifting to high gears and should
therefore need the services of technically proficient lawyers.
Another clear indication of the absence of resolve to fight smuggling is the nonindictment of Customs employees and officials who have a hand either by commission
or omission in customs frauds and other shenanigans.
Anecdotal reports are replete with tales of smuggling cases without smugglers.
Yet, these known smugglers are plying their nefarious trade under the very noses of
customs authorities and, they go unmolested. Some even have the gumption to bark
orders to, influence decisions of, or even threaten customs officials.
They drop names of people in high places; they pull strings; and they push their
weight around.
They assume various names, aliases, call signs or codenames. They are known
to the top officials, to the hao-shiaos, to everyone. Yet, they have never been charged.

25

Still, another indication of the absence of resolve to fight smuggling is the

number of administrative cases that were dismissed by the various Law Divisions of the
collection districts due to non-appearances of lawyer-prosecutors or their witnesses
during the hearings. While these non-appearances have nauseatingly caused dismissal
of cases, none of these disappearing prosecutors and their witnesses have been
disciplined, let alone, dismissed from service.
Yes, Virginia, smuggling comes in various fashions from hi-jack me to
default me. It is not discriminating in the kind of commodities or goods they get
interested in from thumb tacks to dump trucks, jewelries to plastic wastes, rotten
meat to animal feeds, and elephant tusks to melamined milk.
And, smugglers thrive anywhere from quiet steeples, or noisy shores; through
airports tarmac and coffee shops; in the high and byways of the metropolis as well as
in dimly lighted warehouses; in local wharves or busy ports. They do it on the ship,
beside the ship, and sometimes they include the ship (no pun intended).
Many things happen in the customs zone, day in and day out. Many things are
felt in the customs zone, big and small. And many things are done by customs
authorities, except run after the smugglers.
Some observers commented: call it professional courtesy, if you may; but they
cannot bite the hands that feed.
Thank goodness, for a while there was RATS. Far from what it should be, but
certainly a good start.
Unfortunately, the RATS Program was decommissioned. The RATS were driven
away by the C.A.T.S. - Captain Americas Tactical Somersault. Yes, the Millennium
Challenge Account pulled the life-support system of the RATS when it stopped funding
the program.
If at all, the only remarkable show of the governments determination to run
after the smugglers is the frequent visit of the Chief Executive to the customs zones.
Without this, all pretenses of waging war against the smuggling are certainly kaput.

26

Failing No. 6

Defenseless Areas in Customs Operation Abound

SWING, NINJA, HIJACK ME and, of late BLTB [Barko-Lifter-Truck-Bodega]

and many more are what one hears when dutiable cargoes or articles are spirited out of
the customs zone sans the payment of customs duties. These are just some of the
known species of what the customs authorities regard as outright smuggling.
In some areas, piggybacks are frequently happening yet documenting it in a
customs environment is bound to fail. Anecdotal accounts will tell us that a truck that is
hired to transport a certain commodity is used to load more than the legitimate
transportable commodity that it should. Those that are loaded over the legit
transportables are what we shall call piggybacks.
And these piggybacks come in various forms: different description, different

volume, different classification, or simply different from what should be transported out
of the zone.
All because, our customs zones are wanting in customs control in fact, we can
even say that physical control of most of our customs zones are controlled by noncustoms.
Take the case of transshipment cargoes: they are supposed to be transported
while underguarded. And the rule requires that every transported container should be
under the watchful eyes of an underguard. The need for underguarding springs from
the fact that these otherwise highly dutiable cargoes pass through our ports, yet
released to consignees without payment of customs duties, hoping that these
transshipments are raw materials that are to be processed into finished products that
shall be exported upon completion.
In other words, transshipment is an administrative mechanism that allows
physical entry of imported raw materials without the consignee paying customs duties
and taxes. This is to support the export development program of the government a
sector that is heavily laden with labor and employment. Fair enough. So, let them be
released untaxed, but underguarded they should be.

27

But, how many warm bodies do we have in the BOC that are available to
perform underguarding chores, compared to the number of containers that are
transshipped everyday?
Heres an example: Sometime in September this year, Mr. H. L. was tasked to
underguard (escort) 7 containers to Subic, 5 containers to Harbor Center, and 3
containers to NAIA.
In short, so many containers, bound for three different
destinations, all in one day.

Can it be done? Can there be effective underguarding? Can Mr. H. L., be at 15

different places and bound for 3 different destinations at the same time?
I doubt, unless he is a Superman. But, Superman does not belong here, not in
the ports, neither in the airports.

Result: Transshipped containers are not adequately guarded. In other words,

the purpose of underguarding is defeated, and this makes transshipment a
defenseless area in customs operation.
Yes, BOC is very vulnerable in the area of transshipment. And, we still have local
transshipment, customs euphemism for what the TCCP refer to as transit cargoes.
Simply put, transit cargoes are the domestic counterpart of transshipment cargoes.
In both areas foreign and local transshipment - the evils of inadequate
underguarding are present, and diversions are just lurking along the route.

Just what is diversion?

Diversion, refers to the disappearance of cargoes while en route to their
registered destination, or the non-delivery of these shipments to the premises of their
registered consignee. In simple language, highly dutiable cargoes were spirited out of
its authorized route as a means to evade taxes. Smuggling, pure and simple.
And this happens every now and then. The sad thing is, even our customs rules
and regulations have sometimes been influenced in such a way that the entire process
is pockmarked with loopholes; virtually making the BOC unprotected and rendered
defenseless in this particular area of customs operations.
For instance: In PEZA-bound cargoes, the use of boatnote a BOC preformatted document that chronicles the transport, turn-over and receipt of the cargoes
has been dispensed with; and, the PEZA Corral a holding facility where cargoes are
opened, checked or inventoried in the presence of customs examiner and PEZA
28

authorities was abolished. These alone, have occasioned wholesale disappearances

of highly dutiable cargoes without trace.
There are many more defenseless areas in customs operations (DACO) and we
shall identify some more: Technical Smuggling we are yet defenseless in this area;
Inventory there are no rules on Inventory such that anecdotal accounts tell us that

every time an inventory is conducted, the quantity of confiscated and other inventoried
articles irritatingly decreases; Transport there is no accreditation of trucks and other
motor vehicles upon whose control highly dutiable goods are placed; Surveying it is
only very lately that attempts are being made to put in check the activities of bulk and
break bulk surveyors (even this, it has apparently been subjected to regulatory
capture, when the whole shebang was derailed by vested interest groups that, until
now, the proposed measure has remained unimplemented); Custodianship goods

that have become properties of the government are still in the physical control and
custody of terminal operators who are not even bonded for their possession of these
government acquired assets; Disposal of Wastes and Scraps in the Ecozones and
Freeports there were anecdotal reports that one company alone would dispose of 20
to 30 truckloads a day, yet no one in Customs bureau has seen what really these scraps
or wastages are all about; the CBW our warehousemen and customs guards are not
in their proper places of assignment during critical times; and, of course, our
Coastlines it is one of the longest coastlines yet inadequately guarded for customs
operation virtually making Philippines customs as the most challenged customs
coastal security-wise. And, as if this is not enough, we have even disbanded the Water
Patrol Division of the Philippine Customs.

29

Failing No. 7

Regulatory Capture

Regulation is a function of authority. Yes, it is an attribute of power and

governance. It is an extension of the will of the people expressed through their chosen
representatives. Verily, therefore, the end goal of regulation is to promote and protect
the interest of the greater number - without regard to circumstances. It applies to both
the impoverished in the slums and the elite in swanky villages. It is to be observed not
only by the governed but by the governors as well. It is aimed to benefit both the
movers and shakers in business centers as the hoi polloi in both the rural and urban
areas.
The power to regulate is normally aimed at ensuring governments control of any
activity that is imbued with public interest. This finds particular relevance in economic
governance.
Former Economic Planning Secretary Cielito F. Habito in his Philippine Daily
Inquirer (PDI) No Free Lunch column said: Economic theory teaches us that

regulators are there either to ensure and promote healthy competition, or where
economies of scale make monopoly inevitable or even desirable (i.e., natural
monopoly), ensure that the monopolizing firms do not take advantage of the consuming
public and earn inordinate profits.
Unmistakably, therefore, regulators essentially exist for the protection of the
public interest.

But what happens, when the supposed regulator is held captive by the industry
that it is supposed to regulate?
Former US President George Washington once wrote Maj. Gen. Robert Howe in
August of 1799 with these words: Few men have the virtue to withstand the

highest bidder.
Is it any wonder therefore that some government regulators end up regulated by
the sectors and interests they are supposed to regulate?
Anti-corruption analysts coined a term for this regulatory capture.
30

Professor Alex Magno simply describes regulatory capture as a condition where

the regulated actually manages to control the regulator. When that happens, selfinterest rather than public interest defines policy.15
And, Virginia, the costliest and most pernicious form of corruption in our
economy is the corruption of policy through regulatory capture, remarked Economic
Planning Secretary Neri.
This is a wholesale graft. It abets hemorrhagic corruption. It ensures a
systematic loss of government revenue. Matter of factly, it is the worst kind of
corruption.
But it was never the intention of George Washington to justify government mens
inclination to graft and corruption. On the contrary, it should have given men in power
and authority sufficient time to vaccinate themselves against the evils and influence of
regulatory capture, with warning that somehow, somewhere, sometime, lobbyists and
interests groups will come their way to ask for favor, apply pressure, exert influence, or
buy their way in or out of the industry or sector where they move or operate.
Unfortunately, this is the present reality in the Bureau of Customs. Without
doubt, this is one of the worst failings in the agency. Yes, Virginia, the Customs Bureau
is, at present, under the talons of the industry it is supposed to control. And, this is not
the sole making of the men and women of Customs; and, neither is it their own liking
that the agency is held hostage by various interests.
Sometime back, the President was reported to have berated Customs officials
for not doing enough to improve the dismal revenue collection in the first six months
of the year. She was quoted as having said: (T)he economy is booming and there is
no reason why you should not meet your collection target.16
Citing a paradox from the book of economic intelligence guru, Jose Almonte, We
Must Level the Playing Field, Magno said that we all must learn to deal with the paradox
of national development. He said: the stronger the economy becomes, the greater the
capacity for governance will be demanded of our state institutions.

If, we take the word of the President that indeed, the economy is booming,
Professor Magno suggests that the greater capacity for governance will be demanded
of the Bureau of Customs.
15
16

The Philippine Star, First Person, August 11, 2007;

The Manila Times, Saturday, August 11, 2007;

31

Now, can the Bureau of Customs rise to the occasion? Does it possess the

greater capacity for governance?

In the customs zone, regulatory capture assumes many forms, yet they all
wear a globally-crafted mask known as trade facilitation.
But, albeit not surprising anymore, trade facilitation has not only been invoked
by the importers, traders, businessmen, exporters. It has also been invoked with
even more propensity by the customs officials and employees.

Oh! Trade Facilitation, how many crimes have been committed in thy name?

32

Failing No. 8

Insanity, as defined by Dr. Covey

One of the definitions of insanity is to keep on doing the same thing, in the
same way, and expecting a different result, says Dr. Stephen Covey, one of
Americas Five Most Influential People, and author of the book Seven Habits of Highly
Effective People. This definition aptly captures the governments knee-jerk reaction
every time there is public outrage over unabated smuggling.
As if it announces to the whole world that the Bureau of Customs is inutile in
suppressing smuggling, Malacanangs shoot-from-the-hips solution is always to form a
task force headed by someone more frequently from without the BOC who
ostensibly enjoys the trust and confidence of the Palace. In my 7 years in the Bureau of
Customs, I have witnessed ASIIC, NASTF, CASG, ASTF, and TFAS, PASG.
Of these task forces, only TFAS was headed by the Customs Commissioner in
concurrent capacity. The rest were headed by outsiders.
During the previous administration, the Economic Intelligence and Investigation
Bureau (EIIB) was disbanded. Its deactivation paved the way to the constitution of
what it called Task Force ADUANA. This was also headed by an outsider.
If there is any message the government was able to graphically convey, it is this:

the BOC, by itself, is not capable of suppressing smuggling that the government has to
employ a parallel force to put in check, or at least, attempt to address smuggling and
other frauds on customs. Unfortunately, not one of these supposedly complementary
Warriors Against Smugglers succeeded in their missions.
Anecdotal information attributed to have come from sarcastic sources say that
the only thing these Task Forces succeeded in eliminating is the letter T in their
Task Forces, thus, ending as Ask Forces. They hasten to add that the Task Forces
track records speak clearly for themselves horrible failures.
They noticed that these Task Forces have invariably undergone similar
metamorphosis: from eagle-eyed watchers, to inexorably strict spot-checkers, to over-

zealous enforcers, and when their presence shall have been felt by the highly-reactive,
if not, jittery customs community, the gradual shedding-off of its Spartan-like mask
begin; then a short lull follows; and, almost always, the once hard to deal with Task
33

Forces have slackened their speed a little, softened their once rigid posturing, backpedaled a bit, and the once unyielding enforcers have now become virtually detached
watchers. They have noticeably albeit slowly morphed into neophyte facilitators, then
pretty soon will become nauseating protectors, until they end up actively engaged in
the business they were supposed to suppress.
The transmogrification of the once noble idea, that is, the Task Force, becomes
complete when its members now use the knowledge and trade secrets they have
discovered, the experience they have gained, and, the money they have accumulated,
in thwarting succeeding law enforcement campaigns aimed at addressing the problems
that they have failed to solve.
This metamorphosis, observers note, is what every Task Force will have to
undergo. Will this PASG be any different?
This late, PASG appears to be different from the rest of its predecessors. PASG
has passed the test when it reportedly relieved even high ranking police officers that
were on DS (detached service) but who were suspected of cavorting with the
smugglers.

Good move. Politically correct.

But the question lingers: for how long? Hopefully, for good!
In Memorial Day, a New York Times Bestseller written by Vince Flynn, two
statements appearing in the last page of the book one a declaration, the other one a
question look interestingly relevant in this practice, thus:

I think it would be a good idea to bring in a fresh set of eyes on this.

Are you sure you dont mean youd like to let the bull into the china shop and
see what he breaks?

These statements appear relevant in the light of the initial successes of PASG
courtesy of some customs insiders as well as the resolute and determined efforts
of the Groups leadership. PASG is backed up by selected operatives of the BOCs
intelligence and enforcement units the organizational components principally tasked
to perform the very task, the non-performance of which gave rise to the creation of
PASG.

34

If these select elements can do the job exceedingly well under PASG, what
reasons did they have for failing to do the same while under BOC? A question of
leadership?
And, these guys have been tapped by every newcomer Commissioners as well
as Task Force Chiefs; and they have consistently responded positively they deliver, at
least, during the initial stages of the Task Force.
But, as fast as they deliver, they also quickly lose steam.
The sad part happens when the metamorphosis of the Task Force reaches halfway. This becomes apparent because the regulars of the BOC are returned to their
mother units, while the outsiders and hao-shiaos remain with the Task Force. And
these outsiders and hao-shiaos change role and personality they virtually become
bulls in a china shop, or fox guarding a chicken house - until they are disbanded or
replaced with another Task Force.
Unfortunately, the government never learns: it keeps on doing the same
thing [creating Task Forces], in exactly the same way, and expects a different
result.

Hello! Dr. Covey, are you there?

35

Failing No. 9

Flawed Concept of Trade Facilitation

Let me open this chapter with a reiteration of what I have used in closing
another chapter elsewhere in this work, thus: Oh! Trade Facilitation, how many

crimes have been committed in thy name?

For the uninitiated, the concept of Trade Facilitation is an offshoot of our
countrys membership to the General Agreement on Tariff and Trade-World Trade
Organization (GATT-WTO).
With the Philippine accession to this international
agreement, the Philippine Congress came out with Republic Act No. 9135, amending
certain provisions of the Tariff and Customs Code of the Philippines.
One of the salient points of this piece of legislation is about Transaction Value as
the taxable base of import transactions.
In other words, the cost of acquiring the goods plus other allowable costs that
the importation has entailed shall be the base figures upon which the duties and other
taxes shall be determined. No more haggling, no more bargaining; unlike in the
previous tax regime where assessment is heavily dependent on the discretion or
judgment of the customs appraiser. Today, the cost of procuring these goods beyond
the borders, plus some additional inputs, shall become the basis of the duty imposition.
This scheme is mainly designed to facilitate trade, to eliminate time-wasters that
impede the movement of goods and services especially the matter of releasing or
clearing cargoes from the customs zone. This is certainly in keeping with the Kyoto
Convention which requires that formalities must be minimal as possible and as rapidly
as practicable.
At the front end of transaction continuum, there shall be no more causes for
delay. No unnecessary control, no unwarranted restrictions, no more offer and counter
offer between the broker and the appraiser.

In effect, we tax him based on his acquisition cost plus allowable inputs. In this
way, we facilitate transaction, and hopefully increase the frequency of commerce and
enliven the robustness of trade and economy.
36

Well-grounded.
Logical.
Indeed, facilitative of trade.
Unfortunately, there are noticeable abuses, misconceptions, costs and tolls?
And, there are negative repercussions brought about by these abuses and
misconceptions.
Let us get grounded, right in the customs zone.
In so many areas of customs operation, any attempt to institute control, no
matter how logical, reasonable, and excellently crafted, will be shot down, torpedoed,
or jettisoned in the guise of trade facilitation. Interestingly, trade facilitation is invoked
whenever convenient; and stifled or disregarded whenever some customs officials saw
the need to poke their dainty fingers into the clearance process duty stop here,

alert order there, and hold order from somewhere.

Take the case of containerized cargoes bound for transshipment to ecozones and
legislated freeports: they are not examined before leaving the customs zones. They are
not even escorted by customs authorities during their transport to the freeports and
ecozones, much less are they examined as they enter the consignees warehouses in
the ecozones.
What used to safeguard the process from customs frauds and leaks the PEZA
Corral where customs officers alongside with PEZA authorities are on hand to examine
the containerized cargoes upon entry to the zone before they are transported to specific
locators warehouses has now become extinct; it has been abolished and eliminated,
ostensibly because of the false belief that the process tends to derogate the trade
facilitation concept of WTO. Sacrebleau!
Various reports are replete with incidents of containerized cargoes bound for but
end up in areas outside the ecozones diversion in customs lingo. There are plenty
of cases when containerized cargoes have been shanghaied to undisclosed places. This
trick is called in customs community as hijack me.

There is even a wholesale mess. Before, containerized shipments consigned to

ecozone locators are first delivered to the zones. From there, the cargoes are
devanned and transported in smaller bulks or volume to sub-contractors of these
locators situated outside the ecozones. Today, the transport of these containers may
37

now be conducted directly to sub-contractors premises outside the ecozones, leaving

the cargoes un-examined, un-inspected, or unaccounted.
These are done in the name of trade facilitation.
And, the list is as endless as the opportunities which are limitless.

Result: huge tax leaks due to diversion, misdeclaration, misclassification,

undervaluation, or technical smuggling. All in the name of Trade Facilitation.
On the contrary, some time-wasters, duplicators, overlappers and unwanted
oversight intruders have become a-dime-a-dozen. Chief among these timewasters are
the ad hoc units masquerading as oversight bodies created by Customs Memorandum
Order, Customs Special Order, Customs Administrative Order, and similar issuances by
the Office of the Commissioner. Some were done with the approval of even higher
authorities, while many more were issued without the Secretary of Finances
imprimatur, thereby violating the Tariff and Customs Code requirement for the latters
approval.
Notable among them is the VRIS which practically encroaches into a line function
of the port. It does not only review the correctness of the assessment made by the
assessment people of the ports, it also issues alert orders to check not only on
assessment and examination issues, but also on enforcement or regulation-related
issues. In fact, VRIS pushes its weight on any issue over any commodity it would like
to lay its hands on.
While VRIS has in some instances served to check on the evils attendant to
transaction value approach, the fact remains that the Transaction Value concept has
been violated. It may be argued that trade facilitation cannot be used as an argument
for massive tax leak. Yes, but the Bureau is not defenseless against the evil sought to
be avoided by these oversight groups the post-entry audit mechanism as a backend process is available. While the post-entry mechanism is not yet fully functional, it
will not however change the picture that the BOC is not left without a remedy against
railroaded clearance process. The problem though is PEAG is not given much
emphasis despite its potency.

What is worth stressing is the inconsistency in the arguments of the Customs

leadership, thus: it invokes Trade Facilitation whenever a measure that seeks to plug
tax leak is proposed not by people close to the top echelon of Bureau; while they ignore
Trade Facilitation when they want a piece of the action in the customs operations
38

reserved for the privileged few. In fine, to some people it is trade facilitation whenever
it serves their interest, while it becomes otherwise whenever they want to throw a
monkey-wrench into the cargo clearance process.

So, are we really serious with Trade Facilitation?

39

Failing No. 10

Technology: Misused, Abused, Confused?

In its November 2006 Final Report, the Center for Advancement of Trade
Integration and Facilitation (CATIF) noted thus:
What BOC may consider as a turning point in its more than a
century of public service is the automation and integration of its cargo
processing system during the 1990s. Labeled as Automated Customs
Operations Systems (ACOS), the Philippine cargo clearance system is a
product of collaboration of the Philippine government, international
agencies, and private sector. All three sectors had put as much financial
and technical resources to the system that one sector could claim principal
credit for its development.i
CATIF further notes that (F)ollowing the introduction of ACOS, the delivery of
customs services in the Philippines was radically changed.
Procedures were
streamlined; customs intervention on release of cargo was reduced; some discretionary
processes were eliminated; more effective controls on revenues were put in place; and
a new division mandated to ensure the continuity of modernization and reform in
customs was created.
Overnight, the Bureaus ICT-aided operations were hyped as the panacea to all
the ills that plague the Customs community. Thus, the ICT was tagged as the ultimate
tool that could effectively address corruption issues related to importation. It was
poised to reduce occasions of face-to-face interactions, to simplify procedures and
ensure consistent application; to minimize opportunities for exercise of discretion; and
to provide paper-free and cashless clearance process for low risk shipments.
Admittedly, ICT revolutionized the ways of doing things, triggered new ways of
thinking, minted brand new concepts of service delivery, and shifted paradigms that
demolished most of the age-old and restrictive frames of reference. Kudos, ICT!

Unfortunately, not all the hoped for outcomes were achieved. On the contrary,
ICT has been in many instances made a tool to further the ends of vested interests.
40

And they have thrived in various fronts and different stripes; assumed varied forms,
colors and hues; and are present in many areas from accreditation of
importers/brokers to first and last importation, advance filing of IFM to amendment of
the same, from lodgment of entry to revision through rider, from risk management
profiling to x-ray scanning, from tax assessment to auto matching of payment and
payables, from application of duty stop to triggering of OLRS, from please do not use
display on monitors to the dreaded pindot technology, name it, ICT may have a role
in it.
Let us discuss a couple of issues that will illustrate how the ICT has been
abused, misused and sometimes confused.
Here are some:
Importers lodge their entries17 through an entry encoding center (EEC), a
privately owned facility where computers would trigger information into the BOC-owned
Asycuda. Once the data or information is triggered into the mainstream of Customs
ICT system, it becomes the basis of succeeding actions of customs assessment
personnel. Ideally, this is a very desirable and effective arrangement.
Unfortunately, the EEC now replaced with Value Added Service Providers
[VASPs] in keeping with the worlds best customs practices has been the refuge of
players [a customs euphemism for brokers or importers concentrating in shady deals]
while carrying out their machinations that normally end up defrauding the government.
And considering EECs vantage position in the entire cargo clearance process, they can
influence the succeeding course of events, wittingly or unwittingly allow surreptitious
virus operations, and expose BOCs lethal vulnerability.
For the uninitiated, all entry lodgment facilities have the capability to dictate the
tempo through which cargo clearance shall proceed. This is so because they are the
first touch, so to speak they input vital information, from supplier to consignee,
from HS classification to tariff headings, from volume to value, from handling
assessment section to so-on-and-so-forth they become very vital cogs in the entire
assessment function of the customs bureau.

It may be well to remind us that in customs parlance, entry is a technical term that has three
different connotations. It sometimes refer to the import documents; the act of filing the
documents through the customs house; or, the act of bringing the imported goods into the
Philippines customs territory.
17

41

Consider these: the different sections of the Formal Entry Division (FED) of the
premier Port of Manila (POM) are manned by people of different orientations, distinct
motivations, and varied expectations. They are lumped in the FED simply because of
their job description. Human as they are, they are vulnerable to different human
intercessions they can be befriended, offended, or made numb or callous.
Knowing these ground level realities, a scheming player comes to lodge his
import entry, suggests that he prefers his shipment to be handled, for instance, by
Section 14 rather than section 7. The lodgment facility will just key in data and other
information that will describe the shipment in terms of tariff heading/classification
whose processing shall make his import entry fall into the players desired Section 14.
Even without physically shepherding his import documents, the processing of his
shipment will expectedly fall on accommodating terrains of Section 14 who, because
of pre-agreed concessions, will make sure that their covenants will result in friendlier
assessments in friendlier terms. This is done with so much ease a flick of a finger
consummates this. Patalon!
In other words, the scheming player can dictate where his/her entry should go,
who shall conduct the appraisal and examination, and, in some respects, determine the
cost that he has to shell out for them. This he does, under the cloak of lodgment facility
operating in a computerized environment.

A classic case of a technology misused!

Another case is the not so exposed duty stops. Contrary to the tenet of Trade
Facilitation, there are so many duty stops that litter along the way of customs cargo
clearance. Despite our accession to the Revised Kyoto Convention that concretizes our
countrys adherence to faster trade, our cargo clearance process has been hamstrung
by so many oversight interventions that emanate from officials and ad hoc units whose
authority does not come from the Port Collectors but from officials who are not
responsible for collection targets. That this is unfair in the light of the Lateral Attrition
Law is another subject that merits separate discussion.
But, back to these unreasonable interventions in the front end of the cargo
clearance process, these Trade Barriers are executed by way of what is known as duty
stops a computerized monkey wrench that when thrown at your shipment would
effectively stop its processing until such time that that duty stop is lifted. Controlwise, this computerized facility is very effective. But abused, it violates not only the
trade facilitation mandate of the Bureau but also occasion shakedowns and other
forms of harassment.
42

Unfortunately, more often than not duty stops have been used for purposes
other than those for which they have been intended, that is, to prevent fraud on
customs. Anecdotal accounts show that these duty stops have been nauseatingly
thrown the importers way, for reasons unclear and unclean.
For a more vivid picture of what I mean, a check into the audit trail of all duty
stops will surely yield how often they are [ab]used. And, probing further check the
exact time of their use and juxtapose them with the exact time they were lifted. The
time difference indicates that no serious investigation has been conducted that would
have warranted the lifting thereof. (If this did not give you an idea of what I mean,

then you have not been an importer.)

In other words, why use the duty stop, if after a very short while just enough
for the player to see and meet the person behind the said duty stop - it is
mysteriously lifted and the processing of shipment is allowed to proceed. (If, still, this

does not give you an idea of what I mean, then you have not been to the port area.)
The relevance of the duty stop is it enables the user (s/he can be a regular
customs officer, a haoshiao, or even a ghost) to tell the importers that s/he can derail
the otherwise speedy cargo clearing process unless you make a call on her/him, not
necessarily for good reasons but for reasons that will surely deliver the goods. (If,

still, further, you fail to get what I mean, this article is not for you.)
Try auditing the duty stops, and we see a classic case of a good technology
that has gone abused. Then, finally, check the list of those provided with access to
the bureaus Asycuda and we will find out that not only those who are tactically
positioned to have access have been given access, but also those whose only
qualification to have this computerized access codes is the accident of closeness to
the power wielders in the Bureau. On the contrary, those that have monitoring
functions, auditing functions, and even some of those with enforcement functions, were
mysteriously not given access. Why?

A classic case of good technology confused?

Nonetheless, there is no gainsaying that ICT if used strategically, professionally,
and effectively will make the planning exercises of the bureau easy and accurate.

43

Before the advent of the Philippine Customs automation, brokers and importers
accreditation were virtually unheard of. The imperatives of accreditation reportedly
came to the fore only because of automation. In an automated environment, the
processing of import entry will have to depend on a unique number that is given to
accredited importers. Unless the importer as well as broker appear in the accreditation
registry of the Bureau of Customs, their import entries will not be recognized by the
Asycuda and processing thereof will have to be stalled.
Sound requirement,
automation-wise.
But why is it that a good number of importers albeit with incomplete, defective,
or delinquent accreditation still manage to get a green light, and get processed
despite the much-ballyhooed stringent controls of the BOCs ICT department?
A check with some print-outs on the importers and brokers IDs will show this
phrase please do not use. Yet, they end up getting used, thus allowing importers
and brokers with delinquent accreditation to file import entries with no one from the
customs bureau getting reprimanded, charged, and disciplined.
If the BOCs computerized processes are working, why then would an accredited
importer complain that its accreditation ID has been used by unauthorized persons
without the system noticing it? This case has been reported; and, just like the

rest, remains unacted.

Why then would an importer with no record as accredited importer be able to
have its import entries processed when the Asycuda is too strict with IDs? Or, why
would a broker with imperfect accreditation be allowed to file entries and have the
same processed and passed through the Asycuda parameters? Again, just like the

rest, this case has been reported to the top leadership; yet, it has remained
un-redressed.
And, even with the E2M (electronic to mobile) facility, still brokers with imperfect
accreditation can do their thing unmolested.
To reiterate, these cases have been brought to the attention of customs
authorities, yet disciplinary actions have yet to be taken to forestall a recurrence of the
same. This does not suggest that this is the first time it happened.
One thing more, if accreditation is required for all importers and brokers if only
to be allowed to file import entry, why then devise the first and last importation where
non-accredited importers are just the same allowed to file import entries?

44

Intended to accommodate those who are not regular importers, meaning, those
that only import once a year, the first and last importation registry will show that said
scheme has been abused, misused and confused. As a sequel to this work, we shall
endeavor to document reports about an importer having resorted to the first and last
importation scheme for more than ten, twenty, 30 or more times. Another area that
may warrant probing is why the first and last importers, especially those that import
luxury vehicles have their addresses reportedly unverified and, in some cases, situated
in the most unlikely places that are capable of holding, keeping or storing a luxury
vehicle?
There are many more, but I rest my case.
So, what should be done?
To paraphrase a line from a solon: what are those wrongs that should be made

right, and what are those rights that should be kept right?
To my mind, these GUYS ADRIFT are the culprits behind the perennial failings in
the Bureau of Customs.
And, these failings are compounded by antiquated customs laws, rules and
regulations; hackneyed customs processes; and, undeterred interference by politicians
in the affairs of the Bureau.
That said, is BOC beyond redemption?
I bet, the Customs bureau can still be customized to better our lot if only we

grab the bull by its horns!

What about corruption? Is it not one of the failings in the Customs bureau?

Dean Robert Klitgard, former President of Claremont Graduate University in

Claremont, California, defines corruption in a formulaic expression, thus: corruption
equals monopoly plus discretion minus accountability or (C=M+D-A).

Explaining this formula in a Global Forum on Fighting Corruption in Washington

DC, USA (1999), former US Vice President Al Gore said: if you have a monopoly, and
45

you have discretion in applying the rules, and no one is holding you accountable, you
are far likelier to become corrupt.
With this as the backdrop, it will not strain ones imagination that indeed
corruption is the principal motivation for the GUYS ADRIFT.
While corruption is not pronounced as the main reason for the above failings,
nonetheless, the situation obtaining in the Bureau is so open to abuse that corruption is
not a very unlikely cause and consequence.
By admission, even James Shaver, former Secretary-General of the World
Customs Organization (1998) said: There are few public agencies in which the classic

pre-conditions for institutional corruption are so conveniently presented as in Customs

Administration. The potent mixture of administrative monopoly coupled with the
exercise of wide discretion, particularly in a work environment that may lack proper
systems of control and accountability, can easily lead to corruption.

Need I say more?

46

Part 3
Doables to Address the Ten Failings

Failing No. 1 Graveyard of Careerism and Professionalism

Solution: Careerism should be strictly upheld.

Strictly uphold the tenets of civil service professionalism where careers are
protected, performances evaluated, and meritocracy is held supreme.
This is not hard to do in an environment where The Four Ins - integrity,
independence, industry and intelligence, as aptly coined by former Supreme Court
Chief Justice Artemio Panganiban reign.
Sadly though, meritocracy is not known to be the primordial consideration in the
employment rights of people in the BOC. On the other hand, ships kinship,
friendship, and other relationships are more often than not the main determinant
if one is to advance in his or her career.

Failing No. 2 Unfair Target-setting Exercises

Solution: Lateral Attrition Law should be considered as a backdrop in

all target-setting exercises. Consultation
should precede target
configuration.

Target-setting exercises should be made consultative. It should be intelligencebased where figures are not drawn in a vacuum but out of data-mining from the
bureaus data storage. It should consider the highs and lows of trade in goods and
services, the ups and downs of foreign exchange, just as it should consider sovereign
commitments and treaties where tariffs and allied barriers are knocked down, as well as
those revenue-eroding legislations which directly impact into the revenue-collection
capacity of the Bureau.

47

Unless the foot soldiers in the customs bureau are made to feel that the Bureaus
target is their collective goal which could be done only through honest and sincere
consultation and dialogues it is very unlikely that they will develop a sense of
belonging, a sense of ownership, and the proverbial wind beneath my wings,
ingredients that are prerequisites to a passionate drive for excellence. It will be
foolhardy therefore for the top leadership of the bureau to expect the best from every
collection personnel without factoring emotions.
Further, Lateral Attrition Law, if it is to be made effective, should be applied
consistently. Unfortunately, in the BOC, people who have developed some kind of
closeness to the leadership of the Bureau can get promoted despite miserable failure in
revenue collection performance; while, those who are unfortunately not so close to the
demigods of the agency, can get easily attrited, even if they keep their noses to the
grindstone.

Failing No. 3 Yards-monitoring, Border-controlling, and Gate-keeping Is

Weak

Solution: Effective enforcement of customs authority in all customsdedicated areas and facilities whether government or privately owned or
operated.

It is a must that customs authority in the whole of customs zones is effectively

enforced.
Effective control of the yards, borders and gates of all customs-related facilities,
including CY-CFSOCZ and inland depots, are, for customs purposes, required to be
restored to the Bureau of Customs.
For how can the BOC officials and personnel enforce taxation powers when
access to areas where highly dutiable goods are kept or stored, are held off-limits to
them unless permitted by the private facility operators?

In other words, the arrastre operator who is merely holding the goods for and in
behalf of the consignee (in so far as the cargoes are concerned) as well as for and in
48

behalf of the BOC (in so far as customs duties and other taxes are concerned) unduly
limits or effectively restricts the ability of BOC officials to check and make sure if the
goods that are highly dutiable are still there?
By the way, were private custodians held responsible for the many cargoes or
shipments that disappeared in these facilities?

Failing No. 4 Sale of Forfeited, Abandoned and other Disposable Goods Is

Systematically Flawed

Solution: Auction System must be comprehensively reformed using

ICT-aided solutions. A 3rd Party Custodianship Program is proposed.

A comprehensive and structural reform is needed in the auction system of the

bureau.
A 3rd Party Custodianship Program is proposed aimed at addressing the ills that
plaque the auction system. This Program is a holistic solution where the private sector
is tapped to handle the business-like facets of the whole process, i.e., storage, custody,
transport, marketing, and the like.
As it is now, even the basic warehousing principle of first in, first out is violated
with impunity. Goods that are subjected to auction are left to the identified by
whoever is interested in the goods. No well-defined parameter is being followed in
identifying which one should be auctioned off first. Report have it that shoppers are
even ahead of customs officials in knowing that their kind of goods exists in the
terminal operators premises that are waiting to be auctioned.
In other words, there are no well-defined marketing efforts from customs
authorities, in so far as those abandoned, confiscated or seized cargoes are concerned.
Concomitantly, perishable goods rot, electronic gadgets i.e., celfones and computers
become obsolete, and motor vehicles get vandalized with vital parts missing, to the
damage and prejudice of the government. This must be remedied.
Unless
transparency, uniformity, and professionalism are injected into the auction process, this
facet of customs operations will continue to abet smuggling as well as occasion huge
tax leaks.
49

Failing No. 5 Anemic Drive to Prosecute Smuggling

Solution: Resolute Drive against Smuggling; gathering of evidence

should be complete, airtight, and stress-tested.

Against the daily occurrence of smuggling, the government resolve to go after

these economic saboteurs is palpably wanting.
Records of the enforcement and investigative offices of the customs bureau will
show smuggling cases having been perpetrated, yet smugglers still have to be pursued,
their conspirators co-charged, and the guilty penalized.
Of late, the dramatic increase in cases filed against smugglers is very
encouraging.
However, filing of cases is not indicative of the resoluteness of the attempt of
government to address smuggling. The quality of the complaints filed should be looked
into, i.e., Are the real perpetrators, not just the fall guys, the ones charged? Are the
evidence complete, airtight and strong? Are they real persons not non-existent ones? So
on and so forth.
Also, how many times big time smuggling cases have been filed, complete with
theatrics and pageantry, and when the public uproar have subsided, and the quizzical
press no longer insistent, the cases are just consigned to the Mona Lisa Files where
they lie there and they die there, and finally forgotten, and the perpetrators who were
once on the tight watch of the BOC are free again ready to ply their trade anew?
And, have we ever wondered why so many smuggling cases have been
documented without any smuggler having been charged? Is this akin to the many
illegal cockfighting apprehensions where only the fighting cocks were hauled down
and not one sabunggero was ever haled to court?

Failing No. 5 Defenseless Areas in Customs Operation Abound

Solution: Fix all Defenseless Areas in Customs Operations;
warehousing, transport, custody, inventory, auction and disposal are just
50

some of the huge tax leaks that are identified as black spots along the entire
breadth of customs operation.

Identify the black spots in the whole stretch of cargo clearance process where
the Bureaus vulnerability has been taken advantage of by all forces legit and
otherwise.
Starting with the accreditation process where non-existent ones can end up
processing their entries. Or, an accreditation that is used by an unauthorized importer
in some other places other than the accredited companys place of business. An
example is the case of a Metro Manila-based accredited importer who complained that
its accreditation has been used to cover unauthorized importations in Cebu 18. A multiparty oversight group that may include the private sector may help the purging process
of the Bureaus list of accredited importers.
The transport component needs re-visiting. Most of these trucks that load
untaxed yet highly dutiable goods are not even accountable. Neither are they subjected
to BOCs control except for the bonds that they post the amount of which is not even
commensurate to the risk that the Bureau will suffer when the transporters fail to
comply with their undertaking. Their operation is not even monitored. This writer has
recommended and has presented his proposal simply called TRAC ME (Transport
Regulatory Accreditation to Monitor Exports) which aimed to monitor the
movement of highly dutiable goods on real-time basis using Filipino technology that is
available on the market. Sadly, this proposal gathered has cobwebs. This is one
vulnerable area, especially when speaking of diversions, hijack me, or other forms
of technical smuggling.
The custodial services for those in the inland depots as well as those in
government warehouses there appears no reconciliation and audit for such a long
time now. What gets in is no longer juxtaposed with what gets out. The custodian are
not even bonded officers, if at all, their bonds are way below the value of the
possessions that are left under their control. Similarly, even the CY-CFS system needs
to be re-examined. Ditto with the designated examination areas (DEAs) in the
South that are under the effective control of people other than the Bureau of Customs.

See Affidavit of Denial of Stella A. Ortega, Vice-President and Import Manager of WEAL
BUILDERS, INC, Doc. No. 37, Page No. 08, Book No. 39, Series of 2009 of Notary Public Ernesto G.
Gasis.
18

51

Akin to custodianship, even the inventory of goods that are seized, confiscated
and abandoned are found wanting. There is no numbering system that will complete
the accounting and inventory of all goods that are put under custodianship. This is a
basic flaw in the custodianship system that needs to be fixed immediately.
Another area where the Bureau is defenseless is the transshipment to ecozones
and freeports.
Surveying, especially in the cases of bulk and break bulk is a major component
where the correct quantity or quality of shipment is entirely left to the control of the
sector that is supposed to be regulated by the Bureau of Customs the importers.
What they declare through their respective surveyors is held in reverence by the
assessment people of the Bureau.
There are many more; and the Bureau has to move fast. Every day that passes
without these black spots fixed, a substantial amount of tax leakage is caused upon the
coffers of government.

Failing No. 6 Regulatory Capture.

Solution: Oppose all forms of Vested Interests in the crafting of
administrative regulations.

This is one area where the Bureau has not shown enough courage to oppose the
undue influence thrown its way by the sectors that it is mandated to regulate.
While public sector participation is encouraged, and stakeholders are consulted,
the interest of the government should be held paramount in crafting customs rules and
regulations.
Take the case of most of the Bureaus automation projects. Acts which the laws
have reserved for licensed customs brokers have been encroached upon by entities that
are proscribed from handling acts regulated by the Broker Act of the Philippines. This
is the howl raised by the customs brokers against the Entry Encoding Center (EEC) then
lodgment of entry being embraced in the acts that are rightfully embraced as tasks
for brokers. Fortunately, the EEC has been done away with not without an
admonition from a Senator Juan Ponce Enrile.

52

I agree with the senior legislator that people can go behind bars for this mess
they called the EEC.
Unfortunately, again, the EEC has been replaced by another species we call the
VASPs (value added service providers). The justification: this is among the worlds best
practices in customs administration.
Fine!
But, has anyone checked if the economies that use these VASPs have laws
authorizing their engagement that serve as the legal cover for their operation? And, do
we have the same law in this jurisdiction?
To the latter, I bet none.

Failing No. 8 Insanity, as defined by Dr. Covey

Solution: Customs oversight committee over customs operations
should not run parallel enforcement units; rather, it should establish a multiparty oversight group that should operate as a compliance monitoring forum
to ensure that responsibilities are defined in the BOC, and accountabilities
identified.

In my submission to the Hong Kong University as part of the requirements for

my post-graduate course in Corruption Studies, I suggested a 1-2 punch combination:

1. Establishment of a Customs Integrity Development Group (CIDG) in

the Bureau of Customs using the Development Academy of the Philippines
(DAP)-United States Agency for International Development (USAid) Model
that shall serve as the agencys internal audit and compliance monitoring
units as well as the implementer of the BOC Integrity Agenda;

2. Constitution of a senior-level oversight forum to be known as

Operations Compliance Review Committee (OCRC) for the BOC, similar to
that of the Hong Kong Independent Commission Against Corruption (HK
ICAC). This OCRC shall oversee the immediate implementation of the
53

agencys Integrity Agenda using recognized and generally-accepted IDR

tools and methodology as well as the best practices in other customs
administrations. The OCRC shall have in its Terms of Reference (TOR) an
Engagement and Disengagement Program (EDP). The EDP shall include,
among others, the commencement of its oversight functions over the
agencys CIDG, the measurable indicators of success, the parameters and
timelines for its gradual disengagement, and a built-in mechanism for
automatic re-engagement in case of back-sliding tendencies.

Malacaang has been creating task forces after task forces that do not operate
as oversight to customs operation; rather, they operate as parallel customs
enforcement in and out of the customs zones. Result: conflicts arise due to
overlapping of functions, miscommunication and want of coordination.
As experience has shown, these task forces that are supposed to be ephemeral
in character have become permanent fixtures in the customs zone. This is because
there is no pre-defined Engagement and Disengagement Plan.
It is worthy to note though that the BOC has taken the initial steps toward
organizing its Interim Internal Control Office. However, organizing is one thing,
operationalizing is another. It is in the latter that the BOC is definitely wanting.
Nonetheless, it is an oversight group that BOC needs in order to whip the latters
operating units into fighting form; not a rival or parallel group that will only force BOC
to instinctively protect its turf.

Failing No. 9 Flawed concept of Trade Facilitation

Solution: Ulterior motives should be exposed and should not be
concealed behind Trade Facilitation.

The November 10, 2009 issue of The Manila Times editorialised19 the
apprehensions of the Federation of Philippine Industries and the Alyansa Agrikultura
when they were reported to have said that the Anti-Smuggling bill must first be passed
Dont ratify Revised Kyoto [customs] Convention yet, The Manila Times, Tuesday, November 10,
2009
19

54

and enacted before the Senate ratifies the Revised Kyoto Convention (RKC) on global
customs practices. The senators must not believe those pushing for the ratification
soon of the RKC, saying that the apprehensions of the Filipino industrial and agricultural
sectors are without basis.
Further, they expressed their fears that ratification of the RKC and the resulting
accession of the Philippines to the RKC (inclusion of the Philippines among the countries
bound by it) will allow the Customs bureau to relax controls and give technical
smugglers less trouble bringing in their misdeclared goods.
They are apprehensive because the RKC has a provision in its Chapter A1 that
the Customs should normally accept the cargo declaration as the only required
documentation. . . .
I agree, this may simplify handling and release of cargo, which is good for
honest importations. The trouble is that technical smuggling is rampant. The
smugglers misdeclare the goods they are importing as to quantity and amount.
Sometimes they even misdeclare what the goods in the containers are.
That misdeclaration is happening in the customs zone is no longer in issue. The
Manila Times (on even date) reported that the importer of the used cars-misdeclared
the shipment as used truck parts in violation of Executive Order 156, which prohibits
the importation of used motor vehicles into the country. On the other hand, the rice
shipment, loaded in a 10 20-footer container vans was misdeclared as talc powder. It
has no import permit from the Department of Agriculture.20
Now, are we going to honor similar misdeclarations just because of the concept
of Trade Facilitation? And, even with the E2M can it effectively curtail the evils of
misdeclaration, undervaluation, misclassification, and worse, spurious documentation?
I agree that Trade Facilitation is an imperative. But who is pushing for the
immediate relaxation of customs control? Shouldnt the Trade Department push for
Trade Facilitation, while Customs bureau should move for a strengthened customs
controls?
Again, who is behind the move for the early accession even when the country is
not yet assured of its capability to suppress technical smuggling?

Customs to auction smuggled rice, used cars by William B. Depasupil, Reporter, The Manila
Times, Tuesday, November 10, 2009
20

55

Anecdotal reports say that some 80% of the commercial documents of imports
categorized as trabaho are not authentic. Revolting? Incredible? Whew! No one
openly agrees, yet no one courageously disagrees, either.
Who stands to benefit out of the countrys early accession to RKY while the BOC
has yet to prepare for its transition?
This is worth asking again and again: Oh! Trade Facilitation, how many crimes
have been committed in thy name?

Failing No. 10 Technology: Misused, Abused, Confused

Solution: Systems and processes should be ICT-aided. ICT should be
used for the interest of the BOC. The Bureaus ICT should be fully harnessed
to provide intelligence services for effective management decision-making.
Otherwise, for whom is the technology?

If check and balance is still relevant in the BOCs scheme of things and I think
it should be then the ICT must be made available to audit and monitoring units of the
Bureau regardless of whether they are pet boys and girls of the BOC leadership or not.
Why are some critical monitoring units of the Bureau left out in the cold simply because
they dont belong to the group? Dahil ayaw makasira sa diskarte?

If only the ICT is used fully harnessed according to how it was planned; or,
for the purpose it was intended; or, in the interest of effective service delivery, then
pindot technology, please dont use, and non-accredited brokers and importers will
no longer be resurfacing as problems.

I suggest, there should also be an Ombudsman for ICT the composition of

which must include, among others, disinterested private sector representative. The
task of the Ombudsman for the ICT must be to regularly monitor the audit trail of ICT
systems and processes that shall enable it to draw lessons from the present, foretell the
future course of events and effectively face the ever changing ways of doing business
of the Bureaus clients both legitimate as well as not. After all, business war games
are now the current mode of role-playing.
56

CLEAR FOCUS versus GUYS ADRIFT

In fine, the antidote to GUYS ADRIFT is CLEAR FOCUS an acronym of

solutions, to wit:
C for Careerism should be strictly upheld;
L for Lateral Attrition Law should be considered as a backdrop in all target-

setting exercises;
E for Effective enforcement of customs authority in all customs-dedicated areas

and facilities whether government or privately owned or operated should be

relentlessly conducted;
A for Auction System must be comprehensively reformed using ICT-aided
solutions. A 3rd Party Custodianship Program is proposed;
R for Resolute Drive against Smuggling should be persistently exhibited;
F for Fix all Defenseless Areas in Customs Operations systematically using ICT-

enabled tools;
O for Oppose Vested Interests in the crafting of administrative regulations

consistently without fear or favor;

C for Customs Oversight Committee or Task Force should be constituted

immediately. It should not run parallel enforcement units; rather, it should establish a
multi-party oversight group that should operate as a compliance monitoring forum to
ensure that responsibilities are defined, and accountabilities identified in the whole of
BOC operations;
U for Ulterior motives should be exposed and denounced. It should not be

concealed under the cloak of Trade Facilitation;

S for Systems and processes should be re-designed immediately. ICT should be

used for the interest of the BOC. The Bureaus ICT should be fully harnessed to provide
intelligence services for effective management decision-making. Otherwise, for whom is
the technology?
Unless the Bureau of Customs grabs the bull by its horns, GUYS ADRIFT will
continue to take their toll, if not drift, on the Bureaus scheme of things, especially in
the area of anti-smuggling. The BOC can only succeed if it has CLEAR FOCUS!
57

Part 4
Imperatives of a Smuggling-free Philippines

The Management Association of the Philippines (MAP) suggests that a

smuggling-free Philippines will (1) improve the countrys standing in the global race for

competitiveness, (2) address the revenue gap, and provide much-needed funds for
education, health and infrastructure.
The first may sound Greek to the hoi polloi, but the second is unmistakably clear
even to the late Mang Pandoy more funds for education, health and infrastructure,

and other governmental concerns.

Heres MAP21: a smuggling-free Philippines will not only improve our standing in
the world competitiveness ranking but will also address the revenue gap and provide
much-needed funds for education, health and infrastructure. Smuggling on petroleum
products alone is conservatively estimated to result in a revenue loss of at least P30
billion per year.
That said, cant those pushing for the relaxation of customs control in favor of
trade facilitation draw lessons from the MAP?
Will not global competitiveness more than our flawed concept of trade
facilitation derive immediate benefit for the country? But, global competitiveness will
suffer if smuggling is rampant in the country, says MAP.
So, stop smuggling we must.
But, how do we address smuggling, relax customs control?

I doubt.
Again, a smuggling-free Philippines will also address the revenue gap and
provide much-needed funds for education, health and infrastructure. Smuggling on

21MAP

Query of the Week, Management Association of the Philippines, Business World, Series of

2008

58

petroleum products alone is conservatively estimated to result in a revenue loss of at

least P30 billion per year.

So, will our flawed concept of trade facilitation not abet huge tax leaks that will
just widen our revenue gap and ultimately deprive the government of funds for
education, health and infrastructure for the country?

59

Part 5
Smuggling Alphabet For Those Who Mind

Smuggling has many faces. It assumes many names, projects various forms, and
comes in different shades, colors, stripes and hues.
My seven years in the BOC enabled me to watch from the ringsides as the
protagonists went for the jugular, ran after the scalp of anyone who crossed their
paths, and, at times, slugged it out not necessarily against (but in concert with) each
other, albeit their skirmishes resulted in draining our coffers.
From my vantage point, let me share with those who mind this Smuggling
Alphabet,22 thus:

SMUGGLING ALPHABETii
A
B
C
D
E
F
G
H
I
J
K
L
M
N

Accreditation Mechanism is Weak.

Bulk and break bulk cargo surveying is not regulated.
Custody over seized, forfeited and abandoned goods is not secured.
Disappearance of seized vessels, and other high profile cargoes is not addressed.
Ecozones and Freeports privileges were abused to cover up smuggling
operations.
First and Last Importation Scheme became a Scam.
Government sponsored smuggling?
Hi-jack me and other transport laxities that have resulted to losses of highly
dutiable goods is not effectively addressed.
Inventory of seized, forfeited and abandoned goods are not transparent.
Junking through cannibalizing of seized motor vehicles abets pilferage.
Knock off and other IPR infringements are not abated.
Legally flawed and inconsistent decisions of ports legal divisions have occasioned
tax leak.
Mis-declaration and mis-classification have not been consistently addressed.
Non-exercise of the right to compulsory acquisition in cases of Gross

This is a work in progress. If anyone argues that this is incomplete, I can only agree. After all,
the Bureau has been in existence for more than a century now, and cheating has always been
present in its scheme of things since time immemorial. But, what are we doing about it?
22

60

O
P
Q
R
S
T
U
V
W
X
Y
Z

Undervaluation has not been checked/audited.

Outright smuggling that comes in many forms and assumes many names, i.e.,
ninja, swing, b-l-t-b, etc., has remained unchecked.
Players influence that dictate the tempo of benchmarking remains unchecked.
Questionable practice of amending the IFM has not been checked.
Riders that have become institutional facilities to ensure friendly assessment
remained uncontrolled.
Spurious documentation and other Forgeries have not been adequately addressed.
Technologically-aided glitches that have deliberately aided questionable
transactions have not been remedied.
Unrestrained exercise of discretion by Customs officials remains unchecked.
VRIS that was intended to challenge undervaluation failed to serve its purpose.
Warehousing frauds and export-related leaks have long become known yet still unremedied.
X-ray facility as a Trade Facilitation tool has been deliberately under-utilized.
Yards monitoring, gate-keeping, border-controlling have been taken for granted.
Zombie-CBWs kept on re-appearing without their previous obligations properly
settled.

What is next?
I suggest we do the following:

MATRIX OF IMMEDIATELY IMPLEMENTABLE INTERVENTIONS

IDENTIFIED
PROBLEMS

Accreditation
Mechanism is Weak
Bulk and Break Bulk
Surveying is not
regulated
Custody over seized,
forfeited and abandoned
goods is not secured.

RECOMMENDED
INTERVENTIONS

Immediately purge the BOC Accreditation

Registry; allow the intervention of nongovernment organizations (disinterested
NGOs) in the re-accreditation process.
Full-implementation of Accreditation
Program coupled with the Constitution of
the CSIs, with the participation of NGOendorsed representatives to the CSI in every
port.
Outsource the task thru a 3rd Party
Custodianship Program. The Auction
Function however must be retained by the
BOC in order to be compliant with the law.
Order a one-time disposal of presently
undisposed cargoes (to generate revenue
and have a fresh start).

61

TIMELINES

3
months
3
months

3
months

IMPERATIVES

Issuance of
CAO and MOA
signing with
NGOs
Issuance of
CMO and MOA
signing with
NGOs
Issuance of
CAO and
signing of MOA.
EO from the
Office of the
President
ordering the
one-time
disposal.

Disappearance of Seized
Vessels and other High
Profile cargoes is not
Addressed

Ecozones and
Freeports privileges
were abused to
cover up smuggling
operations.

Pursue legal action versus the RES, as well as

against persons involved BOC or ex-BOC
both administratively, criminally as well as
civilly, in cooperation with the DOJ, OSG,
OMB, and other agencies, aimed at deterring
like-minded operators.
Immediately do-able moves: [1] Pursue

documented smuggling cases in order to

send the message; [2] Address the 3000 or
more units of motor vehicles in SUBIC to
convert them to revenue through the creation
of AMADO (Asset Management And
Disposal Office) in appropriate office
(SBMA/BOC/PITC); and, [3] Revisit the Rules
on Locators Perks and Privileges

Start the
process
on
Immedia
tely
Day 1
For No.
[1],
Start the
process
on Week
2; For
No. [2],
Within 3
months;
and For
No. [3]
Within 1
month

First and Last

Importation Scheme
Became a Scam

Audit and Inventory the First and Last

Importation and coordinate with LTO,BIR
and other offices to determine the extent;
pursue cases whenever warranted, to deter
like-minded operators; and, conduct postentry audit (PEA) in appropriate cases

Government-sponsored
Smuggling?

Re-visit NFA, SRA, tax-subsidy availment, as

well as the DOF-PIA MOA on earned-time
credits.

Hijack Me and other

Re-design processes utilizing ICT-aided

monitoring tools. (I proposed TRAC ME
Transport Regulatory Accreditation for
Monitoring of Exports, some 3 years back.)

Start the
process
in 1
month

Establish a Protective Custodian for

goods that were seized and forfeited while
undergoing litigation, as well as for newly
abandoned cargoes; and there should only be
one-time inventory

Start the
process
in 1
month

transport laxities that

have resulted to
losses of highly
dutiable goods
is not effectively
addressed.
Inventory of seized,
forfeited and abandoned
goods are not
transparent

62

Start the
process
in 1
month

Start the
process
in 1
month

Issuance of
CMO and Letter
Request to DOJ,
OSG, OMB, and
other agencies
[1]CMO and
MOA with law
and
enforcement
offices; [2]
Executive order
(OP) and
corresponding
CAO on IRR;
[3] Letter
request for
coordination
meetings
CAO
constituting
joint audit for
BOC, BIR and
other offices.
Notification of
ANLs may be
done in 2
weeks.
Memorandum
Circular from
the Office of the
President
ordering this
inter-agency
task
CAO and other
Accreditation
and appropriate
MOAs

Issuance of
CAO and CMO

Junking through
cannibalizing of
seized motor vehicles
abets pilferage
Knock off and other IPR
infringements are not
abated.

Legally flawed and

Inconsistent decisions
of ports legal divisions
have occasioned tax
leak.
Misdeclaration and
misclassification have
not been consistently
addressed
Non-exercise of the
right to compulsory
acquisition in cases of
Gross Undervaluation
has not been
checked/audited

Re-design the process of taking into custody

of seized motor vehicles (MVs) and their
parts, in order that a proper inventory that
will identify responsibility and accountability
is established, in order to prevent pilferage
and cannibalization of MVs.
Definition of the modes of disposal of
Knock Off commodities and other IPR
infringing goods in coordination with IPO,
NBI, DOJ, as well as the IPR holders/owners.
Designate a Protective Custodian jointly
maintained by the IPR owners and the IPO.

Start the
process
in 1
month

Compilation and Publication of all

decisions of the Law Divisions in order to
ensure consistency, and prevent the
recurrence of palpably flawed decisions.

Start the
Process
in Month
2

Risk-based liquidation audit of all

liquidated entries consumption and
warehousing and pursue administrative or
judicial collection efforts; Post Entry Audit of
importers; and, whenever warranted, pursue
criminal action in coordination with the DOJ.
There has never been a reported case of
compulsory acquisition despite
unconscionable undervaluation. The IRR on
compulsory acquisition must be revised, and

entry of the private sector for the seed

capital to finance the acquisition should be
explored and studied.

Start the
Process
in Month
2

Start the
Process
in Month
2
Start the
process
in 2
months.

Outright smuggling that

comes in many forms
and assumes many
names, i.e., ninja,
swing, b-l-t-b, etc.,
has remained
unchecked.

Outright smuggling cases are never reported.

Documentation is normally a problem. A
three (3) pronged approached patterned
after Hongkong ICAC is needed to address
the problem ENFORCEMENT (for

Start the
process
in 1
month,
and
sustaine
d all
through
out.

Players influence that

dictate the tempo of
benchmarking
remains unchecked

Insulate the principal appraisers and

examiners from the influence of the
Players.
This can be done ONLY when the
Commissioners and the District Collectors are

Start the
process
in Week
One;

deterrence), SYSTEMS AND PROCESSES

REVIEW AND RE-DESIGN (for prevention),
and COMMUNITY RELATIONS (for education
and sustainable public support).

63

Issuance of
CMO

Issuance of
CAO/CMO and
forging of MOA;
whenever
necessary,
issuance of EO
from OP
Issuance of
CAO/CMO

Issuance of
CMO/ANL/Dema
nd Letters, and
Referral Letters
[DOJ]
EO from OP for
the entry of the
Private Sector;
CAO/CMO for
the revision of
rules on
Compulsory
Acaquisition.
CAO/CMO that
shall re-define
the specific
tasks, identify
responsibility,
and exact
accountability
shall be issued,
couple with
leveling of
expectations.
Issuance of
CAO/CMO and
Execution of an
Actionable
Commitment

Questionable Practice of
Amending the IFM has
not been checked

determined to eliminate players influence.

Leadership by example. In fine, in cleaning
a staircase, it is best to start from the
top. Conscientization Meeting among the
Commissioner, Collectors and other key
officials of BOC shall be held.
Audit and Inventory of Orders Amending
IFM. If IFM were filed by the Ship Captains
as required by law, who should be allowed to
amend? The TCCP has enumerated cases
where amendments are allowed these have
been observed more in the breach than in
the compliance.

Declaration

Start the
process
in 2
months

Riders that have

become institutional
facilities to ensure
friendly assessment
remained uncontrolled

Audit and inventory of Riders. Re-definition

of parameters where Riders may be allowed.

Start the
process
in 1
month.

Spurious Documentation
and other Forgeries
have not been
adequately addressed

Pursue documented spurious

documentation cases to put a stop to this
glaring practice. Coordinate with DOJ, OMB,
PRC [Brokers], OSG and other offices.

Start the
process
in 1
month.

Technologically-aided
glitches that have
deliberately aided
questionable
transactions have not
been remedied
Unrestrained Exercise of
Discretion by Customs
officials remains
unchecked

Contracting a 3rd Party Ombudsman for

ICT aimed at improving the systems to
prevent the recurrence of similar glitches

Start the
process
in 1
month

Audit and Inventory of Alert Orders issued;

Audit and Inventory of Duty Stops Log to
determine when, who, and why the customs
clearance process was stopped/duty stop
order lifted; and, whenever practicable,
pursue admin and criminal liability as well as
civil and collection actions; audit and
inventory the exercise of Section 1508; as
well as audit and inventory untrammeled
issuance of continue processing orders.
Ideally, under an environment where
Transaction Value is held sacred, seldom will
VRIS be put to use this is so because, what
the importers declare are honored/respected
without prejudice to Post-entry audit. VRIS

Start the
process
during
the 1st
month

VRIS that was intended

to challenge
undervaluation failed to
serve its purpose

64

Start the
process
in 2
months.

Issuance of
CAO and CMO\,
as well as Public
Advisory.
Meeting with
the AISL/PISA
and other
stakeholders.
Issuance of
COA/CMO.
Meeting with
Brokers and
other
Stakeholders.
Issuance of
CAOs/CMOs;
Coordinating
conferences
with DOJ, OMB,
PRC, OSG and
Brokers
Issuance of
CMO; Technical
meetings with
interested
parties; and
forging of MOA
Issuance of
CAO; CMO
constituting the
audit teams and
prescribing the
parameters of
the audit.

Issuance of
CAO/CMO.

Warehousing frauds
and export-related leaks
have long become
known yet still unremedied.

X-ray facility as a Trade

Facilitation tool has
been deliberately underutilized

Yards monitoring, gatekeeping, bordercontrolling have been

taken for granted.

Zombie-CBWs kept on
re-appearing without
their previous
obligations properly
settled.

will just be used to trigger doubt so that

the value declared can be challenged. VRIS
was not used for this. Re-definition of
VRIS functions shall be made. Further,
VRIS must be updated, revised, and/or
sanitized.
Audit and Inventory the performance of
CBWs in so far as their liquidation of bonded
raw materials, disposition of scraps and
wastages, supervision during actual stuffing
and re-export, as well as the compliance to
the maximum ceiling of 30% allowable local
sales, are concerned. Bonds Audit,
Liquidation Assessment Audit, coupled with
Post Entry Audit shall be sustained. WAMUs
creation should be revisited in relation to
existing audit organizational units.
Re-visit the Risk Management
Parameters that are used before a cargo is
referred for Xray inspection. Xray Project
shall be consulted in the drafting the revised
parameters. Private Sector
representatives shall be allowed access
and participation in the conduct of Xray, even
on observer status only, subject however to
health regulatory access requirements.
Audit and inventory of the performance of
Inland Container Depot, CY-CFS, accredited
DEAs, and other customs custodial facilities.
Public-private sector participation
(LGUs,NGOs, students, civil society) shall be
allowed in marshalling customs gate and well
as borders patrolling.
Audit and inventory all CBWs and their
stockholders with unsettled obligations with
the Bureau; Establish a Merit and
Demerit Program for CBW; and, activate a
Blacklisting Mechanism that will prevent
delinquent and reportedly closed CBWs from
re-appearing under a new assumed name,
without settling previous obligations with the
BOC. Also, Oplan BONDS (Bonding Options
to Neutralize Delinquent Sureties) may be
activated.

65

Start the
process
in the
2nd
month.

Issuance of
appropriate
CAOs, CMOs,
CSOs and
whenever
warranted, EO
from the Office
of the President
re: WAMU

Start the
process
in Month
2.

Issuance of
appropriate
CAO/CMOs/CSO
.

Start the
process
in Month
2.

Issuance of
appropriate
CAOs/CMOs
and CSOs, as
well as the
forging of MOA
with the private
sector.
Issuance of
appropriate
CAOs/CMOs,
and whenever
appropriate, EO
from the OP for
a fresh start.

Start the
process
in Month
3.

ii

By Atty. RAMON G. CUYCO, CESO V, Director III, Collection Service, Revenue Collection Monitoring Group,
BOC .

66