Some BOI-listed firms accused of tech'l smuggling

Companies registered with the Board of Investments (BOI) are abusing their bonded warehouse privileges and are engaged in technical smuggling, according to a multi-sectoral group called Smuggling Watch.

Under the government's incentive program for export-oriented businesses, BOI-registered companies that have bonded warehouses for manufacturing are allowed to import raw materials duty free and tax free provided these are re-exported as finished products.

However, Smuggling Watch chairman Jesus Arranza told reporters over the weekend that many of these companies have been found to be "abusing their privileges in connivance with Customs personnel involved in bonded warehouse operation."

Arranza said these companies submit documents attesting that the products imported free of duties and taxes have been re-exported but "some have no actual exportation."

He said these raw materials reach the domestic market without paying the usual import duties and value added tax.

According to Arranza, some BOI-registered companies also abuse the BOI rule which require them to submit manufacturing formula duly approved by the Department of Science and Technology (DOST).

"More often than not, the percentages of allowable manufacturing losses are set too high," Arranza said.

In the manufacture of tin cans, for instance, Arranza said the DOST allows a 36-percent manufacturing loss when this should only be two percent.

"Assuming the real loss is only five percent, this means that 30 percent would no longer be accounted for and finds its way into the domestic market without paying all taxes," Arranza said. "These products compete unfairly with the legitimate manufacturers."

Arranza said Smuggling Watch also documented cases where export shipments were being hi-jacked. "This may be the handy work of some unscrupulous manufacturers and the result is obvious," he said.

Arranza reported that there were local feeds manufacturers that abuse their privilege to import raw material from the manufacture of feeds free of taxes and duties, provided they get a permit from the Bureau of Animal Industry.

"We have reports that some recipients of such permits to import palm olein and soya oil do not channel all their importation to feed manufacturers," he said. "As much as 50 percent finds its way to the domestic market as edible oil."

Arranza said even fish imported for canning purposes are also being diverted to the local market and sold not as canned fish but as fresh fish.

According to Arranza, Smuggling Watch has asked government to conduct an audit of all bonded warehouses and the list of manufacturers using such warehouses.

"Similarly, government should also audit the list of companies who are recipients of special permits from government agencies," he said, adding that even the rules of the DOST should be reviewed.