Retailers decry entry of smuggled goods via bonded warehouses

Retailers have expressed alarm over the rampant hijacking of goods being transported from bonded warehouses to the Subic Bay Freeport and Clark Special Economic Zone. They said businesses operating in these facilities have been suffering losses of as high as 30 percent.

The Retailers Council of the Philippines (RCP) pointed out that bonded warehouses have inadequate safeguards.

According to RCP council member Jesus Aranza, goods arriving at bonded warehouses and transshipped to Subic and Clark for re-export almost always end up being diverted and ultimately sold in the domestic market.

Aranza reported that each week over 300 containers on their way for re-export are being reported as hijacked or forcefully diverted. These goods, he said, inevitably make their way into the market, competing with domestically produced goods while escaping import duties.

Aranza said retailers should be asked to submit documents covering the purchase of their goods for verification of various anti-smuggling bodies.

The Senate has already directed its ways and means committee to conduct an inquiry into the reported abuses in the use of common bonded warehouses by companies registered with the Board of Investments (BOI).

Bonded warehouses are being used as conduits to avoid payment of imposable taxes and duties.

Under the law, importers using bonded warehouses are entitled to tax and duty exemptions provided the imports are to be used in the manufacture of goods for export.

According to Aranza, unscrupulous importers have used the facilities of bonded warehouses to avoid the payment of taxes and duties by withdrawing the entered imports for disposal in the domestic market.

Arranza said part of the blame should go to existing rules which he said are much too lenient thereby encouraging abuse among importers.

Arranza told reporters that some companies are using these privileges to smuggle goods for sale in the domestic market.

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.

Arranza said these raw materials reach the domestic market without being covered with the usual import duties and value added tax.

According to Arranza, some BOI-registered companies also abuse the BOI rule which requires 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 35 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."

The task force earlier reported that the government has agreed to audit the operations of common bonded warehouses, particularly the Department of Science and Technology (DOST) and the Bureau of Customs (BOC).

The review, according to Arranza, would start in the footwear industry, a sector known for rampant technical smuggling.

According to Arranza, the DOST has agreed to review its formula. "They realized that some of the percent of allowable wastage are so liberal."