Large-scale agricultural smuggling as economic sabotage

MANILA, Philippines — The call of our farmers is for violators to be held liable for their acts under Republic Act No. 10845 or the Anti-Agricultural Smuggling Act of 2016.

The law authored by Senators Cynthia Villar and JV Ejercito aims to protect and promote the productivity of the agriculture sector and the farmers from unscrupulous traders and importers, who by their illegal importation of agricultural products, affect the production, availability of supply and stability of prices and thereby threatens the food security of the State.

Smuggling is the movement of goods across national borders to avoid customs duties, or import or export restrictions, in violation of applicable laws or other regulations.

Smuggling becomes economic sabotage when agricultural products are brought in the country to the detriment of farmers and consumers. They are able to manipulate the supply and demand and are able to increase prices while at the same time providing justifications to import.

They suppress the supply of pork, fish products, garlic, onions and carrots, among others to create an artificial shortage which leaves consumers with no choice but to buy the food items at a much higher price. It is outright inimical to the national interest, economic growth and development.

It is good to note that the policy of the State is to advance and safeguard the agriculture sector from unscrupulous individuals or dummy corporations, who by the sheer volume of their illegal importation of agricultural products, significantly affect the production, availability of supply and stability of prices.

The proliferation of smuggled products effectively manipulates the prices by lowering them, therefore discouraging food producers from continuing their production due to lack of satisfactory return on investment. This will eventually lead to the demise of our local agricultural industries, and hence, sabotage our economy.

As a prerequisite to importation, all agricultural and food products entering the Philippines must be accompanied by a phytosanitary or health certificate issued by the regulatory body of the exporting country.

This is presented along with the import permit to facilitate physical inspection of the goods and customs clearance at the port of entry. The general rule is that all necessary phytosanitary or health certificates should be secured prior to importation and for each shipment.  

For fresh fruits and vegetables, the Bureau of Plant Industry (BPI) regulates the importation by requiring phytosanitary clearances, which also serve as import licenses.  These permits are applied for by the Philippine importer for each shipment. 

With respect to fresh, chilled or frozen fish and fishery/aquatic products, it is only allowed when certified as necessary by the Secretary of Agriculture in order to achieve food security, taking into consideration public welfare and safety, subject to exception of institutional buyers and for canning or processing purposes.

Import regulations for meat and meat products, implemented by the Bureau of Animal Industry under the Department of Agriculture (DA), require a Veterinary Quarantine Clearance (VQC) certificate. A VQC is valid for 60 days from the date of issuance, within which the meat or meat products are to be shipped from the country of origin and may no longer be extended beyond that.  It is non-transferable and can only be used by the consignee to whom it was issued.

Thereafter, the National Meat Inspection Service (NMIS) shall conduct examination of imported meat after the commodity is approved for release by the Bureau of Animal Industry - National Veterinary Quarantine Service (BAI-NVQS) at the ports of entry.

Despite the strict regulation on importation, the legal process is somehow used as a channel for smuggling. As opposed to outright smuggling, “technical smuggling” is the manipulation of technical processes, which is also in violation of the law, regulations and orders.

The government through the Bureau of Customs is unable to collect the full taxes on imports which is a great loss for our country to be able to better our economic, social and health services. Smuggling is an enemy of national development it keeps millions of our people in poor.

One such method involves the misdeclaration of the imported items. Such as shipment from China which was declared to contain “cream cheese” and “frozen puff pastries” but was discovered to be imported onions.

Another is when an importer, through the broker and consignee declared the imported goods as ceramic tiles with a declared value of the shipment, plus duties and taxes amounting only to P3.6M but actually contained rice valued at P28.10M.

Misclassification is another form of evasion. This is erroneously classifying the imported article under a tariff heading that carries a lower rate than the correct tariff heading, by submitting a fraudulent customs declaration in order to pass the imported goods off as something else.

Although the smuggler would have to pay some duty, they still gain by the discrepancy of the amount of duty declared. One example is that of husked rice which is usually only 5-25% broken but is declared to be broken rice. On the other hand, the same thing happens to good meat that is misclassified as offal.

The tariff barrier could be contravened by undervaluing the shipment such as declaring a lesser quantity. By this, the shipment is described correctly but the value declared is lower than the actual value of the importation. Although the correct tariff rate is applied, the trader manages to pay a lower duty.

Undervaluation happens when an importer claims a cost for the product that is significantly below the reference value provided by the DA. It also happens with insurance and freight charges which are not declared or of lower value. Both the tariff and value-added tax are based on a product’s CIF (cost, insurance, freight). Undervaluation deprives the government of the revenue from both tariffs and taxes.

Republic Act 10845 or the Anti-Agricultural Smuggling Act of 2016 provides that Large-Scale Agricultural Smuggling as Economic Sabotage, is a crime when it  involves sugar, corn, pork, poultry, garlic, onions, carrots, fish, and cruciferous vegetables, in their raw state, or which have undergone the simple processes of preparation or preservation for the market, with a minimum amount of one million pesos (P1,000,000.00), or rice, with a minimum amount of ten million pesos (P10,000,000.00), as valued by the Bureau of Customs (BOC), is committed through any of the following acts:

(a) Importing or bringing into the Philippines without the required import permit from the regulatory agencies;

(b) Using import permits of persons, natural or juridical, other than those specifically named in the permit;

(c) Using fake, fictitious or fraudulent import permits or shipping documents;

(d) Selling, lending, leasing, assigning, consenting or allowing the use of import permits of corporations, non-government organizations, associations, cooperatives or single proprietorships by other persons;

(e) Misclassification, undervaluation or misdeclaration upon the filing of import entry and revenue declaration with the BOC in order to evade the payment of rightful taxes and duties due to the government;

(f) Organizing or using dummy corporations, non-government organizations, associations, cooperatives or single proprietorships for the purpose of acquiring import permits;

(g) Transporting or storing the agricultural product subject to economic sabotage regardless of quantity; or

(h) Acting as broker of the violating importer.

The law also provides for stringent penalties as follows:

(a) The penalty of life imprisonment and a fine of twice the fair value of the smuggled agricultural product and the aggregate amount of the taxes, duties and other charges avoided shall be imposed on any person who commits any of the acts enumerated under Section 3 of this Act.

(b) For not less than seventeen (17) years but not more than twenty (20) years, and a fine of twice the fair value of the smuggled agricultural product and the aggregate amount of the taxes, duties and other charges avoided shall be imposed on the officers of dummy corporations, non-government organizations, associations, cooperatives or single proprietorships who knowingly sell, lend, lease, assign, consent or allow the unauthorized use of their import permits for purposes of smuggling;

(c). And imprisonment of not less than fourteen (14) years but not more than seventeen (17) years and a fine equal to the fair value of the smuggled agricultural product and the aggregate amount of the taxes, duties and other charges avoided shall be imposed on the following:

1. The registered owner and its lessee or charterer, in case of lease, of a chartered boat, motorized commercial vessel of more than three (3) gross tonnage, who knowingly transports the agricultural product subject to economic sabotage, regardless of quantity;
2. The registered owner and its lessee, in case of lease of six (6) or more wheeler trucks, vans and other means of transportation, who knowingly transports the agricultural product subject to economic sabotage, regardless of quantity;
3. The registered owner and lessee of a warehouse, or any property, who knowingly stores the smuggled agricultural product subject to economic sabotage; or
4. The registered owner, lessee, president or chief executive officer of the private port, fish port, fish landing sites, resorts, and airports knowingly allows the agricultural product to be smuggled into the country.

(d) The penalty of imprisonment of not less than twelve (12) years but not more than fourteen (14) years and a fine equal to the fair value of the smuggled agricultural product subject to economic sabotage and the aggregate amount of the taxes, duties and other charges avoided shall be imposed on the following:

1. The registered owner and its lessee or charterer, in case of lease.; of a chartered boat, motorized commercial vessel of three (3) gross tonnage or less, who knowingly transports the agricultural product subject to economic sabotage, regardless of quantity; or
2. The registered owner and its lessee, in case of lease, of less than six (6) wheeler trucks, vans and other means of transportation, who knowingly transports the agricultural product subject to economic sabotage, regardless of quantity.

In all cases, the smuggled agricultural products shall be confiscated and the property used in agricultural smuggling, consistent with Section 2530 of the Tariff and Customs Code and without prejudice to Section 2531 of the same Code, shall be forfeited in favor of the government.

The law also provides for the presumption of agricultural smuggling, whereby the mere possession of rice or any agricultural product entered into the Philippines other than the BOC controlled ports or without the necessary permits shall be prima facie evidence of smuggling.

Smuggling is a crime that not only affects the consumers, it also threatens the livelihood of farmers and fisherfolks. Six years have passed since the law was implemented, yet despite the countless apprehensions, and the prohibited acts constitute non-bailable offenses, not even one has been put to jail for violating it.

Sadly, the lack of a harmonized electronic data system by the implementing agencies is being cited as the culprit.  The need for a computerized system between the Department of Agriculture and the Bureau of Customs will facilitate not only the process of curbing large-scale smuggling in the country but will also form part of data on imported goods leaving the port of origin relayed to the country of destination in real-time.  This would lessen or eliminate human intervention.

There is a Filipino saying that goes, “Kung gusto, may paraan. Kapag ayaw, maraming dahilan,” which may be the reason why despite technological advancements we have not been able to eliminate smuggling.