Customs probes huge discrepancy in China trade

The Bureau of Customs (BOC) is investigating a huge discrepancy it has discovered between China’s export volumes to the Philippines and the shipment figures officially reported by importers, as part of its ongoing efforts to run after smugglers and improve revenue collections.

In a report to Finance Secretary Carlos Dominguez, Customs Commissioner Isidro Lapeña said the wide discrepancy between China’s recorded exports and imports to the Philippines may be attributed to the gross misdeclaration or undervaluation of goods in terms of either volume or weight and the possible use of “consignees for hire,” which leads to goods released to “hidden” traders and not to the consignees on record.

“The latter practice allowed the importer to evade the scrutiny of the Bureau of Internal Revenue (BIR),” Lapeña said.

“In both instances—misdeclaration or undervaluation and the use of consignees for hire—benchmarking and the submission of fake documents allow traders to get away with these underhanded schemes,” he said.

Lapeña told Dominguez at a recent executive committee meeting of the Department of Finance that he is going to China to personally look into the matter and check the Philippine export records of the BOC’s Chinese counterpart agency.

In response, Dominguez instructed Lapeña to focus on China’s trade records and arrange a meeting with his Chinese counterpart to discuss and find possible solutions to bridge the massive trade gap.

Lapeña said the BOC was gradually doing away with the practice of “benchmarking,” which allows traders to expedite the processing of their imports without the required inspections, and is instead pushing for the proper valuation and assessment of duties.

Last year, Dominguez said the finance department’s ongoing efforts to improve the efficiency of the tax and customs systems revealed alarming discrepancies totaling P1.8 trillion between the volume of imports reported here and actual figures recorded by countries exporting to the Philippines.

“This massive value gap translates into foregone revenues estimated at around P231 billion, representing two percent of the gross domestic product (GDP),” Dominguez said.

Dominguez, however, raised the possibility that the trade gap could just be the result of timing issues and the inclusion and exclusion of particular commodities in reporting.