AAA SPEECH/ FEDERATION OF PHILIPPINE INDUSTRIES

11 MAY 2011

GOOD AFTERNOON!

Thank you for having me here today.

At a time when yours truly and even my Boss, Secretary Cesar Purisima,

have been at the receiving end of dirty tricks from people who obviously

have been adversely affected by our campaign to stamp out corruption and

smuggling in the Bureau of Customs, it feels good to spend quality time

with people like you who share our passion for good, honest-to-goodness

and efficient governance.

So many things have happened on the smuggling and corruption front

since November last year when he had our first anti-smuggling summit at

the Hotel Intercontinental in Makati.

In that brief period spanning five months, the BOC under my watch had

seized more than P2 billion worth of assorted smuggled commodities that

included illegal drugs, high-end vehicles, metal and metal products, rice,

sugar, onions, wearing apparels with intellectual property rights issues,

bunker oil, diesel fuel, ten-wheeler trucks, liquor, ceramic tiles, frozen

mackerel, household appliances, musical instruments, molding machine

and ukay-ukay. Just this morning, we confiscated P20 million worth of

precious corals which were concealed in two twenty-footer container vans

at the Port of Manila.

During the same period, we filed before the Department of Justice

smuggling cases against a lady gun smuggler, two metal and metal product

importers, a CD duplicating machine importer, two major meat importers,

a sliced potato importer, a palm oil importer, a polyester and cotton yarn

importer and two petroleum product importers with claims exceeding P10

billion. The two oil-related smuggling cases we recently filed in addition to

the three others we brought to the attention of the DOJ between July and

October last year are a manifestation of the high priority the BOC is giving

to our goal of putting an end to the fraudulent entry of imported oil products

into the country.

I am happy to report that the DOJ has already approved for filing in court of

the case involving Viking Haulers, the companythat allegedly smuggled

luxury vehicles into the country, We also understand that 21 other cases

are already up for resolution by the DOJ.

Needless to say, the above multi-billion peso seizures and multi-billion

peso smuggling cases we have filed against powerful interest groups have

made us obvious targets of retaliatory attacks. Not the least of these dirty

tricks is the recent spate of media attacks on the BOC and Department of

Finance leadership based on fabricated charges that were allegedly file by

customs employees. However, we were also surprised to find out that the

supposed to be complainant, a certain Amie Arciaga ‘s name does not

appear in the personnel records of the BoC.

Needless to say, the claims hurled against us were full of factual errors:

a) Guillermo L. Parayno was never an undersecretary of Finance;

b) E-konek, one of the 3 Value Added Service Providers (VASPs)

c) started doing with BoC wayback in 2007 when I was still working at the private sector;

d) Of the two names specifically mentioned as those belonging to the

2500 alleged “Hao Shiaos” operating at the BoC, we were able to find out that these two people are actually legitimate employees of the BoC.

Obviously, there are people and organizations out there who would stop

at nothing to derail the programs of reform and renewal we have initiated in

the Bureau of Customs.

That is why I find it truly comforting to spend the next hour or so with you,

knowing full well that I am in the company of people whose unbroken

determination to help us succeed in our crusade against smuggling and

corruption is in full evidence in this venue today.

I find it truly inspiring that while our programs for reform,modernization and

renewal often require difficult period of adjustments, your group has

decided not only to take the path of no resistance but also, and more

importantly, to join us in taking a dramatic leap of faith.

Already, our partnership has produced a rich harvest of good results.

As you may have heard, Pulse Asia, a reputable public opinion pollster, has

reported a historic decline in the corruption rating of the BOC.

The results of a recently concluded nationwide survey revealed that fewer

Filipinos, specifically 6.9%, now remain critical of corruption in the BOC.

That was a sharp improvement compared with the results of a 2009

survey, also done by Pulse Asia, in which 14.7 % of Filipinos put the

Bureau of Customs in the league of most corrupt agencies in the

bureaucracy.

The inevitable conclusion is that the general public has taken cognizance of

the BOC’s high-profile campaign against corruption and smuggling,

meaningful reform and renewal programs, proactive initiatives to enhance

institutional efficiency and integrity as well as our single-minded pursuit of

customs modernization and trade facilitation.

Of course, the present stewards of the BOC have not lost sight of the fact

that we still have miles to go, so to speak, before we can honestly claim

that the process of change and transformation has developed deep and

sturdy roots.

But there is also no denying that we getting there. To date, we have taken

small but cumulative steps that bring us closer to our goal of curtailing

smuggling and stamping out corruption in the BOC.

These include:

1) The continuous updating of the reference values for every description

and tariff heading. The idea is to give customs personnel the necessary

tool to detect gross undervaluation of importations and protect

legitimate importers from unreasonable assessment of their imported

commodities;

2) Adoption of worldwide freight rate reference for containerized cargoes

to help the agency’s assessment personnel to detect under-declarations in freight charges.

- Studies have shown that the BOC was losing more than P1.3

billion a year from freight undervaluation due to absence of a

reliable reference rate which the agency’s assessment personnel

could use to check under-declarations in freight charges.

- Until recently, mere photocopies of the bill of lading submitted

by the importer/broker were accepted by customs assessment

personnel as valid supporting documents in import entry

declarations.

- More often than not ,the photocopies of bills of lading being

received by customs personnel did not reflect the actual

transportation costs paid for the importation, thereby resulting in revenue loss.

- With the conference freight reference covering 280 ports from

70 countries provided by the Philippine Shippers Bureau, BOC

assessment personnel are now able to detect wrong entries in

transport cost declarations.

3) Warehousing reforms that include automation of bond processing

and recording, re-training of personnel assigned to the Bonds

Divisions on the mechanics and nuances of the customs bonding

system and cancellation of warehousing privileges of importers

with outstanding customs bonds issues.

4) Retroactive verification, audit and reconciliation of insurance

declarations of all imports beginning with those made in 2010 to

put an end to the widespread practice of importers to under-

declare their insurance premiums with the end in view of scaling

down the dutiable base of their incoming shipments. Through an

administrative issuance, I have directed all BOC District Collectors

to immediately retrieve all marine insurance policies that were

submitted to the BOC in support of import entries that were filed in

2010.In the event that discrepancies are discovered,District

Collectors “are authorized to allow the correction of errors and re-

adjustment of assessments for importers who wish to voluntary

avail themselves of said remedial measures.Importers who fail to

effect re-adjustment or correction of errors would be subjected to

the administrative tools available to the BOC which may include

withholding of the release of future shipment unless payment of

deficiencies is made.

5) Thorough screening and validation of “Certificate of Origin” (CO)

covering importations claiming preference under various Free

Trade Agreements (FTA) following reports of rampant use of fake

documents to obtain reduced tariff on certain import products. The

evaluation and review process is intended to ferret out suspected

spurious Certificates of Origin which will then be subjected to

further verification process thru the cooperation of the issuing

authority in the exporting countries. The link up will be made

possible by the Bureau of International Trade Relations of the

Department of Trade and Industry.The results of the retro-

verification process will be the basis of actions to be taken by the

Bureau of Customs, among them the collection of proper duties

and taxes and the filing of smuggling cases if and when the

commission of fraud is proven.

6) Re-deployment of under utilized Xray machines to the busy ports

in Manila, hopefully to deter mis-declaration and undervaluations.

7) In coordination with the Banker’s Associaition of the Phillipines, we

we will soon automate the reconciliation process between BoC’s

owned collection records as compared with the amount actually

remitted to the National Treasury. Thru this move, we are

confident that the use of fakes Official Receipt will soon be a thing

of the past.

8) On bulk and break-bulk cargoes that are subject to review by the

six surverying companies accredited by the BoC, the submitted

Load Survey Report will now be reconciled with the figures

submitted in the Import Entry Declaration.

During the first Anti-Smuggling Summit, a resolution adopted by the

participants recommended the exercise by the BOC of its right to

Compulsary Acquisition of grossly undervalued importations.

Unfortunately, while I have vigorously pursued this initiative, the

Department of Finance has recently expressed reservations about this in

the light of an unexpected discovery that the re-selling of seized

undervalued goods at the prevailing market value could violate World

Trade Organization rules. Among the concerns being raised is the issue

of the right valuation of undervalued products. In the light of this

development, I solicited inputs from FPI and other concerned

stakeholders on how we could address this matter at the soonest time

possible.

Another item in the adopted resolution was the recommendation for the

BOC to engage the services of qualified private auditing firms to

undertake post-entry audit. Again, while I tried to push this idea off the

drawing board, one of the biggest auditing firms in the country told me

that there could be ethical issues to the idea of compensating the

participating auditing firms based on a percentage of what is collected

from positive findings. Again, I would like to solicit ideas on how we can

overcome that particular ethical encumbrance.

I also fully support the idea of creating special courts to hear and try

smuggling cases and I believe we should work on this together. I am

also with the FPI in its desire to have Malacanang certify as urgent the

passage of the Anti-Smuggling Bill now pending in Congress. And if the

proposal of the FPI to a establish a Public-Private Sector (PPP) Anti-

Smuggling Oversight Committee earns the approval of higher

authorities, I would like to state for the record that I believe Mr. Jess

Aranza is the best man for the job.

I would like to thank you once more for inviting me here today which I

take the liberty of interpreting as an expression of encouragement for

the new stewards of the BOC to remain firm in our resolve, faithful in our

conviction, upbeat in mood and bold in decision.

The road to excellence and modernization is littered with difficult

challenges.

But if we pull in the same direction and remain committed to the same

noble goal, we have no reason to fail.

In closing, let me quote Sec. Cesar Purisima of the Department of

Finance. “ Reforms are also continuously being undertaken in the Bureau

of Customs to improve its operation and cleanse it of corrupt officials. This

is not an oversight job and we will not stop until we see a Customs Bureau

at par with the rest of the world. We understand that throughout the

campaign, we will inevitably lock horns with those whose interests lie in the

preservation of the status quo. “

“ Our efforts at raising revenues have produced the desired results and we

assure the nation that your Department of Finance will not be distracted in

its duties by some petty, unsubsantiated complaints.

Comparing our 2010 collections with that of 2011, we are very proud to

report that our cash collections during the first 4 months of the year

already exceded the 2010 levels by 5.5 billion pesos, in spite of the fact

that the tariff on oil & steel products were reduced to zero when I assumed

my position mid last year.

We will continue to do our job and we seek the public’s help in running after

smugglers and tax evaders by reporting to us any knowledge of wrong

doing.

Marami pong salamat.