Old-timers at the Bureau of Customs (BOC) jokingly refer to two cases of irregularity that happened recently at Pampanga’s special economic zone as “miracles at Clark.”
The term refers to the disappearance of 94 drums of seized diesel fuel that the Department of Finance had planned to sell to raise additional revenue.
Some still unidentified employees at the port spirited out the diesel fuel and replaced it with drums of water and sludge. They made money, of course.
It is likely that with the help of the thieving port employees, the people behind the smuggling of the diesel into the country got the seized fuel back.
Smuggling is a never-ending problem for the customs bureau, and frustrated by the resistance of the agency’s officials and employees to reform, Customs Commissioner Rozzano Rufino Biazon has proposed the abolition of the bureau and replacing it with a professional institution.
Biazon’s proposal, taken up with but still to be decided by President Aquino, has drawn objections from lawmakers, and on Sunday Sen. Ralph Recto, a senior member of the Senate ways and means committee, said it was unnecessary in stamping out smuggling.
High taxes, duties
Recto blamed continued smuggling on high taxes and duties. Cut taxes and duties, he said, and importers would pay the right rates.
It may not stamp out smuggling, but it could ease the problem and reduce the occurrence of “miracles” at the free ports.
For Biazon and lawyer Ronnie Silvestre, customs collector at Clark, the changing of diesel fuel to water and sludge is no joking matter.
Biazon, under siege for allegedly failing to stop “rampant smuggling” of petroleum and agricultural products through the country’s special economic zones, told the Inquirer by text message that he had ordered an investigation to identify those responsible for the irregularity.
The 94 drums of diesel, part of a 165-drum catch scored by the customs bureau at Clark from 2009 to 2012, had been stored in a warehouse owned by a private investor at the free port.
The warehouse is located in the customs clearance area of the free port.
Silvestre, who was appointed to the Clark post in February, does not even think of a miracle like Jesus’ changing water into wine during a wedding feast at Cana in the Gospel of John.
“Some people replaced the contents of more than 90 drums of diesel oil with water and dirty industrial oil and obviously made money,” he said.
A drum of ordinary diesel oil costs a bit above P6,000.
Those who did it should not be allowed to get away and enjoy the money, Silvestre said.
A high-ranking customs official, who asked not to be identified because he was not authorized to speak to the press, said the Clark Freeport irregularity was proof that “some people in the government” cared nothing about the Aquino administration’s drive for good government.
It is unclear exactly when the diesel fuel disappeared. Silvestre reported the first case to Biazon on April 3 and the second case, on April 8.
The first case involved 65 drums of diesel fuel, replaced with 65 drums of water and sludge.
In the second case, 29 drums of diesel, among 30 drums of smuggled fuel earlier seized from G2G gas station in San Francisco village in Mabalacat town in Pampanga, were replaced with 29 drums of sludge.
The 30 drums, containing 6,692 liters of diesel oil, were ordered seized on March 13 by the customs bureau.
Of the 30 drums, 29 contained industrial diesel and one contained ordinary diesel, according to Silvestre’s report to Biazon.
Sold outside zones
In his latest posting on the Internet, Biazon said “petroleum products are imported into the economic zones duty free supposedly for use within those zones.”
But the fuel eventually ends up in “retail stations outside the zones,” Biazon said.
“Proof of this is the fact that the [BOC’s] fuel marking program has resulted in the confiscation of marked fuel and the inclusion for prosecution of those caught selling the smuggled fuel. Even big players in the industry are not spared, with cases filed against them,” Biazon said.
To combat the smuggling of fuel through the free ports, the customs bureau is planning to restrict the delivery of imported fuel to specific ports, a policy that will narrow the delivery corridors and tighten the monitoring of fuel arrivals.
At the same time, the customs bureau will upgrade its electronic clearance program to include a petroleum inventory system with automated data gathering and analysis of imports.
Biazon reiterated his warning to the agency’s personnel, saying the days of officials and employees who make fortunes in connivance with smugglers are numbered.
“Those who continue to engage in illegal activities in cahoots with smugglers will be targeted and will face the full force of the law,” Biazon said.
Speaking in an interview on dzBB radio, Recto said he was not surprised that fuel smuggling continued, as taxes imposed on petroleum products made it tempting for importers to resort to illegality to earn more.
That there are cooperative people at the customs bureau makes smuggling even more attractive, Recto said.
Biazon, he said, should consider lowering taxes on imported goods.
“The taxes are too high. If we didn’t have this, there would be minimal smuggling,” Recto said.
Lower taxes could also attract new importers, he said.
“If we let the market operate properly, we would also reduce the tendency or opportunity for corruption,” he added.
VAT, excise tax
Recto did not go into details, but noted that both excise tax and value-added tax (VAT) are imposed on petroleum products.
“Gasoline is imposed VAT and excise, while diesel has VAT only. But if the importer smuggles the lower-priced diesel, the 12-percent VAT he saves is already his. What more if the smuggled goods are also liable for excise, as in the case of gasoline? That’s why I believe there’s more gasoline than diesel smuggling,” Recto said.
He urged the government to take a second look at the free trade agreements that the Philippines has with many countries “to facilitate trade.”
“In cases of zero duties, what are the chances of corruption? None. Look at the Singapore model. There is almost zero duties on everything, that is why there is also very little corruption,” he said.
Recto said he was not advocating a total zero duty policy for all goods.
“What I’m saying is, reduce the taxes. Look at what happened to cigarettes and alcohol. Since there is already smuggling of petroleum and rice, I would not be surprised if this is already happening in the case of sin products,” he said.