Dissecting Import Smuggling

By Kritiko Research Series Section 1, in the General Rules for the Interpretation of the Harmonized System is the category for the importation of Live Animals * Meat & Edible Meat offal * Fish & Crustaceans, Molluscs& other aquatic invertebrates * Dairy products * Birds eggs * Natural Honey * Edible products of animal origin * Products of Animal Origin

ISO standard: US Intermodal container

Source: Wikipedia Standard Lengths = Gross Mass for Dry Cargo 20-ft (6.1m) = 22,000 kg to 24,000 kg. 40-ft (12.2m) = 27,000 kg to 30,480 kg.

Section 1: Chicken
In this edition, we will feature everyones favorite CHICKEN and chicken parts. Specifically, LEG QUARTERS, MDM and Machine Separated parts - all were imported from the US and Canada. None of the imports would be considered AFTA / Free Trade and should therefore be subjected to the required duties and taxes. To best understand the study, each assumption will based on a group of chicken parts as imported. Study period is July to Aug. 5, 2011 As we are not familiar with the code MDM, we will have to assume that this would be chicken parts. Hence, the total shipment of chicken will be analyzed. The shipment comprised of 12 containers of Leg Quarters + 10 containers of MDM + 24 containers of machine separated chicken = 46 containers. A total of Php3,220,155 in Taxes were paid by the importers for all 46 containers. If the ISO standard weight per 40-footer container is 27,000 kg. Then it is safe to assume that a total of 1,242,000 kg. of chicken arrived. With an average market value of Php120/kilo. That would mean Php149,040,000 worth of chicken will go into the market. Now, if 40% taxes will be charged, then the taxable amount should be Php5,916,000. Whereas, only Php3,220,155 was paid in duties and taxes. Hence, a discrepancy of at least Php2,695,845 was not collected. If Php3,220,155 was charged in taxes, divided by the 46 containers, then the average tax per container is only Php70,003. If Php70,003 average tax per container is divided by the 27,000kg. Then a 1kg chicken is worth Php2.59/kilo

What are the implications? For one, importers paid a paltry amount to the BoC for the chicken we buy in the market / grocery for Php120 per kilogram. Local poultry growers will never be able to compete with the imported chicken supply as these average a mere Php2.59 per kilo. Which would definitely be a loss for the poor farmer. While we consumers may seem to find the prices of chicken lower due to its stock importation, think about how we are literally pulling the feathers of our local growers and killing the supply chain from feeds to the actual broiler chickens.

Dissecting Import Smuggling: Section 1: Beef

Breeding of livestock in the Philippines is done in two ways, the backyard system where one or a few heads of cattle are kept within the confines of the owners home property. And in cattle farms where headcount and a better system is of great importance. In the Harmonized System of the Bureau of Customs around the world, Livestockcomprise of Hogs, Cattle, Carabao, Goat and its by-products Dairy Milk. With Cattle being a high value livestock worth millions. According to a study on the Philippine livestock industry, an estimated total of 800,000 jobs are generated by all stages of the breeding process. Nearly 500,000 jobs are generated by breeders alone. In the year 2003, the industrys income has been an estimated Php10 billion. That is for domestic breeding intended for either local consumption or exports. Broken into specific categories, livestock value reached Php117 billion. With cattle bringing in an estimated Php14.3 billion. Immediate concerns of the industry include: Increasing finished weight per unit of production by finishing local cattle in the feedlot. Sustaining the overall population growth and arrest the decline of the commercial sector.And achieving a total system of production and marketing. Unfortunately, while the local cattle breeding industry continue to suffer the high cost of production , feeds and operational expenses, the unscrupulous entrepreneur manages to import their supply with minimal expenses. No longer will we assume that such importations are used only by hotels and industrial users, simply look into open shelving display of popular supermarkets to see why. This section aims to illustrate, using an actual list of shipments declared under the category of BEEF the financial and stock values which affect our industry. Note that the figures only cover July to August 4, 2011 one month.

Dissecting Import Smuggling : Section 1: BEEF & BUFFALO

(Period: Bureau of Customs Imports July to August 3, 2011)

STUDY:Imported Beef from New Zealand

A total of 9 containers arrived with an estimated total weight of 216,000 kg. Section 1 of the Bureau of Customs charged a total of Php639,089 for duties and taxes. Which then means an average of Php71,009.00 in taxes were charged per container. If the Market Value of the Imported Beef was Php260/kilo x 27,000 kg/cont. = Php7,020,000 total value inside that container! Since the shipment came from New Zealand, then taxes should be charged. Assuming 40% represented duties & taxes, then each shipment should average Php2,808,000. A 50% discrepancy of Php1,404,000 in taxes far from the average of Php71,009 per container charged! Hence, we lost an estimated Php6,380,911 in uncollected duties from the NZ beef!

FACT: Imported Beef from Australia

A Total of 9containers with duties and taxes of Php1,091,582 were collected by Section 1 of the Bureau of Customs. Which means each container had an average of Php121,286.00 in taxes. 9 containers x 27,000 kgs/cont.= a total weight of 243,000 kgs. of beef entering the market system. If the Market Value of the beef was Php260/kilo, this means the estimated value of the 9 containers would be Php63,180,000! If the Php63,180,000 MVis charged a 40% tax = Php25,272,000 should have been the taxes. Assuming 50% discrepancy = Php12,636,000 should have been collected by Section 1 of the Bureau of Customs. This means a loss of revenue amounting to Php11,598,418 for beef from Australia. (According to an Aussie show on cable, hormones are added to the cattle to ensure weight gain.)

FACT : Imported Beef from USA

Only 5 containers arrived in the month, with a total duties & taxes of Php613,963 collected by Section 1 of the Bureau of Customs. 5 containers x 27,000kgs/cont. = a total weight of 135,000 kgs. of beef were shipped into the country. Php260/kilo Market Value x 135,000kgs. = Php35,100,000 in market value. Which means a container of USA beef average Php7,020,000! Whereas the average taxes collected per container amounted only to Php122,792. A difference of Php6,897,208 were not collected per container! Assuming a discrepancy again of 50% still translates to Php3,448,604 was not collected for each container heading for Section 1 of the BoC.

FACT: Imported Beef from France & India

Only 1 container arrived from France, with taxes charged by Section 1 at Php1,765. And only 1 container from India, with taxes at Php1,765.

The Impact of this months imported Beef

A total of 16 containers arrived, with an estimated weight of 432,000 kilograms of beef in various cuts and forms. Out of the 16 containers, only a total of Php2,348,164 was collected by Section 1 of the Bureau of Customs. Which means an average of Php14,676 was paid for import duties and taxes. Assuming 16 containers x 27,000kg./cont. = 432,000 kg. That means at Market Value (MV) Php260 / kilo = Php112,320,000 million worth of beef were imported in July to August alone. Assuming (again) a 40% in taxes = Php44,928,000 should have been collected by the BoC. A difference of Php42,579,836 in uncollected taxes! At a 50% discrepancy rate, that means Php21,289,918 loss in our revenue coffers.

Conclusions:
Importing beef from the US, NZ, AU, FR & India will prove more lucrative than breeding those smelly cattle locally! Assuming our revenue suffered Php21,289,918 in losses for a month x 6 imports of the same system annually, that would translate to a massive Php127,739,508 million a year! What are the economic implications on the Filipinos working in cattle farms and breeding smelly cows in their backyard? What of the many local industries crying in pain due to the difficulty of breeding? Compare that to handful of importers in their Export Entries and you will see the difference. Section 1 of the Bureau of Customs must be laughing all the way to the bank especially since the BoC Commissioner is leaving (again). Another learning curve gap is enough to squeeze more technical smuggling into the honeymoon stage of the newbie.

Dissecting Import Smuggling : Section 1 : Dairy Milk

(Period: Bureau of Customs July to August 5, 2011)
Sources :BoC documents &www.fao.org/ag/againfo/programmes/en/pplpi/docarc/LLAX14.pdf The Philippine Dairy Industry by Salvacion M. Bulatao Administrator National Dairy Authority, Philippines

Unless youre allergic to milk or lactose intolerant, you and your family will require a daily dose of milk in one form or another. The Philippine has been found by the National Dairy Authority (NDA) as a huge market for milk and milk products. According to a study by SalvacionBulatao, the dairy market generates sales amounting to US$1.1billion annually. Australia, New Zealand and the USA supply 80% of milk imports. Milk powder comprises 71% of the imports. Around 8,000 dairy farming families in 223 villages are engaged in milk production. They pour milk to over 100 dairy cooperative accounting for 23% of national liquid milk supply, which translates to 11 million kilogram of milk from some 8,900 milk animals.

The NDA study states that there is a growing consumer preference for liquid milk. UHT milk imports have trebled since 1995, while milk power imports have remained constant over the same period. There is also a surge in demand for milk from local milk producers from the leading coffeeshops in Metro Manila. Some 10,774 children are fed in milk feeding programs. While countless more in the population require and consume milk in one form or another. Dissecting the import smuggling on milk and its other import cheese will our focus on this edition. Study duration covers the month of July to August 5, 2011 and shall be based on real importations covering entry numbers and passing thru Section 1 of the Bureau of Customs. For the record, Section 1 of the BoC is manned by the following personnel : Section 1-A : Principal Appraiser Emelita Morales & Principal Examiner Lourdes Guevarra. Section 1-B : Principal Appraiser Ma. Teresa Aggabao& Principal Examiner Akmad Noor. This edition will welcome their enlightenment should they provide us with a written explanation.

FILLED MILK imported from New Zealand & Australia:

A total of 8 containers x 40 footers entered the country with total duties &taxes collected amounting to Php490,833. IF: Php490,833 8 containers = average tax per container Php61,360 IF : Php61,360 per container 27,000 kg. per container = Php 2.27 per kilo IF : We buy 500gms milk at Php120 in the grocery x 2 = Php320per kilo market value of filled milk x 27,000kg./container = Php8,640,000 would be the approximate Market Value of each container. Since the milk was imported from non-AFTA countries, then we have to assume that duties & taxes should be about 40% = Php3,456,000 At 50% discrepancies on our estimates = Php1,728,000 per container of the imported milk. IF: Php1,728,000 x 8 containers = Php 13,824,000 estimated collectibles. Whereas, the 8 containers garnered Php490,833. Difference in uncollected taxes estimated at Php 13,333,167

SPECIAL MILK (whole milk, full cream low fat, lactose, milk lactose, buttermilk) imported from New Zealand, Australia,
USA, Denmark, France & Taiwan) A total of 39 containers x 40 footers & 3 containers x 20 footers entered with total duties & taxes collected by the BoC amounting to Php14,243,116. So as not to confuse our readers, we shall only analyze the 39 x 40 footers: IF: 39 containers x 27,000 kgs. per container = 1,053,000 kgs. imported IF: Php13,247,058 was the total tax collected = average tax per container is Php339,668 IF: Php339,668 taxes 27,000 kgs = Php12.50 per kilo of milk IF: Php13,247,058 for the 39 cont. 1,053,000 kg = PHp12.58 per kilo IF: Special milk is sold in the groceries/drugstores at Php200 to Php700 per 500gms. A conservative estimate of Php400 per kilo in Market Value x 1,053,000 kg.on imports = Php 421,200,000 Market Value IF: Market Value of the imports x 40% for taxes = Php168,480,000 taxes

IF: Our mistakes /discrepancies is 50% = Php 84,240,000 in taxes Whereas, theBoC collected Php14,243,116 for the 39containers Difference: Php 69,996,884 in uncollected taxes for the 39x40footers

Cheese (Danish blue cheese, Flavored cheese, Natural Mozzarella Cheese & Asstd. Processed cheese) from
Singapore, Denmark, Australia, New Zealand A total of 6 containers x 40 footers entered the country with a total duties & taxes collected by the BoC amounting to Php2,444,183 IF: 6 containers Php2,444,183 = average taxes of Php407,363 per container IF: 6 containers x 27,000kg. = 162,000kgs. of cheese IF : 162,000kgs. Php407,363 taxes = Php15 per kilo of cheese IF: Average grocery/market value of the cheese Php3,000 per kilo x 162,0000kgs. = Php486,000,000 market value of the cheese IF : Php486,000,000 at 40% taxes = Php 194,400,000 in taxes IF: Discrepancies will be at 50% of total estimates = Php 97,200,000 in taxes

Differences: Php2,444,183 in taxes collected by the BoC Less: Php 97,200,000 = Php94,755,817

Dissecting Import Smuggling Section 1 : Fish. Shrimp &Squid

Fish is the primary source of protein in the Filipino diet. Some 2,000 species abound in Philippine waters. Despite more than a doubling in output since the 1960s, the fishing industry remains relatively undeveloped, and large quantities of fish are imported. The Bureau of Fisheries and Aquatic Resources (BFAR) cites the continued environmental degradation of Philippine waters as a major constraint on fish production. In 2000, the total domestic fish catch was 1,892,832 tons (12th in the world), of which 8% came from inland waters. Exports of fish products in 2000 were valued at $400 million. Six species are most important, according to BFAR, because each has yielded 100,000 tons per year or more since the mid- 1980s. These species are: sardines, roundscad, frigate tuna, anchovies, milkfish, and tilapia. Indian mackerel, skipjack and yellowfin tuna, sea bass, red snapper, mullet, kawakawa, squid, and prawn are also plentiful. Principal commercial fishing grounds are off Palawan, north of Panay and Negros, and to the south and west of Mindanao. Subsistence fishing is conducted throughout the archipelago. Fish ponds, chiefly for cultivation of bangos or milkfish, are principally in the swampy coastal areas of western Panay and around Manila Bay.

Pearl shells (including cultured pearls), sponges, sea cucumbers (trepang), shark fins, and sea turtles are exported.

Fishermen communities
Municipal fisherfolk are considered the poorest among the poor. In 2000, households whose heads were fishers had a significantly higher poverty incidence than households in general. Their daily income was roughly the retail value of 2 kg of fish. Low incomes can be attributed to declining fish catch, estimated to be about 2 kg per day, down fromthe 20 kg per day that was the average catch during the 1970s. Households of fishers and those in the fishing industry also had heads with relatively lower education levels compared with households in general. Fishers households had lower access rates to basic necessities like safe water, sanitary toilets and electricity than other households, and were more likely to live in makeshift houses or were squatting. Also, the average size of households of fishers and of those in the fishing industry was greater than the national average (Israel, 2004). According to the 2002 Census of Fisheries, there were 1.8 million municipal and commercial fishing operators. This was a three-fold increase from the 584, 000 fishing operators recorded in 1980. Municipal fishing dominated the fishing industry in terms of numbers of operators. In 2002, 1.78 million operators (99.6%) were engaged in municipal fishing compared with only 7 800 in commercial fishing operations. The vast majority of municipal fishing operations (1.752 million or 98.4%) were individual operations. At 1.7 million, male operators accounted for 94.5% of the municipal fishing operators, with a median age of 41 years. In 2002, out of 7,200 commercial fishing operations, 7,190 were operated by individuals, and almost all (98.6%) were males, with a median age of 39 years. Women have a role in fisheries and helping in the livelihood of the family (Siason, 2004). Their roles include: (1) fish marketing or vending, (2) fish processing, (3) fry gathering, (4) gear preparation, (5) fishing, (6) net mending, and (7) fishing boat ownership and operation. Source:http://www.nationsencyclopedia.com/Asia-and-Oceania/PhilippinesFISHING.html#ixzz1YLAbs3RB Source:http://www.fao.gov.com

This edition will cover 15 actual importations within July to August 3, 2011. All going thru Section 1 of the Bureau of Customs manned by its Prinicipal Appraiser and Principal Examiner. A total of 20 containers were released with total Duties and Taxes of merely Php656,974.

Declared: Frozen Cooked Peeled Shrimp

This month, only 1unit of 40-footer container of very expensive shrimp from Malaysiawas imported. Duties and Taxes paid = Php84,743.

If: the standard capacity weight of a 40-footer is at a minimum of 27,000kgs. Taxes charged Php84,743 = Taxes Php3.14 per kilo If: average Supermarket Value Php 600/kilo x 27,000kgs = Php16,200,00MV If: TCCP EO334 is 5%: Php16,200,000 MV x 5% = Php810,000 should have been the Duties & Taxes. If: our Discrepancy is 50%, thenPhp405,000 should have been collected. Difference: Php320,257 in uncollected tax.

Declared : Giant Squid Fillet Skinless

4 containers x 40 footers from CL-Chile & US, with total duties & taxes = Php155,218. If: Weight is 27,000kgs. minimumx 4 containers = 108,000kgs. in all Php155,218 taxes = Php.69 centavos tax/kg. only If: MV is Php300/kg x 108,000kgs. = Php32,400,000 total MV. If: TCCP EO334 is 5% : Php32,400,000MV x 5% = Php1,620,000 should have been the Duties & Taxes. If: our Discrepancy is 50%, the Php810,000 should have been the Duties & Taxes. Difference: Php654,782 in uncollected taxes.

Declared :Frozen Whole Shell Mussels

1 container from CL-Chile was imported with total duties & taxes = Php19,207 If: Weight is 27,000kgs minimum Php19,207 taxes = Php0.17 centavos /kilo! If: MV is Php300/kg x 27,000 kgs. = Php8,100,000MV If: TCCP EO334 is 5%: Php8,100,000 x 5% = Php405,000 should have been the Duties & Taxes. If our Discrepancy is 50% , then Php202,500 should have been collected. Difference: Php183,293 in uncollected taxes.

SECTION 1 : The Importers ORO CAMPO TRADING RM 3A ENRIQUETA BLDG., N. S. AMORANTO,, QUEZON CITY, NCR, SECOND DISTRICT, NATIONAL CAPITAL REGION (NCR) DTI-Registered

ROYAL GLOBE ENTERPRISES

eBNRS Search No Matching Records Found. FEDERAL FOOD CORP. SEC-Registered FEDERAL FOOD CORP. SEC-Registered

DYNAMIC FOOD OPPORTUNITIES CORP. SEC-Registered UNIFIED FOOD CORP. SEC-Registered

FAIRFIELD GENERAL MERCHANDISE UNIT 19 TIMOG ARCADE, # 67 TIMOG AVE., COR. SCOUT TORILLO,, SOUTH TRIANGLE, QUEZON CITY, NCR, SECOND DISTRICT, NATIONAL CAPITAL REGION (NCR) DTI-Registered

MOFELS FOOD INTL. CORP. SEC-Registered FIRST CROCUS PHILIPPINES INC. SEC-Registered PURO CARNE INTL. CORP. No Records Found

TRIANGLE SISTERS TRADING DTI-Registered National Scope ZENITH FOODS CORPORATION No Records Found FRESH N FAMOUS INC. No Records Found

THE PACIFIC MEAT CO. INC. No Records Found

CLASSIC FINE FOODS INC. SEC registered

BENISAND MERCHANDISING CORPORATION SEC-Registered

DELFI FOODS INC. No Records Found

NUEVA FOODS CORP. No Records Found

FOODSPHERE INC. SEC Registered

THE PUREFOODS HORMEL CO. INC. No matching records found

APM AGRICOM INC. SEC Registered

Dissecting Import Smuggling : The Section 1 Summary

Section 1,

in the General Rules for the Interpretation of the Harmonized System is the category for the importation of Live Animals * Meat & Edible Meat offal * Fish & Crustaceans, Molluscs& other aquatic invertebrates * Dairy products * Birds eggs * Natural Honey * Edible products of animal origin * Products of Animal Origin
This edition will contain the figures acquired from some importations in the month of July and up to August 3, 2011 only. For clarity, presentation shall be in its mathematical format. Previous editions contain the individual breakdowns. You, dear reader, can help with the analysis later. DECLARED IMPORTS CONTAINERS (QUANTITY) TAX PAID TO SECTION 1 Frozen PORK- CA, US, FR, DK, AU, IE, NL, GB
Belly rind & skin Back skin Cutting Fat Ham Fat Minced Fat Sirloin Boneless Boneless Ham Ham / Ear Base Mask / Liver 8 x 40 footers 1 x 40 footer 3 x 40 footers 6 x 40 footers 1 X 40 footer 2 X 40 footers 4 x 40 footers 21 x 40 footers 2 x 20 footers Php1,809,348 59, 941 206,099 227,971 28,332 380,891 397,362 2,126,376

TOTAL FROZEN PORK

46 X 40 footers & 2 X 20 footers Php5,233,360 1,286,000 kgs. If: Taxes paid Total weight = Php 4.10 average tax per kilo Discrepancies Found: Php43,679,320 uncollected

DECLARED IMPORTS

CONTAINERS (QUANTITY) Frozen CHICKEN- US, CA, NL

Leg Quarters Chicken MDM Mech. Separated Deboned Meat 12 x 40 footers 10 x 40 footers 24 x 40 footers 1 x 40 footer

TAX PAID TO SECTION 1

Php1,644,164 393,990 1,257,001 40,257

TOTAL FROZEN CHICKEN 47 X 40 footers Php 3,340,412 1,269,000 kgs If: Taxes Paid Total Weight = Php2.63 average tax per kilo Discrepancies Found: Php2,695,845 uncollected

DECLARED IMPORTS

CONTAINERS (QUANTITY) TAX PAID TO SECTION 1 Frozen BEEF & BUFFALO NZ, AU, US, FR, INDIA
Boneless / Boneless Fat Tripe Scalded/ Shortplates Chuckblade / Bone in Buffalo Quarters 24 x 40 footers 648,000 kgs. 7 x 40 footers 189,000 kgs. Php2,230,272 Php1,725,262

TOTAL FROZEN BEEF & BUFFALO 837,000kgs Php3,955,534 If: Taxes Paid Total Weight = Php2.63 average tax per kilo Discrepancies Found: Php 44,928,000 uncollected on BEEF

DECLARED IMPORTS

CONTAINERS (QUANTITY) TAX PAID TO SECTION 1 Frozen BEEF & BUFFALO NZ, AU, US, FR, INDIA
Boneless / Boneless Fat Tripe Scalded/ Shortplates Chuckblade / Bone in Buffalo Quarters 24 x 40 footers 648,000 kgs. 7 x 40 footers 189,000 kgs. Php2,230,272 Php1,725,262

TOTAL FROZEN BEEF & BUFFALO 837,000kgs Php3,955,534 If: Taxes Paid Total Weight = Php2.63 average tax per kilo Discrepancies Found: Php 44,928,000 uncollected on BEEF

DECLARED IMPORTS

CONTAINERS (QUANTITY) TAX PAID TO SECTION 1 DAIRY MILK NZ, AU, TWN, US, FR, SG, DK
Filled Milk/ Whole / Full Cream /

Low Fat / Lactose/ Milk Lactose Buttermilk 39 x 40 footers 3 x 20 footers

Php13,247,058 Php 886,058

TOTAL DAIRY MILK 1,253,000 kgs. Php 14,343,116 If: Taxes Paid Total Weight = Php11.44 Discrepancies Found: Php 83,330,051

DECLARED IMPORTS

CONTAINERS (QUANTITY)

TAX PAID TO SECTION 1

CHEESE SG, DK, AU, NZ Danish Blue, Flavored, Natural Mozzarella, Asst. Processed 6 x 40 footers Php 2,444,183 TOTAL CHEESE 162,000 kgs. Php2,444,183 If: Taxes Paid Total Weight = Php15.08 Discrepancies Found: Php94,755,817

DECLARED IMPORTS

CONTAINERS (QUANTITY)

TAX PAID TO SECTION 1

FROZEN SEAFOOD MY, TWN, CN, VN, CL, US Peeled Shrimp, Giant Squid, Whole Shell Mussels, Fish Cakes, Fillet, Meat Trout, Mackerel 19 x 40 footers Php 656,974 5,245,798 kgs. TOTAL SEAFOOD 438,798 kgs. Php 656,974 If: Taxes Paid Total Weight = Php 1.49 per kilo Discrepancies Found: Php 25, 670,906

Section 1: Frozen Pork, Chicken, Beef, Buffallo, Dairy Milk, Seafood

Imported from July to August 3, 2011:

Total BoC Tax Collection = Php 29,973,579 Total Est. Uncollected Taxes = Php295,059,939
(based on % Duties & Tax @ Market Value)

Section 1-B (Boc) : Apple, Oranges,

Grapes & Pears

Section 2 under the Harmonized System Code: Live trees & other plants, bulbs,
roots & the like, cut flowers & ornamental foliage; Edible vegetables & certain roots and tubers; Edible fruit & nuts ; peel of citrus fruit or melons; Coffee, tea, mate & spices; Cereals, Products of milling industry; Malt; Starches ; Inulin; Wheat glutten; Oil seeds & oleaginous fruits; Misc. grains, seeds & fruits; Industrial or medicinal plants, straw & fodder; Lac; Gums, resins & other vegetable saps & extracts; Vegetable plaiting materials; Vegetable products not elsewhere specified or included

Sources: Philippine Bureau of Customs www-2.knu.ac.kr/~iatc/spboard/board.cgi?id=report&action... www.unctad.org The Philippines a National Case Study on Capacity Building by Alex F. Favila

The Philippine processed and fresh fruits industry combined constitute a

94% majority of horticultural exports. In 2004, total fruit exports grew at an average of 15.07%, with growth in first place of total horticulture. The fruit industry plays an important role in the Philippine agriculture and economy. Three most important fruits are banana, pineapple and mango which contribute 90% of the total volume of production and 10% to other fruits. Hence, the importation of fruits which our country have limited propagation conditions must be closely monitored to ensure the safety of consumers both for health and economic reasons. The smuggling of imported fruits not only destroys the balance of economics for business. Unrestricted entry via technical smuggling in cahoots with corrupt officials at the Bureau of Customs pose a serious health risk to the consumers who purchase the products with questionable propagation methods. Earlier findings of extreme usage of pesticides and formalin for preservation in imported fruits and vegetables have proven detrimental to the Filipinos.

FRESH APPLES China, US, Chile

1 box of apples = 20 kgs. ave. weight 1 box of apples = Php1,000 Market Value 40footer container = 27,000 kgs capacity A total of 12 x 40-footer containers were imported in 1 month. IF: 12 containers x 27,000 kgs./cont. = 324,000kgs. imported IF: Weight 20kgs./box = 16,200 boxes imported IF: 16,200 boxes x Php1,000 MV = Php 16,200,000.- Market Value IF: Php16.2million MV x 40% tax = Php6,480,000 taxes for 12 containers IF : 50% Discrepancies = Php3,240,000.- tax collectibles Whereas: Total Tax collected by BoC for the 12 containers = Php162,768.Hence, the BoC Sec. 1-B failed to collect Php3,077,232 in taxes

FRESH ORANGES US & Argentina (AR)

1 box of oranges = 20 kgs. ave. weight 1 box of oranges = Php1,500 Market Value 40 footer container = 27,000 kgs. capacity A total of 7 x 40-footer containers were imported in 1 month. IF: 7 containers x 27,000 kgs./cont. = 189,000 kgs. imported IF Weight 20gs./box = 9,450 boxes imported IF: 9,450 boxes x Php1,500 MV = Php14,750,000 Market Value IF: Market Value x 40% tax = Php5,670,000 taxes for 7 containers IF: 50% Discrepancies = Php2,835,000 tax collectibles Whereas: Total Tax collected by BoC for the 7 containers = Php220,375.Hence, the BoC Sec.1-B failed to collect Php2,614,625 in taxes

FRESH GRAPES United States

1 box of grapes/10 bags = 15 kgs. ave. weight 1 box of grapes = Php2,500 Market Value 40-footer container = 27,000 kgs. capacity A total of 3 x 40 footer containers were imported in 1 month. IF: 3 containers x 27,000 kgs./cont. = 81,000kgs. imported IF: Weight 15 kgs./box = 5,400 boxes imported IF: 5,400 boxes x Php2,500 MV = Php13,500,000 Market Value IF: Market Value x 40% tax = Php5,400,000 taxes for 3 containers IF: 50% Discrepancies = Php2,700,000 tax collectibles Whereas: Total Tax collected by BoC for the 3 containers = Php124,087.Hence, the BoC Sec.1-B failed to collect Php2,575,319 in taxes

Fresh Pears China

1 box of pears = 20 kgs. ave. weight 1 box of pears = Php1 ,000 Market Value 40-footer container = 27,000 kgs. capacity A total of 6 x 40 footer containers were imported in 1 month. IF : 6 containers x 27,000 kgs./cont. = 162,000 kgs. imported IF: Weight 20kgs./box = 8,100 boxes imported IF: 8,100 boxes x Php1,000 MV = Php8,100,000 Market Value

IF: Market Value x 40% tax = Php3,240,000 taxes for 6 containers IF: 50% Discrepancies = Php1,620,000 tax collectibles Whereas: Total Tax collected by BoC for the 6 containers = Php61,840 Hence, the BoC Sec.1-B failed to collect Php1,558,160 in taxes Conclusion : The Bureau of Customs failed to collect a total of Php 9,825,336 in duties & taxes. While the shipments from China are covered by ACFTA, those from the US, Argentina & Chile should have been properly taxed. Assumption: If the importation of fruits should occur 4 times a year, to coincide with high frequency consumptions, then it would be safe to assume that : Php9,825,336 of tax deficits x 4 frequencies per annum = Php39,301,344 tax collection deficit of the BoC on importations of fresh apples, oranges, grapes & pears. Applicable to the 22 importations only. Limitations: The research study does not cover the general imports of fruits on a national scale as the study covered only 22 actual importations within the one month period.