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26 May 2024, 01:45 AM

Customs Plugs Revenue Leaks from Undervalued Freight Declarations

April 12, 2011

Customs Commissioner Angelito Alvarez has ordered the adoption of worldwide freight rate reference for containerized cargoes to deny tax cheats one of their age-old tricks for duties and taxes avoidance.

Alvarez said the Bureau of Customs 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”, disclosed Alvarez, “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.”

According to the customs chief, a complete list of conference freight reference covering 280 ports from 70 countries has empowered BOC assessment personnel to detect wrong entries in transport cost declarations.

The list was provided by the Philippine Shippers’ Bureau (PSB), an agency under the Department of Trade and Industry.

Sample documents retrieved by the study team commissioned by Alvarez revealed that some importers declared a transport cost of only US$50 for a 20 footer container from Kaoshiong in China to Manila when in truth, the prevailing rate as attested to by PSB-accredited freight forwarders was US$150.

It will be noted that transport cost is a component of the dutiable base upon which the tariff rates are applied.

“Any attempt to understate the correct amounts of the various components like the cost of transporting the imported goods will impact into the dutiable base and eventually affect the agency’s tax take,” Alvarez added.

Aside from improving revenue collection efficiency, the reliance on worldwide freight reference rate, said Alvarez, “will help strengthen the agency’s documentary controls and enhance the capability of its post-entry review offices like the Liquidation and Billing Division at the ports and the Post-Entry Audit Group (PEAG) at the BOC central office.”

The post-entry function of the Bureau is intended to help detect some additional cost or price adjustments which should have been declared and computed as part of dutiable value and landed cost by importers but which they did not.

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