The Philippines - Economic Growth - usaid

SOUTHEAST ASIA COMMERCIAL LAW & INSTITUTIONAL REFORM AND TRADE DIAGNOSTICS JULY 2007
THE PHILIPPINES
combined with the ACH payment feature. Additionally, a more sophisticated automated
collections process could be used to ferret out counterfeit surety bonds presented by unscrupulous
traders.
Intellectual Property Rights
In recent years, the Philippines has moved from being a source of pirated materials to a major recipient of
goods in violation of intellectual property rights. The Philippines now faces increasing amounts of these
goods being directly imported. Moreover, the country is increasingly used as transit point for such goods.
Training in identifying counterfeit goods does not occur, and border officials are unfamiliar with
procedures to be followed when counterfeit goods are encountered.
Risk Management
Risk management is a systematic approach to making decisions under uncertain conditions by identifying,
assessing, understanding, planning, and communicating risk issues. It forms the basis for selectivity and is
the single most important facilitative measure that a customs administration can take. For customs and
border agencies, it is a means to move from an attempt to achieve total control of documents and goods
for every shipment to a rational, data-driven process to select only high-risk cargo for intensive
examination. Most countries have adopted a risk management approach to assist the international
movement of goods from compliant importers while devoting their customs and other control agency
resources to goods that have the highest potential negative impact on revenue, the economy, and
especially the health and welfare of its citizens. Risk management deployment simply means that a large
proportion of international shipments can cross the border quickly with no inspection and minimal formal
requirements. As a result, opportunity for bribe solicitation and payment is reduced because of increased
transparency and the removal of customs officers’ opportunity to hold cargo for bribe solicitation.
The move to capture transaction data in a modern automated system such as ASYCUDA World provides
the essentials for a risk management regime. Use of risk management and the selective examination
technique are very limited in the Philippines. While we were unable to obtain exact selectivity figures, we
were told that YELLOW and RED shipments far outnumber the GREEN shipments. In other words,
individuals inside and outside of customs told us that 70-80 percent of the shipments require holding by
customs until the individual officer is satisfied with the shipment. In most cases, a facilitating payment is
required for release.
Selectivity is driven by criteria, and some customs authorities use hundreds of criteria to select which
cargo deserves scrutiny. In the Philippines, the criteria are very broad and unrefined, which results in high
rates of examination. Two examples of this are mandates that all refrigerated cargo and all cargo from
China be designated as color RED. These shipments constitute a large percentage of the Philippine’s
shipments and lead to the high examination rates.
A special program called the Super Green Lane (SGL), which was created to allow certain importers to
move their goods through customs in an expedited process, has not been a success. Although nominal
fees are collected, normal processing and even RED, or full inspection, processing were comparable to
the SGL’s performance. Some interviewees said the RED lane is faster because facilitation fees led to
more rapid service. Problems with delays in verifying bank collections are partly to blame. Additionally,
unlike other “Gold Card” type customs processing, the SGL is based upon the commodity rather than the
company. Most “Gold Card” programs offer expedited release based upon the high compliance rates and
customs expertise of the candidate importers.
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