Customs has been quite a niggling issue in the country. You hear people complaining about how it’s hard to get shipments past customs, how the delays costs them even more money, or how people at times end up paying more for customs fees than for the purchased package. But most people don’t really understand the details in the process that lead to holdups. Perhaps it would be better if we retrace our steps and go back a bit.
How do we define customs brokerage? These are companies who are given license to assist parties in shipping goods in and out of the country by helping them process the documents and fees needed for the goods. In order to do this, they have to have extensive knowledge of the customs law and regulations, know how to classify the goods and identify the corresponding tariffs, among many other things. The licensing bodies in the Philippines are the Professional Regulation Commission and the Bureau of Customs, a branch of the Department of Finance.
Ideally, having these intermediaries in the picture is supposed to make things easier for buyers and sellers. However, if the system is corrupt and most of the processes of the bureau in question are unclear, it is hard for freight forwarders and shipping companies to get past those. This is an often-identified reason for increase in payments required from shipping – companies need a lot of time to negotiate and process the paperwork necessary to get the goods to the buyers. Apart from an existing corrupt system that is undergoing overhaul, another major issue is smuggling, which makes it doubly difficult for the customs bureau to right itself by charging the right people. The government loses a lot of money for the smuggled goods that don’t get taxed, and as a result, it appears that efforts to increase tax revenues result in the individuals’ shipments heavily taxed.
Thus, for companies that wish to import goods for commercial purposes, it’s best to involve customs brokerage to save time, since in business time is of the essential. When it comes to costs, the customs broker will advise you on the tax rates and duties, corresponding exchange rates, and will make the necessary arrangements for the payment of taxes and other expenses. If we cannot get transparency from the customs, we can at least hope to expect that a good customs broker will make things clear by itemizing the expenses and making sure all payments made were necessary and accounted for. In return, the customs broker will charge a brokerage fee for the said services, and it is up to you to make comparisons and gauge if a quoted rate is reasonable enough. To help your customs broker process things, make sure you provide the necessary documents on your part, like commercial invoice, or other applicable files, which are necessary for clearance of merchandise.
For individual clients like us, it is harder to get a good picture of the whole thing, but there are also measures that we can take up. First, we ought to know which items are not taxable, e.g. gifts, objects not for commercial purposes, so that we can call up the Bureau of Customs and ask for the status of the package, knowing that the said package should not be subject to tax. This is assuming that we have the tracking number for our package and have checked with the service provider and confirmed that the package has arrived. Next, if the said item is subject to tax, before shipment, make sure that the sender does not ‘overprice’ the said item, which will lead to higher tax. And, if circumstances permit, always ask for details on whatever payments are being asked of you.
However, going back to the said corrupt system, according to an OECD report by Irene Hors, there are three kinds of corruption: routine corruption, wherein bribery occurs in attempts to hasten processing, fraudulent corruption, which is associated with tax evasion on a certain level, and criminal corruption. In this case we are most concerned with routine corruption. Thus, one of the reform measures cited was the computerization of custom activities – this allows proper tracking of transactions and leaves lesser room for under-the-table activities. Another is the number of items requiring thorough processing is reduced. Others include lessening face-to-face meetings between customs and traders, clarification and realignment of rules, and simplification of clearance process. While these things are beyond our control, it is also good for us to be aware of any ongoing changes, in hopes of getting to deal with a better system in the future.