Smuggling Crackdown Likely to Bring Changes in Philippine Customs Procedures

The Philippine government has informed its trading partners of a major campaign to eliminate fraudulent customs clearance practices involving a wide range of imported commodities, including meat and poultry. According to a study funded by the Philippine Department of Agriculture, the estimated value of smuggled agricultural products approaches $10 billion annually.

Philippine authorities are engaged in discussions with a number of governments from meat and poultry-supplying countries, including the United States, regarding options for combating customs fraud. They are particularly interested in ideas on how to verify transaction prices upon which import duties are based, claiming that under-invoicing is rampant and citing large discrepancies between the reported value of meat and poultry exported to the Philippines and the import values recorded by the Philippine Bureau of Customs.

In addition to targeting under-invoicing, efforts are also underway to ensure that importers classify products correctly with regard to applicable duties. For example, pork offal is subject to a 10 percent duty rate while muscle cuts imported under the Philippines’ tariff rate quota minimum access volume (MAV) system are assessed a 30 percent duty.

The issue of customs valuation for meat and poultry was elevated last year as the Philippine government increased its indicative reference prices, which ostensibly offer a floor value that importers can claim for any given transaction. Prior to issuing new reference prices in February 2013, customs officials maintained a “blue book” which, according to trade sources, contained reference prices that were unrealistically low. According to Philippine officials, meat importers were routinely under-valuing shipments in line with these low reference prices. New reference prices are now provided quarterly to the Bureau of Customs from the Philippine Department of Agriculture, which calculates them based on USDA’s Global Agricultural Trade System database.

USMEF will provide further updates on this situation as more information becomes available.