Bureau of Customs Towards a World-Class Customs Administration Pushing Trade Facilitation Reforms Towards Increased Export Competitiveness

X X Trade Facilitation Main Objective To minimize the transaction costs and complexity of international trade for business The main objective of trade facilitation is to minimize the transaction costs and complexity of international trade for businesses, while maintaining efficient and effective levels of government control.[1] Trade facilitation does not only benefit traders. In fact, ongoing research shows that welfare gains from the streamlining of trade procedures may exceed gains from trade liberalization (i.e., tariff reduction). Average gains from trade facilitation in the Asia-Pacific region account for at least 0.26 per cent of real GDP, while the gains from trade liberalization account for only 0.14 per cent of real GDP.[2] [1] ECE “Trade Facilitation... An Introduction to the Basic Concepts and Benefits” ECE/TRADE/289. [2] APEC, The Impact of Trade Liberalization in APEC, 1998. X X

x Trade Facilitation Trader Benefits Cut costs and reduce delays Faster Customs clearance and release through predictable official intervention Simple commercial framework for doing both domestic and international trade Enhanced effectiveness Trader Benefits • Cutting costs and reducing delays • Faster Customs clearance and release through predictable official intervention • Simple commercial framework for doing both domestic and international trade • Enhanced competitiveness Source: ECE “Trade Facilitation... An Introduction to the Basic Concepts and Benefits”, www.unece.org/trade/forums/forum02/docs/02tfbroch.pdf Trade facilitation is an important issue in both emerging and developed economies as it can promote export growth, improve competitiveness of a country’s goods and services in the global market, attract much needed foreign direct investment, and increase participation of small and medium size enterprises (SMEs) in international trade.

Benefits of Trade Facilitation Benefits to Economies Promote export growth Improve competitiveness in global market Attract much needed FDI Increase participation of SMEs in international trade Trade facilitation is an important issue in both emerging and developed economies as it can promote export growth, improve competitiveness of a country’s goods and services in the global market, attract much needed foreign direct investment, and increase participation of small and medium size enterprises (SMEs) in international trade.

Trade Facilitation Constraints Excessive documentation requirements Lack of automation Lack of transparency, unclear and unspecified import and export requirements Inadequate procedures, especially lack of audit-based controls and risk assessment techniques Need for cooperation among Customs and other government agencies In 1998, The World Trade Organization asked importers and exporters to identify the major issues that needed to be addressed in term of trade facilitation. Some of the main concerns raised by the importers and exporters at the time included: • excessive documentation requirements • lack of automation and insignificant use of information technology • lack of transparency, unclear and unspecified import and export requirements • inadequate procedures, especially a lack of audit-based controls and risk assessment techniques • lack of modernization of, and cooperation among Customs and other government agencies, which thwarts efforts to deal effectively with increased trade flows.

5 POINT AGENDA Revenue Enhancement Trade Facilitation Improved Enforcement Professionalization of Personnel Quality of Corporate Life Development The following are the Five (5) Point agenda of the Commissioner of Customs Revenue Enhancement Trade Facilitation Improved Enforcement Professionalization of Personnel Quality of Corporate Life Development It is noteworthy that the primary mandate of the Bureau of Customs is to generate revenue. Thus, Bureau’s performance is best gauged by the amount of duties and taxes it is able to collect. You may note that trade Facilitation is second in the list. This is so because trade facilitation plays an important role in revenue performance because the former complements the latter. Trade facilitation can promote export growth, improve competitiveness of a country’s goods and services in the global market, attract much needed foreign investment, and increase participation of small and medium size enterprises (SMEs) in international trade.

TF Initiatives Strengthening of the Post Entry Audit Group (PEAG) Professionalization of the Customs Service thru training and retraining of BOC personnel Re-deployment of non-intrusive inspection (NII) machines or x-ray facilities TF Initiatives D. Strengthen its Post Entry Audit Group (PEAG) E. Professionalization of the Customs Service thru training and retraining of BOC personnel F. Re-deployment of non-intrusive inspection (NII) machines or x-ray facilities

X-ray Check System LEGENDS: 1. Port of Manila 5 units 2. MICP 4 units Subport 1. Port of Manila 2. MICP 3. NAIA 4. Port of Batangas 5. Port of Cebu 6. Port of Cagayan de Oro 7. Port of Zamboanga 8. Port of Davao 9. Port of Subic 10. Port of Clark 11. San Fernando 5 units 4 units 2 units 1 unit ________ 30 UNITS TOTAL With Scanner The BOC has twenty nine units of mobile and re-locatable x-ray machine or scanners which are presently deployed in ten primary ports and sub-ports. Records will show, however, that some ports need additional machines while some others can make do with less. A decision has thus been made to pull out 8 underutilized x-ray units from some regional ports for redistribution at the Port of Manila and the Manila International Container Port where container traffic is heaviest. FAQ ON THE BOC NCIS PROJECT What is the BOC Non-Intrusive Container  Inspection System Project?        The BOC Non-Intrusive Container Inspection System Project or NCISP is the acquisition by the BOC of Non-intrusive Inspection Units to allow the speedy examination and more reliable examination and inspection  of all cargoes to facilitate trade, prevent tariff evasion due to misdeclaration, and intensify checks against anti-social goods like weapons, drugs and other contraband.          This will also provide optimum service for the transacting public in the BOC, as it will effectively reduce the number of shipments that may be subjected to actual physical inspection, and pinpointing with accuracy shipments that need to be subjected to physical examination.        The procurement of these machines is consistent with the priorities of the Governance Chapter of the new Philippine Development Plan that set the timetable for its purchase by Q3 of 2005.  Chapter 7 of the MTPDP 2004-2010 noted that smuggling, particularly through underdeclaration or misdeclaration of goods, is still a major source of revenue losses for the Philippine Government.  Specifically the plan stated that "For the BOC, measures will be geared towards controlling smuggling through the use of container x-rays, computerized tracking of the filing and movement of cargo and updating of the value reference data.  Face-to-face interaction will be minimized and customs procedure simplified through electronic filing and single window processing at a BOC virtual window linked to all agencies." What is its funding source?        Funding for the NCISP is sourced from a concessional loan pursuant to a government-to-government counter-trade financing agreement under a Framework of Bilateral Agreement between the Government of the Philippines (GOP) and the Government of the People's Republic of China under the following terms: the loan is without equity, interest rate per annum is 2% on diminishing balance; maturity period of 20 years including the 5-years grace period.        The amortized payments of the BOC to the Eximbank of China over 20 years shall equal the total concessional loan amount granted, including interests.  These payments shall be sourced from the BOC's annual budgetary appropriations because the revenues collected by the BOC, resulting from the collection of the scanning fee charged per container shall be remitted to the National Treasury as part of the BOC's total annual revenues. Aside from the offer of the Government of China, were there other proposals considered by the BOC?        Yes.  The initial project proposal submitted by the BOC was in coordination with the National Development Company (NDC) and was approved by the Investment Coordination Committee-Cabinet Committee (ICC-CC) during its 5 November 2004 with the understanding that the procurement of the non-intrusive CIS equipment will be funded by the National Government (NG) through the BOC and that RA 9184 shall be observed in the bidding/procurement of the equipment.  During its meeting on 16 November 2004, the NEDA Board instructed BOC to process with the ICC a Government-to-Government Financing with Countertrade arrangement for the project.                In  compliance with the NEDA Board Instruction, the BOC explored possible arrangements with Israel and the People's Republic of China (PROC).  Only the PROC however, made a firm offer which culminated with the signing of a Bilateral Framework Agreement on the provision of concessional loan by China to the Philippines during the State Visit of President Hu Jin Tao on 27 April 2005 and with the signing of the Memorandum of Agreement between BOC and NUCTECH Company Inc., Limited, the endorsed manufacturer from China.          Another proposal evaluated was from Sanpiro General Services Corporation which was for a 20 years Build-Operate-Transfer (BOT) scheme using a gamma ray scanning system to be supplied by the Science Applications International Corporation; a company based in San Diego, California, USA Manila International Container Port (MICP). While the SANPIRO proposal required no funding or equity investment from the GOP, the fees generated shall be shared under a revenue-sharing ratio of 20% for the government and 80% for SANPIRO and its partners.  The number of units being offered was just two units and any additional units to  be deployed would depend on the capability of SANPIRO to source additional funds. 8

RISK MANAGEMENT or SELECTIVITY SYSTEM X-ray Check System RISK MANAGEMENT or SELECTIVITY SYSTEM RED – Physical Inspection X-Ray INspection The Risk Management Technique which the Philippine Bureau of Customs is using is the Selectivity System. The selectivity process is a mechanism for determining what goes to the scanner and what does not go to the scanner. Based on the parameters given by the Risk Management Group, the computer randomly selects which container go to red, yellow, or green lane. Import entries selected under the green lane does not undergo inspection. Import entries selects under the yellow lane under go document check. Import entries selected under the red lane are subject to physical examination or x-ray inspection.   At present, containers are subjected to x-ray scanning if they are (a) electronically-selected as RED, (b) manually–selected, or (c) mandatorily subjected for x-ray scanning as directed by the Commissioner. YELLOW – Document Check GREEN – No Inspection

TF INITIATIVES ESTABLISHMENT OF THE AUTHORIZED ECONOMIC OPERATOR (AEO) PROGRAM, TO BE KNOWN AS CUSTOMS-TRADE ALLIANCE TO PROTECT AND ACCELERATE TRADE OR C-TAPAT PROGRAM The World Customs Organization has designed standards to secure and to facilitate the flow of goods in international commerce. These standards are set forth in the SAFE Framework of Standards which was adopted by the WCO Council at its 2005 Sessions. A vast majority of the WCO Member Administrations, including the Philippines, expressed the intention to begin the process of implementing the SAFE Framework provisions. The SAFE framework incorporates the concept of the Authorized Economic Operator as provided in the Resolution of the Customs Co-operation Council on the Framework of Standards to Secure and Facilitate Global Trade dated June 2006. Under the said Resolution, the WCO will provide capacity building linked to the implementation of the SAFE Framework of Standards under its Columbus Programme. AEO is a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a national Customs administration as complying with WCO or equivalent supply chain standards. AEOs include inter alia manufacturers, importers, exporters, brokers, carriers, consolidators, intermediaries, ports, airports, terminal operators, integrated operators, warehouses, distributors.

TF INITIATIVES CUSTOMS ADMINISTRATIVE ORDER HAS BEEN DRAFTED WITH THE FFG OBJECTIVES: To comply with the commitment of the Philippines to implement the World Customs Organization (WCO) Framework of Standards to Secure and Facilitate Global Trade Framework (SAFE) To establish a voluntary certification program to be known as Customs-Trade Alliance to protect and accelerate Trade or (C-TAPAT). To enhance BOC-Business partnership on trade security and trade facilitation based on trust and mutual respect. To establish accreditation procedures that offer certain benefits and incentives to certain economic operators considered as BOC’s trusted allies. The C-TAPAT program is expected to start at the end of the year. Customs Administrative Order has been drafted with the following objectives: To comply with the commitment of the Philippines to implement the World Customs Organization (WCO) Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework, for brevity) To establish a voluntary certification program to be known as Customs-Trade Alliance to Protect and Accelerate Trade or C-TAPAT consistent with the WCO’s AEO Program which shall be administered by the Bureau of Customs (BOC) to help certain economic operators in the international supply chain adopt acceptable control measures to enhance the security of such chain To enhance BOC-Business partnership on trade security and trade facilitation based on trust and mutual respect To establish accreditation procedures that offer certain benefits and incentives to certain economic operators considered as BOC’s trusted allies

TF Initiatives Implement as early as possible the National Single Window (NSW) and later on the ASEAN Single Window (ASW) for single submission, single processing and single decision making. TF Initiatives H. Implement as early as possible the National Single Window (NSW) and later on the ASEAN Single Window (ASW) for single submission, single processing and single decision-making To implement the Philippines’ commitment for the implementation of its National Single Window by 2008, an Executive Order was signed by our President Gloria Macapagal Arroyo for the Creation of the National Single Window Task Force for Cargo Clearance in December 27, 2005.

Exec Order: Creating the National Single Window (NSW) Task Force for Cargo Clearance MAJOR PROVISION: “Government Departments and Agencies involved in the cargo clearance release must cooperate with each other in order to provide the Bureau of Customs with automated electronic system required for the establishment, implementation, and operation of the NSW, and eventually the ASW.” A major provision of the Executive Order is: “Government Departments and Agencies involved in the cargo clearance release must cooperate with each other in order to provide the Bureau of Customs with automated electronic system required for the establishment, implementation, and operation of the NSW, and eventually the ASW.”

NSW is now operational at 30 government agencies Board of Investments Bureau of Animal Industry Bureau of Customs Bureau of Export and Trade Promotion Bureau of Fisheries and Aquatic Resources Bureau of Import Services Bureau of Internal Revenue Bureau of Quarantine Bureau of Plant Industry Bureau of Product Standards Dangerous Drugs Board Department of Health Civil Aviation Authority of the Philippines Environment Management Bureau Fertilizer and Pesticide Authority There are 40 government agencies involved in trade facilitation. However, only 30 agencies out of 40 actually process import and export applications. The other 10 agencies perform monitoring, accrediting and certifying functions. Some of these agencies are : Intellectual Property Rights, Philippine Shippers Bureau,

AGENCIES IN THE NSW Firearms and Explosives Office Food and Drug Administration Forest Management Bureau Maritime Industry Authority National Food Authority National Meat Inspection Service National Telecommunications Commission Optical Media Board Philippine Coconut Authority Philippine Drug Enforcement Agency Philippine Economic Zone Authority Philippine National Police Philippine Nuclear Research Institute Phillippine Ozone Desk Sugar Regulatory Administration

TF Initiatives Implement e2M Customs projectwhere all Customs transactions, from import, export and transshipment, will be covered TF Initiatives I. Migrate to ASYCUDAWorld where all Customs transactions, from import, export and transshipment, will be covered

E2M Status and Enhancement Import and Assesment has been implemented nationwide as of August 2011. AEDS-PILOT implementation in POM and MICP . Unisys to meet with various exports group on April 1, 2010 to agree with the implementation date. E2M Status and Enhancement A. E2M Customs System 1. Import and Assessment System - implemented nationwide as of August 2010 2. Automated Export Documentation System ( new version – web based ) - pilot implementation in POM and MICP. Unisys to meet with various exports group on April 1, 2011 to agree with the implementation date. 17

E2M Status and Enhancement Other Applications Systems Informal Entry System – Implementation to be completed by April 30, 2011 Automated Bonds Management System – CMO is under Review Transit System – Implementation to be completed by April 30, 2011 Value Reference Information System (VRIS) – System configuration being done by MISTG & VRIS group E2M Status and Enhancement 3. Other Applications Systems - Informal Entry System – Full implementation by April 30, 2011 - Automated Bonds Management System –CMO is under review - Transit System – Implementation to be completed by April 30, 2011 - Value Reference Information System (VRIS)- system configuration being done by MISTG & VRIS group 18

E2M Status and Enhancement 5. Client Profile Registration System Export Agencies (PhilExport, BOI, EDC) were required to submit list of members in good standing by 3.11.2011 VASPs to help encode and transmit CPRS data of Exporters to E2M by March 25, 2011 MISTG to activate exporters CPRS Meeting with EDC, Philexport , BOI is set April 1, 2011 to follow-up on status and set schedule for implementation of AEDS. E2M Status and Enhancement 5. Client Profile Registration System - Export Agencies (PhilExport, BOI, EDC) were required to submit list of members in good standing by 3.11.2011 VASPs to help encode and transmit CPRS data of Exporters to E2M by March 25, 2011 MISTG to activate exporters CPRS Meeting with EDC, Philexport , BOI is set April 1, 2011 to follow-up on status and set schedule for implementation of AEDS. 19

E2M STATUS and ENHANCEMENT B. Electronic Certificate of Payment System Nationwide implementation done in 2011 C. Enhanced Risk Management System - Implemented also in 2010 under ASYCUDA 1.16D E2M STATUS and ENHANCEMENT B. Electronic Certificate of Payment System - nationwide implementation done in 2010 C. Enhanced Risk Management System - implemented also in 2011 under ASYCUDA 1.16D 20

Procedural and Technical Enhancements of I-Care Introduced a systematic and computerized procedure in the handling of documents submitted to ICARE (i.e. scanning of applications) Initiated a faster mode of sending notices to applicant-importers and brokers by sending e-mails Designating pre-evaluators for completeness of documents Creation of TWG for the rationalization of Accreditation requirements. 21

Thank you and good day! Thank you and good day!