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Customs accreditation — many crimes have been committed in your name!

Accreditation is the first issue one has to get acquainted with when planning to deal with the customs bureau. Unless your firm is accredited, your importation documents will not be processed. You have to get accreditation, otherwise your importation will languish within the customs zone for eons.

Under the old Tariff and Customs Code of the Philippines (TCCP), accreditation was never a legislative imposition. It was not even expressly mentioned in any of its provisions. It gained relevance, traction, recognition, and prominence only through various rules and regulations of the agency—i.e., Customs Administrative Order (CAO), Customs Memorandum Order (CMO), or Customs Memorandum Circular (CMC), that were issued by our fiscal and customs authorities in the exercise of their powers of subordinate legislation. Until the last time the TCCP was amended to accommodate post-entry audit operations, there was no mention of accreditation.

But the objectives of accreditation were undoubtedly noble, and their pursuit were necessary, until—unfortunately—the implementation became tainted with graft, its reputation besmirched, and the entire process has gone terribly awry. Today, nothing good has been said about it; only its notoriety has stuck with this administrative mechanism. And it has even survived the TCCP having perpetuated its infamy under the new Customs Modernization and Tariff Act (CMTA).

What started as an effective organizational response to the many evils that were sought to be avoided, succumbed to, and, worse, ended up becoming the very evil itself. And the BOC seemingly has not find—or deliberately refuses to find—an antidote to this virus which—for want of a name, we shall refer to as “accreditationitis.” This dreaded disease has long gnawed into the very backbone of the agency’s cargo clearing system. Perforce, a procedure is necessary, and “accreditingotomy” it has to be.

Unfortunately, the agency’s response to contain this disease was simply to transfer the Accreditation Office to a new organizational grouping, or create a new name for the outfit, or install a new head; but it maintained its systems and processes that were pockmarked with holes—so big are the holes that even ocean going vessels can breeze through them, in a manner of speaking.

The new CMTA has preserved the requirement in the old law, that is, for the BOC to keep records of importers and brokers. These data are necessary in the conduct of the post audit activities of the bureau, and include vital information that can only be generated through a system of accreditation.

Thus, the CMTA provides:

“SEC. 1006. Records to be Kept by the Bureau. – The Bureau shall keep a database of importer and broker profiles which shall include a record of audit results and the following information and papers:

  • (a) Articles of Incorporation;
  • (b) The company structure, which shall include but not limited to incorporators and board of directors, key officers, and organizational structure;
  • (c) Key importations;
  • (d) Privileges enjoyed;
  • (e) Penalties; and
  • (f) Risk categories.

X x x.”

Much was expected of this CMTA. After all, the law “generally aims to simplify, modernize and align the country’s customs procedures with global best practices,” as well as “do justice to overseas Filipino workers who remit billions of pesos to the country by not burdening them with excessive taxes,” said Senator Sonny Angara.

The new law was foisted on the menace of smuggling. It “imposes stiffer penalties for smugglers and their coddlers in government,” notes Senator Recto.

Approved two months before the installation of a new President who campaigned on a platform of a “drug-free, crime-free, and drug-free Federal Philippines,” this new law has not really curtailed the evils that were sought to be avoided—consignees-for-hire, single-proprietorships bringing in billion pesos-worth of goods, firms that are not just flying-by-night but on-broad-day-light as well, among the many, still proliferate in wild abandon.

A check into the regulatory architecture of this accreditation process will readily show that its design was bound to fail ab initio. The whole process is host to the DNA of corruption, that is, C=M+D-A, as deciphered by Dean Robert Kliitgard of the Rand Graduate School of Sta. Monica, California, USA.

Kliitgard says: where there is monopoly of authority, plus wide latitude of discretion, minus accountability, you are likely to see corruption.

Applied to the BOC’s accreditation process, M+D-A exists unchallenged, undisturbed, and unabated—worse, nurtured and cared for.

Starting with its days under the Customs Intelligence and Investigation Service (CIIS) of the Intelligence and Enforcement Group (IEG) as Accreditation Unit, it was re-located to the Legal Service (LS) of the Revenue Collections Monitoring Group (RCMG) as Customs Accreditation Secretariat (CAS). Then, having seen the potency of the “enterprise,” the RCMG itself poked its dainty fingers into the accreditation process as its Interim Customs Accreditation and Registration (ICARE) office—this was the period when some 2000 containers were reported missing. ICARE didn’t care; then it meandered its way to a joint-accreditation system in tandem with the Bureau of Internal Revenue (BIR) upon the behest of the Department of Finance (DOF). Eventually, it got unnecessarily annexed to the Office of the Commissioner (OCOM) as its Accreditation Management Office (AMO), yet the outfit’s systems did not really address the problem of M+D-A.

As had been for decades, BOC has a predilection for simply changing people, without changing its systems. And this port-based agency has been doing this repeatedly in the same fashion for the same purpose with high expectation for a different outcome. Einstein has a term for this: insanity. Dr. Stephen Covey, once one of America’s Five Most Influential People, expounded Einstein’s postulate, he said: “One of the definitions of insanity is to keep on doing the same thing the same way and expect a different result.”

Under the present dispensation, the incumbent Customs chief is the third Customs Commissioner of the Duterte Administration—they’re all handpicked by the Chief Executive, sans recommendation from anyone, not even from the top honcho of the Finance department. To date, the systems and processes of accreditation office have virtually remained unchanged—from the perspective of checks and balances.

I remembered having been invited to a focused group discussion (FGD) by a reform-minded general who was then a deputy commissioner who was supervising the accreditation outfit. We were to discuss the pitfalls of the agency’s accreditation process. I joined, actively participated in the discussion, and, in the end, I recommended an alternative solution: a 2-phase measure called Project EnLIST.

The insiders (read: staffmembers of the accreditation office) agreed on Phase 1 of my proposal—it will make the process fast and less cumbersome. Unfortunately, they did not like Phase 2, where abuses in Phase 1 is capable of being checked and exposed—the whole shebang being no longer within the exclusive control of the unit, but by a process that will now dilute the insider’s absolute authority and wide latitude of discretion. The resistance from within was so clear to me—I sensed they were taking the reformist general for a ride. I remember confronting a co-participant: “Mister, seems like you don’t want the system changed!” He was nonplussed. The objection was loud and clear. So, I got out of the room of that Pasay-based hotel where the zarzuela was held. I know I would have gotten the nod of the General had only they decided to refer my proposal; but they did not. Unfortunately, that deputy commissioner resigned from BOC out of exasperation.

From where I sit, the BOC accreditation process is not a hopeless case. We only have to recognize that it is not necessarily a case of bad people—rather a case of bad systems. And it gets compounded when this bad system is assigned to be handled by bad people.

So, what’s this 2-Phase EnLIST System all about? How will it function?

EnLIST is an acronym for Enrollment of Legitimate Importers for Security in Trade. But more than just an acronym, the 2-phase system will address the foundations of the evils that have been besetting the agency year after year, administration after administration: consignees-for-hire, single-proprietorships bringing in billion pesos-worth of goods, importers that are not just flying-by-night but on-broad-day-light as well, or missing containers in hundreds or even thousands, in addition to the more paramount issues of national security, among them the entry of anti-social goods like drugs, knock-off products, firearms and explosives, and terrorist’s gadgets.

So, how does it operate?

Phase 1—eliminates the yearly registration. There shall be one time registration only. This will facilitate trade, and it will make the legitimate importer’s administrative burdens much lighter.

To ensure that the legitimacy of importers, and security interests are not imperiled, Phase 1 shall be attached to a regularly updated firms and importers risk management system (FIRMS), that shall be the starting mechanism for a merit and demerit system (MADS) whose scorecard shall be inputted into the Phase 2 of Project EnLIST.

This MADS, together with other derogatory information (DERO) that are crowdsourced and carefully validated, shall become the bases for reclassifying FIRMS, if not, totally blacklisting or revoking the company’s accreditation.

In other words, Phase 2 consists of outsourced and validated inputs from internal sub-systems of the Bureau, as well as from externally sourced out DEROs like those emanating from the courts, the Department of Justice (DOJ), the National Bureau of Investigation (NBI), the BIR, the DOF, the local government units (LGUs), including the Office of the President (OP).

The validated DERO from the various externalities of the Bureau of Customs, together with the inputs from the various ports and subports, their enforcement units—CIIS, ESS, and the OCOM, will periodically and automatically revise—upgrade or downgrade of the firms’ and importers’ risk categories; or, whenever warranted, blacklist or totally delete the importer’s name from its registry of accredited importers, of course, following a summary proceeding that observes due process.

This is what the insiders did not like in my proposal—the Phase 2, where they lose their centralized authority and unbridled discretion.

They preferred the present practice—only the Phase 1, the Enrollment Phase, where post enrollment incidents will not be factored until a controversy erupts and ends up in a congressional probe. And, there can only be one reason for this: your guess is as good as mine, yet we both stand a good chance of being correct—100 is to nil, if you may.

Again, it is not necessarily a case of bad people; rather a case of bad system—and it stinks, and it sucks!

Kalakaran na? OMG! if only they would, they could. If they buy in, Project EnLIST will clean the list–but this is what they dread the most.

About Atty. Ramon Cuyco

Ramon G. Cuyco, Esq., CESO (inactive), former Regional Director, LTO; former DOTC Spokesperson; former Customs Director, former Head, Competitive Planning and Management Staff of the Bureau of Immigration. Currently, a Project-based Consultant at the Development Academy of the Philippines.

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