A friend from Down Under called me asking what benchmarking means. Obviously, he was watching the legislative inquiries in both chambers of Congress. I am sure there is no such animal among the kangaroos and koalas even in their outbacks.
This I told him: Benchmarking is a smugglingo (smuggling lingo). It is not found in the customs books on valuation, whether in the old Tariff and Customs Code of the Philippines (TCCP), or the newly minted Customs Modernization and Tariff Act (CMTA). It’s just a concoction out of frustration. It’s pure and simple smuggling.
Strictly, it is not a benchmark. It refers to an imaginary threshold of declared values which when breached, would invite a suspecting customs mind to trigger a challenge most likely grounded on undervaluation, and thus put the cargo on hold.
This came about because of the shift in customs valuation upon the imposition of the World Customs Organization. Where we used to haggle the proper valuation under the Home Consumption Value scheme, among the many other schemes, the WTO mandated legislation, that is, Republic Act No. 9135, signaled the onset of what we now call the Transaction Value (TV), and the 5 other methods of valuation normally applied sequentially.
Under Method One, the TV of the merchandize refers to the price actually paid or payable for the goods when sold for export to the Philippines, of course, with allowable adjustments as enumerated by the law. In short, how much you actually paid for these goods beyond our borders, plus some legally allowed adjustments shall become the dutiable base amount upon which government revenues hinge. No haggling; just show the receipts and other documents.
Naturally, what the documents will say carries the day, so to speak. The commercial invoice, receipts, and other papers speak for themselves. As a result, the dutiable base became higher as it was no longer subject to negotiation between the importer and the customs appraisers and examiners. This gave rise to higher yield for the BOC. The customs community was caught by surprise–this included the principals of the brokers, consignees, and personeros as well. Masyadong mataas, they chorused. So, port holiday muna; meaning, import less, unless the duties and taxes are lowered. But, the dutiable base is now defined by law; these are now beyond the discretion of the customs appraisers and examiners. How can we do it? Nonetheless, they stood their grounds. Result: REVENUE COLLECTION DROPPED.
And because the Customs bureau has a collection target to meet–normally DBCC-imposed, and the players, importers, consignees, and brokers are too aware of this predicament, they played hardball; and the government was forced to negotiate–this gave birth to the dreaded benchmarking.
Thus, this threshold known as benchmark is the lower limit. Usually, the upper limit which is seldom breached, as we seldom notice faithful declarant, unless you belong to the top 1000 corporations (which is even non-sequitor), is not much contentious because they command higher yield for the government anyway.
And, the mechanics are simple: Any imported goods whose declared value falls below the threshold will automatically be subjected to actual inspection where determination not only of the value but also the volume will be determined. The actual physical inspection on his shipments is dreaded by the importer; not only because it will unearth the real score, but also because it will delay the release of these cargo, even assuming that he declared their true purchase value fair and square.
So the trick is: regardless of value, just don’t declare it below the threshold; which means, you don’t breached their benchmark, and you’ll be fine. True enough, it worked; it has worked, it is still working, and will continue to work unless drastic overhaul is done. This can even overwrite, silence, or ignore the bureau’s Risk Management System.
In short, benchmarking is simply a subterfuge to evade actual inspection even if there is UNDERVALUATION, UNDERDECLARATION, MISCLASSIFICATION, or worst, FORGERIES and other FALSITIES. For as long as your declared value falls within the threshold, you’re OK; no inspection, no negotiation. this is the kalakaran (trend).
The lure of facilitated release, and his goods hitting the market just in time is what an importer gets for deferring to the kalakaran. Declare within the threshold, sumunod ka sa kalakaran (just follow the trend), and, labas na ang kargamento nyo! Walang hassle! (your shipment will come out hassle-free!)
Inevitably, when you make sure that you declare within the threshold amount, you will have to make some arbitrary adjustments of your papers; in short, commit some forgeries and falsities, because you have to see to it that your documents, like official receipts, support your declared value. For, how can you play benchmarking without falsifying some documents? Unless, the real TV is really falling within the threshold.
Benchmarking is an invitation to falsify; benchmarking is the culmination of falsification.
Yet, the Customs appraisers are unfairly exposed regularly to these risks, not necessarily of their liking, but because of the hard choice: between missing their revenue collection targets thus booted out of their posts on one hand; and, the deleterious effects of falsities which includes laxity in border control to the prejudice of the government, as well as their exposure to criminal and administrative liabilities on the other.
By the way, the benchmark as understood in the waterfront fluctuates. At times, it is pegged at Php 40,000 for TEUs, or Php 80,000 for 40 footers; regardless of what they actually contain, or how much they actually cost when purchased abroad. Sometimes, during election periods, the threshold goes down to 20 thousand or even 15 thousand per TEUs.
The Customs people are aware of the risks; yet, the clashing demands of hitting the collection target versus the interests of effective enforcement neutralize each other – to the damage and prejudice of customs systems and processes, as well as the employees shepherding them.
While, theoretically, effective customs enforcement should support rightful collection of revenue, the ground level realities at Customs Ground Zero will tell every waterfront observer that they are not sitting well with each other. Hence, they should be made distinct and separate concerns of two different offices.
And, because almost 90 per cent of our imports now are either zero-rated, duty-neutral, or ecozone-bound-hence-conditionally-free, it is wise to realign or reassign the assessment and collection functions of the bureau to the BIR–for after all, the major bulk of BOC’s collections now come from the BIR-delegated functions.
Then, enhance effective customs enforcement under a revitalized bureau that should cover Customs Intelligence and Border Protection Bureau.
Unless we decouple the two clashing interests, it can only be this: either we meet revenue collection but precariously lift our border security screens; or, go hammer and thongs on customs enforcement, but fall flat on its face as the weight of its revenue collection target crashes on its dysfunctional system.