Customs Reforms in the Philippines

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Derek O’Connor’
6 years ago
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1 Customs Reforms in the Philippines June 12, 2006 Bertram I. Spector Management Systems International 600 Water Street, NW, Washington, DC 20024

2 Bureau of Customs in the Philippines Collects 20% of government s total revenue Target of political and business leaders Entrenched corruption Victims are also willing participants Few monitoring or accountability mechanisms 2

3 Long History of Customs Reforms in the Philippines Sacking of personnel Revision of legal framework and valuation methods Introduction of assembly line processing Structural reorganization Streamlining procedures/reduction of red tape Implementation of IT system (World Bank: $19 million) Code of conduct and Integrity Action Plan Internal anticorruption investigative unit in MOF 3

4 USAID/EGTA Intervention: Draft and implement Customs Valuation Act Transaction valuation methodology Risk classification system (selectivity) Implement Super Green Lane Implement Post-Entry Audit Office 4

5 Case Study Goals Analysis of long-term results of EGTA interventions Efficiency outcomes speed of release and facilitated trade Effectiveness outcomes increased revenue collection Anti-corruption outcomes reduced bribery requests and offers 5

6 Early Intervention Results Initial results after World Bank automation project Duty collected varied (+ & -) against targets and projections Average clearance time reduced from 10 days to less than 3 hours Initial findings after EGTA initiatives Transaction value changeover yielded 2.6% increase in collections Without pre-shipment inspections, administration costs reduced by $68 per declaration & clearance time reduced by 1 to 5 days Super Green Lane saved up to 15 hours in clearance time 6

7 Longer-Term Results of EGTA Reforms Transaction Valuation Importers/brokers pleased with implementation: Calculations understood Viewed as fair Implemented as law intended BUT reference values still applied, reducing objectivity and transparency Selectivity Basically fair, but still viewed as subject to discretion and abuse 80% shipments now selected for Red Lane 7

8 Longer-Term Results of EGTA Reforms Super Green Lane Most SGL-accredited firms use SGL SGL shipments treated in accordance with law BUT 80% of SGL shipments held for documentary/physical examination Few accredited firms Post-Entry Audit Most firms believe audit rules are clear, but teams exercise too much discretion Audits currently suspended 8

9 Efficiency Findings: Inconsistent Picture PERCEPTIONS Faster clearance times attributed to transaction value and SGL BUT also. New procedures damage business activity, slow down imports, hinder efficient transit PRACTICE Overall savings of 1-5 days Dwell time in port down 5 days due to reduced wait for documentation BUT also 38% increase in clearance time Risk selection has increased since the reforms causing major efficiency backsliding 9

10 Effectiveness Findings: Positive Picture Customs collections missed targets half the time between BUT From , actual collection exceeded expected collection by 1 to 45 percent 10

11 Anti-Corruption The Same or Worse Unofficial Practices in Customs Operations Percent of respondents All Brokers only Unofficial Practices as a Result of Interventions Percent of respondents Unofficial practices under TV vs. HCV Asked for unoffical fee during PEA 4 Incurred unofficial fee during SGL accreditation 74 Incurred unofficial fee in SGL processing All Brokers only 11

12 Lessons Learned What Went Wrong? EGTA reforms proper framework, well-conceived, well-supported BOC mismanagement Extensive leadership turnover Limited buy-in for reform Excessive discretion remained Agency motive targeted at revenue generation BOC client motivation to circumvent in absence of controls 12

13 Recommendations for Future Customs Reform Programs 1. Management supervision and controls at all levels 2. High risk for corrupt behaviors Manage and monitor personnel strictly Time limits for accomplishing basic clearance steps Random checks of personnel and procedures Real sanctions for abuse Continuous training about reformed procedures Re-target Bureau s goals, from tax collection to trade facilitation Improved certification for brokers and importer agents 13

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