Digital Customs: The opportunities of a digitized system

Illegal trade reduces turnovers for honest operators and domestic producers while causing significant revenue losses for the national government. The failure to declare imported goods and local production undermines the administration's programs to provide better infrastructures, social services, public health, and even school buildings.

Customs commissioner Yogi Filemon Ruiz, guesting in the Daily Tribune's digital program Straight Talk, said enforcing tax policies and detecting non-compliance and fraud are critical to nation-building, especially with the budget relying heavily on collecting taxes.

"This is hopefully the final leg of digitalization that will do away with the entire process of having documents handed from one Customs officer to another," Ruiz said as he explained the full implementation of the P5.5 billion Philippine Customs Modernization Project.

With a digitalized system, a tracking system will monitor how long documents stay in a specific office.

"If documents' processing is delayed and the reason is insufficient, then it is a ground to file a case," he added.

Smuggling losses
A study by The Center for Research and Communication Foundation, Inc., a think tank based in the Philippines and affiliated with the University of Asia and the Pacific, found that some P904.6 billion worth of products were smuggled into the Philippines from 2011 to 2015.

While an independent study by the Federation of Philippine Industries estimated the government lost more than P1.33 trillion in revenue due to smuggling from 2002 to 2011. It added that lost revenues from 2002 to 2008 reached P889.5 billion, with further losses of P119.65 billion in 2009 and Php 326.76 billion in 2010 and 2011.

But Ruiz expressed optimism that a digitized BoC operation will solve the lingering challenge.

"I can see a resolution is on the horizon, and the Bureau of Customs will be at par with other first-world customs administration," he added.

He said 91 percent of the 155 processes at the BoC have already been digitalized. These include the Liquidation and Billing System, Raw Materials Liquidation System, Electronic Customs Baggage and Currencies Declaration, National Customs Intelligence System, E2M-ETRACC Integration, and Payment Application Secure 6.

The remaining nine percent of the bureau's digitization initiative has two critical anti-smuggling features inherent to its system, including Real-Time Tracking and Immutable Data.

The real-time tracking of cargoes from the point of origin to the point of destination will prevent cargo diversion or diverting shipments to another warehouse. This is a favorite scheme of smugglers.

Building trust through technology

If there is one segment in the Customs operations that fosters distrust, it is the supply chain. The movements of goods change hands multiple times, sit idle for long stretches, and ultimately show up in a warehouse or store shelf. Most of us do not know how they got there, and we don't care.

But all the stakeholders responsible for ensuring that goods reach store shelves do care. They care that the products are in good condition, that they arrived on time, and that it is the least cost to maximize margin. This results in a lack of trust in the system.

Eugenio Ynion Jr., the CEO of Shiptek Solutions and developer of the end-to-end logistics company XLOG on the blockchain platform, is offering its platform to the BoC. If approved, Customs will be saved of the billion peso expenses for its digital transformation plans as XLOG is already fully-functioning and ready for integration with its systems.

Among many of its functions, XLOG allows real-time monitoring of all cargoes. This will enable law intermediaries to track the containers in real time. This will prevent container diversion and ensure the goods are delivered on time and where they should be delivered.

The solution offered by the technology provides transparency and accountability regarding cargo movement because the containers will be tracked in real-time.

Like the tracking system now in use among private port operators, the technology makes it easy for investigators to identify and prosecute suspected smugglers.

The blockchain will eliminate bogus consignees, shippers, and addresses. Even the contents and value of the cargo cannot be altered "without the consent of all stakeholders."

A blockchain is an online database that stores information across a network of personal computers, making it decentralized and distributed. This means no major company or person owns the database, yet everyone in the network can use and help run it but not tamper with it.

Gone will be the days of "Recto -produced cargo manifest, cargo declaration, bogus consignees" because nobody can tamper with the data once it is stored on the blockchain.

And even if the importer or broker requested an "amendment" to the cargo manifest, it will leave a paper trail of evidence, including the Customs examiner, ESS Guard, and Customs Collector, who approved the release of the shipment.

These data can be shared with relevant government agencies for Post-Audit purposes to determine if the correct taxes are collected.