Customs orders suspension of Mighty's bonded warehouse

By Iris C. Gonzales, The Philippine Star

Posted at Jan 23 2014 08:56 AM | Updated as of Jan 23 2014 04:56 PM

MANILA - The Bureau of Customs (BOC) has ordered the suspension of the customs bonded warehouse of Mighty Corp., a Bulacan-based cigarette company.

In a Jan. 17 memorandum, Customs Commissioner John Sevilla has ordered the suspension of the cigarette company’s warehouse, acting on the recommendation of a task force formed to investigate Mighty’s operations.

“Initial report of the task force reveals that Mighty Corp. committed serious violations of tariff and customs laws, rules and regulations resulting to huge revenue losses for the government. Consequently, there is a need to suspend the operations of the customs bonded warehouse of Mighty Corporation to prevent revenue leakages while further investigation is being conducted,” Sevilla said in his memorandum, a copy of which was obtained by The STAR.

Sevilla directed the district collector of the Port of Manila to immediately implement the suspension of Mighty’s license to operate the bonded warehouse.

“Please be informed that I approved the recommendation of the task force to suspend the license to operate a customs bonded warehouse under CBW M.-1718 of Mighty Corp.,” Sevilla said.

With the suspension order, Mighty will be unable to import tobacco raw materials.

The BOC created the task force following a memorandum issued by Finance Secretary Cesar Purisima on Aug. 15 last year. The Finance chief ordered a probe into the alleged illicit trade practices of Mighty which may have resulted to the non-collection of P4.4 billion in excise taxes last year.

“The volume of imported tobacco leaf for warehousing from the BOC does not match with the volume of re-exports from the Bureau of Internal Revenue, leaving unaccounted tobacco leaf import entries of 6.86 million kilograms in 2011 and 3.52 kg in 2012. The excise tax revenue loss from the unaccounted volume amounts to P1.16 billion in 2011 and P598 million in 2012,” Purisima said.

Furthermore, Purisima said the same case had been noted for acetate tow, a raw material used for cigarette filters. “Moreover, using the same variables of BOC import entries for warehousing and BIR export data, there is also an unaccounted volume of acetate tow (raw material for cigarette filters) amounting to 1.89 million kilograms in 2011 and 2.16 million kg in 2012. Computing for the implied number of sticks, data show that Mighty exported only 2.22 billion sticks out of the 13.79 billion sticks imported in 2011 while in 2012, Mighty exported only 2.18 billion sticks out of the 16.39 billion sticks imported,” Purisima said.

In his memorandum, Purisima also noted that the price of Mighty imports is “much lower” at P0.68 per kilogram compared to the prices of other tobacco importers, which ranged from $3 to $8 per kg based on data from the National Tobacco Administration.

Earlier, several lawmakers filed resolutions calling for a review of the Sin Tax Law which took effect Jan. 1, 2013. Rep. Paolo Javier has filed the resolution in the House calling for an inquiry while Sen. Miriam Defensor Santiago filed a similar measure in the Senate.

Mighty, for its part, has vehemently denied it was engaged in unscrupulous business practices.

The company’s executive vice president and spokesperson Oscar Barrientos has said that Mighty has paid P5.4 billion in excise tax from January to September 2013 alone.

Reacting to the Customs’ order, Mighty Corp. said it would continue to cooperate with the BOC regarding an ongoing inquiry being conducted by Task Force Mighty Corp.

Barrientos said that the company had decided in the latter part of 2013 to fully concentrate on serving the domestic market.

As a result of this strategy, he said the company veered away from exports. Consequently, the company’s customs bonded warehouses are now sparingly used.

“It is still business as usual for us. Nothing has changed, and until such time that we receive the final report of the task force, it will be business as usual,” he said.