Groups hail closure of Mighty's bonded warehouse

By Iris C. Gonzales, The Philippine Star

Posted at Feb 09 2014 10:29 AM | Updated as of Feb 09 2014 06:29 PM

MANILA, Philippines - Business and advocacy groups welcomed the move of the Bureau of Customs (BOC) to shut down a Customs bonded warehouse (CBW) operated by Mighty Corp., a low-priced cigarette maker in Malolos, Bulacan.

Jesus Lim Arranza, chairman of the 800-strong Federation of Philippine Industries (FPI) and anti-tobacco groups hailed the BOC for closing Mighty’s CBW pending full audit investigations.

In a joint statement, the Action for Economic Reforms (AER), FCTC Alliance of the Philippines (FCAP), Philippine College of Physicians (PCP), and WomanHealth Philippines said that Mighty has been accused of engaging in technical smuggling and downshifting consumption, which “does not align with the Sin Tax Law’s objective of discouraging smoking.”

After months of investigation, a special Department of Finance Task Force ordered the shutdown of the importation warehouse of Mighty Corp. for “serious violations of the Tariff and Customs Code.”

The move bars Mighty Corp. from re-channeling duty-free cigarettes-for-export for domestic distribution and consumption.

However, Mighty said it’s business as usual for the company and that it has long been focused on the domestic market.

In an initial review of the import entries covering 2011 and 2012, BOC discovered that Mighty imported tobacco regardless of type and country of origin at $0.68 per kilo where other high-volume tobacco importers paid a range of $3 to $8, based on data supplied by the National Tobacco Administration (NTA).

Also, Mighty imported acetate tow, the raw material used for filters, at $0.30 to $0.32 per kilo. Other importers declared amounts ranging from $4.93 to $7.45.

Mighty claims that most of their tobacco leaf and acetate tow imports are intended for export.

But the Task Force discovered the “unauthorized” use of bonded raw materials intended for export of domestic production without proper payment of Customs duties.

Based on the export commodity clearance issued by the National Tobacco Administration (NTA), the imported raw materials do not match the volume of finished goods actually exported.

“Simply put, there is significant unaccounted tobacco leaf and acetate tow that have not yet been exported by Mighty within the allowable period,” the Task Force said in its report.

The Task Force was created under Customs Special Order (CSO) 60-2013 dated Nov. 6, 2013, pursuant to the memorandum issued by Finance Secretary Cesar Purisima on Aug. 15, 2013.

This developed as Congress prepare to hold its own investigation on the alleged smuggling and tax evasion in relation to payment of sin taxes on cigarettes.

Rep. Paolo Javier has filed a resolution in the House calling for an inquiry, while Sen. Miriam Defensor Santiago filed a similar measure in the Senate.

Party-list Rep. Jonathan dela Cruz specifically asked the House Ways and Means Committee to investigate the alleged questionable business practices of Mighty which he said may have resulted to the non-collection of at least P4.4 billion in excise taxes last year.