The customs agency of China has committed to help the Bureau of Customs (BOC) in its efforts to stop Chinese exports of unauthorized cigarette-making machines from entering the country, as part of the Duterte administration’s stepped-up campaign against the illicit tobacco trade.

BOC Commissioner Rey Leonardo Guerrero said in his report to Finance Secretary Carlos Dominguez III that he reiterated the Philippines’ concern over the export of these unauthorized cigarette-making machines to the Chinese vice minister of the General Administration of Customs of China (GACC) on the sidelines of the 28th ASEAN Customs Directors-General Meeting held recently in Laos.

“I asked them if they could stop such exportations on their part because this is creating problems as far we’re concerned,” Guerrero said in his report to Dominguez during a recent Department of Finance (DOF) Executive Committee (Execom) meeting.

Guerrero said the Chinese customs officials agreed “to look into the matter.”

Earlier, Dominguez directed the BOC and the Bureau of Internal Revenue (BIR) to work with their respective counterparts in China to stop the illicit entry of cigarette-making machines that are being used to manufacture counterfeit tobacco products in the country.

The Finance chief issued the order after confirming with BIR Commissioner Caesar Dulay that the illegal tobacco trade has shifted from smuggling cigarettes to producing locally counterfeit brands using undocumented cigarette-making machines acquired from China.

Based on previous raids conducted by the BIR, counterfeiters are able to manufacture fake versions of popular brands using smaller, more portable versions of the machines and devices for making cigarettes.

Just last May 29, the BIR Strike Team tasked to crack down on the illicit tobacco trade conducted an inventory of machines, finished goods, raw materials and counterfeit tax stamps seized by the National Bureau of Investigation (NBI) at a factory in Marilao, Bulacan.

Erring traders have apparently switched to manufacturing their own counterfeit cigarettes in lieu of smuggling legitimate products following the heightened joint BIR-BOC drive against suppliers of tobacco products with fake tax stamps, which was in compliance with Dominguez’s earlier orders.

Dominguez has underscored the need for heightened government vigilance against the illicit manufacture and sale of tobacco products, given that the increase in the excise tax rates of tobacco products has incentivized illegal traders to increasingly resort to smuggling and tax evasion.

He said the destruction last January of several machines used in the manufacture of illicitly traded cigarettes forms part of the Duterte administration’s relentless campaign against manufacturers of these products, as effectively demonstrated in 2017 when the DOF, through the BIR and of BOC, cracked down on the “biggest fish,” namely Mighty Corp.

Taking down Mighty Corp. for using counterfeit excise tax stamps led to the biggest tax settlement ever in the country’s history amounting to about P30 billion, forcing the company to get out of the cigarette business.

Moreover, after Japan Tobacco Inc. (JTI) took over the business of Mighty, tobacco excise tax collections increased by at least P2 billion a month.

The contraband destroyed last Jan. 18 in Porac, Pampanga included units and parts of three filter maker machines, two packaging machines, and a cigarette-making machine, along with 484 master cases of various finished cigarette brands, and raw materials used in making cigarettes such as filter rods, tipping papers, packaging foil, acetate tow, and other supplies.

With a single cigarette-making machine capable of producing 20,000 sticks per minute, which is equivalent to about 9.6 million sticks during an eight-hour shift or 480,000 packs per day, Dominguez said the government has effectively blocked attempts of being defrauded of as much as P16.8 million per day of much-needed revenues for its priority programs—infrastructure and human capital development—by destroying these confiscated machines and products.

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