JGL Eye

By JOSEPH G. LARIOSA

(© Journal Group Link International)

The Arithmetic of the Balikbayan-boxes’ Shipping Business Is Explained by this Columnist’s Contacts

C HICAGO (jGLi) – I have been dismissing rumors a few months ago of a former Philippine Customs commissioner, who bought a house for $300,000 in cash in California.

But the latest problem facing a Chicago, Illinois-based freight forwarder could give us a clue that the rumor against this Philippine Customs commissioner under former Philippine President Gloria Macapagal Arroyo could be true after all.

Because no member in the freight forwarder industry in the Chicago area will volunteer any information, I have to put two and two together and try to prove that the commissioner could really buy that kind of house with that kind of money.

When the Shipping Express owned by Robert and Hazel Cirera in Chicago could not deliver on their promise to deliver the Balikbayan boxes to their destinations by Christmas, everything seems to have unraveled.

There are about a dozen or so cargo freight forwarders in Chicago area. But an employee of the Cireras in the Philippines told me that their broker in the Philippines is holding their container unless they fork out 500,000 pesos (US$11,628.00). Each 50-foot container the employee, Renz Santos, told me contains 500 to 600 Balikbayan boxes.

A forwarder in Chicago told me that “there is no such “50-foot” container if you don’t mind me correcting you.” What are there are 20-foot, 40-foot, and 45-foot containers, “but depending on the size of the container, the customs taxes and duties will vary.”

The forwarder said, “I don’t know what practice other businesses do, but we operate with legitimacy both here in the U.S. and in the Philippines when shipping cargo.”

40-FOOT CONTAINER CAN CONTAIN 1,000 BALIKBAYAN BOXES

He explained that a 20-foot container can load anywhere from 150 to 170 Balibayan boxes. In other words, a 40-foot container can load anywhere from 300 to 340 Balikbayan boxes.

But the forwarder never disputed the “500,000 pesos (US$11,628.00) demanded by the broker in the Philippines.”

I tried to solicit information from other forwarders about the way they operate in Chicago but I did not get any answer.

So, I had to ask around in California, where hundreds of cargo forwarders are operating.

Until I ran into a former Philippine Customs employee, who immigrated to California a long time ago. Although, he is now out of the Philippine government service, he still gets feedbacks from his current and former co-employees in the Philippines Customs office in Manila.

He told me this is how a former cargo freight forwarder in California operates: If a forwarder ships a 40-foot container, the secret of the profit is in putting the boxes into the container. If the 40-foot container is “tight” enough, it can load up to 1,000 Balikbayan boxes (measuring 18”X18”X20”), not the 340 Balikbayan boxes intimated to me by the Chicago forwarder.

If the forwarder charges a sender of Balikbayan boxes $50.00 per box, this means in a one 40-foot container, the forwarder makes $50,000.00. If the forwarder ships the 40-foot container from the United States, the freight fee is $5,000. This leaves the forwarder a balance of $45,000.

P250K (US$5,814) “SOP” AT CUSTOMS

W hen the container gets to the Philippine Customs, this is where the haggling begins. If the forwarder wants to breeze thru the Customs “without inspection,” he will have to put up with the “SOP” (standard operating procedure or payment) under the table to the tune of 250,000 pesos (US$5,814.00) to Customs and an additional 50,000 pesos ($1,163.00) to the broker. This will leave the forwarder a balance of $38,000.00, still a handsome amount.

Now, if the forwarder refuses to come up with the “SOP” because he is a law-abiding forwarder, then his container will get “100%” inspection. This, of course, means the inspection will take forever.

This must have happened to the Shipping Express, whose customers are now planning to formally take their complaints against this forwarder to the Illinois Attorney General’s Office for the overdue delivery of the boxes.

If a forwarder goes past Customs and broker, he will have to pay the arrastre about 45,000 pesos (US$1,000.00) and this fee is legitimately declared and duly-receipted. This still leaves the forwarder, US$37,000.00.

When the forwarder takes the contents of the container from Customs, they will hire delivery service trucks and workers to move the Balikbayan boxes  from the Customs to the forwarder’s warehouse. Here, the forwarder will have to pay up another US$5,000, leaving the forwarder some US$32,000 profit.

THANK YOU, PRESIDENT MARCOS!

B ut some of you will ask why doesn’t the forwarder pay taxes at the Customs? Well, the forwarders have President Ferdinand Marcos to thank for.  Under the Balikbayan program of President Marcos, which is still in place to this day, Balikbayan boxes are exempted from paying taxes at Customs.

You can just imagine the windfall of the forwarders if they can make US$32,000 each shipment of a 40-foot container? If a forwarder can make two 40-foot shipments in a year, they make something like US$64,000 a year, which is an average income of a 9-5 American employee.

Now in the under-the-table payment of US$5,814 to Customs, if the Customs officials and employees divvied up the loot, the Customs commissioner easily gets 20% or about US$1,162 if he “moderates his greed.”

Think of the US$1,162 that the Customs Commissioner gets for a one 40-foot container. If there are ten 40-foot containers inspected in one day, it will be a cool US$11,620.00 a day that a Customs Commissioner takes home.

If there are 221 weekdays a year, that will be US$2,568,020 annual take-home pay. And the US$300,000 cash that the Customs Commissioner used to buy a house in California was only equivalent to his take for his 25 days of work or loot. A drop in the bucket.

I wonder where the Customs Commissioner took the rest of his loot? # # #

Editor’s Note: To contact the author, please e-mail him at:  (lariosa_jos@sbcglobal.net)