The Bureau of Customs (BoC) stands to lose about P7 billion in revenues as a result of zero tariffs on all trade goods from Australia, New Zealand, and ASEAN member countries but the benefits of the free trade agreement far outweighs its revenue losses for the year.

Customs Commissioner Napoleon Morales said the BoC will bear the brunt of the reduced tariffs but he said this would be offset by the 12 percent value added tax (VAT) collection they will get from their importations.

“Reduction of tariff is now the pattern in the world trade and we cannot isolate ourselves because nothing would happen and no new investments would come in,” Morales said in an interview.

The BoC and Department of Trade and Industry (DTI) recently launched the ASEAN- Australia- New Zealand Free Trade Agreement (AANZFTA), which aims to reduce tariff rates while keeping afloat its trade of goods and services with other countries.

The free trade agreement with the 10-member ASEAN, Australia and New Zealand was signed on February 27 last year. It covers the reduction of tariffs on all traded goods and the simplification of procedures governing rules of origin of the goods.

In a separate interview, Customs Deputy Commissioner and lawyer. Reynaldo Nicolas said BoC will strictly implement the preferential tariff which means that the traded goods are only entitled to zero tariffs if they contain 40 percent value added content from the country of origin.

"If the raw materials of the product come from other countries such as Argentina although it has a certificate of origin of Australia or New Zealand, it cannot apply for the free trade agreement,” Nicolas said.

He said this requirement under AANZFTA will likewise be imposed by the countries adhering to the free trade agreement. “To be part of...they must present the certificate of origin.”

The certificate of origin attests to the eligibility of products for preferential treatment for export to another AANZFTA market. The application process is simplified for convenience of exporter and for trade efficiency and transparency.