In a report titled “Driving ASEAN Action Against Illicit Trade,” submitted to the Philippine government and the ASEAN Secretariat, the council proposed a framework that promotes cooperation-first strategies to address cross-border smuggling and illicit commerce.
The group said stronger regional coordination is necessary as illicit trade continues to threaten fiscal revenues, weaken supply chains, and undermine legitimate businesses.
Why it matters
Illicit trade remains a persistent challenge across ASEAN, affecting industries ranging from pharmaceuticals and agriculture to consumer goods, alcohol, fuels, and tobacco.
According to the EU-ABC, sophisticated transnational networks exploit regulatory gaps and weak enforcement coordination across borders.
The council said ASEAN’s growing trade integration makes stronger safeguards necessary to ensure supply chains remain secure and transparent.
“Achieving deeper trade integration requires not only stronger connectivity but also safeguards to ensure trade remains rules-based,” said EU-ABC executive director Chris Humphrey.
Philippine opportunity
The council said the Philippines is uniquely positioned to lead regional efforts when it assumes the ASEAN chairship in 2026.
Under the theme “Navigating Our Future Together,” the Philippines is expected to prioritize deeper trade and investment ties, supply chain resilience, and digital transformation.
The EU-ABC believes these priorities create a timely platform to embed illicit trade prevention into ASEAN’s broader economic agenda.
By advancing cross-border cooperation and policy alignment, the Philippines could help safeguard regional trade routes and strengthen supply chain security, the council said.
Policy examples
The report highlights several Philippine initiatives that could serve as models for ASEAN.
Among these is the Anti-Agricultural Economic Sabotage Law, which criminalizes large-scale smuggling and strengthens enforcement mechanisms through technical verification.
Another key measure is the Preboarded Technical Verification (PTV) system, designed to intercept noncompliant shipments before they leave exporting countries.
The EU-ABC said such mechanisms could help reduce diversion risks and prevent illicit goods from entering legitimate supply chains.
The report also cited provisions under the Implementing Rules and Regulations of Republic Act No. 10643, which require tobacco products intended for export to carry fiscal and regulatory markings of their destination markets.
Aligning packaging and labeling with destination-market standards before shipment can help prevent re-routing and illicit leakage, the Council noted.
Regional cooperation
Beyond national reforms, the report stresses the importance of stronger ASEAN-wide cooperation.
The council recommended enhancing customs coordination, expanding risk-based monitoring systems, and improving data-sharing among regional authorities.
It also encouraged the use of AI-enabled risk management tools and digital traceability systems to track goods across supply chains.
Existing platforms such as the ASEAN Single Window, which facilitates electronic customs data exchange among member states, could be further expanded to strengthen supply chain visibility.
Targeted assurance mechanisms such as PTV could also be applied to high-risk goods, routes, or operators to intercept illicit shipments before export.
“These measures are designed to facilitate legitimate trade while excluding criminal actors,” the report said.
Rising costs
The EU-ABC warned that illicit trade has significant economic consequences, including lost tax revenues and reduced investor confidence.
In the Philippines alone, the illicit trade of tobacco and related products has resulted in billions of pesos in revenue losses.
Senator Win Gatchalian, chair of the Senate Committee on Ways and Means, cited Bureau of Internal Revenue data showing that tax leakages from illicit cigarette trade and misdeclared vapor products reached an estimated P50 billion in 2024.
Of this amount, P34.37 billion came from illicit cigarette trade, while P14.84 billion was attributed to the misdeclaration of vapor products. Illicit trade involving heated tobacco products accounted for P840 million in foregone revenues.
The trend has steadily worsened over the past several years.
Excise tax leakages linked to illicit tobacco trade rose from P13.9 billion in 2019 to P48.3 billion in 2023, before reaching P54.1 billion in 2025.
Government projections indicate losses could climb further to P58.2 billion in 2026, P62.1 billion in 2027, and P65.9 billion by 2028 if stronger enforcement measures are not implemented.
Looking ahead
The EU-ABC said aligning anti-illicit trade measures with ASEAN’s Priority Economic Deliverables (PEDs) would reinforce existing regional objectives rather than create new regulatory burdens.
By strengthening enforcement coordination and leveraging digital tools, ASEAN could improve supply chain security while maintaining trade facilitation, the Council said.
“By building on existing ASEAN mechanisms and strengthening cooperation with the private sector and dialogue partners, ASEAN can reinforce its commitment to a resilient and future-ready regional economy,” Humphrey said.
The report builds on an EU-ABC business mission to Manila last year and has since been submitted to key Philippine agencies including the Department of Trade and Industry and the Department of Finance.
The EU-ABC serves as the primary advocacy group representing European businesses operating across Southeast Asia. —Ed: Corrie S.. Narisma
