Notes on Tariff and Customs Code PDF

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TARIFF AND CUSTOMS CODECUSTOMS MODERNIZATION AND TARIFF ACT (R NO. 10863)THE BUREAU OF CUSTOMSBureau of Customs – is an attached agency of the Department of Finance. It is charged with assessing and collecting customs revenues, curbing illicit trade and all forms of customs fraud, and facilitating t...

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TARIFF AND CUSTOMS CODE

CUSTOMS MODERNIZATION AND TARIFF ACT (R.A NO. 10863)

THE BUREAU OF CUSTOMS Bureau of Customs – is an attached agency of the Department of Finance. It is charged with assessing and collecting customs revenues, curbing illicit trade and all forms of customs fraud, and facilitating trade through an efficient and effective customs management system. Composition: 1 Chief and 2 Assistant Chiefs known as Commissioner of Customs, appointed by the President respectively. Functions: 1. Control smuggling and related frauds. 2. Assessment and collection of Revenues from imported articles and all other impositions under the tariff and customs laws. 3. Supervision and control over due entrance and clearance of vessels and aircraft engaged in foreign commerce. 4. Enforcement of Tariff and Custom Code and related laws. 5. Supervision on control over the handling of foreign mails arriving in the Philippines. 6. Supervise and control all import and export cargos for the protection of the government revenue. 7. Exclusive original jurisdiction over seizure and forfeiture cases under the tariff and customs laws. Other Powers: 1. Supervision of collection districts and ports of entry, coast ruse trade, vessels an aircrafts used in foreign trade; 2. Ascertainment, collection and recovery of import duty; 3. Warehousing of imported articles; and 4. Administrative proceedings like search, seizure and arrest, including forfeitures. Commissioner of Customs is vested with authority to: A. Assess B. Collect 1. All lawful revenues from imported articles; 2. All other dues, fees, charges, fines and penalties.

THE TARIFF COMMISSION Composition: Chairman and 2 member Commissioners, all appointed by the President. Functions: A. Investigative Powers: 1. Administration and the fiscal and industrial effect of the Tariff and Customs laws of this country now in force or when hereafter be enacted; 2. Relations between the rates of duty on raw materials and the finished or partly finished products; 3. Effects of ad valorem and specific duties and of compound, specific and ad valorem duties; 4. All questions relative to the arrangement of schedules and classification of articles in several sections of the tariff law; 5. Tariff relations between the Philippines and the Foreign countries, commercial treaties, preferential provisions, economic alliances, the effect of export bounties and preferential transportation rate; 6. Volume of importations compared with domestic production and consumption; 7. Conditions, causes and effects relating to completion of foreign industries with those of the Philippines, including dumping and cost of production; 8. In general, to investigate the operation of customs and tariff laws, including their relations to the national revenues, their effect upon the industries or labor of the country and to submit reports of its investigation; 9. Nature and composition and the classification and heading number for customs revenue and other related purposes. B. Administrative Assistance to the President and Congress 1. Ascertain conversion costs and costs of production: A. In the principal growing, producing or manufacturing: 1. Centers in the Philippines whenever possible; 2. Centers in foreign countries; whenever necessary; B. Including effects of tariff modifications or import restriction or prices. 2. Select and describe representative articles imported to the Philippines similar to or comparable with those locally produced

3. Ascertain imposts costs of such representative articles so selected. 4. Ascertain the grower’s producers or manufacturer’s selling prices. 5. Submit annual reports of these to the President of the Philippines, copies of which shall be furnished to the NEDA, BSP, Dept. of Finance and the Bureau of Investments. . NATURE OF TARIFF AND CUSTOMS DUTY Tariff - is the list or schedule of articles in which a duty is imposed upon the importation into the country with the rates at which they are severally taxed. It is the system of imposing duties or taxes on the importation of foreign merchandise. It includes customs duties, toll or tribute payable upon merchandise to the general government; rate of customs; or list of articles liable to duties. Customs Duties - is the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country (Garcia v. Executive Secretary, G.R. No. 101273, July 03, 1992). NOTE: Tariffs and customs are used interchangeably. Concept of Good for Customs duty purposes: As to Imported Articles: All articles when imported from any foreign country into the Philippine shall be subject to duty upon each importation even though previously exported from the Philippines. Except as otherwise specifically provided for in the code or other laws. As to Exported Articles: Certain articles like specific types of wood, mineral plant, vegetable and animal products are subject to tariff and premium duties. Liability of Importer for Custom Duties: A personal debt which can be discharged only by payment in full thereof; A lien upon the imported article while they are in custody or subject to the control of the government.

BASES OF ASSESSMENT OF DUTY Subject to Ad valorem - The duty shall be assessed upon the market value or price, at the time of importation, at which the same, like or similar article is freely offered for sale in the principal markets, of the exporting country for exportation to the Philippines, in the usual wholesale quantities and in the ordinary course of trade including ordinary expenses.

When value cannot be ascertained—the value shall be the domestic wholesale market value or selling price of the same, like or similar imported article in the principal market of the Philippines on the date of exportation in the usual wholesale quantities and in the ordinary course of trade. Following values are to be utilized in their sequence: a. transaction value of identical goods – the goods sold for export to the Philippines and exported at or about the same time. b. transaction value if similar goods – although not alike in all respects have characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable. c. deductive value – based on the unit price at which the imported goods or identical or similar goods are sold in the Philippines, in the same condition as when imported in the greatest aggregate quantity at or about the time of importation. d. computed value - the sum of cost or value of materials in processing the imported goods, amount of profit, and general expenses usually reflected in the sale of goods by producers in the country of export, freight and insurance, cost of packaging, etc. e. fallback value – value determined by using other reasonable means on the basis of date available in the Philippines. TRANSACTION VALUE The price actually paid or payable for the goods when sold for export to the Philippines, adjusted by adding: a. Commissions and brokerage fees b. Cost of containers c. Cost of packing, whether for labor or materials d. value of materials, components, parts and similar items incorporated in the imported goods. e. Royalties and license fees related to the goods f. Cost of transport from port of exportation to the port of entry g. Loading, unloading and handling charges h. cost of insurance. Ordinary/Regular Tariff or Customs Duties These are taxes imposed or assessed upon merchandise from, or exported to, a foreign country for the purpose of raising revenues. Kinds of Regular Customs Duties 1. Ad valorem duty – Customs duties that are computed on the basis of value of imported article 2. Specific duty – Customs duties that are computed on the basis of dutiable weight of good i.e. a unit of measure such as per kilogram, per liter, etc. 3. Compound duty – Customs duties that impose both ad valorem and specific customs duties. E.g. 10% ad valorem plus P100 per liter. 4. Alternating duty – alternates between ad valorem and specific

Special tariffs or custom duties These are additional import duties imposed on specific kinds of imported articles under certain conditions. They are imposed for the protection of consumers and manufacturers, as well as Philippine products from undue competition posed by foreign made products. a. Marking duty b. Anti-Dumping duty c. Countervailing duty d. Safeguard e. Discriminatory duty Marking Duty Special duty of 5% ad valorem imposed or articles properly marked, collected by the commissioner, except when such article is exported or destroyed under the customs supervision and prior to final liquidation of the corresponding entry. Purpose: To prevent possible deception of the consumers. Dumping Duty Imposed by the Secretary of Finance upon the recommendation of the Tariff Commission when: a. The price of the imported article is deliberately or continually fixed at less than the fair market value or cost of production; and b. Importation would cause or likely to cause an injury to local industries engaged in the manufacture or production of the same or similar articles or prevent their establishment. Amount of special duty: extent of the under pricing Countervailing duty Special duty imposed on imported articles which are granted any kind or dorm of subsidy by the government in the country or origin or exportation, the importation of which has caused or threatens to cause material injury to a domestic industry or has materially aided the growth or, prevents the establishment of a domestic industry. Requisites: 1. The levy of an excise tax or inland tax or local goods of the same or similar class as the article imported or the grant of subsidy to the foreign exporter by his government; and 2. The importation is likely to insure materially established local industries or prevent their establishments. Amount of special duty: Equal to the bounty or subsidy or subvention.

Safeguard duty – (R.A No. 8800) A.

General safeguard duty – duty imposed by the Secretary of Trade after positively determining that a product is being imported in increased quantities, whether absolute or relative to domestic production, as to be a substantial cause of injury or threat thereof to the domestic industry;

B. Special safeguard duty for agriculture-imposed by the Commissioner of Customs, upon request of the Secretary of Agriculture through the Secretary of Finance, on an agricultural product, consistent with our international obligations, either (a) when its cumulative import volume exceeds the trigger volume, or (b), even if trigger volume is not exceeded, it fails the price test. Discriminatory/Retaliatory duty Imposed on imported goods whenever it is found as a fact that the country of origin discriminates against the commerce of the Philippines in such a manner as to place the commerce of the Philippines at a disadvantage compared with the commerce of any foreign country. Preferential Tariffs It is the imposition of high customs duties which results to making the foreign goods more expensive compared with locally produced articles. This is to protect Philippine manufacturers from competition posed by foreign manufacturers. Other Types of Fees Charged by the BOC 1. Arrastre charge 2. Wharfage dues – counterpart of license, charged not for the use of any wharf but for a special fund known as the Port Works Fund NOTE: Wharfage dues may be imposed whether or not the wharf is privately owned or owned by the government.

3. Berthing fee 4. Harbor fee 5. Tonnage dues Customs valuation Customs valuation is a procedure for determining the customs value of imported goods. If the rate of duty is ad valorem, the customs value is essential to determine the duty to be paid on an imported good. Computation of Customs Duties The importer/broker shall compute the duties and taxes using the appropriate valuation method. There are two processes involved in the computation of customs duties on imported articles: 1. Classification of the articles into their appropriate tariff heading; 2. Determination of the valuation if the rate is ad valorem or mixed. Flexible Tariff Clause

It refers to the power of the President upon recommendation of the National Economic and Development Authority (NEDA) the President has the power to: 1. to increase, reduce or remove existing protective tariff rates of import duty, but in no case shall be higher than 100% ad valorem; 2. to establish import quota or to ban importation of any commodity as may be necessary; and 3. to impose additional duty on all import not exceeding 10% ad valorem, whenever necessary Limitations imposed on the flexible tariff clause 1. Before any recommendation is submitted by NEDA to the President, except in the imposition of an additional duty not exceeding 10% ad valorem, the Commission shall conduct an investigation and hold a public hearing to give reasonable opportunity for any interested party to be produce evidence and be heard. The Commission shall also hear the views and recommendations of any government office, agency or instrumentality concerned. The Commission shall submit their findings and recommendations to the NEDA within 30 days after the termination of the public hearings. The NEDA thereafter submits its recommendation to the President (Sec. 1608(b), CMTA). 2. The power of the President to increase or decrease the rates of import duty within the abovementioned limits shall include the modification in the form of duty. In such a case, the corresponding ad valorem or specific equivalents of the duty with respect to the imports from the principal competing foreign country for the most recent representative period shall be used as basis (Sec. 1608(b), CMTA). 3. Any order of the President pursuant to this section shall take effect 30 days after, except in the imposition of additional duty not exceeding 10% ad valorem which shall take effect at the discretion of the President. 4. The power delegated to the President as provided for in this section shall be exercised only when Congress is not in session. 5. The power herein delegated may be withdrawn or terminated by Congress through a joint resolution. Applicability of Tariff and Customs Law – After importation has begun but before importation is terminated.

BEGINNING AND ENDING OF IMPORTATION 1. Importation begins when the carrying vessel or aircraft enters the Philippine territory with intention to unload therein. 2. Importation is deemed terminated when: a. The duties, taxes and other charges due upon the goods have been paid or secured to be paid at the port of entry and legal permit for withdrawal has been granted; or b. In case the goods are deemed free of duties, taxes and other charges, the goods have legally left the jurisdiction of the Bureau

NOTE: Intention to unload is essential. Even if the cargo is not yet unloaded and there is unmanifested cargo, forfeiture may take place because importation has already begun. NOTE FURTHER: Imported goods must be entered into a custom house at their port of entry otherwise they shall be considered as contraband and the importer is liable for smuggling. Jurisdiction of the BOC The jurisdiction of the BOC to enforce the provisions of the CMTA, including seizure and forfeiture, begins from the commencement of importation. The BOC loses jurisdiction to enforce the CMTA after importation is deemed terminated. Meaning of “Entry” in Customs Law It has a three-fold meaning: 1. The documents filed at the Customs house; 2. The submission and acceptance of the documents; and 3. Customs declaration forms or customs entry forms required to be accomplished by passengers of incoming vessels or passenger planes as envisaged under Sec. 2505 of the TCCP (now Sec. 1404 of CMTA) IMPORT ENTRY It is a declaration to the BOC showing the description, value, tariff classification and other particulars of the imported article to enable the customs authorities to determine the correct customs duties and internal revenue taxes due on the importation. Requirement of Import entry GR: All goods declaration for consumption shall be cleared through a formal entry process. All importations entered through, a formal entry process shall be covered: 1. by a letter of credit or any verifiable commercial document evidencing payment or 2. in cases where there is no sale for export, by any commercial document indicating the commercial value of the goods. (Sec. 402, CMTA) XPN: The following goods shall be cleared through an informal entry process; (a) Goods of a commercial nature with Free on Board (FOB) or Free Carrier At (FCA) value of less than ₱ 50,000. Every 3 years after the effectivity of RA 10863, the Secretary of Finance shall adjust this amount as provided herein to its present value, using the Consumer Price Index (CPI) as published by the PSA; and (b) Personal and household effects or goods, not in commercial quantity, imported in a passenger’s baggage or mail. (Sec. 402, CMTA). Persons authorized to make import entry Sec. 106 of the CMTA defines a declarant as follows: A declarant may be a consignee or a person who has the right to dispose of the goods. The declarant shall lodge a goods declaration with the Bureau and may be: a. The importer, being the holder of the bill of lading; or

b. The exporter, being the owner of the goods to be shipped out (Note: not applicable for import entry) or

c. A customs broker acting under the authority of the importer or from a holder of the bill; or d. A person duly empowered to act as agent or attorney-in-fact for each holder. In case the consignee or the person who has the right to dispose of the goods is a juridical person, it may authorize a responsible officer of the company to sign the goods declaration as declarant on its behalf. Period for filing import entry Goods declaration must be lodged within 15 days from the date of discharge of the last package from the vessel or aircraft. (Sec. 407(2), CMTA) XPN: The period to file the goods declaration may, upon request, be extended on valid grounds for another 15 days: Provided, That the request is made before the expiration of the original period within which to file the goods declaration (Sec. 407(2), CMTA) Provisional goods declaration Where the declarant does not have all the information or supporting documents required to complete the goods declaration, the lodging of a provisional goods declaration may be allowed. It shall substantially contain the necessary information required by the Bureau and the declarant undertakes to complete the information or submit the supporting documents within 45 days from the filing of the provisional goods declaration, which period may be extended by the Bureau for another 45 days for valid reasons. (Sec. 403, CMTA) “Discharge of the last package” It is when the unloading of the shipment from the carrier is completed. In case of transshipment, the discharge of the last package from the domestic carrier at the port of final destination. DECLARATION OF CORRECT WEIGHT OR VALUE Consumption entry It is a government form accomplished by an importer or his representative, which is ultimately submitted to the proper office of the BOC as a basis for inspection of the importations of an importer and for the computation of the correct customs duties and internal revenue taxes due on importation. Computation and payment of customs duties The Philippines adopts the “self-assessment” system. Thus, it is the importer which initially determines the customs duties and other charges due from him and pays the same. However, his computation and payment is subject to the review of the taxing authorities. Liquidation is the final computation and ascertainment by the Collector of Customs of the duties due on imported merchandise based on official reports as to the quantity, character and value thereof, and the Collector of Customs' own finding as to the applicable rate of duty. It is akin to an assessment of internal revenue taxes under the NIRC where the tax liability of the taxpayer is definitely determined. Liquidation is considered to have been made when the entry is officially stamped “liquidated”.

Liquidation deemed...