I.

Brief History of the Tariff Acts in the Philippines

From a historical perspective, the first piece of tariff legislation was

passed by the United States Congress for the Philippines during the
American regime. This was known as the Philippine Tariff Act of 1909
which gave birth to the imposition of tariff on goods coming from
foreign countries and entering the Philippines.

In 1957, RA No. 1937 was crafted and passed by the Philippine

Congress as the first TCCP that codified customs laws for the country,
superseding the 48-year colonial regime of the Tariff Act of 1909. It
took effect on 1 July 1957. Certain provisions of the TCCP eventually
became obsolete, and were updated through various presidential
decrees issued by Former President Marcos, as Chief Executive who,
during the Martial Law regime, exercised the powers of Congress. In
1972, Presidential Decree (PD) No. 34 consolidated into one Code all
amendments made therein.

On 11 June 1978, RA No. 1464 was signed into law (revising PD No. 34),
which, in general, strengthened the punitive force of the TCCP against
smuggling and other forms of customs fraud. Many changes in global
and regional trade policies, rules and processes have since then
developed and evolved which have been addressed (through
legislative amendments of the TCCP and administrative issuances) on a
piecemeal basis. Republic Act (RA) No. 10863, otherwise known as the
Customs Modernization and Tariff Act (CMTA), which amends the Tariff
and Customs Code of the Philippines (TCCP) took effect on 16 June
2016, 15 days after it was published in a major daily newspaper.
(Changes under the Customs Modernization and Tariff Act: An
Overview, Mark Anthony P. Tamayo, accessed at
http://www.bworldonline.com/content.php?
section=Economy&title=changes-under-the-customs-modernization-
and-tariff-act-an-overview&id=128524)

II. Discussion

A. The CMTA in General

The new CMTA declares the policy of the state to protect and enhance
government revenue, institute fair and transparent customs and tariff
management that will efficiently facilitate international trade, prevent
and curtail any form of customs fraud and illegal acts, and modernize
customs and tariff administration, taken into consideration the
mandatory standards of the Revised Kyoto Convention, to which the
Philippines is a signatory, international agreements, recommendations
from the business sectors and industry groups as well as some of the
best practices in customs administration, among others. It seeks to
transform the Bureau of Customs (BoC) into a modern and efficient
organization that is at par with global standards. (Sec. 101, Republic
Act 10863)

The CMTA has both saving and repealing clauses. Laws, rules and
regulations previously issued pertaining to the importation of goods
that are consistent with the CMTA will remain valid unless the same be
repealed or amended. While those which are inconsistent are expressly
repealed, amended or modified accordingly. (Secs. 1802, 1803, and
1804 of Republic Act 10863)

B. Changes Effected by the CMTA

1. Declaration of Goods

All imported goods will be subject to the lodgment of a goods

declaration (commonly known as entry declaration), which may be for
consumption, for warehousing, for admission, for conditional
importation or for customs transit, or for other purposes. (Sec. 401, R.A
10863).

As a general rule, goods declarations for consumption are cleared

though a formal entry process, except in the following instances
where goods may be cleared through informal entry: (i) goods of a
commercial nature with Free on Board or Free Carrier Arrangement
(FCA) value of less than Php 50,000 (which is an increase from the
previous thresholds of Php 2,000 per TCCP, as amended, and USD 500
under Customs Memorandum Order No. 13-2010); or (ii) personal or
household effects or goods, not in commercial quantity, imported in
passengers baggage or mail. (Sec. 402, R.A. 10863)

A goods declaration must now be lodged within 15 days (previously,

30-day non-extendible period) from a BoC notice sent through
electronic or personal service, informing the importers of the date of
discharge of the last package from the vessel or aircraft, extendible for
another 15 days upon request by the importer based on valid grounds.
Once lodged, the BoC, after its examination, shall issue a notice of
assessment of duties and taxes payable. The importer has a period of
15 days from receipt of said notice within which to pay the
corresponding duties and taxes. In effect, this is also the period within
which the importer may contest the assessment issued by the BoC at
the border. Otherwise, the assessment will be deemed final after the
lapse of the 15-day period. When a protest is filed in proper form, the
Commissioner shall render a decision within thirty (30) days from
receipt of the protest. (Sections 407, 429, 1106, 1110, Republic Act
10863).

The failure to pay duties and taxes within the 15-day period shall result
in the imposition of a 10% surcharge (increased to 25% if delinquency
lasts for more than one year) based on the total assessed amount or
balance thereon as well as to a 20% interest per annum computed
from the date of final assessment. (Ibid.)

After payment of duties and taxes, the importer will then have a non-
extendible period of 30 days (previously, 15 days from posting of
notice to claim) to claim the goods from customs custody. (Ibid.)

The new law also allows the lodging of provisional goods declaration if
at the time of importation, an importer does not have all the
information or supporting documents required to complete a goods
declaration. The PGD is a new concept that importers can use
particularly in instances where additional information and/or collateral
documents are required to be submitted at the border. Under this
concept, an importer would have to execute an undertaking to
complete the necessary information or submit the supporting
documents within 45 days (extendible for another 45 days) from the
lodging of the PGD. Goods under PGD may be released upon posting of
a security equivalent to the amount ascertained to be the applicable
duties and taxes. (Sec. 403, Republic Act 10863).

An assessment by the BoC at the border of a PGD shall be deemed

tentative and shall be completed upon final readjustment and
submission of the additional information or documentation required to
complete the declaration. (Sec. 426)

If an importer needs to amend a goods declaration already filed, the

new law, for valid reasons and with the approval of the BoC, also
permits the filing of an amended goods declaration. The amendment,
however, must be done prior to final assessment or examination of the
goods by the BoC. (Sec. 408, R.A. 10863)

2. De minimis value

The de minimis importation value under the old customs and tariff act
of 1978, which was in effect until May30 this year, was only P10, which
meant that virtually all importations were subject to tax. Under the
new law, no duties and taxes shall be collected on goods with an FOB
or FCA value of ten thousand pesos (10,000.00) or below. The
Secretary of Finance shall adjust the de minimis value as provided
every three (3) years after the effectivity of the Act. (Sec. 423, RA
10863 and Customs Administrative Order No. 02-2016)

One of the objectives of the new policy is to reduce the administrative

costs for importations with de minimis value. This is also in compliance
with the governments effort, under the revised Kyoto Convention, to
facilitate trade by harmonizing and simplifying customs procedures
and practices. Transitional Standard 4.13 of the Kyoto Convention
provides that, National legislation shall specify a minimum value
and/or a minimum amount of duties and taxes below which no duties
and taxes will be collected.

3. Tax Exemption of Relief Consignment

Relief consignment or goods such as food, medicine, equipment and

materials for shelter, donated or leased to government institutions and
accredited private entities for free distribution to or use of victims of
calamities imported during a state of calamity and intended for a
specific calamity area for the use of the calamity victims therein, shall
be exempt from duties and taxes. (Sections 120 and 121, Republic Act
10863).

4. Tax Exemption of Travelers

The new law also allows travelers to bring in personal valuables with a
minimum of P150,000. R.A. 10863 also allows travelers a maximum of
P350,000, depending on the length of stay abroad. The law provides
that wearing apparel, goods of personal adornment, toilet goods,
portable tools and instruments, theatrical costumes and similar effects
accompanying travelers, or tourists, or arriving within a reasonable
time before or after their arrival in the Philippines, which are necessary
and appropriate for the wear and use of such persons according to the
nature of the journey, their comfort and convenience shall also be
exempt from payment of import duties.

5. Tax Exemption of Returning Residents

Under the Old Tariff and Customs Code returning residents shall only
exempt for goods whose export value does not exceed five hundred
pesos. (Sec. 101 [i], PD1464).
Under RA 10863, returning residents or nationals shall also be exempt
from payment of import duties on personal and household effects but
this exemption now covers goods up to P350,000.00 in value, provided
that it is not of commercial quality and not intended for sale, hire or
barter.

5. Tax Exemption for Balikbayan Boxes

The Philippines new de minimis importation value of P10,000 is on top

of the new exemption for balikbayan boxes of at least P150,000 per
year. Returning Overseas Filipino Workers (OFWs) shall have the
privilege to bring in, tax and duty-free, home appliances and other
durables, limited to one of every kind once in a given calendar year
accompanying them on their return, or arriving within a reasonable
time which, barring unforeseen and fortuitous events, in no case shall
exceed sixty (60) days after every returning OFW's return upon
presentation of their original passport at the port of entry, as long as
the contents amount to not more than P150,000. (Sec. 800) They can
now can send up to three P150,000-worth of tax and duty free
balikbayan boxes in a year, given that goods are not in commercial
quantities nor intended for barter, sale or for hire.

6. Application of Information and Communications Technology

One of the issues that the new law tries to address is the tedious and
complex customs processes emanating from customs regulations and
practices based on more than 50-year-old policies and laws. The new
law simplifies and harmonizes customs procedures, pushes for full
customs automation, and aligns the TCCP with international standards
and practices, ultimately making it easier for traders, importers and
exporters to comply with border requirements.

Section 109. Application of Information and Communications

Technology. In accordance with international standards, the Bureau
shall utilize information and communications technology to enhance
customs control and to support a cost-effective and efficient customs
operations geared towards a paperless customs environment.

The Bureau shall communicate, exchange and process trade- and

logistics-related information in the national and regional level for the
efficient and prompt clearance of goods and commodities in a
technology-neutral and secured infrastructure for business, industries,
and government.
The security of data and communication shall be in a manner that is
consistent with applicable local and internationally accepted standards
on information security.

6. Stiffer Penalties

The law likewise imposes stiffer penalties on the smuggling of goods. It

slaps a minimum jail time of 31 days to six months or a fine of not less
than P25,000 but not more than P75,000, or both, if the appraised
value of the goods were unlawfully imported.
If the value of smuggled items exceeds P200 million, guilty parties
shall be penalized with a fine of not less than P50 million, and shall
suffer reclusion perpetua as the offense shall be deemed as a heinous
crime.

RA 10863 also mandates the Bureau of Customs (BOC) to adopt non-

intrusive examination of goods, and will be only allowed to conduct
physical examination if directed by the Commissioner, the goods are
subject to an alert order, and if there are controversies surrounding the
goods declaration and the import process.

http://www.ibtimes.ph/3-things-know-about-new-customs-
modernization-and-tariff-act-signed-2483)