Changes under the Customs Modernization and Tariff Act: DE MINIMIS IMPORTATIONS
An Overview
By MAPT
On 30 May 2016, President Benigno S. C. Aquino III signed 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). It will become effective on 16 June 2016 which
is 15 days after it was published in a major daily newspaper.
GOODS DECLARATION FOR CONSUMPTION
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, depending on the purpose.
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
passenger’s baggage or mail.
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.
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.
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.
If, at the time of importation, an importer does not have all the
information or supporting documents required to complete a goods
declaration, the CMTA now allows the lodging of a provisional goods
declaration (PGD). 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.
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.
If an importer needs to amend a goods declaration already filed, the
CTMA, 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.
The CMTA acknowledges the e-commerce trend of increasing number
of small value consignments and thus, retained the provision on de
minimis values (small value importations) below which no duties and
taxes will be collected and with minimal clearance procedures,
including data requirements.
The de minimis threshold value has now been increased to Php10,000
(previously, Php10) in response to the clamor of foreign business
groups. Thus, if the value of an importation does not exceed Ph10,000,
there will be no duties and taxes that will be collectible by the BoC.
This threshold value is subject to review by the Finance Secretary
every three years.
RELIEF CONSIGNMENT
Goods such as food, medicine, equipment and materials for shelter,
donated or lease to government institutions and accredited private
entities for free distribution to or use of victims of calamities shall be
treated as relief consignment. Relief goods are exempt from duties and
taxes.
Upon declaration of a state of calamity, the clearance of such goods
will be a matter of priority.
Towards this end, restrictions on customs policies are now relaxed
under the CMTA. Special procedures are now provided to facilitate
their unimpeded entry. Among these procedures are: a) lodging of a
simplified or provisional goods declaration; b) pre-arrival clearance; c)
clearance beyond business hours without corresponding charges; and
d) examination shall be in exceptional cases only.
The Department of Finance (DoF) and the Department of Social
Welfare and Development shall jointly issue implementing rules on
this.
CONDITIONALLY-FREE AND DUTY-EXEMPT IMPORTATIONS
The CMTA introduces modifications to Section 105 of the TCCP, as
amended, on conditionally-free importations (now named conditionally-
free and duty-free importations under Section 800).
One of the more well-known privileges recognized under Section 800
is the duty and tax-free importation of personal and household effects
by “returning residents” which has been defined as nationals who have
stayed in a foreign country for a period of at least six months.
The conditions for exemption (aside from the requirements that the
same should neither be of commercial quantity nor intended for barter,
sale or hire) are as follows:
• For those who have stayed in a foreign country for a period of at
least 10 years, the Free on Board (FoB) or Free Carrier
Arrangement (FCA) value shall not exceed P350,000 and that the
privilege is not availed of within 10 years prior to the returning
resident’s arrival.
• If the stay is at least five years, the FCA or FOB value shall not
exceed P250,000 and that the privilege is not availed of within five
years prior to the returning resident’s arrival.
• If the stay is less than five years, the FCA or FoB value shall not
exceed P150,000 and that the privilege is not availed of within six
months prior to the returning resident’s arrival.
In addition to the above, 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 (not exceeding 60 days after every returning OFWs
return).
Residents of the Philippines, OFWs or other Filipinos, while residing
abroad or upon their return to the Philippines, are also allowed to bring
in or send to their families or relatives in the Philippines “balikbayan
boxes” (containing personal and household effects only) duty and tax-
free, provided that the FCA value shall not exceed P150,000 and the
items are not in commercial quantities or intended for barter, sale or for
hire. This can be availed up to three times in a calendar year.
Any amount in excess of the above threshold values shall, however, be
subject to duties and taxes.
RELATED PARTY TRANSACTIONS
The CMTA upholds the hierarchical application of the six methods of
valuation of imported goods, with Method 1 or the Transaction Value
(TV) of the imported goods being the primary method. The TV is
basically the “price paid or payable” for the goods when sold for export
to the Philippines, subject to certain adjustments such as selling
commissions and brokerage fees, cost of containers, cost of packing,
assists, royalties and license fees, cost of transport and insurance,
among others.
Under the rules, one of the limitations on the application of the TV
method is that, in cases of a related party transaction, the price
between the importer and its related foreign supplier should not be
influenced by such a relationship. The CMTA states that in order to
prove the absence of such influence, the importer must be able to
demonstrate that the declared value closely approximates one of the
following “test values” occurring at or about the same time:
• The TV in sales to unrelated buyers of identical or similar goods
for export to the same country of importation;
• The customs value of identical or similar goods as determined
using the Deductive Value Method; and
• The customs value of identical or similar goods as determined
using the Computed Value Method.
Aside from the application of test values, the WTO agreement also
recognizes the “circumstances of sale analysis” as a remedy in proving
the absence of such influence. This remedy, which is likewise
embodied under Customs Administrative Order (CAO) No. 4-2004 and
Customs Memorandum Order (CMO) No. 16-2010, involves showing
the arm’s length nature of the transaction by proving that the price was:
• Settled in accordance with normal pricing practices of the
industry;
• Settled in a manner consistent with sales to unrelated buyers;
• Adequate to ensure recovery of all costs plus a profit equivalent to
the firm’s overall profit realized over a representative period of
time in sales of goods of the same class or kind.
Failure to establish either of the above proofs may result in the
declared TV to be rejected for purposes of customs appraisement and
the price will be determined using other methods of valuation in their
sequential order.
MISDECLARATION, MISCLASSIFICATION, UNDERVALUATION IN
GOODS DECLARATION
The CMTA has increased the surcharge penalty for misdeclaration,
misclassification and undervaluation of imported goods.
There is misdeclaration when the discrepancy pertains to quantity,
quality, description, weight, or measurement of the imported goods.
Misclassification, on the other hand, exists when insufficient or wrong
description of the goods or use of wrong tariff heading was declared
resulting in a discrepancy.
Undervaluation is present when:
• The declared value fails to disclose in full the price actually
paid or payable or any dutiable adjustment to the price; or
• When an incorrect valuation method is used; or
• The valuation rules are not properly observed.
Any misdeclaration, misclassification or undervaluation of imported
goods resulting in a discrepancy (in duty and tax to be paid) between
what is legally determined upon assessment and what is declared will
be subject to a fixed surcharge rate of 250% of the duty and tax due
(previously, 100% to 200% of the duty due).
Surcharge, however, will not be imposed when:
• The discrepancy in duty is less than 10%; or
• The importer’s declared value and/or tariff
heading/classification:
• Relied on an official government ruling; or
• Is rejected in a formal customs dispute settlement process
involving difficult or highly technical questions relating to the
application of customs valuation rules and/or tariff
classifications.
If the misdeclaration, misclassification or undervaluation is intentional
or fraudulent (such as when a false or altered document is submitted
or when false statements or information are knowingly made), a 500%
surcharge (of the duty and tax due) will be imposed on the importer
and to those who willfully participated in the fraudulent act. The
imported goods will be subject to seizure regardless of the amount of
the discrepancy.
The CMTA likewise adopts the previous rule under the TCCP, as
amended, on the existence of a prima facie evidence of fraud if the
discrepancy (in duty and tax to be paid) amounts to more than 30%.
UNLAWFUL IMPORTATION OR EXPORTATION
The CMTA provides stiffer penalties for smuggling (which can either be
outright or technical) which has been defined as the fraudulent act of
importing any goods into the Philippines, or the act of assisting in
receiving, concealing, buying, selling, disposing or transporting such
goods, with full knowledge that the same has been fraudulently
imported. It likewise includes the exportation of goods in any manner
contrary to law.
Outright smuggling refers to the act of importing goods into the country
without complete customs-prescribed importation documents, or
without being cleared by customs or other regulatory government
agencies. In this case, imported goods are not registered at all with the
BoC or other government agencies.
Technical smuggling, on the other hand, refers to the act of importing
goods into the country by means of a fraudulent, falsified or erroneous
declaration of the goods as to its nature, kind, quality, quantity or
weight. In other words, technical smuggling takes place through
undervaluation, misclassification or underdeclaration of the goods
shipped.
The difference between outright smuggling and technical smuggling
lies in the use or non-use of legal trade channels when bringing the
goods into the country. Outright smuggling bypasses the usual and
normal procedure and process of clearing the cargo at the BoC, while
technical smuggling involves fraudulent acts during the processing and
releasing of the goods. In both instances, however, the ultimate
objective is to evade the payment of the prescribed taxes, duties and
other charges.
The penalty is imprisonment or a fine which ranges from Php 25,000 to
Php 50,0000,000 depending on the value (up to Php 200,000,000) of
the goods unlawfully imported, including duties and taxes. If the value
(or aggregate value) exceeds Php 200,000,000, the same shall be
deemed as a heinous crime punishable with a penalty of reclusion
perpetua (imprisonment of 20 years and 1 day to 40 years) and a fine
of not less than Php 50,000,000.
Each act of unlawful importation or exportation shall be deemed a
separate offense.
ABANDONMENT RULES
The abandonment of imported goods can either be express or implied.
An express abandonment occurs when an importer expressly signifies
in writing to the District Collector of his intention to abandon the
imported goods. In such case, the goods shall ipso facto be deemed
property of the Government and may be sold or disposed of generally
at the port where the goods are located.
On the other hand, there is implied abandonment, in the following
cases, among others:
• When an importer fails to file the goods declaration within 15 days
(previously, a 30-day non-extendible period) or within the
approved extended period of another 15 days from notice of the
date of discharge of the last package from the vessel or aircraft;
• Having filed such a declaration, the importer fails to pay the
assessed duties and taxes within 15 days from receipt of notice of
final assessment;
• Failure to claim the goods within 30 days (previously, 15 days)
from payment of duties and taxes.
If the BoC has not disposed of the goods implied to be abandoned, the
owner or importer of goods may, within 30 days after the lapse of the
prescribed period to file the declaration (15 days, extendible for
another 15 days), still reclaim the goods by complying with all legal
requirements and paying the corresponding duties, taxes, and other
charges.
On the other hand, if the BoC has already sold the goods, the
proceeds of the sale, after deduction of any duty and tax and all other
charges and expenses (such as, government storage charges;
expenses for the appraisal, advertisement, and sale of auctioned
goods; arrastre and private storage charges and demurrage charges;
and freight, lighterage or general average, on the voyage of
importation) shall be turned over to those persons entitled to receive
them. The balance will then be deposited to a “forfeiture fund” to be
managed by the BoC which shall be used to, among others, support its
modernization program and other operational efficiency and trade
facilitation initiatives.
PERIOD OF STORAGE IN A CUSTOMS BONDED WAREHOUSE
(CBW)
The general rule under the CMTA is that goods entered for
warehousing may remain in a CBW for a fixed period of one year from
the time of their arrival, except for perishable goods where the storage
period is three months from the date of arrival, extendible (for valid
reasons and upon written request) for another three months. This is a
departure from the current rule which fixes the storage period in a
CBW to a maximum one year period, regardless of whether the goods
are perishable or not. Goods not withdrawn after the expiration of the
prescribed period shall be deemed abandoned.
The BoC Commissioner, in consultation with the Secretary of Trade
and Industry, shall also establish reasonable storage period limits
beyond the general one-year period for bonded goods, the processing
into finished goods of which require a longer period based on industry
standards and practice, subject to the approval of the Secretary of
Finance.
The unauthorized withdrawal of imported goods from the CBW shall be
subject to a surcharge of 50% of duties, taxes, customs fees and
charges, found to be due and unpaid. If the delinquency lasts for more
than one year, the surcharge shall be increased by 25% of the unpaid
duties and taxes annually.
SELF-CERTIFICATION SYSTEM FOR ORIGIN PURPOSES
While the BoC may (upon request) determine the Philippine origin of
goods for export through the issuance of certificates of origin, the
CMTA, in preparation for the ASEAN-wide implementation of the self-
certification system, allows exporters (producers or manufacturers of
goods) duly accredited by the BoC to perform a “self-certification”
procedure as an alternative means of proving the Philippine origin of
goods for export.
The introduction of a self-certification arrangement (in establishing the
origin of Goods) plays a critical role in achieving a free flow of goods
within the ASEAN single market as it is aimed at facilitating the
utilization of Free Trade Agreements (FTAs). The system effectively
eliminates the need to present a Certificate of Origin (CO) to claim
preference under FTAs as it allows accredited exporters to self-declare
that their products have satisfied the ASEAN origin criteria by simply
affixing a declaration on the commercial invoice.
This new system seeks to reduce compliances of exporters and
administrative cost associated with CO application. It likewise
facilitates the release of shipments availing of preferential tariff under
FTAs.
ADVANCE CUSTOMS RULINGS
Importers (and exporters) oftentimes are faced with issues such as
whether certain payments to suppliers are dutiable or not, whether an
article would fall under an identified specific tariff heading or another,
or whether rules of origin requirements to qualify for the availing the
preferential rates under FTAs are met. Potentially, these issues may
lead to uncertainty in the entire trade transaction as these will have an
impact on the amount of duties to be paid and ultimately, on the end
price of the product.
In order to promote higher certainty, predictability and reliability, the
CMTA now adopts the Revised Kyoto Convention (RKC) provision on
advance (binding) rulings and recognizes the right of importers and
exporters, upon written application, to seek advance rulings on
classification from the Tariff Commission, and valuation as well as
rules of origin from the BoC Commissioner. These rulings, once
obtained, should provide applicants with more certainty on the customs
treatment of their specific transaction or product.
Rulings are required to be issued within 30 days from receipt of the
application and supporting documents as may be required by
regulation.
POST-CLEARANCE AUDIT
The CMTA states that the Bureau of Customs (BoC) may conduct a
“post-clearance audit” within three years from the date of final payment
of duties and taxes or customs clearance, as the case may be. In the
absence of any specific regulation, this provision of the CMTA can be
seen as a departure from Executive Order 155 (which placed the audit
function with the Department of Finance’s (DoF) Fiscal Intelligence
Unit) as well as the audit guidelines under DoF Department Order (DO)
Nos. 11-2014 and 44-2014.
The penalties for failure to pay correct duties and taxes on imported
goods, as may be found during post-clearance audit, are now
categorized into two degrees of culpability, as follows:
This is a departure from the previous degrees of penalties; (a)
negligence (50% to 200% of the revenue loss); (b) gross negligence
(250% to 400% of the revenue loss); and (c) 500% to 800% of the
revenue loss and/or criminal prosecution.
Furthermore, under the CMTA, no substantial penalty shall be imposed
on inadvertent errors amounting to simple negligence as will be
defined by the implementing rules. This rule was lifted from Standard
3.39 of the Revised Kyoto Convention (RKC) as well as from Article
VIII of the World Trade Organization/General Agreement on Tariffs and
Trade (WTO/GATT), providing for the non-imposition of penalties for
errors when such errors are inadvertent and where there has been no
fraudulent intent or gross negligence.
A penalty, which should not be excessive, may however be imposed in
order to discourage a repetition of such errors.
RECORD-KEEPING REQUIREMENT
The CMTA states that all importers are required to keep relevant
importation documents, at their principal place of business, for a period
of three years from the date of final payment of duties and taxes or
customs clearance, as the case may be. This provision of the CMTA
can be seen as a reversion to the old rules and a departure from the
audit guidelines under DoF DO Nos. 11-2014, which set the record
retention period to 10 years from the date of importation.
Economic zone locators are likewise required to keep records of
imported goods withdrawn from the zones and brought into the
customs territory.
If an importer who, after receiving a lawful demand in writing, fails or
refuses to produce relevant records, accounts or invoices necessary to
determine and assess the correct value and classification of the
imported goods at the border, the CMTA empowers a District Collector
to impose a 20% surcharge based on the dutiable value of such goods.
On the other hand, if during post clearance audit, it was determined
that an importer auditee failed to keep the required records of
importation, the penalty that could be imposed by the BoC is a fine of
P1,000,000 (previously, a fine of not less than P100,000 but not more
than P200,000) and/or imprisonment of not less than three years and
one day but not more than six years (previously, imprisonment of not
less than two years and one day to six years). Furthermore, the failure
shall constitute a waiver of the importer’s right to contest the results of
the audit based on records kept by the BoC.
AUTHORITY OF THE COMMISSIONER TO MAKE COMPROMISE
Under the CMTA, the Commissioner may, subject to the further
approval of the Finance Secretary, compromise any administrative
case involving the imposition of fines and surcharges, including those
arising from the conduct of a post clearance audit, unless otherwise
specified by law. Although not an entirely new concept, it nevertheless
specifically mentions that the compromise powers of the Commissioner
include fines and surcharges arising from a post clearance audit. This
is a welcome reintroduction of a voluntary disclosure concept for
importers who would want to correct their mistakes by voluntarily
settling their deficiencies in duties and taxes.
Cases involving forfeiture of goods shall, however, not be subject to
any compromise.
APPLICATION OF INFORMATION AND COMMUNICATIONS
TECHNOLOGY (ICT)
The BoC, in accordance with international standards, is mandated
under the CMTA to utilize ICT in enhancing customs control and
efficiency in customs operations geared towards a paperless customs
environment. Electronic documents, permits, licenses or certificates
will now be acceptable and will have the legal effect, validity or
enforceability as any other document or legal writing. The utility of full
automation will be felt once the “Single Window Policy” is fully
implemented.
OTHER SOURCES
Understanding the Tariff System
For importers and customs brokers, the computation of taxes and
duties payable on imported articles is principally based on the value,
classification and quantity of the importation.
While the dutiable value is normally reflected on the invoice price,
certain adjustments (depending on the INCOTERM used) may be
made on the invoice price to arrive at the dutiable value. With regard to
classification (product nomenclature and tariff rate), the principal basis
for classifying the product and determining the duty rate is provided in
Section 1611 of the CMTA.
For imported articles regularly imported, particularly raw materials and
unprocessed articles, classification can be straightforward and simple.
For finished and processed goods, and new products, especially those
involving composites or mixtures, classification is a more complicated
process. On not a few occasions, imported articles may ostensibly be
classifiable under two separate headings located in different chapters
or sections. The challenge is how to identify the proper or correct
classification of the imported article.
The present product classification system provided is mainly based on
the 8-digit ASEAN Harmonized Tariff Nomenclature (AHTN), the first 6
digits of which is based on the Harmonized System (HS) while the
seventh and eight digit codes are assigned to ASEAN subheadings
with more than 10,000 tariff lines. Beyond the 8-digit level, member
countries of ASEAN are allowed to create new national subheadings.
Prior to the adoption of the AHTN, modifications may be made only
beyond the 6-digit system of the HS system, which was reserved for
national sub-headings. With the adoption of the AHTN in 2004,
modifications were allowed beyond the 8-digit level. In other words,
further subdivisions for national governments of ASEAN member
countries were permitted only beyond the 8-digit level.
The purpose of national sub-headings is to provide varying tariff rates
on similar articles, data and statistical profile, in-quota and out-quota
rates, preferential rates or rules of origin. When implementing the tariff
system, the Philippines must be consistent with the GRI and the
Section/Chapter/Heading Notes. Non-application of GRI and the notes
is a violation of the commitments provided under the HS Convention.
A usual recourse when confronted with doubt as to the classification of
a particular imported goods is to first refer to the “Philippine Standard
Commodity Classification (PSCC)”, which provides for classification of
products based on their common names. Many articles, however, are
not provided in the PSCC. In such a situation, we may refer to the
Section/Chapter/Heading Notes and the GRI. Further reference may
be made on the Explanatory Notes to the HS Convention. It must be
noted that the headings under the HS system are arranged in
systematic order (i.e., degree of processing) and, where appropriate,
subdivided into sub-headings.
Abandonment – New Rights and Benefits
Under the old rules, goods deemed ‘abandoned’ automatically
becomes government property. Under the new rules, abandoned
goods are NOT government property and the importer has:
• the right to reclaim the goods after payment of the duty and tax,
and all other charges and expenses; and
• the right over the proceeds of the sale, after deduction of any duty
and tax, and all other charges and expenses.
Under the CMTA, importers should understand that even if there is
failure to file the import entry within the prescribed period, the goods do
not become government property and importers may (a) request for
extension of the period to file the entry, (b) reclaim the goods, or (c)
collect the proceeds if the goods have already been sold.
Old Rules (Section 1801, Tariff and Customs Code of the Philippines)
Under the old rules, there are three instances of abandonment:
• Express and written notice to abandon from the importer;
• Failure to file entry within 30 days from discharge from the vessel;
and
• Failure to claim the importation after the filing of an import entry
within 15 days from date of posting of Notice to Claim such
importation.
When a shipment is declared “abandoned”, it becomes automatically
property of government and may be disposed by donation or auction.
New Rules (Sections 1129 and 1130, CMTA)
Under the CMTA, goods are deemed abandoned under the following
instances:
• Express and written notice to abandon from the importer;
• Failure to file entry within 15 days from discharge from the vessel
or aircraft (note that the period may be extended for another 15
days upon request);
• Failure to pay the duties and taxes 15 days after final
assessment;
• Failure to claim the importation within 30 days after payment; and
• Failure to claim the goods in customs bonded warehouse within
the prescribed period.
Notice of abandonment shall be made by electronic notice or personal
service. Expressly abandoned goods under paragraph (a) above shall
ipso facto be deemed the property of the government.
For impliedly abandoned goods under paragraphs (b), (c), (d) and (e),
an importer may reclaim the goods after compliance with legal
requirements and payment of corresponding duties, taxes, and other
charges within 30 days from lapse of the period to filed the import
entry. When these goods are sold by customs by public auction, the
proceeds of the sale, after deduction of duty and tax and all other
charges, shall be turned over to persons entitled to receive them.
In other words, the balance of the proceeds shall be returned to the
importer. In case there is no claimant, the balance shall be deposited
to the Forfeiture Fund.
Forfeiture Funds (Section 1151, CMTA)
All proceeds from public auction sales, after deduction of the charges
and expenses and subject to the claim of the owner or importer of an
impliedly abandoned goods as discussed above, shall be deposited in
an account to be known as Forfeiture Fund.
The fund shall be managed by the Bureau of Customs and shall be
used for the following:
• outsource the management of the inventory, safekeeping,
maintenance and sale of abandoned and forfeited goods;
• facilitate customs seizure, abandonment and forfeiture
proceedings and the disposition of goods;
• enhance customs intelligence and enforcement capability; and
• support the modernization program, and other operational
efficiency and trade facilitation initiatives.
Title I
Chapter 1 (Short Title)
As previously mentioned, the original title of the initial bills filed in
Congress in 2008 was “Customs and Tariff Modernization Act” or
CTMA. The approved law revised the short title based on the
misconception that the term tariff refers to the Tariff Commission and
that the term modernization should properly refer to customs only.
In most customs jurisdictions, tariff administration is an inherent
function of the customs office and there is no separate office assigned
to perform tariff administration. In the Philippines, we have a separate
agency known as the Tariff Commission which is under the National
Economic and Development Authority whereas the Bureau of Customs
is under the Department of Finance.
Chapter 2 (General and Common Provisions)
We have outlined below the specific changes provided under this
chapter:
• ‘Declaration of Policy’ (Section 101) is a new provision which
specifically mentions the promotion of trade facilitation as a major
customs function. (Section 101)
• ‘Definition of Terms’ (Section 102) defines new terms not
previously provided in the old law such as Admission, AWB
(airway bill), AEO (Authorized Economic Operator), Carrier,
Conditional Importation, Perishable Goods, Tentative Release,
Transit, Travelers and Third Party.
• Section 103 (When Importation Begins and Deemed Terminated)
expounds on the instances when importation is deemed
terminated.
• Section 104 (When Duty and Tax is Due on Imported Goods) has
a new provision providing for 20% legal interest on duties and
taxes that are already due and demandable.
• Section 105 (Effective Date of Rate of Import of Duty) provides
the applicable dates depending on the type of goods such as
those for consumption, goods withdrawn from customs bonded
warehouses or from free zones and goods for public auction.
• Sections 106 (Declarant) has redefined the declarant to refer
mainly to the owner of the goods. Section 107 provides the rights
and obligations of a declarant.
• Section 108 on penalties adopts the Revised Kyoto Convention
(RKC) policy that penalties should not be substantial for errors in
the goods declaration and those not involving gross negligence or
fraud.
• Section 109 promotes the use of ICT in customs processes.
• Section 110 adopts the RKC policy providing equal treatment of
parties transacting directly with customs or through
representatives.
• Section 111 and 112 is based on the RKC policy to provide
transparency and accessibility to information not otherwise
considered as confidential in nature.
• Section 113 (Decision and Ruling) defines the standards for
issuing decisions, including advance rulings, relating to the
importation and exportation of goods. Section 114 provides the
right to appeal a decision deemed adverse to an importer or
exporter.
Chapter 3 (Types of Importation)
This Chapter is based on the Section 100 and 101 of the Tariff and
Customs Code of the Philippines (TCCP). The main difference under
the CMTA is that the old provision on prohibited importation has been
redefined under 2 new section—one on prohibited goods per se and
another on restricted goods. Additionally, new provisions have been
provided to define free and regulated goods.
Under Section 117, import permits for regulated goods may be
submitted after arrival of the goods but prior to release from customs
custody. Old customs rules require that import permits be issued prior
to arrival of the goods and this rule affects many importations
particularly telecom equipment and IT products arriving at Ninoy
Aquino International Airport.
Chapter 4 (Relief Consignment)
Under Section 105 of the old TCCP, donations to relief organizations
are duty free but subject to VAT. There is now a specific chapter under
CMTA which provides for tax and duty free treatment of goods
considered as relief consignments.
Please note that while Title I refers to preliminary provisions, this
particularly chapter refers to special procedures for a specific type of
importation. The original draft bills have these provisions together with
those provisions for travelers and passenger baggage, postal matters
and express shipment.
Title II (Bureau of Customs)
Chapter 1 (General Administration) covers the general duties and
functions of the Bureau of Customs (BOC) and covers about 6
sections. Among the salient features of this chapter are as follows:
• Requirement that there should be at least four (4) but not more
than six (6) Deputy Commissioners, majority of whom shall come
from the ranks of the bureau;
• Expanded power of the Commissioner to include the power to (i)
exercise any customs power directly or indirectly, and (ii) subject
to approval of the Secretary of Finance, to assign or reassign any
customs officer;
• New limitation on assessment officers to remain in their
assignment for not more than 3 years;
• Enhanced functions for the bureau to include trade facilitation and
border control; and
• Submission of copies of goods declarations to various
government agencies in electronic copies (this repeals the
previous requirement for manual copies).
One issue relating to the appointment of Deputy Commissioners is the
requirement that majority come from the ranks apply to former customs
officers.
With regard to the submission of electronic copies of goods declaration
to other government agencies, such requirement puts pressure on the
bureau to enhance its automated system to ensure such copies are
made readily and easily available.
Chapter 2 (Port of Entry) retains many of the old provisions relating to
this topic. The old provision on assignment of customs officers and
employees has been qualified with the requirement that such
assignment may only be made within the bureau.
We note that there had been previous instances of customs officers
being temporarily assigned to the Finance Department and the new
provision as mentioned now prohibits such reassignment to offices
other than the bureau.
Chapter 3 (Exercise of Police Authority) defines the scope and
limitation of the police power as exercised by the BOC. Among major
changes under this chapter are as follows:
• Law enforcement officers may exercise the power to search,
seize and/or arrest but only upon authorization of the
Commissioner and such deputized officers shall disclose the
nature of their authority upon request;
• Goods seized by deputized officers shall be physically turned over
immediately to the bureau;
• Port and airport authorities are obliged to provide authorized
customs officers with unhampered access to all premises within
their administrative jurisdictions; and
• In the exercise of the power to inspect and visit commercial
establishments and demand evidence of tax and duty payments,
the owners of the establishments have 15 days to produce
evidence before their goods may be subject to seizure.
Under the past administrations, law enforcement agencies were
allowed to exercise customs police authority without the supervision
and control of the BOC. The cited provision now has certain limitations.
For one, these agencies must clearly be authorized by the
Commissioner and deputized officers must at all times carry their
written authorizations and present the same upon requested.
With regard to the exercise of police power in ports and airports, this
chapter now expressly provides that port and airport authorities are
required to provide unhampered access to customs police authorities.
Title III (Customs Jurisdiction and Customs Control)
Many of the sections under this Title have been adopted from the old
code. Under chapter 2, BOC shall exercise control, direction and
management of customs offices, facilities, warehouses, ports, airports,
wharves, infrastructures and other premises. In addition, the bureau
may issue rules and regulations to allow temporary operation of
storage facilities especially for abandoned and overstaying cargoes.
This expanded power of the bureau under this title clearly impacts on
the management and supervision of facilities and operators within
ports and airports.
Title IV (Import Clearance and Formalities)
Chapter 1 (Goods Declaration) covers general requirements and has
19 sections dealing with the importation process. While many of the
provisions have been adopted from the old code, among the salient
features of this chapter are as follows:
• Goods declarations (for consumption, customs bonded
warehouse (CBW), for admission to free zones, for conditional
importation or for customs transit) are required for ALL
importations, including goods bound for freeports and Philippine
Economic Zone Authority zones and those directly discharged in
freeports (e.g. Subic).
• Goods declarations shall be submitted electronically and, when
printed and certified, such printed copy shall be considered as
actionable documents for purposes of filing administrative and
criminal charges against the importer.
• Customs can now allow provisional goods declarations when
some information or supporting documents are not available to
complete a regular goods declaration, but such information or
document must be submitted within 45 days.
• Goods declarations are now required to be submitted within 15
days from discharge from aircraft or vessel. The period may be
extended for another 15 days. Under the rules on abandonment,
the importer may also reclaim the abandoned goods within an
additional 30 days.
• A new provision has been provided allowing advance lodgement
and clearance of goods. At present, the Bureau of Customs
allows the advance filing of goods declaration even prior to the
arrival of the goods.
• International standards on the mode of payment and terms of
trade are recognized. These standards include those developed
by the International Chamber of Commerce (ICC) on
INCOTERMs and on international letter of credit such as the
Uniform Customs and Practice for Documentary Credits.
Chapter 2 (Examination of Goods) retains many of the old provisions
relating to examination of goods. A provision has been provided
allowing customs to adopt non-intrusive technology (such as x-ray
machines) in the examination of goods.
Chapter 3 (Assessment and Release) adopted many of the old
provisions on the assessment process which includes the valuation,
classification and computation of taxes and duties on imported goods.
Among the major changes under this chapter are as follows:
• A new provision provides a tax and duty exemption on goods with
a de minimis value of Php10,000 FOB or FCA.
• In lieu of the old provision on tentative liquidation, two provisions
on tentative assessment have been provided to cover (i) goods
subject to dispute settlement, and (ii) goods covered by
provisional declarations.
• Assessment shall be deemed FINAL after 15 days from receipt of
notice. Final assessment shall also be deemed CONCLUSIVE
after 3 years from date of final payment of duties and taxes.
Within that 3-year period, customs may conduct a post clearance
audit on the subject importation.
Chapter 4 (Special Procedures) are new provisions covering rules on
travelers, passenger baggage, postal mail and express shipment
(courier). Additional provision under Section 440 on advance clearance
and control on containerized cargoes has been provided to allow
customs to provide a load port survey program on containerized
cargoes.
What is clearly new under this chapter is the mandate for customs to
provide a simplified process based on international practices for postal
matters and courier shipments. With regard to Section 440, the version
approved by the Lower House required a load port survey for all
containerized cargoes but the approved version only directs customs
to implement a voluntary program.
Title V (Export Clearance and Formalities)
Many of the sections under this Title have been adopted from the old
code. The only new provision is Section 503 (Rules of Origin). Under
this new provision, CMTA allows the bureau or any other designated
government agency to determine the origin of goods for export, and for
exporters to adopt a self-certification system accredited by the bureau
or a designated government agency.
Title VI (Customs Transit and Customs Transshipment)
Chapter 1 (Customs Transit) covers new rules on the movement of
goods from one customs office to another office. Under the old rules,
the term for such movement would be ‘transshipment’. Transit goods
are generally not subject to duties and taxes. Transit may involve the
following activities:
• Goods imported through any port of entry (e.g. Clark) for transit to
another port (e.g. Ninoy Aquino International Airport) for
immediate exportation;
• Goods imported through any port of entry (e.g. NAIA, Port of
Manila or Manila International Container Port) for transit to a Free
Zone such as a free port (e.g. Clark or Subic) or a Philippine
Economic Zone Authority (PEZA) zone;
• Goods from a Free Zone (e.g. zone) for transit to a port (e.g.
MICP) for subsequent export; and
• Goods from a Free Zone (e.g. Subic) for transfer to a PEZA zone
or a customs bonded warehouse.
Under Section 600, goods transferred from one customs office to
another customs office (e.g. Port of Manila to Port of Davao) but
intended for domestic use (goods for consumption) are not considered
transit goods and are subject to the immediate payment of duties and
taxes.
Under Section 601, transit goods bound for CBWs, Free Zones, and
goods covered by RA 10668 (An Act Allowing Foreign Vessels to
Transport and Co-Load Foreign Cargoes for Domestic Transshipment
and for Other Purposes) are not subject to the payment of duties and
taxes. In the case of goods covered by RA 10668, goods for
consumption arriving at a port of discharge (e.g. Port of Manila) for
transfer to the port of final destination (e.g. Port of Davao) using
another foreign vessel shall be subjected to the payment of duties only
at the port of destination. In all other cases, goods for transit or for
transfer from one customs office to another shall be subject to the
payment of duties and taxes at the port of discharge.
Chapter 2 (Customs Transshipment) refers to goods for
transshipment or goods that are transshipped through a port of entry
for immediate exportation in the same port. Transshipped goods will
not be subject to the payment of duties and taxes and shall be subject
to re-exportation in the same port within 30 days from arrival. The
period for exportation may be extended by the Commissioner upon
request.
Section 604 also states that
“unless it shall appear in the bill of lading, airway bill, invoice, manifest,
or other satisfactory evidence, that goods arriving in the Philippines are
destined for transshipment, no exportation thereof will be permitted…”.
Title VII (Import Duty and Tax)
Chapter 1 (Basis of Valuation) covers the rules on valuation,
specifically the different methods of valuation which are principally
based on the WTO Valuation Agreement. While the new rules are
substantially based on the old ones, the new rules are now provided in
7 sections unlike the old rules which are provided in a single section
(Section 201, TCCP). Section 700 sets the rules on the sequential
application of the valuation methods while the succeeding 6 sections
outline the various methods of valuation.
Section 707 clearly provides the basis for customs to verify the truth or
accuracy of values as declared by importers. Specifically, the section
states that
“when a declaration has been presented and when the Bureau has
reason to doubt the truth or accuracy of the particulars or of documents
produced in support of such declaration, it may ask the importer to
provide further explanation, including documents or other evidence,
that the declared value represents the total amount actually paid or
payable for the imported goods…”.
The same section also provides that when there is a valid valuation
dispute, the importer has the right to secure the release of the imported
goods upon the posting of sufficient guaranty equivalent to the duties
and taxes subject of the dispute. The amount of duties and taxes not
subject to dispute shall be paid prior to release of the goods.
Chapter 2 (Special Duties and Trade Remedy Measures)
substantially reiterates the old provisions on the right of compulsory
acquisition of grossly undervalued goods and the power of the
President to increase duties on imported goods arising from
discrimination from a foreign country. The same chapter outlines the
additional duties that may also be imposed on imported duties such as:
marking duty, safeguard duty, dumping duty and countervailing duty.
• New Concepts. We have outlined below many of the major
concepts and policies as originally provided under the CMTA, as
follows:
• Expansion of the customs mandate to include trade facilitation;
• Promotion of ‘paperless’ transactions through the use of
information and communication technology;
• Definition of “free zones” to harmonize rules and regulations
governing all special economic zones, free ports and similar
authorities;
• Provision for tax and duty status on ‘relief consignments’ to,
among others, promote donations and international aid during
calamities and major disasters;
• Provision for legal interest in case of non-payment of duties and
taxes;
• Procedure for advance ruling to allow early resolution of customs
issues even if there is yet no actual importation involved;
• Provision on ‘Authorized Economic Operator’ or AEO, an
expansion of the original concept of ‘Authorized Operator’ under
the RKC and an adoption of the expanded program of the the
World Customs Organization (WCO) to promote both trade
compliance and security in the supply chain;
• Definition of ‘alerts’ to harmonize and simplify rules on the
apprehension of shipments, to make the process transparent for
the trading community, and to prevent abuse by customs
enforcement officers;
• Provision for summary remedies such as distraint on personal
property and levy on real property to collect duties, taxes and
other charges arising from a customs audit;
• Creation of a Forfeiture Fund for the purpose of outsourcing
customs functions, facilitating processes, capacity building, and
modernization through automation; and
• Creation of a Congressional Customs and Tariff Oversight
Committee to oversee the implementation of the CMTA.
• Revised Policies. Many policies under the old law have likewise
been revised or amended such as the following:
• Requirement that majority of the Deputy Commissioners must
come from the ranks;
• Provision for the mandatory transfer of assessment officers after 3
years;
• Redefinition of the term ‘declarant’, to allow importers to transact
with the bureau, either directly or through authorized
representatives;
• Provision for ‘restricted imports’ to cover imports that are
generally prohibited unless given prior permits from certain
regulating agencies;
• Provision to allow motion to quash or recall of a Warrant of
Seizure to prevent delay in the processing of shipments;
• Procedure allowing the submission of provisional goods
declarations in cases of incomplete documents or information
necessary to file the import entry;
• Additional conditions for the exercise of the power to visit and
inspect commercial establishments by non-customs personnel;
• Provision for ‘transit’ shipments as against ‘transshipment’;
• Redefinition of the concept of ‘abandonment’; and
• Procedure allowing settlement while forfeiture proceedings are
ongoing.
Implementation. Once fully implemented, the CMTA should in general
provide for (a) less discretion on customs decision-making, (b)
adoption of internal best practices, (c) clear, simplified and harmonized
processes, and (c) reduced penalties for errors and omissions.
Given the scope of work required, full implementation of CMTA will
take years, albeit many of the major policy reforms will be issued
piece-by-piece.
Title VIII (Tax and Duty Deferment, Preference and Exemption)
Chapter 1 (Conditionally Tax and/or Duty Free Importation) is
substantially based on Section 105 of the Tariff and Customs Code of
the Philippines. Among the substantial changes under this chapter are
the following:
• Reduction of the security required from 150% to 100% of the
ascertained duty and tax;
• Duty exemption of goods subject to outward processing; and
• Increase in tax and duty exemptions of OFWs and returning
residents for a minimum of PhP150,000.
Chapter 2 (Customs Warehouses) covers the operations of CBWs
and CFWs. The provision on CBWs is substantially based on the old
code while the provisions on CFWs are akin to the existing customs
regulations on Authorized Customs Facility (ACF). With regard to
CBWs, the major change is the increase in the period of storage to 1
year from the previous 9-month requirement.
The provisions covering CFWs are new provisions, providing customs
the express power to supervise and control facilities handling goods for
import and export such as container yards, container freight stations,
seaport warehouses, and airport warehouses.
Chapter 3 (Free Zones) are new provisions to cover “non-customs”
territories such as free ports (e.g. Subic, Clark and PHIVIDEC) and
PEZA zones. Under this chapter, customs shall issue harmonized rules
for Free Zones. Once the rules are issued, new registration
requirements for PEZA and Free Port operators as well as new
processing requirements for goods admitted to or withdrawn from free
zones will be provided. At present, while goods admitted to PEZA
zones are subject to customs processing, many goods imported by
freeports operators (such as SBMA locators) are exempted from the
required goods declaration requirement. Specifically, Section 816 of
the CMTA now provides that:
“Movement of Goods into and from Free Zones. – The entry of goods
into a free zone, whether directly or through the customs territory, shall
be covered by the necessary goods declaration for admission or
transit. Withdrawal from the free zone into the customs territory shall
be covered by the necessary goods declaration for consumption or
warehousing.”
Chapter 4 (Stores) provides new provisions to specifically cover tax-
and duty-free facilities storing goods for use of international
passengers and crew or for the operation and maintenance (e.g. fuel,
parts and equipment) of international vessels and aircraft.
Title IX (Duty Drawback and Refund)
Chapter 1 (Duty Drawback) and Chapter 2 (Refund and
Abatement) are principally based on the provisions of the old code.
The major change involves the provision on the prescription for the
duty drawback claim (1 year) and for refund application (12 months).
It should be noted here that while 1 year is normally interpreted as a
calendar year, the term “12 months” is generally defined as equivalent
to “three hundred sixty (360) days”.
Title X (Post Clearance Audit)
A major change under CMTA is the change in title from “Post Entry
Audit” to “Post Clearance Audit”, the latter being the commonly-used
term by most customs jurisdictions worldwide. While many provisions
are still based on the old code, among the substantial changes are as
follows:
increase in the minimum penalty but decrease in the maximum penalty
in case of findings of underpayment of duties and taxes; and additional
powers to the bureau to enable it to fully exercise its audit powers —
power to issue summons to produce records and to give testimony,
and to exercise summary remedies such as distraint of personal
property and levy of real property to implement its audit findings.
Sometime late 2013, the customs audit function was transferred from
the BOC to the Department of Finance. The CMTA clearly provides
that Post Clearance Audit (PCA) is a function and responsibility of the
BOC. Customs is expected to aggressively start its customs audits
once the PCA office is activated and a new head is appointed.
Title XI
Chapter 1 (Advance Ruling and Dispute Settlement) is a new
chapter but has old and new provisions. Among the new provisions are
as follows:
• The law now provides for a mechanism for BOC to issue advance
rulings with regard to valuation, rules of origin and other customs
issues (classification issues are excluded);
• Application for advance ruling shall be submitted to the
Commissioner and appeals from adverse rulings shall be filed
with the Court of Tax Appeals (CTA); and
• Application for classification ruling shall be filed with the Tariff
Commission and classification rulings shall be binding upon BOC;
and in case of classification disputes, the BOC shall refer the
matter to the Tariff Commission.
(Note that under the old rules, it is not expressly provided that tariff
rulings shall be binding upon BOC. In addition, there is no clear
jurisdictional rules in regards to actual classification disputes.)
Chapter 2 (Protest) is principally based on the old rules, the major
revision being with regard to the venue of the protest which is the
Office of the Commissioner, and in case of adverse decisions, with the
CTA. The rationale for this is that when an issue is raised on a pending
shipment at the level of the Collection District, such dispute shall be
treated as a case on “first instance” and when the importer disagrees
with the position of the Collection District, the remedy would be to file a
protest with the Commissioner.
With regard to the requirement for the amount to be paid or the posting
of guaranty, the law has provided that the implementing rules shall be
provided as to the following:
• When payment has to be made or not with regard to the disputed
amount of duties and taxes;
• in case the disputed amount is not paid, whether to require a
guaranty or not; and
• in case a guaranty is required, whether the same shall be in cash,
check, letter of credit, surety bond or any other kind of guaranty.
Chapter 3 (Alert Orders) is a new chapter. It specifically provides the
rules with regard to the:
• basis for the issuance of alert orders which may result in
suspension of the processing of the shipment and the conduct of
physical or non-intrusive inspections; and
• validity of the orders and the period required to make a finding
after the conduct of the examination.
Chapter 4 (Seizure and Forfeiture) is mainly based on the old
provisions with the following significant changes:
• Period required to issue an order of release or a warrant of
seizure upon recommendation of the alerting officer;
• Provision allowing the District Collector to order the release of the
alerted goods in case of an absence of probable cause, subject to
review by the Commissioner;
• Redemption, even when there is evidence of fraud, shall be
available even during the course of the forfeiture proceedings,
without prejudice to the filing of the administrative and criminal
cases as applicable; and
• Period required for the issuance of an order for hearing and for
the issuance of the decision after termination of the hearing.
Chapter 5 (Appeal in Protest and Forfeiture Cases) is mainly based
on old provisions.
Chapter 6 (Abandonment) substantially departs from the old
provisions. Under the new rules, abandoned goods are NOT
government property and the importer has:
• the right to reclaim the goods after payment of the duty and tax,
and all other charges and expenses; and
• the right over the proceeds of the sale, after deduction of any duty
and tax, and all other charges and expenses.
Importers should understand that even if there is failure to file the
import entry within the prescribed period, the goods do not become
government property and importers may (a) request for extension of
the period to file the entry, (b) reclaim the goods, or (c) collect the
proceeds if the goods have already been sold. (We have extensively
discussed ‘abandonment’ in the first article of this series last
November 14, 2016.)
Chapter 7 (Other Administrative Proceedings) repeats the old
provision allowing the Commissioner to enter into a compromise but
limited to the imposition of fines and surcharges. During the
deliberations on the CMTA in the Lower House, there was a proposal
to include the principal amount in the authority to enter into a
compromise but the same was disapproved.
Chapter 8 (Civil Remedies for the Collection of Duties and Taxes)
provides additional powers to the BOC to enable it to fully exercise its
audit powers. These additional powers include the power to issue
summons to produce records and to give testimony, and to exercise
summary remedies such as distraint of personal property and levy of
real property to implement its audit findings. This chapter is principally
based on similar provisions in the National Internal Revenue Code
(NIRC).
Chapter 9 (Judicial Proceedings) is an iteration of the old provisions.
A significant amendment is that with regard to the prosecution and
handling of criminal cases, the same shall be handled by customs
lawyers, with the assistance of the Department of Justice.
Chapter 10 (Disposition of Property in Customs Custody) restates
many of the old provision with the following major changes:
• BOC may immediately opt to donate forfeited goods to another
government agency or to declare the same for official use of the
bureau;
• Prohibited goods shall be destroyed, except those suitable for
shelter, foodstuff, clothing materials and medicines; and
• Regulated goods shall be disposed of in the manner to be
determined by the regulating agency and not the BOC.
Section 1151 of this chapter provides for the creation of a Forfeiture
Fund. All proceeds from public auction sales, after deduction of the
charges and expenses and subject to the claim of the owner or
importer in the case of impliedly abandoned goods, shall be deposited
in the Forfeiture Fund. The fund shall be used specifically for the
following purposes:
• outsource the management of the inventory, safekeeping,
maintenance and sale of abandoned and forfeited goods;
• facilitate customs seizure, abandonment and forfeiture
proceedings and the disposition of goods;
• enhance customs intelligence and enforcement capability; and
• support the modernization program, and other operational
efficiency and trade facilitation initiatives.
Title XII (Third Parties)
This Title provides the general provisions covering all third parties
transacting with the BOC. A separate chapter is provided for
Authorized Economic Operators or AEOs.
Chapter 1 (Customs Service Providers) provides for the registration
of customs brokers and the accreditation of other customs service
providers. This new provision clarifies the role of the BOC regarding
the registration of licensed customs brokers.
Chapter 2 (Carriers, Vessels and Aircrafts) are principally based on
old provisions. Among the substantial changes are as follows:
• Advance submission in electronic format of cargo manifest within
a period to be determined by the bureau; and
• Submission of electronic copies of the manifest to the
Chairperson, COA.
Chapter 3 (Other Third Parties) provides that third parties shall be
treated equally as importers or consignees and that rules and
regulations shall be issued to regulate these third parties. These third
parties include the following: logistics providers (including truckers),
importers, exporters, carriers, airlines, shipping lines and shipping
agents, forwarders and consolidators, arrastre, port and terminal
operator, and warehouse operators.
Chapter 4 (Authorized Economic Operator) is a new provision which
merges the concept of Authorized Persons under the Revised Kyoto
Convention (RKC) and the AEO program under various World
Customs Organization instruments. The implementing rules of the AEO
framework should recognize the need to involve the private sector to
ensure safety and security in the supply chain and to provide
standards in trade facilitation for businesses that have undergone
validation and quality accreditation procedures.
Title XIII (Customs Fees and Charges)
This Title expressly allows the bureau to collect dues, fees and for imported and exported goods. The chapter is composed of 3
charges for services rendered. sections as follows:

Title XIV (Offenses and Penalties) • General Rules on Interpretation (Section 1610)
• Tariff Nomenclature and Rates of Import Duty (Section 1611)
• Tariff Nomenclature and Rates of Export Duty (Section 1612)
While the RKC provides that penalties should depend on the gravity or
importance of the offense, the CMTA provides penalties that would
seem excessive and confiscatory. The rationale behind the increase in
penalties is to prevent smuggling, particularly that of agricultural
products which greatly affect the domestic industry.

Chapter 1 (Crimes and Other Offense) are based on old provisions

and some of the significant changes are as follows:

• Increase of the surcharge for misdeclaration, misclassification and

undervaluation to 250% of the duty and tax due;
• Increase in the fines to be imposed and period of imprisonment
for unlawful importation or exportation, and other fraudulent
practices; and
• Unlawful importation of goods exceeding Php200 million shall be
considered as a ‘heinous crime’.

Chapter 2 (Penalties Imposed upon Bureau Employees) covers the

offenses committed by officers and employees of the bureau.

Title XV (Miscellaneous Provisions)

This Title covers all the old provisions not specifically covered by the
various titles but which are just as important. Among these provisions
are as follows:

• Requirement to issue a ruling within 30 days from application;

• Application of the established ruling or decision after 30 days from
public notice;
• Provision allowing a general security covering a specific period
and such transactions within such period;
• Provision for reward of 20% of the actual proceeds for customs
and non-customs informers; and
• Outsourcing of non-sovereign customs functions to private
entities.

Title XVI (Tariff Administration and Policy)

This Title has 13 sections covered by 3 chapters. Most of the

provisions are based on the old code.

Chapter 1 (Tariff Commission) restates many of the old provisions in

relation to the composition, powers and functions of the Tariff
Commission. With respect to the functions of the commission as
provided in Section 1603, a major change is the provision that provides
that the commission “shall issue advance rulings on tariff classification
of imported goods and render rulings on disputes over tariff
classification”. Under this Section, the commission has been expressly
provided the power and function to adjudicate classification issues on
imported goods. The same section restates the jurisdiction of the
commission over trade remedy measures – dumping, safeguard and
countervailing duties.

Chapter 2 (Flexible Tariffs) restates the old provisions on “flexible

clause” and “promotion of foreign trade”. The flexible clause empowers
the President to:

• increase, reduce or remove existing rates of import duty;

• establish import quotas or ban imports of any commodity; and
• impose additional duty on all imports not exceeding 10% ad
valorem.

Chapter 3 (Tariff Nomenclature and Rate of Duty) restates most of

the old provisions and provides the tariff classification and duty system