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A comprehensive report on The Tariff and Customs Code (Republic Act no.

1937)

CONCEPT

What is a tariff?

Under the Tariff & Customs Code, a Tariff may refer to two things:

1. As a book of rates which lists down the different kinds of articles or merchandise along with the
duties imposed on the same;

2. As the duties payable on articles or merchandise imported or exported.

The Bureau of Customs Duties

( Duties, Powers and Jurisdiction)

Section 601. Chief Officials of Bureau of Customs. The Bureau of Customs shall have one chief
and one assistant chief, to be known respectively at the Commissioner (hereinafter known as
the "Commissioner") and Assistant Commissioner of Customs, who shall each receive an annual
compensation in accordance with the rates prescribed by existing laws. The Assistant
Commissioner of Customs shall be appointed by the proper department head.

Sec. 602. Functions of the Bureau. The general duties, powers and jurisdiction of the bureau
shall include:

a. The assessment and collection of the lawful revenues from imported articles and all other
dues, fees, charges, fines and penalties accruing under the tariff and customs laws.

b. The prevention and suppression of smuggling and other frauds upon the customs.

c. The supervision and control over the entrance and clearance of vessels and aircraft engaged in
foreign commerce.

d. The general supervision, control and regulation of vessels engaged in the carrying of
passengers and freight or in towage in coastwise trade and in the bays and rivers of the
Philippines.

e. The prohibition and suppression of unnecessary noises, such as explosion of gasoline


engines, the excessive blowing of whistles or sirens, and other needless and disturbing sounds
made by water craft in the ports of the Philippines or in parts of rivers included in such ports.

f. The exclusion, if the conditions of traffic should at any time so require, of vessels of more than
one hundred and fifty tons from entering, berthing or mooring in the Pasig River.

g. The admeasurement, registration, documenting and licensing of vessels built or owned in the
Philippines, the recording of sales, transfers and encumbrances of such vessels, and the
performance of all the duties pertaining to marine registry.

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h. The inspection of Philippine vessels, and supervision over the safety and sanitation of such
vessels.

i. The enforcement of the lawful quarantine regulations for vessels entering Philippine ports.

j. The enforcement of the tariff and customs laws and all other laws, rules and regulations relating
to the tariff and customs administration.

k. The licensing of marine officers who have qualified in the examination required by law to be
carried on Philippine vessels, the determination of the qualifications of pilots, the regulation of
this service, and the fixing of the fees which they may charge.

l. The supervision and control over the handling of foreign mails arriving in the Philippines, for
the purpose of the collection of the lawful duty on dutiable articles thus imported and the
prevention of smuggling through the medium of such mails.

Sec. 603. Territorial Jurisdiction. For the due and effective exercise of the powers conferred by law
and to the extent requisite therefor, said bureau shall have the right of supervision and police authority
over all seas within the jurisdiction of the Philippines and over all coasts, ports, airports, harbors, bays,
rivers and inland waters navigable from the sea.

When a vessel becomes subject to seizure by reason of an act done in Philippine waters in violation of
the tariff and customs laws, a pursuit of such vessel begun within the jurisdictional waters may continue
beyond the maritime zone, and the vessel may be seized on the high sea. Imported articles which may be
subject to seizure for violation of the tariff and customs laws may be pursued in their transportation in the
Philippines by land, water or air and such jurisdiction exerted over it at any place therein as may be
necessary for the due enforcement of the law.

Sec. 604. Jurisdiction over Premises Used for Customs Purposes. The Bureau of Customs shall,
for customs purposes, have exclusive control, direction and management of custom-houses, warehouses,
offices, wharves, and other premises in the respective ports of entry, in all cases without prejudice to the
general police powers of the city or municipality wherein such premises are situated.

Sec. 605. Enforcement of Port Regulation of Bureau of Quarantine. Customs officials and
employees shall cooperate with the quarantine authorities in the enforcement of the port quarantine
regulations promulgated by the Bureau of Quarantine and shall give effect to the same in so far as they
are connected with matters of shipping and navigation.

Sec. 606. Power of the President to Subject Premises to Jurisdiction of Bureau of Customs.
When any public wharf, landing place, street or land, not previously under the jurisdiction of the Bureau of
Customs, in any port of entry, is necessary or desirable for any proper customs purpose, the President of
the Philippines may, by executive order, declare such premises to be under the jurisdiction of the Bureau
of Customs, and thereafter the authority of such Bureau in respect thereto shall be fully effective.

Sec. 607. Annual Report of Commissioner. The annual report of the Commissioner shall, among
other things, contain a compilation of the (a) volume and value of articles imported into the Philippines
and the corresponding customs duties assessed and collected thereon itemized in accordance with the
tariff classification provided in this Code and (b) volume and value of articles exported from the
Philippines for the preceding year.

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Sec. 608. Commissioner to Make Rules and Regulations. The Commissioner shall, subject to the
approval of the department head, make all rules and regulations necessary to enforce the provisions of
this Code.

Articles Subject to Duty

Section 1201. Articles to Be Imported Only Through Customhouse. All articles imported into the
Philippines, whether subject to duty or not, shall be entered through a customhouse at a port of entry.

When does Importation begin?

It begins when the vessel or aircraft ENTERS the jurisdiction of the Philippines with the intention to
UNLOAD.

It is terminated when:

1) There is PAYMENT of duties, taxes, and other charges.

2) It is secured to be paid and legal permit for withdrawal.

3) The ARTICLES have legally left the jurisdiction of CUSTOMS.

Sec. 1202. When Importation Begins and Deemed Terminated.

Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with
intention to unlade therein.

Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the
articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been
granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the
jurisdiction of the customs.

Classes of Importation:

Dutiable Importation

Section 100. Imported Articles Subject to Duty

All articles, when imported from any foreign country into the Philippines, shall be subject to duty upon
each importation, even though previously exported from the Philippines, except as otherwise specifically
provided for in this Code in other laws.

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Prohibited Importations

Section 101. Prohibited Importations:

The importation into the Philippines of the following articles is prohibited:

(a) Dynamite, gunpowder, ammunitions and other explosives, firearms and weapons of war, and parts
thereof, except when authorized by law.

(b) Written or printed articles in any form containing:

1) any matter advocating or inciting treason, or rebellion, or insurrection, sedition or subversion


against the Government of the Philippines,

2) or forcible resistance to any law of the Philippines,

3) or containing any threat to take the life of, or inflict bodily harm upon any person in the
Philippines.

(c) Written or printed articles, negatives or cinematographic film, photographs, engravings, lithographs,
objects, paintings, drawings or other representation of an obscene or immoral character.

(d) Articles, instruments, drugs and substances designed, intended or adapted for producing unlawful
abortion, or any printed matter which advertises or describes or gives directly or indirectly information
where, how, or by whom unlawful abortion is produced.

(e) Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or mechanical
devices used in gambling or the distribution of money, cigars, cigarettes or other articles when such
distribution is dependent on chance, including jackpot and pinball machines or similar contrivances, or
parts thereof.

(f) Lottery and sweepstakes tickets except those authorized by the Philippine Government,
advertisements thereof, and lists of drawings therein.

(g) Any article manufactured in whole or in part of gold, silver or other precious metals or alloys thereof,
the stamps, brands or marks or which do not indicate the actual fineness of quality of said metals or
alloys.

(h) Any adulterated or misbranded articles of food or any adulterated or misbranded drug in violation of
the provisions of the "Food and Drugs Act".

(I) Marijuana, opium, pipes, coca leaves, heroin or any other narcotics or synthetic drugs which are or
may hereafter be declared habit forming by the President of the Philippines, or any compound,
manufactured salt, derivative, or preparation thereof, except when imported by the Government of the
Philippines or any person duly authorized by the Dangerous Drugs Board, for medicinal purposes only.

(j) Opium pipes and parts thereof, of whatever material.

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(k) All other articles and parts thereof, the importation of which prohibited by law or rules and regulations
issued by competent authority. (As amended by Presidential Decree No. 34)

Sec. 1207. Jurisdiction of Collector Over Articles of Prohibited Importation. Where articles are
of prohibited importation or subject to importation only upon conditions prescribed by law, it shall
be the duty of the Collector to exercise such jurisdiction in respect thereto as will prevent
importation or otherwise secure compliance with all legal requirements.

To simplify the said article:

It is the duty of the Collector to exercise jurisdiction to:

1) PREVENT Importation (prohibited importation)

2) SECURE compliance with LEGAL requirements (articles that may be subject to conditions)

Sec. 105. Conditionally Free Importations. The following articles shall be exempt from the
payment of import duties upon compliance with the formalities prescribed in, or with the
regulations which shall be promulgated by the Commissioner of Customs with the approval of the
department head: Par. (a) to (aa)

What are Conditionally-free importations?

Conditionally-free importations are exempt from payment of import duties provided they comply with
formalities and regulations promulgated by the Commisioner of Customs (with approval of the
Secretary of Finance.)

- If the article imported for free was used, sold, bartered or hired for purposes

other than that which they were intended for without prior payment of the duty,

tax, or other charges which would have been due and payable at time of entry,

then the article will be forfeited for the Government, and the importation shall

constitute a fraudulent practice against customs revenue.

- The President may suspend, disallow or completely withdraw, in whole or in part, any of the
conditionally-free imporation.

Section 105 is quite long, so we decided to discuss those important paragraphs of the said section:

Paragraph (f)

- Personal and household effects are duty free to the extent of P2000.

-If it excees P2000, a lower duty is imposed.

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Paragraph (l)

Imported articles donated to, or for the account of, any duly registered relief organization, not
operated for

profit, for free distribution among the needy, upon certification by the Department of Social
Services and

Development or the Department of Education, Culture and Sports, as the case may be;

-This is the section which prevented most of the Ondoy relief goods from getting to the needy folk.

-Former Pres. GMA however relaxed the rules using an executive order, under the Flexible Tariffs
Clause.

Paragraph (q)

- Take note that the sample medicines brought in the Philippines must not be sold or available
commercially in the Philippines.

Paragraph (s)

- The books must be: economic, technical, vocational, scientific, philosophical, historical, religious or
cultural.

Paragraph (t)

- Articles which were previously exported and returned without having been advanced in value or
improved are exempt, provided they comply with the conditions set by the Code.

PRESIDENTIAL DECREE No. 34 October 27, 1972

AMENDING THE TARIFF AND CUSTOMS CODE OF THE PHILIPPINES.

On the Provisions of Sec. 105:

- The importations of the Government and its agencies, instrumentalities and its GOCCs which have
contracts with foreign countries are exempt from duties.

However, read with Sec. 1205.

SEC. 1205. Importations by the Government. - Except those provided for in Section One

Hundred and Five of this Code, all importations by the Government for its own use or that of
its subordinate branches or instrumentalities, or corporations, agencies or instrumentalities
owned or controlled by the government shall be subject to the duties, taxes, fees and other
charges provided for in this code.

- This section requires a certificate that the importations were used for government purposes to
enable the government to get a refund.

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RATES OF DUTY

A. GENERAL RULES

Sec. 104

There shall be levied, collected and paid upon all imported articles the rates of duty indicated.

Max rate: NOT exceed 100% ad valorem

Rates of duty shall apply to ALL products whether imported directly or indirectly of all foreign products
which do not discriminate against Philippine products

If foreign country discriminates


- additional 100% across-the-board duty on their products

Rates of duty shall be subject to periodic investigation by Tariff Commission and may be revised by
President upon recommendation of NEDA.

Sec 106

DRAWBACKS - in the nature of refund or tax credit

a) Fuel used for Propulsion of Vessels engaged in trade with foreign countries or coastwide trade
-refund or credit not exceeding 99% of duty imposed by law on such fuel

b) Petroleum oils and oils from bituminous minerals, crude oils imported by non electric utilities and then
sold to electric utilities for generation of electric power
-refund or credit not exceeding 50% of duty imposed by law

c) Exportation of articles manufactured or produced in Phil (including packing +


covering + marking/labeling) of imported materials for which duties have been paid

B. BASIS OF DUTY

METHOD ONE

Transaction value of the price actually paid or payable for the goods when sold for export
to the Philippines.

commissions & brokerage fees


cost of containers
cost of packing (labor, materials)
assists (value of goods and services
supplied by the buyer free of charge or at a
reduced price for use in connection with the
production and sale for export of the good)
royalties & license fees
value of any part of the proceeds of
- subsequent resale, disposal or use of
- imported goods that accrue directly or
- indirectly to seller
cost of transport
loading, unloading, handling
insurance

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METHOD TWO

Transaction value of identical goods.

The DV shall be the transaction value of identical goods sold for export to the Phil and
exported at or about the same time as the goods being valued. Identical goods must be
same commercial level and substantially same quantity as the goods being valued.

METHOD THREE

Transaction value of similar goods.

The DV shall be the transaction value of similar goods sold for export to the Phil and
exported at or about the same time as the goods being valued.
Similar goods must be same commercial level and substantially same quantity as the
goods being valued.

METHOD FOUR

Deductive value.

DV is determined on the basis of sales in the Phil of goods being valued of identical or
similar imported goods less certain expenses resulting from importation and sale of
goods.
Deductive Value is determined by making a deduction from the established price per unit
for the aggregate of the following elements:

a. Commissions OR
b. additions made in connection with profit and general expenses AND
c. transport, insurance and associated costs
d. customs duties and other national taxes

PRICE - COMMISIONS/ADDITIONS - COSTS - DUTIES/TAXES = DEDUCTIVE VALUE

METHOD FIVE

Computed value.

DV is determined on the basis of cost of production + profit + general expenses reflected


in sales from exporting country to the Phil of goods of same class or kind DV is calculated
by:

Determine aggregate of relevant costs,


charges and expenses or value of
(1) materials and (2) production or processing costs
+ costs (containers, packing, assists, engineering, artwork, plans and sketches
undertaken in Phil and charged to producer
+ profits and general expenses
+ cost of transport, insurance and charges to the port or place of importation

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METHOD SIX

Fallback value.

DV cannot be determined using any of the above methods


- Use other reasonable means consistent with principles and general provisions of GATT

C. SPECIAL DUTIES

Dumping duties this is a duty imposed on a specific kind or class of foreign article which
is being imported into or sold or is likely to be sold for exportation to or in the Philippines at a
PRICE LESS THAN THE FAIR VALUE the importation or sale of which might injure or retard the
establishment of an industry producing goods in the Philippines.

Countervailing this is a duty imposed on articles, upon the production, manufacture or


export of which any BOUNTY or SUBSIDY is DIRECTLY or INDIRECTLY granted in the country
of origin and/or exportation, and the exportation of which into the Philippines will likely injure an
industry in the Philippines or retard the establishment of such industry.

Marking this is a duty imposed on imported articles or containers which have NOT
BEEN PROPERLY MARKED in any official language of the Philippines as to indicate the name of
the country, planet or origin of the article.

Discriminatory this is a duty imposed upon articles of a foreign country which


DISCRIMINATES AGAINST PHILIPPINE COMMERCE in such a manner to place it a
disadvantage compared with the commerce of another foreign country.

C. FLEXIBLE TARIFF RATES

The President is empowered:

a. to increase, reduce or remove existing protective rates of import duty


b. to establish import quota or to band imports of any commodity, as may be
necessary
c. to impose an additional duty on all imports not exceeding 10% ad valorem
whenever necessary

The President may do this in the interest of national economy, general welfare and/or
national security, and upon recommendation of the NEDA.

IMPOSITION OF DUTIES

A. Persons liable

Deemed Owner of Imported Articles:

1. consignee
2. holder of bill of lading

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3. if consigned to order, the consignor
4. underwriters of abandoned articles and salvors of articles saved at a wreck

The liability of importer for the duties, taxes, fees and other charges constitute a personal
debt due to the government which may be discharged only upon full payment. It also constitutes a
lien upon the articles imported while articles are in custody or subject to control of government.

All importations by the government, its branches, instrumentalities, GOCCs, agencies or


instrumentalities owned or controlled by government are subject to similar duties, taxes and fees
except for those provided in Sec. 105 (conditionally free imports)

B. Declaration

Imported articles must be entered in customhouse at the port of entry within 30 days from date of
discharge by:

1. importer, being holder of B of L


2. customs broker
3. agent

Import entries:

Informal entry
- articles of commercial nature intended for sale, barter or hire the Deductible Value is P2,000 or
less
- personal and household effects, not in commercial quantity, for personal use

Formal entry
- may be for immediate consumption, or under irrevocable domestic letter of credit, bank
guarantee or bond for:

a. placing article in customs bonded warehouse


b. constructive warehousing and immediate transportation to other Phil ports upon proper
examination and appraisal
c. constructive warehousing and immediate exportation

Written Declaration of Import Entry must contain statements that declare:

1. full account of value or price


2. the invoice and entry contains just and faithful account of the value or price of articles; nothing
has been omitted or concealed
3. to the best of knowledge of declaring, all the invoices and B of L are the only ones in exiting in
relation to the importation in question
4. the invoices, entries and B of L are genuine and true
- signed by importer, consignee or holder of bill, manager of corporation, firm or
association, licensed customs broker

C. Examination, Appraisal and Classification (Section 1405-08)

Procedure:
1. appraisers shall ascertain, estimate, determine the value or price of articles
-file action within 1 year
2. examiners shall render a report
3. appraisers shall describe all articles on the face of entry in tariff

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-15 days
An appraisal, fully passed upon and approved by Collector, may not be altered or modified except:

1. statement of error
2. request for reappraisal and/or classification if duty assessed amount is lower than the entered
value

D. Assessment of Taxes

E. Liquidation (Section 1601-03)

Liquidation shall be made on the face of entry showing the particulars

Daily record of entries liquidated shall be posted ion the public corridor of customs house

Tentative Liquidation

If to determine the exact amount due some future action is required, liquidation is
deemed tentative as to items affected and shall be subject to future and final adjustment and
settlement within 6 months

Finality of Liquidation

After expiration of 1 year from date of final payment of duties. In the absence of protest,
final and conclusive between the parties unless liquidation was tentative.

IV. REMEDIES OF THE GOVERNMENT

A. Extrajudicial

1. Enforcement of Tax Lien

Sec. 1508
When an importer has an outstanding and demandable account with the Bureau of Customs,

- Collector shall hold the delivery of the article


- Upon notice, he may sell such importation or a portion of it to satisfy the obligation

-importer may settle his obligation anytime before the sale

2. Seizure and Forfeiture

Sec 2205

WHO: customs official


Fisheries Commissions
Philippine Coast Guard

-to make seizure of any vessel, aircraft, cargo, animal or any movable property when the same is
subject to forfeiture or liable for any fine under the tariff and customs law

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ADMINISTRATIVE PROCEEDINGS
(Secs 2301 2316)

When seizure is made:

1. Collector shall issue a warrant for the detention of the property Cash bond

- if importer wishes to secure release of article for legitimate use


- amount fixed by Collector
- conditioned on payment of appraised value of article and/or fine, expenses, costs
-article will NOT be released if:
- prima facie evidence of fraud in the importation
- article is prohibited by law

2. Report to Commissioner and Chairman of Commission of Audit

3. Written notice to owner or importer

4. Collector shall make a list and particular description and classification of the seized
property, appraisal based on local wholesale values by
- at least 2 appraising officials
- absent such, 2 competent disinterested citizens

If within 15 days from notification, no owner or agent is found or appears before Collector the property
forfeited to Government and sold at auction

SETTLEMENT

While case is pending, Collector may accept settlement of any seizure case
- upon approval of Commissioner
- payment of fine ( 25% - 80% of the landed cost of the article)
In case of forfeiture, should pay the domestic market value of the seized article

Settlement NOT allowed:


o Fraud in importation
o importation prohibited by law
o release would be contrary to law

PROTEST

- written protest
- payment before protest is necessary (amount due + docket fee)

WHEN: at the time payment of the amount claimed to be due is made within 15 days thereafter

FORM: filed according to RR; point out the particular decision or ruling grounds used as basis for
the protest

SCOPE: limited to the subject matter of a single adjustment (refers to the entire content of one
liquidation including duties, fees, surcharges and fines) or other independent transaction

-failure to protest will render the action of the Collector final and conclusive except for manifest error
-upon demand of Collector, the importer shall furnish samples of the articles which are the subject of the
protest

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HEARING: 15 days after filing of protest

DECISION: within 30 days

REVIEW BY COMMISIONER: 15 days after notification in writing of Collectors decision


-if decision of Collector is adverse to government - automatic review

DECISION OF COMMISIONER: within 30 days


-notice to party who brought case ( if seizure case, personal service if practicable)

REVIEW BY SECRETARY OF FINANCE


-if decision of Collector is adverse to government - automatic review
Inaction of Commissioner or Secretary for 30 days from receipt of records of the case - decision
under review becomes final and executory

APPEAL TO CTA: within 30 days from receipt of copy of decision

COMPROMISE

-Commissioner may compromise any case subject to approval by Secretary.

REMEDIES OF THE TAXPAYER

1. Refund (1707-1708)

2. Protest (2308-2312)

3. Abandonment (1801-1803)

A. Refund (1707-08)

When:

1. manifest clerical error made in invoice or entry

2. error in return of weight, measure and gauge

- certified, under penalties of falsification or perjury, by examining official

3. error in the distribution of charges on invoices

- not involving any question of law

- certified, under penalties of falsification or perjury, by examining official

Conditions

1. Errors discovered before payment OR discovered within 1 year after the final liquidation

2. Written request and notice from importer OR statement of error certified by the Collector

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How:

1. Claim made in writing

2. Collector shall verify with the records in his office

3. Certify claim to Commissioner with his recommendation and necessary papers

4. Commissioner shall then cause the claim to be paid if found correct

If the result of the refund would result to a corresponding refund of the internal revenue taxes on the
same importation, Collector shall certify to Commissioner who shall cause the said excess to be paid,
refunded or credited in favor of the importer.

B. Protest (2308-09. 2312)

- written protest

- Payment before protest is necessary

(amount due + docket fee)

When: at the time payment of the amount claimed to be due is made within 15 days thereafter

Form: filed according to Rules and Regulations point out the particular decision or ruling ground used as
basis for the protest

Scope: limited to the subject matter of a single adjustment (refers to the entire content of one liquidation
including duties, fees, surcharges and fines) or other independent transaction

failure to protest will render the action of the Collector final and conclusive except for manifest error

upon demand of Collector, the importer shall furnish samples of the articles which are the subject of
the protest.

C. Abandonment (1801-03)

Article is deemed abandoned when:

1. Owner, importer or consignee expressly signifies in writing to Collector his intention to abandon

2. After due notice, fails to file an entry within 30 days from date of discharge of last package from vessel
or aircraft

3. After filing entry, fails to claim his importation 15 days from date of posting of the notice to claim such
importation

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Effect:

- deemed to have renounced his interest and property rights

- ipso facto deemed property of the Government

If any official or employee who:

- Had knowledge of the existence of abandoned article

- Custody or charge of such article fails to report within 24 hours from time article deemed abandoned
shall be punished:

According to sec. 3604 (fine: P5000 P50,000 imprisonment: 1 yr 10 yrs perpetual disqualification to
hold public office, vote and participate in election)

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