TARIFF AND CUSTOMS CODE DISCRIMINATORY / RETALIATORY DUTY

imposed for goods originating from countries

Fundamentals to Customs duties
Why are duties imposed?
Revenue to provide the government
income
Regulation
Protection of local industry
Protection of the national interest
Customs duties imposed for this
purpose are called special
customs duties
which discriminates against the commerce of
the Philippines
SAFEGUARD DUTY imposed to protect
domestic industries from increased imports
Types of safeguard duty:
General imposed upon products
imported in increased quantity
Special imposed upon products
exceeding a base level or which falls
below a price level

Nature of Tariff and Customs Duties IMPORT PROCEDURES

Customs duties charges upon
IMPORTER BUREAU OF
commodities imported or exported out of the
Arrival at
country CUSTOMS
Examinatio
Tariff
Tariff book of rates, table or catalogue, point of
drawn usually in alphabetical order containing
Submissio n of goods
classificati
the names of several kinds of merchandise entry
with the duties to be paid for the same as
settled or agreed upon between several
nUnloading
of papers on of
Appraisal
states that holds commerce together ofEntry to
cargoes ofgoods
goods
Notice of
customs
Payment Liquidation
house of Release of
CLASSIFICATION OF CUSTOMS DUTIES
1. Ordinary or Regular Customs Duties - are
imposed and collected mainly as a source of
revenue, namely:
duties goods
a. Ad valorem - duty is based on the market Obligations of importers
value or price of the imported article. PAPERS TO BE SUBMITTED
b. Specific - duty is based on the weight or Passenger and cargo manifest
volume of the imported article
Cargo storage plan
c. Alternate - the duty is based either on
Store list showing store laden
the weight or volume or on the value of
the imported article whichever is higher UNLOADING OF CARGO
d. Compound - the duty is based both on
the weight or volume and the value of the IMPORT ENTRY
imported article. A declaration to the BOC showing description,
2. Special customs duties - imposed and self-assessed value, tariff classification and
collected in addition to the ordinary customs other particulars of the imported articles
duties usually to protect local industries Basis for authorities to determine customs
against foreign competition. duties
Due date: Within 30 days from
Types of special customs duties discharge of last package (i.e.
ANTI-DUMPING DUTY imposed for goods complete at final destination)
imported which are sold or likely to be sold at
less than its fair value Types of entry
Amount of duty: Export price less Informal entry
normal price Commercial articles with dutiable
COUNTERVAILING DUTIES imposed to value of P2,000 or less
protect local industries against unfair Personal or household effects or
competition articles not in commercial quantity,
Amount of duty = ascertained or imported in passengers baggage,
estimated amount of subsidy, bounty mails or otherwise, for personal use
or subventions granted by the foreign Formal entry
country on exporters More than P2,000 in value or
MARKING DUTY imposed for improperly regardless of value for certain articles
marked articles in order to protect domestic industries
Amount of duty = 5% of goods ad NOTE: Formal entry requires a bond or duty
valorem deposit for their importation.

Register as
 the Client
Profile
Who can make an import entry? Confirmati Authority
Importer who is the holder of bill of lading Registratio
Authorized customs broker by the holder of on of to load
Loading
bill of lading n System
customer the
An authorized agent or attorney-in-fact for
Selection
(Unique
each holder of bill of lading order products
Certificate
ofExport
courier
Reference
Duties paid at point of entry are duty (Pro-forma of origin
deposits since they are estimates and are (Bill
#)of
clearance
Export Receiving
not final assessments invoice)
Revision can be made during assessment Lading)
(for
declaration payments
period: value, classification, origin, etc.
Liquidation final assessment of regulated/
admissibility and calculation of duties, to
provide importers certainty on amount of
prohibited
obligation products)
REGISTRATION TO CPRS proof of
Tariff classification accreditation as exporter
Dictate applicable rate or duty for the product CONFIRMATION OF ORDER
Determine whether subject to quotas, Foreign buyer issues purchase order
restraint, embargoes or other restrictions Exporter issues a pro-forma invoice,
signed by buyer returned to the
Valuation exporter
Per WTO valuation agreement in hierarchical EXPORT DECLARATION online form at E2M
order of priority: Internet System
Transaction value (TV) actual price paid
or payable for the goods when imported plus EXPORT CLEARANCE
other cost to bring the goods to the Needed for regulated or prohibited
Philippines products
TV of identical merchandise goods which Regulated products cleared
are same in all respects by the Commodity Agency
TV of similar merchandise not alike in all Prohibited products can be
respect but performs same functions and are exported only for scientific
interchangeable purposes
Deductive value SRP in the Philippines of Types of clearance:
the imported goods, identical or similar goods Periodic clearance given to
less allowance for profit, customs duties and regular importer, valid for 1
other charges, freight and commissions year
This is similar to FV on Repo goods Per shipment clearance
Computed value the sum of: given for regulated or
Cost of materials and fabrication, prohibited products
home country profits and general Optional clearance may be
expenses, and freight and incidental issued by the CA upon
costs to Philippines exporters request
Fallback value last resort if fair value CERTIFICATE OF ORIGIN if required by the
cannot be determined, any reasonable means foreign buyer for their customs purposes
of valuation (legality, proper taxation)
CERTIFICATE OF SHIPMENT obtained to
Marking (at origin) put on record the shipment of goods
Imported goods shall be marked as to their AUTHORITY TO LOAD released after filing
country of origin to enable determination of of electronic Export Declaration
the proper tariff to be imposed LOADING THE PRODUCTS products will be
Failure to mark product origin, automatic inspected by:
penalty or additional duty of 5% of the value BOC for air freight
of the imported goods Customs Container Control Division
for sea freight containerized products
Export Procedures Piers and Inspection Division for non-
containerized products
Wharfage and arrastre fee shall be
paid for inspection
RECEIVING PAYMENTS
 Letters of credit a guarantee from
the buyers bank to pay the sellers
bank
Documents against payment
buyer is required to pay sellers right
draft in order to obtain shipping
documents
Document against acceptance
buyer is required to accept a time draft
acknowledging obligations to pay at a
specific future dates
Functions of the BOC
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
The prevention and suppression of smuggling
and other frauds upon the customs
The supervision and control over the entrance
and clearance of vessels and aircraft engaged
in foreign commerce
The enforcement of the tariff and custom laws
and all other laws, rules and regulations
relating to the tariff and customs
administration
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 the dutiable articles thus imported
and the prevention of smuggling through the
medium of such mails;
Supervise and control all import and export
cargoes, landed or stored in piers, airports,
terminal facilities, including container yards
and freight stations, for the protection of
government revenue
Exercise exclusive original jurisdiction over
seizure and forfeiture cases under the tariff
and customs laws
Functions of the Tariff Commission
Provides Classification Rulings
Issuance of advance rulings on tariff
classification, and rulings on dispute
over tariff classification; issuance of
opinions on tariff-related queries
including provision of assistance on
commodity classification and tariff
nomenclature issues to various parties
Provide Assistance to the President and
Congress of the Philippines
Provide the President and Congress
with independent analysis, information
and technical support on matters
related to tariff and nontariff measures
affecting Philippine industries and
exports for policy guidance
Flexible Clause
Conduct of public hearings on petitions
for tariff modification; investigation of
said petitions; submission of findings
and recommendations to the National
Economic and Development Authority
(NEDA); preparation of implementing
Executive Orders; provision of policy
advice on tariffs and related matters
Promotion of Foreign Trade
Conduct of public consultations on
proposed tariff concessions under
international trade agreements;
submission of findings and
recommendations to NEDA;
preparation of implementing Executive
Orders; provision of technical
assistance and advice to Philippine
negotiators (e.g., tariff schedules; tariff
nomenclature; rules of origin; review of
agreements/commitments and
modifications thereon; negotiating
strategies); submission of tariff data
requirements in compliance with
Philippine commitments under
international trade agreements;
monitoring of Philippine and other
parties compliance with international
obligations; participation in relevant
meetings associated with Philippine
participation in international trade
agreements
Dumping Duty
Conduct of formal investigation and
submission of report of findings,
including amount of the definitive
dumping duty to be imposed in cases
of affirmative findings, to the Secretary
of Agriculture (for agricultural goods)
or Secretary of Trade and Industry (for
industrial products)
Safeguard Duty
Conduct of formal investigation and
submission of report of findings,
including recommendation on the
appropriate definitive safeguard
measure in cases of positive
determination, to the Secretary of
Agriculture (for agricultural goods) or
Secretary of Trade and Industry (for
industrial products)
Countervailing Duty
Conduct of formal investigation and
submission of report of findings,
including amount of the definitive
countervailing duty to be imposed in
cases of affirmative findings, to the
Secretary of Agriculture (for
agricultural goods) or Secretary of
Trade and Industry (for industrial
products)
Preferential Taxation
Omnibus Investment Code (Book 1)
Special economic zones
Barangay Micro-business enterprise act
Double taxation agreements
Senior citizens law
Magna carta for disabled persons
OMNIBUS INVESTMENT CODE
Declared policies (BOI)
To encourage private Filipino and foreign
investment in industry, agriculture, forestry,
mining, tourism and other sectors of the
economy
To provide significant employment
opportunities
To increase productivity of land, mineral,
forestry, aquatic and other resources
To improve utilization of products
To improve technical skills of people employed
To provide a foundation for the future
economy
To meet the test of international
competitiveness
To accelerate development of less developed
regions
To increase volume and value of exports for
the economy
To ensure holistic development by
safeguarding the well-being of the social,
cultural and ecological life of the people
(consultation with affected locales)
To extend fiscal incentives to projects that
significantly contribute to the attainment of
these objectives
To encourage private initiative with
deregulation and self-regulation of business
activities
To play a competitive role, rather than a
competitive one, providing the framework,
climate and incentive within which a business
activity is to take place
To define roles of foreign and local capital in
the development of the Philippine economy
and provide climate for their entry and growth
To ensure industrial peace prevails
To provide fiscal incentive to stimulate the
establishment and assist the initial operations
of the enterprise which shall terminate after
not more than 10 years from registration or
start-up of operation
The Board of Investment
The body tasked to implement EO 226
Composition: 7 governors
Secretary of DTI as chairman
3 undersecretary of DTI to be
appointed by the President
3 representatives from government
agencies and private sectors
The Board sets the Annual Investment
Priority Plan
Annual IPP contains listing of specific activities
that qualify for incentives under Book 1 of EO
226 duly supported by studies of existing and
prospective demands
Preferred Areas of Investment
Economic activities that the Board declared as
such and shall be classified as either:
Pioneer
Non-pioneer
Pioneer enterprise a registered enterprise:
Engaged in manufacture, processing and
production (not merely assembly or
packaging) of goods, products or commodities
or raw materials that have not been or not
being produced in the Philippines in
commercial scale (new or developing
products) or
Uses a design, formula, scheme, method,
process or system of production or
transformation of any element, substance or
raw materials into another raw material or
finished goods which is new and untried in the
Philippines (new process or technology) or
engaged in the pursuit of agricultural, forestry
and mining activities and/or services including
the industrial aspects of food processing
whenever appropriate, or
which produces non-conventional fuels or
manufactures equipment which utilize non-
conventional sources of energy or uses or
converts to coal or other non-conventional
fuels or sources of energy in its production,
manufacturing or processing operations (new
fuel or energy source)
NOTE: The final product in any of the foregoing
instances, involves or will involve substantial use
and processing of domestic raw materials
Non-pioneer enterprise registered producer
enterprise other than pioneer enterprises
Fiscal Incentives to BOI-registered
enterprises
INCOME TAX HOLIDAY
For pioneer firms 6 years from
commercial operations
For non-pioneer firms 4 years from
commercial operations
ITH is extendible for another year for each of
the following cases:
Meeting the prescribed ratio of capital
equipment to number of workers set
by the Board;
Utilization of indigenous raw materials
at rates set by the Board;
 Net foreign exchange savings or
earnings amount to at least
US$500,000.00 annually during the
first three (3) years of operation.
For a period of three (3) years from
commercial operation, registered expanding
firms shall be entitled to an exemption from
income taxes levied by the National
Government proportionate to their expansion
under such terms and conditions as the Board
may determine
ADDITIONAL DEDUCTION FOR LABOR
EXPENSE
For the first five (5) years from
registration, a registered enterprise
shall be allowed an additional
deduction from the taxable income of
fifty percent (50%) of the wages
corresponding to the increment in the
number of direct labor for skilled and
unskilled workers if the project meets
the prescribed ratio of capital
equipment to number of workers set
by the Board.
This additional deduction shall be
doubled if the activity is located in less
developed areas
Tax and Duty Exemption on Imported
Capital Equipment
Within five (5) years from the
effectivity of this Code, importations of
machinery and equipment and
accompanying spare parts of new and
expanding registered enterprise shall
be exempt to the extent of one
hundred percent (100%) of the
customs duties and national internal
revenue tax payable thereon
Tax Credit on Domestic Capital
Equipment
A tax credit equivalent to one hundred
percent (100%) of the value of the
national internal revenue taxes and
customs duties that would have been
waived on the machinery, equipment
and spare parts, had these items been
imported shall be given to the new and
expanding registered enterprise which
purchases machinery, equipment and
spare parts from a domestic
manufacturer
EXEMPTION FROM CONTRACTORS TAX (i.e.
VAT now)
SIMPLIFICATION OF CUSTOMS PROCEDURES
Unrestricted Use of Consigned Equipment.
Employment of Foreign Nationals.
Tax Credit for Taxes and Duties on Raw
Materials.
Access to Bonded Manufacturing/Trading
Warehouse System.
Exemption from Taxes and Duties on Imported
Spare Parts.
Exemption from Wharfage Dues and any
Export Tax, Duty, Impost and Fee.
Incentives to Less-Developed Area
Registered Enterprises
Apply to registered enterprises regardless of
nationality
PIONEER INCENTIVES
INCENTIVE FOR NECESSARY AND MAJOR
INFRASTRUCTURE AND PUBLIC UTILITIES
may deduct from taxable income 100% of the
cost with a special carry-over for unutilized
deduction up to 10 years from commercial
operations
Registration of Enterprises
Nationality requirements
Citizen of the Philippines
Domestic corporation at least 60%
Filipino-owned and controlled
(directors)
Applicant should engage in preferred projects
listed in the IPP
If not project is not listed, must meet
the following export requirement:
Filipino nationals 50%
production for export
Non-Filipino nationals 70%
production for export
The applicant may be an export trader buying
from export producers
Applicant should be engaged in rendering
technical, professional or other services,
exporting television and motion pictures and
musical recordings made or produced in the
Philippines, either directly or through a
registered trader
The applicant is capable of
The applicant is capable of operating on a
sound and efficient basis that will contribute
to the national economy;
The applicant will install a separate
accounting system or establish a separate
corporation if engaged in activities other than
preferred or registered projects.
If ownership requirement not met
It is required that:
Applicant must engage in pioneer projects, or
at least 70% of total production are exported
Must obligate the group to attain Philippine
national status within thirty (30) years from
date of registration, except if one hundred
percent (100%) of total production are
exported; and
The pioneer area it will engage in is one that
is not within the activities reserved by the
constitution or other laws of the Philippines to
 Philippine citizens or corporations owned and
controlled by Philippine citizens
SPECIAL ECONOMIC ZONE ACT
Declared policies (PEZA)
To actively encourage, promote, induce and
accelerate a sound and balanced industrial,
economic and social development of the
country in order to:
provide jobs to the people especially
those in the rural areas
increase their productivity and their
individual and family income, and
thereby improve the level and quality
of their living condition
Through
the establishment, among others, of
special economic zones in suitable and
strategic locations in the country and
measures that shall effectively attract
legitimate and productive foreign
investments
Special Economic Zone (SEZ or ECOZONE)
selected areas with highly developed or which
have the potential to be developed into
agroindustrial, industrial tourist/recreational,
commercial, banking, investment and
financial centers
Types:
Industrial estate - refers to a tract of land
subdivided and developed according to a
comprehensive plan under a unified
continuous management and with provisions
for basic infrastructure and utilities, with or
without pre-built standard factory buildings
and community facilities for the use of the
community of industries
Export processing zones - a specialized
industrial estate located physically and/or
administratively outside customs territory,
predominantly oriented to export production.
Enterprises located in export
processing zones are allowed to import
capital equipment and raw materials
free from duties, taxes and other
import restrictions.
Free trade zones - an isolated policed area
adjacent to a port of entry (as a seaport)
and/or airport where imported goods may be
unloaded for immediate transshipment or
stored, repacked, sorted, mixed, or otherwise
manipulated without being subject to import
duties.
However, movement of these imported
goods from the freetrade area to a
non-free-trade area in the country shall
be subject to import duties
Tourism/recreational centers
The PEZA Board
A body attached to DTI attached to implement
the Special Economic Zone Act
Composition: 8 members
Director general ex officio chairman
assisted by 3 deputy director
generals
1 each for (DTI, DOF, DOLE, DILG,
NEDA, BSP, business sector in the
Ecozone)
Fiscal Incentives
Employment of foreign nationals
Exemption from customs duties of
merchandise in the Ecozone
Export sales treatment of sales to Ecozones
Exemption from local taxes and licenses,
except real estate tax
ECOZONE Export Manufacturing
Enterprise
Income tax holiday similar to BOI-
enterprises (up to 8 years)
Upon graduation: 5% special tax on
gross income, exempt from all national
and local taxes
Tax and duty free importation of raw
materials, capital equipment, machineries and
spare parts.
Exemption from wharfage dues and export
tax, impost or fees
VAT zero-rating of local purchases including
land-based telecommunications, electrical
power, water bills, and lease on the
building, subject to compliance with Bureau of
Internal Revenues and PEZA requirements
subject to compliance with BIR and PEZA
requirements
Exemption from payment of any and all local
government imposts, fees, licenses or taxes
Exemption from expanded withholding tax
Information Technology Enterprise
Same with export manufacturing
enterprise
TOURISM ECONOMIC ZONE LOCATOR
4 years of ITH
Upon graduation: 5% special tax on
gross income
Tax and duty free importation of
capital equipment
VAT Zero Rating on local purchases of
goods and services, including land-
based telecommunications, electric
power, and water bills
Exemption from expanded withholding
tax
MEDICAL TOURISM ENTERPRISE same
with tourism economic zone locator

AGRO-INDUSTRIAL ECONOMIC ZONE
ENTERPRISE same with tourism economic
zone locator, plus exemption from payment of
local government fees such as Mayors Permit,
Business Permit, permit on the Exercise of
profession/Occupation/Calling, Health
Certificate Fee, Sanitary Inspection Fee, and
Garbage Fee but subject to CWT requirements
MANUFACTURING ECONOMIC ZONE
DEVELOPER/ OPERATOR
5% GIT
VAT zero rating on local purchase
Exemption from expanded withholding
tax
Same incentive is conferred to
developers of:
Ecozone medical tourism
Agro-industrial ecozone
Retirement ecozone, and
Ecozone facilities enterprises
ECOZONE LOGISTIC SERVICE ENTERPRISE
Exemption from duties and taxes on
raw materials, semi-finished goods for
re-sale to-or for packing/covering,
cutting, altering for subsequent sale to
PEZA-registered Export Manufacturing
Enterprises, for direct export or for
consignment to PEZA-registered export
enterprise.
VAT Zero Rating on raw materials for
checking, packing, visual inspection,
storage and shipping to be sourced
locally
Who can register?
Any person, firm, association, partnership or
corporation or any other form of business
organization regardless of nationality, control,
and/or ownership of the working capital may
apply for registration as a zone export
enterprise.
Required documents for registration
Accomplished PEZA application form
Project Feasibility Study
Copy of the Articles of Incorporation and By-
laws
Board Resolution authorizing the filing of the
application for the setting up of business
organization inside the Zone
List of Directors, principal officers, and major
stockholders together with their bio-data
Audited financial statements of the business
organization for the preceding three (3) years,
or financial statements during the period the
company was operational
Income Tax Return (ITR) of the business
organization for three (3) preceding years, or
ITR during the period the company was
operational
ITR and tax clearances of its principal officers
and major stockholders for three consecutive
years
Other papers/documents that may be
required by the PEZA