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ASSIGNS IN TARIFFS & CUSTOMS CODE & CTA LAW

A. Texts of Vitug & Acosta & Hector De Leon’s The Fundamentals of Taxation, 2004 edition B. Tariff & Customs Code, Sections 100, 101, 105, 106, 201 to 205, 401, 602, 603, 604, 1201 to 1211, C. D. E. 1. 2. 3.
1508, 1601 to 1604, 1701-1708, 1801-1802, 2201 to 2212, 2301-2316, 2401-2402, 2503, 2530-2533, 2535, 2536, 3501 to 3503, 3511 to 3512, 3519, 3601-3602 RA 8751 – Counter-veiling Duty, RA 8752 – Anti-Dumping Act, RA 8181 – Transaction Value, RA 8800 Safeguard Measures Act RA 1125, as amended by RA 9282 – The Court of Tax Appeals and its Rules of Court Cases: Illuh Asaali v. Commissioner of Customs, Dec 16, 1968, 26 SCRA 382. Doctrine of International Law that allows a state to protect itself from injury not only within its territorial jurisdiction but also in the high seas. People v Mago Juvencito Zuno v Judge Arnulfo Cabredo AM RTJ 03-1779, Apr 30, 2003 – Judge was castigated for issuing TRO over seizure and forfeiture of bags of rice by BOC. SC held BOC has exclusive jurisdiction over these cases. Similar holding was made in RV Marzan Freight v CA and Sheila’s Mfg Inc. 128064 Mar 4, 2004 re declaration of legality of abandonment proceedings People v. Lo Ho 135 SCRA 122 (1991) – warrantless search and seizure of moving vehicles Maribel Jardeleza v People GR 165265 Feb 6, 2006 – Under what section of the TCC does a smuggler of jewelry criminally liable. Nasiad & Lozada v. CTA 61 SCRA 238 – Corporate officers sued in their individual capacity cannot invoke the constitutional protection against warrantless search and seizure that is available to corporation Rigor vs. Rosales, 117 SCRA 780 – power of the collector of customs to enforce customs laws in every port Pacis v Pamaran, 56 SCRA 16 – Authority of the Col of Customs to issue Warrant of Seizure and Detention. Rieta v People, 436 SCRA 273 (2004) - Under the tariff and Customs Code, a search, seizure and arrest may be made even without a warrant to purposes of enforcing customs and tariff laws. Commissioner of Customs v Milwaukee Industries Corp. 445 SCRA 604 (2004) - Where the transfer of a shipment was made under specific instruction that the shipment should be “under continuous guarding” by the Customs guard “until released by the Customs authorities”, the physical and legal custody over the shipment remained with the Customs authorities. Acceptance by the Bureau of Customs of the importer’s payment of the customs duties and taxes on the shipment legally terminates the importation of goods or articles. The Customs Commissioner’s order of release upon payment of taxes and duties on the shipment, indicated in a notation made by his Special Assistant, is a sufficient legal permit for the official release of the shipment. Commissioner of Customs v Philippine Phosphate Fertilizer Corp. 437 SCRA 452 (2004) - It is the presence of tangible tax benefits attached to these zones, which make them viable as investment locations, areas which ordinarily would be overlooked. The incentive given under Sec 17(1) is broader than a mere tax exemption. There can be no doubt that the additional incentives under Sec 18 are separate and distinct from those under the preceding section. Sec 17(1) is determinative o the fundamental question whether there is legal basis for the claim of exemption. On the practical side, the taxpayer to whom the tax is refunded would have the option among others to invest for profit the returned sum, an option not proximately available if the taxpayer chooses instead to receive a tax credit. Southern Cross Cement Corp v Phil Cement Manufacturers Association, Sec Trade & Industry, Finance and BOC GR158540 Jul 8, 2004 – Held CTA has jurisdiction over cases were safeguards are to be imposed or there is none. Also, Sec of Trade & Industry will only apply general safeguard measure

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upon positive formal determination by Tariff Commission. Negative determination of TC binds the Sec of DTI. NESTLE PHILIPPINES, INC., (FORMERLY FILIPRO, INC.) petitioner, vs. HONORABLE COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF CUSTOMS, respondents. G.R. No. 134114. July 6, 2001.] – Protests vs valuation, prescription, claim for refund. This is a claim for refund of customs duties arising from alleged erroneous valuation of imported milk. After payment of CD and AST, Nestle filed a claim for refund with the Collector of Customs, who had not acted on it for almost 6 years and before the lapse of 6 years prescriptive period under the Civil Code for Solutio Indebiti, Nestle went to CTA docketed as Case No. 4478. Another refund claim was filed with the BIR with respect to AST and then before the 2-year period expired under the NIRC, Nestle went to the CTA (Case No. 4114), who found for Nestle. In 4478, CTA dismissed the case for lack of jurisdiction and was affirmed by CA ratiocinating that CTA does not have concurrent jurisdiction with Comm of Customs; in action of Col of Customs was not an exception to the principle of exhaustion of admin remedies; CTA decision in 4114 was binding controlling on 4478; and Nestle has to prove its claims. Held: Solutio Indebiti is not applicable since it is not yet established whether indeed Nestle has overpaid, despite the ruling in 4114. There is presumption of regularity; TCC provides the procedures on protesting and claiming refund, i.e.,, file claim with COC within 15 days from payment or liquidation, then appeal to Comm of Customs, then within 30 days appeal to CTA. Since Col of Customs had not acted on it yet, appeal to CTA was not proper. And based on these rules, exhaustion of admin remedies does not apply either. The fact that in 4114, CTA approved the refund of AST is not controlling. Because of the long delay in BOC, to be fair both the OSG and CA said that the case be remanded to CTA for trial, the same was remanded to CTA. Commissioner of Customs v CA, et al, GR 111202-05 Jan 31, 2006 – Jurisdiction on customs cases. The facts in this case are like those in that case. Urbino claimed to be the owner of the vessel and he sought to restrain the PPA and the Bureau of Customs from interfering with his rights as owner. His remedy, therefore, was not with the RTC but with the CTA where the seizure and detention cases are now pending and where he was already allowed to intervene. Moreover, this Court, on numerous occasions, cautioned judges in their issuance of temporary restraining orders and writs of preliminary injunction against the Collector of Customs based on the principle enunciated in Mison v. Natividad and has issued Administrative Circular No. 7-99 to carry out this policy. This Court again reminds all concerned that the rule is clear: the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings and trial courts are precluded from assuming cognizance over such matters even through petitions for certiorari, prohibition or mandamus. Note: In filing the case, Urbino had impleaded the vessel as a defendant to enforce his alleged maritime lien. This meant that he brought an action in rem under the Code of Commerce under which the vessel may be attached and sold. However, the basic operative fact for the institution and perfection of proceedings in rem is the actual or constructive possession of the res by the tribunal empowered by law to conduct the proceedings. This means that to acquire jurisdiction over the vessel, as a defendant, the trial court must have obtained either actual or constructive possession over it. Neither was accomplished by the RTC of Manila. In his comment to the petition, Urbino plainly stated that “petitioner has actual[sic] physical custody not only of the goods and/or cargo but the subject vessel, M/V Star Ace, as well. This is clearly an admission that the RTC of Manila did not have jurisdiction over the res. While Urbino contends that the Commissioner of Custom’s custody was illegal, such fact, even if true, does not deprive the Commissioner of Customs of jurisdiction thereon. This is a question that ought to be resolved in the seizure and forfeiture cases, which are now pending with the CTA, and not by the regular courts as a collateral matter to enforce his lien. By simply filing a case in rem against the vessel, despite its being in the custody of customs officials, Urbino has circumvented the rule that regular trial courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted in the Bureau of Customs, on his mere assertion that the administrative proceedings were a nullity. On the other hand, the Bureau of Customs had acquired jurisdiction over the res ahead and to the exclusion of the RTC of Manila. The forfeiture proceedings conducted by the Bureau of Customs are in the nature of proceedings in rem. and jurisdiction was obtained from the moment the vessel entered the SFLU port. Moreover, there is no question that forfeiture proceedings were instituted and the vessel was seized even before the filing of the RTC of Manila case. And to remove further doubts that the forfeiture case takes precedence over the RTC of Manila case, it should be noted that forfeiture retroacts to the date of the commission of the offense, in this case the day the vessel entered the country. A maritime lien, in contrast, relates back to the period when it first attached in this case the earliest retroactive date can only be the date of the

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Salvage Agreement. Thus, when the vessel and its cargo are ordered forfeited, the effect will retroact to the moment the vessel entered Philippine waters. AGFHA Inc. v CTA (EB) and CIR GR 172051 Jul 27, 2007 – Forfeiture proceedings under Sec 2530(f) (1), (3-5) of TCCP [effect of loss of shipment in the custody of customs on the liability of importer/owner] Pilipinas Shell v Rep of Phils (BOC) GR 161953, Mar 6, 2008; Rep of the Phils v Shell GR 172598 Dec 27, 2007 – Alleged TCC Scam prompted the BOC to collect deficiency taxes from Shell who alleged that they purchased the TCC in good faith. Pilipinas Shell v Rep of Phils (BOC) GR 161953, Mar 6, 2008 – In 1997 and 1998 Pilipinas Shell paid duties and taxes due on its importations with the TCCs it acquired from various sources with the approval of the BOI, One Stop Shop and DOF. Subsequently, these were cancelled allegedly because they were acquired fraudulently and the BOC demanded payment of the duties and taxes paid with these TCCs. Shell protested on Dec 23, 1999 but BOC did not act, hence the appeal to CTA. While pending, on Apr 3, 2002 BOC filed a collection case with RTC with respect to a TCC on the ground that it was spurious and thus was invalidated. Shell moved to dismiss questioning the jurisdiction of the RTC and stating that only when the assessment has become final and executory could the BOC file a collection case but was denied. CA denied appeal saying the demand for payment was not an assessment that could be protested. thus RTC and not CTA has jurisdiction. Ruling: Assessments inform taxpayers of their tax liabilities. Under the TCCP, the assessment is in the form of a liquidation made on the face of the import entry return and approved by the Collector of Customs. Liquidation is the final computation and ascertainment by the Collector of Customs of the duties due on imported merchandise based on official reports as to the quantity, character and value thereof, and the Collector of Customs' own finding as to the applicable rate of duty. A liquidation is considered to have been made when the entry is officially stamped “liquidated.” An assessment or liquidation by the BoC attains finality and conclusiveness one year from the date of the final payment of duties except when: (a) there was fraud; (b) there is a pending protest or (c) the liquidation of import entry was merely tentative. None of the foregoing exceptions is present in this case. These duties and taxes are the personal liability of the importer and they constitute a lien to the articles while in customs custody. RTC has jurisdiction under old CTA Law. Note: Now CTA has exclusive original jurisdiction in collection cases for P1 Million or more claims.; Chevron Phils v. Commissioner of Bureau of Customs, GR 178759, Aug 11, 2008 – Effective date of reduction of tariff rate from 10% to 3% per RA 8180 (Apr 16, 1996) while importations arrived in the Phils prior to Apr 16, 1996; Import Entry Declarations [IED] were filed prior to said later date but the Import Entry Internal Revenue Declarations [IEIRD] were filed after said date. Chevron paid customs duties at 3%. Three years later, an informer reported the transactions and investigation conducted. The CBOC declared the importations abandoned for failure to enter them within 30 days from unloading and issued assessments for more than P1 Billion. Hence the appeal to CTA division which ruled that 10% applied per Sec 204, 205 and 1408; there was fraud but no abandonment. Both parties went to CTA en banc, which ruled that there was abandonment because IEIRD was not filed within 30 days per Sec 1301 in rel Sec 205, thus abandonment ensued per Sec 1801 and 1802; notice of abandonment per CMO 15-94 was not necessary because Chevron had knowledge; and agreed there was fraud for failure file entry that was intended to avoid higher rate of duties. Issues: 1. whether “entry” under Section 1301 in relation to Section 1801 of the TCC refers to the IED or the IEIRD?\ The filing of the IEIRDs has several important purposes: to ascertain the value of the imported articles, collect the correct and final amount of customs duties and avoid smuggling of goods into the country. Entry refers to both. They must be filed within 30 days. 2. whether fraud was perpetrated by petitioner? yes there was fraud. Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is taken of another. It is a question of fact and the circumstances constituting it must be alleged and proved in the court below. The finding of the lower court as to the existence or non-existence of fraud is final and cannot be reviewed here unless clearly shown to be erroneous. In this case, fraud was established by the IPD-CIIS of the BOC. Both the CTA First Division and en banc agreed completely with this finding. Chevron bided its time to avail of lower rate. Hence, due to the presence of fraud, the one year prescriptive period of the finality of liquidation under Section 1603 was inapplicable and 3. whether the importations can be considered abandoned under Section 1801. Yes, per Sec 1801 as amended by RA 7651. Notice was not necessary because BOC learned of fraud after 3 years and importations had been released. Abandoned article ipso facto deemed the property of the government per Sec 1802. This section cannot be questioned as unconstitutional collaterally. Besides, there is clear intent to do away with seizure

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proceedings in abandonment. Ordered to pay (P893,781,768.21) plus six percent (6%) legal interest per annum accruing from the date of promulgation of this decision until its finality. Upon finality of this decision, the sum so awarded shall bear interest at the rate of twelve percent (12%) per annum until its full satisfaction. El Greco Ship Manning & Mgt Corp v. Bureau of Customs, GR 177188 Dec 4, 2008 –BOC District Collector of Port of Manila issued Warrant of Seizure and Detention under Seizure Identification No. __, Greco, as agent of the owner of vessel filed a Motion for Intervention and Motion to Quash Warrant of Seizure Detention with Urgent Prayer for the Immediate Release of M/V Neptune Breeze with the DCPOM, which in an Order granted the same on the ground that M/V Criston and M/V Netune Breeze are not one and the same. Said Order was automatically elevated to the BOC Commissioner who reversed the Order, holding that based on the findings of PNP Crime Laboratory said vessels bore the same engine and generator serial numbers. Thus, the forfeiture of the vessel by District Collector of Legaspi was affirmed. Greco went to CTA Division and En Banc, which both affirmed the decision of Commissioner. Hence the Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court to the SC. Issues: Whether Greco was denied due process; Whether M/V Criston and M/V Nepture Breeze are one and same; and whether M/V Neptune Breeze is qualified to be subject of forfeiture under Sec 2531 of the TCC.

GUIDE QUESTIONS

1. What are subject to tariffs or customs duties? Sec 100 2. What is importation? When does it begin and end? [Sec 1202] 3. Upon entry into the Philippine waters but prior to unloading the articles on board the vessel, is there
importation? Intention is the key. See also US v Chu Loy. 4. Intention is a state of mind. How do we establish it? What factual circumstances can suggest that there is intention to unload? 5. What are the types of importation? Dutiable [Sec 104], absolutely prohibited, conditionally prohibited, conditionally free importation and exempt importation. 6. Who are liable to pay customs duties and taxes? 7. What are prohibited importations? Sec 101 8. May an importer/consignee redeem an article whose importation is absolutely prohibited by paying all the duties and taxes due thereon? No. See Paterok v. BOC case. 9. What are conditionally free importations? Sec 105 10. If it is conditionally free, are the conditions met and if not met what happens? 11. What are the classifications of customs duties? Ordinary and special duties. 12. What are ordinary duties? Ad Valorem and Specific 13. What are the special duties? Anti-dumping [Sec 301], Counterveiling [Sec 302], Discriminatory [Sec 304] , & Marking [Sec 303(c)] Duties? 14. Who may impose Anti-Dumping and Counterveiling Duties? For Agrix, DA for non-agrix, DTI. 15. Where may one appeal the decision of the DA and DTI? CTA. See Southern Cross Cement Corp v Phil Cement Manufacturers Association, Sec Trade & Industry, Finance and BOC GR158540 Jul 8, 2004 16. What must be established to impose Anti-Dumping Duty? Injury to local industry, Rate of ADD and the duration of the imposition. 17. Distinguish ADD from Safeguard Duty under RA 8800. 18. What is Flexible Tariff Law? Sec 401. Relate to the Constitutional provision empowering the President to fix import duties. 19. Describe the processes involved in the imposition of customs duties? 20. What is the basis of dutiable value? Sec 201. There are six methods. 21. What if the BOC has doubt the value shown on the commercial invoice, may it adopt other method? Yes.

22. What is the criterion used to determine what tariff rates are applicable? Tariff heading or classification. 23. Where do we find the Tariff headings and classifications? Sec 104 24. What are drawbacks? Sec 106 25. What are the functions of the BOC? [Sec 602] 26. What is the territorial jurisdiction of the BOC? [Sec 603] 27. What is meant by extra-terrritorial jurisdiction? 28. Does the BOC have jurisdiction over a vessel in the high seas? As a general rule, No. The exceptions
are (a) when in hot pursuit beginning from the Philippine waters (b) if the vessel is Philippine-registered, and (c) under the conditions mentioned in Asaali v. Commissioner of Customs, Dec 16, 1968, 26 SCRA 382. Who has jurisdiction over seizure & forfeiture proceedings, the BOC or the ordinary courts? See Juvencito Zuno v Judge Arnulfo Cabredo AM RTJ 03-1779, Apr 30, 2003. Persons charged with smuggling use transshipment as defense. What is meant by transshipment? Vessel carrying goods subject to customs law must leave the Philippines within a certain number of days with the goods; otherwise they could be seized. What is smuggling? See Section 3519, as amended by RA 3519. What is meant by misshipment? Does the BOC have the power to conduct search, seizure and arrest without a warrant duly issued by a court? Yes, Sec 2208 and 2209; see Rieta v People, 436 SCRA 273 (2004); People v Mago, 22 SCRA 857. How do we determine whether the structure is one that requires a warrant issued by the court? Appearance alone will not give the indication but other circumstances should be looked at, like what is the primary purpose of the structure, dwelling or storage? It does not matter if it is used as sleeping quarters of the warehouseman. What if the employee of the warehouse took out hot items and brought them to his dwelling house, can the house be searched and the items seized? Yes, it can be done as incidental to lawful arrest. May customs agent drop by a store and inquire from the storeowner if duties were paid on the articles being sold therein? Sec 2536. Seeing a truck leaving the customs zone, a customs agent pursued and searched the truck, is he justified? Sec 2211. May a vessel carrying contraband be forfeited? No. if it is a common carrier. Sec 2530 [a] If not a common carrier and it is carrying articles in commercial quantities, may it be forfeited? Yes, provided the owner of the carrier does not have knowledge of it carries contraband. Sec 2531. What is abandonment and what is its legal effect? Sec 1801 Who has jurisdiction on the legality of the declaration of abandonment? What are the remedies of the importer who disagrees with the BOC on the valuation and classification of dutiable imported articles? Describe the procedure of contesting the decision of the Collector of Customs in the classification and or valuation of dutiable articles? See Nestle case. How long should Collector make the decision, if he denies, what is the remedy of importer? 15 days files with Collector intention to appeal to Commissioner, documents are transmitted to Commissioner within 5 days and the latter should make decision within 30 days, if not forthcoming appeal to CTA or he affirms decision of Collector within 30 days appeal to CTA What are the remedies of the BOC to collect the customs duties and taxes? How may the BOC enforce tax lien? Sec 1204 What is the prescriptive period within which the BOC may collect tax? Sec 1603

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