Tariff & Customs Duties.

What are Tariff & Customs Duties?

Tariff refers to the schedule of rates applied to goods as a basis for the
computation of customs duties, which are the taxes levied on certain goods.
However, the passage of time has made the two terms interchangeable nowadays
so you may now use the term “tariff” to refer to the tax but, originally, it used to
refer to the book of rates only.

What are the purposes of the imposition of Customs Duties?

 Revenue-raising
 Protection of local industries
 Economic stimulation

What are goods subject to Customs Duties?

All goods imported are subject to import duties unless specifically

exempted under the CMTA or special laws. (Sec. 104/CMTA)

All goods exported are now exempt from customs duties except for logs
which still remain to be subject to export duties. (See Sec. 1612 of CMTA and
Executive Order No. 26, series of 1986, amending Sec. 514 of PD 1464)

Are services subject to Customs Duties?

No. There is no tax provision specifically stating that services may be

subject to customs duties.

What are importation and exportation?

Importation refers to the act of bringing in of goods from a foreign territory

into Philippine territory, whether for consumption, warehousing, or
admission. (Sec. 102 [z])

Exportation refers to the act, documentation, and process of bringing goods

out of Philippine territory. (Sec. 102[s])
What goods are exempt from import duties?

De Minimis Importations / Small Value Importations – goods with FOB or

FCA value of ten thousand pesos (₱10,000.00) or below. (Sec. 423)

o The CMTA was enacted in 2015 but the threshold is still the same.
(See “De Minimis Rate in the Philippines” at
https://janio.asia/articles/philippines-de-minimis-rate/)

Conditionally-free Importations (See Sec. 800)

Relief Consignment – commodities used in aid of victims of calamities.

Such goods are not only exempt from duties, they are also prioritized. (Sec.
120)

o See Joint Administrative Order No. 1-2020 issued by DOF, DSWD

and other agencies at http://customs.gov.ph/wp-
content/uploads/2020/03/JAO_Relief_Consignments.pdf

What are the types of duties?

 As to the basis for computation

o Ad valorem – tax is computed based on the price or value of the
commodity
o Specific – tax is computed on the basis of weight, volume, capacity or
any other physical unit of measurement

 As to purpose
o Ordinary or Regular – collected for the purpose of raising revenues
o Special – collected for the purpose of protecting local industries

What are the types of special duties?

 Dumping Duties – imposed upon foreign goods with prices substantially

lower than local goods to the detriment of the latter.

 Countervailing Duties – imposed upon foreign goods enjoying subsidy thus

allowing them to sell at lower prices to the detriment of similar local
products.
  Marking Duties – imposed upon those goods not properly marked as to the
place of origin. [The purpose of incorrect marking is usually to deceive
buyers.]

 Discriminatory/Retaliatory Duties – imposed upon goods coming from

countries that discriminate against PH products.

 Safeguard Duties – imposed upon goods imported in the PH in increased

quantities to the detriment of local products.

o Additional Requirement for imposition as regards non-agricultural

products: the DOF Secretary shall first establish that the safeguard
measures will be in public interest. No such requirement as regards
agricultural products.

Who is responsible to pay customs duties?

The Declarant (Sec. 107) who must be:

o The importer, being the holder of the bill of lading; or

o The exporter, being the owner of the goods to be shipped out; or

o A person duly empowered to act as agent or attorney-in-fact for each

holder. (Sec.106)

 A declarant may be a consignee or a person who has the right to

dispose of the goods. (Sec. 106)

 The customs broker, though may be a declarant themself, is not

liable to pay the customs duties (Sec. 107).

 The exporter is only liable if the goods they export are logs.

 Aside from payment of taxes, the declarant is also responsible

for the accuracy of the goods declaration, even though
exempted from duties. (Sec. 107)
  In case the consignee or the person who has the right to dispose
of the goods is a juridical person, it may authorize a responsible
officer of the company to sign the goods declaration as
declarant on its behalf.

What is goods declaration?

Goods Declaration refers to a statement made in the manner prescribed by

the Bureau and other appropriate agencies, by which the persons concerned
indicate the procedure to be observed in the application for the entry or admission
of imported goods and the particulars of which the customs administration shall
require. (Sec. 102[y])

Distinguish formal entry vis-à-vis informal entry.

 Formal Entry – a document used to clear from customs custody commercial

shipments and the form itself is filled out by the importer themself or their
broker.

 Informal Entry – a document used to clear from customs custody

commercial shipments worth less than ₱50,000.00 and personal and
household effects filled up by the customs examiner themself for the owner
or addressee of the parcel.

- See Sec. 402 and Lim, p. 876.

What is Drawback?

It is a device whereby goods affected by taxes are re-exported as if they are

not taxed at all.

It refers to duties or taxes paid back or remitted by the Government on the

exportation of that on which they are levied. (Lim, p. 870)

A drawback may also be refunded to companies who imported petroleum

and other oils when sold directly or indirectly to electric utilities for the generation
of electric power and the manufacture of city gas. (Sec. 900)
What are the goods subject to Drawback?

 On Fuel Used for Propulsion of Vessels. — On all fuel imported into the
Philippines used for propulsion of vessels engaged in trade with foreign
countries, or in the coastwise trade.

 On Petroleum Oils and Oils Obtained from Bituminous Minerals,

Crude, Eventually Used for Generation of Electric Power and for the
Manufacture of City Gas. — On petroleum oils and oils obtained from
bituminous materials, crude oil imported by nonelectric utilities, sold
directly or indirectly, in the same form or after processing, to electric
utilities for the generation of electric power and for the manufacture of city
gas

 On Goods Made from Imported Materials. — Upon exportation of goods

manufactured or produced in the Philippines, including the packing,
covering, putting up, marking or labeling hereof either in whole or in part of
the imported materials for which duties have been paid.

o See Secs. 900-02 for more.

Are goods previously exported subject to Customs Duties?

Yes. According to Sec. 104, all goods imported, including those previously
exported, are subject to customs duties. See Sec. 800 (u) for the exceptions.

Mnemonic: This is the inverse of goods that may claim drawbacks.

What are the other charges and fees that are collected in connection with the
shipment of goods?

 Harbor Fee – the amount which the owner, agent, operator or master of a
vessel has to pay for each entrance into or departure from a port of entry in
the Philippines.

o Rationale: A vessel ordinarily enters a harbour and lays anchor or

moors in a port to load, or unload or both and in doing so, the vessel
derives benefits from port facilities maintained by the government.
(Lim, p.868)
  Wharfage Charge – the amount assessed against the cargo of a vessel
engaged in the foreign trade. The owner, consignee, or agent of either, of the
merchandise is the person liable for such charge.

o Purpose: Wharfage charges are specifically allotted for the special

Port Works Fund. (Lim, p. 869, citing Phil. Iron Mines v.
Commissioner of Customs, 30 SCRA 60, and Victorias Milling v.
Auditor General, 116 Phil. 1139)

 Berthing Charge – the amount assessed against a vessel for mooring or

berthing at a pier, wharf, bulkhead wharf, river or channel marginal wharf at
any port in the Philippines; or for mooring or making fast to a vessel so
berthed; or for coming or mooring within any slip, channel, basin, river or
canal under the jurisdiction of any port of the Philippines. The owner, agent,
operator or master of the vessel is liable for this charge.

 Storage Charge – the amount assessed on merchandise for storage in

customs premises, cargo sheds and warehouses of the government. The
owner, consignee, or agent of either, of the merchandise is liable for this
charge.

 Arrastre Charge – the amount which the owner, consignee, or agent of

either, of merchandise or baggage has to pay for the handling, receiving and
custody of the imported or exported merchandise or the baggage of the
passengers.

 See more: RA 1371.

 Tonnage Due – the amount paid by the owner, agent, operator or master of
a vessel engaged in foreign trade, whether coming to or going out of the
Philippines. (Lim, p.870)

What is Smuggling?

It refers to the fraudulent act of importing goods to the Philippines (Sec. 102
[nn]). It includes:
 o Importing goods by means of fraudulent, falsified, or erroneous
declaration of the goods, for the purpose of reducing or avoiding
payment of taxes and duties (technical smuggling). ~Sec. 102 (pp)

o Importing goods without complete importation documents, or without

being cleared by customs or the government, for the purpose of
reducing or avoiding payment of taxes and duties (outright
smuggling). ~Sec. 102 (ff)

o The act of assisting in receiving, concealing, buying, selling,

disposing, or transporting such goods with full knowledge that the
same has been fraudulently imported. (Sec. 102[nn])

o The fraudulent exportation of goods. (Sec. 102[nn]).

What is a Port of Entry?

Port of Entry refers to a domestic port open to both domestic and

international trade, including principal ports of entry and subports of entry.

A principal port of entry is the chief port of entry of the Customs District
wherein it is situated and is the permanent station of the District Collector of such
port.

Port of entry shall include airport of entry.

 Sec. 102(hh).

What is a Subport of Entry?

There is no definition in the CMTA but it appears that it refers to ports of

entry that are not principal ports of entry.

Where are the Principal Ports of Entry in the Philippines?

The principal ports of entry shall be located in Aparri, San Fernando,

Manila, Manila International Container Port, Ninoy Aquino International Airport,
Subic, Clark, Batangas, Legazpi, Iloilo, Cebu, Tacloban, Surigao, Cagayan de Oro,
Zamboanga, Davao, Limay and such other ports that may be created pursuant to
CMTA. (Sec. 207)