701 CMTA

710, 711, 712, 713, 714 CMTA

104, 116, 117, 118, 119, 423, 800 CMTA

103 CMTA

425, 426, 429 CMTA

430, 1000 CMTA

1400 CMTA

1401 CMTA, BOC v Devanadera Sep 8, 2015

BOC v Ogario, Mar 20, 2000

1127, 2313, 2314 CMTA

130 LGC

128, 134, 142, 151, 152 LGC

Figuerres v CA Mar 25, 1999

165 LGC

194 LGC

233, 235, 236, 240 LGC

234 LGC

201, 199 (e, f, g, h) LGC

Romeo Pucyutan v Meralco Apr 18, 2016

Sec 227, 229, 252 LGC City of Lapulapu v PEZA Nov 26, 2014
G.R. No. 193253

BUREAU OF CUSTOMS, Petitioner, 
vs.
THE HONORABLE AGNES VST DEVANADERA, ACTING SECRETARY, DEPARTMENT OF JUSTICE;
HONORABLE JOVENCITO R. ZUNO, PEDRITO L. RANCES, ARMAN A. DE ANDRES, PAUL CHI TING
CO, KENNETH PUNDANERA, MANUEL T. CO, SALLY L. CO,, STANLEY L. TAN, ROCHELLE E.
VICENCIO, LIZA R. MAGAWAY, JANICE L. CO, VIVENCIO ABANO, GREG YU, EDWIN AGUSTIN, VICTOR
D. PIAMONTE, UNIOIL PETROLEUM PHILIPPINES, INC., and OILINK, INTERNATIONAL,
INC., Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse
and set aside the Court of Appeals (CA) Resolutions dated March 26, 2010  and August 4, 2010,  and to
1 2

reinstate the petition for certiorari in CA-G.R. SP No. 113069, or in the alternative, to issue a decision finding
probable cause to prosecute the private respondents for violation of Sections 3601 and 3602, in relation to
Sections 2503 and 2530, paragraphs f and l (3), (4) and (5) of the Tariff and Customs Code of the Philippines
(TCCP), as amended.

The antecedents are as follows:

Private respondent UNIOIL Petroleum Philippines, Inc. is engaged in marketing, distribution, and sale of
petroleum, oil and other products, while its co-respondent OILINK International, Inc. is engaged in
manufacturing, importing, exporting, buying, selling, or otherwise dealing in at wholesale and retails of
petroleum, oil, gas and of any and all refinements and byproducts thereof. Except for respondent Victor D.
Piamonte who is a Licensed Customs Broker, the following private respondents are either officers or directors
of UNIOIL or OILINK:

1. Paul Chi Ting Co – Chairman of UNIOIL and OILINK

2. Kenneth Pundanera – President/Director of UNIOIL

3. Manuel T. Co – Officer/Director of UNIOIL

4. Sally L. Co – Officer/Director of UNIOIL

5. Stanley L. Tan – Officer/Director of UNIOIL

6. Rochelle E. Vicencio – Corporate Administrative Supervisor of UNIOIL

7. Liza R. Magaway – President of OILINK

8. Janice L. Co – Director of OILINK

9. Vivencio Abaño – Director of OILINK

 10. Greg Yu – Director of OILINK

11. Edwin Agustin – Corporate Secretary of OILINK

On January 30, 2007, Commissioner Napoleon L. Morales of petitioner Bureau of Customs (BOC) issued Audit
Notification Letter (ANL) No. 0701246,  informing the President of OILINK that the Post Entry Audit Group
3

(PEAG) of the BOC will be conducting a compliance audit, including the examination, inspection, verification
and/or investigation of all pertinent records of OILINK's import transactions for the past three (3)-year period
counted from the said date.

On March 2, 2007, a pre-audit conference was held between the BOC Audit Team  and the representatives of
4

OILINK.  During the conference, the Audit Team explained to OILINK representatives the purpose of the
5

postentry audit and the manner by which it would be conducted, and advised it as to the import documents
required for such audit.

On March 14, 2007, OILINK submitted to the Audit Team the following documents: Post-Entry Audit Group
General Customs Questionnaire, General Information Sheet for the year 2006, SEC Registration, Articles of
Incorporation, Company By-laws, and Audited Financial Report for the year 2005.

On April 20, 2007, the Audit Team requested OILINK to submit the other documents stated in the List of Initial
Requirements for Submission, namely: 2004 Audited Financial Report, 2004-2006 Quarterly VAT Returns with
the accompanying schedule of importations, Organizational chart/structure, and List of foreign suppliers with
details on the products imported and the total amount, on a yearly basis.

On May 7, 2007, OILINK expressed its willingness to comply with the request for the production of the said
documents, but claimed that it was hampered by the resignation of its employees from the Accounting and
Supply Department. OILINK also averred that it would refer the matter to the Commissioner of Customs in view
of the independent investigation being conducted by the latter.

On June 4, 2007, OILINK sent a letter stating that the documents which the Audit Team previously requested
were available with the Special Committee of the BOC, and that it could not open in the meantime its Bureau of
Internal Revenue (BIR) – registered books of accounts for validation and review purposes.

In a letter dated July 11, 2007, the Audit Team informed OILINK of the adverse effects of its request for the
postponement of the exit conference and its continuous refusal to furnish it the required documents. It advised
OILINK that such acts constitute as waiver on its part to be informed of the audit findings and an administrative
case would be filed against it, without prejudice to the filing of a criminal action.

On July 24, 2007, Commissioner Morales approved the filing of an administrative case against OILINK for
failure to comply with the requirements of Customs Administrative Order (CAO) No. 4-2004.  Such case was
6

filed on July 30, 2007.

On September 20, 2007, an Order was issued by the Legal Service of the BOC, submitting the case for
resolution in view of OILINK's failure to file its Answer within the prescribed period.

On December 14, 2007, the Legal Service of the BOC rendered a Decision finding that OILINK violated Section
IV.A.2(c) and (e) of CAO 4- 2004  when it refused to furnish the Audit Team copies of the required documents,
7

despite repeated demands. The dispositive portion of the Decision states:

WHEREFORE, in view of the foregoing, this Office finds herein respondent liable for violating Sections IV.A.2
(c) and (e) of Customs Administrative Order No. 4-2004, and a DECISION is hereby rendered:

1. Ordering OILINK INTERNATIONAL CORPORATION to pay the equivalent of twenty percent (20%)
ad valorem on the article/s subject of the Importation for which no records were kept and maintained
as prescribed in Section 2504 of the Customs Code in the amount of Pesos: Two Billion Seven
 Hundred Sixty-Four Million Eight Hundred Fifty-Nine Thousand Three Hundred Four and 80/100
(Php 2,764,859,304.80);

2. Ordering the Bureau of Customs to hold the delivery or release of subsequent imported articles to
answer for the fine, any revised assessment, and/or as a penalty for failure to keep records.

This is without prejudice to the filing of a criminal case or any appropriate legal action against the importer in
order to protect the interest of the government and deter other importers from committing the same offense.

SO ORDERED. 8

Pursuant to the Decision dated December 14, 2007, Commissioner Morales, in a letter  of even date, directed
9

the President of OILINK to pay the BOC the administrative fine of _2,764,859,304.80 for violation of CAO No.
4-2004, in relation to Section 2504 of the TCCP. Copy of the said Decision and letter were served to OILINK
through personal service on December 28, 2007. 10

On March 13, 2008, Atty. Noemi B. Alcala, Officer-in-Charge, Collection Service, Revenue and Monitoring
Group, sent a final demand letter for OILINK to settle the administrative fine, otherwise, the BOC will be
compelled to file the necessary legal action and put in force Section 1508  of the TCCP against its succeeding
11

shipments to protect the government's interest. 12

On April 23, 2008, a Hold Order  was issued by Horacio P. Suansing, Jr., District Collector, Port of Manila,
13

against all shipments of OILINK for failure to settle its outstanding account with the BOC and to protect the
interest of the government pursuant to Section 1508 of the TCCP.

On May 2, 2008, Rochelle E. Vicencio, Corporate Administrative Supervisor of UNIOIL, citing the existing
Terminalling Agreement dated January 2, 2008 with OILINK for the Storage of UNIOIL's aromatic process oil
and industrial lubricating oils (collectively, "base oils"), requested District Collector Suansing Jr. to allow it to
withdraw base oils from OILINK's temporarily closed Terminal.

On May 6, 2008, Commissioner Morales granted the request of UNIOIL to withdraw its base oils stored at
OILINK's terminal/depot based on the Terminalling Agreement between the two companies, subject to the
following conditions:

1. Only Unioil products shall be withdrawn subject to proper inventory by the BIR and BOC.

2. Appropriate duties and taxes due on the products to be withdrawn are fully paid or settled.

3. The company should allow the operation/withdrawal to be closely monitored and continuously
underguarded by assigned Customs personnel. 14

On May 9, 2008, a Warrant of Seizure and Detention (WSD), docketed as Seizure Identification (S.I.) No. 2008-
082, was issued by District Collector Suansing Jr., directing the BOC officials to seal and padlock the oil
tanks/depots of OILINK located in Bataan.

On May 12, 2008, Kenneth C. Pundanera, Operations Manager of UNIOIL, requested Zaldy E. Almoradie,
District Collector of Mariveles, Bataan, for permission to release UNIOIL-owned products from OILINK's
storage terminal. Pertinent portion of the request letter reads:

Unioil is a licensed importer of various Petroleum Products by virtue of its import license LTAD-0-021-2002
issued on March 26, 2002 which was revised to include all other petroleum products in 2007 through LTAMII
(P) 001-10-07-13639. To pursue its line of business, Unioil has an existing Terminalling Agreement with Oilink
for the storage of various Unioil products at the Oilink terminal located at Lucanin Pt., Mariveles, Bataan.
In view of the said temporary closure of Oilink's terminal, Unioil is currently unable to fully utilize its leased
tanks as well as make use of the products contained therein. We understand that there is still an unresolved
issue between Oilink and the Bureau of Customs. However, with all due respect, said issue should not affect
Unioil because it is not a party to the same, furthermore there is a legal and binding terminalling agreement
between Oilink and Unioil which should be honored.

Last May 8, 2008, an asphalt importation for Unioil Petroleum Philippines, Inc. arrived in Mariveles, Bataan.
This was issued the corresponding discharging permit by the Bureau of Customs. All duties, excise taxes and
value added taxes for this product have already been settled. However, we are still unable to withdraw these
products in order to serve our customers who are using the product to supply major government infrastructure
projects in the country.

In line with the endorsement coming from the Bureau of Customs Commissioner Napoleon D. Morales issued
last May 6, 2008, Unioil has complied with the conditions stipulated therein which are:

1. Only Unioil products shall be withdrawn subject to proper inventory by the BIR and BOC.

2. Appropriate duties and taxes due on the products to be withdrawn are fully paid or settled.

3. The company (Unioil) should allow the operation/withdrawal to be closely monitored and
continuously underguarded by assigned Customs personnel.

In this regard, may we respectfully request your good office to please allow Unioil to withdraw from Oilink's
terminal its products which are stored in the following tanks[:]15

TANK PROD CONTENTS (Liters)

2 diesel 2,171,670.00

6 rexo 1,862,846.00

10 asphalt 4,573.14

13 gasoline 809,345.00

14 gasoline 746,629.00

17 diesel 360,097.00

19 sn 500 203,659.00

20 sn 500 643,236.00

In the same request letter, District Collector Almoradie approved the release of the above petroleum products
through a handwritten note dated May 12, 2008: "All concerned: Pls. allow the release of the Unioil-owned
products from the Oilink Storage Terminal per this request. Thanks." 16

On May 15, 2008, Pundanera wrote a clarificatory letter pursuant to the verbal instruction of District Collector
Almoradie to explain the withdrawal of products from the Terminal of OILINK, to wit:
As far as Unioil is concerned, we affirm to your good office that the products withdrawn/loaded at the Terminal
are entirely Unioil products. Unioil owns these products pursuant to its supply and terminalling agreements with
Oilink. (We shall be submitting to you copies of these documents as soon as they arrive from our office in
Manila.) In addition, due to the issue involving Oilink and the Bureau of Customs, Unioil was forced to secure
its petroleum products from local sources in order to comply with its valid contractual commitments.

Unioil intended to withdraw these products because it believed in good faith and based on documents in its
possession that it is allowed to do so. Unioil based its intention pursuant to the Indorsements of the Collector of
the Port of Manila as well as the Office of the Commissioner that allowed the withdrawal of Unioil products
subject to compliance with the three (3) conditions specified in the abovementioned Indorsements.

This being the precedent, we believe in good faith that, since Unioil owns the products, and it is considered a
stranger to the issue between Oilink and the Bureau, then Unioil is allowed to withdraw the products it owns
subject to the compliance with the three (3) stated conditions. Besides, any withdrawal is covered by an
appropriate delivery receipt, which would clearly indicate that Unioil owns the products being withdrawn. 17

In a complaint-affidavit dated December 15, 2008, Atty. Balmyrson M. Valdez, a member of the petitioner
BOC's Anti-Oil Smuggling Coordinating Committee that investigated the illegal withdrawal by UNIOIL of oil
products consigned to OILINK, valued at _181,988,627.00 with corresponding duties and taxes in the amount
of _35,507,597.00, accused the private respondents of violation of Sections 3601  and 3602,  in relation to
18 19

Sections 2503  and 2530,  paragraphs f and l (3), (4) and (5), of the TCCP.
20 21

In a letter  dated December 15, 2008, Commissioner Morales referred to the Office of Chief State Prosecutor
22

Jovencito R. Zuño the said complaintaffidavit, together with its annexes, for preliminary investigation. During
the said investigation, BOC's counsel appeared and all of the private respondents submitted their respective
counter-affidavits.

In a Resolution  dated May 29, 2009, public respondent Arman A. De Andres, State Prosecutor of the
23

Department of Justice (DOJ), recommended the dismissal of the complaint-affidavit for lack of probable cause.
The Resolution was approved by public respondents Assistant Chief State Prosecutor Pedrito L. Rances and
Chief State Prosecutor Zuño. On automatic review, the Resolution was affirmed by then Secretary of Justice
Raul M. Gonzales. 24

Dissatisfied, the BOC filed a motion for reconsideration which was denied by the public respondent, the Acting
Secretary of Justice Agnes VST Devanadera, in a Resolution  dated December 28, 2009.
25

On March 11, 2010, the BOC filed a petition for certiorari with the CA.

In the Resolution dated March 26, 2010, the CA dismissed outright the petition due to procedural defects:

The instant petition (i) contains no explanation why service thereof was not done personally (Sec. 11, Rule 13,
1997 Rules of Civil Procedure); (ii) shows that it has no proper verification and certification against forum
shopping and (iii) the docket and other lawful fees payment is short by P1,530.00. 26

In the Resolution dated August 4, 2010, the CA denied the private respondents' motion for reconsideration of
the March 26, 2010 Resolution, as follows:

We made a cursory examination of the petition filed in this case as well as the whole rollo of the case. It is our
finding that, up to the date hereof, the petitioner has not duly submitted to this Court another set of petition with
a certification against forum shopping embodied therein or appended thereto. Thus, the petition really suffers
from a fatal defect until now, and so, the petitioner has to bear the consequence thereof. 27

The CA stressed that procedural rules are not to be belittled or dismissed simply because their non-observance
may have resulted in prejudice to a party's substantive rights. Like all rules, they are required to be followed
except only when, for the most persuasive of reasons, they may be relaxed to relieve a litigant of an injustice
not commensurate with the degree of thoughtlessness in not complying with the procedure prescribed. While it
is true that litigation is not a game of technicalities, this does not mean that Rules of Court may be ignored at
will and at random to the prejudice of the orderly presentation and assessment of the issues and their just
resolution.

Aggrieved, the BOC filed the instant petition for review on certiorari, raising the following issues:

WHETHER THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT DENIED

PETITIONER'S MOTION FOR RECONSIDERATION SOLELY ON THE GROUND THAT,
ALLEGEDLY, IT DID NOT RECEIVE THE SECOND AND COMPLETE COPY OF THE PETITION,
CONTAINING THE VERIFICATION AND CERTIFICATION AGAINST FORUM SHOPPING.

WHETHER THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN LAW AND

JURISPRUDENCE WHEN IT AFFIRMED ITS 26 MARCH 2010 RESOLUTION, DISMISSING THE
PETITION ON ACCOUNT OF MERE TECHNICALITIES.

WHETHER THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT

DID NOT LOOK INTO THE MERITS OF THE CASE, WHERE IT WAS CLEARLY ESTABLISHED
THAT THERE IS PROBABLE CAUSE TO INDICT RESPONDENTS FOR TRIAL FOR VIOLATION OF
SECTION 3601 AND 3602 IN RELATION TO SECTION 2530, PARAGRAPHS (E), AND SECTION
3604 (D), (E), (F), AND (H) OF THE TCCP, AS AMENDED. 28

The petition is partly meritorious.

Although the question of jurisdiction over the subject matter was not raised at bench by either of the parties, the
Court will first address such question before delving into the procedural and substantive issues of the instant
petition. After all, it is the duty of the courts to consider the question of jurisdiction before they look into other
matters involved in the case, even though such question is not raised by any of the parties.  Courts are bound
29

to take notice of the limits of their authority and, even if such question is neither raised by the pleadings nor
suggested by counsel, they may recognize the want of jurisdiction and act accordingly by staying pleadings,
dismissing the action, or otherwise noticing the defect, at any stage of the proceedings.  Besides, issues or
30

errors not raised by the parties may be resolved by the Court where, as in this case, the issue is one of
jurisdiction; it is necessary in arriving at a just decision; and the resolution of the issues raised by the parties
depend upon the determination of the unassigned issue or error, or is necessary to give justice to the parties. 31

On the issue of whether or not the CA has certiorari jurisdiction over the resolution of the Acting Secretary of
Justice, affirming the dismissal of the complaint-affidavit for violation of provisions of the TCCP due to lackof
probable cause, the Court rules in negative.

The elementary rule is that the CA has jurisdiction to review the resolution of the DOJ through a petition
for certiorari  under Rule 65 of the Rules of Court on the ground that the Secretary of Justice committed grave
abuse of his discretion amounting to excess or lack of jurisdiction.  However, with the enactment  of Republic
32 33

Act (R.A.) No. 9282, amending R.A. No. 1125  by expanding the jurisdiction of the CTA, enlarging its
34

membership and elevating its rank to the level of a collegiate court with special jurisdiction, it is no longer clear
which between the CA and the CTA has jurisdiction to review through a petition for certiorari the DOJ
resolution in preliminary investigations involving tax and tariff offenses.

Apropos  is City of Manila v. Hon. Grecia-Cuerdo  where the Court en banc declared that the CTA has
35

appellate jurisdiction over a special civil  action for certiorari assailing an interlocutory order issued by the RTC
in a local tax case, despite the fact that there is no categorical statement to that effect under R.A. No. 1125, as
well as the amendatory R.A. No. 9282. Thus:

x x x Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme Court, in the exercise of its
original jurisdiction, to issue writs of certiorari, prohibition and mandamus. With respect to the Court of Appeals,
Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the appellate court, also in the exercise of its original
jurisdiction, the power to issue, among others, a writ of certiorari, whether or not in aid of its appellate
jurisdiction. As to Regional Trial Courts, the power to issue a writ of certiorari, in the exercise of their original
jurisdiction, is provided under Section 21 of BP 129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA, Section
1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested in one
Supreme Court and in such lower courts as may be established by law and that judicial power includes the duty
of the courts of justice to settle actual controversies involving rights which are legally demandable and
enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA
includes that of determining whether or not there has been grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within the
exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional mandate, is
vested with jurisdiction to issue writs of certiorari in these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the
authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax
cases to the CTA, it can reasonably be assumed that the law intended to transfer also such power as is
deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There is no perceivable reason
why the transfer should only be considered as partial, not total.

xxxx

Furthermore, Section 6, Rule 135 of the present Rules of Court provides that when by law, jurisdiction is
conferred on a court or judicial officer, all auxiliary writs, processes and other means necessary to carry it into
effect may be employed by such court or officer.

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with the CA,
this Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter – precisely the split-jurisdiction situation which is anathema to the orderly
administration of justice. The Court cannot accept that such was the legislative motive, especially considering
that the law expressly confers on the CTA, the tribunal with the specialized competence over tax and tariff
matters, the role of judicial review over local tax cases without mention of any other court that may exercise
such power. Thus, the Court agrees with the ruling of the CA that since appellate jurisdiction over private
respondents' complaint for tax refund is vested in the CTA, it follows that a petition for certiorari seeking
nullification of an interlocutory order issued in the said case should, likewise, be filed with the same court. To
rule otherwise would lead to an absurd situation where one court decides an appeal in the main case while
another court rules on an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split
jurisdiction to conclude that the intention of the law is to divide the authority over a local tax case filed with the
RTC by giving to the CA or this Court jurisdiction to issue a writ of certiorari  against interlocutory orders of the
RTC but giving to the CTA the jurisdiction over the appeal from the decision of the trial court in the same case.
It is more in consonance with logic and legal soundness to conclude that the grant of appellate jurisdiction to
the CTA over tax cases filed in and decided by the RTC carries with it the power to issue a writ
of certiorari when necessary in aid of such appellate jurisdiction. The supervisory power or jurisdiction of the
CTA to issue a writ of certiorari  in aid of its appellate jurisdiction should co-exist with, and be a complement to,
its appellate jurisdiction to review, by appeal, the final orders and decisions of the RTC, in order to have
complete supervision over the acts of the latter.

A grant of appellate jurisdiction implies that there is included in it the power necessary to exercise it effectively,
to make all orders that will preserve the subject of the action, and to give effect to the final determination of the
appeal. It carries with it the power to protect that jurisdiction and to make the decisions of the court thereunder
effective.
The court, in aid of its appellate jurisdiction, has authority to control all auxiliary and incidental matters
necessary to the efficient and proper exercise of that jurisdiction. For this purpose, it may, when necessary,
prohibit or restrain the performance of any act which might interfere with the proper exercise of its rightful
jurisdiction in cases pending before it.

Lastly, it would not be amiss to point out that a court which is endowed with a particular jurisdiction should have
powers which are necessary to enable it to act effectively within such jurisdiction. These should be regarded as
powers which are inherent in its jurisdiction and the court must possess them in order to enforce its rules of
practice and to suppress any abuses of its process and to defeat any attempted thwarting of such process.

In this regard, Section 1 of RA 9282 states that the CTA shall be of the same level as the CA and shall possess
all the inherent powers of a court of justice.

Indeed, courts possess certain inherent powers which may be said to be implied from a general grant of
jurisdiction, in addition to those expressly conferred on them. These inherent powers are such powers as are
necessary for the ordinary and efficient exercise of jurisdiction; or are essential to the existence, dignity and
functions of the courts, as well as to the due administration of justice; or are directly appropriate, convenient
and suitable to the execution of their granted powers; and include the power to maintain the court's jurisdiction
and render it effective in behalf of the litigants.

Thus, this Court has held that "while a court may be expressly granted the incidental powers necessary to
effectuate its jurisdiction, a grant of jurisdiction, in the absence of prohibitive legislation, implies the necessary
and usual incidental powers essential to effectuate it, and, subject to existing laws and constitutional provisions,
every regularly constituted court has power to do all things that are reasonably necessary for the administration
of justice within the scope of its jurisdiction and for the enforcement of its judgments and mandates." Hence,
demands, matters or questions ancillary or incidental to, or growing out of, the main action, and coming within
the above principles, may be taken cognizance of by the court and determined, since such jurisdiction is in aid
of its authority over the principal matter, even though the court may thus be called on to consider and decide
matters which, as original causes of action, would not be within its cognizance.

Based on the foregoing disquisitions, it can be reasonably concluded that the authority of the CTA to take
cognizance of petitions for certiorari  questioning interlocutory orders issued by the RTC in a local tax case is
included in the powers granted by the Constitution as well as inherent in the exercise of its appellate
jurisdiction.
36

Since the Court ruled in City of Manila v. Hon. Grecia-Cuerdo  that the CTA has jurisdiction over a special civil
37

action for certiorari  questioning an interlocutory order of the RTC in a local tax case via  express constitutional
mandate and for being inherent in the exercise of its appellate jurisdiction, it can also be reasonably concluded
based on the same premise that the CTA has original jurisdiction over a petition for certiorari assailing the DOJ
resolution in a preliminary investigation involving tax and tariff offenses.

If the Court were to rule that jurisdiction over a petition for certiorari assailing such DOJ resolution lies with the
CA, it would be confirming theexercise by two judicial bodies, the CA and the CTA, of jurisdiction over basically
the same subject matter – precisely the split-jurisdiction situation which is anathema to the orderly
administration of justice. The Court cannot accept that such was the legislative intent, especially considering
that R.A. No. 9282 expressly confers on the CTA, the tribunal with the specialized competence over tax and
tariff matters, the role of judicial review over local tax cases without mention of any other court that may
exercise such power. 38

Concededly, there is no clear statement under R.A. No. 1125, the amendatory R.A. No. 9282, let alone in the
Constitution, that the CTA has original jurisdiction over a petition for certiorari. By virtue of Section 1,

Article VIII of the 1987 Constitution, vesting judicial power in the Supreme Court and such lower courts as may
be established by law, to determine whether or not there has been a grave abuse of discretion on the part of
any branch or instrumentality of the Government, in relation to Section 5(5), Article VIII thereof, vesting upon it
the power to promulgate rules concerning practice and procedure in all courts, the Court thus declares that the
CA's original jurisdiction  over a petition for certiorari assailing the DOJ resolution in a preliminary investigation
39

involving tax and tariff offenses was necessarily transferred to the CTA pursuant to Section 7 of R.A. No.
9282,  and that such petition shall be governed by Rule 65 of the Rules of Court, as amended. Accordingly, it is
40

the CTA, not the CA, which has jurisdiction over the petition for certiorari assailing the DOJ resolution of
dismissal of the BOC's complaint-affidavit against private respondents for violation of the TCCP.

On the procedural issue of whether the CA erred in dismissing the petition for certiorari on the sole ground of
lack of verification and certification against forum shopping, the Court rules in the affirmative, despite the above
discussion that such petition should have been filed with the CTA.

In Traveño, et al. v. Bobongon Banana Growers Multi-Purpose Cooperative, et al.,  the Court restated the
41

jurisprudence on non-compliancewith the requirements on, or submission of defective, verification and

certification against forum shopping:

1) A distinction must be made between non-compliance with the requirement on or submission of

defective verification, and noncompliance with the requirement on or submission of defective
certification against forum shopping.

2) As to verification, non-compliance therewith or a defect therein does not necessarily render the
pleading fatally defective. The court may order its submission or correction or act on the pleading if the
attending circumstances are such that strict compliance with the Rule may be dispensed with in order
that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to swear to
the truth of the allegations in the complaint or petition signs the verification, and when matters alleged
in the petition have been made in good faith or are true and correct.

4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike in

verification, is generally not curable by its subsequent submission or correction thereof, unless there is
a need to relax the Rule on the ground of "substantial compliance" or presence of "special
circumstances or compelling reasons."

5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a case;
otherwise, those who did not sign will be dropped as parties to the case. Under reasonable or
justifiable circumstances, however, as when all the plaintiffs or petitioners share a common interest
and invoke a common cause of action or defense, the signature of only one of them in the certification
against forum shopping substantially complies with the Rule.

6) Finally, the certification against forum shopping must be executed by the party-pleader, not by his
counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he must
execute a Special Power of Attorney designating his counsel of record to sign on his behalf. 42

While it admittedly filed a petition for certiorari  without a certification against forum shopping on March 11,
2010, the BOC claimed to have subsequently complied with such requirement by filing through registered mail
a complete set of such petition, the following day which was also the last day of the reglementary period. The
problem arose when the CA failed to receive such complete set of the petition for certiorari  with the verification
and certification against forum shopping. In support of the motion for reconsideration of the CA's March 26,
2010 resolution which dismissed outright the petition, the BOC asserted that it filed a complete set of petition by
registered mail. It also submitted an affidavit of the person who did the mailing as required by Section 12,  Rule
43

13 of the Rules of Court, including the registry receipt numbers, but not the receipts themselves which were
allegedly attached to the original copy mailed to the CA. Instead of ordering the BOC to secure a certification
from the postmaster to verify if a complete set of the petition was indeed filed by registered mail, the CA – after
examining the whole case rollo  and finding that no other set of petition with a certification against forum
shopping was duly submitted – denied the motion for reconsideration.
Faced with the issue of whether or not there is a need to relax the strict compliance with procedural rules in
order that the ends of justice may be served thereby and whether "special circumstances or compelling
reasons" are present to warrant a liberal interpretation of such rules, the Court rules – after a careful review of
the merits of the case – in the affirmative.

Despite the BOC's failed attempt to comply with the requirement of verification and certification against forum
shopping, the Court cannot simply ignore the CA's perfunctory dismissal of the petition on such sole procedural
ground vis-à-vis the paramount public interest in the subject matter and the substantial amount
involved, i.e., the alleged illegal withdrawal of oil products worth _181,988,627.00 with corresponding duties
and taxes worth _35,507,597.00. Due to the presence of such special circumstances and in the interest of
justice, the CA should have at least passed upon the substantive issue raised in the petition, instead of
dismissing it on such procedural ground. Although it does not condone the failure of BOC to comply with the
said basic requirement, the Court is constrained to exercise the inherent power to suspend its own rules in
order to do justice in this particular case.

Given that the petition for certiorari should have been filed with the CTA, the mistake committed by the BOC in
filing such petition before the CA may be excused. In this regard, Court takes note that nothing in R.A. No.
1125, as amended by R.A. No. 9282, indicates that a petition for certiorari  under Rule 65 may be filed with the
CTA. Despite the enactment of R.A. No. 9282 on March 30, 2004, it was only about ten (10) years later in the
case of City of Manila v. Hon. Grecia-Cuerdo  that the Court ruled that the authority of the CTA to take
44

cognizance of such petitions is included in the powers granted by the Constitution, as well as inherent in the
exercise of its appellate jurisdiction. While the rule on perfection of appeals cannot be classified as a difficult
question of law,  mistake in the construction or application of a doubtful question of law, as in this case, may be
45

considered as a mistake of fact, excusing the BOC from the consequences of the erroneous filing of its petition
with the CA.

As the CA dismissed the petition for certiorari  solely due to a procedural defect without resolving the issue of
whether or not the Acting Secretary of Justice gravely abused her discretion in affirming the dismissal of the
BOC's complaint-affidavit for lack of probable cause, the Court ought to reinstate the petition and refer it to the
CTA for proper disposition. For one, as a highly specialized court specifically created for the purpose of
reviewing tax and customs cases,  the CTA is dedicated exclusively to the study and consideration of revenue-
46

related problems, and has necessarily developed an expertise on the subject.  For another, the referral of the
47

petition to the CTA is in line with the policy of hierarchy of courts in order to prevent inordinate demands upon
the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and to
prevent further overcrowding of its docket. 48

Be that as it may, the Court stressed in The Diocese of Bacolod v. Commission on Elections  that the doctrine
49

of hierarchy of courts is not an  iron-clad rule, and that it has full discretionary power to take cognizance and
assume jurisdiction over special civil actions for certiorari filed directly with it for exceptionally compelling
reasons or if warranted by the nature of the issues clearly and specifically raised in the petition. Recognized
exceptions to the said doctrine are as follows: (a) when there are genuine issues of constitutionality that must
be addressed at the most immediate time; (b) when the issues involved are of transcendental importance; (c)
cases of first impression where no jurisprudence yet exists that will guide the lower courts on the matter; (d) the
constitutional issues raised are better decided by the Court; (e) where exigency in certain situations necessitate
urgency in the resolution of the cases; (f) the filed petition reviews the act of a constitutional organ; (g) when
petitioners rightly claim that they had no other plain, speedy, and adequate remedy in the ordinary course of
law that could free them from the injurious effects of respondents’ acts in violation of their right to freedom of
expression; and (h) the petition includes questions that are dictated by public welfare and the advancement of
public policy, or demanded by the broader interest of justice, or the orders complained of were found to be
patent nullities, or the appeal was considered as clearly an inappropriate remedy.  Since the present case
50

includes questions that are dictated by public welfare and the advancement of public policy, or demanded by
the broader interest of justice, as well as to avoid multiplicity of suits and further delay in its disposition, the
Court shall directly resolve the petition for certiorari, instead of referring it to the CTA.

On the substantive issue of whether the Acting Secretary of Justice gravely abused her discretion in affirming
the dismissal of the BOC's complaint-affidavit for lack of probable cause, the settled policy of noninterference in
the prosecutor’s exercise of discretion requires the courts to leave to the prosecutor and to the DOJ the
determination of what constitutes sufficient evidence to establish probable cause. As the Court explained
in Unilever Philippines, Inc. v. Tan: 51

The determination of probable cause for purposes of filing of information in court is essentially an executive
function that is lodged, at the first instance, with the public prosecutor and, ultimately, to the Secretary of
Justice. The prosecutor and the Secretary of Justice have wide latitude of discretion in the conduct of
preliminary investigation; and their findings with respect to the existence or non-existence of probable cause
are generally not subject to review by the Court.

Consistent with this rule, the settled policy of non-interference in the prosecutor’s exercise of discretion requires
the courts to leave to the prosecutor and to the DOJ the determination of what constitutes sufficient evidence to
establish probable cause. Courts can neither override their determination nor substitute their own judgment for
that of the latter. They cannot likewise order the prosecution of the accused when the prosecutor has not found
a prima facie  case.

Nevertheless, this policy of non-interference is not without exception. The Constitution itself allows (and even
directs) court action where executive discretion has been gravely abused. In other words, the court may
intervene in the executive determination of probable cause, review the findings and conclusions, and ultimately
resolve the existence or non-existence of probable cause by examining the records of the preliminary
investigation when necessary for the orderly administration of justice. 52

Probable cause for purposes of filing a criminal information is defined as such facts as are sufficient to
engender a well-founded belief that a crime has been committed and the respondent is probably guilty thereof,
and should be held for trial.  As explained in Sy v. Secretary of Justice,  citing Villanueva v. Secretary of
53 54

Justice:55

x x x [Probable cause] is such a state of facts in the mind of the prosecutor as would lead a person of ordinary
caution and prudence to believe or entertain an honest or strong suspicion that a thing is so. The term does not
mean "actual or positive cause"; nor does it import absolute certainty. It is merely based on opinion and
reasonable belief. Thus, a finding of probable cause does not require an inquiry into whether there is sufficient
evidence to procure a conviction. It is enough that it is believed that the act or omission complained of
constitutes the offense charged. Precisely, there is a trial for the reception of evidence of the prosecution in
support of the charge. 56

To find out if there is a reasonable ground to believe that acts or ommissions complained of constitute the
offenses charged, the Court must first examine whether or not the allegations against private respondents in
the BOC's complaint-affidavit constitute the offenses of unlawful importation under Section 3601 and various
fraudulent practices against customs revenue under Section 3602 of the TCCP.

In Jardeleza v. People,  the Court discussed the concepts of unlawful importation under Section 3601 of the
57

TCCP, and various fraudulent practices against customs revenue under Section 3602 thereof, thus:

Section 3601 of the TCC was designed to supplement the existing provisions of the TCC against the means
leading up to smuggling, which might render it beneficial by a substantive and criminal statement separately
providing for the punishment of smuggling. The law was intended not to merge into one and the same offense
all the many acts which are classified and punished by different penalties, penal or administrative, but to
legislate against the overt act of smuggling itself. This is manifested by the use of the words "fraudulently" and
"contrary to law" in the law.

Smuggling is committed by any person who: (1) fraudulently imports or brings into the Philippines any article
contrary to law; (2) assists in so doing any article contrary to law; or (3) receives, conceals, buys, sells or in any
manner facilitate the transportation, concealment or sale of such goods after importation, knowing the same to
have been imported contrary to law.
The phrase "contrary to law" in Section 3601 qualifies the phrases "imports or brings into the Philippines" and
"assists in so doing," and not the word "article." The law penalizes the importation of any merchandise in any
manner contrary to law.

The word "law" includes regulations having the force and effect of law, meaning substantive or legislative type
rules as opposed to general statements of policy or rules of agency, organization, procedures or positions. An
inherent characteristic of a substantive rule is one affecting individual rights and obligations; the regulation must
have been promulgated pursuant to a congressional grant of quasi-legislative authority; the regulation must
have been promulgated in conformity to with congressionally-imposed procedural requisites.

xxxx

Section 3602 of the TCC, on the other hand, provides:

Sec. 3602. Various Fraudulent Practices Against Customs Revenue. – Any person who makes or attempts to
make any entry of imported or exported article by means of any false or fraudulent invoice, declaration,
affidavit, letter, paper or by any means of any false statement, written or verbal, or by any means of any false or
fraudulent practice whatsoever, or knowingly effects any entry of goods, wares or merchandise, at less than the
true weight or measures thereof or upon a false classification as to quality or value, or by the payment of less
than the amount legally due, or knowingly and wilfully files any false or fraudulent entry or claim for the
payment of drawback or refund of duties upon the exportation of merchandise, or makes or files any affidavit,
abstract, record, certificate or other document, with a view to securing the payment to himself or others of any
drawback, allowance or refund of duties on the exportation of merchandise, greater than that legally due
thereon, or who shall be guilty of any wilful act or omission shall, for each offense, be punished in accordance
with the penalties prescribed in the preceding section.

The provision enumerates the various fraudulent practices against customs revenue, such as the entry of
imported or exported articles by means of any false or fraudulent invoice, statement or practice; the entry of
goods at less than the true weight or measure; or the filing of any false or fraudulent entry for the payment of
drawback or refund of duties.

The fraud contemplated by law must be intentional fraud, consisting of deception, willfully and deliberately
dared or resorted to in order to give up some right. The offender must have acted knowingly and with the
specific intent to deceive for the purpose of causing financial loss to another; even false representations or
statements or omissions of material facts come within fraudulent intent. The fraud envisaged in the law includes
the suppression of a material fact which a party is bound in good faith to disclose. Fraudulent nondisclosure
and fraudulent concealment are of the same genre.

Fraudulent concealment presupposes a duty to disclose the truth and that disclosure was not made when
opportunity to speak and inform was present, and that the party to whom the duty of disclosure as to a material
fact was due was thereby induced to act to his injury.  Fraud is not confined to words or positive assertions; it
1âwphi1

may consist as well of deeds, acts or artifice of a nature calculated to mislead another and thus allow one to
obtain an undue advantage. 58

In unlawful importation, also known as outright smuggling, goods and articles of commerce are brought into the
country without the required importation documents, or are disposed of in the local market without having been
cleared by the BOC or other authorized government agencies, to evade the payment of correct taxes, duties
and other charges. Such goods and articles do not undergo the processing and clearing procedures at the
BOC, and are not declared through submission of import documents, such as the import entry and internal
revenue declaration.

In various fraudulent practices against customs revenue, also known as technical smuggling, on the other
hand, the goods and articles are brought into the country through fraudulent, falsified or erroneous
declarations, to substantially reduce, if not totally avoid, the payment of correct taxes, duties and other charges.
Such goods and articles pass through the BOC, but the processing and clearing procedures are attended by
fraudulent acts in order to evade the payment of correct taxes, duties, and other charges. Often committed by
means of misclassification of the nature, quality or value of goods and articles, undervaluation in terms of their
price, quality or weight, and misdeclaration of their kind, such form of smuggling is made possible through the
involvement of the importers, the brokers and even some customs officials and personnel.

In light of the foregoing discussion, the Court holds that private respondents cannot be charged with unlawful
importation under Section 3601 of the TCCP because there is no allegation in the BOC's complaint-affidavit to
the effect that they committed any of the following acts: (1) fraudulently imported or brought into the Philippines
the subject petroleum products, contrary to law; (2) assisted in so doing; or (3) received, concealed, bought,
sold or in any manner facilitated the transportation, concealment or sale of such goods after importation,
knowing the same to have been imported contrary to law.

The said acts constituting unlawful importation under Section 3601 of the TCCP can hardly be gathered from
the following allegations in the BOC's complaint-affidavit:

19.1 From May 23, 2007 to February 10, 2008, UNIOIL is not an accredited importer of the BOC;

19.2 From the time UNIOIL was accredited on February 11, 2008 until the time of its request to withdraw its oil
products on 02 May 2008, they did not import Gasoil (diesel) and Mogas Gasoline;

19.3 The Terminalling Agreement allegedly executed between OILINK and UNIOIL was obviously for the
purpose of circumventing the Warrant of Seizure and Detention issued against the shipments of OILINK aside
from the fact that it was only executed on 02 January 2008 after the decision of the Commissioner finding
OILINK liable to pay an administrative fine of Two Billion Seven Hundred Sixty-Four Million Eight Hundred Fifty-
Nine Thousand Three Hundred Four Pesos and 80/100 (Php2,764,859,304.80);

19.4 Only base oil should have been withdrawn by UNIOIL since it is the only product subject of its request and
approved by the Commissioner;

19.5 UNIOIL withdrew Gasoil (Diesel) and Mogas which were not covered by importations;

19.6 Finally, the illegal release/withdrawal of the oil products deprived the government of the supposed partial
payment on the Php2.7 billion liability of OILINK in the approximate amount of Php181,988,627 representing
the customs value of the released/withdrawn oil products and estimated duties and taxes of Php35,507,597
due thereon or the total amount of Php217,496,224.00. 59

xxxx

21.1 When UNIOIL withdrew Gasoil (Diesel) and Mogas without filing the corresponding Import Entry, the
shipment becomes unlawful per se and thus falls under unlawful importation under Section 3601 of the Tariff
and Customs Code of the Philippines, as amended;

21.2 The fact that UNIOIL and OILINK executed a belated Terminalling Agreement after the issuance of the
Warrant of Seizure and Detention showed the fraudulent intent of the respondents whereby UNIOIL can still
withdraw the oil products stored at OILINK's depot likewise in clear violation of section 3601 and 3602 of the
Tariff and Customs Code of the Philippines, as amended;

21.3 The fact that the UNIOIL make [sic] it appear that they are the owner of Gasoil (Diesel) and Mogas when
in truth and in fact they did not import said products make them liable for [violation of] Section 3602 of the Tariff
and Customs Code of the Philippines, as amended and falsification; 60

Since the foregoing allegations do not constitute the crime of unlawful importation under Section 3601 of the
TCCP, the Acting Secretary of Justice did not commit grave abuse of discretion when she affirmed the State
Prosecutor's dismissal the BOC's complaint-affidavit for lack of probable cause.
Neither could private respondents be charged with various fraudulent practices against customs revenue under
Section 3602 of the TCCP as the above allegations do not fall under any of the following acts or omissions
constituting such crime/s: (1) making or attempting to make any entry of imported or exported article: (a) by
means of any false or fraudulent invoice, declaration, affidavit, letter, paper or by any means of any false
statement, written or verbal; or (b) by any means of any false or fraudulent practice whatsoever; or (2)
knowingly effecting any entry of goods, wares or merchandise, at less than the true weight or measures thereof
or upon a false classification as to quality or value, or by the payment of less than the amount legally due; or (3)
knowingly and wilfully filing any false or fraudulent entry or claim for the payment of drawback or refund of
duties upon the exportation of merchandise; or (4) making or filing any affidavit, abstract, record, certificate or
other document, with a view to securing the payment to himself or others of any drawback, allowance or refund
of duties on the exportation of merchandise, greater than that legally due thereon.

Related to various fraudulent practices against customs revenue by means of undervaluation, misclassification
and misdeclaration in the import entry is the following provision of R.A. No. 7651 - An Act to Revitalize and
Strengthen the Bureau of Customs, Amending for the Purpose Certain Sections of the Tariff and Customs
Code of the Philippines, as amended: 61

Sec. 2503. Undervaluation, Misclassification and Misdeclaration in Entry. – When the dutiable value of the
imported articles shall be so declared and entered that the duties, based on the declaration of the  importer on
the face of the entry, would be less by ten percent (10%) than  should be legally collected, or when the imported
articles shall be sodescribed and entered that the duties based on the importer's description on the face of the
entry would be less by ten percent (10%) than should be legally collected based on the tariff classification, or
when the dutiable weight, measurement or quantity of imported articles is found upon examination to exceed by
ten percent (10%) or more than the entered weight, measurement or quantity, a surcharge shall be collected
from the importer in an amount of not less than the difference between the full duty and the estimated duty
based upon the declaration of the importer, nor more than twice of such difference: Provided, that an
undervaluation, misdeclaration in weight, measurement or quantity of more than thirty percent (30%)
between the value, weight, measurement, or quantity declared in the entry, and the actual value,
weight, quantity, or measurement shall constitute a prima facie evidence of fraud penalized under Sec.
2530 of this Code: Provided, further, that any misdeclared or undeclared imported articles/items found upon
examination shall ipso facto be forfeited in favor of the Government to be disposed of pursuant to the
provisions of this Code.

When the undervaluation, misdescription, misclassification or misdeclaration in the import entry is

intentional, the importer shall be subject to the penal provision under Sec. 3602 of this Code. 62

A careful reading of the BOC's complaint-affidavit would show that there is no allegation to the effect that
private respondents committed undervaluation, misdeclaration in weight, measurement or quantity of more than
thirty percent (30%) between the value, weight, measurement, or quantity declared in the entry, and the actual
value, weight, quantity, or measurement which constitute prima facie  evidence of fraud. Nor is there an
allegation that they intentionally committed undervaluation, misdescription, misclassification or misdeclaration
in the import entry. Since the allegations in the BOC's complaint-affidavit fall short of the acts or omissions
constituting the various fraudulent acts against customs revenue under Section 3602 of the TCCP, the Acting
Secretary of Justice correctly ruled that there was no probable cause to believe that they committed such
crime/s.

While it is true that the sole office of the writ of certiorari  is the correction of errors of jurisdiction, including the
commission of grave abuse of discretion amounting to lack of jurisdiction, and does not include a correction of
the public respondents' evaluation of the evidence and factual findings thereon, it is sometimes necessary to
delve into factual issues in order to resolve the allegations of grave abuse of discretion as a ground for the
special civil action of certiorari.  In light of this principle, the Court reviews the following findings of the Acting
63

Secretary of Justice in affirming the State Prosecutor's dismissal of the BOC's complaint-affidavit for lack of
probable cause:

Respondents are being charged for unlawful importation under Section 3601, and fraudulent practices against
customs revenues under Section 3602, of the TCCP, as amended. For these charges to prosper, complainant
must prove, first and foremost, that the subject articles were imported. On this score alone, complainant has
miserably failed.

Indeed, except for complainant's sweeping allegation, no clear and convincing proof was presented to show
that the subject petroleum products (gasoil and mogas) withdrawn by Unioil from the oil depot/terminal of Oilink
were imported. For, only when the articles are imported that the importer/consignee is required to file an import
entry declaration and pay the corresponding customs duties and taxes. The fact that complainant's record fails
to show that an import entry was filed for the subject articles does not altogether make out a case of unlawful
importation under Section 3601, or fraudulent practices against customs revenue under Section 3602, of the
TCCP, without having first determined whether the subject articles are indeed imported. Thus, in this case,
complainant still bears the burden of proof to show that the subject petroleum products are imported, by means
of documents other than the import entry declaration, such as but not limited to, the transport documents
consisting of the inward foreign manifest, bill of lading, commercial invoice and packing list, all indicating that
the goods were bought from a supplier/seller in a foreign country and imported or transported to the
Philippines. Instead[,] complainant merely surmised that since the subject products were placed under warrant
of seizure and detention[,] they must necessarily be imported. Regrettably, speculation and surmises do not
constitute evidence and should not, therefore, be taken against the respondents. x x x Taken in this light, we
find more weight and credence in respondent Unioil's claim that the subject petroleum products were not
imported by them, but were locally purchased, more so since it was able to present local sales invoices
covering the same.

Even assuming gratia argumenti that the subject petroleum products were imported, it still behooves the
complainant to present clear and convincing proof that the importation was unlawful or that it was carried out
through any fraudulent means, practice or device to prejudice the government. But again, complainant failed to
discharge this burden.

As can be culled from the records, the warrant of seizure and detention docketed as Seizure Identification No.
2008-082, which covers various gas tanks already stored at Oilink's depot/terminal located at Lucanin Pt.,
Mariveles, Bataan, was issued pursuant to Section 2536, in relation to Section 1508, of the TCCP because of
Oilink's failure to pay the administrative fine of P2,764,859,304.80 that was previously meted against the
company for its failure/refusal to submit to a post entry audit. In fact, the delivery of all shipments consigned to
or handled directly or indirectly by Oilink was put on hold as per order of the Customs Commissioner dated
April 23, 2008 pursuant to Section 1508 of the TCCP, also for the same reason. There was nothing on record
which shows, or from which it could be inferred, that the warrant of seizure and detention or hold order were
imposed pursuant to Section 2530 of the same Code which relates, among others, to unlawfully imported
articles or those imported through any fraudulent practice or device to prejudice the government, much less
due to non-payment of the corresponding customs duties and taxes due on the shipments/articles covered by
the warrant of seizure and detention. Again, what complainant's evidence clearly shows is that Oilink's failure to
pay the administrative fine precipitated the issuance of the warrant of seizure and detention and hold order. 64

After a careful review of records, the Court affirms the dismissal of the BOC's complaint-affidavit for lack of
probable cause, but partly digresses from the reasoning of the Acting Secretary of Justice in arriving at such
conclusion. While the Acting Secretary of Justice correctly stated that the act of fraudulent importation of
articles must be first proven in order to be charged for violation of Section 3601 of the TCCP, the Court
disagrees that proof of such importation is also required for various fraudulent practices against customs
revenue under Section 3602 thereof.

As held in Jardeleza v. People,  the crime of unlawful importation under Section 3601 of the TCCP is complete,
65

in the absence of a bona fide intent to make entry and pay duties when the prohibited article enters Philippine
territory. Importation, which consists of bringing an article into the country from the outside, is complete when
the taxable, dutiable commodity is brought within the limits of the port of entry.  Entry through a customs house
66

is not the essence of the act.  On the other hand, as regards Section 3602 of the TCCP which particularly
67

deals with the making or attempting to make a fraudulent entry of imported or exported articles, the term "entry"
in customs law has a triple meaning, namely: (1) the documents filed at the customs house; (2) the submission
and acceptance of the documents; and (3) the procedure of passing goods through the customs house.  In 68

view thereof, it is only for charges for unlawful importation under Section 3601 that the BOC must first prove
that the subject articles were imported. For violation of Section 3602, in contrast, what must be proved is the
act of making or attempting to make such entry of articles.
The Court likewise disagrees with the finding of the Acting Secretary of Justice that the BOC failed to prove that
the products subject of the WSD were imported. No such proof was necessary because private respondents
themselves presented in support of their counter-affidavits copies of import entries  which can be considered
69

as prima facie evidence that OILINK imported the subject petroleum products. At any rate, the Acting Secretary
of Justice aptly gave credence to their twenty (20) sales invoices  covering the dates October 1, 2007 until April
70

30, 2008 which tend to prove that UNIOIL locally purchased such products from OILINK even before the BOC
rendered the Decision dated December 14, 2007 imposing a _2,764,859,304.80 administrative fine, and
holding the delivery or release of its subsequently imported articles to answer for the fine, any revised
assessment and/or penalty for failure to keep records.

The Court also finds as misplaced the BOC's reliance on the Terminalling Agreement dated January 2, 2008
and the Certification  that UNIOIL made no importation of Gasoil (diesel) and Mogas gasoline from January
71

2007 up to June 2008 in order to prove that it illegally imported the said products. Such documentary evidence
tend to prove only that UNIOIL was engaged in the importation of petroleum products and that it did not import
the said products during the said period. Such documents, however, do not negate the evidence on record
which tend to show that OILINK was the one that filed the import entries,  and that UNIOIL locally purchased
72

from OILINK such products as indicated in the sales invoices.  Not being the importer of such products,
73

UNIOIL, its directors and officers, are not required to file their corresponding import entries. Hence, contrary to
the BOC's allegation, UNIOIL's withdrawal of the Gasoil (Diesel) and Mogas gasoline without filing the
corresponding import entries can neither be considered as unlawful importation under Section 3601 of the
TCCP nor as a fraudulent practice against customs revenue under Section 3602 thereof.

Moreover, the fact that private respondent Paul Chi Ting Co is both the Chairman of UNIOIL and OILINK is not
enough to justify the application of the doctrine of piercing the corporate veil. In fact, mere ownership by a
single stockholder or by another corporation of a substantial block of shares of a corporation does not, standing
alone, provide sufficient justification for disregarding the separate corporate personality.  In Kukan International
74

Corporation v. Hon. Judge Reyes, et al.  the Court explained the application of the said doctrine in this wise:
75

In fine, to justify the piercing of the veil of corporate fiction, it must be shown by clear and convincing proof that
the separate and distinct personality of the corporation was purposefully employed to evade a legitimate and
binding commitment and perpetuate a fraud or like wrongdoings. To be sure, the Court has, on numerous
occasions, applied the principle where a corporation is dissolved and its assets are transferred to another to
avoid a financial liability of the first corporation with the result that the second corporation should be considered
a continuation and successor of the first entity.

In those instances when the Court pierced the veil of corporate fiction of two corporations, there was a
confluence of the following factors:

1. A first corporation is dissolved;

2. The assets of the first corporation is transferred to a second corporation to avoid a financial liability
of the first corporation; and

3. Both corporations are owned and controlled by the same persons such that the second corporation
should be considered as a continuation and successor of the first corporation. 76

Granted that the principle of piercing the veil of corporate entity comes into play only during the trial of the case
for the purpose of determining liability,  it is noteworthy that even the BOC itself virtually recognized that
77

OILINK and UNIOIL are separate and distinct entities when it alleged that only the base oil products should
have been withdrawn by UNIOIL, since they were the only products subject of its request and approved by the
Customs Commissioner. As discussed above, however, private respondents were able to present sales
invoices which tend to show that UNIOIL locally purchased Gasoil (diesel) and Mogas gasoline products from
OILINK. Hence, the BOC cannot invoke the doctrine of piercing the veil of corporate entity in this case.

On a final note, the Court stresses that OILINK, its directors or officers, and Victor D. Piamonte, the Licensed
Customs Broker, may still be held liable for various fraudulent practices against customs revenue under
Section 3602 of the TCCP, if the final results of the post-entry audit and examination would show that they
committed any of the following acts or omissions: (1) making or attempting to make any entry of imported or
exported article: (a) by means of any false or fraudulent invoice, declaration, affidavit, letter, paper or by any
means of any false statement, written or verbal; or (b) by any means of any false or fraudulent practice; or (2)
intentional undervaluation, misdescription, misclassification or misdeclaration in the import entries; or (3)
undervaluation, misdeclaration in weight, measurement or quantity of more than thirty percent (30%) between
the value, weight, measurement, or quantity declared in the entries, and the actual value, weight, quantity, or
measurement. This is consistent with Section 2301  (Warrant for Detention of Property-Cash Bond) of the
78

TCCP which states that nothing therein shall be construed as relieving the owner or importer from any criminal
liability which may arise from any violation of law committed in connection with the importation of articles, which
in this case were placed under a WSD for failure of the importer, OILINK, to submit the required post-entry
audit documents under CAO No. 4-2004.

In addition, OILINK and its directors or officers may be held liable under Section 16 of R.A. No. 9135: 79

SEC. 16. A new section to be known as Section 3611 is hereby inserted in Part 3, Title VII of the Tariff and
Customs Code of the Philippines, as amended, which shall read as follows:

SEC. 3611. Failure to Pay Correct Duties and Taxes on Imported Goods. - Any person who, after being
subjected to post-entry audit and examination as provided in Section 3515 of Part 2, Title VII hereof, is
found to have incurred deficiencies in duties and taxes paid for imported goods, shall be penalized
according to three (3) degrees of culpability subject to any mitigating, aggravating or extraordinary
factors that are clearly established by the available evidence:

(a) Negligence - When the deficiency results from an offender’s failure, through an act or acts of
omission or commission, to exercise reasonable care and competence to ensure that a statement
made is correct, it shall be determined to be negligent and punishable by a fine equivalent to not less
than one-half (1/2) but not more than two (2) times the revenue loss.

(b) Gross Negligence - When a deficiency results from an act or acts of omission or commission done
with actual knowledge or wanton disregard for the relevant facts and with indifference to or disregard
for the offender’s obligation under the statute, it shall be determined to be grossly negligent and
punishable by a fine equivalent to not less than two and a half (2 ½) but not more than four (4) times
the revenue loss.

(c) Fraud - When the material false statement or act in connection with the transaction was committed
or omitted knowingly, voluntarily and intentionally, as established by clear and convincing evidence, it
shall be determined to be fraudulent and be punishable by a fine equivalent to not less than five (5)
times but not more than eight (8) times the revenue loss and imprisonment of not less than two (2)
years but not more than eight (8) years.

The decision of the Commissioner of Customs, upon proper hearing, to impose penalties as prescribed in this
Section may be appealed in accordance with Section 2402 hereof. 80

With respect to the directors or officers of OILINK, they may further be held liable jointly and severally for all
damages suffered by the government on account of such violation of Sections 3602 and 3611 of the TCCP,
upon clear and convincing proof that they willfully and knowingly voted for or assented to patently unlawful acts
of the corporation or was guilty of gross negligence or bad faith in directing its corporate affairs.
81

WHEREFORE, the petition is PARTLY GRANTED. The Court of Appeals Resolutions dated March 26, 2010
and August 4, 2010, in CA-G.R. SP No. 113069, are REVERSED and SET ASIDE. The Resolution dated
December 28, 2009 of the ·Acting Secretary of Justice Agnes VST Devanedera, which upheld the State
Prosecutor's dismissal of the complaintaffidavit filed by the Bureau of Customs for lack of probable cause,
is AFFIRMED. This is without prejudice to the filing of the appropriate criminal and administrative charges
under Sections 3602 and 3611 of the Tariff and Customs Code of the Philippines, as amended, against private
respondents OILINK, its officers and directors, and Victor D. Piamonte, if the final results of the post-entry audit
and examination would show that they violated the said provisions.

SO ORDERED.

G.R. No. 138081             March 30, 2000

THE BUREAU OF CUSTOMS (BOC) and THE ECONOMIC INTELLIGENCE AND INVESTIGATION
BUREAU (EIIB), petitioners, 
vs.
NELSON OGARIO and MARK MONTELIBANO, respondents.

MENDOZA, J.:

The question for decision in this case is whether the Regional Trial Court has jurisdiction to enjoin forfeiture
proceedings in the Bureau of Customs. In accordance with what is now settled law, we hold it does not.

The facts are as follows: On December 9, 1998, Felipe A. Bartolome, District Collector of Customs of Cebu,
issued a Warrant of Seizure and Detention of 25,000 bags of rice, bearing the name of SNOWMAN, Milled in
1 

Palawan" shipped on board the M/V "Alberto", which was then docketed at Pier 6 in Cebu City. The warrant
was issued on the basis of the report of the Economic Intelligence and Investigation Bureau (EIIB), Region VII
that the rice had been illegally imported. The report stated that the rice was landed in Palawan by a foreign
vessel and then placed in sacks marked "SNOWMAN," Milled in Palawan." It was then shipped to Cebu City on
board the vessel M/V "Alberto." Forfeiture proceedings were started in the customs office in Cebu, docketed as
Cebu Seizure Identification Case No. 17-98.

On December 10, 1998, respondent Mark Montelibano, the consignee of the sacks of rice, and his buyer,
respondent Elson Ogario, filed a complaint for injunction (Civil Case No. CEB-23077) in the Regional Trial
Court of Cebu City, alleging:

4.) That upon arrival of the herein-mentioned sacks of rice at the PIER 5 of Cebu City, Philippines on
the 7th day of December 1998 all of the defendants rushed to the port with long arms commanding the
plaintiff's laborer[s] to stopped [sic] the unloading of the same from the vessel named M/V Alberto. The
defendants alleged that the herein-mentioned rice were [sic] smuggled from abroad without even proof
that the same were [sic] purchased from a particularly country.

5.) By the mere suspicion of the defendants that the goods were smuggled from abroad, they
immediately put on hold the release of the goods from the ship and at the same time they jointly barred
unloading and loading activities of the plaintiffs' laborers of the herein-mentioned rice.

6.) The plaintiffs then presented all the pertinent and necessary documents to all of the defendants but
the latter refused to believe that the same is from Palawan because their minds are closed due to
some reason or another Civil [while] the plaintiffs believed that the same is merely an act of
harassment. The documents are as follows:

A.) Certification from the National Food Authority that the same is from Palawan. This is
hereto attached Annex A.

B) Bill of Lading issued by ANMA PHILIPPINES Shipping Company. This is hereto attached
as Annex B.

7.) The acts of the defendants in stopping he loading and unloading activities of the plaintiff's laborers
[have] no basis in law and in fact; thus, unlawful and illegal. A mere suspicious which is not coupled
with any proof or evidence to that effect is [a] matter which the law prohibits.
 8.) That for more than three days and despite the repeated plea of the plaintiffs that their goods should
be released to them and the defendants should stop from barring the unloading and loading activities,
the latter blindly refused [to] heed the same.

9.) That the acts of all of the defendants which are greatly unlawful and erroneous would caused [sic]
irreparable damage, injury, and grave injustices to the plaintiffs.

10.) That by way of example or correction for the public good and to deter the defendants from doing
the same acts to other businessmen, defendants should be held liable for exemplary damages in
amount of not less than One Hundred Thousand Pesos (P100,000.00).

11.) That the plaintiffs are entitled to the relief prayed in this complaint and the whole or part of such
reliefs consists in restraining perpetually the defendants from holding the herein-mentioned twenty-five
thousand sacks of rice. That defendants should be restrained perpetually from barring the unloading
and loading activities of the plaintiffs' laborers.

12.) That allowing the defendants to continue their unlawful acts would work grave injustice to
the  plaintiffs. Unless a preliminary injunction be granted ex-parte, grave and irreparable injury and
damage would result to the plaintiffs before the latter can be heard on notice.

13.) That if the defendants be not restrained perpetually from their unlawful acts, the herein-mentioned
rice will deteriorate and turn into dusts [sic] if not properly disposed.
1âwphi1.nêt

14.) That a Warrant of Seizure and detention issued by the Collector of Custom[s] dated December 9,
1998 be quashed because the defendants' act of seizing and detaining the herein-mentioned sacks of
rice are illegal. The continuing act of detaining the herein-mentioned sacks of rice will led to the
deterioration of the same. That no public auction sale of the same should be conducted by the Bureau
of Custom[s] or any government agenc[y].

15.) That plaintiffs are ready and willing to file a bond executed to the defendants in an amount to be
fixed by this Honorable Court to the effect that plaintiffs will pay to the defendants all damages which
they may sustain by reason of the injunction if this Honorable Court should finally decide that the
plaintiffs are not entitled thereto.

PRAYER

WHEREFORE, Premised on the foregoing, it is most respectfully prayed before this Honorable Court that a
restraining order or temporary injunction be immediately issued prohibiting the defendants from holding
plaintiffs' above-mentioned goods. That it is further prayed that a restraining order or temporary injunction be
issued prohibiting the defendants from barring the unloading and loading activities of the plaintiffs'
laborers. Further, the plaintiffs prayed that the warrant of seizure and detention issued by the Collector of
Custom[s] dated December 9, 1998 be quashed and no public auction sale of the same should be conducted
by any government agency or authority.

It is further prayed that after due hearing, judgment be rendered:

1.) Making the restraining order and/or preliminary injunction permanent.

2.) Ordering the defendants jointly to pay exemplary or corrective damages to the plaintiff[s] in the
amount of One Hundred Thousand Pesos (P100,000.00)

Such other relief which are just and demandable under the circumstances are also prayed for. 2
In separate motions, petitioners Bureau of Customs (BOC), Port of Cebu and the EIIB, as well as the Philippine
3 

Navy and Coast Guard, sought the dismissal of the complaint on the ground that the RTC had no jurisdiction,
but their motions were denied. In its resolution, dated January 11, 1999, the RTC said:

The Warrant of Seizure and Detention issued by the Bureau of Customs cannot divest this court of
jurisdiction since its issuance is without legal basis as it was anchored merely on suspicion that the
items in question were imported or smuggled. It is very clear that the defendants are bereft of any
evidence to prove that the goods were indeed imported or smuggled, that is why the plaintiffs have
very vigorously protested against the seizure of cargoes by the defendants. In fact, as revealed by
defendants' counsel, the Warrant of Seizure and Detention was issued merely to shift the burden of
proof to the shippers or owners of the goods to prove that the bags of rice were not imported or
smuggled. However, the court feels this is unfair because the settled rule is that he who alleges must
prove the same. Besides, at this time when our economy is not good, it would be a [dis]service to the
nation to use the strong arm of the law to make things hard or difficult for the businessmen. 4

The 25,000 bags of rice were ordered returned to respondents upon the posting by them of an P8,000,000.00
bond.

Petitioners BOC and EIIB moved for a reconsideration, but their motion was denied by the RTC in its order
dated January 25, 1999. In the same order, the RTC also increased the amount of respondents' bond to
5 

P22,500,000.00. On certiorari to the Court of Appeals, the resolution and order of the RTC were sustained. 6

Accordingly, on April 26, 1999, upon motion of respondents, the RTC ordered the sheriff to place in
respondents' possession the 25,000 bags of rice.

Meanwhile, in the forfeiture proceedings before the Collector of Customs of Cebu (Cebu Seizure Identification
Case No. 17-98), a decision was rendered, the dispositive portion of which reads:

WHEREFORE, by virtue of the authority vested in me by law, it is hereby ordered and decreed that the
vessel M/V "Alberto"; the 25,000 bags of rice brand "Snowman"; and the two (2) trucks bearing Plate
Nos. GCC 844 and GHZ 388 are all FORFEITED in favor of the government to be disposed of in the
manner prescribed by law while the seven (7) trucks bearing Plate Nos. GFX 557; GFX 247; TPV 726;
GBY 874; GVE 989; and GDF 548 are RELEASED in favor of their respective owners upon proper
identification and compliance with pertinent laws, rules and regulations.

Since this decision involves the release of some of the articles subject matter of herein case which is
considered adverse to the government, the same is hereby elevated to the Commissioner of Customs
for automatic review pursuant to Republic Act 7651.  7

The District Collector of Customs found "strong reliable, and convincing evidence" that the 25,000 bags of rice
were smuggled. Said evidence consisted of certifications by the Philippine Coast Guard, the Philippine Ports
Authority, and the Arrastre Stevedoring Office in Palawan that M/V "Alberto" had never docked in Palawan
since November, 1998; a certification by Officer-in-Charge Elenita Ganelo of the National Food Authority (NFA)
Palawan that her signature in NFA Grains Permit Control No. 00986, attesting that the 25,000 bags of rice
originated from Palawan, was forged; and the result of the laboratory analysis of a sample of the subject rice by
the International Rice Research Institute (IRRI) stating that the sample "does not compare with any of our IRRI
released varieties."

Respondent Montelibano did not take part in the proceedings before the District Collector of Customs despite
due notice sent to his counsel because he refused to recognize the validity of the forfeiture proceedings. 8

On April 30, 1999, petitioners filed the present petition for review on certiorari of the decision of the Court of
Appeals, dated April 15, 1999, upholding the resolution of the RTC denying petitioners' motions to dismiss.
They contend that:
 I. SINCE THE REGIONAL TRIAL COURT OF CEBU CITY DOES NOT HAVE JURISDICTION OVER
THE SUBJECT MATTER OF THE INSTANT CONTROVERSY, AND THE BUREAU OF CUSTOMS
HAD ALREADY EXERCISED EXCLUSIVE ORIGINAL JURISDICTION OVER THE SAME, THE
COURT OF APPEALS SERIOUSLY ERRED IN SUSTAINING THE EXERCISE BY THE TRIAL
JUDGE OF JURISDICTION OVER THE CASE BELOW AND IN AFFIRMING THE TRIAL JUDGE'S
RESOLUTION DATED JANUARY 11, 1999 AND ORDER DATED JANUARY 25, 1999 IN CIVIL CASE
NO. CEB-23077.

II. SINCE RESPONDENTS HAVE NOT EXHAUSTED ALL THE ADMINISTRATIVE REMEDIES
PROVIDED FOR BY LAW, THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE
TRIAL JUDGE'S DENIALS OF PETITIONERS' SEPARATE MOTIONS TO DISMISS AND MOTIONS
FOR RECONSIDERATION. 9

In Jao v. Court of Appeals,  this Court, reiterating its ruling in a long line of cases, said:
10 

There is no question that Regional Trial Courts are devoid of any competence to pass upon the validity
or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin
or otherwise interfere with these proceedings. The Collector of Customs sitting in seizure and forfeiture
proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and
forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over
such matters even through petitions of certiorari, prohibition or mandamus.

It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act
No. 1125, as amended, otherwise known as "An Act Creating the Court of Tax Appeals," specify the
proper fora and procedure for the ventilation of any legal objections or issues raised concerning these
proceedings. Thus, actions of the Collector of Customs are appealable to the Commissioner of
Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax
Appeals and from there to the Court of Appeals.

The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon
the policy of placing no unnecessary hindrance on the government's drive, not only to prevent
smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the
collection of import and export duties due the State, which enables the government to carry out the
functions it has been instituted to perform.

Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have said
that such act does not deprive the Bureau of Customs of jurisdiction thereon.

Respondents cite the statement of the Court of Appeals that regular courts still retain jurisdiction "where, as in
this case, for lack of probable cause, there is serious doubt as to the propriety of placing the articles under
Customs jurisdiction through seizure/forfeiture proceedings"  They overlook the fact, however, that under the
11 

law, the question of whether probable cause exists for the seizure of the subject sacks of rice is not for the
Regional Trial Court to determine. The customs authorities do not have to prove to the satisfaction of the court
that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they
may exercise the power to effect customs' searches, seizures, or arrests provided by law and continue with the
administrative hearings.  As the Court held in Ponce Enrile v. Vinuya: 
12  13

The governmental agency concerned, the Bureau of Customs, is vested with exclusive
authority.  Even if it be assumed that in the exercise of such exclusive competence a taint of illegality
1âwphi1

may be correctly imputed, the most that can be said is that under certain circumstances the grave
abuse of discretion conferred may oust it of such jurisdiction. It does not mean however that
correspondingly a court of first instance is vested with competence when clearly in the light of the
above decisions the law has not seen fit to do so. The proceeding before the Collector of Customs is
not final. An appeal lies to the Commissioner of Customs and thereafter to the Court of Tax Appeals. It
may even reach this Court through the appropriate petition for review. The proper ventilation of the
legal issues raised is thus indicated. Certainly a court of first instance is not therein included. It is
devoid of jurisdiction.
It is noteworthy that because of the indiscriminate issuance of writs of injunction, the Supreme Court issued on
June 25, 1999 Administrative Circular No. 07-99 to all judges of lower courts entitled EXERCISE OF UTMOST
CAUTION, PRUDENCE, AND JUDICIOUSNESS IN ISSUANCE OF TEMPORARY RESTRAINING ORDERS
AND WRITS OF PRELIMINARY INJUNCTION. The circular states in part:

Finally, judges should never forget what the Court categorically declared in Mison v. Natividad (213
SCRA 734, 742 [1992]) that "[b]y express provision of law, amply supported by well-settled
jurisprudence, the Collector of Customs has exclusive jurisdiction over seizure and forfeiture
proceedings, and regular courts cannot interfere with his exercise thereof or stifle or put it to naught.

The Office of the Court Administrator shall see to it that this circular is immediately disseminated and
shall monitor implementation thereof. 1âwphi1.nêt

STRICT OBSERVANCE AND COMPLIANCE of this Circular is hereby enjoined.

WHEREFORE, the temporary restraining order issued on May 17, 1999 is hereby made permanent. The
decision, dated April 15, 1999, of the Court of Appeals is REVERSED and Civil Case No. CEB-23077 in the
Regional Trial Court, Branch 5, Cebu City is DISMISSED.

SO ORDERED.

G.R. No. 119172 March 25, 1999

BELEN C. FIGUERRES, petitioner, 
vs.
COURT OF APPEALS, CITY OF ASSESSORS OF MANDALUYONG CITY TREASURER OF
MANDALUYONG, and SANGGUNIANG BAYAN OF MANDALUYONG, respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals, dated February 8, 1995,
dismissing a prohibition suit brought by petitioner against the respondent officials of the Municipality, now City,
of Mandaluyong to prevent them from enforcing certain ordinances revising the schedule of fair market values
of the various classes of real property in that municipality and the assessment levels applicable thereto.

Petitioner Belen C. Figuerres is the owner of a parcel of land, covered by Transfer Certificate of Title No.
413305, and located at Amarillo Street, Barangay Mauway, City of Mandaluyong. In 1993, she received a
notice of assessment, dated October 20, 1993, from the municipal assessor of the then Municipality of
Mandaluyong, containing the following specifics:

TYPE AREA BASE VALUE MARKET ASSESSMENTS ASSESSED

PER SQ.M VALUE LEVEL VALUE

Residential 530sq.m. P2,500.00 P1,325,000.00 20 P265,006·.00  1

The assessment, effective in the year 1994, was based on Ordinance Nos. 119 and 125, series of 1993, and
Ordinance No. 135, series of 1994, of the Sangguniang Bayan of Mandaluyong. Ordinance No. 119, series of
1993, which was promulgated on April 22, 1993, contains a schedule of fair market values of the different
classes of real property in the municipality.   Ordinance No. 125, series of 1993, which was promulgated on
2

November 11, 1993, on the other hand, fixes the assessment levels applicable to such classes of real
property.   Finally, Ordinance No. 135, series of 1994, which was promulgated on February 24, 1994, amended
3
Ordinance No. 119, §6 by providing that only one third (1/3) of the increase in the market values applicable to
residential lands pursuant to the said ordinance shall be implemented in the years 1994, 1995, and 1996.  4

Petitioner brought a prohibition suit in the Court of Appeals against the Assessor, the Treasurer, and the
Sangguniang Bayan to stop them from enforcing the ordinances in question on the ground that the ordinances
were invalid for having been adopted allegedly without public hearings and prior publication or posting and
without complying with the implementing rules yet to be issued by the Department of Finance. 5

In its decision, dated February 8, 1995,   the Court of Appeals threw out the petition. The appellate court said in
6

part:

Petitioner's claim that Ordinance Nos. 119, 125 and 135 are null and void since they were
prepared without the approval and determination of the Department of Finance is without
merit.

The approval and determination by the Department of Finance is not needed under the Local
Government Code of 1991, since it is now the city council of Mandaluyong that is empowered
to determine and approve the aforecited ordinances. Furthermore, contrary to the claim of
petitioner that the Department of Finance "has not promulgated the necessary rules and
regulations for the classification, appraisal and assessment of real property as prescribed by
the 1991 Local Government Code," Department of Finance Local Assessment Regulation No.
1-92 dated October 6, 1992, which is addressed to provincial, city, and municipal assessors
and others concerned with the proper implementation of Section 219 of R.A. No. 7160,
provides for the rules relative to the conduct of general revisions of real property assessment
pursuant to Sections 201 and 219 of the Local Government Code of 1991.

Regarding petitioner's claim that there is need for municipal ordinances to be published in the
Official Gazette for their effectivity, the same is also without merit.

Sec. 511 of R.A. No. 7160 provides that —

x x x           x x x          x x x

The secretary to the Sanggunian concerned shall transmit official copies of

such ordinances to the chief executive officer of the Official Gazette within
seven (7) days following the approval of the said ordinances for publication
purposes. The Official Gazette may publish ordinances with penal sanctions
for archival and reference purposes.

Thus, the posting and publication in the Official Gazette of ordinances with penal sanctions is
not a prerequisite for their effectivity. This finds support in the case of Tañada v. Tuvera (146
SCRA 446), wherein the Supreme Court declared that municipal ordinances are covered by
the Local Government Code.

Moreover, petitioner failed to exhaust the administrative remedies available to him as provided
for under Section 187 of R.A. No. 7160, before filing the instant petition with this Court.

xxx xxx xxx

In fact, aside from filing an appeal to the Secretary of Justice as provided under Section 187
of R.A. No. 7160, the petitioner . . . could have appealed to the Local Board of Assessment
Appeals, the decision of which is in turn appealable to the Central Board of Assessment
Appeals as provided under Sections 226 and 230 of the said law. According to current
jurisprudence, administrative remedies must be exhausted before seeking judicial
intervention. (Gonzales v. Secretary of Education, 5 SCRA 657). If a litigant goes to court
without first pursuing the available administrative remedies, his action is considered
 premature and not yet ripe for judicial determination (Allied Brokerage Corporation v.
Commissioner of Customs, 40 SCRA 555).

As the petitioner has not pursued the administrative remedies available to him, his petition for
prohibition cannot prosper (Gonzales v. Provincial Auditor of Iloilo, 12 SCRA 711).

WHEREFORE, the petition is hereby DENIED due course and is hereby DISMISSED. 7

Petitioner Figuerres assails the above decision. She contends that —

1. THE HONORABLE COURT OF APPEALS PATENTLY ERRED IN

FINDING LACK OF EXHAUSTION OF ADMINISTRATIVE REMEDIES ON
THE PART OF HEREIN PETITIONER WHEN UNDER THE
CIRCUMSTANCES EXHAUSTION OF ADMINISTRATIVE REMEDIES IS
NOT REQUIRED BY LAW AND WOULD HAVE BEEN A USELESS
FORMALITY.

2. THE HONORABLE COURT OF APPEALS ERRED WHEN IT STATED

THAT THE CITY COUNCIL OF MANDALUYONG IS EMPOWERED TO
DETERMINE AND APPROVE THE AFORECITED ORDINANCES
WITHOUT TAKING INTO ACCOUNT THE MANDATORY PUBLIC
HEARINGS REQUIRED BY R.A. No. 7160.

3. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS

PATENTLY ERRED IN STATING THAT THERE IS NO NEED FOR
PUBLICATION OF TAX ORDINANCES.

4. THERE IS NON COMPLIANCE BY PUBLIC RESPONDENTS OF

ASSESSMENT REGULATION No. 1-92 DATED OCTOBER 6, 1992, EVEN
IF THE HONORABLE COURT OF APPEALS MENTIONED THE
EXISTENCE OF THE SAID ASSESSMENT REGULATIONS.  8

On the other hand, the Municipality of Mandaluyong contends:

(1) the present case does not fall within any of the exceptions to the doctrine of exhaustion of administrative
remedies;

(2) apart from her bare allegations, petitioner Figuerres has not presented any evidence to show that no public
hearings were conducted prior to the enactment of the ordinances in question;

(3) although an ordinance concerning the imposition of real property taxes is not required to be published in the
Official Gazette in order to be valid, still the subject ordinances were disseminated before their effectivity in
accordance with the relevant provisions of R.A. No. 7160; and

(4) the Municipality of Mandaluyong complied with the regulations of the Department of Finance in enacting the
ordinances.

Exhaustion of administrative remedies

In Lopez v. City of Manila,   we recently held:

9

. . . Therefore, where a remedy is available within the administrative machinery, this should be
resorted to before resort can be made to the courts, not only to give the administrative agency
the opportunity to decide the matter by itself correctly, but also to prevent unnecessary and
premature resort to courts. . . .
 With regard to questions on the legality of a tax ordinance, the remedies available to the
taxpayer are provided under Sections 187, 226, and 252 of R.A. 7160.

Sec. 187 of R.A. 7160 provides, that the taxpayer may question the constitutionality or legality
of a tax ordinance on appeal within thirty (30) days from effectivity thereof, to the Secretary of
Justice. The petitioner after finding that his assessment is unjust, confiscatory, or excessive,
may bring the case before the Secretary of Justice for questions of legality or constitutionality
of the city ordinance.

Under Section 226 of R.A. 7160, an owner of real property who is not satisfied with the
assessment of his property may, within sixty (60) days from notice of assessment, appeal to
the Board of Assessment Appeals.

Should the taxpayer question the excessiveness of the amount of tax, he must first pay the
amount due, in accordance with Section 252 of R.A. No. 7160. Then, he must request the
annotation of the phrase "paid under protest" and accordingly appeal to the Board of
Assessment Appeals by filing a petition under oath together with copies of the tax declarations
and affidavits or documents to support his appeal.

Although cases raising purely legal questions are excepted from the rule requiring exhaustion of administrative
remedies before a party may resort to the courts, in the case at bar, the legal questions raised by petitioner
require, as will presently be shown, proof of facts for their resolution. Therefore, the petitioner's action in the
Court of Appeals was premature, and the appellate court correctly dismissed her action on the ground that she
failed to exhaust available administrative remedies as above stated.

Petitioner argues that resort to the Secretary of Justice is not mandatory but only directory because R.A. No.
7160, §187 provides that "any question on the constitutionality or legality of tax ordinances or revenue
measures" may be appealed to the Secretary of Justice. Precisely, the Secretary of Justice can take
cognizance of a case involving the constitutionality or legality of tax ordinances where, as in this case, there are
factual issues involved.

There need be no fear that compliance with the rule on exhaustion of administrative remedies will unduly delay
resort to the courts to the detriment of taxpayers. Although R.A. No. 7160, §187 provides that an appeal to the
Secretary of Justice "shall not have the effect of suspending the effectivity of the ordinance and the accrual and
payment of the tax, fee, or charge levied therein," it likewise requires the Secretary of Justice to "render a
decision within sixty (60) days from the date of receipt of the appeal," after which "the aggrieved party may file
appropriate proceedings with a court of competent jurisdiction."

Public hearings on tax ordinance.

Petitioner is right in contending that public hearings are required to be conducted prior to the enactment of an
ordinance imposing real property taxes. R.A. No. 7160, §186 provides that an ordinance levying taxes, fees, or
charges "shall not be enacted without any prior public hearing conducted for the purpose."

However, it is noteworthy that apart from her bare assertions, petitioner Figuerres has not presented any
evidence to show that no public hearings were conducted prior to the enactment of the ordinances in question.
On the other hand, the Municipality of Mandaluyong claims that public hearings were indeed conducted before
the subject ordinances were adopted,   although it likewise failed to submit any evidence to establish this
10

allegation. However, in accordance with the presumption of validity in favor of an ordinance, their
constitutionality or legality should be upheld in the absence of evidence showing that the procedure prescribed
by law was not observed in their enactment. In an analogous case, United States v. Cristobal,   it was alleged
11

that the ordinance making it a crime for anyone to obstruct waterways had not been submitted by the provincial
board as required by §§2232-2233 of the Administrative Code. In rejecting this contention, the Court held:

From the judgment of the Court of First Instance the defendant appealed to this court upon
the theory that the ordinance in question was adopted without authority on the part of the
 municipality and was therefore unconstitutional. The appellant argues that there was no proof
adduced during the trial of the cause showing that said ordinance had been approved by the
provincial board. Considering the provisions of law that it is the duty of the provincial board to
approve or disapprove ordinances adopted by the municipal councils of the different
municipalities, we will assume, in the absence of proof to the contrary, that the law has been
complied with. We have a right to assume that officials have done that which the law requires
them to do, in the absence of positive proof to the contrary.  12

Furthermore, the lack of a public hearing is a negative allegation essential to petitioner's cause of action in the
present case. Hence, as petitioner is the party asserting it, she has the burden of proof.   Since petitioner failed
13

to rebut the presumption of validity in favor of the subject ordinances and to discharge the burden of proving
that no public hearings were conducted prior to the enactment thereof, we are constrained to uphold their
constitutionality or legality.

Publication and posting of schedule of fair market values

Petitioner is also right that publication or posting of the proposed schedule of fair market values of the
difference classes of real property in a local government unit is required pursuant to R.A. No. 7160, §212 which
in part states:

. . . The schedule of fair market values shall be published in a newspaper of general

circulation in the province, city, or municipality concerned, or in the absence thereof, shall be
posted in the provincial capitol, city or municipal hall and in two other conspicuous public
places therein.

In Ty v. Trampe,   it was held that, if the local government unit is part of Metro Manila, the abovequoted portion
14

of §212 must be understood to refer to the schedule of fair market values of the different classes of real
property in the district to which the city or municipality belongs, as prepared jointly by the local assessors
concerned.

In addition, an ordinance imposing real property taxes (such as Ordinance Nos. 119 and 135) must be posted
or published as required by R.A. No. 7160, §188 which provides:

Sec. 188. Publication of Tax Ordinances and Revenue Measures. — Within ten (10) days
after their approval, certified true copies of all provincial, city, and municipal tax ordinances or
revenue measures shall be published in full for three (3) consecutive days in a newspaper of
local circulation: Provided, however, That in provinces, cities and municipalities where there
no newspapers of local circulation, the same may be posted in at least two (2) conspicuous
and publicly accessible places.

Hence, after the proposed schedule of fair market values of the different classes of real property in a local
government unit within Metro Manila, as prepared jointly by the local assessors of the district to which the city
or municipality belongs, has been published or posted in accordance with §212 of R.A. No. 7160 and enacted
into ordinances by the sanggunians of the municipalities and cities concerned, the ordinances containing the
schedule of fair market values must themselves be published or posted in the manner provided by §188 of R.A.
No. 7160.

With respect to ordinances which fix the assessment levels (such as Ordinance No. 125), being in the nature of
a tax ordinance, §188 likewise applies. Moreover, as, Ordinance No. 125, §7 provides for a penal sanction for
violations thereof by means of a fine of not less than P1,000.00 nor more than P5,000.00, or imprisonment of
not less than one (1) month nor more than six (6) months, or both, in the discretion of the court, not only §188
but §511(a) also must be observed:

Ordinances with penal sanctions shall be posted at prominent places in the provincial capitol,
city, municipal or barangay hall, as the case may be, for a minimum period of three (3)
consecutive weeks. Such ordinances shall also be published in a newspaper of general
 circulation, where available, within the territorial jurisdiction of the local government unit
concerned, except in the case of barangay ordinances. Unless otherwise provided therein,
said ordinances shall take effect on the day following its publication, or at the end of the
period of posting, whichever occurs later.

In view of §§188 and 511(a) of R.A. No. 7160, an ordinance fixing the assessment levels applicable to the
different classes of real property in a local government unit and imposing penal sanctions for violations thereof
(such as Ordinance No. 125) should be published in full for three (3) consecutive days in a newspaper of local
circulation, where available, within ten (10) days of its approval, and posted in at least two (2) prominent places
in the provincial capitol, city, municipal, or barangay hall for a minimum of three (3) consecutive weeks.

Apart from her allegations, petitioner has not presented any evidence to show that the subject ordinances were
nor disseminated in accordance with these provisions of R.A. No. 7160. On the other hand, the Municipality of
Mandaluyong presented a certificate, dated November 12, 1993, of Williard S. Wong, Sanggunian Secretary of
the Municipality of Mandaluyong that "Ordinance No. 125, S-1993 . . . has been posted in accordance with
§59(b) of R.A. No. 7160, otherwise known as the Local Government Code of 1991."   Thus, considering the
15

presumption of validity in favor of the ordinances and the failure of petitioner to rebut such presumption, we are
constrained to dismiss the petition in this case.

Compliance with regulations issued by the

Department of Finance

Also without merit is the contention of petitioner that Ordinance No, 119 and Ordinance No. 135 are void for not
having been enacted in accordance with Local Assessment Regulation No. 1-92, dated October 6, 1992, of the
Department of Finance, which provides guidelines for the preparation of proposed schedules of fair market
values of the different classes of real property in a local government unit, such as time tables for obtaining
information from owners of affected lands and buildings regarding the value thereof. As in the case of the
procedural requirements for the enactment of tax ordinances and revenue measures, however, petitioner has
not shown that the ordinances in this case were enacted in accordance with the applicable regulations of the
Department of Finance. The Municipality of Mandaluyong claims that, although the regulations are merely
directory, it has complied with them.   Hence, in the absence of proof that the ordinances were not enacted in
16

accordance with such regulations, said ordinances presumed to have been enacted in accordance with such
regulations.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

G.R. No. 184203               November 26, 2014

CITY OF LAPU-LAPU, Petitioner, 
vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.

x-----------------------x

G.R. No. 187583

PROVINCE OF BATAAN, represented by GOVERNOR ENRIQUE T. GARCIA, JR., and EMERLINDA S.

TALENTO, in her capacity as Provincial Treasurer of Bataan, Petitioners, 
vs.
PHILIPPINE ECONOMIC ZONE AUTHORITY, Respondent.

DECISION
LEONEN, J.:

The Philippine Economic Zone Authority is exempt from payment of real property taxes.

These are consolidated  petitions for review on certiorari the City of Lapu-Lapu and the Province of Bataan
1

separately filed against the Philippine Economic Zone Authority (PEZA).

In G.R. No. 184203, the City of Lapu-Lapu (the City) assails the Court of Appeals’ decision  dated January 11,
2

2008 and resolution  dated August 6, 2008, dismissing the City’s appeal for being the wrong mode of appeal.
3

The City appealed the Regional Trial Court,Branch 111, Pasay City’s decision finding the PEZA exempt from
payment of real property taxes.

In G.R. No. 187583, the Province of Bataan (the Province) assails the Court of Appeals’ decision  dated August
4

27, 2008 and resolution  dated April 16, 2009, granting the PEZA’s petition for certiorari. The Court of Appeals
5

ruled that the Regional Trial Court, Branch 115, Pasay City gravely abused its discretion in finding the PEZA
liable for real property taxes to the Province of Bataan.

Facts common to the consolidated petitions

In the exercise of his legislative powers,  President Ferdinand E. Marcos issued Presidential Decree No. 66 in
6

1972, declaring as government policy the establishment of export processing zones in strategic locations in the
Philippines. Presidential Decree No. 66 aimed "to encourage and promote foreign commerce as a means of
making the Philippines a center of international trade, of strengthening our export trade and foreign exchange
position, of hastening industrialization,of reducing domestic unemployment, and of accelerating the
development of the country." 7

To carry out this policy, the Export Processing Zone Authority (EPZA) was created to operate, administer, and
manage the export processing zones established in the Port of Mariveles, Bataan  and such other export
8

processing zones that may be created by virtue of the decree. 9

The decree declared the EPZA non-profit in character  with all its revenues devoted to its development,
10

improvement, and maintenance.  To maintain this non-profit character, the EPZA was declared exempt from all
11

taxes that may be due to the Republic of the Philippines, its provinces, cities, municipalities, and other
government agencies and instrumentalities.  Specifically, Section 21 of Presidential Decree No. 66 declared
12

the EPZA exempt from payment of real property taxes:

Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall be non-profit and
shall devote and use all its returns from its capital investment, as well as excess revenues from its operations,
for the development, improvement and maintenance and other related expenditures of the Authority to pay its
indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in
Section 1 of this Decree. In consonance therewith, the Authority is hereby declared exempt:

....

(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses to be paid to
the National Government, its provinces, cities, municipalities and other government agenciesand
instrumentalities[.]

In 1979, President Marcos issued Proclamation No. 1811, establishing the Mactan Export Processing Zone.
Certain parcels of land of the public domain located in the City of Lapu-Lapuin Mactan, Cebu were reserved to
serve as site of the Mactan Export Processing Zone.

In 1995, the PEZA was created by virtue of Republic Act No. 7916 or "the Special Economic Zone Act of
1995"  to operate, administer, manage, and develop economic zones in the country.  The PEZA was granted
13 14

the power to register, regulate, and supervise the enterprises located in the economic zones.  By virtue of the
15
law, the export processing zone in Mariveles, Bataan became the Bataan Economic Zone  and the Mactan
16

Export Processing Zone the Mactan Economic Zone. 17

As for the EPZA, the law required it to "evolve into the PEZA in accordance with the guidelines and regulations
set forth in an executive order issued for [the] purpose." 18

On October 30, 1995, President Fidel V. Ramos issued Executive Order No. 282, directing the PEZA to
assume and exercise all of the EPZA’s powers, functions, and responsibilities "as provided in Presidential
Decree No. 66, as amended, insofar as they are not inconsistent with the powers, functions, and
responsibilities of the PEZA, as mandated under [the Special Economic Zone Act of 1995]."  All of EPZA’s
19

properties, equipment, and assets, among others, were ordered transferred to the PEZA. 20

Facts of G.R. No. 184203

In the letter  dated March 25, 1998, the City of Lapu-Lapu, through the Office of the Treasurer, demanded from
21

the PEZA 32,912,350.08 in real property taxes for the period from 1992 to 1998 on the PEZA’s properties
located in the Mactan Economic Zone.

The City reiterated its demand in the letter  dated May 21, 1998. It cited Sections 193 and 234 of the Local
22

Government Code of 1991 that withdrew the real property tax exemptions previously granted to or presently
enjoyed by all persons. The City pointed out that no provision in the Special Economic Zone Act of 1995
specifically exempted the PEZA from payment of real property taxes, unlike Section 21 of Presidential Decree
No. 66 that explicitly provided for EPZA’s exemption. Since no legal provision explicitly exempted the PEZA
from payment of real property taxes, the City argued that it can tax the PEZA.

The City made subsequent demands  on the PEZA. In its last reminder  dated May 13, 2002, the City
23 24

assessed the PEZA 86,843,503.48 as real property taxes for the period from 1992 to 2002.

On September 11, 2002, the PEZAfiled a petition for declaratory Relief  with the Regional Trial Court of Pasay
25

City, praying that the trial court declare it exempt from payment ofreal property taxes. The case was raffled to
Branch 111.

The City answered  the petition, maintaining that the PEZA is liable for real property taxes. To support its
26

argument, the City cited a legal opinion dated September 6, 1999 issued by the Department of Justice,  which
27

stated that the PEZA is not exempt from payment of real property taxes. The Department of Justice based its
opinion on Sections 193 and 234 of the Local Government Code that withdrew the tax exemptions, including
real property tax exemptions, previously granted to all persons.

A reply  was filed by the PEZA to which the City filed a rejoinder.
28 29

Pursuant to Rule 63, Section 3 of Rules of Court,  the Office of the Solicitor General filed a comment  on the
30 31

PEZA’s petition for declaratory relief. It agreed that the PEZA is exempt from payment of real property taxes,
citing Sections 24 and 51 of the Special Economic Zone Act of 1995.

The trial court agreed with the Solicitor General. Section 24 of the Special Economic Zone Act of 1995
provides:

SEC. 24. Exemption from National and Local Taxes. – Except for real property taxes on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating within the
ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises within the
ECOZONE shall be paid and remitted as follows:

a. Three percent (3%) to the National Government;

 b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurer’s
office of the municipality or city where the enterprise is located.

Section 51 of the law, on the other hand, provides:

SEC. 51. Ipso-Facto Clause. – All privileges, benefits, advantages or exemptions granted to special economic
zones under Republic Act No. 7227, shall ipso-facto be accorded to special economic zones already created or
to be created under this Act. The free port status shall not be vested upon new special economic zones.

Based on Section 51, the trial court held that all privileges, benefits, advantages, or exemptions granted
tospecial economic zones created under the Bases Conversion and Development Act of 1992 apply to special
economic zones created under the Special Economic ZoneAct of 1995.

Since these benefits include exemption from payment of national or local taxes, these benefits apply to special
economic zones owned by the PEZA.

According to the trial court, the PEZA remained tax-exempt regardless of Section 24 of the Special Economic
Zone Act of 1995. It ruled that Section 24, which taxes real property owned by developers of economic zones,
only applies to private developers of economic zones, not to public developers like the PEZA. The PEZA,
therefore, is not liable for real property taxes on the land it owns.

Characterizing the PEZA as an agency of the National Government, the trial court ruled that the City had no
authority to tax the PEZA under Sections 133(o) and 234(a) of the Local Government Code of 1991.

In the resolution  dated June 14, 2006, the trial court granted the PEZA’s petition for declaratory relief and
32

declared it exempt from payment of real property taxes.

The City filed a motion for reconsideration,  which the trial court denied in its resolution  dated September 26,
33 34

2006.

The City then appealed  to the Court of Appeals.

35

The Court of Appeals noted the following issues the City raised in its appellant’s brief: (1) whether the trial court
had jurisdiction over the PEZA’s petition for declaratory relief; (2) whether the PEZA is a government agency
performing governmental functions; and (3) whether the PEZA is exempt from payment of real property taxes.

The issues presented by the City, according to the Court of Appeals, are pure questions of law which should
have been raised in a petition for review on certiorari directly filed before this court. Since the City availed itself
of the wrong mode of appeal, the Court of Appeals dismissed the City’s appeal in the decision  dated January
36

11, 2008.

The City filed a motion for extension of time to file a motion for reconsideration,  which the Court of Appeals
37

denied in the resolution  dated April 11, 2008.

38

Despite the denial of its motion for extension, the City filed a motion for reconsideration.  In the
39

resolution  dated August 6, 2008, the Court of Appeals denied that motion.
40

In its petition for review on certiorari with this court,  the City argues that the Court of Appeals "hid under the
41

skirts of technical rules"  in resolving its appeal. The City maintains that its appeal involved mixed questions of
42

fact and law. According to the City, whether the PEZA performed governmental functions "cannot completely
be addressed by law but [by] the factual and actual activities [the PEZA is] carrying out." 43

Even assuming that the petition involves pure questions of law, the City contends that the subject matter of the
case "is of extreme importance with [far-reaching] consequence that [its magnitude] would surely shape and
determine the course ofour nation’s future."  The Court of Appeals, the City argues, should have resolved the
44

case on the merits.

The City insists that the trial court had no jurisdiction to hear the PEZA’s petition for declaratory relief.
According to the City, the case involves real property located in the City of Lapu-Lapu. The petition for
declaratory relief should have been filed before the Regional Trial Court of the City of Lapu-Lapu. 45

Moreover, the Province of Bataan, the City of Baguio, and the Province of Cavite allegedly demanded real
property taxes from the PEZA. The City argues that the PEZA should have likewise impleaded these local
government units as respondents in its petition for declaratory relief. For its failure to do so, the PEZA violated
Rule 63, Section 2 of the Rules of Court, and the trial court should have dismissed the petition. 46

This court ordered the PEZA to comment on the City’s petition for review on certiorari. 47

At the outset of its comment, the PEZA argues that the Court of Appeals’ decision dated January 11, 2008 had
become final and executory. After the Court of Appeals had denied the City’s appeal, the City filed a motion for
extension of time to file a motion for reconsideration. Arguing that the time to file a motion for reconsideration is
not extendible, the PEZA filed its motion for reconsideration out of time. The Cityhas no more right to appeal to
this court.48

The PEZA maintains that the City availed itself of the wrong mode of appeal before the Court of Appeals. Since
the City raised pure questions of law in its appeal, the PEZA argues that the proper remedy is a petition for
review on certiorari with this court, not an ordinary appeal before the appellate court. The Court of Appeals,
therefore, correctly dismissed outright the City’s appeal under Rule 50, Section 2 of the Rules of Court. 49

On the merits, the PEZA argues that it is an agency and instrumentality of the National Government. It is
therefore exempt from payment of real property taxes under Sections 133(o) and 234(a) of the Local
Government Code.  It adds that the tax privileges under Sections 24 and 51 of the Special Economic Zone Act
50

of 1995 applied to it. 51

Considering that the site of the Mactan Economic Zoneis a reserved land under Proclamation No. 1811, the
PEZA claims that the properties sought to be taxed are lands of public dominion exempt from real property
taxes.52

As to the jurisdiction issue, the PEZA counters that the Regional Trial Court of Pasay had jurisdiction to hear its
petition for declaratory relief under Rule 63, Section 1 of the Rules of Court.[53]] It also argued that it need not
implead the Province of Bataan, the City of Baguio, and the Province of Cavite as respondents considering that
their demands came after the PEZA had already filed the petition in court. 54

Facts of G.R. No. 187583

After the City of Lapu-Lapu had demanded payment of real property taxes from the PEZA, the Province of
Bataan followed suit. In its letter  dated May 29, 2003, the Province, through the Office of the Provincial
55

Treasurer, informed the PEZA that it would be sending a real property tax billing to the PEZA. Arguing that the
PEZA is a developer of economic zones, the Province claimed that the PEZA is liable for real property taxes
under Section 24 of the Special Economic Zone Act of 1995.

In its reply letter  dated June 18, 2003, the PEZA requested the Province to suspend the service of the real
56

property tax billing. It cited its petition for declaratory relief against the City of Lapu-Lapu pending before the
Regional Trial Court, Branch 111, Pasay City as basis.

The Province argued that serving a real property tax billing on the PEZA "would not in any way affect [its]
petition for declaratory relief before [the Regional Trial Court] of Pasay City."  Thus, in its letter  dated June 27,
57 58

2003, the Province notified the PEZAof its real property tax liabilities for June 1, 1995 to December 31, 2002
totalling ₱110,549,032.55.
After having been served a tax billing, the PEZA again requested the Province to suspend collecting its alleged
real property tax liabilities until the Regional Trial Court of Pasay Cityresolves its petition for declaratory relief.
59

The Province ignored the PEZA’s request. On January 20, 2004, the Province served on the PEZA a statement
of unpaid real property tax for the period from June 1995 to December 2004. 60

The PEZA again requested the Province to suspend collecting its alleged real property taxes.  The Province
61

denied the request in its letter  dated January 29, 2004, then servedon the PEZA a warrant of levy  covering
62 63

the PEZA’s real properties located in Mariveles, Bataan.

The PEZA’s subsequent requests  for suspension of collection were all denied by the Province.  The Province
64 65

then served on the PEZA a notice of delinquency in the payment of real property taxes  and a notice of sale of
66

real property for unpaid real property tax.  The Province finally sent the PEZA a notice of public auction of the
67

latter’s properties in Mariveles, Bataan. 68

On June 14, 2004, the PEZA filed a petition for injunction  with prayer for issuance of a temporary restraining
69

order and/or writ of preliminary injunction before the Regional Trial Court of Pasay City, arguing that it is
exempt from payment ofreal property taxes. It added that the notice of sale issued by the Province was void
because it was not published in a newspaper ofgeneral circulation asrequired by Section 260 of the Local
Government Code. 70

The case was raffled to Branch 115.

In its order  dated June 18, 2004, the trial court issued a temporary restraining order against the Province. After
71

the PEZA had filed a ₱100,000.00 bond,  the trial court issued a writ of preliminary injunction,  enjoining the
72 73

Province from selling the PEZA’s real properties at public auction.

On March 3, 2006, the PEZA and Province both manifested that each would file a memorandum after which the
case would be deemed submitted for decision. The parties then filed their respective memoranda. 74

In the order  dated January 31, 2007, the trial court denied the PEZA’s petition for injunction. The trial court
75

ruled that the PEZA is not exempt from payment of real property taxes. According to the trial court, Sections
193 and 234 of the Local Government Code had withdrawn the real property tax exemptions previously granted
to all persons, whether natural or juridical.  As to the tax exemptions under Section 51 of the Special Economic
76

Zone Act of 1995, the trial court ruled that the provision only applies to businesses operating within the
economic zones, not to the PEZA. 77

The PEZA filed before the Court of Appeals a petition for certiorari  with prayer for issuance of a temporary
78

restraining order.

The Court of Appeals issued a temporary restraining order, enjoining the Province and its Provincial Treasurer
from selling PEZA's properties at public auction scheduled on October 17, 2007.  It also ordered the Province
79

to comment on the PEZA’s petition.

In its comment,  the Province alleged that it received a copy of the temporary restraining order only on October
80

18, 2007 when it had already sold the PEZA’s properties at public auction. Arguing that the act sought to be
enjoined was already fait accompli, the Province prayed for the dismissal of the petition for certiorari.

The PEZA then filed a supplemental petition for certiorari, prohibition, and mandamus  against the Province,
81

arguing that the Provincial Treasurer of Bataan acted with grave abuse of discretion in issuing the notice of
delinquency and notice of sale. It maintained that it is exempt from payment of real property taxes because it is
a government instrumentality. It added that its lands are property of public dominion which cannot be sold at
public auction.
The PEZA also filed a motion  for issuance of an order affirming the temporary restraining order and a writ of
82

preliminary injunction to enjoin the Province from consolidating title over the PEZA’s properties.

In its resolution  dated January 16, 2008,the Court of Appeals admitted the supplemental petition for certiorari,
83

prohibition, and mandamus. It required the Province to comment on the supplemental petition and to file a
memorandum on the PEZA’s prayer for issuance of temporary restraining order.

The Province commented  on the PEZA’s supplemental petition, to which the PEZA replied.
84 85

The Province then filed a motion  for leave to admit attached rejoinder with motion to dismiss. In the rejoinder
86

with motion to dismiss,  the Province argued for the first time that the Court of Appeals had no jurisdiction over
87

the subject matter of the action.

According to the Province, the PEZA erred in filing a petition for certiorari. Arguing that the PEZA sought to
reverse a Regional Trial Court decision in a local tax case, the Province claimed that the court with appellate
jurisdiction over the action is the Court of Tax Appeals. The PEZA then prayed that the Court of Appeals
dismiss the petition for certiorari for lack of jurisdiction over the subject matter of the action.

The Court of Appeals held that the issue before it was whether the trial court judge gravely abused his
discretion in dismissing the PEZA’s petition for prohibition. This issue, according to the Court of Appeals, is
properly addressed in a petition for certiorari over which it has jurisdiction to resolve. It, therefore, maintained
jurisdiction to resolve the PEZA’s petition for certiorari. 88

Although it admitted that appeal, not certiorari, was the PEZA’s proper remedy to reverse the trial court’s
decision, the Court of Appeals proceeded to decide the petition for certiorari in "the broader interest of
89

justice."
90

The Court of Appeals ruled that the trial court judge gravely abused his discretion in dismissing the PEZA’s
petition for prohibition. It held that Section 21 of Presidential Decree No. 66 and Section 51 of the Special
Economic Zone Act of 1995 granted the PEZA exemption from payment of real property taxes.  Based on the91

criteria set in Manila International Airport Authority v. Court of Appeals,  the Court of Appeals found that the
92

PEZA is an instrumentality of the national government. No taxes, therefore, could be levied on it by local
government units. 93

In the decision  dated August 27, 2008, the Court of Appeals granted the PEZA’s petition for certiorari. It set
94

aside the trial court’s decision and nullified all the Province’s proceedings with respect to the collection of real
property taxes from the PEZA.

The Province filed a motion for reconsideration,  which the Court of Appeals denied in the resolution  dated
95 96

April 16, 2009 for lack of merit.

In its petition for review on certiorari with this court,  the Province of Bataan insists that the Court of Appeals
97

had no jurisdiction to take cognizance of the PEZA’s petition for certiorari. The Province maintains that the
Court of Tax Appeals had jurisdiction to hear the PEZA’s petition since it involved a local tax case decided by a
Regional Trial Court. 98

The Province reiterates that the PEZA is not exempt from payment of real property taxes. The Province points
out that the EPZA, the PEZA’s predecessor, had to be categorically exempted from payment of real property
taxes. The EPZA, therefore, was not inherently exempt from payment of real property taxes and so is the
PEZA. Since Congress omitted from the Special Economic Zone Act of 1995 a provision specifically exempting
the PEZA from payment of real property taxes, the Province argues that the PEZA is a taxable entity. It cited
the rule in statutory construction that provisions omitted in revised statutes are deemed repealed. 99

With respect to Sections 24 and 51 of the Special Economic Zone Act of 1995 granting tax exemptions and
benefits, the Province argues that these provisions only apply to business establishments operating within
special economic zones,  not to the PEZA.
100
This court ordered the PEZA tocomment on the Province’s petition for review on certiorari.  In its 101

comment,  the PEZA argues that the Court of Appeals had jurisdiction to hear its petition for certiorari since
102

the issue was whether the trial court committed grave abuse of discretion in denying its petition for injunction.
The PEZA maintains thatit is exempt from payment of real property taxes under Section 21 of Presidential
Decree No. 66 and Section 51 of the Special Economic Zone Act of 1995.

The Province filed its reply,  reiterating its arguments in its petition for review on certiorari. On the PEZA’s
103

motion,  this court consolidated the petitions filed by the City of Lapu-Lapu and the Province of Bataan.
104 105

The issues for our resolution are the following:

I. Whether the Court of Appeals erred in dismissing the City of Lapu-Lapu’s appeal for raising pure
questions of law;

II. Whether the Regional Trial Court, Branch 111, Pasay City had jurisdiction to hear, try, and decide
the City of Lapu-Lapu’s petition for declaratory relief;

III. Whether the petition for injunction filed before the Regional Trial Court, Branch 115, Pasay City, is a
local tax case appealable to the Court of Tax Appeals; and

IV. Whether the PEZA is exempt from payment of real property taxes.

We deny the consolidated petitions.

I.

The Court of Appeals did not err in

dismissing the City of Lapu-Lapu’s
appeal for raising pure questions of law

Under the Rules of Court, there are three modes of appeal from Regional Trial Court decisions. The first mode
is through an ordinary appeal before the Court of Appeals where the decision assailed was rendered in the
exercise of the Regional Trial Court’s original jurisdiction. Ordinary appeals are governed by Rule 41, Sections
3 to 13 of the Rules of Court. In ordinary appeals, questions of fact or mixed questions of fact and law may be
raised.106

The second mode is through a petition for review before the Court of Appeals where the decision assailed was
rendered by the Regional Trial Court in the exercise of its appellate jurisdiction. Rule 42 of the Rules of Court
governs petitions for review before the Court of Appeals. In petitions for review under Rule 42, questions of
fact, of law, or mixed questions of fact and law may be raised. 107

The third mode is through an appealby certiorari before this court under Rule 45 where only questions of law
shall be raised. 108

A question of fact exists when there is doubt as to the truth or falsity of the alleged facts.  On the other hand,
109

there is a question of law if the appeal raises doubt as to the applicable law on a certain set of facts. 110

Under Rule 50, Section 2, an improper appeal before the Court of Appeals is dismissed outright and shall not
be referred to the proper court:

SEC. 2. Dismissal of improper appeal to the Court of Appeals. – An appeal under Rule 41 taken from the
Regional Trial Court to the Court of Appeals raising only questions of law shall be dismissed, issues purely of
law not being reviewable by said court. Similarly, an appeal by notice of appeal instead of by petition for review
from the appellate judgment of a Regional Trial Court shall be dismissed.
An appeal erroneously taken to the Court of Appeals shall not be transferred to the appropriate court but shall
be dismissed outright.

Rule 50, Section 2 repealed Rule 50, Section 3 of the 1964 Rules of Court, which provided that improper
appeals to the Court of Appeals shall not be dismissed but shall be certified to the proper court for resolution:

Sec. 3. Where appealed case erroneously, brought. — Where the appealed case has been erroneously
brought to the Court of Appeals, it shall not dismiss the appeal, but shall certify the case to the proper court,
with a specific and clear statement of the grounds therefor.

With respect to appeals by certiorari directly filed before this court but which raise questions of fact, paragraph
4(b) of Circular No. 2-90 dated March 9, 1990 states that this court "retains the option, in the exercise of its
sound discretion and considering the attendant circumstances, either itself to take cognizance of and decide
such issues or to refer them to the Court of Appeals for determination." In Indoyon, Jr. v. Court of Appeals,  we 111

said that this court "cannot tolerate ignorance of the law on appeals."  It is not this court’s task to determine for
112

litigants their proper remedies under the Rules. 113

We agree that the City availed itself of the wrong mode of appeal before the Court of Appeals. The City raised
pure questions of law in its appeal. The issue of whether the Regional Trial Court of Pasay had jurisdiction over
the PEZA’s petition for declaratory relief is a question of law, jurisdiction being a matter of law.  The issue of
114

whether the PEZA is a government instrumentality exempt from payment of real property taxes is likewise a
question of law since this question is resolved by examining the provisions of the PEZA’s charter as well as
other laws relating to the PEZA. 115

The Court of Appeals, therefore, did not err in dismissing the City’s appeal pursuant to Rule 50, Section 2 of the
Rules of Court.

Nevertheless, considering the important questions involved in this case, we take cognizance of the City’s
petition for review on certiorari in the interest of justice.

In Municipality of Pateros v. The Honorable Court of Appeals,  the Municipality of Pateros filed an appeal
116

under Rule 42 before the Court of Appeals, which the Court of Appeals denied outright for raising pure
questions of law. This court agreed that the Municipality of Pateros "committed a procedural infraction"  and
117

should have directly filed a petition for review on certiorari before this court. Nevertheless, "in the interest of
justice and in order to write finisto [the] controversy,"  this court "opt[ed] to relax the rules"  and proceeded to
118 119

decide the case. This court said:

While it is true that rules of procedure are intended to promote rather than frustrate the ends of justice, and
while the swift unclogging of the dockets of the courts is a laudable objective, it nevertheless must not be met
at the expense of substantial justice.

The Court has allowed some meritorious cases to proceed despite inherent procedural defects and lapses.
Thisis in keeping with the principle that rules of procedure are mere tools designed to facilitate the attainment of
justice, and that strict and rigid application ofrules which should result in technicalities that tend to frustrate
rather than promote substantial justice must always be avoided. It is a far better and more prudent cause of
action for the court to excuse a technical lapse and afford the parties a review of the case to attain the ends of
justice, rather than dispose of the case on technicality and cause grave injustice to the parties, giving a false
impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of justice. 120

Similar to Municipality of Pateros, we opt to relax the rules in this case. The PEZA operates or otherwise
administers special economic zones all over the country. Resolving the substantive issue of whether the PEZA
is taxable for real property taxes will clarify the taxing powers of all local government units where special
economic zones are operated. This case, therefore, should be decided on the merits.

II.
 The Regional Trial Court of Pasay had no
jurisdiction to hear, try, and decide the
PEZA’s petition for declaratory relief
against the City of Lapu-Lapu

Rule 63 of the Rules of Court governs actions for declaratory relief. Section 1 of Rule 63 provides:

SECTION 1. Who may file petition. – Any person interested under a deed, will, contract or other written
instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any other
governmental regulation may, before breach or violation, thereof, bring an action in the appropriate Regional
Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or
duties, thereunder.

An action for reformation of an instrument, to quiet title to real property or remove clouds therefrom, or to
consolidate ownership under Article 1607 of the Civil Code, may be brought under this Rule.

The court with jurisdiction over petitions for declaratory relief is the Regional Trial Court, the subject matter of
litigation in an action for declaratory relief being incapable of pecuniary estimation.  Section 19 of the Judiciary
121

Reorganization Act of 1980 provides:

SEC. 19. Jurisdiction in Civil Cases. – Regional Trial Courts shall exercise exclusive original jurisdiction:

(1) In all civil actions in which the subject of litigation is incapable of pecuniary estimation[.]

Consistent with the law, the Rules state that a petition for declaratory relief is filed "in the appropriate Regional
Trial Court."122

A special civil action for declaratory relief is filed for a judicial determination of any question of construction or
validity arising from, and for a declaration of rights and duties, under any of the following subject matters: a
deed, will, contract or other written instrument, statute, executive order or regulation, ordinance, orany other
governmental regulation.  However, a declaratory judgment may issue only if there has been "no breach of the
123

documents in question."  If the contract or statute subject matter of the action has already been breached, the
124

appropriate ordinary civil action must be filed.  If adequate relief is available through another form of action or
125

proceeding, the other action must be preferred over an action for declaratory relief. 126

In Ollada v. Central Bank of the Philippines,  the Central Bank issued CB-IED Form No. 5 requiring certified
127

public accountants to submit an accreditation under oath before they were allowed to certify financial
statements submitted to the bank. Among those financial statements the Central Bank disallowed were those
certified by accountant Felipe B. Ollada.  Claiming that the requirement "restrained the legitimate pursuit of
128

one’s trade," 129

Ollada filed a petition for declaratory relief against the Central Bank.

This court ordered the dismissal of Ollada’s petition "without prejudice to [his] seeking relief in another
appropriate action."  According to this court, Ollada’s right had already been violated when the Central Bank
130

refused to accept the financial statements he prepared. Since there was already a breach, a petition for
declaratory relief was not proper. Ollada must pursue the "appropriate ordinary civil action or
proceeding."  This court explained:
131

Petitioner commenced this action as, and clearly intended it to be one for Declaratory Relief under the
provisions of Rule 66 of the Rules of Court. On the question of when a special civil action of this nature would
prosper, we have already held that the complaint for declaratory relief will not prosper if filed after a contract,
statute or right has been breached or violated. In the present case such is precisely the situation arising from
the facts alleged in the petition for declaratory relief. As vigorously claimed by petitioner himself, respondent
had already invaded or violated his right and caused him injury — all these giving him a complete cause of
action enforceable in an appropriate ordinary civil action or proceeding. The dismissal of the action was,
therefore, proper in the lightof our ruling in De Borja vs. Villadolid, 47 O.G. (5) p. 2315, and Samson vs. Andal,
G.R. No. L-3439, July 31, 1951, where we held that an action for declaratory relief should be filed before there
has been a breach of a contract, statutes or right, and that it is sufficient tobar such action, that there had been
a breach — which would constitute actionable violation. The rule is that an action for Declaratory Relief is
proper only if adequate relief is not available through the means of other existing forms of action or proceeding
(1 C.J.S. 1027-1028). 132

It is also required that the parties to the action for declaratory relief be those whose rights or interests are
affected by the contract or statute in question.  "There must be an actual justiciable controversy or the
133

‘ripening seeds’ of one"  between the parties. The issue between the parties "must be ripe for judicial
134

determination."  An action for declaratory relief based on theoreticalor hypothetical questions cannot be filed
135

for our courts are not advisory courts. 136

In Republic v. Roque,  this court dismissed respondents’ petition for declaratory relief for lack of justiciable
137

controversy. According to this court, "[the respondents’] fear of prospective prosecution [under the Human
Security Act] was solely based on remarks of certain government officials which were addressed to the general
public."
138

In Velarde v. Social Justice Society,  this court refused to resolve the issue of "whether or not [a religious
139

leader’s endorsement] of a candidate for elective office or in urging or requiring the members of his flock to vote
for a specific candidate is violative [of the separation clause]."  According to the court, there was no justiciable
140

controversy and ordered the dismissal of the Social Justice Society’s petition for declaratory relief. This court
explained: Indeed, SJS merely speculated or anticipated without factual moorings that, as religious leaders, the
petitioner and his co-respondents below had endorsed or threatened to endorse a candidate or candidates for
elective offices; and that such actual or threatened endorsement "will enable [them] to elect men to public office
who [would] in turn be forever beholden to their leaders, enabling them to control the government"[;] and
"pos[ing] a clear and present danger ofserious erosion of the people’s faith in the electoral process[;] and
reinforc[ing] their belief that religious leaders determine the ultimate result of elections," which would then be
violative of the separation clause.

Such premise is highly speculative and merely theoretical, to say the least. Clearly, it does not suffice to
constitute a justiciable controversy. The Petition does not even allege any indication or manifest intent on the
part of any of the respondents below to champion an electoral candidate, or to urge their so-called flock to vote
for, or not to vote for, a particular candidate. It is a time-honored rule that sheer speculation does not give rise
to an actionable right.

Obviously, there is no factual allegation that SJS’ rights are being subjected to any threatened, imminent and
inevitable violation that should be prevented by the declaratory relief sought. The judicial power and duty of the
courts to settle actual controversies involving rights that are legally demandable and enforceable cannot be
exercised when there is no actual or threatened violation of a legal right.

All that the 5-page SJS Petition prayed for was "that the question raised in paragraph 9 hereof be resolved." In
other words, it merely sought an opinion of the trial court on whether the speculated acts of religious leaders
endorsing elective candidates for political offices violated the constitutional principle on the separation of
church and state. SJS did not ask for a declaration of its rights and duties; neither did it pray for the stoppage of
any threatened violation of its declared rights. Courts, however, are proscribed from rendering an advisory
opinion.  In sum, a petition for declaratory relief must satisfy six requisites:
141

[F]irst, the subject matter of the controversy must be a deed, will, contract or other written instrument, statute,
executive order or regulation, or ordinance; second, the terms of said documents and the validity thereof are
doubtful and require judicial construction; third, there must have been no breach of the documents in question;
fourth, there must be an actual justiciable controversy or the "ripening seeds" of one between persons whose
interests are adverse; fifth, the issue must be ripe for judicial determination; and sixth, adequate relief is not
available through other means or other forms of action or proceeding.  (Emphases omitted)
142

We rule that the PEZA erred in availing itself of a petition for declaratory relief against the City. The City had
already issued demand letters and real property tax assessment against the PEZA, in violation of the PEZA’s
alleged tax-exempt status under its charter. The Special Economic Zone Act of 1995, the subject matter of
PEZA’s petition for declaratory relief, had already been breached. The trial court, therefore, had no jurisdiction
over the petition for declaratory relief. There are several aspects of jurisdiction.  Jurisdiction over the subject
143

matter is "the power to hear and determine cases of the general class to which the proceedings in question
belong."  It is conferred by law, which may either be the Constitution or a statute.  Jurisdiction over the subject
144 145

matter means "the nature of the cause of action and the relief sought."  Thus, the cause of action and
146

character of the relief sought as alleged in the complaint are examinedto determine whether a court had
jurisdiction over the subject matter.  Any decision rendered by a court without jurisdiction over the
147

subjectmatter of the action is void.148

Another aspect of jurisdiction is jurisdiction over the person. It is "the power of [a] court to render a personal
judgment or to subject the parties in a particular action to the judgment and other rulings rendered in the
action." A court automatically acquires jurisdiction over the person of the plaintiff upon the filing of the initiatory
149

pleading. With respect to the defendant, voluntary appearance in court or a valid service of summons vests
150

the court with jurisdiction over the defendant’s person.  Jurisdiction over the person of the defendant is
151

indispensable in actions in personamor those actions based on a party’s personal liability.  The proceedings in
152

an action in personamare void if the court had no jurisdiction over the person of the defendant. 153

Jurisdiction over the resor the thing under litigation is acquired either "by the seizure of the property under legal
process, whereby it is brought into actual custody of the law; or asa result of the institution of legal proceedings,
in which the power of the court is recognized and made effective."  Jurisdiction over the res is necessary in
154

actions in remor those actions "directed against the thing or property or status of a person and seek judgments
with respect thereto as against the whole world."  The proceedings in an action in rem are void if the court had
155

no jurisdiction over the thing under litigation.

156

In the present case, the Regional Trial Court had no jurisdiction over the subject matter of the action,
specifically, over the remedy sought. As this court explained in Malana v. Tappa: 157

. . . an action for declaratory relief presupposes that there has been no actual breach of the instruments
involved or of rights arising thereunder. Since the purpose of an action for declaratory relief is to secure an
authoritative statement of the rights and obligations of the parties under a statute, deed, or contract for their
guidance in the enforcement thereof, or compliance therewith, and not to settle issues arising from an alleged
breach thereof, it may be entertained only before the breach or violation of the statute, deed, or contract to
which it refers. A petition for declaratory relief gives a practical remedy for ending controversies that have not
reached the state where another relief is immediately available; and supplies the need for a form of action that
will set controversies at rest before they lead to a repudiation of obligations, an invasion of rights, and a
commission of wrongs.

Where the law or contract has already been contravened prior to the filing of an action for declaratory relief, the
courts can no longer assume jurisdiction over the action. In other words, a court has no more jurisdiction over
an action for declaratory relief if its subject has already been infringed or transgressed before the institution of
the action.  (Emphasis supplied)
158

The trial court should have dismissed the PEZA’s petition for declaratory relief for lack of jurisdiction.

Once an assessment has already been issued by the assessor, the proper remedy of a taxpayer depends on
whether the assessment was erroneous or illegal.

An erroneous assessment "presupposes that the taxpayer is subject to the tax but is disputing the correctness
of the amount assessed."  With an erroneous assessment, the taxpayer claims that the local assessor erred in
159

determining any of the items for computing the real property tax, i.e., the value of the real property or the
portion thereof subject to tax and the proper assessment levels. In case of an erroneous assessment, the
taxpayer must exhaust the administrative remedies provided under the Local Government Code before
resorting to judicial action.
The taxpayer must first pay the realproperty tax under protest. Section 252 of the Local Government Code
provides:

SECTION 252. Payment Under Protest. -(a) No protest shall be entertained unless the taxpayer first paysthe
tax. There shall be annotated on the tax receipts the words "paid under protest". The protest in writing must be
filed within thirty (30) days from payment of the tax to the provincial, city treasurer or municipal treasurer, in the
case of a municipality within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from
receipt.

(b) The tax or a portion thereof paidunder protest, shall be held in trust by the treasurer concerned.

(c) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion of the
tax protested shall be refunded to the protestant, or applied as tax credit against his existing or future
tax liability.

(d) In the event that the protest is denied or upon the lapse of the sixty day period prescribed in
subparagraph (a), the taxpayer may avail of the remedies as provided for in Chapter 3, Title II, Book II
of this Code.

Should the taxpayer find the action on the protest unsatisfactory, the taxpayer may appeal with the Local Board
of Assessment Appeals within 60 days from receipt of the decision on the protest:

SECTION 226. Local Board of Assessment Appeals. - Any owner or person having legal interest in the property
who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his
property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the
Board of Assessment Appeals of the provincial or city by filing a petition under oath in the form prescribed for
the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support
of the appeal.

Payment under protest and appeal to the Local Board of Assessment Appeals are "successive administrative
remedies to a taxpayer who questions the correctness of an assessment."  The Local Board Assessment
160

Appeals shall not entertain an appeal "without the action of the local assessor"  on the protest.
161

If the taxpayer is still unsatisfied after appealing with the Local Board of Assessment Appeals, the taxpayer
may appeal with the Central Board of Assessment Appeals within 30 days from receipt of the Local Board’s
decision:

SECTION 229. Action by the Local Board of Assessment Appeals. - (a) The Board shall decide the appeal
within one hundred twenty (120) days from the date of receipt of such appeal. The Board, after hearing, shall
render its decision based on substantial evidence or such relevant evidence on record as a reasonable mind
might accept as adequate to support the conclusion. (b) In the exercise ofits appellate jurisdiction, the Board
shall have the power to summon witnesses, administer oaths, conduct ocular inspection, take depositions, and
issue subpoena and subpoena duces tecum. The proceedings of the Board shall be conducted solely for the
purpose of ascertaining the facts without necessarily adhering to technical rules applicable in judicial
proceedings.

(c) The secretary of the Board shall furnish the owner of the property or the person having legal interest therein
and the provincial or city assessor with a copy of the decision of the Board. In case the provincial or city
assessor concurs in the revision or the assessment, it shall be his duty to notify the owner of the property or the
person having legal interest therein of such factusing the form prescribed for the purpose. The owner of the
property or the person having legal interest therein or the assessor who is not satisfied with the decision of the
Board, may, within thirty (30) days after receipt of the decision of said Board, appeal to the Central Board of
Assessment Appeals, as herein provided. The decision of the Central Board shall be final and executory.
(Emphasis supplied)
On the other hand, an assessment is illegal if it was made without authority under the law.  In case of an illegal
162

assessment, the taxpayer may directly resort to judicial action without paying under protest the assessed tax
and filing an appeal with the Local and Central Board of Assessment Appeals.

In Ty v. Trampe,  the Municipal Assessor of Pasig sent Alejandro B. Ty a notice of assessment with respect to
163

Ty’s real properties in Pasig. Without resorting to the administrative remedies under the Local Government
Code, Ty filed before the Regional Trial Court a petition, praying that the trial court nullify the notice of
assessment. In assessing the real property taxes due, the Municipal Assessor used a schedule of market
values solely prepared by him. This, Ty argued, was void for being contrary to the Local Government Code
requiring that the schedule of market values be jointly prepared by the provincial, city, and municipal assessors
of the municipalities within the Metropolitan Manila Area.

This court ruled that the assessmentwas illegal for having been issued without authority of the Municipal
Assessor. Reconciling provisions of the Real Property Tax Code and the Local Government Code, this court
held that the schedule of market valuesmust be jointly prepared by the provincial, city, and municipal assessors
of the municipalities within the Metropolitan Manila Area.

As to the issue of exhaustion of administrative remedies, this court held that Ty did not err in directly resorting
to judicial action. According to this court, payment under protest is required only "where there is a question as
to the reasonableness of the amount assessed."  As to appeals before the Local and Central Board of
164

Assessment Appeals, they are "fruitful only where questions of fact are involved." 165

Ty raised the issue of the legality of the notice of assessment, an issue that did not go into the reasonableness
of the amount assessed. Neither did the issue involve a question of fact. Ty raised a question of law and,
therefore, need not resort to the administrative remedies provided under the Local Government Code.

In the present case, the PEZA did not avail itself of any of the remedies against a notice of assessment. A
petition for declaratory relief is not the proper remedy once a notice of assessment was already issued.

Instead of a petition for declaratory relief, the PEZA should have directly resorted to a judicial action. The PEZA
should have filed a complaint for injunction, the "appropriate ordinary civil action"  to enjoin the City from
166

enforcing its demand and collecting the assessed taxes from the PEZA. After all, a declaratory judgment as to
the PEZA’s tax-exempt status is useless unless the City isenjoined from enforcing its demand.

Injunction "is a judicial writ, process or proceeding whereby a party is ordered to do or refrain from doing a
certain act."  "It may be the main action or merely a provisional remedy for and as incident in the main
167

action."  The essential requisites of a writ of injunction are: "(1) there must be a right in esseor the existence of
168

a right to be protected; and (2) the act against which the injunction is directed to constitute a violation of such
right."
169

We note, however, that the City confused the concepts of jurisdiction and venue in contending that the
Regional Trial Court of Pasay had no jurisdiction because the real properties involved in this case are located
in the City of Lapu-Lapu.

On the one hand, jurisdiction is "the power to hear and determine cases of the general class to which the
proceedings in question belong."  Jurisdiction is a matter of substantive law.  Thus, an action may be filed
170 171

only with the court or tribunal where the Constitution or a statute says it can be brought.  Objections to
172

jurisdiction cannot be waived and may be brought at any stage of the proceedings, even on appeal.  When a
173

case is filed with a court which has no jurisdiction over the action, the court shall motu propriodismiss the
case.174

On the other hand, venue is "the place of trial or geographical location in which an action or proceeding should
be brought." 175 In civil cases, venue is a matter of procedural law.  A party’s objections to venue must be
176

brought at the earliest opportunity either in a motion to dismiss or in the answer; otherwise the objection shall
be deemed waived.  When the venue of a civil action is improperly laid, the court cannot motu propriodismiss
177

the case. 178

The venue of an action depends on whether the action is a real or personal action. Should the action affect title
to or possession of real property, or interest therein, it is a real action. The action should be filed in the proper
court which has jurisdiction over the area wherein the real property involved, or a portion thereof, is situated.  If 179

the action is a personal action, the action shall be filed with the proper court where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a
non-resident defendant where he may be found, at the election of the plaintiff. 180

The City was objecting to the venue of the action, not to the jurisdiction of the Regional Trial Court of Pasay. In
essence, the City was contending that the PEZA’s petition is a real action as it affects title to or possession of
real property, and, therefore, the PEZA should have filed the petition with the Regional Trial Court of Lapu-Lapu
City where the real properties are located. However, whatever objections the City has against the venue of the
PEZA’s action for declaratory relief are already deemed waived. Objections to venue must be raised at the
earliest possible opportunity.  The City did not file a motion to dismiss the petition on the ground that the venue
181

was improperly laid. Neither did the City raise this objection in its answer.

In any event, the law sought to be judicially interpreted in this case had already been breached. The Regional
Trial Court of Pasay, therefore, had no jurisdiction over the PEZA’s petition for declaratory relief against the
City.

III.

The Court of Appeals had no jurisdiction

over the PEZA’s petition for certiorari
against the Province of Bataan

Appeal is the remedy "to obtain a reversal or modification of a judgment on the merits."  A judgment on the
182

merits is one which "determines the rights and liabilities of the parties based on the disclosed facts, irrespective
of the formal, technical or dilatory objections."  It is not even necessary that the case proceeded to trial.  So
183 184

long as the "judgment is general"  and "the parties had a full legal opportunity to be heard on their respective
185

claims and contentions,"  the judgment is on the merits.

186

On the other hand, certiorari is a special civil action filed to annul or modify a proceeding of a tribunal, board, or
officer exercising judicial or quasi-judicial functions.  Certiorari, which in Latin means "to be more fully
187

informed," was originally a remedy in the common law. This court discussed the history of the remedy of
188

certiorari in Spouses Delos Santos v. Metropolitan Bank and Trust Company: 189

In the common law, from which the remedy of certiorari evolved, the writ of certiorari was issued out of
Chancery, or the King’s Bench, commanding agents or officers of the inferior courts to return the record of a
cause pending before them, so as to give the party more sure and speedy justice, for the writ would enable the
superior court to determine froman inspection of the record whether the inferior court’s judgment was rendered
without authority. The errors were of such a nature that, if allowed to stand, they would result in a substantial
injury to the petitioner to whom no other remedy was available. If the inferior court acted without authority, the
record was then revised and corrected in matters of law. The writ of certiorari was limited to cases in which the
inferior court was said to be exceeding its jurisdiction or was not proceeding according to essential
requirements of law and would lie only to review judicial or quasi-judicial acts. 190

In our jurisdiction, the term "certiorari" is used in two ways. An appeal before this court raising pure questions of
law is commenced by filing a petition for reviewon certiorari under Rule 45 of the Rules of Court. An appeal by
certiorari, which continues the proceedings commenced before the lower courts,  is filed to reverse or modify
191

judgments or final orders.  Under the Rules, an appeal by certiorarimust be filed within 15 days from notice of
192

the judgment or final order, or of the denial of the appellant’s motion for new trial or reconsideration. 193

A petition for certiorari under Rule 65, on the other hand, is an independent and original action filed to set aside
proceedings conducted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack
or excess of jurisdiction.  Under the Rules, a petition for certiorari may only be filed if there is no appeal or any
194
plain, speedy, or adequate remedy in the ordinary course of law.  The petition must be filed within 60 days
195

from notice of the judgment, order, or resolution. 196

Because of the longer period to file a petition for certiorari, some litigants attempt to file petitions for certiorari
as substitutes for lost appeals by certiorari. However, Rule 65 is clear that a petition for certiorari will not
prosper if appeal is available. Appealis the proper remedy even if the error, or one of the errors, raised is grave
abuse of discretion on the part of the court rendering judgment.  If appeal is available, a petition for certiorari
197

cannot be filed.

In this case, the trial court’s decision dated January 31, 2007 is a judgment on the merits. Based on the facts
disclosed by the parties, the trial court declared the PEZA liable to the Province of Bataan for real property
taxes. The PEZA’s proper remedy against the trial court’s decision, therefore, is appeal.

Since the PEZA filed a petition for certiorari against the trial court’s decision, it availed itself of the wrong
remedy. As the Province of Bataan contended, the trial court’s decision dated January 31, 2007 "is only an
error of judgment appealable to the higher level court and may not be corrected by filing a petition for
certiorari."  That the trial court judge allegedly committed grave abuse of discretion does not make the petition
198

for certiorari the correct remedy. The PEZA should haveraised this ground in an appeal filed within 15 days
from notice of the assailed resolution.

This court, "in the liberal spirit pervading the Rules of Court and in the interest of substantial justice,"  has
199

treated petitions for certiorari as an appeal: "(1) if the petition for certiorari was filed within the reglementary
period within which to file a petition for review on certiorari; (2) when errors of judgment are averred; and (3)
when there is sufficient reason to justify the relaxation of the rules."  Considering that "the nature of an action
200

is determined by the allegationsof the complaint or the petition and the character of the relief sought,"  a201

petition which "actually avers errors of judgment rather than errors than that of jurisdiction"  may be considered
202

a petition for review.

However, suspending the application of the Rules has its disadvantages. Relaxing procedural rules may reduce
the "effective enforcement of substantive rights,"  leading to "arbitrariness, caprice, despotism, or whimsicality
203

in the settlement of disputes."  Therefore, for this court to suspend the application of the Rules, the
204

accomplishment of substantial justice must outweigh the importance of predictability of court procedures.

The PEZA’s petition for certiorari may be treated as an appeal. First, the petition for certiorari was filed
withinthe 15-day reglementary period for filing an appeal. The PEZA filed its petition for certiorari before the
Court of Appeals on October 15, 2007,  which was 12 days from October 3, 2007  when the PEZA had notice
205 206

of the trial court’s order denying the motion for reconsideration.

Second, the petition for certiorari raised errors of judgment. The PEZA argued that the trial court erred in ruling
that it is not exempt from payment of real property taxes given Section 21 of Presidential Decree No. 66 and
Sections 11 and 51 of the Special Economic Zone Act of 1995. 207

Third, there is sufficient reason to relax the rules given the importance of the substantive issue presented in this
case.

However, the PEZA’s petition for certiorari was filed before the wrong court. The PEZA should have filed its
petition before the Court of Tax Appeals.

The Court of Tax Appeals has the exclusive appellate jurisdiction over local tax cases decided by Regional
Trial Courts. Section 7, paragraph (a)(3) of Republic Act No. 1125, as amended by Republic Act No. 9282,
provides:

Sec. 7. Jurisdiction. – The [Court of Tax Appeals] shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

 ....

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or
resolved by them in the exercise of their original or appellate jurisdiction[.]

The local tax cases referred to in Section 7, paragraph (a)(3) of Republic Act No. 1125, as amended, include
cases involving real property taxes. Real property taxation is governed by Book II of the Local Government
Code on "Local Taxation and Fiscal Matters." Real property taxes are collected by the Local Treasurer,  not by 208

the Bureau of Internal Revenue in charge of collecting national internal revenue taxes, fees, and charges. 209

Section 7, paragraph (a)(5) of Republic Act No. 1125, as amended by Republic Act No. 9282, separately
provides for the exclusive appellate jurisdiction of the Court of Tax Appeals over decisions of the Central Board
of Assessment Appeals involving the assessment or collection of real property taxes:

Sec. 7. Jurisdiction. – The [Court of Tax Appeals] shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

....

5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over cases
involving the assessment and taxation of real property originally decided by the provincial or city board of
assessment appeals[.]

This separate provision, nevertheless, does not bar the Court of Tax Appeals from taking cognizance of trial
court decisions involving the collection of real property tax cases. Sections 256  and 266  of the Local
210 211

Government Code expressly allow localgovernment units to file "in any court of competent jurisdiction" civil
actions to collect basic real property taxes. Should the trial court rule against them, local government units
cannot be barred from appealing before the Court of Tax Appeals – the "highly specialized body specifically
created for the purpose of reviewing tax cases." 212

We have also ruled that the Court of Tax Appeals, not the Court of Appeals, has the exclusive original
jurisdiction over petitions for certiorari assailing interlocutory orders issued by Regional Trial Courts in a local
tax case. We explained in The City of Manila v. Hon. Grecia-Cuerdo  that while the Court of Tax Appeals has
213

no express grant of power to issue writs of certiorari under Republic Act No. 1125,  as amended, the tax
214

court’s judicial power as defined in the Constitution  includes the power to determine "whether or not there has
215

been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the [Regional Trial
Court] in issuing an interlocutory order of jurisdiction in cases falling within the exclusive appellate jurisdiction of
the tax court."  We further elaborated:
216

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the
authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax
cases to the CTA, it can reasonably be assumed that the law intended to transfer also such power as is
deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There is no perceivable reason
why the transfer should only be considered as partial, not total.

....

If this Court were to sustain petitioners' contention that jurisdiction over their certiorari petition lies with the CA,
this Court would be confirming the exercise by two judicial bodies, the CA and the CTA, of jurisdiction over
basically the same subject matter – precisely the split-jurisdiction situation which is anathema to the orderly
administration of justice.The Court cannot accept that such was the legislative motive, especially considering
that the law expressly confers on the CTA, the tribunal with the specialized competence over tax and tariff
matters, the role of judicial review over local tax cases without mention of any other court that may exercise
such power. Thus, the Court agrees with the ruling of the CA that since appellate jurisdiction over private
respondents' complaint for tax refund is vested in the CTA, it follows that a petition for certiorari seeking
nullification of an interlocutory order issued in the said case should, likewise, be filed with the same court. To
rule otherwise would lead to an absurd situation where one court decides an appeal in the main case while
another court rules on an incident in the very same case.

Stated differently, it would be somewhat incongruent with the pronounced judicial abhorrence to split
jurisdiction to conclude that the intention of the law is to divide the authority over a local tax case filed with the
RTC by giving to the CA or this Court jurisdiction to issue a writ of certiorari against interlocutory orders of the
RTC but giving to the CTA the jurisdiction over the appeal from the decision of the trial court in the same case.
It is more in consonance with logic and legal soundness to conclude that the grant of appellate jurisdiction to
the CTA over tax cases filed in and decided by the RTC carries withit the power to issue a writ of certiorari
when necessary in aid of such appellate jurisdiction. The supervisory power or jurisdiction of the CTA to issue a
writ of certiorari in aid of its appellate jurisdiction should co-exist with, and be a complement to, its appellate
jurisdiction to review, by appeal, the final orders and decisionsof the RTC, in order to have complete
supervision over the acts of the latter.  (Citations omitted)
217

In this case, the petition for injunction filed before the Regional Trial Court of Pasay was a local tax case
originally decided by the trial court in its original jurisdiction. Since the PEZA assailed a judgment, not an
interlocutory order, of the Regional Trial Court, the PEZA’s proper remedy was an appeal to the Court of Tax
Appeals.

Considering that the appellate jurisdiction of the Court of Tax Appeals is to the exclusion of all other courts, the
Court of Appeals had no jurisdiction to take cognizance of the PEZA’s petition. The Court of Appeals acted
without jurisdiction in rendering the decision in CA-G.R. SP No. 100984. Its decision in CA-G.R. SP No. 100984
is void.218

The filing of appeal in the wrong court does not toll the period to appeal. Consequently, the decision of the
Regional Trial Court, Branch 115, Pasay City, became final and executory after the lapse of the 15th day from
the PEZA’s receipt of the trial court’s decision.  The denial of the petition for injunction became final and
219

executory.

IV.

The remedy of a taxpayer depends on the

stage in which the local government unit
is enforcing its authority to impose real
property taxes

The proper remedy of a taxpayer depends on the stage in which the local government unit is enforcing its
authority to collect real property taxes. For the guidance of the members of the bench and the bar, we reiterate
the taxpayer’s remedies against the erroneous or illegal assessment of real property taxes.

Exhaustion of administrative remedies under the Local Government Code is necessary in cases of erroneous
assessments where the correctness of the amount assessed is assailed. The taxpayer must first pay the tax
then file a protest with the Local Treasurer within 30 days from date of payment of tax.  If protest is denied or
220

upon the lapse of the 60-day period to decide the protest, the taxpayer may appeal to the Local Board of
Assessment Appeals within 60 days from the denial of the protest or the lapse of the 60-day period to decide
the protest.  The Local Board of Assessment Appeals has 120 days to decide the appeal.
221 222

If the taxpayer is unsatisfied withthe Local Board’s decision, the taxpayer may appeal before the Central Board
of Assessment Appeals within 30 days from receipt of the Local Board’s decision. 223

The decision of the Central Board of Assessment Appeals is appealable before the Court of Tax Appeals En
Banc.  The appeal before the Court of Tax Appeals shall be filed following the procedure under Rule 43 of the
224

Rules of Court. 225

The Court of Tax Appeals’ decision may then be appealed before this court through a petition for review on
certiorari under Rule 45 of the Rules of Court raising pure questions of law. 226

In case of an illegal assessment where the assessment was issued without authority, exhaustion of
administrative remedies is not necessary and the taxpayer may directly resort to judicial action.  The taxpayer
227

shall file a complaint for injunction before the Regional Trial Court  to enjoin the local government unit from
228

collecting real property taxes.

The party unsatisfied with the decision of the Regional Trial Court shall file an appeal, not a petition for
certiorari, before the Court of Tax Appeals, the complaint being a local tax case decided by the Regional Trial
Court.  The appeal shall be filed within fifteen (15) days from notice of the trial court’s decision.
229

The Court of Tax Appeals’ decision may then be appealed before this court through a petition for review on
certiorari under Rule 45 of the Rules of Court raising pure questions of law. 230

In case the local government unit has issued a notice of delinquency, the taxpayer may file a complaint for
injunction to enjoin the impending sale of the real property at public auction. In case the local government unit
has already sold the property at public auction, the taxpayer must first deposit with the court the amount for
which the real property was sold, together with interest of 2% per month from the date ofsale to the time of the
institution of action. The taxpayer may then file a complaint to assail the validity of the public auction.  The
231

decisions of the Regional Trial Court in these cases shall be appealable before the Court of Tax Appeals,  and 232

the latter’s decisions appealable before this court through a petition for review on certiorari under Rule 45 of the
Rules of Court. 233

V.

The PEZA is exempt from payment of

real property taxes

The jurisdictional errors in this case render these consolidated petitions moot. We do not review void decisions
rendered without jurisdiction.

However, the PEZA alleged that several local government units, including the City of Baguio and the Province
of Cavite, have issued their respective real property tax assessments against the PEZA. Other local
government units will likely follow suit, and either the PEZA or the local government units taxing the PEZA may
file their respective actions against each other.

In the interest of judicial economy  and avoidance of conflicting decisions involving the same issues,  we
234 235

resolve the substantive issue of whether the PEZA is exempt from payment of real property taxes.

Real property taxes are annual taxes levied on real property such as lands, buildings, machinery, and other
improvements not otherwise specifically exempted under the Local Government Code.  Real property taxes
236

are ad valorem, with the amount charged based on a fixed proportion of the value of the property.  Under the
237

law, provinces, cities, and municipalities within the Metropolitan Manila Area have the power to levy real
property taxes within their respective territories. 238

The general rule is that real properties are subject to real property taxes. This is true especially since the Local
Government Code has withdrawn exemptions from real property taxes of all persons, whether natural or
juridical:

SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment of real property
tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;
 (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, nonprofit
or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively
used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water
districts and government-owned or – controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938; and

(e) Machinery and equipment usedfor pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property taxes previously granted to, or
presently enjoyed by, all persons, whether natural or juridical, including government-owned or -controlled
corporations are hereby withdrawn upon the effectivity of this Code. (Emphasis supplied)

The person liable for real property taxes is the "taxable person who had actual or beneficial use and
possession [of the real property for the taxable period,] whether or not [the person owned the property for the
period he or she is being taxed]."
239

The exceptions to the rule are provided in the Local Government Code. Under Section 133(o), local
government units have no power to levy taxes of any kind on the national government, its agencies and
instrumentalities and local government units:

SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided
herein, the exercise of taxing powers of provinces, cities, municipalities, and barangays shall not extend to the
levy of the following:

....

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local
government units.

Specifically on real property taxes, Section 234 enumerates the persons and real property exempt from real
property taxes:

SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment of real property
tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques,

nonprofitor religious cemeteries and all lands, buildings, and improvements actually, directly, and
exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water
districts and government-owned or – controlled corporations engaged in the supply and distribution of
water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.
Except as provided herein, any exemption from payment of real property tax previously granted to, or presently
enjoyed by, all persons, whether natural or juridical, including all government-owned or -controlled corporations
are hereby withdrawn upon the effectivity of this Code. (Emphasis supplied)

For persons granted tax exemptions or incentives before the effectivity of the Local Government Code, Section
193 withdrew these tax exemption privileges. These persons consist of both natural and juridical persons,
including government-owned or controlled corporations:

SEC. 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this code, tax exemptions
or incentives granted to or presently enjoyed by all persons, whether natural or juridical, including government-
owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. 6938,
non stock and non profit hospitals and educational institutions, are hereby withdrawn upon effectivity of this
Code.

As discussed, Section 234 withdrew all tax privileges with respect to real property taxes. Nevertheless, local
government units may grant tax exemptions under such terms and conditions asthey may deem necessary:

SEC. 192. Authority to Grant Tax Exemption Privileges. – Local government units may, through ordinances
duly approved, grant tax exemptions, incentives or reliefs under such terms and conditions as they may deem
necessary.

In Mactan Cebu International Airport Authority v. Hon. Marcos,  this court classified the exemptions from real
240

property taxes into ownership, character, and usage exemptions. Ownership exemptions are exemptions based
on the ownership of the real property. The exemptions of real property owned by the Republic of the
Philippines, provinces, cities, municipalities, barangays, and registered cooperatives fall under this
classification.  Character exemptions are exemptions based on the character of the real property. Thus, no
241

real property taxes may be levied on charitable institutions, houses and temples of prayer like churches,
parsonages, or convents appurtenant thereto, mosques, and non profitor religious cemeteries. 242

Usage exemptions are exemptions based on the use of the real property. Thus, no real property taxes may be
levied on real property such as: (1) lands and buildings actually, directly, and exclusively used for religious,
charitable or educational purpose; (2) machineries and equipment actually, directly and exclusively used by
local water districts or by government-owned or controlled corporations engaged in the supply and distribution
of water and/or generation and transmission of electric power; and (3) machinery and equipment used for
pollution control and environmental protection. 243

Persons may likewise be exempt from payment of real properties if their charters, which were enacted or
reenacted after the effectivity of the Local Government Code, exempt them payment of real property taxes. 244

V.

(A) The PEZA is an instrumentality of the national government

An instrumentality is "any agency of the National Government, not integrated within the department framework,
vested with special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a charter." 245

Examples of instrumentalities of the national government are the Manila International Airport Authority,  the 246

Philippine Fisheries Development Authority,  the Government Service Insurance System,  and the Philippine
247 248

Reclamation Authority.  These entities are not integrated within the department framework but are
249

nevertheless vested with special functions to carry out a declared policy of the national government.

Similarly, the PEZA is an instrumentality of the national government. It is not integrated within the department
framework but is an agency attached to the Department of Trade and Industry.  Book IV, Chapter 7, Section
250

38(3)(a) of the Administrative Code of 1987 defines "attachment": SEC. 38. Definition of Administrative
Relationship.– Unless otherwise expressly stated in the Code or in other laws defining the special relationships
of particular agencies, administrative relationships shall be categorized and defined as follows:

....

(3) Attachment.– (a) This refers to the lateral relationship between the department or its equivalent and the
attached agency or corporation for purposes of policy and program coordination. The coordination may be
accomplished by having the department represented in the governing board of the attached agency or
corporation, either as chairman or as a member, with or without voting rights, if this is permitted by the charter;
having the attached corporation or agency comply with a system of periodic reporting which shall reflect the
progress of the programs and projects; and having the department or its equivalent provide general policies
through its representative in the board, which shall serve as the framework for the internal policies of the
attached corporation or agency[.]

Attachment, which enjoys "a larger measure of independence"  compared with other administrative
251

relationships such as supervision and control, is further explained in Beja, Sr. v. Court of Appeals: 252

An attached agency has a larger measure of independence from the Department to which it is attached than
one which is under departmental supervision and control or administrative supervision. This is borne out by the
"lateral relationship" between the Department and the attached agency. The attachment is merely for "policy
and program coordination." With respect to administrative matters, the independence of an attached agency
from Departmental control and supervision is further reinforced by the fact that even an agency under a
Department’s administrative supervision is free from Departmental interference with respect to appointments
and other personnel actions "in accordance with the decentralization of personnel functions" under the
Administrative Code of 1987. Moreover, the Administrative Code explicitly provides that Chapter 8 of Book IV
on supervision and control shall not apply to chartered institutions attached to a Department. 253

With the PEZA as an attached agency to the Department of Trade and Industry, the 13-person PEZA Board is
chaired by the Department Secretary.  Among the powers and functions of the PEZA is its ability to coordinate
254

with the Department of Trade and Industry for policy and program formulation and implementation.  In 255

strategizing and prioritizing the development of special economic zones, the PEZA coordinates with the
Department of Trade and Industry. 256

The PEZA also administers its own funds and operates autonomously, with the PEZA Board formulating and
approving the PEZA’s annual budget.  Appointments and other personnel actions in the PEZA are also free
257

from departmental interference, with the PEZA Board having the exclusive and final authority to promote,
transfer, assign and reassign officers of the PEZA. 258

As an instrumentality of the national government, the PEZA is vested with special functions or jurisdiction by
law. Congress created the PEZA to operate, administer, manage and develop special economic zones in the
Philippines.  Special economic zones are areas with highly developed or which have the potential to be
259

developed into agro-industrial, industrial tourist/recreational, commercial, banking, investment and financial
centers.  By operating, administering, managing, and developing special economic zones which attract
260

investments and promote use of domestic labor, the PEZA carries out the following policy of the Government:
SECTION 2. Declaration of Policy. — It is the declared policy of the government to translate into practical
realities the following State policies and mandates in the 1987 Constitution, namely:

(a) "The State recognizes the indispensable role of the private sector, encourages private enterprise,
and provides incentives to needed investments." (Sec. 20, Art. II)

(b) "The State shall promote the preferential use of Filipino labor, domestic materials and locally
produced goods, and adopt measures that help make them competitive." (Sec. 12, Art. XII) In
pursuance of these policies, the government shall 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 through measures that shall effectively attract legitimate and productive foreign
investments. 261

Being an instrumentality of the national government, the PEZA cannot be taxed by local government units.

Although a body corporate vested with some corporate powers,  the PEZA is not a government-owned or
262

controlled corporation taxable for real property taxes.

Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines the term "government-
owned or controlled corporation":

SEC. 2. General Terms Defined. – Unless the specific words of the text, or the context as a whole, or a
particular statute, shall require a different meaning:

....

(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock
corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and
owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the
case of stock corporations, to the extent of at least fifty-one (51) per cent of its capital stock: Provided, That
government owned or controlled corporations may be further categorized by the Department of the Budget, the
Civil Service Commission, and the Commission on Audit for purposes of the exercise and discharge of their
respective powers, functions and responsibilities with respect to such corporations.

Government entities are created by law, specifically, by the Constitution or by statute. In the case of
government-owned or controlled corporations, they are incorporated by virtue of special charters  to participate
263

in the market for special reasons which may be related to dysfunctions or inefficiencies of the market structure.
This is to adjust reality as against the concept of full competition where all market players are price takers.
Thus, under the Constitution, government-owned or controlled corporations are created in the interest of the
common good and should satisfy the test of economic viability.  Article XII, Section 16 of the Constitution
264

provides:

Section 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or established
by special charters in the interest of the common good and subject to the test of economic viability.

Economic viability is "the capacity to function efficiently in business."  To be economically viable, the entity
265

"should not go into activities which the private sector can do better." 266

To be considered a government-owned or controlled corporation, the entity must have been organized as a
stock or non-stock corporation. 267

Government instrumentalities, on the other hand, are also created by law but partake of sovereign functions.
When a government entity performs sovereign functions, it need not meet the test of economic viability. In
Manila International Airport Authority v. Court of Appeals,  this court explained:
268

In contrast, government instrumentalities vested with corporate powers and performing governmental orpublic
functions need not meet the test of economic viability. These instrumentalities perform essential public services
for the common good, services that every modern State must provide its citizens. These instrumentalities need
not be economically viable since the government may even subsidize their entire operations. These
instrumentalities are not the "government-owned or controlled corporations" referred to in Section 16, Article XII
of the 1987 Constitution.
Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested
with corporate powers but performing essential governmental or public functions. Congress has plenary
authority to create government instrumentalities vested with corporate powers provided these instrumentalities
perform essential government functions or public services. However, when the legislature creates through
special charters corporations that perform economic or commercial activities, such entities — known as
"government-owned or controlled corporations" — must meetthe test of economic viability because they
compete in the market place.

....

Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional
Commission the purpose of this test, as follows:

MR. OPLE: Madam President, the reason for this concern is really that when the government creates a
corporation, there is a sense in which this corporation becomes exempt from the test of economic performance.
We know what happened in the past. If a government corporation loses, then it makes its claim upon the
taxpayers' money through new equity infusions from the government and what is always invoked is the
common good. That is the reason why this year, out of a budget of ₱115 billion for the entire government,
about ₱28 billion of this will go into equity infusions to support a few government financial institutions. And this
is all taxpayers' money which could have been relocated to agrarian reform, to social services like health and
education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the
drain.

Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this
becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of
meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committee's
consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the
standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good.

....

Clearly, the test of economic viability does not apply to government entities vested with corporate powers and
performing essential public services. The State is obligated to render essential public services regardless of the
economic viability of providing such service. The noneconomic viability of rendering such essential public
service does not excuse the State from withholding such essential services from the public.  (Emphases and
269

citations omitted)

The law created the PEZA’s charter. Under the Special Economic Zone Act of 1995, the PEZA was established
primarily to perform the governmental function of operating,administering, managing, and developing special
economic zones to attract investments and provide opportunities for preferential use of Filipino labor.

Under its charter, the PEZA was created a body corporate endowed with some corporate powers. However, it
was not organized as a stock  or non-stock  corporation. Nothing in the PEZA’s charter provides that the
270 271

PEZA’s capital is divided into shares.  The PEZA also has no members who shall share in the PEZA’s profits.
272

The PEZA does not compete with other economic zone authorities in the country. The government may even
subsidize the PEZA’s operations. Under Section 47 of the Special Economic Zone Act of 1995, "any sum
necessary to augment [the PEZA’s] capital outlay shall be included in the General Appropriations Act to be
treated as an equity of the national government." 273

The PEZA, therefore, need not be economically viable. It is not a government-owned or controlled corporation
liable for real property taxes.

V. (B)

The PEZA assumed the non-profit character, including the tax exempt status, of the EPZA
The PEZA’s predecessor, the EPZA, was declared non-profit in character with all its revenues devoted for its
development, improvement, and maintenance. Consistent with this non-profit character, the EPZA was
explicitly declared exempt from real property taxes under its charter. Section 21 of Presidential Decree No. 66
provides:

Section 21. Non-profit Character of the Authority; Exemption from Taxes. The Authority shall be non-profit and
shall devote and use all its returns from its capital investment, as well as excess revenues from its operations,
for the development, improvement and maintenance and other related expenditures of the Authority to pay its
indebtedness and obligations and in furtherance and effective implementation of the policy enunciated in
Section 1 of this Decree. In consonance therewith, the Authority is hereby declared exempt:

....

(b) From all income taxes, franchise taxes, realty taxes and all other kinds of taxes and licenses to be paid to
the National Government, its provinces, cities, municipalities and other government agencies and
instrumentalities[.]

The Special Economic Zone Act of 1995, on the other hand, does not specifically exempt the PEZA from
payment of real property taxes.

Nevertheless, we rule that the PEZA is exempt from real property taxes by virtue of its charter. A provision in
the Special Economic Zone Act of 1995 explicitly exempting the PEZA is unnecessary. The PEZA assumed the
real property exemption of the EPZA under Presidential Decree No. 66.

Section 11 of the Special Economic Zone Act of 1995 mandated the EPZA "to evolve into the PEZA in
accordance with the guidelines and regulations set forth in an executive order issued for this purpose."
President Ramos then issued Executive Order No. 282 in 1995, ordering the PEZA to assume the EPZA’s
powers, functions, and responsibilities under Presidential Decree No. 66 not inconsistent with the Special
Economic Zone Act of 1995:

SECTION 1. Assumption of EPZA’s Powers and Functions by PEZA. All the powers, functions and
responsibilities of EPZA as provided under its Charter, Presidential Decree No. 66, as amended, insofar as
they are not inconsistent with the powers,functions and responsibilities of the PEZA, as mandated under
Republic Act No. 7916, shall hereafter be assumed and exercised by the PEZA. Henceforth, the EPZA shall be
referred to as the PEZA.

The following sections of the Special Economic Zone Act of 1995 provide for the PEZA’s powers,functions, and
responsibilities:

SEC. 5. Establishment of ECOZONES. – To ensure the viability and geographical dispersal of ECOZONES
through a system of prioritization, the following areas are initially identified as ECOZONES, subject to the
criteria specified in Section 6:

....

The metes and bounds of each ECOZONE are to be delineated and more particularly described in a
proclamation to be issued by the President of the Philippines, upon the recommendation of the Philippine
Economic Zone Authority (PEZA), which shall be established under this Act, in coordination with the municipal
and / or city council, National Land Use Coordinating Committee and / or the Regional Land Use Committee.

SEC. 6. Criteria for the Establishment of Other ECOZONES. – In addition to the ECOZONES identified in
Section 5 of this Act, other areas may be established as ECOZONES in a proclamation to be issued by the
President of the Philippines subject to the evaluation and recommendation of the PEZA, based on a detailed
feasibility and engineering study which must conform to the following criteria:
 (a) The proposed area must be identified as a regional growth center in the Medium-Term Philippine
Development Plan or by the Regional Development Council;

(b) The existence of required infrastructure in the proposed ECOZONE, such as roads, railways,
telephones, ports, airports, etc., and the suitability and capacity of the proposed site to absorb such
improvements;

(c) The availability of water source and electric power supply for use of the ECOZONE;

(d) The extent of vacant lands available for industrial and commercial development and future
expansion of the ECOZONE as well as of lands adjacent to the ECOZONE available for development
of residential areas for the ECOZONE workers;

(e) The availability of skilled, semi-skilled and non-skilled trainable labor force in and around the
ECOZONE;

(f) The area must have a significant incremental advantage over the existing economic zones and its
potential profitability can be established;

(g) The area must be strategically located; and

(h) The area must be situated where controls can easily be established to curtail smuggling activities.

Other areas which do not meet the foregoing criteria may be established as ECOZONES: Provided, That the
said area shall be developed only through local government and/or private sector initiative under any of the
schemes allowed in Republic Act No. 6957 (the build-operate-transfer law), and without any financial exposure
on the part of the national government: Provided, further, That the area can be easily secured to curtail
smuggling activities: Provided, finally, That after five (5) years the area must have attained a substantial degree
of development, the indicators of which shall be formulated by the PEZA.

SEC. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial, Commercial / Trading, Tourist, Investment

and Financial Community. - Within the framework of the Constitution, the interest of national sovereignty and
territorial integrity of the Republic, ECOZONE shall be developed, as much as possible, into a decentralized,
self-reliant and self-sustaining industrial, commercial/trading, agro-industrial, tourist, banking, financial and
investment center with minimum government intervention. Each ECOZONE shall be provided with
transportation, telecommunications, and other facilities needed to generate linkage with industries and
employment opportunitiesfor its own inhabitants and those of nearby towns and cities.

The ECOZONE shall administer itself on economic, financial, industrial, tourism development and such other
matters within the exclusive competence of the national government.

The ECOZONE may establish mutually beneficial economic relations with other entities within the country, or,
subject to the administrative guidance of the Department of Foreign Affairs and/or the Department of Trade and
Industry, with foreign entities or enterprises.

Foreign citizens and companies owned by non-Filipinos in whatever proportion may set up enterprises in the
ECOZONE, either by themselves or in joint venture with Filipinos in any sector of industry, international trade
and commerce within the ECOZONE. Their assets, profits and other legitimate interests shall be protected:
Provided, That the ECOZONE through the PEZA may require a minimum investment for any ECOZONE
enterprises in freely convertible currencies: Provided, further, That the new investment shall fall under the
priorities, thrusts and limits provided for in the Act.

SEC. 8. ECOZONE to be Operated and Managed as Separate Customs Territory. – The ECOZONE shall be
managed and operated by the PEZA as separate customs territory.
The PEZA is hereby vested with the authority to issue certificate of origin for products manufactured or
processed in each ECOZONE in accordance with the prevailing rules or origin, and the pertinent regulations of
the Department of Trade and Industry and/or the Department of Finance.

SEC. 9. Defense and Security. – The defense of the ECOZONE and the security of its perimeter fence shall be
the responsibility of the national government in coordination with the PEZA. Military forces sent by the national
government for the purpose of defense shall not interfere in the internal affairs of any of the ECOZONE and
expenditure for these military forces shall be borne by the national government. The PEZA may provide and
establish the ECOZONES’ internal security and firefighting forces.

SEC. 10. Immigration. – Any investor within the ECOZONE whose initial investment shall not be less than One
Hundred Fifty Thousand Dollars ($150,000.00), his/her spouse and dependent children under twenty-one (21)
years of age shall be granted permanent resident status within the ECOZONE. They shall have freedom of
ingress and egress to and from the ECOZONE without any need of special authorization from the Bureau of
Immigration.

The PEZA shall issue working visas renewable every two (2) years to foreign executives and other aliens,
processing highly-technical skills which no Filipino within the ECOZONE possesses, as certified by the
Department of Labor and Employment. The names of aliens granted permanent resident status and working
visas by the PEZA shall be reported to the Bureau of Immigration within thirty (30) days after issuance thereof.

SEC. 13. General Powers and Functions of the Authority. – The PEZA shall have the following powers and
functions:

(a) To operate, administer, manage and develop the ECOZONE according to the principles and
provisions set forth in this Act;

(b) To register, regulate and supervise the enterprises in the ECOZONE in an efficient and
decentralized manner;

(c) To coordinate with local government units and exercise general supervision over the development,
plans, activities and operations of the ECOZONES, industrial estates, export processing zones, free
trade zones, and the like;

(d) In coordination with local government units concerned and appropriate agencies, to
construct,acquire, own, lease, operate and maintain on its own or through contract, franchise, license,
bulk purchase from the private sector and build-operate-transfer scheme or joint venture, adequate
facilities and infrastructure, such as light and power systems, water supply and distribution systems,
telecommunication and transportation, buildings, structures, warehouses, roads, bridges, ports and
other facilities for the operation and development of the ECOZONE;

(e) To create, operate and/or contractto operate such agencies and functional units or offices of the
authority as it may deem necessary;

(f) To adopt, alter and use a corporate seal; make contracts, lease, own or otherwise dispose of
personal or real property; sue and be sued; and otherwise carry out its duties and functions as
provided for in this Act;

(g) To coordinate the formulation and preparation of the development plans of the different entities
mentioned above;

(h) To coordinate with the National Economic Development Authority (NEDA), the Department of
Trade and Industry (DTI), the Department of Science and Technology (DOST), and the local
government units and appropriate government agencies for policy and program formulation and
implementation; and
 (i) To monitor and evaluate the development and requirements of entities in subsection (a) and
recommend to the local government units or other appropriate authorities the location, incentives,
basic services, utilities and infrastructure required or to be made available for said entities.

SEC. 17. Investigation and Inquiries. – Upon a written formal complaint made under oath, which on its face
provides reasonable basis to believe that some anomaly or irregularity might have been committed, the PEZA
or the administrator of the ECOZONE concerned, shall have the power to inquire into the conduct of firms or
employees of the ECOZONE and to conduct investigations, and for that purpose may subpoena witnesses,
administer oaths, and compel the production of books, papers, and other evidences: Provided, That to arrive at
the truth, the investigator(s) may grant immunity from prosecution to any person whose testimony or whose
possessions of documents or other evidence is necessary or convenient to determine the truth in any
investigation conducted by him or under the authority of the PEZA or the administrator of the ECOZONE
concerned.

SEC. 21. Development Strategy of the ECOZONE. - The strategy and priority of development of each
ECOZONE established pursuant to this Act shall be formulated by the PEZA, in coordination with the
Department of Trade and Industry and the National Economic and Development Authority; Provided, That such
development strategy is consistent with the priorities of the national government as outlined in the medium-term
Philippine development plan. It shall be the policy of the government and the PEZA to encourage and provide
Incentives and facilitate private sector participation in the construction and operation of public utilities and
infrastructure in the ECOZONE, using any of the schemes allowed in Republic Act No. 6957 (the build-operate-
transfer law).

SEC. 22. Survey of Resources. The PEZA shall, in coordination with appropriate authorities and neighboring
cities and municipalities, immediately conduct a survey of the physical, natural assets and potentialities of the
ECOZONE areas under its jurisdiction.

SEC. 26. Domestic Sales. – Goods manufactured by an ECOZONE enterprise shall be made available for
immediate retail sales in the domestic market, subject to payment of corresponding taxes on the raw materials
and other regulations that may be adopted by the Board of the PEZA. However, in order to protect the domestic
industry, there shall be a negative list of Industries that willbe drawn up by the PEZA. Enterprises engaged in
the industries included in the negative list shall not be allowed to sell their products locally. Said negative list
shall be regularly updated by the PEZA.

The PEZA, in coordination with the Department of Trade and Industry and the Bureau of Customs, shall jointly
issue the necessary implementing rules and guidelines for the effective Implementation of this section.

SEC. 29. Eminent Domain. – The areas comprising an ECOZONE may be expanded or reduced when
necessary. For this purpose, the government shall have the power to acquire, either by purchase, negotiation
or condemnation proceedings, any private lands within or adjacent to the ECOZONE for:

a. Consolidation of lands for zone development purposes;

b. Acquisition of right of way to the ECOZONE; and

c. The protection of watershed areas and natural assets valuable to the prosperity of the ECOZONE.

If in the establishment of a publicly-owned ECOZONE, any person or group of persons who has been
occupying a parcel of land within the Zone has to be evicted, the PEZA shall provide the person or group of
persons concerned with proper disturbance compensation: Provided, however, That in the case of displaced
agrarian reform beneficiaries, they shall be entitled to the benefits under the Comprehensive Agrarian Reform
Law, including but not limited to Section 36 of Republic Act No. 3844, in addition to a homelot in the relocation
site and preferential employment in the project being undertaken.
SEC. 32. Shipping and Shipping Register. – Private shipping and related business including private container
terminals may operate freely in the ECOZONE, subject only to such minimum reasonable regulations of local
application which the PEZA may prescribe.

The PEZA shall, in coordination with the Department of Transportation and Communications, maintain a
shipping register for each ECOZONE as a business register of convenience for ocean-going vessels and issue
related certification.

Ships of all sizes, descriptions and nationalities shall enjoy access to the ports of the ECOZONE, subject only
to such reasonable requirement as may be prescribed by the PEZA In coordination with the appropriate
agencies of the national government.

SEC. 33. Protection of Environment. - The PEZA, in coordination with the appropriate agencies, shall take
concrete and appropriate steps and enact the proper measure for the protection of the local environment.

SEC. 34. Termination of Business. - Investors In the ECOZONE who desire to terminate business or operations
shall comply with such requirements and procedures which the PEZA shall set, particularly those relating to the
clearing of debts. The assets of the closed enterprise can be transferred and the funds con be remitted out of
the ECOZONE subject to the rules, guidelines and procedures prescribed jointly by the Bangko Sentral ng
Pilipinas, the Department of Finance and the PEZA.

SEC. 35. Registration of Business Enterprises. - Business enterprises within a designated ECOZONE shall
register with the PEZA to avail of all incentives and benefits provided for in this Act.

SEC. 36. One Stop Shop Center. - The PEZA shall establish a one stop shop center for the purpose of
facilitating the registration of new enterprises in the ECOZONE. Thus, all appropriate government agencies that
are Involved In registering, licensing or issuing permits to investors shall assign their representatives to the
ECOZONE to attend to Investor’s requirements.

SEC. 39. Master Employment Contracts. - The PEZA, in coordination with the Department of Tabor and
Employment, shall prescribe a master employment contract for all ECOZONE enterprise staff members and
workers, the terms of which provide salaries and benefits not less than those provided under this Act, the
Philippine Labor Code, as amended, and other relevant issuances of the national government.

SEC. 41. Migrant Worker. - The PEZA, in coordination with the Department of Labor and Employment, shall
promulgate appropriate measures and programs leading to the expansion of the services of the ECOZONE to
help the local governments of nearby areas meet the needs of the migrant workers.

SEC. 42. Incentive Scheme. - An additional deduction equivalent to one- half (1/2) of the value of training
expenses incurred in developing skilled or unskilled labor or for managerial or other management development
programs incurred by enterprises in the ECOZONE can be deducted from the national government's share of
three percent (3%) as provided In Section 24.

The PEZA, the Department of Labor and Employment, and the Department of Finance shall jointly make a
review of the incentive scheme provided In this section every two (2) years or when circumstances so warrant.

SEC. 43. Relationship with the Regional Development Council. - The PEZA shall determine the development
goals for the ECOZONE within the framework of national development plans, policies and goals, and the
administrator shall, upon approval by the PEZA Board, submit the ECOZONE plans, programs and projects to
the regional development council for inclusion in and as inputs to the overall regional development plan.

SEC. 44. Relationship with the Local Government Units. - Except as herein provided, the local government
units comprising the ECOZONE shall retain their basic autonomy and identity. The cities shall be governed by
their respective charters and the municipalities shall operate and function In accordance with Republic Act No.
7160, otherwise known as the Local Government Code of 1991.
SEC. 45. Relationship of PEZA to Privately-Owned Industrial Estates. – Privately-owned industrial estates shall
retain their autonomy and independence and shall be monitored by the PEZA for the implementation of
incentives.

SEC. 46. Transfer of Resources. - The relevant functions of the Board of Investments over industrial estates
and agri-export processing estates shall be transferred to the PEZA. The resources of government owned
Industrial estates and similar bodies except the Bases Conversion Development Authority and those areas
identified under Republic Act No. 7227, are hereby transferred to the PEZA as the holding agency. They are
hereby detached from their mother agencies and attached to the PEZA for policy, program and operational
supervision.

The Boards of the affected government-owned industrial estates shall be phased out and only the management
level and an appropriate number of personnel shall be retained.

Government personnel whose services are not retained by the PEZA or any government office within the
ECOZONE shall be entitled to separation pay and such retirement and other benefits theyare entitled to under
the laws then in force at the time of their separation: Provided, That in no case shall the separation pay be less
than one and one-fourth (1 1/4) month of every year of service.

The non-profit character of the EPZA under Presidential Decree No. 66 is not inconsistent with any of the
powers, functions, and responsibilities of the PEZA. The EPZA’s non-profit character, including the EPZA’s
exemption from real property taxes, must be deemed assumed by the PEZA.

In addition, the Local Government Code exempting instrumentalities of the national government from real
property taxes was already in force  when the PEZA’s charter was enacted in 1995. It would have been
274

redundant to provide for the PEZA’s exemption in its charter considering that the PEZA is already exempt by
virtue of Section 133(o) of the Local Government Code.

As for the EPZA, Commonwealth Act No. 470 or the Assessment Law was in force when the EPZA’s charter
was enacted. Unlike the Local Government Code, Commonwealth Act No. 470 does not contain a provision
specifically exempting instrumentalities of the national government from payment of real property taxes.  It was
275

necessary to put an exempting provision in the EPZA’s charter.

Contrary to the PEZA’s claim, however, Section 24 of the Special Economic Zone Act of 1995 is not a basis for
the PEZA’s exemption. Section 24 of the Special Economic Zone Act of 1995 provides:

Sec. 24. Exemption from National and Local Taxes. — Except for real property taxes on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating within the
ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises within the
ECOZONEshall be paid and remitted as follows:

(a) Three percent (3%) to the National Government;

(b) Two percent (2%) which shall be directly remitted by the business establishments to the treasurer's
office of the municipality or city where the enterprise is located. (Emphasis supplied)

Tax exemptions provided under Section 24 apply only to business establishments operating within economic
zones. Considering that the PEZA is not a business establishment but an instrumentality performing
governmental functions, Section 24 is inapplicable to the PEZA. Also, contrary to the PEZA’s claim, developers
ofeconomic zones, whether public or private developers, are liable for real property taxes on lands they own.
Section 24 does not distinguish between a public and private developer. Thus, courts cannot
distinguish.  Unless the public developer is exempt under the Local Government Code or under its charter
276

enacted after the Local Government Code’s effectivity, the public developer must pay real property taxes on
their land.
At any rate, the PEZA cannot be taxed for real property taxes even if it acts as a developer or operator of
special economic zones. The PEZA is an instrumentality of the national government exempt from payment of
real property taxes under Section 133(o) of the Local Government Code. As this court said in Manila
International Airport Authority, "there must be express language in the law empowering local governments to
tax national government instrumentalities. Any doubt whether such power exists is resolved against local
governments." 277

V. (C)

Real properties under the PEZA’s title are owned by the Republic of the Philippines

Under Section 234(a) of the LocalGovernment Code, real properties owned by the Republic of the Philippines
are exempt from real property taxes:

SEC. 234. Exemptions from Real Property Tax. – The following are exempted from payment of real property
tax:

(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable person[.]

Properties owned by the state are either property of public dominion or patrimonial property. Article 420 of the
Civil Code of the Philippines enumerates property of public dominion:

Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;

(2) Those which belong to the State, without belonging for public use, and are intended for some
public service or for the development of the national wealth.

Properties of public dominion are outside the commerce of man. These properties are exempt from "levy,
encumbrance or disposition through public or private sale."  As this court explained in Manila International
278

Airport Authority:

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through
public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is
void for being contrary to public policy. Essential public services will stop if properties of public dominion are
subject to encumbrances, foreclosures and auction sale[.] 279

On the other hand, all other properties of the state that are not intended for public use or are not intended for
some public service or for the development of the national wealth are patrimonial properties. Article 421 of the
Civil Code of the Philippines provides:

Art. 421. All other property of the State, which is not of the character stated in the preceding article, is
patrimonial property.

Patrimonial properties are also properties of the state, but the state may dispose of its patrimonial property
similar to private persons disposing of their property. Patrimonial properties are within the commerce of man
and are susceptible to prescription, unless otherwise provided. 280

In this case, the properties sought to be taxed are located in publicly owned economic zones. These economic
zones are property of public dominion. The City seeks to tax properties located within the Mactan Economic
Zone,  the site of which was reserved by President Marcos under Proclamation No. 1811, Series of 1979.
281

Reserved lands are lands of the public domain set aside for settlement or public use, and for specific public
purposes by virtue of a presidential proclamation.  Reserved lands are inalienable and outside the commerce
282

of man,  and remain property of the Republic until withdrawn from publicuse either by law or presidential
283

proclamation.  Since no law or presidential proclamation has been issued withdrawing the site of the Mactan
284

Economic Zone from public use, the property remains reserved land.

As for the Bataan Economic Zone, the law consistently characterized the property as a port. Under Republic
Act No. 5490, Congress declared Mariveles, Bataan "a principal port of entry"  to serve as site of a foreign
285

trade zone where foreign and domestic merchandise may be brought in without being subject to customs and
internal revenue laws and regulations of the Philippines. 286

Section 4 of Republic Act No. 5490 provided that the foreign trade zone in Mariveles, Bataan "shall at all times
remain to be owned by the Government":

SEC. 4. Powers and Duties.– The Foreign Trade Zone Authority shall have the following powers and duties:

a. To fix and delimit the site of the Zone which at all times remain to be owned by the Government, and which
shall have a contiguous and adequate area with well defined and policed boundaries, with adequate enclosures
to segregate the Zone from the customs territory for protection of revenues, together with suitable provisions for
ingress and egress of persons, conveyance, vessels and merchandise sufficient for the purpose of this Act[.]
(Emphasis supplied)

The port in Mariveles, Bataan then became the Bataan Economic Zone under the Special Economic Zone Act
of 1995.  Republic Act No. 9728 then converted the Bataan Economic Zone into the Freeport Area of Bataan.
287 288

A port of entry, where imported goods are unloaded then introduced in the market for public consumption, is
considered property for public use. Thus, Article 420 of the Civil Code classifies a port as property of public
dominion. The Freeport Area of Bataan, where the government allows tax and duty-free importation of
goods,  is considered property of public dominion. The Freeport Area of Bataan is owned by the state and
289

cannot be taxed under Section 234(a) of the Local Government Code.

Properties of public dominion, even if titled in the name of an instrumentality as in this case, remain owned by
the Republic of the Philippines. If property registered in the name of an instrumentality is conveyed to another
person,the property is considered conveyed on behalf of the Republic of the Philippines. Book I, Chapter 12,
Section 48 of the Administrative Code of 1987 provides:

SEC. 48. Official Authorized to Convey Real Property. – Whenever real property of the government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by
the following:

....

(2) For property belonging to the Republic of the Philippines, but titled in the name of any political subdivision
orof any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis
supplied)

In Manila International Airport Authority, this court explained:

[The exemption under Section 234(a) of the Local Government Code] should be read in relation with Section
133(o) of the same Code, which prohibits local governments from imposing "[t]axes, fess or charges of any
kind on the National Government, its agencies and instrumentalitiesx x x." The real properties owned by the
Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the
National Government.The Administrative Code allows real property owned by the Republic to be titled in the
name of agencies or instrumentalities of the national government. Such real properties remained owned by the
Republic of the Philippines and continue to be exempt from real estate tax.
The Republic may grant the beneficialuse of its real property to an agency or instrumentality of the national
government. This happens when title of the real property is transferred to an agency or instrumentality even as
the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax
exemption/ Section 234(a) of the Local Government Code states that real property owned by the Republic
loses its tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person." . . .  (Emphasis in the original; italics supplied)
290

Even the PEZA’s lands and buildings whose beneficial use have been granted to other persons may not be
taxed with real property taxes. The PEZA may only lease its lands and buildings to PEZA-registered economic
zone enterprises and entities.  These PEZA-registered enterprises and entities, which operate within economic
291

zones, are not subject to real property taxes. Under Section 24 of the Special Economic Zone Act of 1995, no
taxes, whether local or national, shall be imposed on all business establishments operating within the economic
zones: SEC. 24. Exemption from National and Local Taxes. – Except for real property on land owned by
developers, no taxes, local and national, shall be imposed on business establishments operating within the
ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises within the
ECOZONE shall be paid and remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurer’s office of
the municipality or city where the enterprise is located.  (Emphasis supplied)
292

In lieu of revenues from real property taxes, the City of Lapu-Lapu collects two-fifths of 5% final tax on gross
income paid by all business establishments operating withinthe Mactan Economic Zone:

SEC. 24. Exemption from National and Local Taxes. – Except for real property on land owned by developers,
no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In
lieu thereof, five percent (5%) of the gross income earned by all business enterprises within the ECOZONE
shall be paid and remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurer’s
office of the municipality or city where the enterprise is located.  (Emphasis supplied)
293

For its part, the Province of Bataan collects a fifth of the 5% final tax on gross income paid by all business
establishments operating within the Freeport Area of Bataan:

Section 6. Imposition of a Tax Rate of Five Percent (5%) on Gross Income Earned. - No taxes, local and
national, shall be imposed on business establishments operating withinthe FAB. In lieu thereof, said business
establishments shall pay a five percent (5%) final tax on their gross income earned in the following
percentages:

(a) One per centum (1%) to the National Government;

(b) One per centum (1%) to the Province of Bataan;

(c) One per centum (1%) to the treasurer's office of the Municipality of Mariveles; and

(d) Two per centum (2%) to the Authority of the Freeport of Area of Bataan.  (Emphasis supplied)
294

Petitioners, therefore, are not deprived of revenues from the operations of economic zones within their
respective territorial jurisdictions.
The national government ensured that loeal government units comprising economic zones shall retain their
basic autonomy and identity.295

All told, the PEZA is an instrumentality of the national government.  Furthermore, the lands owned by the PEZA
1âwphi1

are real properties owned by the Republic of the Philippines. The City of Lapu-Lapu and the Province of Bataan
cannot collect real property taxes from the PEZA.

WHEREFORE, the consolidated petitions are DENIED.

SO ORDERED.

PERALTA, J.:
For this Court's consideration is the Petition for Review on Certiorari,[1]under
Rule 45 of the Rules of Court, dated July 4, 2011 of petitioner Romeo Pucyutan,
for and in behalf of the City of Muntinlupa as its City Treasurer, seeking the
reversal of the Decision[2] dated October 22, 2010 and Resolution[3] dated May 27,
2011, both of the Court of Appeals (CA) in CA G.R. SP No. 108266 that affirmed
the Orders dated September 4, 2006[4]and October 14, 2008[5] of the Regional
Trial Court (RTC) of Makati City ruling that respondent Manila Electric
Company, Inc. (MERALCO) was not furnished with a notice of assessment.

The facts follow.

MERALCO, a duly-organized Philippine corporation engaged in the distribution

of electricity, erected four (4) power-generating plants in Sucat, Muntinlupa,
namely, the Gardner I, Gardner II, Snyder I and Snyder II from 1969 to 1972.
Thereafter, on December 29, 1978, MERALCO sold all the said power-generating
plants, including their landsites, to the National Power Corporation
(NAPOCOR).

Sometime in 1985, the Assessor of Muntinlupa, while reviewing records

pertaining to assessment and collection of real property taxes, allegedly
discovered that for the period beginning January 1, 1976 to December 29, 1978,
MERALCO misdeclared and/or failed to declare for taxation purposes a number
of real properties consisting of several equipment and machineries found in the
earlier mentioned power-generating plants. The Municipal Assessor, upon its
review of the sale between MERALCO and NAPOCOR, found that the true value
of the machineries and equipment in said power plants were misdeclared, and
accordingly determined and assessed their value for taxation purposes for the
years 1977 to 1978, as later reflected in Tax Declaration Nos. T-009005486 to T-
05506.
A certification of non-payment of real property taxes was issued, and notices of
delinquency were accordingly posted when MERALCO failed to pay taxes as
assessed by said tax declarations and, on October 4, 1990, the Municipal
Treasurer issued Warrants of Garnishment attaching MERALCO's bank deposits
in three (3) different banks equivalent to its unpaid real property taxes.

Thereafter, MERALCO filed before the RTC a Petition for Prohibition with prayer
for Writ of Preliminary Mandatory Injunction and/or Temporary Restraining
Order (TRO) which eventually reached this Court, and on June 29, 2004, [6] with
the then Acting Municipal Treasurer Nelia A. Barlis as respondent, this Court
rendered a Resolution that partly reads as follows:

This Court finds and so rules that the RTC committed grave abuse of
discretion amounting to excess or lack of jurisdiction in declaring that
[MERALCO] is not the taxpayer liable for the taxes due claimed by
[BARLIS]. Indeed, in its May 18, 2001 Decision, this Court ruled:

The fact that NAPOCOR is the present owner of the Sucat power plant
machineries and equipment does not constitute a legal barrier to the
collection of delinquent taxes from the previous owner, MERALCO, who
has defaulted in its payment. x x x
However, the Court holds that the RTC did not commit any grave abuse of
discretion when it denied [BARLIS1] motion to dismiss on the claim that
for [MERALCO's] failure to appeal from the 1986 notice of assessment of
the Municipal Assessor, the assessment had become final and enforceable
under Section 64 of P.D. No. 454.

Section 22 of P.D. No. 464 states that, upon discovery of real property, the
provincial, city or municipal assessor shall have an appraisal and
assessment of such real property in accordance with Section 5 of the law,
irrespective of any previous assessment or taxpayer's valuation thereon.
The provincial, city or municipal assessor is tasked to determine the
assessed value of the property meaning the value placed on taxable
property for ad valorem tax purposes. The assessed value multiplied by the
tax rate will produce the amount of tax due. It is synonymous to taxable
value.

An assessment fixes and determines the tax liability of a taxpayer. It is a

notice to the effect that the amount therein stated is due as tax and a
demand for payment thereof. The assessor is mandated under Section 27 of
the law to give written notice within thirty days of such assessment, to the
person in whose name the property is declared. The notice should indicate
the kind of property being assessed, its actual use and market value, the
assessment level and the assessed value. The notice may be delivered either
personally to such person or to the occupant in possession, if any, or by
mail, to the last known address of the person to be served, or through the
assistance of the barrio captain. The issuance of a notice of assessment by
the local assessor shall be his last action on a particular assessment. For
purposes of giving effect to such assessment, it is deemed made when the
notice is released, mailed or sent to a taxpayer. As soon as the notice is duly
served, an obligation arises on the part of the taxpayer to pay the amount
assessed and demanded.

If the taxpayer is not satisfied with the action of the local assessor in the
assessment of his property, he has the right, under Section 30 of P.D. No.
464, to appeal to the Local Board of Assessment Appeals by filing a verified
petition within sixty (60) days from service of said notice of assessment. If
the taxpayer fails to appeal in due course, the right of the local government
to collect the taxes due becomes absolute upon the expiration of such
period, with respect to the taxpayer's property. The action to collect the
taxes due is akin to an action to enforce a judgment. It bears stressing,
however, that Section 30 of P.D. No. 464 pertains to the assessment and
valuation of the property for purposes of real estate taxation. Such
provision does not apply where what is questioned is the imposition of the
tax assessed and who should shoulder the burden of the tax.

Comformably to Section 57 of P.D. No. 464, it is the local treasurer who is

tasked with collecting taxes due from the taxpayer. x x x

xxxx

In this case, [MERALCO] denied receiving copies of Tax Declarations Nos.

B-009-5501 to B-009-5494 prepared by the respondent Municipal Assessor
in 1985. In the face of [MERALCO's] denial, the respondent was burdened
to prove the service of the tax declarations on the petitioner. While the
respondent alleged in his Comment on the Petition at bar that the
Municipal Assessor furnished the petitioner with copies of the said tax
declarations on November 29, 1985, the only proof preferred by the
respondent to prove such claim was the receipt signed by a certain Basilio
Afuang dated November 29, 1985. The records foiled to show the
connection of Basilio Afuang to the petitioner, or that he was authorized by
the petitioner to receive the owner's copy of the said tax declaration from
the Office of the Municipal Assessor. We note that the respondent even
failed to append a copy of the said receipt in its motion to dismiss in the
trial court. Conformably, this Court, in its May 18, 2001 Decision, declared
as follows:

. . . The records, however, are bereft of any evidence showing actual

receipt by petitioner of the real property tax declaration sent by the
Municipal Assessor. However, the respondent in a Petition
for Certiorari (G.R. No. 100763) filed with this Court which later referred
the same to the Court of Appeals for resolution, narrated that "the
municipal assessor assessed and declared the afore-listed properties for
taxation purposes as of 28 November 1985." Significantly, in the same
petition, respondent referred to former Municipal Treasurer Norberto A.
San Mateo's notices to MERALCO, all dated 3 September 1986, as notices
of assessment and not notices of collection as it claims in this present
petition. Respondent cannot maintain diverse positions.

The question that now comes to [the] fore is, whether the respondent's
Letters to the [MERALCO] dated September 3, 1986 and October 31, 1989,
respectively, are mere collection letters as contended by the petitioner and
as held by this Court in its February 1, 2002 Resolution; or, as claimed by
the respondent and as ruled by this Court in its May 18, 2001 Decision, are
notices of assessment envisaged in Section 27 of P.D. No. 464.

xxxx

The Court, in its February 1, 2002 Resolution, upheld the petitioner's

contention and ruled that the aforequoted letter/notices are not notices of
assessment evisaged in Section 27 of P.D. No. 464. Thus:

xxxx

Upon careful review of the records of this case and the applicable
jurisprudence, we find that it is the contention of [MERALCO] and the
ruling of this Court in its February 1, 2002 Resolution which is correct.
Indeed, even the respondent admitted in his comment on the petition that:
Indeed, respondent did not issue any notice of assessment because
statutorily, he is not the proper officer obliged to do so. Under Chapter VII,
Sections 90 and 90-A of the Real Property Tax Code, the functions related
to the appraisal and assessment for tax purposes of real properties situated
within a municipality pertains to the Municipal Deputy Assessor and for the
municipalities within the Metropolitan Manila, the same is lodged,
pursuant to P.D. No. 921, on the Municipal Assessor.
Consequently then, Sections 30 and 64 of P.D. No. 464 had no application
in the case before the trial. The petitioner's action for prohibition was not
premature. Hence, the Court of Appeals erred in rendering judgment
granting the petition for certiorari of [BARLIS].

Moreover, the petitioner, in its petition for prohibition before the court a
quo, denied liability for the taxes claimed by the respondent, asserting that
if at all, it is the NAPOCOR, as the present owner of the
machineries/equipment, that should be held liable for such taxes. The
petitioner had further alleged that the assessment and collection of the said
taxes had already prescribed. Conformably to the ruling of this Court
in Testate Estate of him vs. City of Manila, Section 30 of P.D. No. 464 will
not apply.

The Court further rules that there is a need to remand the case
for further proceedings, in order for the trial court to sesolve the
factual issue of whether or not the Municipal Assessor served
copies of Tax Declarations Nos. B-009-05499 to B-009-05502 on
[MERALCO], and, if in the affirmative, when [MERALCO]
received the same; and to resolve the other issues raised by the
parties in their pleadings. It bears stressing that the Court is not
a trier of facts.[7]
Respondent therein, on August 5, 2004, moved for the reconsideration of this
Court's June 29, 2004 Resolution, and on March 29, 2005,[8] this Court, En Banc
"Denied with Finality," respondent Barlis' motion for reconsideration. The
resolution partly reads:

The Court shall now address the substantive issue raised by respondent
Municipal Treasurer in his motion for reconsideration: "The applicability of
Section 64 is not dependent on the resolution of the issue of whether or not
the petitioner was furnished with Notices of Assessment."

Section 64 of RPTC reads:

Sec. 64. Restriction upon power of court to impeach tax. - No court shall
entertain any suit assailing the validity of tax assessed under this Code until
the taxpayer shall have paid, under protest, the lax assessed against him
nor shall any court declare any tax invalid by reason of irregularities or
informalities in the proceedings of the officers charged with the assessment
or collection of taxes, or of failure to perform their duties within the time
specified for their performance unless such irregularities, informalities or
failure shall have impaired the substantial rights of the taxpayer; nor shall
any court declare any portion of the tax assessed under the provisions of
this Code invalid except upon condition that the taxpayer shall pay the just
amount of the tax, as determined by the court in the pending proceeding.
Respondent Municipal Treasurer adamantly asserts that whether or not
petitioner MERALCO was furnished with a notice of assessment is not
necessary for the applicability of the above provision. She hinges this
assertion on the use of the term "tax assessed," not "tax assessment," in the
above provision. This allegedly means that the moment a taxpayer is
charged with the payment of a tax, he must pay the same under protest
before he may file a suit in court.

Contrary to respondent Municipal Treasurer's stance, the determination of

whether or not petitioner MERALCO was furnished with a notice of
assessment is necessary in order that Section 64 of the RPTC would apply
to its petition for prohibition before the court a quo. It must be recalled that
the real property taxes sought to be collected by the City of Muntinlupa
from petitioner MERALCO are based on the finding that it "misdeclared
and/or failed to declare for taxation purposes a number of real properties,
consisting of several equipment and machineries, found in the power
plants." In other words, the said taxes are presumably based on "new or
revised assessments" made by the respondent Municipal Treasurer. In this
connection, Section 27 of the RPTC provides:

Sec. 27. Notification of New or Revised Assessments. - When a real

property is assessed for the first time or when an existing assessment is
increased or decreased, the provincial or city assessor shall within thirty
days give written notice of such new or revised assessment to the person in
whose name the property is declared. The notice may be delivered
personally to such person or to the occupant in possession, if any, or by
mail to the last known address of the person to be served, or through the
assistance of the barrio captain.
The term "tax assessed" in Section 67 should, thus, be read in relation to
Section 27 because the particular words, clauses and phrases in a law
should not be studied as detached and isolated expressions, but the whole
and every part thereof must be considered in fixing the meaning of any of
its parts and in order to produce a harmonious whole.

Section 64 stated that "no court shall entertain any suit assailing the
validity of tax assessed under this Code until the taxpayer shall have been
paid, under protest, the tax assessed against him . . ." However, in relation
to Section 27, the taxpayer's obligation to pay the tax assessed against him
arises only upon notification of such assessment. It bears reiterating that
the assessment fixes and determines the tax liability of the taxpayer. The
basic postulate of fairness thus requires that it is only upon notice of such
assessment that the obligation of the taxpayer to pay the same arises. As it
was explained in the Resolution of June 29, 2004:

An assessment fixes and determines the tax liability of a taxpayer. It is a

notice to the effect that the amount therein stated is due as tax and a
demand for payment thereof. The assessor is mandated under Section 27 of
the law to give written notice within thirty days of such assessment, to the
person in whose name the property is declared. The notice should indicate
the kind of property being assessed, its actual use and market value, the
assessment level and the assessed value. The notice may be delivered either
personally to such person or to the occupant in possession, if any, or by
mail, to the last known address of the person to be served, or through the
assistance of the barrio captain. The issuance of a notice of assessment by
the local assessor shall be his last action on a particular assessment. For
purposes of giving effect to such assessment, it is deemed made when the
notice is released, mailed or sent to the taxpayer. As soon as the notice is
duly served, an obligation arises on the part of the taxpayer to pay the
amount assessed and demanded.
It is in this light that the determination of whether or not petitioner
MERALCO was furnished with a notice of assessment is necessary in order
that Section 64 of the RPTC would apply to its petition for prohibition
before the court a quo. If petitioner MERALCO had been furnished with
such notice, then its obligation to pay the real property taxes assessed
against it has already accrued. Consequently, conformably with Section 64
of the RPTC, the court a quo has no jurisdiction over the petition for
prohibition for non-payment by petitioner MERALCO of the said taxes. As
a corollary, if petitioner MERALCO had not been furnished with such
notice, then its obligation to pay the taxes assessed against it has not, as yet,
accrued. The court a quo then has jurisdiction over petitioner MERALCO's
petition for prohibition despite non-payment of the said taxes because, in
such a case, Section 64 of the RPTC is not applicable.

As held in the Resolution of June 29, 2004, whether or not

petitioner MERALCO was furnished with a notice of assessment
is a question of fact. The determination thereof as well as the
other factual issues raised by the parties in their pleadings are
best undertaken by the court a quo.

ACCORDINGLY, the Motion for Reconsideration dated August 5, 2004 of

respondent Municipal Treasurer is DENIED with FINALITY.

The Regional Trial Court (RTC) of Makati City, Branch 66, is hereby
DIRECTED to conduct the necessary proceedings with DISPATCH and to
RESOLVE the said case within six (6) months from notice hereof.[9]
The case was, therefore, remanded to the RTC for the determination of the
question of fact of "whether or not petitioner MERALCO was furnished with a
notice of assessment x x x as well as other factual issues raised by the parties in
their pleadings x x x."

The RTC, on May 2, 2006, rendered a Decision[10] finding that the transmittal

letter of the then Office of the Municipal Assessor of Muntinlupa and the tax
declarations received by the petitioner, through its employee Basilio Afuang in
November 29, 1985, are effectively notices of assessment.

Dissatisfied, MERALCO filed a Motion for Reconsideration which the RTC

granted in an Order[11] dated September 4, 2006, stating the following, among
others:

After carefully considering the arguments of the parties in their respective

pleadings, the Court reconsiders and sets aside the Decision dated May 2,
2006.

The Court finds that the municipal assessor of Muntinlupa failed

to furnish MERALCO with the mandatory notice of assessment.
This is evident from the admission of respondent that aside from
Exhibits "1" to "10" and two letters dated 3 September 1986 and
13 October 1989, no other documents were received by
MERALCO in connection with this case (Order dated 24 January
2006). The Court likewise reverses its ruling that the
"transmittal letter" of the then Office of the Municipal Assessor
of Muntinlupa and the tax declarations received by the petitioner
through its employee Basilio Afuang on November 1985 arc
effectively "notices of assessment."

Article VII-K of Assessment Regulations No. 3-75 dated February

10, 1975 otherwise known as the "Rules and Regulations for the
Implementation of the Real Property Tax Code (P.D. 464),"
specifically paragraph (4) mandates that forms of notice of
assessment RPA No. 7 shall be used which may be
mimeographed by assessors for their use and that "the notice of
assessment and owner's copy of the tax declaration shall be
delivered or mailed to property owners within thirty days from
entry of tax declarations covering the assessment of property in
the Record of Assessments."

Undoubtedly, therefore, the two are separate and distinct; hence, the tax
declarations and the receipt issued for said tax declarations cannot be
considered effectively [sic] notices of assessment. Assessment is deemed
made when the notice to this effect is released, mailed or sent to the
taxpayer for the purpose of giving effect to said assessment. In other words,
without the notice of assessment, there is no valid assessment.

The Court finds that there is arbitrariness and denial of due process on the
part of the respondent in his attempts to collect real estate taxes from
MERALCO although its obligation to pay the same had not yet arisen due to
the failure of the municipal assessor to furnish MERALCO with the
mandated notice of assessment.

In the Resolution of March 29, 2005, this Court was mandated to

determine whether or not petitioner MERALCO was furnished with a notice
of assessment.

According to the Supreme Court -

x x x the determination of whether or not petitioner MERALCO was

furnished with a notice of assessment is necessary in order that Section 64
of the RPTC would apply to its petition for prohibition before the court a
quo. If petitioner MERALCO had been furnished with such notice, then its
obligation to pay the real property taxes assessed against it has already
accrued. Consequently, conformably with Section 64 of the RPTC, the
court a quo has no jurisdiction over the petition for prohibition for non-
payment of petitioner MERALCO of the said taxes. As corollary, if
petitioner MERALCO had not been furnished with such notice, then its
obligation to pay the taxes assessed against it has not, as yet, accrued. The
court a quo then has jurisdiction over petitioner MERALCO's petition for
prohibition despite non-payment of the said taxes because, in such a case,
Section 64 of the RPTC is not applicable.

As held in the Resolution of June 29, 2004, whether or not petitioner

MERALCO was furnished with a notice of assessment is a question of fact.
The determination thereof as well as the other factual issues raised by the
parties in their pleadings are best undertaken by the court a quo.
In view therefore of this Court's finding that petitioner MERALCO had not
been furnished with the notice of assessment, then its obligation to pay
property taxes has not accrued. This Court then has jurisdiction over
MERALCO's petition for prohibition. Likewise, MERALCO's obligation to
pay the taxes has not yet accrued and the three warrants of garnishment
against petitioner's bank deposits with the Philippines Commercial
International Bank (now Equitable PCI Bank)[,] Metropolitan Bank and
Trust Company, and Bank of Philippine Islands prematurely issued by the
respondent treasurer are null and void. Any withdrawal from the bank
deposits of MERALCO by virtue of said writs of garnishment is hereby
declared illegal.[12]
Petitioner filed a motion for reconsideration, but the same was denied in the
Order[13] dated October 14, 2008.

An appeal was, therefore, filed with the CA and in dismissing the appeal, the CA
ruled:

x x x Simply put, what the trial court was finally called upon to resolve is the
factual issue of "whether or not petitioner MERALCO was furnished with a
notice of assessment," and no longer "the factual issue of whether or not the
Municipal Assessor served copies of Tax Declaration Nos. B-009-05499 to
B-009-05502 on [MERALCO]."

xxxx

the Supreme Court could not have been clearer on its point that the tax
declaration here cannot be validly considered as a notice of assessment
under Section 27 of P.D. No. 464.

First, a tax declaration is issued pursuant to "Section 22 of P.D. No. 464"

which mandates "that upon discovery of real property, the provincial, city
or municipal assessor shall make an appraisal and assessment of such real
property in accordance with Section 5 of the law, irrespective of any
previous assessment on taxpayers valuation thereon," while a notice of
assessment is issued pursuant to Section 27 of the law which mandates the
"assessor x x x to give written notice within thirty days of such assessment,
to the person in whose name the property is declared."

Second, a tax declaration is mandated by Section 22 of P.D. No. 464 to be

issued "upon discovery" by the assessor of the "real property" to be
appraised and assessed, while a "written notice of assessment" as required
by Section 27 of the same law has to be issued by the assessor "within thirty
days" from "such assessment."

Third, no tax accrues as a result of the assessor's issuance of a tax

declaration, for at that time, the assessor is merely tasked by Section 22 of
the law "to determine the assessed value of the property, meaning, the
value placed on taxable property for ad valorem tax purposes." On the
other hand, the written notice of assessment is what ripens into a
demandable tax. It is for said reason that the notice must conform to the
standards set by Section 27 of P.D. No. 464 x x x.

xxxx

In sum, the RFC could not have erred when it found "that the municipal
assessor of Muntinlupa failed to furnish MERALCO with the mandatory
notice of assessment. This is evident from the admission of respondent that
aside from Exhibits "1" to "10" and two letters dated 3 September 1986 and
13 October 1989, no other documents were received by MERALCO in
connection with this case.

WHEREFORE, the instant appeal is DISMISSED for lack of merit. The

appealed Orders dated September 4, 2006 and October 14, 2008 are hereby
AFFIRMED.

SO ORDERED.[14]
Petitioner's motion for reconsideration was denied. Hence, this petition, in which
the petitioner raised the following grounds:

a. rejecting and/or failing to resolve the issues raised by Petitioner in the

subject case and resolved instead the issue it formulated in it The Assailed
Order is a coram non-judice judgment;

b. validating a trial court's resolution of "legal issues" in a proceeding its

jurisdiction over was explicitly directed by the Supreme Court to be
rectified to the resolution of the one "factual issue" stated in its said
directive;

c. legitimizing a trial court's absurd claim that it, a mere trial court, was
tasked by the Supreme Court to resolve and hand down for and in its behalf
the resolution of a purely legal issue, and

d. affirming orders and rulings of a trial court which disregarded and even
mocked doctrinal teachings of the Supreme Court.[15]
Petitioner contends that the CA failed to resolve the issues raised by petitioner in
his appeal, thus making the assailed decision coram non-judice. According to
petitioner, it is a general principle of law that a court cannot set itself in motion,
nor has it power to decide questions except as presented by the parties in their
pleadings and anything that is decided beyond them is coram non-judice and
void.

It is also the contention of petitioner that the final judgment of this Court in G.R.
No. 114231 was the Resolution it adopted on June 29, 2004, the verdict of which
has already been registered in its Book of Entry of Judgment on April 13, 2005.
In the said resolution, the petitioner claims that this Court ruled that a notice of
assessment is not an existing, fixed, and standard legal form, and what is
controlling is that it is a written advice that in effect or effectively informs the
taxpayer of the essential information the Real Property Tax Code under P.D. No.
464 obliges such taxpayer to be so informed.

Petitioner further claims that the RTC's first Decision (before it was overturned
by its resolution granting MERALCO's motion for reconsideration) dated May 2,
2006 abided by the directive of this Court's Resolution dated June 29, 2005
because it ruled that petitioner provided MERALCO with the Tax Declarations
specified in the said resolution of this Court before issuing the warrants of
garnishment. As such, petitioner insists, only this Court's Resolution dated June
29, 2004 and the RTC's Decision dated May 2, 2006 can put a resolution on this
case.
In its Comment,[16] MERALCO insists that the CA did not err in formulating the
sole issue to be resolved in its appeal: whether or not the RTC erred in holding in
its assailed Orders that "The City did not provide MERALCO with the notices of
assessment as envisaged in P.D. No. 464." MERALCO further adds that when the
case was called for pre-trial, the parties have agreed that pursuant to the
Resolution dated March 29, 2005 of this Court, the actual issue to be resolved is
whether or not MERALCO was furnished a notice of assessment by the City of
Muntinlupa.

Furthermore, MERALCO argues that while the tax declarations furnished it

contain the essential information such as the kind of property being assessed, its
actual use and market value, which a notice of assessment should indicate, said
tax declarations do not fix and determine the tax liability of the taxpayer and are
not notices to the taxpayers that the liability fixed and determined therein are
due as with a demand for the payment thereof.

MERALCO also points out that this Court's Resolution dated March 29, 2005 is a
clarification as to the directive on how to proceed with the case on remand.

The petition lacks merit.

A close reading of the arguments presented before this Court eventually and
ultimately raises the question of whether this Court's Resolution dated June 29,
2004 and Resolution dated March 29, 2005, contain the same ruling. As claimed
by the petitioner, in this Court's Resolution dated June 29, 2004, it ordered the
case to be remanded to the RTC for factual determination of whether MERALCO
received the "tax declarations" or not. If the same is true, then the RTC's Decision
dated May 2, 2006 should be upheld since it resolved the said issue. However,
based on the Order dated September 4, 2006 of the RTC and the Decision of the
CA, this Court's latter Resolution dated March 29, 2005 calls for the
determination of the RTC of whether or not a "notice of assessment" as
contemplated in RD. No. 464 was provided to MERALCO. Thus, only a
clarification from this Court as to its two earlier resolutions is necessary in order
to put the final nail in the coffin of this case.

While it is true that in this Court's Resolution dated June 29, 2004, it gave the
directive to the RTC to "resolve the factual issue of whether or not the Municipal
Assessor served copies of Tax Declarations Nos. B-009-05499 to B-009-05502
on the petitioner," this Court made it clear or clarified in its latter Resolution
dated March 29, 2005 resolving the motion for reconsideration of the Resolution
dated June 29, 2004 that the directive is for the RTC to determine whether or not
MERALCO was furnished with a notice of assessment. Specifically, this Court
ruled:

It is in this light that the determination of whether or not petitioner

MERALCO was furnished with a notice of assessment is necessary in order
that Section 64 of the RPTC would apply to its petition for prohibition
before the court a quo. If petitioner MERALCO had been furnished with
such notice, then its obligation to pay the real property taxes assessed
against it has already accrued. Consequently, conformably with Section 64
of the RPTC, the court a quo has no jurisdiction over the petition for
prohibition for non-payment of petitioner MERALCO of the said taxes. As a
corollary, if petitioner MERALCO had not been furnished with such notice,
then its obligation to pay the taxes assessed against it has not, as yet,
accrued. The court a quo then has jurisdiction over petitioner MERALCO's
petition for prohibition despite non-payment of Hie said taxes because, in
such a case, Section 64 of the RPTC is not applicable.

As held in the Resolution of June 29, 2004, whether or not

petitioner MERALCO was furnished with a notice of assessment
is a question of fact. The determination thereof as well as the
other factual issues raised by the parties in their pleadings are
best undertaken by the court a quo.[17]
Thus, as a guide, this Court, in the same Resolution dated March 29, 2005, went
on to discuss the nature and what constitutes a notice of assessment. The
following was thus, expounded:

Section 64 stated that "no court shall entertain any suit assailing the
validity of tax assessed under this Code until the taxpayer shall have paid,
under portest, the tax assessed against him . . ." However, in relation to
Section 27, the taxpayer's obligation to pay the tax assessed against him
arises only upon notification of such assessment. It bears reiterating that
the assessment fixes and determines the tax liability of the taxpayer. The
basic postulate of fairness thus requires that it is only upon notice of such
assessment that the obligation of the taxpayer to pay the same arises. As it
was explained in the Resolution of June 29, 2004:

An assessment fixes and determines the tax liability of a

taxpayer. It is a notice to the effect that the amount therein
stated is due as tax and a demand for payment thereof. The
assessor is mandated under Section 27 of the law to give written
notice within thirty days of such assessment, to the person in
whose name the property is declared. The notice should indicate
the kind of property being assessed, its actual use and market
value, the assessment level and the assessed value. The notice
may be delivered either personally to such person or to the
occupant in possession, if any, or by mail, to the last known
address of the person to be served, or through the assistance of
the barrio captain. The issuance of a notice of assessment by the
local assessor shall be his last action on a particular assessment.
For purposes of giving effect to such assessment, it is deemed
made when the notice is released, mailed or sent to the taxpayer.
As soon as the notice is duly served, an obligation arises on the
part of the taxpayer to pay the amount assessed and demanded.
[18]

It is therefore wrong for the petitioner to allege that among the fundamental
rulings in the Resolution dated June 29, 2004 is that a notice of assessment is not
an existing, fixed, and standard legal form and all that is legal and mandatory in
its physical feature or make-up is that it should be in writing, and so long as it is a
written advice that, in effect or effectively informs the taxpayer of the essential
information that the Real Property Tax Code under P.D. No. 464 obliges such
taxpayer to be so informed. A careful reading of the Resolution dated June 29,
2004 does not support such claim of the petitioner. The same Resolution
emphasized that a notice of assessment fixes and determines the tax liabilty of a
taxpayer and is a notice to the effect that the amount stated therein is due as tax
and a demand to pay thereof. This Court also reminded that a notice of
assessment as provided for in the Real Property Tax Code should effectively
inform the taxpayer of the value of a specific property, or proportion thereof
subject to tax, including the discovery, listing, classification, and appraisal of
properties. Nowhere does the resolution state that the tax declarations can be
considered as notices of assessment. Consequently, having thus discussed the
nature and contents of a notice of assessment, the factual issue of whether or not
Meralco was furnished with a notice of assessment is necessary to resolve the
issues of the case. Hence, being a question of fact, this Court deemed it necessary
to remand the case for its proper resolution. To reiterate, the RTC was called
upon to resolve the factual issue of whether or not Meralco was furnished with a
notice of assessment and not the factual issue of whether or not the Municipal
Assessor served copies of Tax Declaration Nos. B-009-05499 to B-009-05502 on
Meralco.

What is controlling, therefore, is the directive of this Court contained in its

Resolution dated March 29, 2005.

In finding that the municipal assessor of Muntinlupa failed to furnish MERALCO

with a notice of assessment, the RTC, in its Order dated September 4, 2006,
ruled, thus:

The Court finds that the municipal assessor of Muntinlupa failed to furnish
MERALCO with the mandatory notice of assessment. This is evident
from the admission of respondent that aside from Exhibits "1" to
"10" and two letters dated 3 September 1986 and 13 October
1989, no other documents were received by MERALCO in
connection with this case (Order dated 24 January 2006). The
Court likewise reverses its ruling that the "transmittal letter" of the then
Office of the Municipal Assessor of Muntinlupa and the tax declarations
received by the petitioner through its employee Basilio Afuang on
November 1985 (Exhibits "1" to "10") are effectively "notices of
assessment."

Article VII-K of Assessment Regulations No. 3-75 dated February 10, 1975
otherwise known as the "Rules and Regulations for the Implementation of
the Real Property Tax Code (P.D. 464)," specifically paragraph (4)
mandates that forms of notice of assessment RPA No. 7 shall be used which
may be mimeographed by assessors for their use and that "the notice of
assessment and owner's copy of the tax declaration shall be delivered or
mailed to property owners within thirty days from entry of tax declarations
covering the assessment of property in the Record of Assessments."

Undoubtedly, therefore, the two are separate and distinct; hence, the tax
declarations and the receipt issued for said tax declarations cannot be
considered effectively [sic] notices of assessment. Assessment is deemed
made when the notice to this effect is released, mailed or sent to the
taxpayer for the purpose of giving effect to said assessment. In other words,
without the notice of assessment, there is no valid assessment.[19]
In affirming the RTC, the CA did not err in ruling that the tax declarations cannot
be validly considered as a notice of assessment under Section 27 of P.D. No. 464,
thus:

First, a tax declaration is issued pursuant to "Section 22 of P.D. No. 464"

which mandates "that upon discovery of real property, the provincial, city
or municipal assessor shall make an appraisal and assessment of such real
property in accordance with Section 5 of the law, irrespective of any
previous assessment on taxpayers valuation thereon," while a notice of
assessment is issued pursuant to Section 27 of the law which mandates the
"assessor x x x to give written notice within thirty days of such assessment,
to the person in whose name the property is declared."
Second, a tax declaration is mandated by Section 22 of P.D. No. 464 to be
issued "upon discovery" by the assessor of the "real property" to be
appraised and assessed, while a "written notice of assessment" as required
by Section 27 of the same law has to be issued by the assessor "within thirty
days" from "such assessment."

Third, no tax accrues as a result of the assessor's issuance of a tax

declaration, for at that time, the assessor is merely tasked by Section 22 of
the law "to determine the assessed value of the property, meaning, the
value placed on taxable property for ad valorem tax purposes." On the
other hand, the written notice of assessment is what ripens into a
demandable tax. x x x.[20]
Such factual issue, having been decided by the RTC and affirmed by the CA, may
no longer be reversed by this Court. Time and again, this Court has ruled that
"the factual findings of the trial court are given weight when supported by
substantial evidence and carries more weight when affirmed by the Court of
Appeals."[21]

Anent the issue raised by petitioner that the CA decision is coram non-judiceor
a void judgment, this Court finds it to be erroneous. The CA, by formulating and
resolving the sole issue of whether or not the RTC erred in holding in its assailed
Orders that the petitioner did not provide MERALCO with the notice of
assessment envisaged in P.D. No. 464 did not abandon or fail to resolve the other
issues raised by the petitioner. Petitioner contends that the following issues
raised in his Memorandum[22] have not been resolved by the CA:

1. Did or did not the court a quo have jurisdiction or authority to issue the
Villarosa Orders #1 and #2 and, assuming it did have such authority, did it
abide by the Supreme Court's ruling in G.R. No. 114231 in exercising it?

2. Were the Tax Declarations Meralco stipulated The City did provide it
relative to its suited tax claim effectively the "Notice of Assessment"
envisaged in P.D. No. 464?

3. Given Meralco's stipulation of its actual receipt from The City of the
aforementioned Tax Declarations, must or may its Treasurer's Letters of 03
September 1986 and 31 October 1989 still be held to be mere collection
letters and not demands for the payment of the amounts stated therein?

4. Was there a notice of assessment structured as "RPA Form No. 7?"[23]

A close reading of the CA decision in question shows that the above-mentioned
issues have been addressed by the appellate court. As aptly pointed out by
MERALCO in its Comment dated October 27, 2011:

Regarding the first issue which the Court of Appeals allegedly did not
resolve, it will be noted that the Court of appeals, after quoting on pages 8-
10 of its Decision the discussion of the Court En Banc in its Resolution
dated March 29, 2005, pertaining to the resolution of the substantive issue
raised by the Municipal Treasurer in his Motion for Reconsideration that
the applicability of Section 64 of the then Real Property Tax Code is not
dependent on the resolution of the issue of whether or not Petitioner was
furnished with Notices of Assessment, concluded:

Thus, the case was remanded to the RTC for the determination of the
"question of fact" of whether or not petitioner MERALCO was furnished
with a notice of assessment x x x as well as other factual issues raised by the
parties in their pleadings x x x.
The trial court in its Orders dated 4 September 2006 and 14 October 2008,
respectively, complied with said directive of the Honorable Supreme Court
En Banc in its Resolution dated March 29, 2005.

In the Order dated September 4, 2006 (the so-called Villarosa Order #1),
the trial court found that the municipal assessor of Muntinlupa failed to
furnish Meralco with the mandatory notice of assessment which was
evident from the admission of respondent that aside from Exhibits "1" to
"10" and the two letters dated 3 September 1986 and 31 October 1989, no
other documents were received by MERALCO in connection with this case.

Consequently, the trial court rulings (1) that Meralco's obligation to pay the
taxes, has not yet accrued; (2) that the trial court has jurisdiction over
petitioner Meralco's petition for prohibition despite nonpayment of said
taxes because in such a case, Section 64 of P.D. 464 is not applicable; (3)
that since the taxes has not, as yet accrued, the three warrants of
garnishment against Meralco's bank deposits with the Philippine
Commercial Industrial Bank and Trust Company, and Bank of Philippine
Islands were prematurely issued and therefore null and void and (4) that
the withdrawal of the City Treasurer from the Meralco's bank deposit with
the Bank of Philippine Islands by virtue of the null and void writ of
garnishment should be refunded to the Meralco, are logical consequences
of this aforesaid determination by the trial court in compliance with the
directive in the Resolution En Banc dated 29 June 2005. No legal issue was
resolved by the trial court.

In view thereof, when the Court of appeals upheld the aforesaid

determination by the trial court, in effect ruled that the trial court complied
with the Court En Banc Resolutions.

With regard to the second issue, the Court of Appeals ruled:

Clearly, the tax decalrations referred to as Exhibits "2" and "10-A", and the
assesor's letter of transmittal thereof offered in evidence as Exhibit "1" are
not either signed singly or collectively, the notice of assessment envisaged
in Section 27 of P.D. No. 464.

xxxxxx

xxx

the Supreme Court could not have been clearer on its point that the tax
declaration here cannot be validly considered as a notice of assessment
under Section 27 of P.D. No. 464.

First, a tax declaration is issued pursuant to "Section 22 of P.D. No. 464"

which mandates "that upon discovery of real property, the provincial, city
or municipal assessor shall make an appraisal and assessment of such real
property in accordance with Section 5 of the law, irrespective of any
previous assessment on taxpayers valuation thereon," while a notice of
assessment is issued pursuant to Section 27 of the law which mandates the
"assessor x x x to give written notice within thirty days of such assessment
to the person in whose name the property is declared."

Second, a tax declaration is mandated by Section 22 of P.D. No. 464 to be

issued "upon discovery" by the assessor of the "real property" to be
appraised and assessed, while a "written notice of assessment" as required
by Section 27 of the same law has to be issued by the assessor "within thirty
days" from "such assessment."

Third, no tax accrues as a result of the assessor's issuance of a tax

declaration, for at that time, the assessor is merely tasked by Section 22 of
the law "to determine the assessed value of the property, meaning, the
value placed on taxable property for ad valorem tax purposes." On the
other hand, the written notice of assessment is what ripens into a
demandable tax.
In view thereof, the Court of appeals ruled on the second issue reaised by
respondent City Treasurer.

As to the third issue, the Court of Appeals likewise disposed the same, thus:

Neither can respondent-appellant validly claim that the Supreme Court

would not have "held x x x 'that the aforequoted letters/notices are not the
notices of assessment envisaged in Section 27 of P.D. No. 464' but merely
rather 'collection letter' as contended by 'Petitioner-appellee,'" had
MERALCO not "denied receiving copies of Tax Declarations Nos. B-009-
5501 to B-009-5994 prepared by the respondent Municipal Assessor in
1985" because if such were the case, the Supreme Court would not have
amended its June 29, 2004 Resolution which originally read:

The Court further rules that there is a need to remand the case for further
proceedings, in order for the trial court to resolve the factual issue of
whether or not the Municipal Assessor served copies of Tax Declarations
Nos. B-009-05499 to B-009-05502 on [MERALCO], and, if in the
affirmative, when [MERALCO] received the same; and to resolve the other
issues raised by the parties in their pleadings. It bears stressing that the
Court is not a trier of facts.
to what its March 29, 2005 Resolution now clarifies as the issue to be
resolved in the remanded case, viz.:

As held in the Resolution of June 29, 2004, whether or not petitioner

MERALCO was furnished with a notice of assessment is a question of fact.
The determination thereof as well as the other factual issues raised by the
parties in their pleadings are best undertaken by the court a quo.
Simply put, what the trial court was finally called upon to resolve is the
factual issue of "whether or not petitioner MERALCO was furnished with a
notice of assessment," and no longer the factual issue of whether or not the
Municipal Assessor served copies of Tax Declaration Nos. B-009-05499 to
B-009-05502 on [MERALCO].

As regards the fourth issue raised by respondent, it was no longer necessary

for the Court of Appeals to resolve the question if there was a notice of
assessment structured as "RPA Form No. 7" when it ruled that -
In sum, the RTC could not have erred when it found that the municipal
assessor of Muntinlupa failed to furnish MERALCO with the mandatory
notice of assessment. This is evident from the admission of respondent that
aside from Exhibits "1" to "10" and two letters dated 3 September 1986 and
13 October 1989, no other documents were received by MERALCO in
connection with this case.

WHEREFORE, the instant appeal is DISMISSED for lack of merit. The

appealed Orders dated September 4, 2006 and October 14, 2008 are hereby
AFFIRMED.

SO ORDERED.[24]
Due to the above disquisitions, the other issues raised by petitioner in his present
petition have already been adequately addressed by this Court.

WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the

Rules of Court, dated July 4, 2011 of petitioner Romeo Pucyutan is DENIEDfor
lack merit. Consequently, the Decision dated October 22, 2010 and Resolution
dated May 27, 2011, both of the Court of Appeals, are AFFIRMED.

SO ORDERED.

An Act Modernizing the Customs

and Tariff Administration
Republic Act No. 10863
Congress of the Philippines
10 June 2016

Republic of the Philippines

Congress of the Philippines
Metro Manila
 Sixteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand fifteen.

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled:

Title I
Preliminary Provisions

CHAPTER 1
SHORT TITLE

SECTION 100. Short Title.— This Act shall be known as the “Customs Modernization and Tariff
Act (GMTA)”.

CHAPTER 2
GENERAL AND COMMON PROVISIONS

SECTION 101. Declaration of Policy.— It is hereby declared the policy of the State to protect and
enhance government revenue, institute fair and transparent customs and tariff management that will
efficiently facilitate international trade, prevent and curtail any form of customs fraud and illegal acts,
and modernize customs and tariff administration. Towards this end, the State shall:

(a) Develop and implement programs for the continuous enhancement of customs systems and
processes that will harmonize customs procedures;

(b) Adopt clear and transparent customs rules, regulations, policies and procedures, consistent
with international standards and customs best practices;

(c) Establish a regime of transparency of and accessibility to customs information, customs laws,
rules, regulations, administrative policies, procedures and practices, in order to ensure informed
and diligent compliance with customs practices and procedures by stakeholders;

(d) Consult, coordinate and cooperate with other government agencies and the private sector in
implementing and developing customs policy;
 (e) Provide a fair and expeditious administrative and judicial appellate remedy for customs
related grievances and matters;

(f) Employ modern practices in customs administration and utilize information and
communications technology in the implementation of customs functions; and

(g) Institute professionalism and meritocracy in customs tax administration by attracting and
retaining competent and capable customs officers and personnel to enforce the provisions of this
Act.

SECTION 102. Definition of Terms.— As used in this Act:

(a) Abatement refers to the reduction or diminution, in whole or in part, of duties and taxes where
payment has not been made;

(b) Actual or Outright Exportation refers to the customs procedure applicable to goods which,
being in free circulation, leave the Philippine territory and are intended to remain permanently
outside it;

(c) Admission refers to the act of bringing imported goods directly or through transit into a free
zone;

(d) Airway Bill (AWB) refers to a transport document for airfreight used by airlines and
international freight forwarders which specify the holder or consignee of the bill who has the right to
claim delivery of the goods when they arrive at the port of destination. It is a contract of carriage
that includes carrier conditions, such as limits of liability and claims procedures. In addition, it
contains transport instructions to airlines and carriers, a description of the goods, and applicable
transportation charges;

(e) Appeal refers to the remedy by which a person who is aggrieved or adversely affected by any
action, decision, order, or omission of the Bureau, seeks redress before the Bureau, the Secretary
of Finance, or competent court, as the case may be;

(f) Assessment refers to the process of determining the amount of duties and taxes and other
charges due on imported and exported goods;

(g) Authorized Economic Operator (AEO) refers to the importer, exporter, customs broker,
forwarder, freight forwarder, transport provider, and any other entity duly accredited by the Bureau
based on the World Customs Organization (WCO) Framework of Standards to Secure and
Facilitate Global Trade, the Revised Kyoto Convention (RKC), the WCO Supply Chain
Management Guidelines and the various national best practices to promote trade facilitation and to
provide a seamless movement of goods across borders through secure international trade supply
chains with the use of risk management and modern technology;

(h) Bill of Lading (B/L) refers to a transport document issued by shipping lines, carriers and
international freight forwarders or non-vessel operating common carrier for water-borne freight.
The holder or consignee of the bill has the right to claim delivery of the goods at the port of
destination. It is a contract of carriage that includes carrier conditions, such as limits of liability and
claims procedures. In addition, it contains transport instructions to shipping lines and carriers, a
description of the goods, and applicable transportation charges;

(i) Bureau refers to the Bureau of Customs;

(j) Carrier refers to the person, actually transporting goods or in charge of or responsible for the
operation of the means of transport such as airlines, shipping lines, freight forwarders, cargo
consolidators, non-vessel operating common carriers and other international transport operators;

(k) Clearance refers to the completion of customs and other government formalities necessary to
allow goods to enter for consumption, warehousing, transit or transshipment, or to be exported or
placed under another customs procedure;

(l) Commission refers to the Tariff Commission;

(m) Conditional Importation refers to the customs procedure known under the RKC as temporary
admission in which certain goods can be brought into a customs territory conditionally relieved,
totally or partially, from payment of import duties and taxes; such goods must be imported for a
specific purpose and must be intended for reexportation within a specified period and without
having undergone any substantial change except due to normal depreciation;

(n) Customs Broker refers to any person who is a bona fide holder of a valid Certificate of
Registration/Professional Identification Card issued by the Professional Regulatory Board and
Professional Regulation Commission pursuant to Republic Act No. 9280, as amended, otherwise
known as the “Customs Brokers Act of 2004”;

(o) Customs Office refers to any customs administrative unit that is competent and authorized to
perform all or any of the functions enumerated under customs and tariff laws;

(₱) Customs Officer, as distinguished from a clerk or employee, refers to a person whose duty,
not being clerical or manual in nature, involves the exercise of discretion in performing the function
of the Bureau. It may also refer to an employee authorized to perform a specific function of the
Bureau as provided in this Act;

(q) Customs Territory refers to areas in the Philippines where customs and tariff laws may be
enforced;

(r) Entry refers to the act, documentation and process of bringing imported goods into the
customs territory, including goods coming from free zones;

(s) Exportation refers to the act, documentation, and process of bringing goods out of Philippine
territory;

(t) Export 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 for taking out or causing to be taken out any exported goods and the particulars of which
the customs administration shall require;

(u) Flexible Clause refer to the power of the President upon recommendation of the National
Economic and Development Authority (NEDA): (1) to increase, reduce or remove existing
protective tariff rates of import duty, but in no case shall be higher than one hundred percent
(100%) ad valorem; (2) to establish import quota or to ban importation of any commodity as may
be necessary; and (3) to impose additional duty on all import not exceeding ten percent (10%) ad
valorem, whenever necessary;

(v) Foreign Exporter refers to one whose name appears on documentation attesting to the export
of the product to the Philippines regardless of the manufacturer's name in the invoice;

(w) Free Zone refers to special economic zones registered with the Philippine Economic Zone
Authority (PEZA) under Republic Act No. 7916, as amended, duly chartered or legislated special
economic zones and freeports such as Clark Freeport Zone; Poro Point Freeport Zone; John Hay
Special Economic Zone and Subic Bay Freeport Zone under Republic Act No. 7227, as amended
by Republic Act No. 9400; the Aurora Special Economic Zone under Republic Act No, 9490, as
amended; the Cagayan Special Economic Zone and Freeport under Republic Act No. 7922; the
Zamboanga City Special Economic Zone under Republic Act No. 7903; the Freeport Area of
Bataan under Republic Act No. 9728; and such other freeports as established or may be created
by law;

(x) Goods refer to articles, wares, merchandise and any other items which are subject of
importation or exportation;
 (y) 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;

(z) Importation refers to the act of bringing in of goods from a foreign territory into Philippine
territory, whether for consumption, warehousing, or admission as defined in this Act;

(aa) Freight Forwarder refers to a local entity that acts as a cargo intermediary and facilitates
transport of goods on behalf of its client without assuming the role of a carrier, which can also
perform other forwarding services, such as booking cargo space, negotiating freight rates,
preparing documents, advancing freight payments, providing packing/crating, trucking and
warehousing, engaging as an agent/representative of a foreign non-vessel operating as a common
carrier/cargo consolidator named in a master bill of lading as consignee of a consolidated
shipment, and other related undertakings;

(bb) International Freight Forwarder refers to persons responsible for the assembly and
consolidation of shipments into single lot, and assuming, in most cases, the full responsibility for
the international transport of such shipment from point of receipt to the point of destination;

(cc) Jurisdictional Control refers to the power and rights of the Bureau in exercising supervision
and police authority over all seas within the jurisdiction of the Philippine territory and over all
coasts, ports, airports, harbors, bays, rivers and inland waters whether navigable or not from the
sea;

(dd) Lodgement refers to the registration of a goods declaration with the Bureau;

(ee) Non-Vessel Operating Common Carrier (NVOCC) refers to an entity, which may or may not
own or operate a vessel that provides a point-to-point service which may include several modes of
transport and/or undertakes group age of less container load (LCL) shipments and issues the
corresponding transport document;

(ff) Outright Smuggling refers to an act of importing goods into the country without complete
customs prescribed importation documents, or without being cleared by customs or other
regulatory government agencies, for the purpose of evading payment of prescribed taxes, duties
and other government charges;

(gg) Perishable Good refers to goods liable to perish or goods that depreciate greatly in value
while stored or which cannot be kept without great disproportionate expense, which may be
proceeded to, advertised and sold at auction upon notice if deemed reasonable;
 (hh) 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. Subports of entry are under the administrative jurisdiction of the District
Collector of the principal port of entry of the Customs District. Port of entry as used in this Act shall
include airport of entry;

(ii) Port of Discharge, also called Port of Unloading, refers to a place where a vessel, ship,
aircraft or train unloads its shipments, from where they will be dispatched to their respective
consignees;

(jj) Reexportation means exportation of goods which have been imported;

(kk) Release of Goods refers to the action by the Bureau to permit goods undergoing clearance
to be placed at the disposal of the party concerned;

(ll) Refund refers to the return, in whole or in part, of duties and taxes paid on goods;

(mm) Security refers to any form of guaranty, such as a surety bond, cash bond, standby letter of
credit or irrevocable letter of credit, which ensures the satisfaction of an obligation to the Bureau;

(nn) Smuggling refers to 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, or the fraudulent exportation of goods.
Goods referred to under this definition shall be known as smuggled goods;

(oo) Taxes refer to all taxes, fees and charges imposed under this Act and the National Internal
Revenue Code (NIRC) of 1997, as amended, and collected by the Bureau;

(pp) Technical Smuggling refers to the act of importing goods into the country by means of
fraudulent, falsified or erroneous declaration of the goods to its nature, land, quality, quantity or
weight, for the purpose of reducing or avoiding payment of prescribed taxes, duties and other
charges;

(qq) Tentative Release refers to a case where the assessment is disputed and pending review,
an importer may put up a cash bond equivalent to the duties and taxes due on goods before the
importer can obtain the release of said goods;

(rr) Transit refers to the customs procedure under which goods, in its original form, are
transported under customs control from one customs office to another, or to a free zone;
 (ss) Transshipment refers to the customs procedure under which goods are transferred under
customs control from the importing means of transport to the exporting means of transport within
the area of one customs office, which is the office of both importation and exportation;

(tt) Traveler refers to any person who temporarily enters the territory of a country in which he or
she does not normally resides (non-resident), or who leaves that territory, and any person who
leaves the territory of a country in which he or she normally resides (departing resident) or who
returns to that territory (returning resident); and

(uu) Third Party refers to any person who deals directly with the Bureau, for and on behalf of
another person, relating to the importation, exportation, movement or storage of goods.

SECTION 103. When Importation Begins and Deemed Terminated.— Importation begins when

the carrying vessel or aircraft enters the Philippine territory with the intention to unload therein.
Importation is deemed terminated when:

(a) The duties, taxes and other charges due upon the goods have been paid or secured to be
paid at the port of entry unless the goods are free from duties, taxes and other charges and legal
permit for withdrawal has been granted; or

(b) In case the goods are deemed free of duties, taxes and other charges, the goods have
legally left the jurisdiction of the Bureau.

SECTION 104. When Duty and Tax are Due on Imported Goods.— Except as otherwise provided
for in this Act or in other laws, all goods, when imported into the Philippines, shall be subject to duty
upon importation, including goods previously exported from the Philippines.

Unpaid duties, taxes and other charges, shall incur legal interest of twenty percent (20%) per
annum computed from the date of final assessment under Section 429 of this Act, when payment
becomes due and demandable. The legal interest shall likewise accrue on any fine or penalty
imposed.

Upon payment of the duties, taxes and other charges, the Bureau shall issue the necessary
receipt or document as proof of such payment.

SECTION 105. Effective Date of Rate of Import Duty.— Imported goods shall be subject to the
import duty rates under the applicable tariff heading that are effective at the date of importation or
upon withdrawal from the warehouse for consumption. In case of withdrawal from free zones for
introduction to the customs territory, the duty rate at the time of withdrawal shall be applicable on the
goods originally admitted, whether withdrawn in its original or advanced form.
 In case of goods sold at customs public auction, the duty rates at the date of the auction shall
apply for purposes of implementing Section 1143(a) of this Act.

SECTION 106. Declarant.— A declarant may be a consignee or a person who has the right to
dispose of the goods. The declarant shall lodge a goods declaration with the Bureau and may be:

(a) The importer, being the holder of the bill of lading; or

(b) The exporter, being the owner of the goods to be shipped out; or

(c) A customs broker acting under the authority of the importer or from a holder of the bill; or

(d) A person duly empowered to act as agent or attorney-in-fact for each holder.

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.

The goods declaration submitted to the Bureau shall be processed by the declarant or by a
licensed customs broker; Provided, That for importations, a transition period of two (2) years from
the effectivity of this Act is hereby provided during which subparagraph (d) of this section shall not
be implemented by the Bureau: Provided, Further, That after two (2) years from the effectivity of this
Act, subparagraph (d) of this section shall take into effect consistent with international standards and
customs best practices.

SECTION 107. Rights and Responsibilities of the Declarant.— The declarant shall be responsible

for the accuracy of the goods declaration and for the payment of all duties, taxes and other charges
due on the imported goods. The licensed customs broker shall likewise be responsible for the
accuracy of the goods declaration but shall not be responsible for the payment of duties, taxes and
other charges due on the imported goods.

The declarant shall sign the goods declaration, even when assisted by a licensed customs broker,
who shall likewise sign the goods declaration.

SECTION 108. Penalties for Errors in Goods Declaration.— The Bureau shall not impose
substantial penalties for errors when such errors are inadvertent and there was no fraudulent intent
or gross negligence in the commission thereof: Provided, That in order to discourage repetition of
such errors, a penalty may be imposed hut shall not be excessive.
 SECTION 109. Application of Information and Communications Technology.— In accordance
with international standards, the Bureau shall utilize information and communications technology to
enhance customs control and to support a cost-effective and efficient customs operations geared
towards a paperless customs environment.

The Bureau shall communicate, exchange and process trade- and logistics-related information in
the national and regional level for the efficient and prompt clearance of goods and commodities in a
technology-neutral and secured infrastructure for business, industries, and government.

The security of data and communication shall be in a manner that is consistent with applicable
local and internationally accepted standards on information security.

The Bureau shall likewise include as part of its systems and processes, a disaster preparedness
and recovery plan to ensure business continuity by maintaining its uptime goal for its electronic and
online services.

For purposes of customs procedures, electronic documents, permits, licenses or certificates shall
be acceptable and shall have the legal effect, validity or enforceability as any other document or
legal writing: Provided, That when the prescribed requirements are duly complied with, the Bureau
shall:

(a) Recognize the authenticity and reliability of electronic documents;

(b) Transmit approval in the form of electronic data messages or electronic documents; and

(c) Require and/or accept payments and issue receipts acknowledging such payments through
systems using electronic data messages or electronic documents.

The introduction and implementation of information and communications technology shall be

undertaken with due consultation with directly affected parties and stakeholders.

SECTION 110. Relationship Between the Bureau and Third Parties.— Parties may transact
business with the Bureau either directly or through a designated third p arty to act on their behalf.

The customs transactions directly transacted by a party shall not be treated less favorably or be
subject to more stringent requirements than those transacted through a designated third party.

A designated third party shall have the same rights and obligations as the designating party when
transacting business with the Bureau.
 Subject to the provisions of existing laws, treaties, convention and international, agreements, the
Secretary of Finance shall make the necessary guidelines for the defined relationship of the Bureau
and third parties.

SECTION 111. Information of General Application.— All laws, decisions, rulings, circulars,

memoranda and orders of the Bureau shall be published in accordance with law.

To foster an informed compliance regime, the Bureau shall ensure that all relevant and available
information of general application pertaining to customs operations and procedures which are not
confidential or intended for the Bureau's internal use only, shall be readily accessible to any
interested person.

Any new information, amendment or changes in customs law, administrative procedures or

requirements, shall, as far as practicable, be made readily available prior to its effective date of
implementation unless advance notice is precluded.

SECTION 112. Information of a Specific Nature.— The Bureau shall provide information, not

otherwise confidential or for the Bureau's internal use only, relating to a specific matter as may be
requested by an interested party for legitimate use.

The Bureau may require the payment of a reasonable fee in providing such information. The
requested information shall be released within reasonable time from the filing of the request and
payment of the required fee.

SECTION 113. Decision and Ruling.— The Bureau shall, consistent with Section 1502 of this Act,
issue binding and advance decision and ruling at the request of an interested party on matters
pertaining to importation or exportation of goods.

Upon written request of the interested party, the Bureau shall notify the party of its decision in
writing within the period specified in this Act or by regulation. Should the decision be adverse to the
requesting interested party, the reasons thereof shall be indicated and the party shall be advised of
the party's right of appeal.

The ruling and decision shall be issued by the Bureau within thirty (30) days from the submission
of the necessary documents and information.

SECTION 114. Right of Appeal, Forms and Ground.— Any party adversely affected by a decision
or omission of the Bureau pertaining to an importation, exportation, or any other legal claim shall
have the right to appeal within fifteen (15) days from receipt of the questioned decision or order.
 An appeal in writing shall be filed within the period prescribed in this Act or by regulation and shall
specify the grounds thereof.

The Bureau may allow a reasonable time for the submission of supporting evidence to tbe appeal.

CHAPTER 3
TYPES OF IMPORTATION

SECTION 115. Treatment of Importation.— Imported goods shall be deemed “entered” in the

Philippines for consumption when the goods declaration is electronically lodged, together with any
required supporting documents, with the pertinent customs office.

SECTION 116. Free Importation and Exportation.— Unless otherwise provided by law or

regulation, all goods may be freely imported into and exported from the Philippines without need for
import and export permits, clearances or licenses.

SECTION 117. Regulated Importation and Exportation.— Goods which are subject to regulation

shall be imported or exported only after securing the necessary goods declaration or export
declaration, clearances, licenses, and any other requirements, prior to importation or exportation. In
case of importation, submission of requirements after arrival of the goods but prior to release from
customs custody shall be allowed but only in cases provided for by governing laws or regulations.

SECTION 118. Prohibited Importation and Exportation.— The importation and exportation of the

following goods are prohibited:

(a) Written or printed goods in any form containing any matter advocating or inciting treason,
rebellion, insurrection, sedition against the government of the Philippines, or forcible resistance to
any law of the Philippines, or written or printed goods containing any threat to take the life of, or
inflict bodily harm upon any person in the Philippines;

(b) Goods, instruments, drugs and substances designed, intended or adapted for producing
unlawful abortion, or any printed matter which advertises, describes or gives direct or indirect
information where, how or by whom unlawful abortion is committed;

(c) Written or printed goods, negatives or cinematographic films, photographs, engravings,

lithographs, objects, paintings, drawings or other representation of an obscene or immoral character;

(d) Any goods manufactured in whole or in part of gold, silver or other precious metals or alloys
and the stamp, brand or mark does not Indicate the actual fineness of quality of the metals or alloys;
 (e) Any adulterated or misbranded food or goods for human consumption or any adulterated or
misbranded drug in violation of relevant laws and regulations;

(f) Infringing goods as defined under the Intellectual Property Code and related laws; and

(g) All other goods or parts thereof which importation and exportation are explicitly prohibited by
law or rules and regulations issued by the competent authority.

SECTION 119. Restricted Importation, and Exportation.— Except when authorized by law or

regulation, the importation and exportation of the following restricted goods are prohibited:

(a) Dynamite, gunpowder, ammunitions and other explosives, firearms and weapons of war, or
parts thereof;

(b) 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 goods
when such distribution is dependent on chance, including jackpot and pinball machines or similar
contrivances, or parts thereof;

(c) Lottery and sweepstakes tickets, except advertisements thereof and lists of drawings therein;

(d) Marijuana, opium, poppies, coca leaves, heroin or 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;

(e) Opium pipes or parts thereof, of whatever material; and

(f) Any other goods whose importation and exportation are restricted.

The restriction to import or export the above stated goods shall include the restriction on their
transit.

CHAPTER 4
RELIEF CONSIGNMENT

SECTION 120. Relief Consignment.— Goods such as food, medicine, equipment and materials for
shelter, donated or leased to government institutions and accredited private entities for free
distribution to or use of victims of calamities shall be treated and entered as relief consignment.
 Upon declaration of a state of calamity, clearance of relief consignment shall be a matter of priority
and subject to a simplified customs procedure. The Bureau shall provide for:

(a) Lodging of a simplified goods declaration or of a provisional or incomplete goods declaration

subject to completion of the declaration within a specified period;

(b) Lodging, registering and checking of the goods declaration and supporting documents prior to
the arrival of the goods, and their release upon arrival;

(c) Clearance beyond the designated hours of business or away from customs offices and waiver
of any corresponding charges; and

(d) Examination and/or sampling of goods only in exceptional circumstances.

The Department of Finance (DOF) and the Department of Social Welfare and Development
(DSWD) shall jointly issue the rules and regulations for the implementation of this provision.

SECTION 121. Duty and Tax Treatment.— Relief consignment, as defined in Section 120,

imported during a state of calamity and intended for a specific calamity area for the use of the
calamity victims therein, shall be exempt from duties and taxes.

Title II
Bureau of Customs

CHAPTER 1
GENERAL ADMINISTRATION

SECTION 200. Chief Officials of the Bureau.— The Bureau shall be headed by a Commissioner

and shall be assisted by at least four (4) but not more than six (6) Deputy Commissioners.

The Commissioner shall be appointed by the President of the Philippines.

The Deputy Commissioners shall also be appointed by the President and at least majority of
whom shall come from the ranks of the Bureau.

SECTION 201. Powers and Functions of the Commissioner.— The Commissioner shall have the
following powers and functions:
 (a) Exclusive and original jurisdiction to interpret the provisions of this Act, in collaboration with
other relevant government agencies, subject to review by the Secretary of Finance;

(b) Exercise any customs power, duties and functions, directly or indirectly;

(c) Review any action or decision of any customs officer performed pursuant to the provisions of
this Act;

(d) Review and decide disputed assessments and other matters related thereto, subject to
review by the Secretary of Finance and exclusive appellate jurisdiction of the Court of Tax Appeals
(CTA);

(e) Delegate the powers vested under this Act to any customs officer with the rank equivalent to
division chief or higher, except for the following powers and functions:

(1) Promulgation of rules and regulations;

(2) Issuance, revocation or modification of rulings; and

(3) Compromise or abate of customs obligations.

(f) Assignment or reassignment of any customs officer subject to the approval of the Secretary of
Finance; Provided, That District Collectors and other customs officers that perform assessment
functions shall not remain in the same area of assignment for more than three (8) years; and

(g) Perform all other duties and functions as may be necessary for the effective implementation
of this Act and other customs related laws.

SECTION 202. Functions of the Bureau.— The Bureau shall exercise the following duties and
functions:

(a) Assessment and collection of customs revenues from imported goods and other dues, fees,
charges, fines and penalties accruing under this Act;

(b) Simplification and harmonization of customs procedures to facilitate movement of goods in

international trade;

(c) Border control to prevent entry of smuggled goods;

(d) Prevention and suppression of smuggling and other customs fraud;

 (e) Facilitation and security of international trade and commerce through an informed compliance
program;

(f) Supervision and control over the entrance and clearance of vessels and aircraft engaged in
foreign commerce;

(g) Supervision and control over the handling of foreign mails arriving in the Philippines for the
purpose of collecting revenues and preventing the entry of contraband;

(h) Supervision and control on 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 and prevention of entry of contraband;

(i) Conduct a compensation study with the end view of developing and recommending to the
President a competitive compensation and remuneration system to attract and retain highly
qualified personnel, while ensuring that the Bureau remains financially sound and sustainable;

(j) Exercise of exclusive originaljumdiction over forfeiture cases under this Act; and

(k) Enforcement of this Act and all other laws, rules and regulations related to customs
administration.

SECTION 203. Annual Report of the Commissioner.— The Commissioner shall submit to the

President, the Congress of the Philippines and the NEDA an annual report on the performance of
the Bureau, on or before March 31 of the following year.

SECTION 204. Promulgation of Rules and Regulations.— The Commissioner, subject to the

approval of the Secretary of Finance, shall promulgate rules and regulations for the enforcement of
this Act. The Commissioner shall regularly prepare and publish an updated customs manual, and the
rules, regulations and decisions of the Bureau. The Commissioner shall furnish the Congress of the
Philippines, the NEDA and the Tariff Commission with electronic copies of department orders,
administrative orders, circulars, and rules and regulations promulgated pursuant to this Act.

SECTION 205. Copies of Goods Declaration.— The Commissioner shall regularly furnish the

NEDA, the Philippine Statistics Authority (PSA), the Bureau of Internal Revenue (BIR) and the Tariff
Commission electronic copies of all customs goods declaration processed and cleared by the
Bureau.
 Upon request, the Tariff Commission shall have access to, and the right to be furnished with
copies of liquidated goods declaration and other documents supporting the goods declaration as
finally filed in the Commission on Audit (COA).

For this purpose, the Bureau shall maintain electronic records of goods declaration and other
documents supporting the declaration.

CHAPTER 2
CUSTOMS DISTRICTS AND PORTS OF ENTRY

SECTION 206. Customs Districts.— For administrative purposes, the Philippines shall be divided

into as many Customs Districts as necessary, the respective limits of which may be changed from
time to time by the Commissioner, with the approval of the Secretary of Finance.

Each Customs District shall be supervised by one (1) District Collector, assisted by as many
Deputy District Collectors as may be necessary. The choice of the location of a District Office, its
business hours and the staffing pattern thereof, shall be based on the particular requirements of
each district.

SECTION 207. Ports of Entry.— All ports of entry shall be under the supervision and control of a
Customs District. A District Collector shall be assigned in the principal ports of entry while a Deputy
District Collector may be assigned to other types of ports of entry.

The principal ports of entry shall he located in Aparri, San Fernando, Manila, Manila International
Container Port, Ninoy Aquino International Airport, Subic, Clark, Batangas, Legaspi, Iloilo, Cebu,
Tacloban, Surigao, Cagayan de Oro, Zamboanga, Davao, Limay and such other ports that may be
created pursuant to this Act.

For the effective enforcement of the Bureau's functions and without hampering business and
commercial operations of the ports, sea ports and airport authorities and private ports and airport
operators shall provide suitable areas for examination, and for other customs equipment free of
charge within a definite period of time, as agreed with private port and airport operations, if any.

SECTION 208. Power of the President to Open and Close Any Port.— Up on the recommendation
of the Secretary of Finance, the President may open or close any port of entry. Upon closure of a
port of entry, the existing personnel shall he reassigned by the Commissioner, subject to the
approval of the Secretary of Finance.
 SECTION 209. Assignment of Customs Officers and Employees to Other Duties.— The
Commissioner, with the approval of the Secretary of Finance, may assign any employee of the
Bureau to any port, service, division or office of the Bureau within the Bureau's staffing pattern or
organizational structure, or may assign any employee other duties: Provided, That such assignment
shah not affect the employee's tenure of office nor result in a change of status, demotion in rank
and/or salary deduction.

SECTION 210. Duties of the District Collector.— The District Collector shall have the following
duties in their assigned Customs District:

(1) Ensure entry of all imported goods at the customs office;

(2) Prevent importation and exportation of prohibited goods;

(3) Ensure legal compliance of regulated goods and facilitate the flow of legitimate trade;

(4) Examine, classify and value imported goods;

(5) Assess and collect duties, taxes and other charges on imported goods;

(6) Hold and dispose imported goods in accordance with this Act;

(7) Prevent smuggling and other customs fraud; and

(8) Perform other necessary duties that may be assigned by the Commissioner for the effective
implementation of this Act. Subject to the supervision and control of the District Collector, the
duties and functions of the District Collector may be delegated to the Deputy District Collector. The
Deputy District Collector assigned to a sub-port shall be under the supervision and control of the
District Collector of the corresponding principal port.

SECTION 211. Temporary Succession of Deputy District Collector to Position of Acting District

Collector.— In the absence or disability of a District Collector or, in case of vacancy, the Deputy
District Collector shall temporarily discharge the duties of the District Collector. Should there be no
Deputy District Collector, the District Collector shall designate, in writing, a senior ranking customs
officer to temporarily perform the duties of the District Collector. In case there are two (2) or more
senior ranking customs officers with equal length of service, a drawing of lots shall be undertaken.
The District Collector shall report the designation to the Commissioner within twenty-four (24) hours
after the designation.
 SECTION 212. Records to be Kept by Customs Officers.— District Collectors, Deputy District
Collectors, and customs officers acting in such capacities must maintain permanent records of
official transactions and turn-over all records and official papers to their respective successors or
other authorized officials. The records shall be made available for inspection by other authorized
officials of the Bureau.

If required, the District Collector shall affix the official dry seal of the Bureau on all documents and
records requiring authentication.

SECTION 213. Reports of the District Collector to the Commissioner.— The District Collector shall
report to the Commissioner any probable or initiated litigation within the Customs District and shall
submit regular monthly reports on all district transactions.

CHAPTER 3
EXERCISE OF POLICE AUTHORITY

SECTION 214. Persons Exercising Police Authority.— For the effective implementation of this Act,
the following persons are authorized to effect search, seizure, and arrest:

(a) Officials of the Bureau, District Collectors, Deputy District Collectors, police officers, agents,
inspectors and guards of the Bureau;

(b) Upon authorization of the Commissioner, officers and members of the Armed Forces of the
Philippines (AFP) and national law enforcement agencies; and

(c) Officials of the BIR on all cases falling within the regular performance of their duties, when
payment of internal revenue taxes is involved.

All officers authorized by the Commissioner to exercise police authority shall at all times
coordinate with the Commissioner.

Goods seized by deputized officers pursuant to this section shall be physically turned-over
immediately to the Bureau, unless provided under existing laws, rules and regulations.

For this purpose, mission orders shall clearly indicate the specific name carrying out the mission
and the tasks to be carried out.

Subject to the approval of the Secretary of Finance, the Commissioner shall define the scope,
areas covered, procedures and conditions governing the exercise of such police authority including
custody and responsibility for the seized goods. The rules and regulations to this effect shall be
furnished to the concerned government agencies and personnel for guidance and compliance.

All seizures pursuant to this section must be effected in accordance with the provisions on the
conduct of seizure proceedings provided for in Chapters 3 and 4 of Title XI of this Act.

SECTION 215. Place Where Authority May be Exercised.— All persons exercising police authority
as described in the preceding section shall, only exercise powers within customs premises as
provided for in Section 303 of this Act, and within the limits of the authority granted by the
Commissioner, Port and airport authorities in allports of entry shall provide authorized customs
officers with unhampered access to all premises within their administrative jurisdiction.

SECTION 216, Exercise of Power of Seizure.— Any person exercising police authority under this
Act has the power and duty to seize any vessel, aircraft, cargo, goods, animal or any other movable
property when the same is subject to forfeiture or when they are subject of a fine imposed under this
Act.

SECTION 217. Duty of Officer to Disclose Official Character.— For the proper exercise of police
authority, any authorized person shall disclose the nature of the authority upon being questioned at
the time of exercise thereof and shall exhibit the corresponding written authority issued by the
Commissioner.

SECTION 218. Authority to Require Assistance and Information.— Any person exercising police

authority may demand the assistance of and request information from the Philippine National Police
(PNP), the AFP and other national law enforcement agencies, when necessary, to effect any search,
seizure or arrest. It shall be the duty of any police officer and other national law enforcers to give
such lawful assistance.

SECTION 219. Authority to Enter Properties.— Any person exercising police authority may, at any
time, enter, pass through, and search any land, enclosure, warehouse, store, building or structure
not principally used as a dwelling house.

When a security personnel or any other employee lives in the warehouse, store, or any building,
structure or enclosure that is used for storage of goods, it shall not be considered as a dwelling
house for purposes of this Act.

SECTION 220. Authority to Search Dwelling House.— A dwelling house may be entered and
searched only upon warrant issued by a Judge of a competent court, the sworn application thereon
showing probable cause and particularly describing the place to be searched and the goods to be
seized.
 SECTION 221. Authority to Search Vessels or Aircrafts and Persons or Goods Conveyed Therein.
— Any person exercising police authority under this Act may board, inspect, search and examine a
vessel or aircraft and any container, trunk, package, box or envelope found on board, and physically
search and examine any person thereon. In case of any probable violation of this Act, the person
exercising police authority may seize the goods, vessel, aircraft, or any part thereof.

Such power to search includes removal of any false bottom, partition, bulkhead, or any other
obstruction for the purpose of uncovering any concealed dutiable or forfeitable goods.

The proceeding herein authorized shall not give rise to any claim for damage caused to the goods,
vessel or aircraft, unless there is gross negligence or abuse of authority in the exercise thereof.

SECTION 222. Authority to Search Vehicles, Other Carriers, Persons and Animals.—Upon

reasonable cause, any person exercising police authority may open and examine any box, trunk,
envelope, or other container for purposes of determining the presence of dutiable or prohibited
goods. This authority includes the search of receptacles used for the transport of human remains
and dead animals. Such authority likewise includes the power to stop, search, and examine any
vehicle or carrier, person or animal suspected of holding or conveying dutiable or prohibited goods.

SECTION 223. Authority to Search Persons Arriving From Foreign Countries.— Upon reasonable

cause, travelers arriving from foreign countries may be subjected to search and detention by the
customs officers. The dignity of the person under search and detention shall be respected at all
times. Female inspectors may be employed for the examination and search of persons of their own
sex.

SECTION 224. Power to Inspect and Visit.— The Commissioner or any customs officer who is
authorized in writing by the Commissioner, may demand evidence of payment of duties and taxes on
imported goods openly for sale or kept in storage. In the event that the interested party fails to
produce such evidence within fifteen (15) days, the goods may be seized and subjected to forfeiture
proceedings: Provided, That during the proceedings, the interested party shaUbe given the
opportunity to prove or show the source of the goods and the payment of duties and taxes
thereon: Provided, Further, That when the warrant of seizure has been issued but subsequent
documents presented evidencing proper payment are found to be authentic and in order, the District
Collector shall, within fifteen (15) days from the receipt of the motion to quash or recall the warrant,
cause the immediate release of the goods seized, subject to clearance by the
Commissioner: Provided, Finally, That the release thereof shall not be contrary to law.
 Title III
Customs Jurisdiction and Customs Control

CHAPTER 1
CUSTOMS JURISDICTION

SECTION 300. Customs Jurisdiction.— For the effective implementation of this Act, the Bureau
shall exercise jurisdiction over all seas within Philippine territory and all coasts, ports, airports,
harbors, bays, rivers and inland waters whether navigable or not from the sea and any means of
conveyance.

The Bureau shall pursue imported goods subject to seizure during its transport by land, water and
air and shall exercise jurisdiction as may be necessary for the effective enforcement of this Act.
When a vessel or aircraft becomes subject to seizure for violation of this Act, a pursuit of such vessel
or aircraft which began within the territorial waters or air space may continue beyond the same, and
the vessel or aircraft may be seized in the high seas or international air space.

CHAPTER 2
CUSTOMS CONTROL

SECTION 301. Customs Control Over Goods.— All goods, including means of transport, entering
or leaving the customs territory, regardless of whether they are liable to duties and taxes, shall be
subject to customs control to ensure compliance with this Act.

In the application of customs control, the Bureau shall employ audit-based controls and risk
management systems, use automation to the fullest extent possible, and adopt a compliance
measurement strategy to support risk management.

The Bureau shall seek to cooperate and conclude mutual administrative assistance agreements
with other customs administrations to enhance customs control. The Bureau shall consult,
coordinate, and cooperate with other government regulatory agencies, free zones authorities, and
the customs stakeholders, in general, to enhance customs control.

SECTION 302. Enforcement of Port Regulation of the 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
insofar as connected with matters of shipping and navigation.

SECTION 303. Control Over Premises Used for Customs Purposes.— The Bureau shall, for
customs purposes, have exclusive control, direction and management of customs offices, facilities,
warehouses, ports, airports, wharves, infrastructure and other premises in the Customs Districts, in
all cases without prejudice to the general police powers of the local government units (LGUs), the
Philippine Coast Guard and of law enforcement agencies in the exercise of their respective
functions.

SECTION 304. Power of the President to Subject Premises to Customs Jurisdiction.—When public

interest requires, the President may, by executive order, declare any public wharf, landing place,
infrastructure, street or land, in any port of entry under the jurisdiction of the Bureau as may be
necessary, for customs purposes and/or to authorize a port or terminal operator to transfer
overstaying cargoes in an inland depot or terminal.

SECTION 305. Trespass or Obstruction of Customs Premises.— No person shall enter or obstruct

a customs office, warehouse, port, airport, wharf, or other premises under the control of the Bureau
without prior authority, including the streets or alleys where these facilities are located.

SECTION 306. Special Surveillance for the Protection of Customs Revenue and Prevention of
Smuggling.— The Bureau shall conduct surveillance on vessels or aircrafts entering Philippine
territory and on imported goods entering the customs office: Provided, That the function of the
Philippine Coast Guard to prevent and suppress the illegal entry of these goods, smuggling and
other forms of customs fraud and violations of maritime law and its proper surveillance of vessels
entering anchor leaving Philippine territory as provided in Republic Act No. 9993, otherwise known
as the “Philippine Coast Guard Law of 2009”, shall continue to be in force.

SECTION 307. Temporary Storage of Goods.— Subject to the rules and regulations to be issued

by the Secretary of Finance, the Commissioner shall establish a system for temporary storage of
imports prior to goods declaration in case of abandoned or overstaying goods.

Title IV
Import Clearance and Formalities

CHAPTER 1
GOODS DECLARATION
 SECTION 400. Goods to be Imported through Customs Office.— All goods imported into the
Philippines shall be entered through a customs office at a port of entry, or may be admitted to or
removed from a free zone as defined in this Act, as the case may be.

SECTION 401. Importations Subject to Goods Declaration.— Unless otherwise provided for in this

Act, all imported goods shall be subject to the lodgement of a goods declaration. A goods
declaration may be for consumption, for customs bonded warehousing, for admission, for conditional
importation, or for customs transit.

SECTION 402. Goods Declaration for Consumption.— All goods declaration for consumption shall
be cleared through a formal entry process except for the following goods which shall be cleared
through an informal entry process;

(a) Goods of a commercial nature with Free on Board (FOB) or Free Carrier At (FCA) value of
less than fifty thousand pesos (₱50,000.00). Every three (3) years after the effectivity of this Act,
the Secretary of Finance shall adjust this amount as provided herein to its present value, using the
Consumer Price Index (CPI) as published by the PSA; and

(b) Personal and household effects or goods, not in commercial quantity, imported in a
passenger’s baggage or mail.

The Commissioner may adjust the value of goods of commercial nature that shall be cleared
through an informal entry process without prejudice to the periodic adjustment period in
subparagraph (a) of this section.

All importations entered through, a formal entry process shall be covered by a letter of credit or
any verifiable commercial document evidencing payment or in cases where there is no sale for
export, by any commercial document indicating the commercial value of the goods.

SECTION 403. Provisional Goods Declaration.— Where the declarant does not have all the
information or supporting documents required to complete the goods declaration, the lodging of a
provisional goods declaration may be allowed: Provided, That it substantially contains the necessary
information required by the Bureau and the declarant undertakes to complete the information or
submit the supporting documents within forty-five (45) days from the filing of the provisional goods
declaration, which period may be extended by the Bureau for another forty-five (45) days for valid
reasons.

If the Bureau accepts a provisional goods declaration, the duty treatment of the goods shall not be
different from that of goods with complete declaration.
 Goods under a provisional goods declaration may be released upon posting of any required
security equivalent to the amount ascertained to be the applicable duties and taxes.

SECTION 404. Owner of Imported Goods.— All goods imported into the Philippines shall be
deemed to be the property of the consignee or the holder of the bill of lading, airway bill or other
equivalent transport document if duly endorsed by the consignee therein, or, if consigned to order,
duly endorsed by the consignor. The underwriters of abandoned goods and the salvors of goods
saved from wreck at sea, coast, or in any area of the Philippines, may be regarded as the
consignees.

SECTION 405. Liability of Importer for Duties and Taxes.— Unless relieved by laws or

regulations, the liability for duties, taxes, fees, and other charges attached to importation constitutes
a personal debt due and demandable against the importer in favor of the government and shall be
discharged only upon payment of duties, taxes, fees and other charges. It also constitutes alien on
the imported goods which may be enforced while such goods are under customs' custody.

SECTION 406. Importations by the Government.— Except those provided for in Section 800 of

this Act, 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 he subject to the duties, taxes, fees and other charges under this Act.

SECTION 407. Goods Declaration and Period of Filing.— As far as practicable, the format of the
goods declaration shall conform with international standards. The data required in the goods
declaration shall be limited to such particulars that are deemed necessary for the assessment and
collection of duties and taxes, the compilation of statistics and compliance with this Act. The Bureau
shall require the electronic lodgement of the goods declaration.

The Bureau shall only require supporting documents necessary for customs control to ensure that
all requirements of the law have been complied with. Translation of supporting documents shall not
be required except when necessary.

Goods declaration must be lodged within fifteen (15) days from the date of discharge of the last
package from the vessel or aircraft. The period to file the goods declaration may, upon request, be
extended on valid grounds for another fifteen (15) days: Provided, That the request is made before
the expiration of the original period within which to file the goods declaration: Provided, However,
That the period of the lodgement of the goods declaration may be adjusted by the Commissioner.

SECTION 408. Lodgement and Amendment of Goods Declaration.— The Bureau shall permit the
electronic lodgement of the goods declaration at any designated customs office. The Bureau shall,
for valid reason and under terms and conditions provided by regulation, permit the declarant to
amend the goods declaration that has already been lodged; Provided, That the request to amend the
goods declaration, together with the intended amendments, must be received prior to final
assessment or examination of the goods.

SECTION 409. Advance Lodgement and Clearance.— The Bureau may provide for the lodgement
and clearance of goods declaration and supporting documents prior to the arrival of the goods under
such terms and conditions as may be provided by rules and regulations to be promulgated under this
Act.

SECTION 410. Entry of Goods in Part for Consumption and in Part for Warehousing.—Goods
declaration covered by one bill of lading or airway bill over goods which are meant in part for
consumption and in part for warehousing may be both entered simultaneously for release at the port
of entry.

SECTION 411. Contents of Goods Declaration.— Goods declaration shall contain the names of the
consignee, importing vessel or aircraft, port of departure, port of destination and date of arrival, the
number and marks of packages, or the quantity, if in bulk, the nature and correct commodity
description of the goods contained therein, its value as set forth in a proper invoice, and such other
information as may be required by rules and regulations. Where the declarant does not have all the
information required to make the goods declaration, a provisional or incomplete goods declaration
shall, for certain cases and for reasons deemed valid by the Bureau, be allowed to be
lodged: Provided, That it contains the particulars deemed necessary by the Bureau for the
acceptance of the entry filed and that the declarant undertakes to complete it within forty-five (45)
days from the filing of the provisional goods declaration in accordance with Section 403 of this Act.

SECTION 412. Statements to be Provided in the Goods Declaration.— No entry of imported goods

shall be allowed unless the goods declaration has been lodged with the Bureau. The goods
declaration shall, under penalties of falsification or perjury, contain the following statements:

(a) The invoice and goods declaration contain an accurate and faithful account of the prices paid
or payable for the goods, and other adjustments to the price actually paid or payable, and that
nothing has been omitted therefrom or concealed whereby the government of the Republic of the
Philippines might be defrauded of any part of the duties and taxes lawfully due on the goods; and

(b) To the best of the declarant's information and belief, all the invoices and bills of lading or
airway bills relating to the goods are the only ones in existence relating to the importation in
question, and that these documents are in the same state as when they were received by the
declarant, and the declaration thereon are in all respects genuine and true.
 Goods declaration shall be submitted electronically pursuant to Republic Act No. 8792, otherwise
known as the “Electronic Commerce Act of 2000”. Such declarations when printed and certified by a
competent customs officer as a faithful reproduction of the electronic submission shall be considered
as actionable documents for purposes of prosecuting a declarant if the declarations are found to be
fraudulent.

SECTION 413. Description of Goods.— Under such terms and conditions prescribed under the
rules and regulations, the description of the goods in the goods declaration must be sufficient and
specific in detail to enable the goods to be Identified for customs valuation, statistical purposes, and
classification to the appropriate tariff heading and subheading in the currency of the invoice, and in
such other particulars necessary for the proper assessment and collection of duties and taxes. The
quantity and value of each of the several classes of goods shall be separately declared according to
their respective headings or subheadings and the totals of each heading or subheading shall be duly
shown.

SECTION 414. Commercial and Noncommercial Invoice.— Commercial invoice of imported goods

shall contain the following:

(a) The agreed price paid or to be paid for the goods;

(b) The adjustments to the price paid or to be paid as defined in Section 701(1) of this Act, if not
yet included in the invoice, as may be applicable;

(c) The names of the buyer, seller, and the time and place of sale;

(d) The port of entry;

(e) A sufficient description to enable the accurate identification of goods for tariff classification,
customs valuation, and statistical purposes, indicating the correct commodity description, in
customary term or commercial designation, the grade or quality, numbers, marks or symbols under
which they are sold by the seller or manufacturer, together with the marks and number of packages
in which the goods are packed;

(f) The quantities in the weights or measures of the goods shipped; and

(g) Any other fact deemed necessary for the proper examination, customs valuation, and tariff
classification of the goods as may be prescribed by rules and regulations.
 To the extent possible, the above requirements shall also apply to goods imported but not covered
by sale, such as goods on consignment or lease, samples, or donations, covered by a
consignment, pro forma invoice, or other noncommercial invoice.

SECTION 415. Mode of Payment and Terms of Trade.— Subject to existing laws and rules on
foreign currency exchange, the internationally accepted standards and practices on the mode of
payment or remittance covering import and export transactions, including standards developed by
international trading bodies such as the International Chamber of Commerce (ICC) on trading terms
(incoterms) and on international letters of credit such as the Uniform Customs and Practice for
Documentary Credits (UCPDC), shall he recognized.

SECTION 416. Examination of Samples.— Customs officers shall see to it that representative

samples taken during examination shall be properly receipted for and retained within a reasonable
period of time. The quantity and value of the samples taken shall be noted in the specified box of
goods declaration or electronic form. Such samples shall be duly labeled as will definitely identify
them with the importation for which they are taken.

SECTION 417. Forwarding of Cargo and Remains of Wrecked Vessel or Aircraft.— When vessels

or aircrafts are wrecked within the Philippines, the original owners or consignees of the cargo, or by
its underwriters, in ease of abandonment, may seek approval from the Bureau to forward the goods
saved from the wreck to the ports of destination without going through the customs office in the
district in which the goods were cast ashore or unloaded. Upon approval, the goods may be
forwarded with particular manifests and duly certified by a customs officer in charge of the goods.

The owner of the vessel or aircraft may be permitted to export the remains of the wreck upon
proper examination and inspection. The remains of a wrecked vessel shall include not only its hull
and rigging, but also all sea stores, goods and equipment, such as sails, ropes and chain anchors.

SECTION 418. Derelicts and Goods from Abandoned Wrecks.— Derelicts and all goods recovered
from sea or from abandoned wrecks shall be under the jurisdiction of the port where the goods
arrive, and shall be retained in the custody of the Bureau. If not claimed by the owner, underwriter or
salvor, the same shall be deemed as property of the government.

When such goods are brought into port by lighters or other craft, each vessel shall submit a
manifest of their respective cargo.

The customs officer nearest the scene of the wreck shall take charge of the goods saved and shall
give immediate notice to the District Collector or the nearest customs office.
 In order to prevent any attempt to commit fraud, the District Collector shall be represented at the
salvage of the cargo by customs officers who shall examine and receive the inventory made on the
cargo.

Derelicts and goods salvaged from foreign vessels or aircrafts recovered from sea or wreck
are prima facie dutiable and may be entered for consumption or warehousing. If claimed to be of
Philippine production, and consequently conditionally duty-free, proof must be submitted as in
ordinary cases of reimportation of goods. Foreign goods landed from a vessel or aircraft in distress
is dutiable if sold or disposed of in the Philippines.

Before any goods taken from a recent wreck are admitted to the customs territory, the same shall
be appraised, and the owner or importer shall have the same right to appeal as in ordinary
importation.

No part of a Philippine vessel or aircraft or its equipment, wrecked either in Philippine or foreign
waters, shall be subject to duty.

CHAPTER 2
EXAMINATION OF GOODS

SECTION 419. Examination of Goods.— Examination of goods, when required by the Bureau,

shall be conducted immediately after the goods declaration has been lodged. Priority in the
examination shall be given to live animals, perishable goods and other goods requiring immediate
examination.

Whenever necessary, a system of coordination and joint examination of goods shall be

established by the Bureau and other regulatory agencies under existing laws and regulations.

As a general rule, the Bureau may examine the goods in the presence of the declarant or an
authorized representative. Examination of the goods in the absence of the declarant or authorized
representative may be allowed in exceptional circumstance and for valid and justifiable grounds, as
may be defined by regulations promulgated by the Secretary of Finance, upon recommendation of
the Commissioner. The Bureau may require the declarant to be present or to be represented at
theexamination o£ the goods or to render any assistance necessary to facilitate the examination.

The Bureau shall take samples of the goods only when needed to establish the tariff description
and value of goods declared, or to ensure compliance with this Act. Samples drawn shall be as
minimal as possible.
 SECTION 420. Conditions for Examination.— Pursuant to internationally accepted standards, the
Bureau may adopt nonintrusive examination of goods, such as the use of x-ray machines.

Physical examination of the goods shall be conducted when:

(a) It is directed by the Commissioner on account of a derogatory information;

(b) The goods are subject to an Alert Order issued by competent authority;

(c) The goods are electronically selected for physical examination;

(d) There are issues and controversies surrounding the goods declaration and the import
clearance process; or

(e) The importer or declarant requests for the examination of the goods.

The Commissioner may exempt from physical examination the goods of authorized economic
operators or of those provided for under any existing trade facilitation program of the Bureau.

Physical examination, when required, shall be conducted in an expeditious manner.

SECTION 421. Duties of Customs Officer Tasked to Examine the Imported Goods.— In the
examination, classification, and valuation of the goods, the customs officer shall:

(a) Determine whether the packages for examination and their contents are in accordance with
the goods declaration, invoice and other pertinent documents;

(b) Take samples of the imported goods for examination or laboratory analysis when necessary;

(c) Issue a receipt for a sample taken and retained during examination; and

(d) Report whether the goods have been correctly declared as to value, quantity, measurement,
weight, tariff classification and not imported contrary to law.

Failure on the part of the customs officer to perform the above duties shall be penalized according
to Section 1431 of Title XIV of this Act.

SECTION 422. Customs Expenses Constituting Charges on Goods.— The cost of examination shall

be for the account of the importer or exporter, subject to proper accounting and documentation. All
expenses incurred by the Bureau for the handling or storage of goods and other necessary
operations shall be chargeable against the goods, and shall constitute a lien thereon.
 CHAPTER 3
ASSESSMENT AND RELEASE

SECTION 423. Determination of the De Minimis Value.— No duties and taxes shall be collected
on goods with an FOB or FCA value of ten thousand pesos (₱10,000.00) or below. The Secretary of
Finance shall adjust the de minimis value as provided herein, every three (3) years after the
effectivity of this Act. The value herein stated shall be adjusted to its present value using the CPI, as
published by the PSA.

SECTION 424. Duty of Customs Officer Tasked to Assess Imported Goods.— For purposes of

assessing duties and taxes on imported goods, the customs officer shall classify, value, and
determine the duties and taxes to be paid. The customs officer shall prepare and submit an
assessment report as established under this Act.

SECTION 425. Tentative Assessment of Goods Subject to Dispute Settlement.—Assessment shall

be deemed tentative if the duties and taxes initially assessed are disputed by the importer. The
assessment shall be completed upon final readjustment based on the tariff ruling in case of
classification dispute, or the final resolution of the protest case involving valuation, rules of origin,
and other customs issues.

The District Collector may allow the release of the imported goods under tentative assessment
upon the posting of sufficient security to cover the applicable duties and taxes equivalent to the
amount that is disputed.

SECTION 426. Tentative Assessment of Provisional Goods Declaration.— Assessment of a

provisional goods declaration shall be deemed tentative and such assessment shall be completed
upon final readjustment and submission by the declarant of the additional information or
documentation required to complete the declaration within the period provided in Section 403 of this
Act.

SECTION 427. Readjustment of Appraisal, Classification or Return.— Such appraisal,

classification or return, as finally passed upon and approved or modified by the District Collector,
shall not be altered or modified in any manner, except:

(1) Within one (1) year after payment of the duties, upon statement of error in conformity with
Section 912 of this Act, as approved by the District Collector;
 (2) Within fifteen (15) days after such payment, upon request for reappraisal or reclassification
addressed to the Commissioner by the District Collector, if the appraisal or classification is deemed
to be low;

(3) Upon request for reappraisal and/or reclassification, in the form of a timely protest addressed
to the District Collector by the interested party if the latter should be dissatisfied with the appraisal
or return; or

(4) Upon demand by the Commissioner after the completion of compliance audit in accordance
with the provisions of this Act.

SECTION 428. Assessment of Duty on Less Than Entered Value.— Duty shall not be assessed in
any case upon an amount less than the entered value, unless by direction of the Commissioner in
cases when the importer certifies at the time of entry that the entered value is higher than the
dutiable value and that the goods are so entered in order to meet increases made by the appraiser
in similar cases then pending re-appraisement; and the lower assessment shall be allowed only
when the importer's contention is sustained by a final decision, and shall appear that such action of
the importer was taken in good faith after due diligence and inquiry.

SECTION 429. Final Assessment.— Assessment shall be deemed final fifteen (15) days after
receipt of the notice of assessment by the importer or consignee.

SECTION 430. Period of Limitation.— In the absence of fraud and when the goods have been
finally assessed and released, the assessment shall be conclusive upon all parties three (3) years
from the date of final payment of duties and taxes, or upon completion of the post clearance audit.

SECTION 431. Release of Goods after Payment of Duties and Taxes.— Goods declared shall be
released when duties and taxes and other lawful charges have been paid or secured and all the
pertinent laws, rules and regulations have been complied with.

When the Bureau requires laboratory analysis of samples, detailed technical documents or expert
advice, it may release the goods before the results of such examination are known after posting of
sufficient security by the declarant.

SECTION 432. Release of Goods to the Holder of Bill of Lading or Airway Bill.— Any customs
officer who releases goods to the consignee or lawful holder of the bill oflading or airway bill shall not
be liable for any defect or irregularity in its negotiation unless the customs officer has notice of the
defect or irregularity.
 SECTION 433. Release of Goods Without Production of Bill of Lading or Airway Bill.—No
customs officer shall release goods to any person without the submission of the bill of lading or
airway bill covering the goods, except on written order of the carrier or agent of the vessel or aircraft,
in which case neither the government nor the customs officer shall be held liable for any damage
arising from wrongful release of the goods: Provided, That when the release of goods is made
against such written order, the customs officer shall require the submission of a copy of the bill.

SECTION 434. Release of Goods Upon Order of Importer.— An importer may issue a written
authorization for the release of goods stored in a bonded warehouse to another person. Such
authorization shall not relieve the importer from liability for the duties, taxes and other charges due
on the goods unless the person to whom the release was authorized assumes such liability.

SECTION 435. Withholding Release Pending Satisfaction of Lien.— When the District Collector is

duly notified through a lawful order of a competent court of a lien for freight, lighterage or general
average upon any imported goods, the District Collector shall withhold the release of the goods
unless the claim has been paid or secured. In case of disagreement, the District Collector may
release the goods after payment of the freight and lighterage due on the quantity or weight landed as
actually determined.

SECTION 436. Fine or Surcharge on Goods.— Goods subject to any fine or surcharge shall be

released only after the payment of the fine or surcharge.

CHAPTER 4
SPECIAL PROCEDURES

SECTION 437. Traveler and Passenger Baggage.— The Bureau shall provide simplified customs
procedure for traveler and baggage processing based on international agreements and customs
best practices.

Travelers shall be permitted to export goods for commercial purposes, subject to compliance with
the necessary export formalities and payment of export duties, taxes and charges, if any.

SECTION 438. Postal Item or Mail.— Postal item or mail shall include letter-post and parcels, as
described in international practices and agreements, such as the Acts of the Universal Postal Union
(AUPU), currently in force.

A simplified procedure shall be used in the clearance of postal item or mail, including the collection
of the applicable duties and taxes on such items or goods.
 When all the information required by the customs are available in tbe special declaration form for
postal items as provided in the AUPU or similar international agreements, the special declaration
form and supporting documents shall be the goods declaration. However, a separate goods
declaration shall be required for tbe following:

(a) Goods whose value fall within the level that the Commissioner has determined to be taxable
and thus must be covered by a goods declaration;

(b) Prohibited and regulated goods;

(c) Goods, the exportation of which must be certified; and

(d) Imported goods under a customs procedure other than for consumption.

SECTION 439. Express Shipment.— The Bureau shall provide simplified customs procedures

hasedon international standards and customs best practices for air shipments considered as time-
sensitive and requiring pre-arrival clearance. Express shipments of accredited air express cargo
operators may be released prior to the payment of the duty, tax and other charges upon posting of a
sufficient security.

SECTION 440. Establishment of Advance Customs Clearance and Control Program.—The

Bureau may establish and implement a voluntary program on advance customs clearance and
control on containerized cargoes. The details of the voluntary advance customs clearance shall be
subject to the rules and regulations to be issued by the Bureau after conducting the necessary public
hearings and consultations with the concerned sectors.

Title V
Export Clearance and Formalities

CHAPTER 1
EXPORT CLEARANCE AND DECLARATION

SECTION 500. Export Declaration.— All goods exported from the Philippines, whether subject to
export duty or not, shall be declared through a competent customs office through an export
declaration, duly signed electronically or otherwise by the party making the declaration.
 The description of the goods in the export declaration must contain sufficient and specific
information for statistical purposes as well as for the proper valuation and classification of the goods.

SECTION 501. Export Product to Conform to Standard Grades.— If applicable, products shall

conform to export standard grades established by the government. The packaging of the said goods
shall likewise be labeled and marked in accordance with related laws and regulations. Export
declaration may not be granted for goods violating the aforementioned requirements.

SECTION 502. Lodgement and Processing of Export Declaration.— The Bureau shall promulgate

rules and regulations to allow manual and electronic lodgement and processing of the export
declaration.

SECTION 503. Rules of Origin.— Pursuant to the applicable rules of origin, the Bureau or any
other designated government agency may determine the origin of goods for export and, if
appropriate, issue the corresponding certificates of origin. However, the exporter may adopt a self-
certification system: Provided, That it is duly accredited by tbe Bureau or any other authorized
government agencies.

Title VI
Customs Transit and Transshipment

CHAPTER 1
CUSTOMS TRANSIT

SECTION 600. Customs Transit in the Customs Territory.— Customs transit within the customs
territory shall be allowed for goods except those intended for consumption, to be transported as
follows:

(a) From port of entry to another port of entry as exit point for outright exportation;

(b) From port of entry to another port of entry or inland customs office;

(c) From inland customs office to a port of entry as exit point for outright exportation; and

(d) From one port of entry or inland customs office to another port of entry or inland customs
office.
 A transit permit is required for goods transported under customs transit. However, transfer of
goods in customs transit from one means of transport to another shall be allowed;  Provided, That
any customs seal or fastening is not broken or tampered.

The party responsible for the compliance of the obligations imposed on customs transit shall
ensure that the goods are presented intact and in due course at the customs office of destination.
Failure to comply with the aforementioned obligations or likewise failure to follow a prescribed
itinerary or period for delivery of the goods may immediately subject the goods to the corresponding
duties, taxes and other applicable fines, penalties, and surcharges.

SECTION 601. Duty and Tax on Goods Intended for Transit.— Transit goods admitted for storage
in a customs bonded warehouse, or for outright exportation at the port of destination or inland
customs office, and goods intended for transit covered by Republic Act No. 10668, otherwise known
as “An Act Allowing Foreign Vessels to Transport and Co-Load Foreign Cargoes for Domestic
Transshipment and for Other Purposes”, shall not be subject to the payment of duties and taxes at
the port of entry: Provided, That any conditions and security required by the Bureau are complied
with.

Goods for consumption and other goods intended for customs transit not covered by the
immediately preceding paragraph shall he subject to the payment of duties and taxes at the port of
discharge.

SECTION 602. Carrier's Security.— Carriers that transport imported goods that shall be placed
under customs transit from a port of entry to other ports, shall post a general transportation security
amounting to at least fifty thousand pesos (₱50,000.00). Such security shall ensure the complete
and immediate delivery of goods to the customs officer at the port of destination and the payment of
pertinent customs charges and expenses and other transfer costs. The amount of the security may
be adjusted by the Commissioner, upon approval of the Secretary of Finance.

CHAPTER 2
CUSTOMS TRANSSHIPMENT

SECTION 603. Customs Transshipment.— Goods admitted for transshipment shall not be subject

to the payment of duties and taxes: Provided, That the goods declaration for customs transshipment
particularly indicates such nature of the goods, duly supported by commercial or transport
documents or evidence as required by the Bureau.
 Goods for transshipment must be exported from the Philippines within thirty (30) days from arrival
thereof. The Commissioner may allow an extension of such period after the establishment of valid
reasons.

SECTION 604. Goods Entered for Immediate Reexportation.— Where an intent of reexportation

of the goods is shown by the bill of lading, invoice, manifest, or other satisfactory evidence, the
whole or a part of a bill comprising not less than one package may be entered for immediate
reexportation under security. The District Collector shall designate the vessel or aircraft in which the
goods are loaded constructively as a warehouse to facilitate the direct transfer of the goods to the
exporting vessel or aircraft.

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 except under entry for immediate reexportation under sufficient security in
an amount equal to the ascertained duties, taxes and other charges.

Upon the reexportation of the goods, and the production of proof of landing beyond the limits of
the Philippines, the security shall be released.

Title VII
Import Duty and Tax

CHAPTER 1
BASIS OF VALUATION

SECTION 700. Sequential Application of Valuation Methods.— Imported goods shall be valued in

accordance with the provisions of Section 701 of this Act whenever the conditions prescribed therein
are fulfilled.

Where the customs value cannot be determined under the provisions of Section 701 of this Act, it
is to be determined by proceeding sequentially through the succeeding sections hereof to the first
such section under which the customs value can be determined. Except as provided in Section 704
of this Act, it is only when the customs value cannot be determined under the provisions of a
particular section that the provisions of the next section in the sequence can be used.

If the importer does not request that the order of Sections 704 and 705 of this Act be reversed, the
normal order of the sequence is to be followed. If the importer so requests but it is impossible to
determine the customs value under Section 705 of this Act, the customs value shall be determined
under Section 704.

When the customs value cannot be determined under Sections 701 through 705, it may be
determined under Section 706 of this Act.

SECTION 701. Transaction Value System—Method One.— The transaction value shall be the price
actually paid or payable for the goods when sold for export to the Philippines adjusted in accordance
with the provisions of tins section: Provided, That:

(a) There are no restrictions as to the disposition or use of the goods by the buyer other than
restrictions which:

(i) Are imposed or required by law or by Philippine authorities;

(ii) limit the geographical area in which the goods may be resold; or

(iii) Do not substantially affect the value of the goods:

(b) The sale or price is not subject to some condition or consideration for which a value cannot
be determined with respect to the goods being valued; and

(c) The buyer and the seller are not related, or where the buyer and the seller are related, that
the transaction value is acceptable for customs purposes under the provisions hereof.

For purposes of this Act, persons shall be deemed related only if:

(i) They are officers or directors of one another's business;

(ii) They are legally recognized partners in business;

(iii) There exists an employer-employee relationship between them;

(iv) Any person directly or indirectly owns, controls or holds five percent (5%) or more of the
outstanding voting stocks or shares of both seller and buyer;

(v) One of them directly or indirectly controls the other;

(vi) Both of them are directly or indirectly controlled by a third person;

(vii) Together they directly or indirectly control a third person; or

 (viii) They are members of the same family, including those related by affinity or consanguinity
up to the fourth civil degree.

Persons who are associated in business with one another in that one is the sole agent, sole
distributor or sole concessionaire, however described, of the other shall be deemed to be related
for the purposes of this Act if they fall within any of the eight (8) cases cited in the preceding
paragraph.

In a sale between related persons, the transaction value shall be accepted as basis for customs
valuation whenever the importer demonstrates that such value closely approximates one of the
following occurring at or about the same time:

(a) The transaction value in sales to unrelated buyers of identical or similar goods for export to
the same country of importation;

(b) The customs value of identical or similar goods as determined under the provisions of
Section 704 of this Act; or

(c) The customs value of identical or similar goods are determined under the provisions of
Section 705 of this Act.

In determining the transaction value, the following shall be added to the price actually paid or
payable for the imported goods:

(1) To the extent that they are incurred by the buyer but are not included in the price actually
paid or payable for the imported goods:

(a) Commissions and brokerage fees except buying commissions;

(b) Cost of containers;

(c) Cost of packing, whether for labor or materials;

(d) Value, apportioned as appropriate, of the following goods and services: materials,
components, parts and similar items incorporated in the imported goods; tools; dies; moulds
and similar items used in the production of imported goods; materials consumed in the
production of the imported goods; and engineering, development, artwork, design work and
plans and sketches undertaken elsewhere than in the Philippines and necessary for the
production of imported goods, where such goods and services are supplied directly or
 indirectly by the buyer free of charge or at a reduced cost for use in connection with the
production and sale for export of the imported goods; and

(e) Amount of royalties and license fees related to the goods being valued that the buyer
must pay either directly or indirectly, as a condition of sale of the goods to the buyer.

(2) Value of any part of the proceeds of any subsequent resale, disposal or use of the
imported goods that accrues directly or indirectly to the seller;

(3) Cost of transport of the imported goods from the port of exportation to the port of entry in
the Philippines;

(4) Loading, unloading and handling charges associated with the transport of the imported
goods from the country of exportation to the port of entry in the Philippines; and

(5) Cost of insurance.

All additions to the price actually paid or payable shall be made only on the basis of objective
and quantifiable data.

SECTION 702. Transaction Value of Identical Goods—Method Two.— Where the dutiable value

cannot be determined under method one, the dutiable value shall be the transaction value of
identical goods sold for export to the Philippines and exported at or about the same time as the
goods being valued. For purposes of this section, “Identical goods” refer to goods which are the
same in all respects, including physical characteristics, quality and reputation. Minor differences in
appearances shall not preclude goods otherwise conforming to the definition from being regarded as
identical.

If, in applying this section, more than one transaction value of identical goods are found, the
lowest value shall be used to determine the customs value.

SECTION 703. Transaction Value of Similar Goods—Method Three.— Where the dutiable value

cannot be determined under the preceding method, the dutiable value shall be the transaction value
of similar goods sold for export to the Philippines and exported at or about the same time as the
goods being valued. For purposes of this section, “Similar goods” refer to goods which, although not
alike in all respects, have like characteristics and similar component materials which enable them to
perform the same functions and to be commercially interchangeable. The quality of the goods, its
reputation and the existence of a trademark shall be among the factors to be considered in
determining whether goods are similar.
 If, in applying this section, more than one transaction value of identical goods are found, the
lowest such value shall be used to determine the customs value.

SECTION 704. Deductive Value—Method Four.— Where the dutiable value cannot be determined

under the preceding method, the dutiable value shall be the deductive value unless otherwise
requested by the importer as provided in Section 700 hereof. The deductive value which shall be
based on the unit price at which the imported goods or identical or similar imported goods are sold in
the Philippines, in the same condition as when imported, in the greatest aggregate quantity, at or
about the time of the importation of the goods being valued, to persons not related to the persons
from whom they buy such goods, subject to deductions for the following:

(1) Either the commissions usually paid or agreed to be paid or the additions usually made for
profit and general expenses in connection with sales in such country of imported goods of the
same class or kind;

(2) The usual costs of transport and insurance and associated costs incurred within the
Philippines;

(3) Where appropriate, the costs of: (i) transport of the imported, goods from the port of
exportation to the port of entry in the Philippines; (ii) loading, unloading and handling charges
associated with the transport of the imported goods from the country of exportation to the port of
entry in the Philippines; and (iii) insurance; and

(4) The customs duties and other national taxes payable in the Philippines by reason of the
importation or sale of the goods.

If neither the imported goods nor identical nor similar imported goods are sold at or about the time
of importation of the goods being valued in the Philippines in the conditions they were imported, the
customs value shall, subject to the conditions set forth in the preceding paragraph, be based on the
unit price at which the imported goods or identical or similar imported goods sold in the Philippines in
the condition they were imported and at the earliest date after the importation of the goods being
valued, but before the expiration of ninety (90) days after such importation.

If neither the imported goods nor identical nor similar imported goods are sold in the Philippines in
the condition as imported, then, if the importer so requests, the dutiable value shall be based on the
unit price at which the imported goods, after further processing, are sold in the greatest aggregate
quantity to persons in the Philippines who are not related to the persons from whom they buy such
goods, subject to allowance for the value added by such processing and deductions provided under
subsections (1), (2), (3) and (4) hereof.
 SECTION 705. Computed Value—Method Five.— Where the dutiable value cannot be determined
under the preceding method, the dutiable value shall be the computed value of the sum of:

(1) The cost or the value of materials and fabrication or other processing employed in producing
the imported goods;

(2) The amount for profit and general expenses equal to that usually reflected in the sale of
goods of the same class or kind as the goods being valued which are made by producers in the
country of exportation for export to the Philippines;

(3) The freight, insurance fees and other transportation expenses for the importation of the
goods;

(4) Any assist, if its value is not included under paragraph (1) hereof; and

(5) The cost of containers and packing, if their values are not included under paragraph (1)
hereof.

The Bureau shall not require or compel any person not residing in the Philippines to produce for
examination, or to allow access to, any account or other record for the purpose of determining a
computed value. However, information supplied by the producer of the goods for the purposes of
determining the customs value may be verified in another country with the agreement of the
producer and provided that said producer will give sufficient advance notice to the government of the
country in question and that the latter does not object to the investigation.

SECTION 706. Fallback Value—Method Six.— If the dutiable value cannot be determined under
the preceding methods described above, it shall be determined by using other reasonable means
and on the basis of data available in the Philippines. If the importer so requests, the importer shall be
informed in writing of the dutiable value determined under method six and the method used to
determine such value.

No dutiable value shall be determined under method six on the basis of:

(1) The selling price in the Philippines of goods produced in the Philippines;

(2) A system that provides for the acceptance for customs purposes of the higher of two (2)
alternative values;

(3) The price of goods in the domestic market of the country of exportation;
 (4) The cost of production, other than computed values, that have been determined for identical
or similar goods in accordance with method five hereof;

(5) The price of goods for export to a country other than the Philippines;

(6) Minimum customs values; or

(7) Arbitrary or fictitious values.

SECTION 707. Ascertainment of the Accuracy of the Declared Value.— Nothing in this section

shall be construed as restricting or calling into question the right of the Bureau to ascertain the truth
or accuracy of any statement, document or declaration presented for customs valuation purposes.
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, adjusted in
accordance with the provisions of Section 701 of this Act.

If in the course of determining the dutiable value of imported goods, it becomes necessary to delay
the final determination of such dutiable value, the importer shall nevertheless he able to secure the
release of the imported goods upon posting of a sufficient security in an amount equivalent to the
duties and taxes in dispute conditioned on the payment of additional duties and taxes, if any, as may
be determined: Provided, That prohibited goods shall not be released under any circumstance.

If, after receiving further information, or in the absence of a response, the Bureau still has
reasonable doubts on the truth or accuracy of the declared value, it may deem that the customs
value of the imported goods cannot be determined under method one, without prejudice to an
importer's right to appeal pursuant to Section 1104 of this Act. Before taking a final decision, the
District Collector shall communicate to the importer, in writing if requested, the grounds for doubting
the truth or accuracy of the particulars or documents produced and give the importer a reasonable
opportunity to respond. When a final decision is made, the Bureau shall communicate its decision
and the grounds therefor in writing.

SECTION 708. Exchange Rate.— For the assessment and collection of import duty upon imported
goods and for other purposes, the value and prices thereof quoted in foreign currency shall be
converted into the currency of the Philippines at the current rate of exchange or value specified or
published, from time to time, by the Bangko Sentral ng Pilipinas (BSP).

CHAPTER 2
SPECIAL DUTIES AND TRADE REMEDY MEASURES
 SECTION 709. Government's Right of Compulsory Acquisition.— In order to protect government
revenues against undervaluation of goods, the Commissioner may, motu proprio or upon the
recommendation of the District Collector, acquire imported goods under question for a price equal to
their declared customs value plus any duties already paid on the goods, payment for which shall be
made within ten (10) working days from issuance of a warrant signed by the Commissioner for the
acquisition of such goods.

An importer who is dissatisfied with a decision of the Commissioner pertaining to this section may,
within twenty (20) working days after the date on which notice of the decision is given, appeal to the
Secretary of Finance, and thereafter if still dissatisfied, to the CTA as provided for in Section 1136 of
this Act.

Where no appeal is made by the importer, or upon reaffirmation of the Commissioner's decision
during the appeals process, the Bureau or its agents shall sell the acquired goods pursuant to
existing laws and regulations.

Nothing in this section limits or affects any other powers of the Bureau with respect to the
disposition of the goods or any liability of the importer or any other person with respect to an offense
committed in the importation of the goods.

SECTION 710. Marking of Imported Goods and Containers.—

(A) Marking of Goods.— Except as hereinafter provided, all goods of foreign origin imported into
the Philippines or their containers, as provided in subsection (B) hereof shall be conspicuously
marked in any official language of the Philippines as legibly, indelibly and permanently as the
nature of the goods or container will permit and in such manner as to indicate to an ultimate
purchaser in the Philippines the name of the country of origin of the goods. Pursuant thereto, the
Commissioner shall, with the approval of the Secretary of Finance:

(1) Determine the character of words and phrases or abbreviation thereof which shall be
acceptable as indicating the country of origin and prescribe any reasonable method of marking,
whether by printing, stenciling, stamping, branding, labeling or by any other reasonable method,
and in a conspicuous place on the goods or container where the marking shall appear;

(2) Require the addition of other words or symbols which may be appropriate to prevent
deception or mistake as to the origin of the goods or as to the origin of any other goods with
which such imported goods is usually combined subsequent to importation but before delivery to
an ultimate purchaser; and

(3) Authorize the exception of any goods from the requirements of marking if:
 (i) Such goods are incapable of being marked;

(ii) Such goods cannot be marked prior to shipment to the Philippines without injury;

(iii) Such, goods cannot be marked prior to shipment to the Philippines, except at an
expense economically prohibitive of their importation;

(iv) The marking of a container of such goods will reasonably indicate the origin of such
goods;

(v) Such goods are crude substances;

(vi) Such goods are imported for use by the importer and not intended for sale in their
imported or any other form;

(vii) Such goods are to be processed in the Philippines by the importer or for the importer's
account other than for the purpose of concealing the origin of such goods and in such manner
that any mark contemplated by this section would necessarily be obliterated, destroyed, or
permanently concealed;

(viii) An ultimate purchaser, by reason of the character of such goods or by reason of the
circumstances of their importation, must necessarily know the country of origin of such goods
even though they are not marked to indicate their origin;

(ix) Such goods were produced more than twenty (20) years prior to their importation into
the Philippines; or

(x) Such goods cannot be marked after importation except at an expense which is
economically prohibitive, and the failure to mark the goods before importation was not due to
any purpose of the importer, producer, seller or shipper to avoid compliance with this section.

(B) Marking of Containers.— Whenever goods are exempt under paragraph (3) of subsection (A)
of this section from the requirements of marking, the immediate container, if any, of such goods, or
such other container or containers of such goods, shall be marked in such manner as to indicate to
an ultimate purchaser in the Philippines the name of the country of origin of such goods in any
official language of the Philippines, subject to all provisions of this section, including the same
exceptions as are applicable to goods under paragraph (3) of subsection (A).

(C) Fine for Failure to Mark.— If, at the time of importation any good or its container, as provided
in subsection (B) hereof, is not marked in accordance with the requirements of this section, there
 shall be levied, collected, and paid upon such good a marking duty of five percent (5%) of dutiable
value, which shall be deemed to have accrued at the time of importation.

(D) Release Withheld Until Marked.— No imported goods held in customs custody for
inspection, examination, or assessment shall be released until such goods or their containers shall
have been marked in accordance with the requirements of this section and until the amount of duty
estimated to be payable under subsection (C) of this section shall have been deposited.

(E) The failure or refusal of the owner or importer to mark the goods as herein required within a
period of thirty (30) days after due notice shall constitute as an act of abandonment of said goods
and their disposition shall be governed by the provisions of this Act relative to abandonment of
imported goods.

SECTION 711. Dumping Duty.— The provisions of Republic Act No. 8752, otherwise known as the
“Anti-Dumping Act of 1999”, are hereby adopted.

SECTION 712. Safeguard Duty.— The provisions of Republic Act No. 8800, otherwise known as
the “Safeguard Measures Act”, are hereby adopted.

SECTION 713. Countervailing Duty.— The provisions of Republic Act No. 8751, otherwise known
as “An Act Strengthening the Mechanisms for the Imposition of Countervailing Duties on Imported
Subsidized Products, Commodities or Articles of Commerce in Order to Protect Domestic Industries
from Unfair Trade Competition, Amending for the Purpose Section 302, Part 2, Title II, Book I of
Presidential Decree No. 1464”, otherwise known as the “Tariff and Customs Code of the Philippines,
as Amended”, are hereby adopted.

SECTION 714. Discrimination by Foreign Countries.— Without prejudice to the Philippine

commitment in any ratified international agreements or treaty, the following recourse shall be
applicable in case of discrimination by foreign countries:

(a) When the President finds that the public interest will be served thereby, the President shall,
by proclamation, specify and declare new or additional duties in an amount not exceeding one
hundred percent (100%) ad valorem upon goods wholly or in part the growth or product of, or
imported in a vessel of any foreign country whenever the President shall find as a fact that such
country:

(1) Imposes, directly or indirectly, up on the disposition or transportation in transit or through

reexportation from such country of any goods wholly or in part the growth or product of the
Philippines, any unreasonable charge, exaction, regulation or limitation which is not equally
enforced upon the like goods of every foreign country; or
 (2) Discriminates in fact against the commerce of the Philippines, directly or indirectly, by law
or administrative regulation or practice, by or in respect to any customs, tonnage, or port duty,
fee, charge, exaction, classification, regulation, condition, restriction or prohibition, in such
manner as to place the commerce of the Philippines at a disadvantage compared with the
commerce of any foreign country.

(b) If at any time the President shall find it to be a fact that any foreign country has not only
discriminated against the commerce of the Philippines, as aforesaid, but has, after the issuance of
a proclamation as authorized in subsection (a) of this section, maintained or increased its said
discrimination against the commerce of the Philippines, the President is hereby authorized, if
deemed consistent with the interests of the Philippines and of public interest, to issue a further
proclamation directing that such product of said country or such goods imported in their vessels be
excluded hom importation into the Philippines.

(c) Any proclamation issued by the President under this section shall, if the President deems it
consistent with the interest of the Philippines, extend to the whole of any foreign country or may be
confined to any subdivision or subdivisions thereof; Provided, That the President may, whenever
the public interest requires, suspend, revoke, supplement or amend any such proclamation.

(d) All goods imported contrary to the provisions of this section shall be forfeited to the
government of the Philippines and shall be liable to be seized, prosecuted and condemned in like
manner and under the same regulations, restrictions, and provisions as may from time to time he
established for the recovery, collection, distribution, and remission or forfeiture to the government
by the tariff and customs laws. Whenever the provision of this section shall be applicable to
importations into the Philippines of goods wholly or in part the growth or product of any foreign
country, it shall be applicable thereto, whether such goods are imported directly or indirectly.

(e) It shall be the duty of the Commission to ascertain and at all times be informed whether any
of the discriminations against the commerce of the Philippines enumerated in subsections (a) and
(b) of this section are practiced by any country; and if and when such discriminatory acts are
disclosed, it shall be the duty of the Commission to bring the matter to the attention of the
President, and to recommend measures to address such discriminatory acts.

(f) The Secretary of Finance shall make such rules and regulations as are necessary for the
execution of a proclamation that the President may issue in accordance with the provisions of this
section.
 Title VIII
Tax and Duty Deferment, Preference and
Exemption

CHAPTER 1
CONDITIONALLY TAX AND/OR DUTY-EXEMPT
IMPORTATION

SECTION 800. Conditionally Tax and/or Duty-Exempt Importation.— The following goods shall

be exempt from the payment of import duties upon comphance with the formalities prescribed in the
regulations which shall be promulgated by the Commissioner with the approval of the Secretary of
Finance: Provided, That goods sold, bartered, hired or used for purposes other than what they were
intended for and without prior payment of the duty, tax or other charges which would have been due
and payable at the time of entry if the goods had been entered without the benefit of this section,
shall be subject to forfeiture and the importation shall constitute a fraudulent practice against
customs laws: Provided, However, That a sale pursuant to a judicial order or in liquidation of the
estate of a deceased person shall not be subject to the preceding proviso, without prejudice to the
payment of duties, taxes and other charges; Provided, Further, That the President may, upon the
recommendation of the Secretary of Finance, suspend, disallow or completely withdraw, in whole or
in part, any conditionally free importation under this section:

(a) Aquatic products such as fishes, crustaceans, mollusks, marine animals, seaweeds, fish oil,
roe, caught or gathered by fishing vessels of Philippine registry; Provided, That they are imported
in such vessels or in crafts attached thereto; Provided, However, That they have not been landed
in any foreign territory or, if so landed, that they have been landed solely for transshipment without
having been advanced in condition;

(b) Equipment for use in the salvage of vessels or aircrafts, not available locally, upon
identification and the giving of a security in an amount equal to one hundred percent (100%) of the
ascertained duties, taxes and other charges thereon, conditioned for the exportation thereof or
payment of corresponding duties, taxes and other charges within six (6) months from the date of
acceptance of the goods declaration; Provided, That the Bureau may extend the time for
exportation or payment of duties, taxes and other charges for a term not exceeding six (6) months
from the expiration of the original period;
 (c) Cost of repairs, excluding the value of the goods used, made in foreign countries upon
vessels or aircraft documented, registered or licensed in the Philippines, upon proof satisfactory to
the Bureau: (1) that adequate facilities for such repairs are not afforded in the Philippines; or (2)
that such vessels or aircrafts, while in the regular course of their voyage or flight, were compelled
by stress of weather or other casualty to put into a foreign port to make such repairs in order to
secure the safety, seaworthiness, or airworthiness of the vessels or aircrafts to enable them to
reach their port of destination;

(d) Goods brought into the Philippines for repair, processing or reconditioning to be reexported
upon completion of the repair, processing or reconditioning: Provided, That the Bureau shall
require security equal to one hundred percent (100%) of the duties, taxes and other charges
thereon, conditioned for the exportation thereof or payment of the corresponding duties, taxes and
other charges within six (6) months from the date of acceptance of the goods declaration;

(e) Medals, badges, cups, and other small goods bestowed as trophies or prizes, or those
received or accepted as honorary distinction;

(f) Personal and household effects belonging to returning residents including household
appliances, jewelry, precious stones, and other goods of luxury which were formally declared and
listed before departure and identified under oath before the District Collector when exported from
the Philippines by such returning residents upon their departure therefrom or during their stay
abroad; personal and household effects including wearing apparel, goods of personal adornment,
toilet goods, instruments related to one's profession and analogous personal or household effects,
excluding luxury items, vehicles, watercrafts, aircrafts and animals purchased in foreign countries
by residents of the Philippines which were necessary, appropriate, and normally used for their
comfort and convenience during their stay abroad, accompanying them on their return, or arriving
within a reasonable time which, barring unforeseen and fortuitous events, in no case shall exceed
sixty (60) days after the owner's return.

For purposes of this section, the phrase “returning residents” shall refer to nationals who have
stayed in a foreign country for a period of at least six (6) months. Returning residents shall have
tax and duty exemption on personal and household effects: Provided, That:

(1) It shall not be in commercial quantities;

(2) It is not intended for barter, sale or for hire; and

(3) Limited to the FCA or FOB value of:

 (i) Three hundred fifty thousand pesos (₱350,000.00) for those who have stayed in a foreign
country for at least ten (10) years and have not availed of this privilege within ten (10) years
prior to returning resident's arrival;

(ii) Two hundred fifty thousand pesos (₱250,000.00) for those who have stayed in a foreign
country for a period of at least five (5) but not more than ten (10) years and have not availed of
this privilege within five (5) years prior to returning resident's arrival; or

(iii) One hundred fifty thousand pesos (₱150,000.00) for those who have stayed in a foreign
country for a period of less than five (5) years and have not availed of this privilege within six
(6) months prior to returning resident's arrival.

Any amount in excess of the above-stated threshold shall be subject to the corresponding duties
and taxes under this Act.

Every three (3) years after the effectivity of this Act, the Secretary of Finance shall adjust the
amount herein stated to its present value using the CPI as published by the PSA.

In addition to the privileges granted under the immediately preceding paragraph, returning
Overseas Filipino Workers (OPWs) 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 accomp
anying them on their return, or arriving within a reasonable time which, barring unforeseen and
fortuitous events, in no case shall exceed sixty (60) days after every returning OFW's return upon
presentation of their original passport at the port of entry: Provided, That any amount in excess of
FCA value of one hundred fifty thousand pesos (₱150,000.00) for personal and household effects
or of the number of duty-free appliances as provided for under this section, shall be subject to the
corresponding taxes and duties; Provided, Further, That every three (3) years after the effectivity of
this Act, the Secretary of Finance shall adjust the amount herein stated to its present value using
the CPI as published by the PSA;

(g) Residents of the Philippines, OPWs or other Filipinos while residing abroad or upon their
return to the Philippines shall be allowed to bring in or send to their families or relatives in the
Philippines balikbayan boxes which shall be exempt from applicable duties and taxes imposed
under the NIRC of 1997, as amended: Provided, That balikbayan boxes shall contain personal and
household effects only and shall neither be in commercial quantities nor intended for barter, sale or
for hire and that the FCA value of which shall not exceed one hundred fifty thousand pesos
(₱150,000.00); Provided, Further, That every three (3) years after the effectivity of this Act, the
Secretary of Finance shall adjust the amount herein stated to its present value using the CPI as
published by the PSA; Provided, Finally, That residents of the Philippines, OFWs or other Filipinos
can only avail of this privilege up to three (3) times in a calendar year. Any amount in excess of the
allowable non-dutiable value shall be subject to the applicable duties and taxes;

(1) For purposes of this Act, OFWs referto Holders of valid passports duly issued by the
Department of Foreign Affairs (DFA) and certified by the Department of Labor and Employment
(DOLE) or the Philippine Overseas Employment Administration (POEA) for overseas
employment purposes. They cover all Filipinos, working in a foreign country under employment
contracts, regardless of their professions, skills or employment status in a foreign country; and
(2) Calendar Year refers to the period from January 1 to December 31.

(h) Wearing apparel, goods of personal adornment, toilet goods, portable tools and instruments,
theatrical costumes and similar effects accompanying travelers, or tourists, or arriving within a
reasonable time before or after their arrival in the Philippines, which are necessary and appropriate
for the wear and use of such persons according to the nature of the journey, their comfort and
convenience; Provided, That this exemption shall not apply to goods intended for other persons or
for barter, sale or hire: Provided, However, That the Bureau may require either a written
commitment or a security in an amount equal to one hundred percent (100%) of the ascertained
duties, taxes and other charges thereon, conditioned for the exportation thereof or payment of the
corresponding duties, taxes and other charges within three (3) months from the date of acceptance
of the goods declaration: Provided, Further, That the Bureau may extend the time for exportation or
payment of duties, taxes and other charges for a term not exceeding three (3) months from the
expiration of the original period.

Personal and household effects and vehicles belonging to foreign consultants and experts hired
by, or rendering service to, the government, and their staff or personnel and families
accompanying them or arriving within a reasonable time before or after their arrival in the
Philippines, in quantities and of the kind necessary and suitable to the profession, rank or position
of the person importing said items, for their own use and not for barter, sale or hire: Provided, That
the Bureau may require either a written commitment or a security in an amount equal to one
hundred percent (100%) of the ascertained duties, taxes and other charges thereon, upon the
goods classified under this subsection; conditioned for the exportation thereof or payment of the
corresponding duties, taxes and other charges within three (3) months after the expiration of their
term or contract; Provided, However, That the Bureau may extend the time for exportation or
payment of duties, taxes and other charges for a term not exceeding three (3) months from the
expiration of the original period;

(i) Professional instruments and implements, tools of trade, occupation or employment, wearing
apparel, domestic animals, and personal and household effects belonging to persons coming to
settle in the Philippines or Filipinos or their families and descendants who are now residents or
citizens of other countries, such parties hereinafter referred to as overseas Filipinos, in quantities
and of the class suitable to the profession, rank or position of the persons importing said items, for
their own use and not for barter or sale, accompanying such persons, or arriving within a
reasonable time: Provided, That the Bureau may, upon the production of satisfactory evidence that
such persons are actually coming to settle in the Philippines and that the goods are brought from
their former place of abode, exempt such goods from the payment of duties and
taxes; Provided, Further, That vehicles, vessels, aircrafts, machineries and other similar goods for
use in manufacture, shall not fall within this classification and shall therefore be subject to duties,
taxes and other charges;

(j) Goods used exclusively for public entertainment, and for display in public expositions, or for
exhibition or competition for prizes, and devices for projecting pictures and parts and
appurtenances thereof, upon identification, examination, and appraisal and the giving of a security
in an amount equal to one hundred percent (100%) of the ascertained duties, taxes and other
charges thereon, conditione d for exportation thereof or payment of the corresponding duties, taxes
and other charges within three (3) months from the date of acceptance of the goods
declaration: Provided, That the Bureau may extend the time for exportation or payment of duties,
taxes and other charges for a term not exceeding three (3) months from the expiration of the
original period; and technical and scientific films when imported by technical, cultural and scientific
institutions, and not to be exhibited for profit: Provided, Further, That if any of the films is exhibited
for profit, the proceeds therefrom, shall be subject to confiscation, in addition to the penalty
providedamder this Act;

(k) Goods brought by foreign film producers directly and exclusively used for making or recording
motion picture films on location in the Philippines, upon their identification, examination and
appraisal and the giving of a security in an amount equal to one hundred percent (100%) of the
ascertained duties, taxes and other charges thereon, conditioned for exportation thereof or
payment of the corresponding duties, taxes and other charges within three (3) months from the
date of acceptance of the goods declaration, unless extended by the District Collector for another
three (3) months; photographic and cinematographic films, underdeveloped, exposed outside the
Philippines by resident Filipino citizens or by producing companies of Philippine registry where the
principal actors and artists employed for the production are Filipinos, upon affidavit by the importer
and identification that such exposed films are the same films previously exported from the
Philippines. As used in this paragraph, the terms “actors” and “artists” include the persons
operating the photographic camera or other photographic and sound recording apparatus by which
the film is made;

(l) Importations for the official use of foreign embassies, legations and other agencies of foreign
governments: Provided, That those foreign countries accord like privileges to corresponding
agencies of the Philippines. Goods imported for the personal or family use of members and
attaches of foreign embassies, legations, consular officers and other representatives of foreign
governments; Provided, However, That such privilege shall be accorded under special agreements
between the Philippines and the countries which they represent: Provided, Further, That the
privilege may be granted only upon specific instructions of the Secretary of Finance pursuant to an
official request of the DFA on behalf of members or attaches of foreign embassies, legations,
consular officers and other representatives of foreign governments;

(m) Imported goods donated to or, for the account of the Philippine government or any duly
registered relief organization, not operated for profit, for free distribution among the needy, upon
certification by theDSWD or the Department of Education (DepED), or the Department of Health
(DOH), as the case may be;

(n) Containers, holders and other similar receptacles of any material including kraft paper bags
for locally manufactured cement for export, including corrugated boxes for bananas, mangoes,
pineapples and other fresh fruits for export, except other containers made of paper, paperboard
and textile fabrics, which are of such character as to be readily identifiable and/or reusable for
shipment or transportation of goods shall be delivered to the importer thereof upon identification,
examination and appraisal and the giving of a security in an amount equal to one hundred percent
(100%) of the ascertained duties, taxes and other charges thereon, within six (6) months from the
date of acceptance of the goods declaration;

(o) Supplies which are necessary for the reasonable requirements of the vessel or aircraft in its
voyage or flight outside the Philippines, including goods transferred from a bonded warehouse in
any Customs District to any vessel or aircraft engagedin foreign trade, for use or consumption of
the passengers or its crew on board such vessel or aircraft as sea or air stores; or goods
purchased abroad for sale on board a vessel or aircraft as saloon stores or air store
supplies; Provided, That any surplus or excess of such vessel or aircraft supplies arriving from
foreign ports or airports shall be dutiable;

(₱) Goods and salvage from vessels recovered after a period of two (2) years from the date of
filing the marine protest or the time when the vessel was wrecked or abandoned, or parts of a
foreign vessel or its equipment, wrecked or abandoned in Philippine waters or
elsewhere: Provided, That goods and salvage recovered within the said period of two (2) years
shall be dutiable;

(q) Coffins or urns containing human remains, bones or ashes, used personal and household
effects (not merchandise) of the deceased person, except vehicles, the FCA value of which does
not exceed one hundred fifty thousand pesos (₱150,000.00), upon identification as such: Provided,
That every three (3) years after the effectivity of this Act, the value herein stated shall be adjusted
to its present value using the CPI as published by the PSA;

(r) Samples of the kind, in such quantity and of such dimension or construction as to render them
unsaleable or of no commercial value; models not adapted for practical use; and samples of
medicines, properly marked “sample-sale punishable by law”, for the purpose of introducing new
goods in the Philippine market and imported only once in a quantity sufficient for such purpose by
a person duly registered and identified to be engaged in that trade: Provided, That importations
under this subsection shall be previously authorized by the Secretary of
Finance: Provided, However, That importation of sample medicines shall have been previously
authorized by the Secretary of Health, and that such samples are new medicines not available in
the Philippines: Provided, Further, That samples not previously authorized or properly marked in
accordance with this section shall be levied the corresponding tariff duty.

Commercial samples, except those that are not readily and easily identifiable as in the case of
precious and semi-precious stones, cut or uncut, and jewelry set with precious or semi-precious
stones, the value of any single importation of which does not exceed FCA value of fifty thousand
pesos (₱50,000.00) upon the giving of a security in an amount equal to the ascertained duties,
taxes and other charges thereon, conditioned for the exportation of said samples within three (3)
months from the date of the acceptance of the goods declaration or in default thereof, the payment
of the corresponding duties, taxes and other charges: Provided, That if the FCA value of any single
consignment of such commercial samples exceeds fifty thousand pesos (₱50,000.00), the importer
thereof may select any portion of the same not exceeding the FCA value of fifty thousand pesos
(₱50,000,00) for entry under the provision of this subsection, and the excess of the consignment
may be entered in bond, or for consumption, as the importer may elect: Provided, Further, That
every three (3) years after the effectivity of this Act, the Secretary of Finance shall adjust the
amount herein stated to its present value using the CPI as published by the PSA.

(s) Animals, except race horses, and plants for scientific, experimental propagation or breeding,
andfor other botanical, zoological and national defense purposes: Provided, That no live trees,
shoots, plants, moss and bulbs, tubers and seeds for propagation purposes may be imported
under this section, except by order of the government or other duly authorized
institutions; Provided, However, That the free entry of animals for breeding purposes shall be
restricted to animals of recognized breed, duly registered in the record or registry established for
that breed, and certified as such by the Bureau of Animal Industry (BAI): Provided, Further, That
the certification of such record, and pedigree of such animal duly authenticated by the proper
custodian of such record or registry, shall be submitted to the District Collector, together with the
affidavit of the owner or importer that such animal is the animal described in said certificate of
record and pedigree: Provided, Finally, That the animals and plants are certified by the NEDA as
necessary for economic development;

(t) Economic, technical, vocational, scientific, philosophical, historical and cultural books or
publications, and religious books like Bibles, missals, prayer books, the Koran, Ahadith and other
religious books of similar nature and extracts therefrom, hymnal and hymns for religious
uses; Provided, That those which may have already been imported but are yet to be released by
the Bureau at the effectivity of this Act may still enjoy the privilege herein provided upon
certification by the DepED that such imported books and/or publications are for economic,
technical, vocational, scientific, philosophical, historical or cultural purposes or that the same are
educational, scientific or cultural materials covere d by the International Agreement on Importation
of Educational Scientific and Cultural Materials (XAESCM) signed by the President of the
Philippines on August 2, 1952, or other agreements binding upon the Philippines. Educational,
scientific and cultural materials covered by international agreements or commitments binding upon
the Philippine government so certified by the DepED.

(u) Philippine goods previously exported from the Philippines and returned without having been
advanced in value, or improved in condition by any process of manufacturing or other means, and
upon which no drawback or bounty has been allowed, including instruments and implements, tools
of trade, machinery and equipment, used abroad by Filipino citizens in the pursuit of their business,
occupation or profession; and foreign goods previously imported when returned after haiffif been
exported and loaned for use temporarily abroad solely for exhibition, testing and experimentation,
for scientific or educational purposes; and foreign containers previously imported which have been
used in packing exported Philippine goods and returned empty if imported by or for the account of
the person or institution who exported them from the Philippines and not for sale, barter or hire
subject to identification: Provided, That Philippine goods falling under this subsection upon which
drawback or bounty have been allowed shall, upon reimportation thereof, be subject to a duty
under this subsection equal to the amount of such drawback or bounty;

(v) Aircraft, equipment and machinery, spare parts, commissary and catering supplies, aviation
gas, fuel and oil, whether crude or refined except when directly or indirectly used for domestic
operations, and such other goods or supplies imported by and for the use of scheduled airlines
operating under congressional franchise: Provided, That such goods or supplies are not locally
available in reasonable quantity, quality and price and are necessary or incidental to the proper
operation of the scheduled airline importing the same;

(w) Machineries, equipment, tools for production, plans to convert mineral ores into saleable
form, spare parts, supplies, materials, accessories, explosives, chemicals, and transportation and
communications facilities imported by and for the use of new mines and old mines which resume
operations, when certified to as such by the Secretary of the Department of Environment and
Natural Eesources (DENE), upon the recommendation of the Director of Mines and Geosciences
Bureau, for a period ending five (5) years from the first date of actual commercial production of
saleable mineral products: Provided, That such goods are not locally available in reasonable
quantity, quality and price and are necessary or incidental in the proper operation of the mine; and
aircrafts imported by agro-industrial companies to be used by them in their agriculture and
industrial operations or activities, spare parts and accessories thereof, when certified to as such by
the Secretary of the Department of Agriculture (DA) or the Secretary of the Department of Trade
and Industry (DTI), as the case may be;

(x) Spare parts of vessels or aircraft of foreign registry engaged in foreign trade when brought
into the Philippines exclusively as replacements or for the emergency repair thereof, upon proof
satisfactory to the District Collector that such spare parts shaft he utilized to secure the safety,
seaworthiness or airworthiness of the vessel or aircraft, to enable it to continue its voyage or flight;

(y) Goods exported from the Philippines for repair, processing or reconditioning without having
been substantially advanced in value, and subsequently reimported in its original form and in the
same state: Provided, That in case the reimported goods advanced in value, whether or not in their
original state, the value added shall be subject to the applicable duty rate of the tariff heading of
the reimported goods; and

(z) Trailer chassis when imported by shipping companies for their exclusive use in handling
containerized cargo, upon posting a security in an amount equal to one hundred percent (100%) of
the ascertained duties, taxes and other charges due thereon, to cover aperiod of one (1) year from
the date of acceptance of the entry, which period, for meritorious reasons, may be extended by the
Commissioner from year to year, subject to the following conditions:

(1) That they shall be properly identified and registered with the Land Transportation Office
(LTO);

(2) That they shall be subject to customs supervision fee to be fixed by the District Collector
and subject to the approval of the Commissioner;

(3) That they shall be deposited in the customs territory when not in use; and

(4) That upon the expiration of the period prescribed above, duties and taxes shall be paid
unless otherwise reexported.

(aa) Any officer or employee of the DEA, including any attache, civil or military or member of the
staff assigned to a Philippine diplomatic mission abroad by the Department or any similar officer or
 employee of other departments assigned to any Philippine consular office abroad, or any AFP
military personnel accorded assimilated diplomatic rank or on duty abroad who is returning from a
regular assignment abroad, for reassignment to the home office, or who dies, resigns, or is retired
from the service, after the approval of this Act, shall be exempt from the payment of all duties and
taxes on personal and household effects, including one (1) motor car which must have been
ordered or purchased prior to the receipt by the mission or consulate of the order of recall, and
which must be registered in the name of the officer or employee: Provided, That this exemption
shall apply only to the value of the motor car and to the aggregate assessed value of the personal
and household effects, the latter not to exceed thirty percent (30%) of the total amount received by
the officer or employee in salary and allowances during the latest assignment abroad, but not to
exceed four (4) years: Provided, However, That this exemption shall not be availed of more than
once every four (4) years: Provided, Further, That the officer or employee concerned must have
served abroad for not less than two (2) years.

The provisions of general and special laws, to the contrary notwithstanding, including those
granting franchises, there shall be no exemption whatsoever from the payment of duties except as
provided for in this Act; those granted to government agencies, instrumentalities or government-
owned or -controlled corporations (GOCCs) with existing contracts, commitments, agreements, or
obligations with foreign countries requiring such exemption; those granted to international
institutions, associations or organizations entitled to exemption pursuant to agreements or special
laws; and those that may be granted by the President upon prior recommendation of the NEDA in
the interest of national economic development.

CHAPTER 2
CUSTOMS WAREHOUSES

SECTION 801. Establishment and Supervision of Customs Bonded Warehouses.— When the

business of the port requires such facilities, the District Collector, subject to the approval of the
Commissioner, shall designate and establish warehouses for use as public and private bonded
warehouses, yards, or for other special purposes. All such warehouses and premises shall be
subject to the supervision of the District Collector who shall impose such conditions as may be
deemed necessary for the protection of the revenue, and of the goods stored therein. In the exercise
of the District Collector's supervisory functions herein and in the Bureau's implementation of this
chapter, existing contracts of private operators with appropriate government agency or regulator,
such as, but not limited to, the Philippine Ports Authority (PPA), Subic Bay Metropolitan Authority
(SBMA) and Phividec Industrial Authority (₱1A) and their respective authorities and powers already
granted by law pertinent to such contracts, shall not be impaired or adversely affected.
 Goods manufactured in whole or in part of imported materials, and intended for exportation, may
be made and manufactured in a bonded manufacturing warehouse subject to the following
conditions;

(1) The manufacturer shall file sufficient security for the faithful observance of all laws, rules and
regulations applicable thereto;

(2) The application for the establishment of bonded warehouses must be made in writing and
filed with the customs officer, describing the premises, the location, and capacity of the same, and
the purpose for which the building is to be used, pursuant to Section 804 of this Act;

(3) From the receipt of the application, the customs officer shall examine the premises, evaluate
its location, construction, and means provided for the safekeeping of the goods;

(4) The customs officer may authorize the establishment of the customs bonded warehouse, and
accept a bond for its operation and maintenance if the applicant was compliant with the prescribed
requirements; and

(5) The operator of the bonded warehMse shall pay an annual supervision fee in an amount to
be fixed by the Commissioner.

SECTION 802. Types of Customs Bonded Warehouses (CBWs).— Customs bonded warehouses

may be classified as either manufacturing or nonmanufacturing.

Manufacturing customs bonded warehouse may be of the following types; (a) miscellaneous
customs bonded warehouse; (b) customs common bonded warehouse; or (c) industry-specific
bonded warehouse.

Nonmanufacturing customs bonded warehouse include; (a) public bonded warehouse; (b) private
bonded warehouse; or (c) other customs facilities.

SECTION 803. Types of Customs Facilities and Warehouses (CFWs).— Customs facilities and

warehouses shall include:

(a) Container yard;

(b) Container freight station;

(c) Seaport warehouses; and

(d) Airport warehouses.

 Subject to consultation with the NEDA and the DTI, and based on prevailing economic
circumstances, the Secretary of Finance may, upon the recommendation of the Commissioner,
create or dissolve certain types of warehouses.

SECTION 804. Application for Operation of a Customs Warehouse.— Application for the

establishment of CBW and CFW shall be filed with the District Collector where the CBW or CFW is
located, describing the premises, location, capacity and purpose thereof.

Upon receipt of such application, the District Collector shall examine the premises of such
proposed warehouse, particularly its location, construction and storage facilities. The District
Collector, with the approval of the Commissioner, may authorize the establishment of customs
warehouses, and accept the required security for its operation and maintenance. The operator of
such CBW and CFW shall pay an annual supervision fee, as determined by the Commissioner.

SECTION 805. Responsibility of Operators.— The operator of a CBW or CFW shall comply with

the customs requirements on establishment, security, suitability and management, including stock-
keeping and accounting of the goods, of the CBW or CFW. Upon lawful demand, the operator of a
CBW or CFW shall allow authorized representatives of the Bureau access to the premises at a
reasonable time, and to all documents, books and records of accounts pertaining to the operations
of the CBW or CFW.

In case of loss of the goods stored in a CBW or CPW due to operator's gross negligence or willful
misconduct, the operator shall be liable for the payment of duties and taxes due thereof. The
government assumes no legal responsibility over the safekeeping of goods stored in any customs
warehouse, yard or premises.

SECTION 806. Customs Control Over CBWs and CFWs.— The Bureau shall, for customs
purposes, exercise control over, direct and manage CBWs and CFWs pursuant to Section 303 of
this Act and likewise over the goods thereat pursuant to Section 301 of this Act:  Provided, That the
Bureau shall not be liable for any loss or damage of the goods stored for safekeeping in any CBW,
CFW, yard or premises.

SECTION 807. Discontinuance of CBW and CFW.— The use of any CBW and CFW may be
discontinued by the District Collector when conditions so warrant, or upon receipt of a written
request from the operator thereof: Provided, That all the requirements of the laws and regulations
have been complied with by said operator. Where dutiable goods are stored in such premises, the
same must be removed at the risk and expense of the operator: Provided, However, That the
premises shall not be relinquished, and its use shall discontinued until after a careful examination of
the account of the warehouse shall have been made. Discontinuance of the use of any warehouse
shall be effective upon approval thereof by the District Collector who shall, within ten (10) days,
inform the Commissioner of such action in writing.

Notice of discontinuance made by the operator shall not result in the discharge from any duties,
taxes, fees and other charges imposed on dutiable goods in said warehouse.

SECTION 808. Warehousing Security on Goods Stored in CBWs.— For goods declared in the

entry for warehousing in CBWs, the District Collector shall require the importer to post a sufficient
security equivalent to the computed duties, taxes and other charges, conditioned upon the
withdrawal of the goods within the period prescribed by Section 811 of this Act or the payment of
duties, taxes and other charges and compliance with all importation requirements.

SECTION 809. Withdrawal of Goods from CBWs.— Imported goods shall be withdrawn from the
CBWs when the necessary withdrawal permit has been filed, together with any related document
required by any provision of this Act and other regulations.

Goods entered under sufficient security as provided in Section 1507 of this Act may be withdrawn
at any time for consumption, transit, or exportation. The withdrawal must be made by the CBW
operator or its duly authorized representative.

SECTION 810. Release of Goods from CFWs.— Imported goods shall be released when the goods
declaration is electronically lodged, together with any related document required by any provision of
this Act and other regulations. AH goods entered into the CFWs shaH be subject to the filing of a
goods declaration within the period specified under Section 407 of this Act.

SECTION 811. Period of Storage in CBWs.— Goods entered for warehousing may remain in a

CBW for a maximum period of one (1) year from the time of its arrival thereat. For perishable goods,
the storage period shaH be three (3) months from the date of arrival, extendible for valid reasons,
and upon written request, to another three (3) months. Goods not withdrawn after the expiration of
the prescribed period shaHbe deemed as abandoned, as provided under Section 1129 of this Act.

The Commissioner shall, in consultation with the Secretary of Trade and Industry, establish a
reasonable storage period limit beyond one (1) year for bonded goods for manufacturing and
intended for export, the processing into finished products of which requires a longer period based on
industry standard and practice, subject to the approval of the Secretary of Finance.

SECTION 812. Exemption from Duty of Goods in CBWs.— Goods duly entered for warehousing in
CBWs shall be exempt from duty and tax within the allowed period for storage unless withdrawn for
consumption, exportation or transit to a free zone or another CBW, in which case, such withdrawal
will be subject to the applicable rules and regulations on the liquidation of the warehousing entry.
 SECTION 813. Records to be Kept by CBW Operators.— An account shall be kept by the Bureau
of all goods delivered to a CBW, and a report shall be made by the CBW operator containing a
detailed statement of all imported goods entered and withdrawn from the CBW. The Bureau shall
specify the format of the report and may require electronic submission.

All documents, books, and records of accounts concerning the operation of any CBW shall, upon
demand, be made available to the District Collector or the representative of the District Collector for
examination or audit. For record purposes, all documents shall be kept for three (3) years.

CHAPTER 3
FREE ZONES

SECTION 814. When Goods are Admitted and Withdrawn.— Imported goods shall be admitted
into a free zone when the goods declaration, together with required documents as required by
existing laws and regulations, are electronically lodged with the Bureau and other relevant
government authorities at the time of admission.

Imported goods shall be withdrawn from the free zone for entry to the customs territory when the
goods declaration is electronically lodged, together with required documents at the time of the
withdrawal from the free zone.

SECTION 815. Exemption from Duty and Tax of Goods in Free Zones.— Unless otherwise
provided by law and in accordance with the respective laws, rules and regulations of the free zone
authorities, goods admitted into a free zone shall not be subject to duty and tax.

SECTION 816. 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. Transfer of goods
from one free zone into another free zone shall likewise be covered by the necessary transit permit.
The implementing rules and regulations on the transit of goods admitted into, exported from,
withdrawn into the customs territory, and moved between free zones shall be formulated and issued
jointly by the Bureau and the free zone authorities.

SECTION 817. Coordination With Free Zone Authority.— To ensure compliance with customs
laws and regulations, the Bureau shall coordinate with the governing authority of the free zone.

CHAPTER 4
STORES
 SECTION 818. Stores for Consumption.— Stores for consumption shall include:

(a) Goods intended for use by the passengers and the crew on board vessels, aircrafts, or trains,
whether or not sold; and

(b) Goods necessary for the operation and maintenance of vessels, aircrafts, or trains including
fuel and lubricants but excluding spare parts and equipment which are either on board upon arrival
or are taken on board during the stay in the customs territory of vessels, aircrafts, or trains used, or
intended to be used, in international traffic for the transport of persons for remuneration or for the
industrial or commercial transport of goods, whether or not for remuneration.

SECTION 819. Stores to be Taken Away.— For purposes of this chapter, “stores to be taken away”
means goods for sale to the passengers and the crew of vessels, aircrafts, or trains with a view to
being landed, which are either on board upon arrival or are taken on board during the stay in the
customs territory of vessels, aircrafts, or trains used, or intended to be used, in international traffic
for the transport of persons for remuneration or for the industrial or commercial transport of goods,
whether or not for remuneration.

SECTION 820. Exemption from Duties and Taxes of Stores.— Customs treatment of stores should
apply uniformly, regardless of the country of registration or ownership of vessels, aircraft, or trains.
Stores which are carried in a vessel, aircraft, or train arriving in the customs territory shall be
exempted from import duties and taxes provided that they remain on board. Stores for consumption
by the passengers and the crew imported as provisions on international express vessels, aircrafts, or
trains shall he exempted from import duties and taxes: Provided, That:

(a) Such goods are purchased only in the countries crossed by the international vessels and
aircrafts in question; and

(b) Any duties and taxes chargeable on such goods in the country where they were purchased
are paid.

Stores necessary for the operation and maintenance of vessels, aircrafts, or trains which are on
board these means of transport shall be exempted from import duties and taxes: Provided, Further,
That they remain on board while these means of transport are in the customs territory. The Bureau
shall allow the issue of stores for use on board during the stay of a vessel in the customs territory in
such quantities as the customs authority deems reasonable with due regard to the number of the
passengers and the crew and to the length of the stay of the vessel in the customs territory. The
Bureau should allow the issue of stores for use on board by the crew while the vessel is undergoing
repairs in a dock or shipyard: Provided, Finally, That the duration of stay in a dock or shipyard is
considered to be reasonable.
 When an aircraft is to land at one or more airports in the customs territory, the Bureau should
allow the issuance of stores for consumption on board both during the stay of the aircraft at such
intermediate airports and during its flight between such airports.

The Bureau shall require a carrier to take appropriate measures to prevent any unauthorized use
of the stores including sealing of the stores, when necessary. It shall require the removal of stores
from the vessel, aircraft, or trains for storage elsewhere during its stay in the customs territory only
when the Bureau considers it necessary.

Vessels, aircrafts, or trains which depart for an ultimate foreign destination shall be entitled to take
on board, exempted from duties and taxes, the following:

(1) Stores in such quantities as the Bureau deems reasonable with due regard to the number of
the passenger’s and the crew, to the length of the voyage or Sight, and to any quantity of such
stores already on board; and

(2) Stores necessary for the operation and maintenance of a vessel, aircraft, or train, in such
quantities as are deemed reasonable for operation and maintenance during the voyage or flight,
after due regard of the quantity of such stores already on board.

Replenishment of stores that are exempted from duties and taxes shall be allowed for vessels,
aircrafts, or trains which have arrived in the customs territory, and which need to replenish their
stores for the journey to their final destination in the customs territory, subject to the same conditions
provided in this Chapter.

SECTION 821. Goods Declaration for Stores.— When a declaration concerning stores on board

vessels arriving in the customs territory is required by the Bureau, the information required shall be
kept to the minimum and as may be necessary for customs control.

The quantities of stores which are supplied to vessels during its stay in the customs territory
should be recorded on the required goods declaration concerning stores.

The Bureau shall not require the presentation of a separate declaration of remaining stores on
board a vessel, an aircraft or a train. No separate declaration concerning stores should be required
upon departure of vessels from the customs territory.

When a declaration is required concerning stores taken on board the vessels or aircrafts upon
departure from the customs territory, the information required shall he kept to the minimum as may
be necessary for customs control.
When a vessel, aircraft, or train arrives in the customs territory, stores on board shall:

(a) Be cleared for consumption or placed under another customs procedure, subject to
compliance with the conditions and formalities applicable in each case; or

(b) Subject to prior authorization by the Bureau, be transferred respectively to another vessel,
aircraft, or train assigned to an international route.

Title IX
Duty Drawback and Refund

CHAPTER 1
DUTY DRAWBACK

SECTION 900. Basis of Duty Drawback.—

(A) 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, a refund or
tax credit shall be allowed not exceeding ninety-nine percent (99%) of the duty imposed by law
upon such fuel, which shall be paid or credited under such rules and regulations as may be
prescribed by the Commissioner with the approval of the Secretary of Finance.

(B) 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, a refund or tax credit shall be allowed not exceeding
fifty percent (50%) of the duty imposed by law upon such oils, which shall be paid or credited under
such rules and regulations as may be prescribed by the Commissioner with the approval of the
Secretary of Finance.

(C) 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 beenpaid, a refund or tax
credit shall be allowed for the duties paid on the imported materials so used including the packing,
covering, putting up, marking or labeling thereof subject to the following conditions:
 (1) The actual use of the imported materials in the production or manufacture of the goods
exported with their quantity, value, and amount of duties paid thereon, should be established
satisfactorily;

(2) The duties refunded or credited shall not exceed one hundred percent (100%) of duties
paid on the imported materials used;

(3) There is no determination by the NEDA of the requirement for certification on

nonavailability of locally-produced or manufactured competitive substitutes for the imported
materials used at the time of importation;

(4) The exportation shall be made within one (1) year after the importation of materials used
and daim of refund or tax credit shall be filed within six (6) months from the date of exportation;
and

(5) When two or more products result from the use of the same imported materials, an
apportionment shall be made on its equitable basis.

SECTION 901. Payment of Drawbacks.— Eligible claims for refund or tax credit shall be paid or
granted by the Bureau to claimants within sixty (60) days after receipt of properly accomplished
claims: Provided, That a registered enterprise under Republic Act No. 5186, otherwise known as the
“Investment Incentives Act”, or Republic Act No. 6135, otherwise known as the “Export Incentives
Act of 1970”, which has previously enjoyed tax credits based on customs duties paid onimported raw
materials and supplies, shall not be entitled to a drawback under this section with respect to the
same importation subsequently processed and reexported.

The Secretary of Finance may, upon the recommendation of the Commissioner, promulgate rules
and regulations allowing partial payments of drawbacks pursuant to this section.

SECTION 902. Prescription of Drawback Claim.— A claim and application for a drawback shall
prescribe if it is not filed within one (1) year from the date of importation in case of Section 900,
paragraphs (A) and (B) and within one (1) year from the date of exportation in the case of Section
900, paragraph (C), subject to such rules and regulations as may be issued by the Commissioner,
upon approval of the Secretary of Finance.

CHAPTER 2
REFUND AND ABATEMENT
 SECTION 903. Refund of Duties and Taxes.— Refund shall be granted where it is established that
duties and taxes have been overcharged as a result of an error in the assessment or goods
declaration.

Where permission is given by the Bureau for goods originally declared for a customs procedure
with payment of duties and taxes to be placed under another customs procedure, a refund shall be
made of any duties and taxes charged in excess of the amount due under the new procedure,
subject to such regulation issued for the purpose.

A refund shall not be granted if the amount of duties and taxes involved is less than five thousand
pesos (₱5,000.00); Provided, That the Secretary of Finance, in consultation with the Commissioner,
may adjust the minimum amount specified in this Act, taking into account the CPI as published by
the PSA.

SECTION 904. Abatement of Duties and Taxes.— When goods have not yet been released for
consumption or have been placed under another customs procedure, provided that no other offense
or violation has been committed, the declarant shall neither be required to pay the duties and taxes
nor be entitled to refund thereof in any of the following cases:

(a) When, at the request of the declarant, the goods are abandoned, or as determined by the
Bureau, the goods are destroyed or rendered commercially valueless while under customs control.
Any cost herein incurred shall be borne by the declarant;

(b) When goods are destroyed or irrecoverably lost by accident or force majeure, the remaining
waste or scrap after destruction, if taken into consumption, shall be subject to the duties and taxes
that would be applicable on such waste or scrap if imported in same state; and

(c) When there are shortages due to the nature of the goods.

SECTION 905. Abatement for Damage Incurred During Voyage.—- Except as otherwise

provided, no abatement of duties shall be made on account of damage incurred or deterioration
suffered during the voyage of importation; and duties will be assessed on the actual quantity
imported as determined by the customs officers concerned.

SECTION 906. Abatement or Refund of Duty on Missing Package.— When any package

appearing on the manifest or bill of lading or airway bill is missing, an abatement or refund of the
duty shall he made if it is certified by the importer or consignee, under pain of penalty for falsification
or perjury, and upon production of proof satisfactory to the Collector concerned, that the package in
question has not been unlawfully imported into the Philippines.
 SECTION 907. Abatement or Refund for Deficiency in Contents of Packages.— If, upon opening of
any package, a deficiency in the quantity of the goods is found to exist based upon the invoice, such
deficiency shall be certified, under pain of penalty for falsification or perjury, by the customs officers
concerned and upon the production of proof showing that the shortage occurred before the arrival of
the goods in the Philippines. Upon sufficient proof thereof, the proper abatement or refund of the
duty shall be made.

SECTION 908. Abatement or Refund of Duties on Goods Lost or Destroyed After Arrival.— The

Bureau may abate or refund the amount of duties accruing or paid on any goods that have been lost
due to injury, theft, destruction through fire or through any other causes, upon satisfactory proof of
the same, under any of the following circumstances:

(a) While within the territory of any port of entry, prior to unloading under the Bureau’s
supervision;

(b) While remaining in customs custody after unloading;

(c) While in transit from the port of entry to any port in the Philippines; and

(d) While released under sufficient security for export except in case of loss by theft.

SECTION 909. Abatement and Refund of Defective Goods.— Under conditions to be set by the

Commissioner, and with the approval of the Secretary of Finance, an abatement and refund shall be
granted on imported or exported goods which are found defective or otherwise not in accordance
with the agreed specifications at the time of importation or exportation and are returned either to the
supplier or to another person designated by the supplier, subject to the following conditions:

(a) The goods have not been worked, repaired, or used in the country of importation, and are
reexported within a reasonable time; and

(b) The goods have not been worked, repaired, or used in the country to which they were
exported, and are reimported within a reasonable time.

Use of the goods shall, however, not hinder the refund if such use was indispensable to discover
the defects or other circumstances which caused the reexportation or reimportation of the goods.

As an alternative to reexportation or reimportation, the goods may be expressly abandoned or

destroyed or rendered commercially valueless under customs control as the Bureau may decide. In
such case, the importer shall not be entitled to an abatement or a refund if it does not defray the
costs of such abandonment, destruction, or rendition.
 SECTION 910. Abatement of Duty on Dead or Injured Animals.— Where it is certified, under pain
of penalty for falsification or perjury, and upon production of proof satisfactory to the Bureau that an
animal subject of importation dies or suffers injury before arrival, or while in customs custody, the
duty due thereon shall be abated provided that its carcass on board or in customs custody is
removed in the manner required by the Bureau and at the expense of the importer.

SECTION 911. Investigation Required in Case of Abatements and Refunds.— The Customs Officer

concerned shall, in all cases of abatement or refund of duties, submit an examination report as to
any fact discovered which indicates any discrepancy and cause the corresponding adjustment on
the goods declaration.

SECTION 912. Refund Arising from Correction of Errors.— Manifest clerical errors made on an

invoice or entry, errors in return of weight, measure and gauge, when duly certified under penalties
of falsification or perjury by the surveyor or examining officer when there are such officers at the
port, and errors in the distribution of charges on invoices not involving any question of law and
certified under penalties of falsification or perjury by the examining customs officer, may be
corrected in the computation of duties, if such errors are discovered before the payments of duties,
or if discovered within one (1) year after release from customs custody of imported goods upon
written request and notice of error from the importer, or upon statement of error certified by the
District Collector, For the purpose of correcting errors specified in the next preceding paragraph, the
Bureau is authorized to make refunds within the statutory time limit.

SECTION 913. Claims for Refund.— All claims and application for refund of duties and taxes shall
be made in writing and filed with the Bureau within twelve (12) months from the date of payment of
duties and taxes.

If as a result of the refund of duties, a corresponding refund of internal revenue taxes on the same
importation becomes due, the Bureau shall cause the refund of internal revenue taxes in favor of the
importer after issuance of a certification from the Commissioner of Internal Revenue, when
applicable.

The importer may file an appeal of a denial of a claim for refund or abatement, whether it is a full
or partial denial, with the Commissioner within thirty (30) days from the date of the receipt of the
denial. The Commissioner shall render a decision within thirty (30) days from the receipt of all the
necessary documents supporting the application. Within thirty (30) days from receipt of the decision
of the Commissioner, the case may also be appealed to the CTA.

Notwithstanding the provisions in the preceding paragraphs, the filing of claims for refund of
national internal revenue taxes shall be governed by the provisions provided under the NTRC of
1997, as amended.
 Title X
Post Clearance Audit
SECTION 1000. Audit and Examination of Records.— Within three (3) years from the date of final
payment of duties and taxes or customs clearance, as the case may be, the Bureau may conduct an
audit examination, inspection, verification, and investigation of records pertaining to any goods
declaration, which shall include statements, declarations, documents, and electronically generated
or machine readable data, for the purpose of ascertaining the correctness of the goods declaration
and determining the liability of the importer for duties, taxes and other charges, including any fine or
penalty, to ensure compliance with this Act.

SECTION 1001. Scope of the Audit.— The audit of importers shall be conducted when firms are
selected by a computer-aided risk management system, the parameters of which are to be based on
objective and quantifiable data, subject to the approval of the Secretary of Finance upon
recommendation of the Commissioner. The criteria for selecting firms to be audited shall include:

(a) Relative magnitude of customs revenue to be generated from the firm;

(b) The rates of duties of the firm’s imports;

(c) The compliance track records of the firm; and

(d) An assessment of the risk to revenue of the firm’s import activities.

SECTION 1002. Access to Records.— Any authorized officer of the Bureau shall be given by the
importer and customs broker full and free access to the premises where the records are kept, to
conduct audit examination, inspection, verification, and investigation of those records relevant to
such investigation or inquiry.

A copy of any document certified by or on behalf of the importer is admissible in evidence in all
courts as if it were the original copy.

A customs officer is not entitled to enter the premises under this section unless, before so doing,
the officer produces to the person occupying or apparently in charge of the premises written
evidence of the fact of being duly authorized. The person occupying or apparently in charge of the
premises entered by an officer shall provide the officer with all reasonable facilities and assistance
for the effective exercise of the officer’s authority under this section.
 Unless otherwise provided herein or in other provisions of law, the Bureau may, in case of
disobedience, invoke the aid of the proper regional trial court within whose jurisdiction the matter
falls. The court may punish contumacy or refusal as contempt. In addition, the fact that the importer
or customs broker denies the authorized customs officer full and free access to importation records
during the conduct of a post clearance audit shall create a presumption of inaccuracy in the
transaction value declared for their imported goods and constitute grounds for the Bureau to conduct
a reassessment of such goods.

In addition, the imposition of the appropriate criminal sanctions provided under this Act and other
administrative sanctions may be concurrently invoked against contumacious importers, including the
suspension of the delivery or release of their imported goods.

SECTION 1003. Requirement to Keep Records.—

(a) All importers are required to keep at their principal place of business, in the manner
prescribed by regulations to be issued by the Commissioner and for a period of three (3) years
from the date of final payment of duties and taxes or customs clearance, as the case may be, all
records pertaining to the ordinary course of business and to any activity or information contained in
the records required by this title in connection with any such activity.

For purposes of the post clearance audit and Section 1005 of this Act, the term importer shall
include the following:

(1) Importer-of-record or consignee, owner or declarant, or a party who:

(i) Imports goods into the Philippines or withdraws such goods into the Philippine customs
territory for consumption or warehousing; files a claim for refund or drawback; or transports or
stores such goods carried or held under security; or

(ii) Knowingly causes the importation or transportation or storage of imported goods referred
to above, or the filing of refund or drawback claim.

(2) An agent of any party described in paragraph (1); or

(3) A person whose activities require the filing of a goods declaration.

A person ordering imported goods from a local importer or supplier in a domestic transaction
shall be exempted from the requirements imposed by this section unless:
 (1) The terms and conditions of the importation are controlled by the person placing the order;
or

(2) The circumstances and nature of the relationship between the person pladngthe order and
the importer or supplier are such that the former may be considered as the beneficial or true
owner of the imported goods; or

(3) The person placing the order had prior knowledge that they will be used in the manufacture
or production of the imported goods.

(b) All parties engaged in customs clearance and processing are required to keep at their
principal place of business, in the manner prescribed by regulations to be issued by the
Commissioner and for a period of three (3) years from the date of filing of the goods declaration,
copies of the aboveraentioned records covering the transactions handled.

(c) Locators or persons authorized to bring imported goods into free zones, such as the special
economic zones and free ports, are required to keep subject-records of all its activities, including in
whole or in part, records on imported goods withdrawn from said zones into the customs territory
for a period of three (3) years from the date of filing of the goods declaration.

Failure to keep the records required by this Act shall constitute a waiver of this right to contest
the results of the audit based on records kept by the Bureau.

SECTION 1004. Power of the Commissioner to Obtain Information and Issue Summons.— For

the effective implementation of the post clearance audit functions of the Bureau, the Commissioner
is hereby authorized to:

(a) Obtain on a regular basis from any person, in addition to the person who is the subject of a
post clearance audit or investigation, or from any office or officer of the national and local
governments, government agencies and instrumentalities, including the BSP and GOCCs, any
information such as costs and volume of production, receipts or sales and gross income of
taxpayers, and the names, addresses, and financial statements of corporations, regional operating
headquarters of multinational companies, joint accounts, associations, joint ventures or consortia
and registered partnerships, and their members, whose business operations or activities are
directly or indirectly involved in the importation or exportation of imported goods or products
manufactured from imported component materials;

(b) Summon the person liable for duties and taxes or required to file goods declaration, or any
officer or employee of such person, or any person having possession, custody, or care of the
books of accounts and other accounting records containing entries relating to the business of the
 person liable for duties and taxes, or any other person, to appear before the Commissioner or the
duly authorized representative at a time and place specified in the summons and to produce such
books, papers, records, or other data, and to give testimony;

(c) Take such testimony of the person concerned, under oath, as maybe relevant or material to
such inquiry; or

(d) Obtain information from banks or other financial institutions on commercial documents and
records pertaining specifically to payments relevant to import transaction.

The provisions of the foregoing paragraphs notwithstanding, nothing in this section shall be
construed as granting the Commissioner the authority to inquire into bank deposits of persons or
entities mentioned in this Title.

SECTION 1005. Failure to Pay Correct Duties and Taxes on Imported Goods.— Any person who,
after being subjected to post clearance audit and examination as provided in Section 1000 of this
Act, is found to have incurred deficiencies in duties and taxes paid for imported goods, shall be
penalized according to two (2) degrees of culpability subject to any mitigating, aggravating, or
extraordinary factors that are clearly established by available evidence as described hereunder:

(a) Negligence.— When a deficiency results from an offender's failure, through an act or acts of

omission or commission, to exercise reasonable care and competence in ensuring that a statement
made is correct, the offender shall be charged for committing negligence, and, if found guilty shall
be penalized with a fine equivalent to one hundred twenty-five percent (125%) of the revenue
loss; Provided, That subject to Section 108 of this Act, no substantial p enalty shall be imposed on
an inadvertent error amounting to simple negligence, as defined by rules promulgated by the
Secretary of Finance, upon recommendation of the Commissioner;

(b) Fraud.— When the material false statement or act in connection with the transaction was
committed or omitted knowingly, voluntarily and intentionally, as established by dear and
convincing evidence, the offender who is charged for committing fraud and Is found guilty thereof,
shall be penalized with a fine equivalent to six (6) times of the revenue loss and/or imprisonment of
not less than two (2) years, but not more than eight (8) years.

The decision of the Commissioner, upon proper hearing, to impose penalties as prescribed in this
section may be appealed in accordance with Section 1104 of this Act.

SECTION 1006. Records to be Kept by the Bureau.— The Bureau shall keep a database of

importer and broker profiles which shall include a record of audit results and the following
information and papers:
 (a) Articles of Incorporation;

(b) The company structure, which shall include, but not limited to, incorporators and board of
directors, key officers, and organizational structure;

(c) Key importations;

(d) Privileges enjoyed;

(e) Penalties; and

(f) Risk categories.

The Bureau shall furnish the BIR and the DOF a copy of the final audit results within thirty (30)
days from the issuance thereof.

Title XI
Administrative and Judicial Procedures

CHAPTER 1
ADVANCE RULING AND DISPUTE SETTLEMENT

SECTION 1100. Classification Ruling.— An importer or exporter may file a written application for
an advance ruling on the tariff classification of goods with the Commission. The Commission shall
render a ruling within thirty (30) days from receipt of a properly documented application.

When a declared tariff classification of goods, not subject of a pending application for advance
ruling, is in dispute, the importer, exporter, or the Bureau shall submit the matter to the Commission
for a ruling, without prejudice to the application of Section 1106 of this Act on “protest”: Provided,
That such rulings of the Commission on commodity classification shall be binding upon the Bureau,
unless the Secretary of Finance shall rule otherwise.

SECTION 1101. Valuation Ruling.— An importer or exporter may file a written application for an
advance valuation ruling on the proper application of a specific method on customs valuation of
specific goods as prescribed in Title VII, Chapter 1 of this Act.
 The application for a valuation ruling shall be filed with the Commissioner who shall issue a ruling
within thirty (30) days from submission of the application form and supporting documents as may be
required by rules and regulations.

When the valuation method of goods not subject of an application for advance valuation ruling or
the declared customs value is in dispute, the matter shall be resolved in accordance with Section
1106 of this Act on “protest”.

SECTION 1102. Ruling on the Rules of Origin.— An importer or exporter may file a written
application for a ruling on whether the goods qualify as originating under the rules of origin of the
applicable preferential trade agreement. The application for an advance ruling on origin shall be filed
with the Commissioner who shall act on the application within thirty (30) days from receipt of the
application and supporting documents as may be required by rules and regulations.

When the declared origin of the goods, not subject of a request for advance ruling on origin, is in
dispute, the matter shall be resolved in accordance with Section 1106 of this Act on “protest”.

SECTION 1103. Conditions for Application and Effect of Advance Ruling.— An application for an
advance ruling shall cover only one (1) product or item. The application for advance ruling shall be
filed at least ninety (90) days before the importation or exportation of the product or item, as the case
may be.

SECTION 1104. Administrative and Judicial Appeals.— An aggrieved party may, within thirty (30)
days from receipt of an adverse ruling or decision, appeal the same to the CTA without prejudice to
the authority of the Secretary of Finance to review decisions adverse to the government in
accordance with Sections 1127 and 1128 of this Act, as the case may be.

SECTION 1105. Implementing Rules and Regulations.— The Secretary of Finance, upon the

recommendation of the Bureau and the Commission, shall promulgate rules and regulations to
implement the preceding provisions on advance ruling.

CHAPTER 2
PROTEST

SECTION 1106. Protest.— When, a ruling or decision of the District Collector or customs officer

involving goods with valuation, rules of origin, and other customs issues is made, except the fixing of
fines in seizure cases, the party adversely affected may appeal by way of protest against such ruling
or decision by presenting to the Commissioner at the time when payment of the amount claimed to
be due the government is made, or within fifteen (15) days thereafter, a written protest setting forth
the objection to the ruling or decision in question and the reasons therefore.

Subject to the approval of the Secretary of Finance, the Commissioner shall provide such rules
and regulations as to the requirement for payment or nonpayment of the disputed amount and in
case of nonpayment, the release of the importation under protest upon posting of sufficient security.

SECTION 1107. Protest Exclusive Remedy in Protestable Case.— In all cases subject to protest,
the interested party who desires to have the action of the District Collector reviewed, shall file a
protest as provided in Section 1106 of this Act, otherwise the action of the District Collector shall be
final and conclusive.

SECTION 1108. Form and Scope of Protest.— A protest shall be filed in accordance with the
prescribed rules and regulations promulgated under this section. It shall specify the particular
decision or ruling of the District Collector for which protest is being made, and shall indicate the
particular ground or grounds upon which the protesting party bases the claim for relief. The scope of
a protest shall be limited to the particular goods subject of a goods declaration, but any number of
issues may be raised in a protest with reference to the goods declaration constituting the subject
matter of the protest.

SECTION 1109. Samples to be Furnished by Protesting Parties.— If the nature of the goods

permit, importers filing protests involving questions offset must, upon demand, present to the
Commissioner samples of the goods which are the subject matter of the protest. The samples of the
goods shall be verified by the customs officer who made the classification against which the protests
are filed.

SECTION 1110. Decision in Protest.— When a protest is filed in proper form, the Commissioner

shall render a decision within thirty (30) days from receipt of the protest. In case the protest is
sustained, in whole or in part, the appropriate order shall be made, and the entry reassessed, if
necessary.

CHAPTER 3
ALERT ORDERS

SECTION 1111. Alert Orders.— Alert orders are written orders issued by customs officers as
authorized by the Commissioner on the basis of derogatory information regarding possible
noncompliance with this Act. An alert order will result in the suspension of the processing of the
goods declaration and the conduct of physical or nonintrusive inspection of the goods within forty-
eight (48) hours from issuance of the order. Within forty-eight (48) hours or, in the case of perishable
goods, within twenty-four (24) hours from inspection, the alerting officer shall recommend the
continuance of processing of goods in case of a negative finding, or issuance of a warrant of seizure
and detention if a discrepancy between the declaration and actual goods is found. The Bureau’s
information system shall immediately reflect the imposition or lifting of an alert order.

Derogatory information shall indicate the violations and other necessary specifics thereof. For this
purpose, the following shall not be considered derogatory information:

(a) General allegations of misclassification without providing the appropriate tariff heading and
duty of the shipment to be alerted;

(b) General allegations of misclassification without providing the appropriate tariff heading and
duty of the shipment to be alerted;

(c) General allegations of over-quantity without indicating the source of information supporting
the allegation;

(d) General allegations of misdeclaration in the entry without indicating the suspected actual
contents thereof; and

(e) General allegations of importations contrary to law without indicating the specific law or rule
to be violated.

No alert order shall be issued on account of allegations of undervaluation unless said

undervaluation is caused by the submission to customs of forged or spurious invoice or other
commercial documents.

An alert order may be issued only after lodgement of the goods declaration and prior to the
release of goods from customs custody. Under no circumstances shall the suspension of the
processing of goods declaration be allowed except through an alert order issued by an authorized
customs officer.

The costs of the physical inspection shall be borne by the Bureau: Provided, That such cost shall
be reimbursed by the owner prior to the release of the goods if the physical inspection results in the
assessment of additional duties or taxes or the issuance of a warrant of seizure.

The Commissioner shall be notified of the recommendation by the alerting officer within twenty-
four (24) hours from the issuance of the alert order. Alert orders shall be dated and assigned a
unique reference number in series which shall be the basis for reporting to and monitoring by the
Commissioner and the Secretary of Finance.
 The Bureau shall create a central clearing house for alert orders and shall submit reports quarterly
on the status thereof.

SECTION 1112. Alert Orders on Perishable Goods.— When the subject of the alert order are
perishable goods, the Bureau shall attach to the recommendation a certificate stating that the goods
are perishable.

CHAPTER 4
SEIZURE AND FORFEITURE

SECTION 1113. Property Subject to Seizure and Forfeiture.— Property that shall be subject to

seizure and forfeiture include:

(a) Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully in the
importation or exportation of goods or in conveying or transporting smuggled goods in commercial
quantities into or from any Philippine port or place. The mere carrying or holding on board of
smuggled goods in commercial quantities shall subject such vehicle, vessel, aircraft, or any other
craft to forfeiture: Provided, That the vehicle, vessel, aircraft or any other craft is not used as a
common carrier which has been chartered or leased for purposes of conveying or transporting
persons or cargo;

(b) Any vessel engaging in the coastwise trade which shaft have on board goods of foreign
growth, produce, or manufacture in excess of the amount necessary for sea stores, without such
goods having been properly entered or legally imported;

(c) Any vessel or aircraft into which shall be transferred cargo unloaded contrary to law prior to
the arrival of the importing vessel or aircraft at the port of destination;

(d) Any part of the cargo, stores, or supplies of a vessel or aircraft arriving from a foreign port
which is unloaded before arrival at the vessel’s or aircraft’s port of destination and without authority
from the customs officer; but such cargo, ship, or aircraft stores and supplies shall not be forfeited
if such unloading was due to accident, stress of weather, or other necessity and is subsequently
approved by the District Collector;

(e) Goods which are fraudulently concealed in or removed contrary to law from any public or
private warehouse, container yard, or container freight station under customs supervision;

(f) Goods, the importation or exportation of which are effected or attempted contrary to law, or
any goods of prohibited importation or exportation, and all other goods which, in the opinion of the
District Collector, have been used, are or were entered to be used as instruments in the
importation or the exportation of the former;

(g) Unmanifested goods found on any vessel or aircraft if manifest therefor is required;

(h) Sea stores or aircraft stores adjudged by the District Collector to be excessive, when the
duties and taxes assessed by the District Collector thereon are not paid or secured forthwith upon
assessment of the same;

(i) Any package of imported goods which is found upon examination to contain goods not
specified in the invoice or goods declaration including all other packages purportedly containing
imported goods similar to those declared in the invoice or goods declaration to be the contents of
the misdeclared package;

(j) Boxes, cases, trunks, envelopes, and other containers of whatever character used as
receptacle or as device to conceal goods which are subject to forfeiture under this Act or which are
so designed as to conceal the character of such goods;

(k) Any conveyance actually used for the transport of goods subject to forfeiture under tbis Act,
with its equipage or trappings, and any vehicle similarly used, together with its equipment and
appurtenances. The mere conveyance of smuggled goods by such transport vehicle shall be
sufficient cause for the outright seizure and confiscation of such transport vehicle but the forfeiture
shall not be effected if it is established that the owner of the means of conveyance used as
aforesaid, is engaged as common carrier and not chartered or leased, or that the agent in charge
thereof at the time, has no knowledge of the unlawful act; and

(l) Goods sought to be imported or exported:

(1) Without going through a customs office, whether the act was consummated, frustrated, or
attempted;

(2) Found in the baggage of a person arriving from abroad and undeclared by such person;

(3) Through a false declaration or affidavit executed by the owner, importer, exporter, or
consignee concerning the importation of such goods;

(4) On the strength of a false invoice or other document executed by the owner, importer,
exporter, or consignee concerning the importation or exportation of such goods; or
 (5) Through any other practice or device contrary to law by means of which such goods
entered through a customs office to the prejudice of the government.

SECTION 1114. Properties not Subject to Forfeiture in the Absence of Prima Facie Evidence.
— The forfeiture of the vehicle, vessel, or aircraft shall not be effected if it is established that the
owner thereof or the agent in charge of the meads of conveyance used as aforesaid has no
knowledge of or participation in the unlawful act: Provided, That a prima facie presumption shall exist
against the vehicle, vessel, or aircraft under any of the following circumstances:

(a) If the conveyance has been used for smuggling before;

(b) If the owner is not in the business for which the conveyance is generally used; and

(c) If the owner is not financially in a position to own such conveyance.

SECTION 1115. Conditions Affecting Forfeiture of Goods.— The forfeiture shall be effected only

when and while the goods are in the custody or within the jurisdiction of customs officers, or in the
possession or custody of or subject to the control of the importer, exporter, original owner,
consignee, agent of another person effecting the importation, entry or exportation in question, or in
the possession or custody of or subject to the control of persons who shall receive, conceal, buy,
sell, or transport the same, or aid in any of such acts, with knowledge that the goods were imported,
or were the subject of an attempt at importation or exportation contrary to law.

SECTION 1116. Seizure or Release of Goods.— The District Collector shall issue an order of

release or a warrant of seizure within five (5) days, or two (2) days in case of perishable goods, upon
the recommendation of the alerting officer or any other customs officer. The District Collector shall
immediately make a report of such seizure or release to the Commissioner.

SECTION 1117. Warrant of Seizure or Order of Release.— The District Collector shall have the
authority to issue a warrant of seizure of the goods upon determination of the existence of probable
cause and in case of nonexistence thereof, the issuance of order of release. In case the District
Collector issued an order of release, the District Collector shall immediately transmit all the records
to the Commissioner who shall automatically review within forty-eight (48) hours, or within twenty-
four (24) hours in case of perishable goods. When no decision is made by the Commissioner within
the prescribed period, the imported goods shall be deemed released.

The lifting of the alert order shall he issued by the District Collector only upon the affirmation of the
decision of the District Collector by the Commissioner, or after the lapse of the period of review by
the Commissioner, whichever is earlier.
 SECTION 1118. Sale of Perishable Goods During Forfeiture Proceedings.— Upon motion of the
importer of the perishable goods, the goods may be sold at a public auction during the pendency of
the forfeiture proceedings. The proceeds of the auction shall be held in escrow until the final
resolution of the proceedings.

SECTION 1119. Service of Warrant of Seizure.— The District Collector shall cause the service of
warrant of seizure to the owner or importer of the goods or the authorized representative thereof.
The owner or importer shall be given, an opportunity to be heard during the forfeiture proceedings.

For the purpose of serving the warrant, the importer, consignee, or person holding the bill of lading
or airway bill shall be deemed the “owner” of the goods. For the same purpose, “authorized
representative” shall include any agent of the owner and if the owner or the agent is unknown, any
person having possession of the goods at the time of the seizure.

Service of warrant to an unknown owner shall be effected by posting the warrant for fifteen (15)
days in a public place at the concerned district, and by electronic or printed publication.

SECTION 1120. Description, Classification and Valuation of Seized Goods.— The District Collector

shall cause the preparation of a list and particular description, classification, and valuation of the
goods seized and valuation of identical or similar goods.

SECTION 1121. Proceedings in Case of Property Belonging to Unknown Parties.— If, within fifteen

(15) days after service of warrant, no owner or agent can he found or appears before the District
Collector, the seized goods shall be forfeited ipso facto in favor of the government to be disposed of
in accordance with this Act.

SECTION 1122. Seizure of Vessel or Aircraft for Delinquency of Owner or Officer.— When the

owner, agent, master, pilot in command or other responsible officer of any vessel or aircraft
becomes liable for any violation of this Act, the vessel or aircraft may be seized and be subjected to
forfeiture proceedings for the settlement of any fine or penalty for which such person is liable. In
determining whether or not to seize a vessel or aircraft, the Bureau shall take into account the
amount of fine or penalty in relation to the commercial impact that be caused to international trade
by the seizure or detention as well as the value of the vessel or aircraft.

SECTION 1123. Burden of Proof in Forfeiture Proceedings.— In all proceedings for the forfeiture of
any vehicle, vessel, aircraft, or goods under this Act, the burden of proof shall be borne by the
claimant.

SECTION 1124. Settlement of Pending Seizure Case by Payment of Fine or Redemption of

Forfeited Goods.— Subject to the approval of the Commissioner, the District Collector may allow the
settlement by payment of fine or the redemption of forfeited goods, during the course of the forfeiture
proceeding. However, the Commissioner may accept the settlement by redemption of any forfeiture
case on appeal. No settlement by payment of fine shall be allowed when there is fraud or when the
discrepancy in duties and taxes to be paid between what is determined and what is declared
amounts to more than thirty percent (30%).

In case of settlement by payment of fine, the owner, importer, exporter, or consignee or agent
shall offer to pay a fine equivalent to thirty percent (30%) of the landed cost of the seized goods. In
case of settlement by redemption, the owner, importer, exporter, or consignee or agent shall offer to
pay the redeemed value equivalent to one hundred percent (100%) of the landed cost.

Upon payment of the fine or payment of the redeemed value, the goods shall be released and all
liabilities which may attach to the goods shall be discharged without prejudice to the filing of
administrative or criminal case.

Settlement of any seizure case by payment of the fine or redemption of forfeited goods shall not
be allowed when there is fraud, or where the importation is prohibited or the release of the goods is
contrary to law.

SECTION 1125. Decision in Forfeiture Cases.— In forfeiture cases, the District Collector shall issue
an order for hearing within fifteen (15) days, or five (5) days in case of perishable goods, from
issuance of the warrant. The District Collector shall render a decision within thirty (30) days upon
termination of the hearing, or within ten (10) days in case of perishable goods. The decision shall
include a declaration of forfeiture, the imposition of a fine or such other action as may be proper.

CHAPTER 5
APPEAL IN PROTEST AND FORFEITURE CASES

SECTION 1126. Appeal to the Commissioner.— In forfeiture cases, the person aggrieved by the
decision of a District Collector may, within fifteen (15) days or five (5) days in case of perishable
goods, from receipt of the decision, file a written notice of appeal, together with the required appeal
fee to the District Collector, furnishing a copy to the Commissioner. The District Collector shall
immediately transmit all the records of the proceedings to the Commissioner, who shall review and
decide on the appeal within thirty (30) days from receipt of the records, or fifteen (15) days in the
case of perishable goods: Provided, That if within thirty (30) days, no dedsionis rendered, the
decision of the District Collector under appeal shall be deemed affirmed. An appeal filed beyond the
period herein prescribed shall be dismissed.

Appeals to protest cases shall be governed by Section 114 of this Act.

 The decision of the Commissioner may be served through the recognized modes of service under
existing law.

SECTION 1127. Automatic Review in Forfeiture Cases.— The Commissioner shall automatically

review any decision by the District Collector adverse to the government. The entire records of the
case shall be elevated within five (5) days from the promulgation of the decision. The Commissioner
shall decide on the automatic review within thirty (30) days, or within ten (10) days in the case of
perishable goods, from receipt of the records. When no decision is rendered within the prescribed
period or when a decision adverse to the government is rendered by the Commissioner involving
goods with FOB or FCA value of ten million pesos (₱10,000,000.00) or more, the records of the
decision of the Commissioner, or of the District Collector under review, as the case may be, shall be
automatically elevated within five (5) days for review by the Secretary of Finance. The decision
issued by the Secretary of Finance, whether or not a decision was rendered by the Commissioner
within thirty (30) days, or within ten (10) days in the case of perishable goods, from receipt of the
records, shall be final upon the Bureau.

SECTION 1128. Automatic Review by the Secretary of Finance in Other Cases.— In cases not
involving protest or forfeiture, the Commissioner shall automatically review any decision by the
District Collector that is adverse to the government. The records of the case shall be elevated to the
Commissioner within five (5) days from the promulgation of the decision. The Commissioner shall
decide on the automatic review within thirty (30) days from receipt of the records, or within ten (10)
days in the case of perishable goods. When no decision is rendered within the prescribed period or
when any decision rendered by the Commissioner is adverse to the government, the records of the
case under review shall be automatically elevated within five (5) days for the review of the Secretary
of Finance. The decision issued by the Secretary of Finance, whether or not a decision was
rendered by the Commissioner within thirty (30) days from receipt of the records, or within ten (10)
days in the case of perishable goods, shall be final upon the Bureau.

CHAPTER 6
ABANDONMENT

SECTION 1129. Abandonment, Kinds and Effects of.— Imported goods are deemed abandoned
under any of the following circumstances;

(a) When the owner, importer, or consignee of the imported goods expressly signifies in writing
to the District Collector the intention to abandon the same; or

(b) When the owner, importer, consignee, or interested party after due notice, falls to file the
goods declaration within the prescribed period in Section 407 of this Act; Provided, That the term
 goods declaration shall include provisional or incomplete goods declaration deemed valid by the
Bureau as provided in Section 403 of this Act. For this purpose, it is the duty of the District
Collector to post a list of all packages discharged and their consignees, whether electronically or
physically in the District Office, or send a notice to the consignee within five (5) days from the date
of discharge; or

(c) Having filed such goods declaration, the owner, importer, consignee or interested party after
due notice, fails to pay the assessed duties, taxes and other charges thereon, or, if the regulated
goods failed to comply with Section 117 of this Act, within fifteen (15) days from the date of final
assessment: Provided, That if such regulated goods are subject of an alert order and the assessed
duties, taxes and other charges thereof are not paid within fifteen (15) days from notification by the
Bureau of the resolution of the alert order, the same shall also be deemed abandoned; or

(d) Having paid the assessed duties, taxes and other charges, the owner, importer or consignee
or interested party after due notice, fails to claim the goods within thirty (30) days from payment.
For this purpose, the arrastre or warehouse operator shall report the unclaimed goods to the
District Collector for disposition pursuant to the provisions of this Act; or

(e) When the owner or importer fails to claim goods in customs bonded warehouses within the
prescribed period.

The due notice requirement under this section may be provided by the Bureau through electronic
notice or personal service; Provided, That for non-regular importers, notification shall be by
registered mail or personal service. For tins purpose, the accreditation of importers, exporters, and
other third parties shall indude provision for mandatory receipt of electronic notices.

SECTION 1130. Treatment and Disposition of Abandoned Goods.— Expressly abandoned goods

under paragraph (a) of Section 1129 of this Act shall ipso facto be deemed the property of the
government and shall be disposed of in accordance with the provisions of this Act.

If the Bureau has not disposed of the abandoned goods, theowner or importer of goods impliedly
abandoned may, at any time within thirty (30) days after the lapse of the prescribed period to file the
declaration, reclaim the goods provided that all legal requirements have been complied with and the
corresponding duties, taxes and other charges, without prejudice to charges and fees due to the port
or terminal operator, as well as expenses incurred have been paid before the release of the goods
from customs custody.

When the Bureau sells goods which have been impliedly abandoned, although no offense has
been discovered, the proceeds of the sale, after deduction of any duty and tax and all other charges
and expenses incurred as provided in Section 1143 of this Act, shall be turned over to those persons
entitled to receive them or, when this is not possible, held at their disposal for a specified period.
After the lapse of the specified period, the balance shall be transferred to the forfeiture fund as
provided in Section 1151 of this Act.

CHAPTER 7
OTHER ADMINISTRATIVE PROCEEDINGS

SECTION 1131. Authority of the Commissioner to Make Compromise.— Subject to the approval of

the Secretary of Finance, the Commissioner may compromise any administrative case arising under
this Act involving the imposition of fines and surcharges, including those arising from the conduct of
a post clearance audit, unless otherwise specified by law.

Cases involving forfeiture proceedings shall however not be subject to any compromise.

CHAPTER 8
CIVIL REMEDIES FOR THE COLLECTION OF
DUTIES AND TAXES

SECTION 1132. Remedies for the Collection of Duties, Taxes, Fines, Surcharges, Interests, and
Other Charges.— The civil remedies for the collection of import duties, taxes, fees, or charges
resulting from the conduct of a post clearance audit shall be obtained by:

(a) Distraint of goods, chattels, or effects, and other personal property of whatever character,
including stocks and other securities, debts, credits, bank accounts, and interest in and rights to
personal property, and by levy upon real property and interest in rights to real property; and

(b) Civil or criminal action.

Either or both of these remedies may be pursued at the discretion of the Bureau;  Provided, That
the remedies of distraint and levy shall not be allowed when the amount of duties and taxes involved
is not more than ten thousand pesos (₱10,000.00).

The Bureau shall advance the amounts needed to defray costs of collection by means of civil or
criminal action, including the preservation or transportation of personal property distrained and the
advertisement and sale thereof as well as of real property and improvements thereon.

SECTION 1133. Constructive Distraint of the Property.— To safeguard the interest of the

government, the Commissioner may place under constructive distraint the property of a delinquent
importer who, in the opinion of the Commissioner, is retiring from any business subject to duty and
tax, or is intending to leave the Philippines, or to remove the property therefrom, or to hide or
conceal the property, or to perform any act tending to obstruct the proceedings for collecting the duty
and tax due, or which may be due.

The constructive distraint of personal property shall be effected by requiring the importer or any
person in possession or control of such property to sign a receipt covering the property, to obligate
to preserve the distrained property on the state and condition at the time of the government's seizure
of the same, and not to dispose of the same in any manner whatsoever, without the express
authority of the Commissioner.

In case the importer or the person in possession and control of the property sought to be placed
under constructive distraint refuses or fails to sign the receipt herein referred to, the customs officer
effecting the constructive distraint shall proceed to prepare a list of such property and, in the
presence of two (2) witnesses, leave a copy thereof in the premises where the property distrained is
located, after which the said property shall be deemed to have been placed under constructive
distraint.

SECTION 1134. Summary Remedies.—

(A) Distraint of Personal Property.— Upon failure of the person owing any delinquent duty, tax
and other charges to pay at the time required, the Commissioner shall seize and distraint the
goods, chattels or effects, and the personal property, including stocks and other securities, debts,
credits, hank accounts, and interests in and rights to personal property of such persons, in
sufficient quantity to satisfy the duty, tax or other charge and the expenses of the distraint and the
cost of the subsequent sale.

The officer serving the warrant of distraint shall make or cause to be made an account of the
goods, chattels, effects, or other personal property distrained, a copy of which, signed by the said
officer, shall he left either with the owner or person from whose possession such goods, chattels,
or effects or other personal property were taken, or at the dwelling or other place of business of
such person and with someone of suitable age and discretion, to which list shall be added a
statement of the sum demanded and note of the time and place of sale.

Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon
the importer and upon the president, manager, treasurer, or other responsible officer of the
corporation, company or association, which issued the said stocks or securities.

Debts and credits shall be distrained by leaving with the person owing the debts or having in
his/her possession or under his/her control such credits, or with his/her agent, a copy of the
warrant of distraint. The warrant of distraint shall be sufficient authority to the person owing the
debts or having in his possession or under his control any credits belonging to the importer to pay
to the Commissioner the amount of such debts of credits.

Bank accounts shall be garnished by serving a warrant of garnishment upon the importer and
upon the president, manager, treasurer, or other responsible officer of the bank Upon the receipt of
the warrant of garnishment, the bank shall turn over to the Commissioner so much of the bank
accounts as may be sufficient to satisfy the claim of the government.

A report on the distraint shall, within ten (10) days from receipt of the warrant, be submitted by
the Commissioner to the Secretary of Finance: Provided, That the Commissioner shall have the
power to lift such order of distraint subject to the rules and regulations promulgated pursuant to this
Act.

(B) Levy on Real Property.— After the expiration of the period within which to pay the duty, tax
and other charges as prescribed in this section, real property may be levied upon, before,
simultaneously, or after the distraint of personal property belonging to the importer. To this end, the
Commissioner or the duly authorized representative shall prepare a duly authenticated certificate
showing the name of the importer and the amounts of the duty and tax and penalty due. The
certificate shall operate with the force of a legal execution throughout the Philippines.

The levy shall be effected by writing upon the certificate a description of the property on which
levy is made. At the same time, written notice of the levy shall be mailed to or served upon the
register of deeds of the province or city where the property is located and upon the importer, or if
the latter is not in the Philippines, upon the agent or the manager of the business from which the
liability arose, or if there be none, to the occupant of the property in question.

In case the warrant of levy on real property is not issued before or simultaneously with the
warrant of distraint on personal property, and the personal property of the importer is not sufficient
to satisfy the duty and tax due, the Commissioner or a duly authorized representative shall, within
thirty (30) days after execution of the distraint, proceed with the levy on the real property of the
importer.

Within ten (10) days after receipt of the warrant, a report on any levy shall be submitted by the
levying officer to the Commissioner; Provided, That the Commissioner may lift such warrants of
levy issued, subject to the rules and regulations promulgated pursuant to this Act.

CHAPTER 9
JUDICIAL PROCEEDINGS
 SECTION 1135. Supervision and Control over Criminal and Civil Proceedings.— Civil and criminal
actions and proceedings instituted on behalf of the Government under the authority of this Act or
other laws enforced by the Bureau shall be brought in the name of the government of the Philippines
and shall be prosecuted and handled by the Bureau with the assistance of the Department of Justice
(DOJ): Provided, That the determination of the existence of probable cause and the subsequent
filing of any criminal or civil case with the proper court against violators of this Act shall exclusively
belong to the DOJ: Provided, However, That no civil or criminal action for the recovery of duties or
the enforcement of any fine, penalty or forfeiture under this Act shall be filed in court without the
approval of the Commissioner.

SECTION 1136. Review by the CTA.— Unless otherwise provided in this Act or by any other law,
the party aggrieved by the ruling or decisions of the Commissioner may appeal to the CTA, in the
manner and within the period prescribed by law and regulations. Decisions of the Secretary of
Finance when required by this Act, may likewise be appealed to the CTA.

Unless an appeal is made to the CTA in the manner and within the period prescribed by law and
regulations, the ruling or decision of the Commissioner or the Secretary of Finance shall be final and
executory.

SECTION 1137. Exclusive Jurisdiction of the Bureau.— Jurisdiction over imported goods and

goods for exportation shall be exclusive to the Bureau, or the Secretary of Finance, when under
review by the latter, subject to the proceedings described in this title.

Except for the CTA, no court may issue any order or decision until all the remedies for
administrative appeal have been exhausted.

SECTION 1138. Fraud Investigation and Prosecution.— No criminal case for violation of this title
shall be instituted without the approval of the Commissioner pursuant to the provisions of this Act.

The Bureau shall have the power to investigate andinstitute smuggling cases committed within its
jurisdiction; Provided, That in case of inquest, the same may be instituted by the apprehending
customs officer.

CHAPTER 10
DISPOSITION OF PROPERTY IN CUSTOMS
CUSTODY

SECTION 1139. Goods Subject to Disposition.— Goods in customs custody that are in the following
conditions and status shall be subject to disposition;
 (a) Abandoned goods;

(b) Goods entered under warehousing entry but not withdrawn, or those whose duties and taxes
have not been paid within the period prescribed under Section dll of this Act;

(c) Forfeited goods, other than prohibited, restricted and regulated goods; after liability have
been established by the proper administrative or judicial proceedings in conformity with the
provisions of this Act; and

(d) Goods subject to a valid lien for customs duties, taxes and other charges collectible by the
Bureau, after the expiration of the period allowed for payment thereof.

SECTION 1140. Place of Disposition of Goods.— Upon the order of the District Collector, goods
may be sold or otherwise disposed of at the port where the goods are located, unless the
Commissioner shall direct its transfer to another port.

SECTION 1141. Mode of Disposition.— The goods subject to disposition may be donated to

another government agency or declared for official use of the Bureau, after approval of the Secretary
of Finance, or sold at a public auction within thirty (30) days after a ten (10)-day notice posted at a
public place at the port where the goods are located and published electronically or in a newspaper
of general circulation.

For purposes of donating the goods as above described, goods suitable for shelter or consisting of
foodstuffs, clothing materials or medicines may be donated to the DSWD.

SECTION 1142. Disqualification to Participate in Auction Sale.— No customs officer or employee,

their spouses and relatives within the fourth degree of consanguinity or affinity shall be allowed to
bid directly or indirectly, in any customs auction.

SECTION 1143. Disposition of Proceeds.— The following expenses and obligations shall be paid

from the proceeds of the sale in the order provided:

(a) Customs duties, except in the case of forfeited goods;

(b) Taxes and other charges due the government;

(c) Government storage charges;

(d) Expenses for the appraisal, advertisement, and sale of auctioned goods;

(e) Arrastre and private storage charges and demurrage charges; and
 (f) Freight, lighterage or general average, on the voyage of importation, of which due notice shall
have been given to the District Collector.

The Commissioner is authorized to determine the maximum charges to be recovered by private

entities concerned under subsections (e) and (f) of this section.

SECTION 1144. Disposition of Perishable Goods.— Perishable goods as defined under this Act

when certified as such by the Bureau, maybe sold at a public auction within five (5) days, after a
three (3)-day notice.

For this purpose, perishable goods shall include goods liable to perish or be wasted, or those that
depreciate greatly in value while stored, or which cannot be kept without great disproportionate
expense. The Bureau shall proceed to advertise and sell the same at auction upon notice as shall be
deemed to be reasonable.

SECTION 1145. Disposition of Goods Injurious to Public Health.— Goods in the custody of the

Bureau which, in the opinion of the District Collector are injurious to public health, shall be seized.
The District Collector shall, if the matter is not disposable under the provisions relating to food and
drugs, appoint three (3) members to constitute a Board to examine the goods. The Board shall be
composed of one (1) representative from either the DOH or other appropriate government agency or
the local government unit (LGU) concerned, and two (2) representatives from the Bureau. If the
goods are found to be injurious to public health, the Board shall report this to the District Collector,
who shall order its destruction in an appropriate manner or order its reexportation in accordance with
this Act.

The District Collector shall immediately coordinate with the health and quarantine officers at the
port of entry for the disposition of goods injurious to public health.

SECTION 1146. Disposition of Prohibited Goods.— Prohibited goods, as provided in Section 118

of this Act, shall be destroys, except paragraph (d) thereof which shall be turned over to the BSP. All
goods suitable for shelter, foodstuffs, clothing materials or medicines may be disposed in
accordance with Section 1141 of this Act.

SECTION 1147. Disposition of Restricted Goods.— Restricted goods as described in Section 119

of this Act shall be disposed as follows:

(a) Dynamite, gunpowder, ammunitions and other explosives, firearms and weapons of war, and
parts thereof shall be turned over to the AFP;
 (b) 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
goods when such distribution is dependent on chance, including jackpot and pinball machines or
similar contrivances, or parts thereof shall be turned over to the appropriate government body or
agency;

(c) Lottery and sweepstakes tickets, except advertisements thereof, and lists of drawings therein
shall be turned over to the appropriate government body or agency;

(d) Marijuana, opium, poppies, coca leaves, heroin, or 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, shall be turned over to the
Dangerous Drugs Board;

(e) Opium pipes and parts thereof, of whatever material, shall be turned over to the Dangerous
Drugs Board; and

(f) All other restricted goods which are highly dangerous to be kept or handled shall be destroyed
in a manner as the District Collector deems appropriate. Otherwise, the restricted goods shall be
turned over to the proper government agency for appropriate handling.

SECTION 1148. Disposition of Regulated Goods.— Regulated goods shall be disposed of in a

manner to be determined by the appropriate regulatory agency. In the event that the regulatory
agency allows the disposition of the regulated goods with commercial value and capable of
legitimate use, these shall be disposed of in accordance with Section 1141 of this Act.

SECTION 1149. Disposition of Unsold Goods for Want of Bidders.— Goods subject to sale at

public auction by the Bureau shall be sold at a price not less than the landed cost of the goods
adjusted for normal depreciation.

Goods which remain unsold after at least two (2) public biddings either due to the lack of bidders
or for the lack of an acceptable bid, may be donated to another government agency or declared for
official use of the Bureau, If the goods are not suitable either for official use or donation, these may
be subject to reexport as government property or sold through a negotiated sale. In case of
negotiated sale, the same shall be subject to the approval of the Secretary ofFinance and executed
in the presence of a representative of the COA. For purposes of donating the goods as above
described, goods suitable for shelter or consisting of foodstuffs, clothing materials or medicines may
be donated to the DSWD.
 SECTION 1150. Disposition of Smuggled Goods.— Smuggled goods, when forfeited, shall be
disposed of as provided in Section 1148 of this Act.

SECTION 1151. Forfeiture Fund.— All proceeds from public auction sales after deduction of the
charges as provided in Section 1143 of this Act and subject to the claim of the owner or importer of
an impliedly abandoned goods as provided in Section 1130 of this Act, shall be deposited in an
account to be known as Forfeiture Fund.

The Fund shall be in the name of and shall be managed by the Bureau which is hereby
authorized, subject to the usual government accounting rules and regulations, tiftctalize it for the
following purposes;

(a) To outsource, subject to the rules on government procurement established by law, the
management of the inventory, safekeeping, maintenance and sale of goods enumerated in Section
1139 of this Act to private service providers: Provided, That the Bureau shall retain jurisdictional
control and supervision over these goods as well as the operations of the service provider so
contracted;

(b) To facilitate customs seizure, abandonment and forfeiture proceedings and the disposition of
goods under Section 1139 of this Act, particularly those to be disposed of other than through public
sale;

(c) To enhance customs intelligence and enforcement capability to prevent smuggling; and

(d) To support the modernization program and other operational efficiency and trade facilitation
initiatives of the Bureau.

The DOF and the Department of Budget and Management (DBM) shall, upon the recommendation
of the Bureau, issue a joint regulation to implement the provisions of this section.

Title XII
Third Parties

CHAPTER 1
CUSTOMS SERVICE PROVIDERS
 SECTION 1200. Customs Brokers and Other Service Providers.— Upon the recommendation of
the Commissioner, the Secretary of Finance shall issue the necessary rules and regulations for the
registration of customs brokers and the accreditation of other customs service providers to ensure
compliance with this Act and the rules and regulations that shall be promulgated to implement it.

CHAPTER 2
CARRIERS, VESSELS, AND AIRCRAFTS

SECTION 1201. Ports Open to Vessels and Aircrafts Engaged in Foreign Trade.— Vessels and
aircrafts engaged in foreign trade shall visit designated ports of entry only except as otherwise
especially allowed by law: Provided, That no existing and valid government contract covering the
handling of import and export cargo shall be diminished or impaired. Every vessel or aircraft arriving
within a Customs District of the Philippines from a foreign port shall dock at the designated port of
entry and shall be subject to the authority of the District Collector of the port while within its
jurisdiction.

SECTION 1202. Control of Customs Officer Over Boarding or Leaving of Incoming Vessel and
Over Other Vessel Approaching the Former.— Upon the arrival in port of any vessel engaged in
foreign trade, it shall be unlawful for any person, except the pilot, consul, quarantine officers,
customs officers, or other duly authorized persons, to board or leave the vessel without permission
of the customs officer concerned. It shall likewise be unlawful for any tugboat, rowboat, or other craft
to go alongside such vessel and for any person so authorized to board the vessel to take any
unauthorized person to board the same, or allow loitering near or alongside such vessel.
Unauthorized tugboats and other vessels shall keep away from such vessel engaged in foreign trade
at a distance of not less than fifty (50) meters.

SECTION 1203. Documents to be Produced by the Master Upon Entry of Vessel.— Upon entry of a

vessel engaged in foreign trade, the master thereof shall present the following certified documents to
the customs boarding officers:

(a) The vessel's general declaration;

(b) The original manifest of all cargoes destined for the port, to he returned with the endorsement
of the boarding officers;

(c) Three (3) copies of the original manifest, one of which, upon certification by the boarding
officer as to the correctness of the copy, shall be returned to the master;

(d) A copy of the cargo stowage plan;

 (e) Two (2) copies of the store list;

(f) One (1) copy of the passengers list;

(g) One (1) copy of the crew list;

(h) The original copy of all through cargo manifest, for deposit with the customs officer who has
jurisdiction over the vessel while in port;

(i) The passengers manifest containing the names of all foreigners, in conformity with the
requirements of the immigration laws in force in the Philippines;

(j) One (1) copy of the original duplicate of fully accomplished bill of lading;

(k) The shipping goods and register of the vessel of Philippine registry; and

(l) Such other related documents.

SECTION 1204. Manifest Required of Vessel from Foreign Port.— Every vessel from a foreign
port must have on board a complete manifest of all its cargoes.

All cargoes intended to be landed at a port in the Philippines must be described in separate
manifests for each port of call. Each manifest shall include the port of departure and the port of
delivery with the marks, numbers, quantity, and description of the packages and the names of the
consignees. Every vessel from a foreign port must have on board complete manifests of passengers
and baggage, in the prescribed form, setting forth the destination and all particulars required by
immigration laws. Every vessel shall present to the proper customs officers upon arrival in ports
ofthe Philippines a complete list of all sea stores then on board. If the vessel does not carry cargo or
passengers, the manifest must show that no cargo or passenger is carried from the port of departure
to the port of destination in the Philippines.

A true and complete copy of the cargo manifest shall be electronically sent in advance by the
shipping company, NVOCC, freight forwarder, cargo consolidator, or their agents within the cut-off
period as may be determined by the Bureau before the arrival of the carrying vessel at the port of
entry. Upon arrival of the carrying vessel, the shipping company, NVOCC, freight forwarder, cargo
consolidator, or their agents shall provide two (2) hard copies of the cargo manifest to the Bureau in
case the port of entry is either the Port of Manila (PoM) or the Manila International Container Port
(MICP), and one (1) copy only in the case of the other ports of entry.
 A cargo manifest shall in no case be changed or altered after entry of vessel, except by means of
an amendment, under oath, by the master, consignee or agent thereof, which shall be attached to
the original manifest; Provided, That after the invoice and/or goods declaration covering an
importation have been received and recorded in the office ofthe appraiser, no amendment of the
manifest shall be allowed, except when it is obvious that a clerical error or any other discrepancy has
been committed in the preparation of the manifest, without any fraudulent intent, the discovery of
which would not have been made until after examination of the importation has been completed.

SECTION 1205. Translation of Manifest.— The cargo manifest and each copy thereof shall he
accompanied by a translation in English, if originally written in another language.

SECTION 1206. Manifests for the Commission on Audit and District Collector.— Upon arrival of a
vessel from a foreign port, the Bureau shall provide electronic copies of the manifest to the
Chairperson ofthe COA. The master shall immediately present to the District Collector the original
copy of the cargo manifest properly endorsed by the boarding officer, and for inspection, the ship's
register, or other documents in lieu thereof, together with the clearance and other papers granted to
the vessel at the port of departure for the Philippines.

SECTION 1207. Production of Philippine Crew.— The master of a Philippine vessel returning from

abroad shall produce the entire crew listed in the vessel's shipping crew manifest. If any member is
missing, the master shall produce proof satisfactory to the District Collector that the member has
died, or absconded, has been forcibly impressed into another service, or has been discharged. In
case of discharge in a foreign country, the master shall produce a certificate from the consul, vice
consul, or consular agent of the Philippines there residing, showing that such discharge was effected
with the consent of the aforesaid representative of the Philippines.

SECTION 1208. Record of Arrival and Entry of Vessels and Aircraft.— A record shall be made
and kept open to public inspection in every Customs District of the date of arrival and entry of all
vessels and aircraft.

SECTION 1209. Arrest of Vessel or Aircraft Departing Before Entry Made.— When a vessel or

aircraft arriving within the limits of a Customs District from a foreign port departs or attempts to
depart before entry shall have been made, not being thereunto compelled by stress of weather,
duress of enemies, or other necessity, the District Collector of the port may cause the arrest and
bring back such vessel or aircraft to the most convenient port with the assistance of other concerned
agencies.

SECTION 1210. Discharge of Ballast.— When not brought to port as goods, ballast of no

commercial value maybe discharged upon permit granted by the District Collector for the purpose.
 SECTION 1211. Time of Unloading Cargo.— Unloading of cargo from a vessel or aircraft from a
foreign port during official nonworking hours shall be allowed subject to payment of service fees by
shipping lines, airlines, or other interested parties at rates prescribed by the Commissioner.

SECTION 1212. Entrance of Vessel through Necessity.— When a vessel from a foreign port is

compelled, by stress of weather or other necessity to put into any other port than that of its
destination, the master within twenty-four (24) hours after its arrival, shall make a protest under oath
setting forth the causes or circumstances of such necessity. This protest, if not made before the
District Collector, must be produced and lodged with the District Collector.

Within the same time, the master shall make a report to the District Collector if any part of the
cargo was unloaded from necessity or lost by casualty before arrival, and produce sufficient proof to
the District Collector of such necessity or casualty before the latter who shall give the approval
thereto and the unloading shall be deemed to have been lawfully effected.

SECTION 1213. Unloading of Vessel in Port from Necessity.— If a situation arises where the
unloading of the vessel is required pending sojourn in port, the District Collector shall, upon sufficient
proof of the necessity, grant a permit therefore, and the goods shall be unloaded and stored under
the supervision of customs officers.

At the request of the master of the vessel or the owner thereof, the District Collector may grant
permission to enter the port and pay duties, taxes and other charges on, and dispose of, such part of
the cargo as may be perishable in nature or as may be necessary to defray the expenses attending
the vessel.

Upon departure, the cargo, or a part thereof, may be reloaded on board the vessel, and the vessel
may proceed with the same to its destination, subject only to the charge for storing and safekeeping
of the goods and the fees for entrance and clearance. No port charges shall be collected on vessels
entering through stress of weather, duress or other urgent necessities.

SECTION 1214. Entry and Clearance of Vessels of a Foreign Government.— The entry and

clearance of transport or supply ship of a foreign government shall be in accordance with the
agreement by and between the Philippines and the foreign government.

SECTION 1215. Clearance of Vessel for Foreign Port.— Before a clearance shall be granted to any
vessel bound to a foreign port, the master or the agent thereof shall present to the District Collector
the following properly authenticated documents:

(a) A bill of health from the quarantine officer or officer of the public health service in the port;
 (b) Three (3) copies of the manifest of export cargo, one of which, upon certification by the
customs officer as to the correctness of the copy, shall be returned to the master;

(c) Two (2) copies of the passengers list, showing foreigners and other passengers;

(d) The register and shipping goods, if the vessel is of Philippine registry;

(e) Clearance issued by the last port of entry; and

(f) A certificate from the Philippine Postal Corporation to the effect that it received timely notice of
the sailing of the vessel: Provided, That the District Collector shall not permit any vessel to sail for
a foreign port if the master or agent thereof refuses to receive bags of mail delivered to the same
by the Philippine Postal Corporation for transport upon reasonable compensation. In case the
Postmaster General and the master or agent do not come to an agreement concerning the amount
of the compensation to be paid for the carriage of the mail, the matter shall be submitted for
decision to a Board of Referees to be composed of three (3) members appointed, respectively, by
the Philippine Postal Corporation, the agency of the company to which the vessel concerned
belongs, and the Bureau, who shall fix a reasonable rate of compensation.

SECTION 1216. Detention of Warlike Vessel Containing Arms and Munitions.— District Collectors

shall report to the proper authorities or detain any vessel of commercial registry manifestly built for
warlike purposes and about to depart from the Philippines with a cargo consisting principally of arms
and munitions of war, when the number of men shipped on board or other circumstances render it
probable that such vessel is intended to be employed by the owner or owners to cruise or commit
hostilities upon the subjects, citizens, or property of any foreign principality or state, or of any colony,
district, or people with whom the Philippines is at peace, until the decision of the President of the
Philippines is rendered thereon, or until the owner or owners shall give a security, in double the
value of the vessel and cargo, that it will not be so employed, if in the discretion of the District
Collector such security will prevent the violation of the provisions of this section.

SECTION 1217. Oath of Master of Departing Vessel.— The master of a departing vessel shall state
under oath that:

(a) All cargoes conveyed on the vessel, destined for the Philippines, have been duly discharged
or accounted for;

(b) A true copy of the outgoing cargo manifest has been furnished to the Bureau;

(c) No letters or packets, not enclosed in properly stamped envelope sufficient to cover postage,
have been received or will be conveyed, except those relating to the vessel; and that all mails
 placed on board the vessel before its last clearance from the Philippines have been delivered at
the proper foreign port; and

(d) If clearing without passenger, the vessel will not carry upon the instant voyage, from the
Philippine port, any passenger of any class, or other person not entered upon the ship's
declaration.

SECTION 1218. Extension of Time for Clearance.— At the time of clearance, the master of a
departing vessel shall he required to indicate the time of intended departure, and if the vessel should
remain in port forty-eight (48) hours after the time indicated, the master shall report to the District
Collector for an extension of time of departure, and without such extension the original clearance
shall be nullified.

SECTION 1219. Advance Notice of Aircraft Arrival.—

(A) Nonscheduled Arrivals.— Before an aircraft comes into any area in the Philippines from any
place outside thereof, a timely notice of the intended flight shall be furnished to the District
Collector or other customs officer-in-charge at or nearest the intended place of first landing, and to
the quarantine and immigration officers-in-charge at or nearest such place of landing. If
dependable facilities for giving notice are not available before departure, the use of any radio
equipment shall be appropriate as long as it will result in the giving of adequate and timely notice of
the aircraft's approach, otherwise landing shall be made at a place equipped with navigational
facilities. If, upon landing in any area, the government officers have not arrived, the pilot-in-
command shall hold the aircraft and any baggage and goods thereon intact and keep the
passengers and crew members in a segregated place until the inspecting officers arrive.

(B) Scheduled Arrivals.— Such advance notice will not be required in the case of an airline
arriving in accordance with the regular schedule filed with the District Collector for the Customs
District in which the place of first landing area is situated, and also with the quarantine and
immigration officers-in-charge of such place.

SECTION 1220. Landing at International Airport of Entry.— Except in case of emergency or

forced landings, aircraft arriving in the Philippines from any foreign port or place shall make the first
landing at an international airport of entry, unless permission to land elsewhere other than at an
international airport of entry is first obtained from the Commissioner. In such cases, the owner,
operator, or person in charge of the aircraft shall pay the expenses incurred in inspecting the aircraft,
goods, passengers, and baggage carried thereon, and such aircraft shall be subject to the authority
of the District Collector at the airport while within its jurisdiction.
 Should an emergency or forced landing be made by an aircraft coming into the Philippines at a
place outside the jurisdiction of the latter, the pilot-in-command shall not allow goods, baggage,
passenger, or crew member to be removed or to depart from the landing place without permission of
a customs officer, unless such removal or departure is necessary for purposes of safety,
communication with customs officers, or preservation of life, health, or property. As soon as
practicable, the pilot-in-command, or a member of the crew-in-charge, or the owner of the aircraft,
shall communicate with the customs officer at the intended place of first landing or at the nearest
international airport or other customs port of entry in the area and make a full report of the
circumstances of the flight and of the emergency or forced landing.

SECTION 1221. Report of Arrival and Entry of Aircraft.— The pilot-in-pommand of any aircraft

arriving from a foreign port or place shall immediately report its arrival to the District Collector at the
airport of entry or to the customs officer detailed to meet the aircraft at the place of first landing.
Upon arrival, such aircraft shall be boarded by a quarantine officer, and after pratique or health
clearance is granted, shall be boarded by a customs officer; subsequently no person shall be
permitted to board or leave the aircraft without the permission of the customs officer. The pilot-in-
command or any other authorized agent of the owner or operator of the aircraft shah make the
necessary entry. No such aircraft shall, without previous permission from the District Collector,
depart from the place of first landing or discharge goods, passengers, or baggage.

SECTION 1222. Documents Required in Making Entry for Aircraft.—

(a) For the purpose of making entry, there shall be presented to the boarding customs officer
four (4) copies of ageneral declaration which shah contain the following data, unless any of such
data is otherwise presented on a separate official form:

(1) Name of owner or operator of aircraft, registration marks and nationality of aircraft, and
flight number of identification;

(2) Points of clearance and entry, and date arrival;

(3) Health and customs clearance at the last airport of departure:

(4) Itinerary of aircraft, including information as to airport of origin and departure dates;

(5) Names and nationality of crew members;

(6) Passengers manifest showing places of embarkation and destination;

 (7) Cargo manifest showing information as to airway bill number, the number of packages
related to each airway bill number, nature of goods, destination, and gross weight, together with
a copy of each airway bill securely attached thereto;

(8) Store list; and

(9) Such other documents as may be required by the Bureau.

(b) The general declaration shall be written in English and duly signed by the pilot-in-command
or operator of the aircraft, or the authorized agent. The section on health, and customs clearances,
however, shall he signed only by the pilot-in-command or when necessary, by a crew member
when the general declaration itself has been signed by a non-crew member. If the aircraft does not
carry cargoes or passengers, such facts must be shown in the manifest.

(c) A cargo manifest shall in no case be changed or altered after entry of the aircraft, except by
means of an amendment by the pilot-in-command or authorized agent thereof, under oath, and
attached to the original manifest: Provided, That after the invoice and/or goods declaration
covering an importation have been received and recorded in the office of the appraiser, no
amendment shall be allowed except when it is obvious that a clerical error or any other
discrepancy has been committed without any fraudulent intent in the preparation of the manifest,
the discovery of which could not have been made until after complete examination of the
importation.

SECTION 1223. Manifests for the Commission on Audit (COA) and District Collector.—Upon
arrival of an aircraft from a foreign port, the Bureau shall provide electronic copies of the manifest to
the Chairperson of the COA. The master shall immediately present to the District Collector the
original copy of the cargo manifest properly endorsed by the boarding officer, and for inspection, the
aircraft's register or other documents in lieu thereof, together with the clearance and other papers
granted to the aircraft at the port of departure for the Philippines.

SECTION 1224. Clearance of Aircraft for Foreign Port.—

(a) Any aircraft bound to a foreign port shall, before departure, be granted clearance by the
Commissioner at an airport of entry where such aircraft has been authorized to make its landing;
and

(b) Before clearance shall be granted to an aircraft bound to a foreign port, there shall be
presented to the District Collector or to the customs officer detailed at the place of departure four
(4) copies of a general declaration signed by the pilot-in-command or authorized agent of an
aircraft which shall contain the following data:
 (1) Name of owner or operator of aircraft, registration marks and nationality of aircraft, and
flight number of identification;

(2) Port of clearance, data thereof and destination;

(3) Health and customs clearance;

(4) Itinerary of aircraft, including information as to airport of destination and departure date;

(5) Names and nationality of crew members;

(6) Passengers manifest showing places of destination;

(7) Export cargo manifest showing information as to airway bill number, the number of
packages related to each airway bill number, nature of goods, destination, and gross weight,
together with a copy of each airway bill securely attached thereto; and

(8) Store list showing stores loaded.

SECTION 1225. Oath of Person-in-Charge of Departing Aircraft.— The pilot-in-command or

authorized agent of such departing aircraft shall also state under oath to the effect that:

(a) All cargoes conveyed on the aircraft destined to the Philippines have been duly discharged
and accounted for; and

(b) The aircraft has not received nor will convey any letter or packet not enclosed in properly
stamped envelope sufficient to cover postage, except those relating to the cargo of the aircraft, and
that there was delivery to the proper foreign port of all mails placed on board said aircraft before
clearance from the Philippines.

If an aircraft is cleared to depart without passengers, the aircraft shall not carry any passenger
thereon.

A record shall be made and kept open to public inspection in every customs office at an airport of
entry of the dates of arrival and entry of all aircraft.

CHAPTER 3
OTHER THIRD PARTIES
 SECTION 1226. Supervision and Regulation of Third Parties.— Third parties transacting with the
Bureau on behalf of importers and consignees shall be treated equally as true importers or
consignees.

Third parties transacting with the Bureau shall be liable for acts committed in violation of this Act
and related laws.

Upon the recommendation of the Commissioner, the Secretary of Finance shall issue rules and
regulations to govern and regulate the conduct of all third parties dealing directly with the Bureau in
relation to the importation, exportation, movement, storage and clearance of goods for and on behalf
of another person. The rules and regulations shall provide for specific conditions when third parties
may or may not directly transact with the Bureau and shall provide a written notice in case such third
parties are, for valid reasons, barred from transacting with the Bureau. Third party is defined under
Section 102(uu) of this Act. For purposes of this section, third parties may also refer to logistics
providers, importers, exporters, carriers, airlines, shipping lines, shipping agents, forwarders,
consolidators, port and terminal operators, and warehouse operators, if such persons or entities
transacted with the Bureau.

CHAPTER 4
AUTHORIZED ECONOMIC OPERATORS (AEOS)

SECTION 1227. Treatment of Authorized Economic Operators (AEOs).— The Bureau shall

promulgate the necessary procedures and requirements for the compliance of Authorized Economic
Operators (AEOs). For AEOs who have displayed diligence in complying with the rules and the
submission of official customs requirements, and have satisfactorily managed their commercial
records, the Bureau shall extend the following incentives:

(a) Release of the goods upon provision of the minimum information necessary to identify the
goods and permit the subsequent completion of the final goods declaration;

(b) Grant of clearance of the goods at the declarant's premises or another place authorized by
the Bureau; and

(c) Other special procedures such as:

(i) Allowing a single goods declaration for all imports or exports in a given period where goods
are imported or exported frequently by the same person;
 (ii) Use of commercial records to self-assess their duty and tax liability and, where appropriate,
to ensure compliance with other customs requirements; and

(iii) Allowing the lodgement of goods declaration by means of an entry in the records by the
authorized person to be supported subsequently by a supplementary goods declaration.

SECTION 1228. Trade Facility for AEO.— The Secretary of Finance shall, upon the
recommendation of the Commissioner, issue the necessary rules;

(a) To supervise and regulate the conduct and operations of the AEOs, consistent with
international best practices, the World Customs Organization (WGO) framework of standards to
secure and facilitate global trade, and other international conventions and agreements;

(b) To develop a trade facilitation program for AEOs and other authorized persons consistent
with international best practices and international conventions and agreements; and

(c) To recognize existing facilities where the authority or right to operate AEOs has been granted
by the relevant government agency or regulator through a contract, where the Bureau shall;

(i) Only require an endorsement by the relevant agency or regulator;

(ii) Issue a certificate of authority as a matter of course; and

(iii) Ensure that the term of the certificate of authority shall be coterminous with the applicable
government contract or any extension thereof.

The Bureau shall implement the provisions of this chapter without interfering, or impeding AEO
operations as well as existing operations of wharves, container yards, container freight stations,
warehouses, examination areas and other facilities located in customs territory and/or in airports and
seaports. The Bureau shall likewise ensure that any subsequent rules, regulations, orders or
memoranda issued in relation to AEOs shall be consistent with the appropriate government agency's
or regulator's prevailing operating procedures and international best practices.

Existing contracts of private operators with appropriate government agency or regulator, such as,
but not limited to, the PPA, SBMA and PIA and their respective authorities and powers already
granted by law pertinent to such contract, shall not be impaired or adversely affected with the
Bureau's implementing rules and regulations on AEOs.

TITLE XIII
CUSTOMS FEES AND CHARGES
 SECTION 1300. Customs Dues, Fees and Charges.— For services rendered and documents issued
by the Bureau, dues, fees and charges shall be collected as may be provided under existing
regulations issued by the Secretary of Finance, upon the recommendation of the Commissioner.

SECTION 1301. General Provision on the Authority to Increase or Decrease Dues, Fees and
Charges.— The Secretary of Finance may, upon the recommendation of the Commissioner, increase
or decrease the dues, fees and charges collectible by the Bureau to protect the interest of the
government.

Title XIV
Offenses and Penalties

CHAPTER 1
CRIMES AND OTHER OFFENSES

SECTION 1400. Misdeclaration, Misclassification, Undervaluation in Goods Declaration.

— Misdeclaration as to quantity, quality, description, weight, or measurement of the goods, or
misclassification through insufficient or wrong description of the goods or use of wrong tariff heading
resulting to a discrepancy in duty and tax to be paid between what is legally determined upon
assessment and what is declared, shall be subject to a surcharge equivalent to two hundred fifty
percent (250%) of the duty and tax due. No surcharge shall be imposed when the discrepancy in
duty is less than ten percent (10%), or when the declared tariff heading is rejected in a formal
customs dispute settlement process involving difficult or highly technical question of tariff
classification, or when the tariff classification declaration relied on an official government ruling.

There is undervaluation when: (a) the declared value fails to disclose in frill the price actually paid
or payable or any dutiable adjustment to the price actually paid or payable; or (b) when an incorrect
valuation method is used or the valuation rules are not properly observed, resulting in a discrepancy
in duty and tax to be paid between what is legally determined as the correct value against the
declared value. When the undervaluation is established without the need to go through the formal
dispute settlement process provided for in this Act, a surcharge shall be imposed equivalent to two
hundred fifty percent (250%) of the duty and tax due. No surcharge shall be imposed when the
discrepancy in duty is less than ten percent (10%), or the declared value is rejected as a result of an
official ruling or decision under the customs dispute settlement process involving difficult or highly
technical question relating to the application of customs valuation rules.
 A discrepancy in duty and tax to be paid between what is legally determined and what is declared
amounting to more than thirty percent (30%) shall constitute a prima facieevidence of fraud.

When 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 surcharge shall be imposed equivalent to five hundred percent (500%) of the
duty and tax due and that the goods shall be subject to seizure regardless of the amount of the
discrepancy without prejudice to the application of fines or penalties provided under Section 1401 of
this Act against the importer and other person or persons who willfully participated in the fraudulent
act.

SECTION 1401. Unlawful Importation or Exportation.— Any person who shall fraudulently import

or export or bring into or outside of the Philippines any goods, or assist in so doing, contrary to law,
or shall receive, conceal, buy, sell, or in any manner facilitate the transportation, concealment, or
sale of such goods after importation, or shall commit technical smuggling as defined in this Act shall
be penalized by:

(a) Imprisonment of not less than thirty (30) days and one (1) day but not more than six (6)
months, or a fine of not less than twenty-five thousand pesos (₱25,000.00) but not more than
seventy-five thousand pesos (₱75,000,00), or both, if the appraised value of the goods unlawfully
imported, to be determined in the manner prescribed under this Act, including duties and taxes, of
the goods unlawfully imported does not exceed two hundred fifty thousand pesos (₱250,000,00);

(b) Imprisonment of not less than six (6) months and one (1) day but not more than one (1) year,
or a fine of not less than seventy-five thousand pesos (₱75.000.00) but not more than one hundred
fifty thousand pesos (₱150,000.00), or both, if the appraised value of the goods unlawfully
imported, to be determined in the manner prescribed under this Act, including duties and taxes,
exceeds two hundred fifty thousand pesos (₱250,000.00) but not more than five hundred thousand
pesos (₱500,000.00);

(c) Imprisonment of not less than one (1) year and one (1) day but not more than three (3) years,
or a fine of not less than one hundred fifty thousand pesos (₱150,000.00) but not more than three
hundred thousand pesos (₱300,000.00) or both, if the appraised value of the goods unlawfully
imported, to be determined in the manner prescribed under this Act, including duties and taxes,
exceeds five hundred thousand pesos (₱500,000.00) but not more than one million pesos
(₱1,000,000.00);

(d) Imprisonment of not less than three (3) years and one (1) day but not more than six (6) years,
or a fine of not less than three hundred thousand pesos (₱300,000.00) but not more than one
million five hundred thousand pesos (₱1,500,000,00), or both, if the appraised value of the goods
 unlawfully imported, to be determined in the manner prescribed under this Act, including duties and
taxes, exceeds one million pesos (₱1,000,000.00) but not more than five million pesos
(₱5,000,000.00);

(e) Imprisonment of not less than six (6) years and one (1) day but not more than twelve (12)
years, or a fine of not less than one million five hundred thousand pesos (₱1,500,000.00) but not
more than fifteen million pesos (₱15,000,000.00), or both, if the appraised value of the goods
unlawfully imported, to be determined in the manner prescribed under this Act, including duties and
taxes, exceeds five million pesos (₱5.000,000.00) but not more than fifty million pesos
(₱50,000,000.00);

(f) Imprisonment of not less than twelve (12) years and one (1) day but not more than twenty
(20) years, or a fine of not less than fifteen million pesos (₱15,000,000.00) but not more than fifty
million pesos (₱50,000,000.00), or both, if the appraised value of the goods unlawfully imported, to
be determined in the manner prescribed under this Act, including duties and taxes, exceeds fifty
million pesos (₱50,000,000.00) but not more than two hundred million pesos (₱200,000,000.00);

(g) If the appraised value of the goods unlawfully imported to be determined in the manner
prescribed under this Act, including duties and taxes, exceeds two hundred million pesos
(₱200,000,000.00) or if the aggregate amount of the appraised value of the goods which are the
subject of unlawful importation committed in more than one instance, including duties and taxes,
exceeds two hundred million pesos (₱200,000,000.00), the same shall be deemed as a heinous
crime and shall be punishable with a penalty of reclusion perpetua and a fine of not less than fifty
million pesos (₱50,000,000.00); and

(h) The penalty of prision mayor shall be imposed when the crime of serious physical injuries
shall have been committed, and the penalty of reclusion perpetuashall be imposed when the crime
of homicide shall have been committed by reason or on the occasion of the unlawful importation.

In applying the above scale of penalties, an offender who is a foreigner shall be deported without
farther proceedings after serving the sentence. If the offender is a public officer or employee, the
penally which is the next higher in degree shall be imposed in addition to the penalty of perpetual
disqualification from public office, and disqualification to vote and to participate in any public election.
If the offender fails to pay the fine, subsidiary imprisonment shall he served.

When, upon trial for violation of this section, the defendant is shown to have had possession of the
goods in question, possession shall be deemed sufficient evidence to authorize conviction unless
the defendant shall explain the possession to the satisfaction of the court: Provided, That each act of
unlawful importation or exportation shall be deemed as a separate offense: Provided, However, That
payment of the tax due after apprehension shall not constitute a valid defense in any
prosecutionunder this section; Provided, Further, That outright smuggling shall also be punishable
under this section; Provided, Finally, That the rights and privileges provided in this Act for the
importers, consignees, exporters, service providers, third parties and other third parties who
committed this offense shall be revoked.

SECTION 1402. Failure or Refusal of Party to Give Evidence or Submit Documents for

Assessment.— When the owner, importer or consignee of any imported goods, or the agent of either,
fails or refuses, upon lawful demand in writing by any customs officer to appear, lawfully depose, or
submit to examination or to answer any material question or refuses to produce records, accounts or
invoices in possession pertaining to the value, classification or disposition of the goods in question
and deemed material in assessing the same, the District Collector shall assess a surcharge of
twenty percent (20%) on the duffiffle value of the goods which is the subject of the importation.

SECTION 1403. Other Fraudulent Practices Against Customs Revenue.— Any person who makes
or attempts to make any entry of imported or exported goods by means of any false or fraudulent
statement, document or practice or knowingly and willfully files any false or fraudulent claim for
payment of drawback or refund of duties shall, for each act, be punished in accordance with the
penalties prescribed in Section 1401 of this Act.

SECTION 1404. Failure to Declare Baggage.— Whenever dutiable goods are not declared by any
person arriving within the Philippines, such goods shall be seized and the person may obtain release
of such goods, if not imported contrary to any law, upon payment of a surcharge equivalent to thirty
percent (30%) of the landed cost of such goods, in addition to all duties, taxes and other charges
due. Nothing in this section shall preclude the filing of criminal action against the offender.

SECTION 1405. Vessel, Seacraft, or Aircraft Departing Before Undergoing Customs Formalities.

— Any vessel, seacraft, or aircraft arriving within the limits of a Customs District from a foreign port
which departs before undergoing customs formalities, without being compelled to do so by stress of
weather, pursuit or duress of enemies, or other necessity, shall be liable for a fine of not less than
one hundred thousand pesos (₱100,000.00) but not more than three hundred thousand pesos
(₱300,000.00).

SECTION 1406. Obstruction to Boarding Officer.— If the master or pilot-in-command or any

member of the complement of any vessel or aircraft arriving at the Philippine port obstructs or
hinders any officer from lawfully going on board such vessel or aircraft for the purpose of enforcing
this Act, or intentionally causes any officer to be so obstructed or hindered, the vessel or aircraft
shall be liable to a fine of not less than one hundred thousand pesos (₱100,000.00) but not more
than three hundred thousand pesos (₱300,000.00).
 SECTION 1407. Unlawful Boarding or Leaving of Vessel or Aircraft.— If, upon arrival at the
Philippine port, any master of a vessel or pilot-in-command of an aircraft engaged in a foreign trade
permits any person to board or leave the vessel or aircraft without the permission of the customs
officer-in-charge, the owner or operator of such vessel or aircraft shall be liable for a fine of not less
than one hundred thousand pesos (₱100,000.00) but not more than three hundred thousand pesos
(₱300,000.00).

SECTION 1408. Unloading of Cargo Before Arrival at Port of Entry.— If, upon the arrival within
the hunts of any Customs District of the Philippines of any vessel or aircraft engaged in foreign
trade, the master or pilot-in-command thereof permits any part of the cargo to be unloaded before
arrival at the port of entry, and without authority from a proper customs officer, the owner, operator,
or agent of such vessel or aircraft shall be liable for a fine of not less five hundred thousand pesos
(₱500,000.00) but not more than two million pesos (₱2,000,000.00); Provided, That no fine shall
accrue upon satisfactory proof to the proper District Collector that the unloading was rendered
necessary by stress of weather, accident or other necessity: Provided, However, That the fine
imposed herein shall be without prejudice to the application of fines or penalties provided under
Section 1401 of this Act.

SECTION 1409. Unloading of Cargo at Improper Time or Place After Arrival.— The owner or

operator of any vessel or aircraft from which cargo is discharged upon arrival in the Philippines at a
time or place other than that designated by the District Collector, shall be fined not less one hundred
thousand pesos (₱100,000.00) but not more than three hundred thousand pesos
(₱300,000.00); Provided, That no fine shall accrue upon satisfactory proof to the proper District
Collector that the unloading was rendered necessary by stress of weather, accident or other
necessity.

SECTION 1410. Failure to Exhibit or Deposit Documents.— When the master of a vessel or pilot-

in-command of an aircraft engaged in foreign trade fails to submit to the District Collector at the time
of entry of the vessel or aircraft the register or other documents in lieu thereof, together with the
clearance and other documents granted by the customs officers to thevessel or aircraft at the last
foreign port of departure, or fans to exhibit any certificate or other documents required to be then
exhibited, the owner or operator of such vessel or aircraft shall be liable for a fine of not less than
one hundred thousand pesos (₱100,000.00) but not more than three hundred thousand pesos
(₱300,000.00).

SECTION 1411. Bringing of Unmanifested Arms, Explosives or War Equipment.— The owner,

operator, or agent of a vessel or aircraft arriving at a port in the Philippines bearing cargo consisting
of firearms, gunpowder, cartridges, dynamite or any other explosives, munitions or equipment of war
not contained in the manifest of the vessel or aircraft, or which are concealed on board, shall be
liable for a fine of not less than five hundred thousand pesos (₱500,000.00) but not more than one
million pesos (₱1,000,000.00).

SECTION 1412. Failure to Supply Advance and Requisite Manifests.— Failure to transmit the

electronic manifest within the required time as may be prescribed by the Bureau, prior to arrival of
the carrying vessel or aircraft at the port of entry shall make the owner, operator, or agent of the
vessel or aircraft liable for a fine of not less than one hundred thousand pesos (₱100,000.00) but not
more than three hundred thousand pesos (₱300,000.00), If the transit time from port of origin to port
of entry is at least seventy-two (72) hours, the shipping or forwarding agent of the carrier or the
vessel who fails to submit the manifest at least twenty-four (24) hours before entry shall likewise be
liable for a fine of not less than one hundred thousand pesos (₱100,000.00) but not more than three
hundred thousand pesos (₱300,000.00).

SECTION 1413. Disappearance of Manifested Goods.— When any package or goods mentioned in

the manifest meant to be unloaded at the port of destination is not unloaded upon the arrival of the
vessel or aircraft, its agent shall be liable for a fine of not less than one hundred thousand pesos
(₱100,000.00) but not more than three hundred thousand pesos (₱300,000.00) unless the
disappearance of the package or the goods in question was not due to the negligence of the master
of the vessel or pilot-in-command of an aircraft, andis explained to the satisfaction of the District
Collector.

The owner, operator, or agent of a vessel or aircraft shall be liable for the payment of the same
fine when a package or goods listed in the manifest does not tally materially in character or
otherwise with the description thereof in the manifest.

SECTION 1414. Discrepancy Between Actual and Declared Weight of Manifested Goods.— If the
gross weight of goods or package described in the manifest or bill of lading exceeds the declared
weight by more than ten percent (10%), and such discrepancy was due to the negligence of the
master or pilot-in-command, the owner, employee, operator or agent of the importing vessel or
aircraft shall be liable for a fine of not more than twenty percent (20%) of the value of the package or
goods in respect to which the deficiency exists.

SECTION 1415. Discrepancy With the Master's or Pilot's-in-Command Deport.— When a vessel

or aircraft arriving from a foreign port is compelled by necessity to unload in another port other than
the port of entry and permission is granted by the District Collector for the unloading of the vessel or
aircraft or the delivery of any part of the cargo and it shall be found that there is discrepancy
between the cargo unloaded and the report of the master or the pilot-in-command and such
discrepancy is not satisfactorily explained, the owner, operator or agent of the vessel or aircraft shall
be liable for a fine of not less than one hundred thousand pesos (₱100,000.00) but not more than
three hundred thousand pesos (₱300,000.00).

SECTION 1416. Failure to Report Fraud.— A master, pilot-in-command or other officer, owner or

agent of any vessel or aircraft trading with or within the Philippines who has knowledge of the
commission of fraud that shall result in the loss or diminution of customs revenue but fails to report
all information relative thereto to the District Collector shall be penalized with imprisonment of not
less than six (6) months and one (1) day but not more than one (1) year and shall be liable for a fine
of not less than one hundred thousand pesos (₱100,000,00) but not than three hundred thousand
pesos (₱300,000.00). If the offender is a foreigner, the offender shall be deported after serving the
sentence. If the offender is a public officer or employee, the offender shall suffer additional penalty of
perpetual disqualification to hold public office, to vote and to participate in any election. All the
benefits due from service in the government, including the separation and retirement benefits, shall
be forfeited.

SECTION 1417. False Statement of Vessel's or Aircraft's Destination.— When the master or pilot-

in-command of a vessel or aircraft loaded with goods shall make a false statement as to the next
destination of such vessel or aircraft when that information is required by a customs officer, the
owner or operator of such vessel or aircraft shall be liable for a fine of not less than one hundred
thousand pesos (₱100,000.00) but not more than three hundred thousand pesos (₱300,000.00). The
arrival of a vessel or aircraft at a different port other than the one it had been originally authorized
and cleared for without having been impelled to do so by necessity, shall be prima facieproof that the
original statement of the actual destination of the vessel or aircraft was false.

SECTION 1418. Affixing Seals.— Any person who, without authority, affixes or attaches a customs
seal, fastening, or any mark, or fastening purporting to be a customs seal, to any vessel, aircraft,
vehicle, warehouse, or package, shall be penalized with imprisonment of not less than six (6)
months and one (1) day but not more than one (1) year, and shall be liable for a fine of not less than
one hundred thousand pesos (₱100,000.00) but not more than three hundred thousand pesos
(₱300,000.00). If the offender is a foreigner, the offender shall he deported after serving the
sentence. If the offender is a public officer or employee, the offender shall suffer an additional
penalty of perpetual disqualification to hold public office and disqualification from exercising the right
to vote and to participate in any election.

SECTION 1419. Breaking of Seal Placed by Customs Officers.— If any seal placed by a customs
officer upon any vessel or aircraft or compartment thereof, or upon any box, trunk or other package
of goods on board is broken, the owner, operator, or agent of the vessel or aircraft shall be liable for
a fine of not less than one hundred thousand pesos (₱100,000.00) but not more than three hundred
thousand peses (₱300,000.00) for each broken or destroyed seal.
 SECTION 1420. Breaking of Lock or Fastening Placed by Customs Officers.— If any lock or other
fastening device placed, by a customs officer upon any hatch door, or other means of
communication in the hold of a vessel or aircraft, or other part thereof for the security of the same
during the night time, is unlawfully opened, broken or removed, or if any of the goods contained in
the hold or in the other compartments so secured is clandestinely abstracted and landed, the owner,
operator, or agent of the vessel or aircraft shall be liable for a fine of not less than one hundred
thousand pesos (₱100,000.00) but not more than three hundred thousand pesos (₱300,000.00).

SECTION 1421. Removal, Breakage, and Alteration of Marks.— Any person who, without

authority, willfully removes, breaks, injures, defaces or alters any customs seal or other fastening or
mark placed upon any vessel, vehicle, on land, sea or air, warehouse or package containing
merchandise or baggage in bond or in customs custody, shall be punished with the penalty
prescribed in Section 1420 hereof.

SECTION 1422. Unauthorized Withdrawal of Imported Goods from Bonded Warehouse.— Any

person who causes the unauthorized withdrawal of imported goods stored from a CBW shall be
liable for payment of a surcharge of fifty percent (50%) of duties, taxes, customs fees, and charges,
found to be due and unpaid. The amount of surcharge shall be added to the duties, taxes and
charges due on the goods withdrawn. If the delinquency lasts for more than one (1) year, the
surcharge shall be increased by twenty-five percent (25%) of the unpaid duties and taxes
annually; Provided, That where the withdrawal is attended with fraud, such as when a fake or altered
withdrawal permit is submitted, the warehouse operator shall be held liable under the pertinent
provisions of this Act, without prejudice to the suspension or revocation of the warehousing
privileges granted by the Bureau pursuant to this Act.

SECTION 1423. Removing or Repacking Goods in Warehouse.— Any person who fraudulently

conceals, removes, or repacks merchandise in any warehouse or fraudulently alters, defaces, or
obliterates any mark or numbers placed upon packages deposited in such warehouse, or shall aid or
abet any such acts, shall be punished with the penalties prescribed in Section 1418 hereof.

Merchandise so concealed, removed, or repacked, or packages upon which marks, numbers or

the values thereof have been so altered, defaced, or obliterated shall be forfeited in favor of the
government.

SECTION 1424. Removing Goods from Customs Custody.— Any person who enters any
warehouse, or any vehicle loaded with or containing merchandise with intent to unlawfully remove
therefrom any merchandise or baggage in such vessel, vehicle or warehouse or otherwise in
customs custody or control, or any person who receives or transports any merchandise or baggage
unlawfully removed from any such vessel, vehicle or warehouse, or shall aid or abet such removal,
shall suffer the penalties provided in Section 1401 hereof.

SECTION 1425. Failure to Pay Duties, Taxes and Other Charges.— For failure to pay the duties,
taxes and other charges of an assessment within fifteen (15) days from the date of final assessment,
a surcharge of ten percent (10%) of the total assessed amount or balance thereon shall be added
and collected, which surcharge shall be increased to twenty-five percent (25%) if the delinquency
lasts for more than one (1) year.

SECTION 1426. Breach of Security.— Upon breach of security required to be filed under this Act,
the District Collector, subject to the approval of the Commissioner, may accept in satisfaction thereof
a smaller sum than that mentioned in the penalty clause of the security, but in no case less than the
amount necessary to indemnify the government for the damage occasioned by such breach.

SECTION 1427. Failure to Keep Importation Records and Full Access to Customs Officers.— Any
person who fails to keep all the records of importations or books of accounts, business and
computer systems and all customs commercial data in the manner prescribed under this Act, shall
be punished with imprisonment of not less than three (3) years and one (1) day but not more than six
(6) years and/or a fine of one million pesos (₱1,000,000.00). This penalty shall likewise be imposed
against importers and brokers who deny an authorizedcustoms officer full and free access to such
records, books of accounts, business and computer systems, and all customs commercial data
including payment records, without prejudice to the imposition of the administrative sanctions by the
Bureau against contumacious importers, including the authority to hold delivery or release of their
imported goods.

SECTION 1428. Concealment or Destruction of Evidence of Fraud.— Any person who willfully

conceals or destroys any invoice, book, or document relating to any goods liable to duly after an
inspection thereof has been demanded by the District Collector or at any time conceals or destroys
any such invoice, book, or document for the purpose of suppressing any evidence of fraud therein
contained, shall be penalized with imprisonment of not less than three (3) years and one (1) day but
not more than six (6) years and shall be liable for a fine of not less than three hundred thousand
pesos (₱300,000.00) but not more than one million pesos (₱1,000,000.00).

SECTION 1429. Other Offenses.— The owner or operator of a vessel, aircraft or train shall be liable
for a fine for the following acts:

(a) For anchoring at any dock, pier, wharf, quay, or bulkhead other than a port of entry, a fine of
not less than five hundred thousand pesos (₱500,000.00) but not more than one million pesos
(₱1,000,000.00) for overseas vessels;
 (b) For dumping of garbage or slops over the sides of the vessel within three (3) miles from the
nearest coastline, a fine of not less than one million pesos (₱1,000,000.00) but not more than ten
million pesos (₱10,000,000.00);

(c) For dumping or causing to spread crude oil, kerosene, or gasoline in the bay or at the piers
within three (3) miles from the nearest coastline, a fine of not less than one million pesos
(₱1,000,000.00) but not more than ten million pesos (₱10,000,000.00) for each, offense;

(d) For loading gasoline or any other petroleum products at a place other than that designated by
the regulations, a fine of not less than five hundred thousand pesos (₱500,000.00) but not more
than one million pesos (₱1,000,000.00) for each offense;

(e) For causing the emission and spread of harmful gas, fumes and chemicals, a fine of not less
than one million pesos (₱1,000,000.00) but not more than ten million pesos (₱10,000,000.00) for
each offense; and

(f) For transporting hazardous waste, radioactive waste and other toxic substances as provided
under the Basel Convention and Republic Act No. 6969, otherwise known as the “Toxic
Substances and Hazardous and Nuclear Wastes Control Act of 1990”, the penalty shall be
forfeiture of the vessel in favor of the government.

The fines imposed herein shall be without prejudice to the application of fines or penalties
provided under special laws and regulations.

SECTION 1430. Violations of this Act and Rules and Regulations in General.— Any person who
violates any other provision of this Act or the rules and regulations issued pursuant thereto, shall be
penalized with imprisonment of not less than thirty (30) days and one (1) day but not more than one
(1) year, or be liable for a fine of not less than one hundred thousand pesos (₱100,000.00) but not
more than three hundred thousand pesos (₱300,000.00), or both. If the offender is a foreigner, the
offender shall be deported after serving the sentence. If the offender is a public officer or employee,
the offender shall be disqualified from holding public office, from exercising the right to vote and to
participate in any public election for ten (10) years.

CHAPTER 2
PENALTIES IMPOSED UPON BUREAU EMPLOYEES

SECTION 1431. Statutory Offenses of Officers and Employees.— Every officer, agent, or employee

of the Bureau or of any other agency of the government charged with the enforcement of the
provisions of this Act, who shall be found guilty of any delinquency as described below shall be
penalized with imprisonment of not less than six (6) years and one (1) day but not more than twelve
(12) years, and perp etual disqualification to hold public office, from exercising the right to vote and
to participate in any public election and a fine of not less than five hundred thousand pesos
(₱500,000.00); but not more than one million pesos (₱1,000,000.00);

(a) Extortion or willful oppression under color of law;

(b) Knowingly demanding other or greater sums that are authorized by law or receive any fee,
compensation, or reward except as by law prescribed, for the performance of any duty;

(c) Willfully neglecting to give receipts, as required by law, for any sum collected in the
performance of duty, or who willfully neglect to perform any of the duties enjoined by law;

(d) Conspiring or colluding with another or others to defraud the customs revenue or otherwise
violate the law;

(e) Providing an opportunity for any person to defraud the government of customs revenue or
failing to do any act with the intent to enable any person to defraud the government of customs
revenue;

(f) Negligently or designedly permitting the violation of the law by any other person;

(g) Making or signing for any false entry or entries in any book, making or signing any false
certificate or return in any case where the law requires the making by them of such entry certificate
or return;

(h) Failing to report knowledge or information to their superior officer about an act or acts of
fraud committed in revenue collection as required by law;

(i) Demanding or accepting or attempting, without authority, to collect directly or indirectly as

payment or otherwise, any sum of money or other thing of value for the compromise, adjustment,
or settlement of any charge or complaint for any violation or alleged violation of law;

(j) Unlawfully disclosing confidential information gained during any investigation or audit, or using
such information for personal gain or to the detriment of the government, the Bureau, or third
parties.

All the benefits due from service in the government, including separation and retirement benefits,
of an officer, agent, or employee of the Bureau or of any other agency of the government charged
with the enforcement of the provisions of this Act found guilty of the foregoing violations shall be
forfeited.

SECTION 1432. Failure to Report Fraud.— Any employee of the Bureau who has knowledge of
any fraud committed against the government pertaining to customs revenue, and who fails to report
all information relative thereto to the District Collector, shall be penalized with imprisonment of not
less than six (6) years and one (1) day but not more than twelve (12) years and a fine of not less
than five hundred thousand pesos (₱500,000.00) but not more than one million pesos
(₱1,000,000,00), The offender shall suffer the additional penalty of perpetual disqualification to hold
public office, to vote and to participate in any election. All the benefits of the offender due from
service in the government, including separation and retirement benefits, shall be forfeited.

SECTION 1433. Liability for Other Offenses.— The fines and penalties imposed in this chapter
shall be without prejudice to the application of fines or penalties provided under Chapter 1 of this title
and special laws and regulations.

Title XV
Miscellaneous Provisions
SECTION 1500. Information, Decisions, and Rulings.— The Bureau shall ensure that all
information of general application pertaining to customs, including revisions or amendments thereto,
shall be available to the general public.

SECTION 1501. Period to Issue Ruling.— Unless otherwise provided in this Act, the issuing
authority shall act on the application for ruling within thirty (30) days from receipt of the application
and supporting documents as may be required by regulation. Within three (3) days from issuance of
a ruling, the issuing authority shall notify the requesting party of such ruling.

SECTION 1502. Publication and Confidentiality of Certain Information in Ruling.— The Bureau

and the Commission shall regularly publish its rulings in a manner accessible to the public. For this
purpose, each application for ruling shall be assigned a title and unique ruling number for easy
reference. The publication shall contain information on the goods involved, the body or summary of
the ruling, particularly the grounds relied upon to support the ruling, but shall exclude the name of
the requesting party and other information which by their very nature are confidential, including those
which the requesting party indicated in its application as confidential in nature. Except in the context
of judicial proceedings, any disclosure of confidential information under this section shall not be
made except upon the written consent of the beneficiary of the advance ruling.
 SECTION 1503. Duty of District Collector to Report Rulings to the Commissioner.—When any
new or unsettled question shall be determined by a District Collector, and if the matter is not
otherwise appealed for review in the ordinary course, the District Collector shall notify the
Commissioner of the decision and submit an adequate statement of the facts involved.

SECTION 1504. Application of Established Ruling or Decision.— A ruling or decision of the

Commissioner which determines the construction or application of any provision of law imposing
customs duties and taxes, and which changes any existing established valuation, classification, rules
of origin and other customs rules, interpretation or practice shall not take effect until thirty (30) days
after public notice shall have been given in the form of a published decision. When the ruling or
decision favors the taxpayers, it shall become effective immediately.

SECTION 1505. Authority of Official to Administer Oaths and Take Testimony.— The

Commissioner, District Collectors and their deputies, and other customs officers especially deputized
by the District Collector shall have authority to administer oaths and take testimony in connection
with any matter within the jurisdiction of the Bureau and, in connection therewith, may require the
production of relevant papers, documents, books and records in accordance with law.

SECTION 1506. General Security.— In cases where securities are required to be given under the
provisions of this Act and related customs laws, the District Collector, instead of requiring separate
sp ecial security where transactions of a particular party are numerous, may accept general security
extending over such periods of time and covering such transactions of the party in question as may
be satisfactory to the District Collector.

SECTION 1507. Security.— The Bureau shall prescribe the forms and amount of security required
to guarantee the payment of duties and taxes and other obligations provided for in this Act. Any
party required to provide security shall have the option to choose from any form of security
prescribed by the Bureau. The Bureau may not require security if satisfied that an obligation to the
Bureau will be fulfilled, but shall require and accept a general security from declarants who regularly
declare goods at different offices in customs territory under such terms and conditions as maybe
determined by the Commissioner.

The required amount of security shah be the lowest possible and shall not exceed the amount of
imposable duties, taxes and other charges.

When the obligation under which the security was required has been satisfied, the security shall
be discharged immediately.

SECTION 1508. Customs Service Fees.— Customs personnel may be assigned by a District

Collector to render overtime work and other customs services and shall be paid for such services by
the Bureau according to service fees fixed by the Commissioner and approved by the Secretary of
Finance. The Bureau may charge additional customs service fees when applicable, subject to the
rates prescribed under existing rules and regulations.

SECTION 1509. Testimony in Writing.— When testimony is taken in any proceeding or matter

under the authority of the Bureau, either party may require that the testimony shall be made in
writing, and when so taken, the written testimony shall be filed with the Office of the District Collector
and to be preserved for use or reference until the final decision has been reached.

SECTION 1510. District Collector Not Liable in Respect to Ruling in Customs Cases.—Every

District Collector or other officials of the Bureau shall not be in any way personally liable on account
of any official ruling or decision as to which the person claiming to be aggrieved has the right to
obtain either an administrative or judicial review. Except for misdelivery of goods, a District Collector
may not, in the absence of abuse of authority, be liable to anypersonfor any loss occasioned either
by the official act or the acts of the subordinates.

SECTION 1511. Interest Prohibited to be Held by Customs Employees.— Any person employed

under the authority of the government in the assessment of duties, taxe#rffees and other charges in
connection with, imports or exports, shall not own, either in whole or in part, any vessel or aircraft or
act as attorney, agent or consignee for the owner of any vessel or aircraft or of any cargo loaded on
board the vessel or aircraft; and shall not import or be involved, directly or indirectly, in the
importation of any goods for sale into the Philippines.

SECTION 1512. Reward to Persons Instrumental in the Actual Collection of Additional Revenues

Arising from the Disco very of Violations of this Act.— A cash reward equivalent to twenty percent
(20%) of the actual proceeds from the sale of smuggled goods and confiscated goods or actual
collection of additional revenues shall be given to the customs and non-customs informers or
whistleblowers who are instrumentalin the collection of additional revenues arising from the
discovery of violations of this Act in accordance with the rules and regulations to be issued by the
Secretary of Finance.

SECTION 1513. Outsourcing of Non-Sovereign Customs Functions to Private Entities.—Subject to

the approval of the Secretary of Finance, the Bureau may outsource any of its non-sovereign and
ancillary function to a qualified and competent private entity in accordance with government rules on
service procurement.

SECTION 1514. International Standards and Best Practices.— The Bureau may adopt

international standards and best practices in customs administration laid down by international
agreement or convention pertaining to trade facilitation, supply chain security, and related matters,
whether or not the Philippines is a signatory to such international agreement or convention.
 Title XVI
Tariff Administration ahd Policy

CHAPTER 1
TARIFF COMMISSION

SECTION 1600. Chief Officials of the Tariff Commission and Qualifications.— The officials of the
Tariff Commission shall consist of a Chairperson and two (2) Commissioners to be appointed by the
President of the Philippines, The Chairperson and the Commissioners shall be natural-born citizens
of the Philippines, of good moral character and proven integrity, and who, by experience and
academic training possess the necessary qualifications requisite for developing expert knowledge of
tariff and trade related matters. During their terms of office, the Chairperson and the Commissioners
shall not engage in the practice of any profession, or intervene directly or indirectly in the
management or control of any private enterprise which may, in anyway, be affected by the functions
of their office. They shall not be, directly or indirectly, financially interested in any contract with the
government, or any subdivision or instrumentality thereof.

SECTION 1601. Appointment and Compensation of Officials and Employees.— All employees of

the Commission shall be appointed by the Chairperson in accordance with the Civil Service Law
except as the private secretaries to the offices of the Chairperson, Commissioners and Executive
Director.

SECTION 1602. Official Seal.— The Commission is authorized to adopt an official seal.

SECTION 1603. Functions of the Commission.— The Commission shall have the following

functions:

(a) Adjudicate cases on the application of trade remedies against imports pursuant to Sections
711, 712 and 713 of this Act;

(b) Study the impact of tariff policies and programs on national competitiveness and consumer
welfare inline with the economic objectives of the government;

(c) Administer the Philippine tariff schedules and tariff nomenclatures;

 (d) Issue advance rulings on tariff classification of imported goods and render rulings on disputes
over tariff classification of goods pursuant to Section 1100 of this Act, except in cases involving
goods on which the Commission has provided advance ruling on tariff classification:

(e) 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;

(f) Analyze the nature and composition, and the classification of goods according to tariff
commodity classification and heading number for customs and other related purposes, which
information shall be furnished the NEDA DTI, DA, DOF, DENR, and BSP;

(g) Review the trade agreements for negotiation and trade agreements entered into by the
Philippines and make recommendations, if necessary, on the consistency of the terms of the
agreements with the national policy objectives;

(h) Conduct public consultations and public hearings pursuant to its functions; and

(i) Deputize or delegate, to appropriate government agency its function of rendering rulings on
disputes over tariff classification of goods, until the plantilla positions necessary for undertaking
such function have been approved and filled-up; Provided, That such delegation of function shall
not extend beyond three (3) years from the effectivity of this Act.

SECTION 1604. Reports of the Commission.— The Commission shall place at the disposal of the
President and any Member of the Congress of the Philippines all information at its command. It shall
conduct such investigation and submit reports as may be required by the President and the
Congress of the Philippines. It shall likewise report to the President and Congress on the first
Monday of December of each year and hereafter, a statement of methods adopted and a summary
of all reports made during the year.

SECTION 1605. Access to Documents and Assistance to the Commission.— The Commission or its

duly authorized representative shall have access to any document, paper or record pertinent to the
subject matter under investigation, in the possession of any person, firm, copartnership, corporation,
or association engaged in the production, importation, or distribution of goods under investigation,
and shall have power to summon witnesses, take testimony, administer oaths, and to
issue subpoena duces tecum requiring the production of books, papers, or documents relating to the
matter under investigation. The Commission may also request the views, recommendations, and
assistance of any government office, agency, or instrumentality who shall be expected to cooperate
fully with the Commission.
 SECTION 1606. Sworn and Verified Statements.— The Commission may order the taking of
sworn statements at any stage of any proceeding or investigation before it. The sworn statements
must be made before a person duly authorized to administer oaths.

The Commission is authorized to require any importer, grower, producer, manufacturer or seller to
file with the Commission a statement, under oath, giving the selling prices in the Philippines of goods
imported, grown, produced, fabricated or manufactured by such person.

SECTION 1607. Implementing Rules and Regulations.— The Commission shall promulgate and

adopt such rules and regulations as may be necessary to carry out the provisions of this Act.

CHAPTER 2
FLEXIBLE TARIFF

SECTION 1608. Flexible Clause.—

(a) In the interest of the general welfare and national security, and, subject to the limitations
prescribed under this Act, the Prlmifient, upon the recommendation of the NEDA, is hereby
empowered to:

(1) Increase, reduce, or remove existing rates of import duty including any necessary change
in classification. The existing rates may be increased or decreased to any level, in one or several
stages, but in no case shall the increased rate of import duty be higher than a maximum of one
hundred percent (100%) ad valorem;

(2) Establish import quotas or ban imports of any commodity, as may be necessary; and

(3) Impose an additional duty on all imports not exceeding ten percent (10%)  ad
valorem whenever necessary: Provided, That upon periodic investigations by the Commission
and recommendation of the NEDA, the President may cause a gradual reduction of rates of
import duty granted in Section 1611 of this Act, including those subsequently granted pursuant to
this section.

(b) Before any recommendation is submitted to the President by the NEDA pursuant to the
provisions of this section, except in the imposition of an additional duty not exceeding ten percent
(10%) ad valorem, the Commission shall conduct an investigation and shall hold public hearings
wherein interested parties shall be afforded reasonable opportunity to be present, to produce
evidence and to be heard. The Commission shall also hear the views and recommendations of any
 government office, agency, or instrumentality. The Commission shall submit its findings and
recommendations to the NEDA within thirty (30) days after the termination of the public hearings.

(c) The power of the President to increase or decrease rates of import duty within the limits fixed
in subsection (a) hereof shall include the authority to modify the form of duty. In modifying the form
of duty, the corresponding ad valorem or specific equivalents of the duty with respect to imports
from the principal competing foreign country for the most recent representative period shall be
used as basis.

(d) Any order issued by the President pursuant to the provisions of this section shall take effect
thirty (30) days after promulgation, except in the imposition of additional duty not exceeding ten
percent (10%) ad valorem which shall take effect at the discretion of the President.

(e) The power delegated to the President as provided for in this section shall be exercised only
when Congress is not in session.

(f) The power herein delegated may be withdrawn or terminated by Congress through a joint
resolution.

The NEDA shall promulgate rules and regulations necessary to carry out the provisions of this
section.

SECTION 1609. Promotion of Foreign Trade.—

(a) For the purpose of expanding foreign markets for Philippine products as a means of assisting
in the economic development of the country, in overcoming domestic unemployment, in increasing
the purchasing power of the Philippine peso, and in establishing and maintaining better relations
between the Philippines and other countries, the President, shall, from time to time:

(1) Enter into trade agreements with foreign governments or instrumentalities thereof; and

(2) Modify import duties, including any necessary change in classification and other import
restrictions as are required or appropriate to carry out and promote foreign trade with other
countries; Provided, That in modifying import duties or fixing import quota, the requirements
prescribed in subsection (a) of Section 1608 of this Act shall be observed; Provided, However,
That any modification in import duties and the fixing of import quotas pursuant to the various
trade agreements the Philippines has entered into, shall not be subject to the limitations of
aforesaid subsection (a) of Section 1608.
 (b) The duties and other import restrictions as modified in subsection (a) of tins section, shall
apply to goods which are the growth, produce, or manufacture of the specific country, whether
imported directly or indirectly, with which the Philippines has entered into a trade
agreement; Provided, That the President may suspend the application of any concession to goods
which are the growth, produce, or manufactured product of the specific country because of acts or
policies which tend to defeat the purposes set in this section, including the operations of
international cartels; and the duties and other import restrictions as negotiated shall be in force and
effect from and after such time as specified in the order, without prejudice to the Philippine
commitments in any ratified international agreement or treaty.

(c) Nothing in this section shall be construed to give any authority to cancel or reduce in any
manner the indebtedness of any foreign country to the. Philippines or any claim of the Philippines
against any foreign country.

(d) Before any trade agreement is concluded with any foreign government or instrumentality
thereof, reasonable public notice of the intention to negotiate an agreement with such government
or instrumentality shall be given in order that interested persons may have an opportunity to
present their views to the Commission. The Commission shall seek information and advice from
the DTI, DA, DOF, DENR, DFA and BSP, and from such other sources as it may deem
appropriate.

(e) In advising the President, on a trade agreement entered into by the Philippines, the following
shall be observed:

(1) The Commission shall determine whether or not the domestic industry has suffered or is
being threatened with injury and whether or not the wholesale prices at which the domestic
products are sold are reasonable, talcing into account the cost of raw materials, labor, overhead,
a fair return on investment, and the overall efficiency of the industry.

(2) The NEDA shall evaluate the report of the Commission and submit recommendations to
the President.

(3) Upon receipt of the report of the findings and recommendations of the NEDA, the President
may prescribe adjustments in the rates of import duties, withdraw, modify or suspend, in whole or
in part, any concession under any trade agreement, establish import quota, or institute such
other import restrictions, as the NBDA recommends to be necessary in order to fully protect
domestic industry and the consumers, subject to the condition that the wholesale prices of the
domestic products shall be reduced to, or maintained at, the level recommended by the NEDA
unless, for good cause shown, an increase thereof, as recommended by the NEDA, is authorized
by the President. Should increases be made without such authority, the NEDA shall immediately
 notify the President who shah allow the importation of competing products in such quantities as
to protect the public from the unauthorized increase in wholesale prices.

(f) This section shah not prevent the effeotivity of any executive agreement or any future
preferential trade agreement with any foreign country.

(g) The NEDA and the Commission shah promulgate such reasonable procedures, rules and
regulations as they may deem necessary to execute their respective functions under this section.

CHAPTER 3
TARIFF NOMENCLATURE AND RATE OF DUTY

SECTION 1610. General Rules for the Interpretation (GRI).— The classification of goods and its
tariff nomenclature as provided pursuant to this Act shall be governed by the following principles:

(1) The titles of sections, chapters and subchapters are provided for easy reference only. For
legal purposes, classification shall be determined according to the terms of the headings and any
relative section or chapter notes and, provided such headings or notes do not otherwise require,
according to the following provisions:

(2) (a) Any reference in a heading to the goods shall be taken to include a reference to the same
in their incomplete or unfinished form or state: Provided, That the incomplete or unfinished goods
have the essential character, as presented, of the complete or finished goods. It shall also be taken
to include a reference to the same, in their complete or finished form or state (or falling to be
classified as complete or finished by virtue of this Rule), presented unassembled or disassembled.

(b) Any reference in a heading to a material or substance shall be taken to include a reference
to mixtures or combinations of that material or substance with other materials or substances. Any
reference to goods of a given material or substance shall be taken to include a reference to
goods consisting wholly or partly of such material or substance. The classification of goods
consisting of more than one material or substance shall be according to the principles of Rule 3.

(3) When by application of Rule 2(b) or for any other reason, goods are,  prima facie, classifiable
under two (2) or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to headings
providing a more general description. However, when two (2) or more headings each refer to part
only of the materials or substances contained in mixed or composite goods or to part only of the
items in a set put up for retail sale, those headings are to be regarded as equally specific in
 relation to those goods, even if one of them gives a more complete or precise description of the
goods.

(b) Mixtures, composite goods consisting of different materials or made up of different

components, and goods put up in sets for retail sale, which cannot be classified by reference to
3(a), shall be classified as if they consisted of their essential character, insofar as this criterion is
applicable.

(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under
the heading which occurs last in numerical order among those which equally merit consideration;

(4) Goods which cannot be classified in accordance with the above Rules shall be classified
under the heading appropriate to the goods to which they are most akin.

(5) In addition to the foregoing provisions, the following Rules shall apply with respect to the
goods referred to therein:

(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace
eases and similar containers, specially shaped or fitted to contain specific goods or set of goods,
suitable for long-term use and presented with the goods for which they are intended, shall be
classified with such goods when of a kind normally sold therewith. The Rule does not, however,
apply to containers which give the whole its essential character; and

(b) Subject to the provisions of Rule 5(a), packing materials and packing containers presented
with the goods therein shall be classified with the goods if they are of a kind normally used for
packing such goods. However, this provision does not apply when such packing materials or
packing containers are clearly suitable for repetitive use.

(6) For legal purposes, the classification of goods in the subheadings of a heading shall be
determined according to the terms of those subheadings and any related subheading notes
and, mutatis mutandis, to the above Rules, on the understanding that only subheadings at the
same level are comparable. For the purposes of the Rule, the relative section and Chapter Notes
also apply, unless the context otherwise requires.

SECTION 1611. Tariff Nomenclature and Bates of Import Duty.— The provisions of Section 104
on Rates of Import Duty of Presidential Decree No. 1464, otherwise known as the Tariff and
Customs Code of the Philippines of 1978, as amended, specifically providing for the tariff sections,
chapters, headings and subheadings and the rates of import duty, shall still apply and shall
supplement this Act. There shall be levied, collected and paid upon all imported goods the rates of
duty indicated thereon except as otherwise specifically provided for in this Act: Provided, That the
maximum rate shall not exceed one hundred percent (100%) ad valorem.

The rates of duty provided or subsequently fixed pursuant to Sections 1608 and 1609 of this Act
shall be subject to periodic investigation by the Tariff Commission and may be revised by the
President, upon the recommendation of the NEDA.

It shall also apply to all products, whether imported directly or indirectly, o£ all foreign countries,
which do not discriminate against Philippine export products. An additional one hundred percent
(100%) across-the-board duty shall be levied on the products of any foreign country which
discriminates against Philippine export products.

SECTION 1612. Tariff Nomenclature and Bates of Export Duty.— The provisions of Section 514
on Export Products Subject to Duty and Rates of Presidential Decree No. 1464, otherwise known as
the Tariff and Customs Code of 1978, as amended, specifically providing for the export products
subject to duty and rates, shall still apply and shall supplement this Act.

Title XVII
Congressional Oversight Committee
SECTION 1700. Congressional Oversight Committee.— The Congressional Customs and Tariff
Oversight Committee, herein referred to as the Committee, is hereby constituted in accordance with
the provisions of this Act. The Committee shall be composed of the Chairpersons of the Committee
on Ways and Means of the Senate and House of Representatives and four (4) additional members
from each House, to be designated by the Senate President and the Speaker of the House of
Representatives, respectively. The Committee shall, among others, in aid of legislation:

(a) Monitor and ensure the prop er implementation of this Act;

(b) Review the collection performance of the Bureau; and

(c) Review the implementation of the programs of the Bureau.

In furtherance of the hereinabove cited objectives, the Committee shall require the Bureau to
submit all pertinent information which includes:

(1) Industry audits;

 (2) Collection performance data; and

(3) Status report on administrative, civil and criminal actions initiated against persons.

TITLE XVIII
FINAL PROVISIONS

SECTION 1800. Implementing Rules and Regulations.— The Secretary of Finance shall, upon the
recommendation of the Commissioner, promulgate the necessary rules and regulations for the
effective implementation of this Act.

SECTION 1801. Transitoiy Provisions.— All suits, proceedings, or prosecutions whether civil or

criminal, for causes arising or acts done or committed prior to the effectivity of this Act, shall be
commenced and prosecuted within the same time in the same manner and with the same effect as if
this Act had not been enacted and all rights acquired, offenses committed, and penalties or
forfeitures or liabilities waived prior to the said effectivity shall not be affected thereby.

SECTION 1802. Saving Clause.— All other laws, acts, executive orders, and Customs
Administrative Orders (CAOs), Customs Memorandum Orders (CMOs), orders, memoranda,
circulars, rules and regulations issued by the Bureau, under the provisions of Presidential Decree
No. 1464, otherwise known as the Tariff and Customs Code of the Philippines of 1978, as amended,
not inconsistent with the provisions of this Act, shall remain valid unless the same will be repealed or
amended accordingly, pursuant to the provisions of this Act.

SECTION 1803. Repealing Clause.— Presidential Decree No. 1464, otherwise known as the Tariff
and Customs Code of the Philippines of 1978, as amended, and Presidential Decree No. 1853 which
require any applicant for letter of credit covering imports to deposit the full amount of duties due on
the importation, are hereby expressly repealed. All other laws, acts, presidential decrees, executive
orders, rules and regulations or parts thereof inconsistent with the provisions of this Act are hereby
expressly repealed, amended or modified accordingly.

SECTION 1804. Separability Clause.— If any provision of this Act is declared invalid or

unconstitutional, the remaining provisions or parts shall remain in full force and effect.

SECTION 1805. Effectivity.— This Act shall take effect fifteen (15) days after its publication in
the Official Gazette or in a newspaper of general circulation.