TARIFF AND CUSTOMS CODE

Republic Act No. 1937, as amended and codified, otherwise known as The Tariff and Customs Code, is divided into two parts:
1. Book I: Tariff Law
a. Title I: Import Tariff – lists all articles subject to tax and the applicable rates; prohibited importations; and conditionally free importations.
b. Title II: Administrative Provisions – which provide for the bases of assessment; enumerate the special customs duties; and create the Tariff
Commission.
c. Title III: Export Tariff

2. Book II: Customs Law

a. Title I: the Bureau of Customs – which deals with the BOC, its organizations, functions and jurisdiction;
b. Title II: Registration of Vessels, Coastwise Trade and Licensing of Marine Officers
c. Title III: Vessels and Aircraft in Foreign Trade
d. Title IV: Ascertainment, Collection and Recover of Import Duty – which governs the importation and entry of goods at the customhouse; examination,
classification and appraisal of such imported articles; liquidation of duties; as well as abatement, refunds and the abandonment of imported articles.
e. Title V: Warehousing of Imported Articles
f. Title VI: Administrative and Judicial Proceedings – which prescribes, and regulates the exercise of, the authority of the BOC to conduct search, seizure
and arrest; administrative and judicial remedies; and the imposition of surcharges, fines and forfeitures.
g. Title VII: Fees and Charges Collectible by the BOC
h. Title VIII: General (and Penal) Provisions

Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act (CMTA), was approved into law on 30 May 2016. The CMTA expressly
repealed Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of the Philippines of 1978 (TCCP), as amended.

The CMTA aims to modernize customs laws, rules and procedures to take into consideration the mandatory standards of the Revised Kyoto Convention (the
blueprint for modern and efficient customs procedures of the World Customs Organization [WCO] to which the Philippines is a signatory), international
agreements, recommendations from the business sectors and industry groups as well as some of the best practices in customs administration, among others.
It seeks to transform the Bureau of Customs (BoC) into a modern and efficient organization that is at par with global standards.1

I. BUREAU OF CUSTOMS

A. DUTIES, POWERS AND JURISDICTION

1. COMPOSITION
a. Customs Commissioner
b. At least Four (4) but not more than Six (6) Deputy Commissioners
c. One (1) District Collector for each Customs District

2. DUTIES AND POWERS

a. The Commissioner has xclusive 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:
i. Promulgation of rules and regulations;
ii. Issuance, revocation or modification of rulings; and
iii. Compromise or abate of customs obligations.
iv. 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 (3) years; and
f. Perform all other duties and functions as may be necessary for the effective implementation of this Act and other customs related laws. (Sec. 201,
CMTA)

Functions of the BOC:

1. Assessment and collection of customs revenues from imported goods and other dues, fees, charges, fines and penalties accruing under this Act;
2. Simplification and harmonization of customs procedures to facilitate movement of goods in international trade;
3. Border control to prevent entry of smuggled goods;
4. Prevention and suppression of smuggling and other customs fraud;
5. Facilitation and security of international trade and commerce through an informed compliance program;
6. Supervision and control over the entrance and clearance of vessels and aircraft engaged in foreign commerce;
7. 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;
8. 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;
9. 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;
10. Exercise of exclusive original jurisdiction over forfeiture cases under this Act; and
11. Enforcement of this Act and all other laws, rules and regulations related to customs administration. (Sec. 202, CMTA)

3. JURISDICTION

1
http://www.sgv.ph/changes-under-the-customs-modernization-and-tariff-act-an-overview-by-mark-anthony-p-tamayo-june-6-2016/
For the effective implementation of the CMTA, the BOC 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 BOC 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.
(Doctrine of Hot Pursuit) (Sec. 300, CMTA)

The phrase “jurisdiction of the Philippines” includes territorial waters of the Philippines or the contiguous zone. Territorial waters are waters within the 12 nautical
miles from the baselines within which the state may apply its laws. The contiguous zone is the additional 12 nautical miles beyond the 12 nautical mile limit, for
a total of 24 nautical miles extending from the baseline. Within this zone, a State may still enforce taxation laws pursuant to the Article 33 of the United Nations
Convention of the Law of the Sea (UNCLOS).

Customhouses:

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

II. TARIFF COMMISSION

The Tariff Commission (TC) is the principal authority on tariffs and trade remedy measures. It investigates and recommends/decides on petitions for tariff
modification and tariff classification. It is an independent adjudicatory body on trade remedy cases.

The Commission is a key adviser to the executive and legislative branches of government on tariff and related matters, promotes trade by providing
recommendations on trade negotiating strategies and participating in policy dialogues and international trade negotiations, and is an advocate of industry
competitiveness and consumer welfare. The Commission is an attached agency of the National Economic and Development Authority (NEDA).2

Composition:
1. Chairperson
2. Two (2) Commissioners

Functions of the TC:

1. Adjudicate cases on the application of trade remedies against imports;
2. Study the impact of tariff policies and programs on national competitiveness and consumer welfare in line with the economic objectives of the government;
3. Administer the Philippine tariff schedules and tariff nomenclatures;
4. Issue advance rulings on tariff classification of imported goods and render rulings on disputes over tariff classification of goods, except in cases involving
goods on which the BOC has provided advance ruling on tariff classification;
5. 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;
6. 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;
7. 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;
8. Conduct public consultations and public hearings pursuant to its functions; and
9. 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. (Sec. 1603, CMTA)

III. CUSTOMS DUTIES

The term “customs duties” should be understood to mean taxes on imports and exports. Tariff means taxes. It may also refer to a list of articles liable to
duties (Bouvier).

Tariff is a list or schedule of articles on which a duty is imposed upon the importation into the country, with the rates at which they are severally taxed.
Derivatively, it refers to the system of imposing duties or taxes on the importation of foreign merchandise (Black’s Law Dictionary).

It may also refer to a table or catalogue in alphabetical order containing the names of the merchandise with the duties to be paid (Matic, Taxation in the
Philippines, Vol. I. pp. 388 – 399).

A. EXPORT TARIFF

Exportation is the bringing out of goods from Philippines’ territorial jurisdiction. Unless otherwise exempted, an export tariff based on the gross FOB value at
the prevailing rate of exchange at the time of shipment is levied, assessed and collected on traditional export products, such as certain wood products, mineral
products, plant and vegetable products and animal products. (PD 230)

Flexible Clause – under this, the President may, upon recommendations of NEDA, change the applicable rates or include, exclude or exempt any product.

Pursuant to Executive Order No. 425, an additional premium duty may by imposed on certain export products on premium sales (called “windfall profits”).

Under Executive Order No. 26, Series of 1986, export taxes, except on logs, has been suspended.

B. IMPORT TARIFF

2 http://tariffcommission.gov.ph/about
 SECTION 101. Imported Articles Subject to Duty. — All articles, when imported from any foreign country into the Philippines, shall be subject to duty
upon each importation, even though previously exported from the Philippines, except as otherwise specifically provided for in this Code or in other laws.

When does Importation Begin and End?

SECTION 1202. When Importation Begins and Deemed Terminated. — Importation begins when the carrying vessel or aircraft enters the jurisdiction
of the Philippines with intention to unload therein. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the
articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case said articles are free of duties, taxes
and other charges, until they have legally left the jurisdiction of the customs.

Importation BEGINS when the carrying vessel or aircraft enters the Philippine territory with the intention to unload therein.

Importation is deemed terminated when:

1. 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
2. In case the goods are deemed free of duties, taxes and other charges, the goods have legally left the jurisdiction of the Bureau. (Sec. 103, CMTA)

The importers payment of customs duties and taxes which was accepted by the Commissioner of Customs after proper application was held to have legally
terminated the importation under the Tariff and Customs Code in spite of pendency of seizure proceedings. (Commissioner of Customs vs. Milwaukee Industries
Corp.; GR No. 135253; Dec. 9, 2004)

Tariff and custom laws are APPLIED ONLY AFTER IMPORTATION HAS BEGUN BUT BEFORE IT IS TERMINATED. Thus, the jurisdiction of the Bureau of Customs
attaches only after importation has begun and retains jurisdiction up to the time that importation is deemed terminated.

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 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. (Sec. 104, CMTA)

CATEGORIES OF IMPORTED ARTICLES:

1. 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. (Sec. 116, CMTA)

2. 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. (Sec. 117, CMTA)

3. 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. (Sec. 118, CMTA)

4. 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. (Sec. 119, CMTA)

5. Conditionally Taxed and/or Duty-Exempt Importation

The following goods shall be exempt from the payment of import duties upon compliance with the prescribed formalities:
Articles
1. Aquatic products
2. Equipment for salvage (recovery) a.
of vessels or aircrafts, not
available locally b.
3. Cost of repairs made in foreign
countries on Philippine-registered/
licensed vessels or aircrafts
4. Goods brought for repairs,
processing or reconditioning to be
exported upon completion of
repairs
5. Medals, badges, cups and other
small articles
6. Personal and household effects of a. Formally declared and listed before departure;
returning residents of the b. Identified under oath before Collector and covered by a Certificate of Identification (CI);
Philippines returning from abroad
(including household appliances, “Returning residents” shall refer to nationals who have stayed in a foreign country for a period
jewelry, precious stones, and of at least 6 months.
other goods of luxury)
7. Personal and household effects
purchased in foreign countries by
residents of the Philippines
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)
8. Home appliances and other a.
durables of returning OFWs b.
9. Balikbayan Boxes brought or sent
by Qualified Filipinos While Abroad
(OFWs, Non-Resident Filipinos,
Resident Filipinos who temporarily
stay abroad) or upon their return
10. Wearing apparel, goods of
personal adornment, toilet goods,
portable tools and instruments,
theatrical costumes and similar
effects of travelers or tourists
11. Personal and household effects a.
and vehicles belonging to foreign b.
Requirements
a. Caught or gathered by fishing vessels of Philippine registry;
b. Imported in such vessels or in crafts attached thereto;
c. Have not been landed in any foreign territory; or
d. If so landed, solely for transshipment without having been advanced in condition.
Upon identification and giving of security in an amount equal to the ascertained duties,
taxes and other charges (DTO) thereon;
Conditioned on:
i. Exportation, or
ii. Payment of DTO, within 6 months from acceptance of import entry, extendible for
a term not exceeding 6 months.
Satisfactory proof to the Collector of Customs of:
a. adequate facilities for repairs not afforded in the Philippines;
b. Vessel/aircraft was compelled by stress of weather or other casualty to dock into a foreign
port to make such repairs to secure safety and= sea/airworthiness;
c. Excluding the value of the goods used.
Security in amount equal to the ascertained DTO thereon, conditioned on:
a. exportation, or
b. payment of DTO within 6 months from acceptance of import entry.
Bestowed as trophies or prizes, or those received as honorary distinction.
a. Purchased in foreign countries by returning residents and/or OFWs;
b. Necessary, appropriate, and normally used for their comfort and convenience during their
stay abroad;
c. Accompanying them on their return, or arriving within a reasonable time which, barring
unforeseen and fortuitous events, in no case shall exceed 60 days after the owner's return;
d. It shall not be in commercial quantities;
e. It is not intended for barter, sale or for hire; and
f. Limited to the FCA or FOB value of:
i. P350,000.00 for those who have stayed in a foreign country for at least 10 years prior
to arrival;
ii. P250,000.00 for those who have stayed in a foreign country for at least 5 years but
not more than 10 years prior to arrival; or
iii. P150,000.00 for those who have stayed in a foreign country for at least 5 years and
have not availed of this privilege within 6 months prior to arrival.
Any amount in excess of the above-stated threshold shall be subject to the corresponding
duties and taxes under this Act.
Limited to one of every kind once in a given calendar year;
accompanying them on their return, or arriving within a reasonable time which, barring
unforeseen and fortuitous events, in no case shall exceed 60 days after every returning
OFW's return; and
c. Limited to an FCA value of P150,000.00
a. Balikbayan box shall contain personal and household effects only;
b. Neither in commercial quantities nor intended for barter, sale or for hire;
c. Limited to an FCA value of P150,000.00; and
d. May be availed of only up to 3 times in a calendar year (de minimis importation shall not
be included in the counting).
a. Accompanying them or arriving within a reasonable time before or after their arrival;
b. Necessary and appropriate for the wear and use of such persons according to the nature
of the journey, their comfort and convenience;
c. Not intended for other persons or for barter, sale or hire; and
d. BOC may require a written commitment or security equal to the ascertained DTO
conditioned on:
i. Exportation, or
ii. Payment of DTO, within 3 months from acceptance of import entry.
Accompanying them or arriving within a reasonable time before or after their arrival;
In quantities and of the kind necessary and suitable to the profession, rank, or position of
 Articles
consultants and experts hired by
and/or rendering services to the c.
Government and their staff or d.
personnel and families
Requirements
the person importing them;
Not intended for other persons or for barter, sale or hire; and
BOC may require a written commitment or security equal to the ascertained DTO
conditioned on:
i. Exportation, or
ii. Payment of DTO, within 3 months after the expiration of their term or contract,
extendible for a term not exceeding 3 months.

12. Professional instruments and a. In quantities and of the class suitable to the profession, rank or position of the persons
implements, tools of trade, importing said items;
occupation or employment, b. For their own use and not for barter or sale;
wearing apparel, domestic c. Accompanying such persons, or arriving within a reasonable time; and
animals, and personal and d. Excluding vehicles, vessels, aircrafts, machineries and other similar goods for use in
household effects belonging to manufacture.
persons coming to settle in the
Philippines or Filipinos or their
families and descendants who are
now residents or citizens of other
countries

13. Goods used exclusively for public a. Identification, examination and appraisal;
entertainment, and for display in b. Security equal to the ascertained DTO, conditioned on:
public expositions, or for i. Exportation, or
exhibition or competition for ii. Payment of DTO within 3 months from acceptance of import entry, extendible for a
prizes, and devices for projecting term not exceeding 3 months.
pictures and parts and c. Technical and scientific films not to be exhibited for profit.
appurtenances thereof; Technical
and scientific films

14. a. Upon payment of a security equal to the ascertained DTO, conditioned on:
a. Articles brought by foreign film i. Exportation, or
producers directly and exclusively ii. Payment of DTO within 3 months from acceptance of import entry, extendible for a
used for making motion picture term not exceeding 3 months;
films on location in the Philippines; b. Underdeveloped and exposed outside the Philippines films require an affidavit by the
and importer that such films were previously exported from the Philippines.
b. photographic and cinematographic
films outside the Philippines by
resident Filipino citizens or by
producing companies of Philippine
registry

15.
a. Importations for the official use of Foreign countries accord like privileges to Philippine agencies.
foreign embassies, legations and a. Privilege granted upon instruction of the Secretary of Finance upon request by the DFA;
other agencies b. Privileges must be contained in a special agreement between the Philippines a foreign
country.
b. Articles for personal or family use
of members and attaches of
foreign embassies, legation,
consular officers and foreign
representatives

16. Imported articles donated to, or Certified by DSWD or DepEd as the case maybe.
for the account of any duly
registered relief organization not
operated for profit

17. Containers, holders and similar a. Identification, examination, and appraisal

receptacles of any material for b. Payment of bond equal to the ascertained DTO, conditioned on:
locally manufactured cement for i. Exportation, or
export ii. Payment of DTO within 6 months from acceptance of import entry.

18. Necessary supplies for the a. For use or consumption by passengers or its crew on board;
reasonable requirements of the b. Any surplus or excess of such vessel or aircraft supplies arriving from foreign ports shall
vessel or aircraft in her voyage be dutiable.
outside the Philippines

19. Articles and salvage from vessels The articles and salvage recovered within the period of 2 years shall be dutiable.
recovered after a period of 2 years
from the date of filing of the
marine protest or when the vessel
was wrecked or abandoned in the
Philippine waters or elsewhere
 Articles Requirements
20. Coffins or urns containing human FCA value does not exceed P150,000.00
remains, bones or ashes, used
personal and household effects of
the deceased

21. Animals and plants for scientific, a. By order of the Government and other duly authorized institutions;
experimental, propagation, b. Duly registered in the book of record established for that breed;
botanical, breeding, zoological c. Certificate of record and pedigree of such animal duly authenticated by the proper
and national defense purposes custodian;
d. NEDA certification.
22. Economic, technical vocational,
scientific, philosophical, historical
and cultural books and/or
publications; Bibles, missals,
prayer books, Koran, Ahadith,
other religious books of similar
nature

23. Philippine goods previously If a drawback or bounty was allowed to any Philippine article, upon re-importation, article shall
exported from the Philippines and be subject to duty equal to the bounty or drawback.
returned without having advanced
in value or improved in condition
by any process of manufacture

24. Aircraft, equipment, machinery, a. Such articles or supplies are not available locally (in reasonable quantity, quality and
spare parts, commissary and price);
catering supplies, aviation gas, b. Articles are necessary or incidental for the proper operation of airline importing.
fuel and oil and such other articles
or supplies imported by and for
the use of scheduled airlines
operating under Congressional
franchise

25. Machineries, equipment, tools for a. Certification of DAR and DENR Secretary , upon recommendation of Director of Mines for
production plants to convert a period ending five (5) years from the first date of actual commercial production
mineral ores into saleable form, of saleable mineral products;
spare parts, supplies, materials b. Articles are not locally available.
and accessories, explosives,
chemicals and transportation and
communication facilities imported
by and for the use of mines

26. Spare parts of vessels or aircrafts Satisfactory proof to the Collector of Customs that such spare parts shall be utilized to secure
of foreign registry engaged in the safety of the vessel or aircraft to enable it to continue its voyage/flight.
foreign trade brought into the
Philippines exclusively as
replacements and emergency
repairs

27. Articles of easy identification a. Not capable of being repaired locally;

exported from the Philippines for b. Cost of repairs made to any such articles shall pay a rate of duty of 30% ad valorem.
repair

28. Trailer chassis imported by a. Posting of bond in amount equal to the ascertained duties and other charges;
shipping companies for their b. Properly identified and registered with the Land Transportation Commissioner;
exclusive use in handling c. Subject to customs supervision fee fixed by the Collector of Custom;
containerized cargo d. Deposited in the Customs zone when not in use.
e. Duties and taxes paid upon the expiration of the period prescribed UNLESS otherwise re-
exported. (Sec. 800, CMTA)

De Minimis Importation

No duties and taxes shall be collected on goods with an FOB or FCA value of P10,000.00 or below. (Sec. 423, CMTA)

Importations of tobacco goods, wines, spirits, within the De Minimis value shall be subject to the provisions of the National Internal Revenue Code (NIRC), as
amended, on excise tax. (CAO No. 02-2016)

C. CLASSIFICATION OF CUSTOMS DUTIES

1. Regular Duties – taxes that are imposed or assessed upon merchandise from, or exported to a foreign country for the purpose of raising revenue.
a. Ad valorem – computed based on value of imported goods.
b. Specific – computed based on dutiable weight of goods.
c. Alternating duties – alternates between ad valorem and specific duties.
d. Compound duties - consists of ad valorem and specific duties.
2. Special duties – additional import duties imposed on specific kinds of imported articles under certain conditions.

Purpose: For the protection of consumers and manufacturers, as well as Philippine products from undue competition posed by foreign made products
(Vitug & Acosta, Tax Law and Jurisprudence, 3rd ed. 2006, p. 364).

a. Anti-dumping duties (Sec. 711, CMTA; RA 8752 [Anti-Dumping Act of 1999]) are those equal to the margin of dumping on such product or article of
commerce, in addition to ordinary duties, taxes and charges imposed by law on the imported product or article, whenever such product or article is
imported into the Philippines at an export price less than the normal value in the ordinary course of trade for the like product or article destined for
consumption in the exporting country or materially retarding the establishment of a domestic industry producing the like product (Sec. 3, RA 8752).

Amount of anti-dumping duty: Difference between the export price and the normal value of such product, commodity or article (Anti-dumping duty
= Normal value – Export price)

b. Countervailing duties (Sec. 713, CMTA; RA 8751 [Countervailing Act of 1999]) are those imposed whenever any article of commerce is granted
directly or indirectly by the government in the country or origin or exportation, any kind or form of specific subsidy upon the production, manufacture
or exportation of such product, commodity or article and the importation of such subsidized product or article has caused or threatens to cause material
injury to a domestic industry or has materially retarded the growth or prevents the establishment of a domestic industry.

The countervailing duty shall be in addition to any ordinary duties, taxes and charges imposed by law on such imported product or article ( Sec. 1, RA
8751).

Kinds of specific subsidy

1. Bounty – cash award paid to an exporter or manufacturer;
2. Subsidy – Financial incentives not in the form of direct or cash award to encourage manufacturers or exporters
3. Subvention – Any assistance other than a bounty or subsidy given by the government for the manufacture and/or exportation of an article

Amount of duty: Equivalent to the bounty, subsidy or subvention

c. Marking duties (Sec. 710, CMTA) additional customs duties imposed on foreign articles (or its container if the article itself cannot be marked) not
marked in any official language of the Philippines and in a conspicuous place as legibly, indelibly and permanently in such manner as to indicate to an
ultimate purchaser in the Philippines the name of country of origin of the article.

Amount of duty: 5% ad valorem of the articles

Imposing Authority: Commissioner of Customs

Exceptions to marking of article:

1. The article is incapable of being marked;
2. The article cannot be marked prior to importation to the Philippines without Injury;
3. The marking of the container of such article will reasonably indicate the origin of such article;
4. The article is of a crude substance;
5. The ultimate purchaser by the character of the article necessarily know the country of origin of such article;
6. Such article is for the use of the importer and not intended for sale in its imported or other form;
7. The article cannot be marked prior to importation to the Philippines except at an expense economically prohibitive of its importation;
8. Such article is to be processed in the Philippines by the importer or for his own account and not for the purpose of concealing the origin of such
article;
9. Such article was produced more than 20 years prior to its importation into the Philippines; and
10. Such article cannot be marked after importation except at an expense economically prohibitive and the failure to mark the article before importation
was not due to any purpose of the importer, producer, seller, or shipper to avoid compliance.

In these situations, the IMMEDIATE CONTAINER OR SUCH OTHER CONTAINER/(S) of the article shall be the one subject to marking.

d. Discriminatory duties (Sec. 714, CMTA) additional customs duty imposed upon articles, 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, upon any Philippine product unreasonable charge, exaction, regulation, or limitation which is not equally enforced
upon like articles of other foreign countries;
2. Discriminates in fact against the commerce of the Philippines, as to place the Philippines at a disadvantage compared with the commerce of any
foreign country.

Amount of duty: Not exceeding 100% ad valorem upon the articles

Imposing authority: The President through a proclamation

Any proclamation issued under this section may, subject to the discretion of the President, extend to:
a. The whole of any foreign country; or
b. Any subdivision/s thereof.

If after the imposition of discriminatory duties, the foreign country maintained or increased its discrimination against commerce of the Philippines, the
President is authorized to exclude such product from importation into the Philippines by virtue of a further proclamation.

Articles imported in violation of this provision shall be forfeited in favor of the Government.

e. Safeguard duties
 1. General safeguard measure (Sec. 712, CMTA; Sec. 5, RA 8800 [Safeguard Measures Act]) duties imposed upon a positive final determination of
the Commission that a product is being imported to the country in increased quantities, whether absolute or relative to the domestic production, as
to be a substantial cause of serious injury or threat to the domestic industry.

Amount of duty: Tariff increase, either ad valorem or specific, or both, to be paid through a cash bond set at a level sufficient to redress or prevent
injury to the domestic industry

Imposing authority:
a. Secretary of Trade and Industry – non-agricultural product
b. Secretary of Agriculture – agricultural product

2. Special safeguard measure for agricultural products (Sec. 21, RA 8800) duty on an agricultural product, consistent with Philippine international
treaty obligations, if its:
a. Cumulative import volume in a given year exceeds its trigger volume subject to the conditions stated in Sec. 23 of RA 8800, or but not
concurrently; and
b. Actual cash, insurance, freight (CIF) import price is less than its trigger price subject to the conditions stated in Sec. 24 of RA 8800.

Amount of duty:
1. For a above: not exceeding one-third of the applicable out-quota customs duty on the agricultural product under consideration in the year when
it is imposed
2. For b above:
a. 0 – price difference is at most 10% of the trigger price
b. 30% of amount by which the price difference exceeds ten percent (10%) of the trigger price – said difference exceeds 10% but at most
40%
c. 50% – exceeds 40% but at most 60%
d. 70% – exceeds 60% but at most 75%
e. 90% – exceeds 75%

f. Imposed under the Flexible Tariff Clause (Sec. 1608, CMTA) import duties which are modified by the President upon investigation of the Tariff
Commission and recommendation of the National Economic and Development Authority.

Amount of duty: The additional duty on all imports shall not exceed 10% ad valorem whenever necessary.

DOCUMENTS AND PROCEDURES FOR IMPORTATION

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. (Sec. 400, CMTA)

Summary of Imported Cargo Clearance Procedure

1. Preparation of Import Entry and Entry Lodgment or Filing of Import Entry
2. Physical examination, if required
3. Preparation of Discrepancy Report, if any
4. Protest on Civil Matters
5. Payment of the computed duties and taxes and release of imported goods
6. Customs Compliance Audit / Post-Audit
7. Finality of Liquidation (Domondon, Bar Reviewer in Taxation, Vol. 1, 7th ed. 2006, p.505)

Summary of Imported Cargo Clearance Procedure

8. Preparation of Import Entry and Entry Lodgment or Filing of Import Entry
9. Physical examination, if required
10. Preparation of Discrepancy Report, if any
11. Protest on Civil Matters
12. Payment of the computed duties and taxes and release of imported goods
13. Customs Compliance Audit / Post-Audit
14. Finality of Liquidation (Domondon, Bar Reviewer in Taxation, Vol. 1, 7th ed. 2006, p.505)

DOCUMENTS USED IN CLEARING IMPORTATIONS AT THE BUREAU OF CUSTOMS

1. Goods Declaration;
2. Bill of Lading or Air Waybill or House Bill of Lading, where applicable;
3. Commercial Invoice;
4. Packing List; and
5. Other additional documents as may be required

Goods Declaration – 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. (Sec. 401, CMTA)

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:
1. Goods of a commercial nature with Free on Board (FOB) or Free Carrier At (FCA) value of less than fifty thousand pesos (P50,000.00); and
2. Personal and household effects or goods, not in commercial quantity, imported in a passenger's baggage or mail.

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. (Sec. 401, CMTA)
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.

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 􀀸le the goods declaration: Provided, however, That the period of the lodgement of the goods declaration may be adjusted by
the Commissioner. (Sec. 407, CMTA)

Contents of Goods Declaration. — Goods declaration shall contain the following:

(a) names of the consignee;
(b) importing vessel or aircraft;
(c) port of departure, port of destination and date of arrival;
(d) the number and marks of packages, or the quantity, if in bulk;
(e) the nature and correct commodity description of the goods contained therein, its value as set forth in a proper invoice; and
(f) 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 fiing of the provisional goods declaration in
accordance with Section 403 of this Act. (Sec. 411, CMTA)

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. (Sec. 403, CMTA)

The goods declaration must be lodged with the Bureau and shall contain the following statements, under penalties of falsification and perjury:
(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. (Sec. 412, CMTA)

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. (Sec. 408, CMTA)

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. (Sec. 409, CMTA)

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.
(Sec. 404, CMTA)

BASIS OF DUTIABLE VALUE

An essential element in the declaration of an importation is the determination of the correct dutiable value of imported goods.

“dutiable value” means the proper valuation of imported goods upon which the appropriate customs duty is imposed.

The following methods are sequentially applied:

a. METHOD ONE: Transaction Value (Sec. 701, CMTA)

The dutiable value of an imported article subject to an ad valorem rate of duty shall be the transaction value, which shall be the PRICE ACTUALLY PAID OR
PAYABLE FOR THE GOODS when sold for export to the Philippines at arm’s length transaction, adjusted by adding:
i. The following to the extent incurred by the buyer but not included in price actually paid:
a. Commission and brokerage fees except buying commissions;
b. Cost of containers;
c. Cost of packing, whether for labor or materials;
d. Value of the goods, materials, and services used in the production or in connection with the production and sale of the imported good
e. Amount of royalties and license fees related to the goods being valued that the buyer must pay;
ii. Value of any of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues directly or indirectly to the seller;
iii. Transport cost of import goods from port of exportation to port of entry in the Philippines;
iv. Unloading and handling charges associated with transport of imported goods;
v. Cost of insurance.

Method 1 shall be used in determining the dutiable value of imported goods provided, that:
1. There are no restrictions as to the disposition or use of the goods by the buyer other than restrictions which:
a) are imposed or required by law or by Philippine authorities;
b) limit the geographical area in which the goods may be sold; or
c) do not substantially affect the value of the goods.
2. 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
3. The buyer and seller are not related, or where the buyer and the seller, that the transaction value is acceptable for customs purposes under the provisions
hereof.

Persons shall be deemed to be related only if:

1. They are officers or directors of one another’s business;
2. They are legally recognized partners in business;
3. They are employer and employee;
4. Any person directly or indirectly owns, controls or holds 5 % or more of the outstanding voting stock or shares or both of them;
5. One of them directly or indirectly controls the other;
6. Both of them are directly or indirectly controlled by a third person;
7. Together they directly or indirectly control a third person; or
8. They are members of the same family, including those related by affinity or consanguinity up to the fourth civil degree.

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:
1. The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of importation;
2. The customs value of identical or similar goods as determined using Method Four; or
3. The customs value of identical or similar goods are determined u using Method Five.

b. METHOD TWO: Transaction Value of Identical Goods (Sec. 702, CMTA)

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.

Identical Goods – 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 is found, the lowest value shall be used to determine the customs value.

Goods shall not be regarded as “identical goods” unless they were produced in the same country as the goods being valued.

c. METHOD THREE: Transaction Value of Similar Goods (Sec. 703, CMTA)

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.

Similar Goods – goods which, although not alike in all respects, have like characteristics and like 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.

Goods shall not be regarded as “similar goods” unless they were produced in the same country as the goods being valued.

d. METHOD FOUR: Deductive Value (Sec. 704, CMTA)

The dutiable value of the imported goods under this method shall be 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. The costs and charges; and
4. Customs duties and other national taxes payable in the Philippines by reason of the importation or sale of the goods.

The term “unit price at which the imported goods are sold in the greatest aggregate quantity” means the price at which the greatest number of units is sold in
sales to persons who are not related to the persons from whom they buy such goods at the first commercial level after importation at which such sales take
place.

Example 1:
Two sales occur. In the first sale, 500 units are sold at a price of 95 currency units each. In the second sale, 400 units are sold at a price of 90 currency units
each. In this example, the greatest number of units sold at a particular price is 500, therefore, the unit price in the greatest aggregate quantity is 95.

Example 2:
Goods are sold from a price list which grants favorable unit prices for purchases made in larger quantities.

Total Quantity
Sale Quantity Unit Price Number of Sales Sold at each
price
 10 sales of 5 units
1-10 units 100 65
5 sales of 3 units
11-25 units 95 55
5 sales of 11 units
1 sale of 30 units
Over 25 units 90 80
1 sale of 50 units

Unit price to be used: 90

e. METHOD FIVE: Computed Value (Sec. 705, CMTA)

The dutiable value under this method shall be the computed value which shall be the SUM of:
1. The cost or the value of materials and fabrication or other processing employed in producing the imported goods;

The “cost or value” referred in this method is to be determined on the basis of information relating to the production of the goods being valued supplied by or
on behalf of the producer. It is to be based upon the commercial accounts of the producer, provided that such accounts are consistent with the Generally
Accepted Accounting Principles (GAAP) applied in the country where the goods are produced.

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.

f. METHOD SIX: Fallback Value (Sec. 706, CMTA)

If the dutiable value cannot be determined under the preceding methods described above, it shall be determined by using REASONABLE MEANS and on the
basis of data available in the Philippines.

If the importer so requests, he shall be informed in writing of the dutiable value determined under Method Six and the method used to determine such value.

Exception: Methods 4 and 5 may be reversed at the request of the importer. (Sec. 700, CMTA)

PROHIBITED METHODS OF VALUATION

No customs value shall be determined on the basis of:
1. The selling price in the country of importation of goods produced in such country;
2. A system which provides for the acceptance for customs purposes of the higher of two alternative values;
3. The price of goods on the domestic market of the country of exportation;
4. The cost of production other than computed values which have been determined for identical or similar goods in accordance with the provisions of Art. 6;
5. The price of the goods for export to a country other than the country of importation;
6. Minimum customs values; or
7. Arbitrary or fictitious values (Sec. 706, CMTA).

Requirement of security for delay in determination of value: In the process of determining the dutiable value of imported goods, it becomes necessary
to delay the final determination of such dutiable value, the importer shall nevertheless be able to secure the release of the imported goods upon the filing of a
sufficient guarantee in the form of a surety bond, a deposit, cash or some other appropriate instrument in an amount equivalent to the imposable duties and
taxes on the imported goods in question conditioned upon the payment of customs duties and taxes for which the imported goods may be liable. Provided,
however, that goods, the importation of which is prohibited by law shall not be released under any circumstance whatsoever.

D. ASSESSMENT

The imported goods are then subjected to examination, appraisal and classification and classification by examiners and appraisers now, Customs officer.
Such appraisal classification or return as finally approved by the Collector of Customs shall not be altered or modified in any manner, except:
1. Within one year after the payment of duties, upon statement of error in conformity with Sec. 1707 of the Code, approved by the Collector;
2. Within 15 days after such payment upon request for reappraisal and/or reclassification addressed to the Commissioner by the Collector, if the appraisal
and/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 Collector by the interested party if the latter should
be dissatisfied with the appraisal or return;
4. Upon demand by the Commissioner of Customs after the completion of the compliance audit pursuant to the provisions of the Code.

E. LIQUIDATION

The assessment is followed by the liquidation of the import entry which is the final stage in the assessment of customs duties. Liquidation may either be final
or merely tentative.

A tentative liquidation is made where the exact tax liability cannot be ascertained promptly and which would require future action. A final settlement thereof
shall be made within 6 months.

A final liquidation is deemed made when articles have been entered and passed free of duty or final adjustment of duties.

STATUTE OF LIMITATIONS

3 YEARS from the date of final liquidation, unless there was fraud or protest, the liquidation shall be final and conclusive upon parties. This, however, does not
apply to tentative liquidations. Also, the same does not apply to forfeiture proceedings where there is fraud. (Commissioner of Customs vs. CTA; GR No. 132929;
March 27, 2000)
Criminal offenses: The 3 year limitation does not apply to penal offenses committed under the Tariff and Customs Code. What is applicable is the prescriptive
periods prescribed for violations of penal statutes in general under Act No. 326, as amended by Act No. 3673.

REMISSION OF CUSTOMS DUTIES, COMPROMISES AND COMPULSORY ACQUISITION

A collector of customs has discretionary authority to remit the assessment and collection of customs duties, taxes and other charges where the aggregate
amount is less than P10, and he may dispense with the seizure of articles of less than P10 in value except in cases of prohibited importations or habitual or
intentional violation of tariff and customs laws.

Neither the Commissioner of Customs nor the Secretary of Finance may remit customs duties (Rovero vs. Amparo), except that, subject to the approval of the
Secretary of Finance, the Commissioner may compromise cases involving the imposition of fines, surcharges and forfeitures unless otherwise specified by law.

Government’s Right to Compulsory Acquisition

In order to protect the government revenues from undervaluation of goods subject to ad valorem duty, the Commissioner may acquire imported goods under
question for a price equivalent to the declared value of the goods plus any duties already paid on the goods, payment for which shall be made within 10 days
from the issuance of a warrant.

An importer dissatisfied with the decision of the Commissioner may appeal the same within 20 days after receipt of notice of the decision with the Secretary of
Finance and thereafter with the CTA.

F. CIVIL PENALTIES

1. SURCHARGES for:
a. Failure to pay liquidated charges;
b. Unauthorized withdrawal of imported articles;
c. Failure to supply the consular invoice required;
d. Undervaluation, misclassification or misdeclaration;
e. Failure or refusal to give evidence or submit documents for examination. (Sec. 2502-2504)

2. FINE may be imposed in the following cases:

a. Any dutiable article is found in the baggage of an arriving passenger which is not included in the baggage declaration;
b. Breach of bond;
c. Unlawful boarding or leaving of vessel or aircraft;
d. Unloading of cargo before arrival at ports of destination, or at improper time or place after arrival; and
e. Failure to supply the requisite manifest. (Sec. 2505-2529)

3. FORFEITURE is imposed on the following cases

SECTION 2530. Property Subject to Forfeiture Under Tariff and Customs Laws. — Any vessel or aircraft, cargo, articles and other objects shall,
under the following conditions, be subject to forfeiture:

a. Any vessel or aircraft, including cargo, which shall be used lawfully in the importation or exportation of articles into or from any Philippine port or place
except a port of entry; and any vessel which, being of less than thirty tons capacity shall be used in the importation of articles into any Philippine port or
place except into a port of the Sulu sea where importation in such vessel may be authorized by the Commissioner, with the approval of the department
head.
b. Any vessel engaging in the coastwise trade which shall have on board any article of foreign growth, product or manufacture in excess of the amount
necessary for sea stores, without such article having been properly entered or legally imported.
c. Any vessel or aircraft into which shall be transferred cargo unladen contrary to law prior to the arrival of the importing vessel or aircraft at her port of
destination.
d. Any part of the cargo of a vessel or aircraft arriving from a foreign port which is unladen before arrival at the vessel's or aircraft's port of destination
and without authority from the proper customs official; but such cargo shall not be forfeited if such unlading was due to accident, stress of weather or
other necessity and is subsequently approved by the Collector.
e. Any article which is fraudulently concealed in or removed from any public or private warehouse under customs supervision.
f. Any article of prohibited importation or exportation, the importation or exportation of which is effected or attempted contrary to law, and all other articles
which, in the opinion of the Collector, have been used, are or were intended to be used as instrument in the importation or exportation of the former.
g. Unmanifested article found on any vessel or aircraft, if manifest therefor is required.
h. Sea stores or stores for aircraft adjudged by the Collector to be excessive, when the duties assessed by the Collector thereon are not paid or secured
forthwith upon assessment of the same.
i. Any package of imported article which is found by the examining official to contain any article not specified in the invoice or entry, including all other
packages purportedly containing imported articles similar to those declared in the invoice or entry to be the contents of the misdeclared package, provided
the Collector is of the opinion that the misdeclaration was caused with fraudulent intent.
j. Boxes, cases, trunks, envelopes and other containers of whatever character used as receptacles or as devices to conceal article which is itself subject to
forfeiture under the customs and tariff laws or which is so designed as to conceal the character of such article.
k. Any beast actually being used for the conveyance of article subject to forfeiture under the customs and tariff laws with its equipage or trappings, and
any vehicles similarly used, together with its equipage and appurtenances, including the beast, team or other motive power drawing or propelling the
same; but the forfeiture shall not be effected if it is established that the owner of the means of conveyance used as aforesaid or his agent in charge thereof
at the time, has no knowledge of the unlawful act.
l. Any money or thing of value offered as a bribe or for the purpose of exerting improper influence over a customs official or employee.
m. Any article sought to be imported or exported:
(1) Without going through a customhouse, whether the act was consummated, frustrated or attempted;
(2) By failure to mention to a customs official, articles found in the baggage of a person arriving from abroad.
(3) On the strength of a false declaration or affidavit executed by the owner, importer, exporter or consignee concerning the importation or exportation
of such article.
(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 article.
 (5) Through any other fraudulent practice or device by means of which such articles was entered through a customhouse to the prejudice of the
government.

Under Sec. 2530, par. m, subparagraphs 3 and 4, the requisites of forfeiture are: (1) The wrongful making by the owner, importer, exporter or consignee of
any declaration or affidavit, or the wrongful making or delivery by the same persons of any invoice, letter or paper – all touching on the importation or exportation
of merchandise; and (2) that such declaration, affidavit, invoice, letter, or paper is false. Although it cannot be denied that private respondent caused to be
prepared through its customs broker a false import entry or declaration, it cannot be charged with the wrongful making thereof because such entry or declaration
merely restated faithfully the data found in the corresponding certificate of origin, certificate of manager of the shipper, the packing lists. Since the misdeclaration
can be traced directly to its foreign suppliers, par. m (3) and (4) does not apply.

The fraud contemplated by law must be actual and not constructive. It must be intentional fraud, consisting of deception wilfully and deliberately done or
resorted to in order to induce another to give up some right. (Hon. Ramon Farolan Jr., in his capacity as Commissioner of Customs vs. CTA; GR No. L-42204;
Jan. 21, 1993)

4. EXTENT OF IMPORTERS’ LIABILITY

The liability of the importer is limited to the value of the imported merchandise. In case of forfeiture of the seized merchandise, the maximum civil
penalty is the forfeiture itself. (Mendoza vs. David)

Forfeiture proceedings are in rem directed against the thing itself; hence, such proceedings are not foreclosed by an acquittal of the holder or owner in the
criminal charge which is in personam and do not thereby operate as res judicata to the former. (Acting Commissioner of Customs vs. Andrulis; GR No. L-62636;
April 27, 1984).

It is of no defense that the owner of the vessel sought to be forfeited had no actual knowledge that his property was used illegally. The absence or lack of
actual knowledge of such use is a defense personal to the owner himself which cannot in any way absolve the vessel from the liability of forfeiture. (The
Commissioner of Customs vs. Manila Star Ferry, Inc., et al.; GR Nos. L-31776-78)

G. ENFORCEMENT OF TAX LIEN AND SEIZURES

In the enforcement of the Tariff and Customs Code, the Bureau may resort to administrative and judicial remedies.

1. EXTRA-JUDICIAL – the administrative proceedings, through seizure and detention or forfeiture, may consist in the enforcement of:
a. The tax lien – a tax lien attaches on the goods, regardless of ownership, while still in the custody or control of the Government.
b. Administrative fines and forfeitures – this remedy is applied when the importation is unlawful, and it may be exercised even where the articles are not
or no longer in Customs’ custody, unless the importation is merely attempted in which case it may be effected only while the goods are still within the
customs jurisdiction or in the hands or under the control of the importer or person who is aware thereof.
c. Sale of Property – property in customs custody shall be subject to sale under the conditions hereinafter provided:
1) Abandoned articles;
2) Articles entered under warehousing entry not withdrawn nor the duties and taxes paid thereon within the period prescribed under Sec. 1908;
3) Seized property, other than contraband, after liability to sale shall have been established by proper administrative or judicial proceedings in
conformity with the provisions of the Code; and
4) Any article subject to valid lien for customs duties taxes or other charges collectible by the BOC, after the expiration of the period allowed for
the satisfaction of the same.

SEIZURE CASES:
• The Collector issues a warrant for the detention or forfeiture of the imported articles;
• A formal hearing is set of which the importer is notified. Mere posting on the bulletin board is not enough if the importer is known.
• The Collector renders a decision.
• If the taxpayer is not satisfied with the collector’s, decision may be brought to the Commissioner within 15 days from notice of decision. IN protest cases,
the importer must pay the tax first and then protest such payment.
• From the Commissioner’s decision, an appeal may be made to the CTA within 30 days from receipt of the Commissioner’s decision.

IF DECISION IS FAVORABLE TO THE TAXPAYER:

In any case involving the assessment of duties, if the Collector renders a decision adverse to the government, such decision shall automatically be elevated
to and reviewed by the Commissioner of Customs;

If the Commissioner affirms the decision of the Collector, such decision shall be automatically elevated to the Secretary of Finance.

If within 30 days from receipt of the record of the case by the Commissioner or by the Secretary of Finance, no decision is rendered by either of them, the
decision under review shall become final and executory. (Sec. 2313, TCC, as amended by RA No. 7651)

2. CUSTOMS AUDIT – Sec. 3514, added by RA No. 9135, requiring all importers to keep in their Principal Office all records of their importations for a period
of 3 years from date of importation. These records shall be subject to audit by duly authorized Customs officer.

3. JUDICIAL ACTION – the tax liability of the importer constitutes a personal debt to the government, enforceable by action. (Sec. 1204).

This remedy is normally availed of when the tax lien is lost by the release of goods. When the goods are properly released and thus beyond the reach of
the tax lien, the government can seek payment of the tax liability by judicial action, customs duties being due on and payable by the importer.

Criminal and civil actions are instituted in the name of the government and shall be conducted by customs officers but no civil or criminal action for recovery
of duties or the enforcement of any fine, penalty or forfeiture under the Code shall be filed in court without the approval of the Commissioner. (Sec. 2401)

Where the importation is prohibited or undeclared, however, the remedy of seizure and forfeiture may be exercised by the BOC even when the goods are
not or no longer in Customs’ custody and in possession or control of the importer or his transferee in bad faith. (Sec. 2532)

IV. TAXPAYERS’ REMEDIES

A. ADMINISTRATIVE RECOURSE

1. CLAIM FOR REFUND

A written claim for refund may be submitted to the importer in abatement cases, such as on damages sustained during voyage (Sec. 1701), missing packages
(Sec. 1702), deficiencies in the contents of packages or shortages before arrival of the goods in the Philippines (Sec. 1703), articles lost or destroyed after such
arrival (Sec. 1704), dead or injured animals (Sec. 1705), and for manifest clerical errors (Sec. 1707); and in drawback cases where the goods are re-exported.

The Collector shall in all cases of allowance, abatements or refunds of duties, cause an examination and report in writing to be made as to any fact discovered
during such examination which tends to account for the discrepancy or difference and cause the corresponding adjustment to be made on the import entry.
(Sec. 1706)

2. PROTEST

Where the taxpayer disagrees with the ruling or decision of the Collector of Customs, the taxpayer can file a protest within 15 days from his payment.
Meanwhile the importer may obtain the release of the goods. If not thus protested, the action taken by the Collector shall be final and conclusive against the
taxpayer except as to manifest errors.

Notice is part of the due process in customs protest cases. (Commissioner vs. Campos Rueda; GR No. L-70648; July 31, 1987) The Collector conducts a hearing
de parte on the protest.

An appeal of the Collector’s decision with which the taxpayer disagrees may be taken within 15 days to the Commissioner of Customs. No hearing on this appeal
is required.

If still unsatisfactory to him, the decision of the Commissioner may then be appealed to the CTA within 30 days.

Sec. 1106 of RA No. 110863, the Customs Modernization and Tariff Act, amending the Tariff and Customs Code now provides:

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.

As can be noted from the above, the protest is now filed with the Commissioner, no longer with the Collector.

3. IN SEIZURE CASES

The Collector shall give notice of seizure cases involving the detention or the forfeiture of prohibited, absolute or disqualified, or illegal importations, including
the carrying vessel or aircraft.

The notice shall either be a written notice addressed to the owner, if known, or through publication, if unknown, and grant him the opportunity to be heard.
After hearing, the Collector shall make a written decision.

The aggrieved taxpayer may, within 15 days from notice thereof, appeal the same to the Commissioner through simply notifying the Collector, who then would
turn over the records to the Commissioner. No hearing on this appeal is required.

From the decision of the Commissioner, the taxpayer may file with the CTA a petition for review within 30 days.

SETTLEMENT OF CASES BY PAYMENT OF FINE OR REDEMPTION OF FORFEITED PROPERTY

Under Sec. 2307, the district collector may, with the approval of the Commissioner, while the case is still pending, except when there is fraud, accept the
settlement of any seizure case provided that the owner, importer, exporter, or consignee or his agent shall offer to pay for the domestic value of the seized
article.

The Commissioner may accept the settlement of any seizure case on appeal in the same manner.

Upon payment of the fine or the domestic market value, the property shall be forthwith released and all liabilities which may or might attach to the property by
virtue of the offense which was the occasion of the seizure and all liability which might have been incurred under any cash deposit or bond given by the owner
or agent in respect to such property shall thereupon be deemed to be discharged.

Settlement of any seizure case by payment of the fine or redemption of forfeited property shall not be allowed in any case where the importation is absolutely
prohibited or where the release of the property would be contrary to law.

ABANDONMENT

The owner or importer may likewise abandon expressly the importation in favour of the government thus relieving himself of the tax liability. (Sec. 1801) The
failure to file an import entry within 30 days from the discharge of the goods shall be deemed an implied abandonment or having filed an entry fails to claim
within 15 days but it shall not be effective until so declared by the Collector. (Sec. 1801)

B. JUDICIAL RELIEF

Sec. 7 of RA No. 1125 grants exclusive jurisdiction with the CTA to review decisions of the Commissioner of Customs in cases involving:
(a) liability for customs duties, fees or other charges;
(b) seizure, detention or release of property affected;
(c) fines, forfeitures or other penalties imposed in relation thereto; and
(d) other matters arising under the Customs Law or other laws administered by the BOC.

In these cases, the ordinary courts are totally without jurisdiction. (Daud vs. Collector, 28 SCRA 157) Cases, however, involving the denial of due process, are
within the cognizance of regular courts. (Commissioner vs. Alikpala, 36 SCRA 208)

In seizure cases, the importer may file an appeal prior to payment of the duties, since the CTA is empowered to issue injunctions in such cases. But not in
protest cases.