Consolidated-CMTA Workshop CEBU (06 06 16)

Customs Updates:
A Seminar on Customs Modernization and

Tariff Act (CMTA) and a Workshop in
Managing Customs Audit
Customs Modernization and
Tariff Act (CMTA)
Atty. Victor C. De Dios

Outline
I. Background on the CMTA

II. Importation and Exportation
III. Lodgement Procedures
IV. Valuation
V. Classification
VI. Audit Levels
VII. Offenses and Penalties
VIII. Remedies
IX. Authority to Compromise
Page 3 Customs Modernization and Tariff Act

Background - CMTA
Development Dates
Senate approval on third and final reading (Senate January 18, 2016
Bill No. 2968)
Bicameral Conference Committee reconciliation January 21, 2016
Ratification by both Houses February 02, 2016
Transmittal to the Office of the President May 3, 2016
Signed into law by the President May 30, 2016
Effectivity
June 16, 2016
(15 days after its publication in the Manila Bulletin on June 1, 2016)

Background
What is the CMTA?
C onvention
M odernization
T rade facilitation
A mendment

Background
Saving Clause
“A ll other laws, acts, executive orders, and CAOs,

CMOs, orders, memoranda, circulars, rules and
regulations issued by the Bureau, under the provisions
of the Tariff and Customs Code of the Philippines, 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repealed or amended accordingly, pursuant to the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.
”
Background
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duties due on the importation, are hereby expressly repealed.

Importation & Exportation
Importation and Exportation
In General
Importation. - Act of bringing in of goods from a foreign territory

into Philippine territory: (i) for consumption; (ii) for warehousing;
or (iii) for admission as defined in this Act.
Begins: Ends:
 When the carrying vessel or  When the duties, taxes and other
aircraft enters the Philippine charges are paid; or if not subject,
territory with the intention to when the goods have legally left
unload therein. the jurisdiction of the BOC.
Exportation. - Act of, documentation, and process of bringing

goods out of Philippine territory.

Importation and Exportation
Types
TCCP CMTA
Free Free
Regulated Regulated
Prohibited Prohibited
X Restricted

Conditionally-free and Duty-exempt
Importations:
 Covers, among others:
► Returning residents:
► Personal and household effects depending on depending on the length of stay
abroad and corresponding FOB or FCA value:
► PHP 150,000 (6 months but not more than 5 years)

► PHP 250,000 (more than 5 but not more than 10 years)
► PHP 350,000 (at least 10 years)
Subject to the following conditions:

(a) Brought in or sent by returning residents of the Philippines, and
(b) The items are not in commercial quantities or intended for barter, sale or for
hire;
 Home appliances and other durables brought in by returning OFWs, provided

that the goods are one of every kind;
Page 11
Conditionally-free and Duty-exempt Importations
 Covers, among others:
 Balikbayan boxes (brought in or sent by returning residents, OFWs or

any Filipino residing abroad):
 Containing personal and household effects
 Not in commercial quantities or intended for barter, sale or for hire
 With FOB or FCA value not exceeding PHP150,000
 May be availed of up to three (3) times in a calendar year.
Page 12
Lodgement Procedures
Declarant vis-à-vis Owner of Goods
Declarant: Owner of Imported

Goods:
 Importer
 Exporter  Consignee or
 Customs broker  Holder of the bill of
 Person duly empowered lading or airway bill
to act as agent or
attorney-in-fact for each
holder


Form of Goods Declaration for Consumption
► TCCP CMTA
► Formal Entry All goods, in All goods,
general In general
personal or household effects personal or household effects

► Informal Entry not in commercial quantity
imported in passenger’s
not in commercial quantity
imported in passenger’s
baggage and mail. baggage and mail.
goods of a commercial nature goods of a commercial nature

with FOB or FCA value of less with FOB or FCA value of less
than Php 2,000 per TCCP and USD than Php 50,000
500 under existing customs rules and
regulations

Provisional and Amended Goods Declaration
CMTA
When declarant does not have all the
information or supporting documents required.
• Information completed or supporting documents
Provisional submitted within 45 days, extendible for another
Declaration 45 days (Sec. 403).
• Release subject to bond
Declarants can now amend its goods

Amended declaration prior to final assessment or
Declaration examination of goods

De Minimis Value
► TCCP CMTA
Php10 (Sec. 709)
Php10,000 (Sec. 423)

Periods to Lodge, Pay and Claim
CMTA
► Filing of entry or  15 days from A
notice of discharge B
lodging of goods  Extendible for
declaration another 15 days A
N
D
 15 days from O
► Payment of receipt of notice of
duties and taxes assessment N
(Abandonment occurs 15 days
M

after finality of assessment)
E
 30 days from
payment N
► Claiming of goods
 Not extendible T

Period to Lodge
Notice of discharge:
February 6, 2017
Deadline of EXTENDED
Deadline of
Date of discharge lodgement of goods
lodgement of goods
of last package: declaration:
declaration:
February 1, 2017 February 21, 2017 March 8, 2017

5 days
15 days
15 days
Lodgement of
Extension to lodge
goods declaration

Period to Pay vis-à-vis Legal Interest & Surcharge
15th day from

finality of One year from
Notice of Finality of
assessment delinquency
Assessment Assessment
April 9, 2017 April 9, 2018
March 10, 2017 March 25, 2017
15 days 15 days If paid within 1 year If paid beyond 1 year
Liable to pay surcharge of Liable to pay increased

10% of the total assessed surcharge of 25% of the
amount or balance thereon total assessed amount or
balance thereon

Liable to pay 20 % per annum Legal interest

Period to Claim
Payment Deadline for

March 15, 2017 Claiming
April 14, 2017
30 days

Period of Storage in a CBW
TCCP CMTA
 1 year from date of arrival  1 year from arrival
► Goods
x
 3 months from
arrival
► Perishable
 Extendible for
Goods 3 months
x
► Bonded goods, which  Reasonable storage period
require a longer limit beyond the general 1
period to process into year period, to be established
finished goods by the BOC Commissioner

Exportation-Specific Rules
► Declared through Export Declaration

► Export Products to conform to standard grades
► Packaging shall be labeled and marked in accordance with rules
► Rules of Origin: Self-certification (if accredited)

Valuation
Methods of Valuation
► Retains the sequential application of 6 methods of valuation of

imported goods, with Method 1 or the Transaction Value (TV)
being the default applicable method
► Methods of Valuation
1. TV of the Goods
2. TV of Identical Goods
3. TV of Similar Goods
4. Deductive Method
5. Computed Value Method
6. Fallback Method

Transaction Value
► Price “paid or payable” by the importer for the sale of goods for
export to the Philippines, plus certain adjustments:
 Commission and brokerage fees
 Cost of container
 Cost of packing
 Assists; and
 Royalties and licenses fees
 Proceeds of any subsequent resale
 Transportation cost
 Loading, unloading and handling charges; and
 Cost of insurance

Transaction Value
► TV may be used by related parties whenever the importer

demonstrates that such value closely approximates one of
the following occurring at or about the same time:
(a) the TV 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

using the Deductive Value Method; and
(c) the customs value of identical or similar goods as determined

using the Computed Value Method.

Classification
Classification
► All trade goods that enter the Philippines must be classified

according to the Harmonized System (HS) which is based on
the ASEAN Harmonized Tariff nomenclature (AHTN).

Classification
► AHTN CODE: 8-digit commodity nomenclature
7 3 1 9 . 4 0 . 0 0 A
Subheading
(national lines)
Two-dash Subheading
One-dash Subheading
Heading Number
Chapter Number

Classification
MFN Rates vs. Free Trade Agreement (FTA)
► General Rule: MFN rates under the TCCP
► Exception: Preferential tariff rates under FTAs

► To qualify for preferential tariff benefits to all goods, it must be
originating from a member country.
► RULES OF ORIGIN –An objective set of criteria set up to determine a
product’s originating status.

Classification
Self-Certification for Origin
► TCCP ► CMTA
 Certificate of Origin (CO)  CO issued by the BOC; or

issued by the BOC  SELF-CERTIFICATION
PROCEDURE

Free Zones
Free Zones
Exemption from Duty and Tax of Goods
“Unless otherwise provided by law,

goods admitted into a free zone
shall not be subject to duty and tax.”

Free Zones
When Goods are Admitted and Withdrawn
Withdrawn
Admitted
Imported goods shall be
Imported goods shall be withdrawn from the free zone
admitted into a free zone when for entry to the customs
the goods declaration are territory when the goods
electronically lodged with the declaration is electronically
Bureau at the time of lodged at the time of the
admission. withdrawal from the free
zone.

Free Zones
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.

Free Zones
Movement of Goods into and from Free Zones
Entry of goods into a Withdrawal from the Transfer of goods from

free zone free zone into the one free zone into
customs territory another free zone
goods declaration for goods declaration for necessary

admission or transit consumption or transit permit
warehousing

Audit Levels
Audit Levels
“Importers” covered by Post Clearance Audits
DECLARANT
importer IMPORTER (For purposes of the post clearance audit and
exporter Section 1005 of this Act)
customs broker imports goods into the Philippines or withdraws such goods into the
person duly empowered Philippine customs territory for consumption or warehousing;
to act as agent or attorney-in- files a claim for refund or drawback; or
fact for each holder. transports or stores such goods carried or held under security; or
knowingly causes the importation or transportation or storage of
imported goods referred to above, or the filing of refund or drawback
claim
agent of any party described above
a person whose activities require the filing of a goods declaration
OWNER OF a person ordering imported goods from a local importer or supplier in a
IMPORTED GOODS domestic transaction, provided that the:
consignee or  the terms and conditions of the importation are controlled by the person
holder of the bill of lading placing the order; or
 the circumstances and nature of the relationship between the person placing
or airway bill
the 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
 the person placing the order had prior knowledge that they will be used in the
manufacture or production of the imported goods

Audit Levels
Post Clearance
Upon Entry Audit
Tentative Assessment: ► within 3 years from the

► duties and taxes initially assessed date of final payment of
are disputed by the importer. duties and taxes or
► release may be allowed upon the customs clearance
posting of bond
► “Conducted by the BOC”
Final Assessment:
► 15 days after receipt of the notice
of assessment by the importer or
consignee

Audit Levels
Periods of Audits
Receipt of Notice of Last day of the authority

Assessment by the of BOC to conduct Post-
Finality of
Importer Clearance Audit
Assessment
March 10, 2017 March 25, 2020
March 25, 2017

15 days 3 years
Period to either
PAY or CONTEST
the assessment

Offenses and Penalties
Misdeclaration, Misclassification, Undervaluation in Goods Declaration
Upon Entry
► TCCP CMTA
Misdeclaration ► Maximum of 200% of ► Generally, 250% of the
the duty and tax due duty and tax due
► Maximum of 200% of ► Generally, 250% of the

Misclassification the duty and tax due duty and tax due
► Maximum of 200% of ► Generally, 250% of the

Undervaluation the duty and tax due duty and tax due

Surcharge on Misdeclaration, Misclassification, Undervaluation in Goods
Declaration Upon Entry
► TCCP CMTA
► prima facie evidence of fraud: ► prima facie evidence of fraud:
undervaluation, misdeclaration discrepancy in duty and tax of
Intentional or of more than 30% of the value, more than 30% between what is
Fraudulent weight, measurement or quantity legally determined and what is
declared in the entry vis-à-vis declared for undervaluation,
Misdeclaration actual value, weight, misdeclaration or
measurement or quantity. misclassification.
Misclassification
or Undervaluation
► ipso facto forfeited in favor of ► the goods shall be subject to
the Government seizure
► application of fine or penalties

► the importer shall be subject to against the importer and other
penal provision under Section person or persons who willfully
3602 of this Code participated in the fraudulent
act.
► 500% of the duty and tax due
x
Failure to Pay Correct Duties and Taxes During PCA
► Now categorized into 2 degrees of culpability, as follows:
► TCCP CMTA
► Negligence 50% to 200% of the 125% of the
revenue loss revenue loss
Gross
x
►
250% to 400% of
negligence the revenue loss
500% to 800% of the 600% of the revenue

► Fraud revenue loss and/or loss; and/or
criminal prosecution. Imprisonment of 2 to 8 years

Failure to Pay Duties, Taxes and Other Charges
► SURCHARGE = 10% of the total assessed

amount or balance
► Increased to 25% if the delinquency lasts for more
than 1 year
► INTEREST = 20% legal interest per annum

for unpaid duties, taxes and other charges
computed from the date of final assessment.
► The legal interest shall likewise accrue on any
fine or penalty imposed.

Audit Levels
Record-keeping Requirement
► Upon entry. - surcharge of 20% on the DV of the goods in
cases of failure or refusal to give evidence or submit documents
for assessment.
► During PCA.- waiver of right to contest issues; 3 to 6 years
imprisonment and/or a fine of Php1,000,000
► TCCP ► DO No. 11-14 and 44-14 ► CMTA
3 10 3
years years years
from date of from date of from date of final
importation importation payment of duties
and taxes or customs
clearance

Audit Levels
Record-keeping Requirement – Free Zones
“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 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 as required shall constitute a waiver of the right to contest the
results of the audit based on records kept by the BOC.

Unlawful Importation or Exportation
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 .
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, kind, quality, quantity or weight, for the purpose of reducing or
avoiding payment of prescribed taxes, duties and other charges;
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

Unlawful Importation or Exportation
► Imprisonment and/or fine depending on the appraised value of the goods unlawfully
imported including taxes and duties
RANGE OF PENALTIES
Maximum:
Minimum: 30 days If appraised value exceeds Php 200,000,000 or
and 1 day to 6 aggregate amount of the appraised values of goods subject of unlawful importation
months or fine Php committed in more than once instance, including duties and taxes exceeds Php
25, 000 to Php 75, 200,000,000.
000 HEINOUS CRIME

RECLUSION PERPETUA (20 years and 1 day to 40 years)
PLUS A FINE OF NOT LESS THAN Php 50, 000, 000

Unauthorized Withdrawal of Imported Goods from Bonded Warehouse
► Surcharge = 50% of duties, taxes, customs fees,

and charges
► If delinquency lasts for more than 1 year,

surcharge shall be increased by 25% of the unpaid
duties and taxes annually
► If attended with fraud, suspension or revocation

of the warehousing privileges

Others
Penalties
► Failure to declare baggage Seizure of the goods
NOTE: payment of a surcharge equivalent to 30% of

the landed cost of the goods to effect the release of
such goods
► Failure to report fraud Imprisonment of not less than 6 months and 1 day
but not more than 1 year
Fine of not less than 100,000.00 but not more than

300,000.00
Imprisonment of not less than 6 months and 1 day but not more
► Removing or repacking than 1 year
goods in warehouse Fine of not less than 100,000.00 but not more than 300,000.00
Forfeiture of the merchandise in favor of the government

Others
Penalties
► Removing goods from Imprisonment OR fine OR both depending on the
appraised value of the goods unlawfully imported
customs custody including taxes and duties
If offender is a foreigner, he shall be deported
► Concealment or Imprisonment of not less than 3 years and 1 day but

not more than 6 years
destruction of evidence
Fine of not less than 300,000.00 but not more than
1,000,000.00
Imprisonment of not less than 30 days and 1 day but not more than 1
► Violations of this act and year
OR
rules and regulations in Fine of not less than 100,000.00 but not more than 300,000.00
OR BOTH
general
If the offender is a foreigner, he shall be deported after serving the
sentence.

Remedies
Remedies
Government
Ascertainment Alert order Hold Delivery and Distraint & Levy
of the Accuracy Release of Goods
of the Declared
Seizure and Forfeiture Compulsory Criminal & Civil
Value
Acquisition Action
Taxpayer
Advance Payment of Fine & Abatement
Ruling Redemption
Refund
Protest Compromise Drawback

Remedies of the Government
Ascertainment of the Accuracy of the Declared Value
BOC’s exercise of power If reasonable doubts still

Doubt exists as to ask importer to exist, BOC may deem
to the accuracy provide further that the customs value of
or truth of explanation to prove that the imported goods cannot
goods the declared value be determined under
declaration or represents the total method one, without
its supporting amount actually paid or prejudice to an importer’s
documents payable for the imported right to appeal
goods.
If there is delay the final determination

of dutiable value, Importer may secure
the release of the imported goods upon
posting of a sufficient security

Alert Order, CMO 7-2018
24/48 Issuance of a
Suspension of the hours warrant of
processing of the
Derogatory Alert 48 goods declaration seizure and
Information Order hours and the conduct detention
of non-intrusive
24/48
inspection of the hours
goods Continuance of
processing of
goods

Seizure and Forfeiture, CAO 10-2020
► The forfeiture shall be effected only in the following cases:
1. While the goods are in the custody/jurisdiction of customs; or
2. While 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
3. While 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.

Seizure and Forfeiture
Warrant Order of Notice of BOC

of Hearing Decision Appeal Comm.
Seizure
15 30 5/15
days days days
District
Collector
Order of BOC
Release Comm.

Hold Delivery and Release of Goods
► 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.
► It is also an administrative sanction for failure to keep importation records

and full access to customs officers.

Compulsory Acquisition
20
30
Notice to working
BOC days Secretary of days
CTA
Importer
Commissioner Finance

Distraint and Levy
Distraint Levy
► Covers the following:
 goods, chattels or effects, and ► Covers real property
 personal property, including stocks belonging to importer
and other securities, debts, credits,
bank accounts, and
 interests in and rights to personal ► May be availed of before,
property of such persons, simultaneously or after the
distraint of personal property
in sufficient quantity to satisfy the duty, belonging to the importer.
tax, or other charge and the expenses
of the distraint and the cost of the
subsequent sale.

Civil and Criminal Action
► Remedies for the collection of import duties, taxes, fees, or charges resulting
from the conduct of a post clearance
► Brought in the name of the government of the Philippines
► Prosecuted and handled by the Bureau with the assistance of the Department
of Justice (DOJ)
► No civil or criminal action for the recovery of duties or the enforcement of
any fine, penalty or forfeiture under this shall be filed in court without the
approval of the Commissioner.

Remedies of the Taxpayer
Drawback
Limitation on Prescription
the Value
Fuel used for propulsion of
vessels 99 %
1 year from
Petroleum Oils and Oils
Obtained from Bituminous importation
Minerals, Crude Eventually 50%
Used for Electric Power and
for Manufacture of City Gas
6 months
Goods Made from vs.
100%
Imported Materials 1 year from
exportation

Refund
►“N otwithstanding 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
NIRC, as amended.
”
Refund
Errors in the 12 months

from date of
assessment or payment 30 days
goods declaration 30 days
Bureau
1 year form
Manifest Clerical release of 30 days Commissioner 30 days
Errors Customs CTA
of
Customs
Errors in the 1 year form

release 30 days
distribution of 30 days
charges

Abatement
Goods have not yet been released for Others: Missing Package,
► 1 consumption or have been placed under Deficiency in Contents of
another customs procedure Packages, Goods Lost or
Destroyed After Arrival,
No other offense or violation has been Defective Goods, Dead or
committed Injured Animals,
► 2 a. Abandoned goods, or destroyed
goods while under customs
control
b. destroyed or irrecoverably lost
goods by accident or force
majeure
c. shortages due to the nature of
the goods

Advance Ruling
Tariff 30 days
Classification
Commission CTA
(without prejudice
to authority of
Valuation 30 days Secretary of
BOC Finance to review)
Commissioner
30 days
Rules of Origin
Conditions:
1. Covers only one product or item
2. Should be filed 90 days before export or import

Protest
Adverse decision Payment

(importer)
Under BOC
protest
District Comm.
Collector (to render a
Written
decision within 30
Protest
(w/in 15 days) days)

Protest
Adverse decision 30 days

(importer)
Appeal CTA
BOC
Comm.
Entry re-
assessed
If protest is sustained

Payment of Fine or Redemption of Goods
Settlement by payment of Settlement by redemption:

fine: a fine equivalent to pay the redeemed value
thirty percent (30%) of the equivalent to one hundred
landed cost of the seized percent (100%) of the landed
goods. cost.
Settlement is not allowed in the following cases:

1. when there is fraud or
2. 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%)
3. where the importation is prohibited or the release of the goods is
contrary to law. .
Page 71 1 January 2014 Presentation title

Authority of the Commissioner to Make Compromise
► Coverage: Any administrative case arising under the CMTA

involving the imposition of fines and surcharges, including
those arising from the conduct of a post clearance audit, unless
otherwise specified by law.
► Exception: Cases involving forfeiture proceedings shall however
not be subject to any compromise.
► Subject to approval of the Secretary of Finance

What to expect from the BOC moving forward
 Close monitoring of importation activities;

 Intensified Post-Clearance Audits;
 Imposition of higher penalties;
 Additional cost for surcharge and interest.

Questions?

WTO Import Valuation
Rules: Revisited
Atty. Mark Anthony P. Tamayo
Partner, Tax/ Global Trade & Customs
Outline
I. WTO Import Valuation Method:

 Revisiting the “Transaction Value” System
II. Methods of Valuation
III. Components of Dutiable Value
IV. Royalties and License fees
 Colgate Palmolive vs. Commissioner of Customs
 Trends & Developments
 TCCV Advisory Opinion 4.15
V. Related Party Transaction
 Customs Valuation – Interplay with Transfer Pricing
 Convergence efforts between WCO and OECD
 TCCV Commentary 23.1
 Case Study 14.1

Transaction Value System
Page 77
Computation of duties and taxes
Customs Duty
Cost x x x (Sec. 201 TCCP, as amended)

Insurance x x x (CMO No. 22-2007)
Freight x x x (CMO No. 22-2007)
Other Charges xxx
Dutiable Value in Foreign Currency x x x
Conversion rate x x x (CAO No. 14-2002)
Dutiable Value in Pesos xxx
Duty Rate (based on classification) x x x (Section 104 TCCP, as amended)
Customs Duty xxx
VAT
Dutiable Value xxx

Customs Duty xxx
Excise tax, if any xxx
Add: Other Charges
Bank Charges (1/8 of 1%)x x x
Brokerage fee xxx (CAO No. 1-2001)
Wharfage xxx (CAO No. 26-95/ CMO No. 32-2009/CMO No.7-2014)
Arrastre xxx (CAO No. 26-95)
Documentary stamp tax xxx (CAO 2-2001 & Sec 188 NIRC)
Import Entry Processing fee x x x x x x (CAO No. 2-2010)
VAT Base xxx
VAT rate 12%
VAT xxx
Page 78
Evolution of the Philippine Valuation Methods
► Prior to July 16, 1996
► Home Consumption Value (HCV) System

 Invoice value
 Published value Whichever is highest
 SGS Clean Report of Findings (CRF) value
► July 16, 1996 to December 31, 1999
► Export Value (EV) System [RA 8181]

 Invoice value
 Published value Whichever is highest
 SGS CRF value
Page 79
Evolution of the Philippine Valuation Methods
► January 1, 2000 onwards
► Transaction Value (TV) System [RA 8181, as amended by RA

9135]
 Price actually “paid or payable” to the seller adjusted by the following:
 Selling Commissions
 Assists
 Royalty and license fees
 Packing and Container Costs
 Proceeds of subsequent resale (no proceeds accrue back to the seller)
 Insurance
 Freight
 Loading, unloading and handling charges
 Cost of containers and packing
 Invoice value, provided all the necessary additions to the price paid or payable were
already included.
Page 80
Philippine Valuation Methods
Case 1
Domestic wholesale price
USD 125
A Co. (US) W Co. (US)
1/10/16
HCV = USD 125
EV = USD 110
TV = USD 100
CIF-USD 100 CIF-USD 105 CIF-USD 110 CIF-USD 112

5/12/16 2/26/16 2/15/16
X. Co. (Phils) Y. Co. (Phils) Z. Co. (Phils) M. Co. (SING)
Page 81
Methods Of Import Valuation
Page 82
Methods of Valuation under the TV System
► Section 201 of the TCCP
 Method 1 – Transaction Value (TV) of the Goods
 Method 2 – TV of Identical Goods
 Method 3 – TV of Similar Goods
 Method 4 – Deductive Value (Resale Minus)
 Method 5 – Computed Value (Cost Plus)
 Method 6 – Fallback Value (Flexible Method)
Page 83
Reference value as Risk Management Tool
CAO No. 5-2001
► Reference values do not qualify as an alternate valuation

method when any of the alternative methods is applicable
in their order of priority.
► However, reference values may be used by the BOC as a

risk management tool to establish doubt as to the
valuation or to alert BOC to do a verification check.
Page 84
Valuation Problem
Case 2
A Co. (USA) B Co. (China)
CIF-$120 CIF-$100
4/5/16 5/12/16
X. Co. (Phils) Y. Co. (Phils)
Page 85
Valuation Problem
Case 3
A Co. (US)
CIF-$100
D Co. (HK)
CIF-$100 CIF-$125
A. Co. W. Co.
(Phils) (Phils Y. Co. (Phils)
CIF-$120 Customer)
Page 86
COST
Method 1 (TV Method)
►Price actually “paid or payable“ of the goods
(Method 1) ► When sold for export to the Philippines
TV of Imported goods
► Adjusted by the following value components:
 Selling Commissions
 Assists
 Royalty and license fees
 Packing and Container Costs
 Proceeds of subsequent resale (no
proceeds accrue back to the seller)
 Insurance
 Freight
 Loading, unloading and handling charges
Page 87
COST
Method 1 (TV Method)
Limitation on the use of TV of imported goods
(Method 1)
TV of Imported goods
 Evidence of sale for export to RP
 No restriction as to the disposition or use of
the goods by the buyer
 Sale of goods must not be subject to
conditions or considerations
 No part of the proceeds of subsequent
resale, disposition, or use of the goods by
the buyer will accrue to the seller
 Prices of goods must not be influenced by
relationship between the buyer and the
seller.
Page 88
Royalties and License Fees
Page 89
Royalties and license fees
Section 201 TCCP, as amended.
Rule: Royalties and License fees are dutiable if:
 Related to the imported goods being valued (Relationship Test);
 Said payments are paid directly or indirectly by the buyer to seller

(Payment Test) and;
 Payment is a condition of the sale of the imported goods to the buyer

(Condition Test).
Page 90
Colgate-Palmolive vs Commissioner of Customs

CTA Case No. 7806 Jan. 26, 2016
Facts:
 Under the MOA, USER (Petitioner Licensee) shall pay OWNER (Licensor) royalty
fees at the rate of 5% of the net sales of petitioner as a consideration for the use of
licensor’s patents and trademarks, trade names, packaging trade dress and its know-
how.
 Under the Addendum:
 OWNER grants to USER the non-exclusive right to use the Patents including the right to make, have, made, use and sell
licensed products. (Patents Contract)
 OWNER grants USER the right to use trademarks on products manufactured, packaged or sold by USER….
(Trademark Contract)
 OWNER grants to USER the right to use its Know-how to make, have made, use and sell the licensed Products. (Know-
How Contract)
Page 91

CTA Case No. 7806 Jan. 26, 2016
Facts:
 The MOA provides that “
 ….. If the USER fails to pay the royalty… or to observe the standards specified
by OWNER or otherwise violated the terms of this agreement in any way,
OWNER may terminate this agreement…
 OWNER may terminate this agreement if USER ceases to be controlled by

OWNER.
Page 92

CTA Case No. 7806 Jan. 26, 2016
Issue:
 Whether or not the royalty payments are dutiable.
Page 93

CTA Case No. 7806 Jan. 26, 2016
Ruling: Dutiable
 The MOA and its addenda reveal that:
 Payments relates to the imported goods since the MOA is computed at the rate of 5% based
on net sales of the licensed products without distinction as to the source of the products
sold whether imported or locally manufactured;
 Royalties are paid by the Petitioner to the Seller Licensor;
 Payment is a condition of sale of the goods to the buyer because without the royalties,
petitioner could not have sold the licensed products in the Philippines under the Licensor
trademark as the MOA provides that the agreement may be terminated once petitioner fails
to pay the royalty.
Page 94
Section 201 TCCP, as amended.
Rule: Royalties and License fees are dutiable if:
 Related to the imported goods being valued (Relationship Test);
 Said payments are paid directly or indirectly by the buyer to seller

(Payment Test) and;
 Payment is a condition of the sale of the imported goods to the

buyer (Condition Test).
Page 95
(Trends and developments)
► Trend is to imply a condition of sale when circumstances
 When: Licensor exerts practical “control” over the purchase of goods
► TCCV Advisory Opinion 4.15
 provides examples of elements of control, which are often part of normal

commercial arrangements
► Countries following this approach find most trademark licenses dutiable
Page 96 Customs Valuation – interplay with Transfer Pricing and other recent trends
(Trends and developments)
Case 6
Supply Agreement
A Corp L Corp
3rd party subcontractor L Corp Controls as to:
(Licensor)
- specification, quality, design & Technology
- As to whom it can sell the manufactured goods
i e s
Imports al t e)
oy b l
Products/RM
Components R t ia
d u
(
B Corp sells
C Corp
(importer)
Page 97
Related Party Transaction
Page 98
Classes of Related parties
A. Work Related
 Entities with overlapping officers and directors.
 Business Partners
 Employers and employees
B. Stock Ownership
 One owning 5% or more of the voting stock or shares of the other
C. Control
 One directly or indirectly controlling the other
 Both being controlled directly or indirectly by a third entity
 Both controlling a third entity together
D. Consanguinity & Affinity

 Members of the same family, related by affinity or consanguinity up to the fourth civil
degree.
Page 99
Related parties
Rule: The TV is acceptable if the Price has not been influenced by

the Relationship:
Established either:
 Circumstances of Sale
 Price settled in accordance with “normal pricing practices of the industry”
 Price settled in a manner “consistent with sales to unrelated buyers”
 “Price is adequate to ensure recovery of all costs plus a profit” equivalent to

the firm’s overall profit realized over a representative period of time in sales
of goods of the same class or kind
Page 100
Related parties
 Approximates a “test value”
 “TV” in sales to unrelated parties of identical/similar goods
 “Customs value of identical/ similar goods as determined using

“Deductive Value Method”
 “Customs Value of identical/ similar goods as determined using

the “Computed Value Method”
Page 101
Customs Valuation – Interplay
with Transfer Pricing

The Transfer Pricing – Customs Dynamics
► Same overall objective: arm’s length pricing

► Two sets of substantive rules, reflecting differing agency
goals
► Conflicting agency concerns in importing country
 High transfer price: low taxable income, high duties
 Low transfer price: high taxable income, low duties
► A common framework for income tax documentation has
developed, but BOC has not established a common
approach
► As a result, businesses have generally addressed the
customs aspects piece-meal

Customs Valuation Basics Transfer Pricing Basics
Rules established by WTO Valuation Agreement Five specified methods for tangible goods
 TV of imported goods - Traditional Methods
 TV of identical goods  Comparable Uncontrolled Price Method (CUP);
 TV of similar goods  Resale Price Method
 Deductive Value Method (Resale Minus)  Cost Plus Method
 Computed Value Method (Cost Plus) - Transactional Profits Methods
 Fallback Method (Flexible Method)  Profit Split Method
 Transactional Net Margin Method (TNM)
Methods are sequential Best Method Rule
 Focus is on function and risk of the tested party

 Degree of comparability
 Quality of data and assumptions
Transaction value is preferred method (used in Comparable profits method is the most commonly
more than 90% of cases) used
Transaction value is allowed for related party sales Contemporaneous documentation generally needed
if the relationship did not influence the price, which to avoid penalty
may be determined by:
 Test values (which rarely exist)
 Circumstances of sale
Importers (and many customs authorities) prefer Country specific rules largely consistent with OECD
transaction value, and consequently appropriately guidelines though variations exist
documenting “circumstances of sale” is critical
Page 104
Convergence efforts
► World Customs Organization (WCO) and OECD joint programs in 2006 and 2007
► Focus Group on Convergence
► 2008 recommendations to Technical Committee on Customs Valuation

(TCCV):
► Current WTO Valuation Agreement broad enough to accommodate income

tax TP methods as support for arm’s length nature of related party pricing
► October 2010, the TCCV) issued Commentary 23.1
► stating that transfer pricing studies may be considered in circumstances of

sale analysis
Page 105 Customs Valuation – interplay with Transfer Pricing and other recent trends
New Instrument on Customs and TP finalized by the TCCV
42nd Session, Brussels (April 18 to 22, 2016)
 The instrument contains:
 a Case Study illustrating a scenario where Customs took into account TP

information/ documentation in the course of verifying the Customs value.
 The new case study provides:
 an example of Customs making use of TP information based on the

transactional net margin (TNM) method.
 On the basis of this information:
 Customs accepted that the sale price in question had not been influenced
by the relationship.
Page 106
Other Dutiable & VAT Components
Page 107
Customs Duty

Other Charges xxx
Customs Duty xxx
VAT
Dutiable Value xxx

Customs Duty xxx
Add: Other Charges
Wharfage xxx (CAO No. 26-95/ CMO No. 32-2009)
VAT Base xxx
VAT rate 12%
VAT xxx
Page 108
INSURANCE
CMO No. 22-2007
Basis of Computation If amount is lower than 2%

FOB value for General
Cargo and 4% FOB for
High Risk Cargoes
A Terms of Sale – CIF or Amount of actual Subject to further BOC
CIP insurance premium verification
B Shipment covered by Amount of premium Present 1). a Certification
Local Insurance actually paid from Insurance Co. as to
the actual premium paid
2). Original OR
C Shipment not covered by Amount of insurance Subject to further BOC
Local Insurance declared in the Entry verification
Page 109
FREIGHT
CMO No. 22-2007
General Rules:
► The freight shall be based on the amount indicated in the Air Waybill (AWB)
or Bill of Lading (BL).
► If no amount in the AWB or BL, then the amount declared in the IEIRD.
► If amount is lower than 70% of the International Air Transport Association
(IATA) rate and Conference rate for airfreight and sea freight shipments,
respectively, importer must present a Certification from the freight forwarder
and/or the official receipt showing the actual freight charges paid.
Page 110
Customs Duty

Other Charges xxx
Customs Duty xxx
VAT
Dutiable Value xxx

Customs Duty xxx
Add: Other Charges
Wharfage xxx (CAO No. 26-95/ CMO No. 32-2009)
VAT Base xxx
VAT rate 12%
VAT xxx
Page 111
Exchange rates to be used
► CAO 14-2002
► The exchange rate officially disseminated to the public by the

BSP each Friday shall be the rate [to be adopted] the following
day, Saturday, and up to Friday of the following week.
Page 112
Other charges
► Brokerage fee
► Customs Administrative Order (CAO) No. 1-2001
Dutiable Value of Shipment Brokerage Fee

Up To P 10,000.00 P 1,300.00
Over P 10,000.00 to P 20,000.00 P 2,000.00
Over P 20,000.00 to P 30,000.00 P 2,700.00
Over P 30,000.00 to P 40,000.00 P 3,300.00
Over P 40,000.00 to P 50,000.00 P 3,600.00
Over P 50,000.00 to P 60,000.00 P 4,000.00
Over P 60,000.00 to P 100,000.00 P 4,700.00
Over P 100,000.00 to P 200,000.00 P 5,300.00
* Over PHP 200,000.00 - PHP 5,300.00 on the first PHP 200,000.00 plus 1/8 of 1% in excess thereof.
Page 113
Other charges
► CMO No. 026-95
Wharfage Fees
► P17.00 per metric ton declared as Shipside Cargo

► P34.00 per metric ton declared as Pierside Cargo
► Or declared fee if higher
Arrastre Charges
► P80.00 per metric ton for cargo declared as full container load, less container
load and conventional pierside cargo
► P6.50 per metric ton for cargo declared as Shipside Cargo
► Or declared charge if higher
Page 114
Other charges
► CMO 07-2014 – Applicable starting January 16, 2013
► Schedule of Cargo Handling Tariff Arrastre charges and Wharfage dues for assessment
purposes at MICT & South Harbor
For importation cleared in Basis Arrastre Rates Wharfage Rates

the MICP and POM
20 footer
Full Container Load (FCL) Import Php 3,727.00 Php 519.35
Export Php 3,043.00 Php 259.70
40 footer
Import Php 8,551.00 Php 779.05
45 footer
Import Php 8,551.00 Php 916.50
Page 115
Other charges
Documentary Stamp Tax is P265.00 broken down as

follows:
CAO 2-2001 P 250.00

Sec 188 of the NIRC 15.00
Total P 265.00
Page 116
Other charges
► CAO 2-2001
► Import Entry Processing Fee

Dutiable Value of Shipment Brokerage Fee
Up To P 250,000.00 P 250.00
Over P 250,000.00 to P 500,000.00 P 500.00
Over P 500,000.00 to P 750,000.00 P 750.00
Over P 750,000.00 P 1,000.00
Page 117
Questions?

Managing Customs Audits
Atty. Jan Manuelle Reyes

Audit Powers of the BOC
Levels of Audit:
► Entry verification at the border (before imported goods are released

from the BOC)
► Entry verification immediately after release of goods
► Post-entry audit – prior to CMTA, conducted by the DOF-FIU (within 3
years from date of importation)
Page 120 Managing Customs Audits

Verification at the Border
► Customs examiner verifies declarations in the import entry BEFORE goods

are released from Customs custody
► Common issues raised:
 Valuation
 Classification
 Compliance with import documentation

Verification at the Border
Issue(s) resolved/
If no findings Release of goods
Appraiser
contests
the Declared VCRC
Value/
Classification
If adverse findings Payment under
Protest – Law
Division
Issue(s) resolved/
Tentative Release Release of goods
Valuation issue If no findings
• No guarantee is required
•IED will be marked as
“under
Payment under
tentative liquidation”
Protest – Law
Classification issue Division
• Guarantee is required If adverse
findings

Valuation and Classification Review Committee
Issue(s) resolved/
If no findings Release of goods
DOF
If no findings
If no findings If adverse
findings
BOC Law BOC CTA
Division Commissioner
If adverse
findings If adverse
findings
CTA

Notes on Protest and Appeal Process at Entry
Verification
► Where the declared value / classification is contested, there may or may not
be physical examination.
► The VCRC Technical Support Team considers comparative data submitted to
it. VCRC convenes, deliberates and comes up with a decision.
► The importer may file a protest with the VCRC, to secure tentative release of
the goods by posting a cash bond.
► The importer must also submit supporting documents to the VCRC.
► An adverse decision of the VCRC may be appealed to the CVCRRC, upon
payment of a docket fee.
► An adverse decision of the CVCRRC may be subject to only one Motion for
Reconsideration, also upon payment of a docket fee.
► Alternatively, upon receipt of an adverse decision, an importer may also
either pay under formal protest, or elevate the matter directly to the
Commissioner of Customs.

Common Issues during Verification
► Valuation of Importation
► Accuracy of Description of Goods
► Proper declaration / Misdeclaration / Underdeclaration
► Proper classification / Misclassification
► Proper application of duty rates

Verification Immediately After Release of Goods
► Conducted by Liquidation and Billing Division
 Reviews computations of formal, informal and withdrawable entries

based on forex rates, correct dutiable and taxable values
 Computes fines and other charges
 Transmits letters of demand to brokers and importers, for all amounts
payable to the BOC including short duties, taxes, fines, and other charges
 Compute, record, control and coordinate collection of amounts remaining
unpaid and unsettled
 Forward dockets of uncollected accounts for possible court action to the
Law Division after the prescribed period for compliance has lapsed and
payment has not been made
(CMO No. 025-14)

Post Entry Audit
In General
► Introduced under RA No. 9135 (June 2, 2001).
► Post-release evaluation, which seeks to verify the integrity of information

supplied to the BOC at the time of the entry of imported goods
(complementary to the Transaction Value (TV) system).
► Generally conducted within 3 years from importation.
► Previously exercised by the BOC-PEAG; transferred to the DOF-FIU by

virtue of EO No. 155 dated December 18, 2013.

Post Entry Audit
FIU
► Established under the office of the Secretary

of Finance (DO No. 52-2013 dated Oct. 11, Secretary of
2013). Finance
► Initially served as a “data analytics unit”.
► Placed under the Revenue Operations and

Legal Affairs Group (DO No. 10-2014 dated ROLAG
Feb. 5, 2014).
FIU

Post Entry Audit
CMTA
Post Clearance Audit (PCA)
► conducted by the BOC within 3 years from the date of final

payment of duties and taxes or customs clearance, as the case
may be.

Post Entry Audit
Types of Issues Commonly Raised
Post-entry audit may involve review of the following issues:
► Correct Valuation;
► Proper Classification/Duty Rates;
► Accuracy of computation of duties & taxes;
► Compliance with procedures and documentation and other requirements
under customs laws, rules and procedures.

Post Entry Audit
Record Keeping
► All importers and brokers are required to keep importation

records at their principal place of business for a period of 10
years from the date of filing of the import entry.
► TCCP ► DO No. 11-14 and 44-14 ► CMTA
3 10 3
years years years
from date of from date of from date of final
importation importation payment of duties
and taxes or customs
clearance

Post Entry Audit
Record Keeping
Required Documents* Importers Brokers
(a) Company or entity structure Yes -
(b) Ordering and purchase documentation Yes -
(c) Shipping, importation, exportation and transportation Yes Yes
documentation (c1 to c13)
(d) Manufacturing, stock and resale documentation Yes -

(e) Bank documents, financial statements and other Yes -
accounting information
(f) Charts and codes of accounts, ledgers, financial
statements, accounting instruction manuals, and systems and Yes -
program documentation
(g) If applicable, papers, books, registers, discs, films, tapes,
sound tracks, and other devices or things where items (a) to Yes Yes
(f) are recorded or stored (c1 to c13)
* Tothe extent relevant for the verification of the TV declared and the duties and
taxes paid.
Post Entry Audit Process
DO Nos. 11-14 and 44-14
PREPARATORY PRE-AUDIT AUDIT FINAL

STAGE STAGE STAGE STAGE
Profiling Pre-audit conference
Assessment and
Collection
Covered by Covered by
DO No. 11-2014 DO No. 44-2014
Profiling: Who shall be audited?
► Importers, when errors in the import declaration are detected
► Importers who voluntary request to be audited, subject to the

approval of the Commissioner of Customs, upon
recommendation of the FIU
► Brokers, to validate audits of their import clients and/or fill in

information gaps revealed during an audit of their importer
clients

Profiling: Who shall be audited?
► Audits can cover importers from various industries.
► Even PEZA, SBMA, CDC and other importers enjoying duty

and tax incentives are subject to audit.
► Basically, all importers may be audited.

Issuance of ANLs
Audit Notification Letter (ANL)
► It is the equivalent of the BIR’s Letter of Authority (LOA) or

Letter Notice (LN)
► Signed by the BOC Commissioner
► Authorizes the conduct of audit (i.e., 3 years from the date of
final payment/settlement of duties)
► Defines the specific period covered by the audit

Issuance of ANLs
► If the FIU determines that there is basis to conduct an audit, it

shall inform the BOC Commissioner in writing.
► Within 15 days from receipt of notice from FIU, the BOC

Commissioner shall issue an ANL to the concerned importer
and the broker.
► According to the standard ANL form, the ANL shall be served

within 30 days from date of issuance.

Issuance of ANLs
Mandatory contents:
(a) Names of the members of

the audit team
(b) Date, time and venue of

pre-audit conference
(c) Date of commencement of

audit proper

Issuance of ANLs
 The ANL shall be accompanied by:
(a) A list of documents (Annex “A”) for compliance audit; and

(b) A General Customs Questionnaire.
 The documents are required to be submitted to the FIU prior to

the Pre-Audit Conference and shall be certified by the importer
and/or broker as true copies.

Pre-Audit Conference and Audit Proper
► DO Nos. 11-14 and 44-14 are silent as to the procedure for the
Pre-Audit Conference and Audit Proper.
► Under the old rules:
► The Pre-Audit Conference is the first meeting where the audit team will
brief the importer of the audit procedure.
► The Audit Proper involves opening of the books, review of documents,

etc.

Issuance of Notice of Findings or PEAF
► After audit proper, FIU issues a Notice of Findings in the form

of a Post Entry Audit Findings (“PEAF”).
► Note: DO No. 44-2014 effectively removed the Exit

Conference stage (which was the venue used by the PEAG to
explain its findings to the importer).

► Contents of the PEAF:
1. Specific import transactions covered;

2. Amount of deficiency duties and taxes (and the basis of the
findings);
3. A notice that the findings of deficiency duties and taxes shall
be submitted to the BOC and the BIR, unless defenses are
satisfactorily explained in a Reply.

► DO No. 44-2014 introduces the “NO CONTACT POLICY”

between the FIU and the importer (insofar as the findings are
concerned).
► Any official or employee of the FIU found to have violated the

policy shall be held administratively liable, without prejudice to
any civil or criminal proceedings.

Single Comprehensive Reply
► Importer must submit a Single Comprehensive Reply within a

non-extendible period of 30 days from receipt of PEAF.
► Note: The DO uses the word “single” as the importer is only

allowed to file one all-in reply, which should either state:
1. An admission of the findings; or

2. A disagreement with the findings (stating all reasons).

Single Comprehensive Reply
► The Reply should be supported by certified true copies of

relevant documents.
► Generally certified by the person or entity who executed the

documents; or
► If the documents were previously filed with any government

agency, certified by the concerned government agency.


Issuance of FARR
► If the explanations in the Reply are satisfactory, the FIU shall

notify the importer that it accepts the explanations.
► Result: No assessment and/or collection
► However…
► (1) if the importer admits the findings;
► (2) if the importer disagrees with the findings, but the explanations are
not satisfactory; or
► (3) no reply is filed within 30 days
… the FIU shall submit a Final Audit Report and
Recommendation (“FARR”) separately to the BOC and/or the
BIR, for assessment and/or collection:

Issuance of FARR
► Unlike in the previous PEAG rules where the FARR is
submitted only to the BOC Commissioner, the FARR under the
new rules is separately submitted to:
► The BOC Commissioner for assessment and/or collection of customs

duty portion (and corresponding fines and penalties); and
► The BIR Commissioner for proper appropriate action (on the tax portion)
pursuant to the Tax Code, as amended.
► The FARR shall include a recommendation to impose

administrative penalties (for failure to pay proper customs
duties and taxes on importation).

Assessment and/or Collection
► Within 5 days from receipt of the FARR, the BOC

Commissioner shall issue:
► Collection letter (pay within 10 working days from receipt) for duties and
taxes admitted in the reply (and corresponding penalties); or
► Formal assessment and demand letter (pay within 10 working days from
receipt) for duties and taxes not admitted in the reply (and corresponding
penalties).
► In case of failure to pay deficiency duties (and penalties) within

10 days, the BOC Commissioner shall:
► Revoke accreditation privileges of the importer
► Avail of the administrative and judicial remedies for collection.

Assessment and/or Collection
► Within 5 days from receipt of the FARR, the BIR

Commissioner shall act on the findings in said FARR in
accordance with the Tax Code.
► Should the importer fail to pay the deficiency taxes (and

penalties) as may be assessed by the BIR, the BIR
Commissioner shall
► Take appropriate action in accordance with the Tax Code.
► Inform the BOC Commissioner in writing of such failure to pay the
deficiency taxes and penalties. The BOC Commissioner shall then
impose the same sanctions (i.e., revoke accreditation privileges and
collection remedies).

Post Entry Audit
Common Issues
► Discrepancy between total value of importation per schedule vs. accounts

payable – trade
► Discrepancy between VAT paid on importation per VAT returns vs. VAT paid
per MISTG data
► Interest expense for default payments to supplier
► Year-end transfer price adjustments
► Royalty or license fee payments
► Prices between related parties
► Fluctuation in prices of imported goods
► Foreign currency conversion to Php
► Proper classification of imported goods
► Failure to keep required records of importation

Post Entry Audit
Common Issues for PEZA Entities
► Discrepancy between importation per books and per summary of importation

submitted
► Discrepancy between importation per books and importation per MISTG
data
► Sale by PEZA entity to another PEZA entity

Post Entry Audit
Common Issues for PEZA Entities
► Withdrawals / Sales to customs territory

► Duties and taxes on scrap sales
► Failure to keep required records of importation

Inventory Audit of CBWs
CMO 36-2004
► Who shall be audited?
► Selection shall be based on the following:
► Information/Intelligence report form the CIIS and ESS

► Referral from the District Collector or the Warehousing Operating Divisions
► Derogatory report/information from external sources (e.g., PCCI, Informers, etc.)
► As a prerequisite for renewal of license to operate CBW when requested by the Bonded
Warehouse Committee
► As directed by the OCOM

CMO 36-2004 – Inventory Audit Procedure
Mission Order  MO issued by the Dep Comm, IEG
 Shall be served to the CBW Operator together with a list of
required documents to be submitted
 Audit of Inventory of the bonded materials (i.e., RM,

Audit Proper Materials in process, FG).
 Verification of the completeness of the export
documents
 Determination if the usage of the bonded materials
reflected in the CI is in accordance with the ITDI
Formula of Manufacture
 Determination of unaccounted bonded materials and
unliquidated/expired entries
 Determination of any other violations of customs laws,
rules and regulations related to warehousing
 In case of doubt, conduct a verification of the
authenticity of the documents

CMO 36-2004 – Inventory Audit Procedure
 If no adverse findings
 The Chief of WAMU shall endorse the same to the Dep
Comm, IEG, who shall in turn endorse the same to the
Commissioner
Audit Report of Findings

 If adverse findings
 WAMU to issue a show-cause letter giving the CBW
Operator 7 days to answer
 Final report – endorsed by Dep Comm approved by

Commissioner
 Issuance of a Demand Letter
 Suspension of warehousing privileges
 Holding release of incoming shipments
 Revocation of license/permit
 Prosecution for criminal liability

Penalties
TCCP as implemented by DO 11-14
Fines and penalties depending on the degree of culpability

Failure to pay
proper duties and
taxes  Negligence  50% to 200% of the revenue loss
 Gross Negligence  250% to 400% of the revenue loss
 Fraud  500% to 800% of the revenue loss
 Criminal prosecution

Penalties
TCCP as implemented by DO 11-14 vs CMTA

Failure to pay
proper duties and
taxes  Negligence  50% to 200% of the revenue loss
 Gross Negligence  250% to 400% of the revenue loss
 Fraud  500% to 800% of the revenue loss

Failure to pay
proper duties and
taxes  Negligence  125% of the revenue loss
Fraud  600% of the revenue loss

Other Penalties
• Fine equivalent of 20% ad valorem on the articles for which no

records were kept
• Punishment for contempt, upon application from the proper
Failure and/or court
Refusal to give • Re-assessment of the importations based on available data, the
full or free declared TV being presumed inaccurate
• Cancellation of accreditation privileges;
• Criminal prosecution

Other Penalties
records were kept
• Punishment for contempt, upon application from the proper
Failure and/or court
Refusal to give
• Re-assessment of the importations based on available data, the
full or free declared TV being presumed inaccurate
• Cancellation of accreditation privileges;
• 3 to 6 years of imprisonment and/or a fine of Php1M

Failure and/or
• Hold delivery or release of imported goods
Refusal to give
full or free

Other Penalties

Failure to keep records were kept
records • Cancellation of accreditation privileges;

Other Penalties

Failure to keep records were kept
records • Cancellation of accreditation privileges;
• Waiver of right to contest issues

Failure to keep • 3 to 6 years of imprisonment and/or a fine of Php1M
records

Surcharge & Interest under the CMTA
► SURCHARGE = 10% of the total assessed

amount or balance
► Increased to 25% if the delinquency lasts for more
than 1 year
► INTEREST = 20% legal interest per annum

for unpaid duties, taxes and other charges
computed from the date of final assessment.
► The legal interest shall likewise accrue on any
fine or penalty imposed.

Authority to Compromise Penalties
FIU
► DO No. 011-2014 retains the BOC Commissioner’s authority to

compromise penalties for failure to pay proper customs duties
and taxes.
► The compromise is subject to approval of the Secretary of Finance.

► It does not cover cases of fraud and other cases specified by law.
► It applies when the importer makes a voluntary and full disclosure prior to
the commencement of the audit stated in the ANL.
(Based on Section 2316 of the TCCP, as amended, CAO No. 4-04, and the VDP
rules per CAO No. 5-2007 and CMO No. 18-2007).

CMTA
► Coverage: Any administrative case arising under the CMTA

involving the imposition of fines and surcharges, including
those arising from the conduct of a post clearance audit, unless
otherwise specified by law.
► Exception: Cases involving forfeiture proceedings shall however
not be subject to any compromise.
► Subject to approval of the Secretary of Finance

PREPARATORY PRE-AUDIT AUDIT FINAL

STAGE STAGE STAGE STAGE
Profiling Pre-audit conference
Assessment and
Collection

Questions?

Best Practices Approach in
Managing Customs Changes
BOC Targets and Collections
600 In Billion Pesos

499
500 456
408
400 366 367
340
315 304
300 280 260 278 263 280
200
100
0
0
2010 2011 2012 2013 2014 2015 2016
Target Collection Actual Collection
Page 168 Best Practices Approach in Managing Customs Changes

Trends and Developments in Customs
► BOC and BIR have agreed to e-data exchange of information. Among

others, this will enable the BOC to validate taxpayer information captured in
the BIR system, while the BIR will receive copies of import and export
entries declared with the BOC.
► BOC has been engaged in intense monitoring of importers and imported
articles (e.g. balikbayan boxes, CBWs); issued CMO Nos. 30-2015, 32-2015
and 37-2015 which required the accreditation of on-site and off-site ACFs.
► Voluntary Disclosure Program is still suspended but the current CoC is open
to accepting voluntary payments coursed through his office.
► Resumption of Post Entry/Release Audits.

What to expect from the BOC?
► Valuation/ classification check at the border (by the Formal Entry Division/
Collector of Customs)
► Issuance of Demand letters (by the Transaction Audit Division [TAD])
► Post-Entry (Release) Audit / Examination
► Suspension of Importer/Broker Accreditation
► Strict implementation on the rules on abandonment
► Fast tracking the auction of all forfeited cargoes
► Compulsory acquisition of undervalued imported goods
► Full automation of BOC; paperless transactions

What should importers do?
► Be audit ready.
► Be proactive in managing and analyzing import data.
► Trade Data Analytics is the process of harvesting key trade data and extracting insights and
opportunities to improve Trade Effectiveness
► Conduct a Compliance Assessment
► Evaluate importation practices and procedures to determine compliance with customs laws, rules and
regulations.
► Identify risk areas and potential exposures in order that the same may be
legally corrected prior and during the customs audit.

Best Practices
► Customs Manual
► Pre-importation valuation and classification review
► Internal or External Compliance Assessment
► Secure BOC Ruling
► Secure Tariff Classification Ruling
► Customs Broker Management

Questions?

Atty. Mark Anthony P. Tamayo
Partner, Tax/Global Trade and Customs
Mark.Anthony.P.Tamayo@ph.ey.com
Atty. Victor C. De Dios

Senior Director, Tax/Global Trade and Customs
Victor.C.De.Dios@ph.ey.com
Page 174 Presentation title

Indirect Tax Services/Global Trade & Customs
Pre- Upon Pre- Exit BOC
Services Importation Importation
ANL
Conference
Field Audit
Conference
FARR
Com
Advisory
Advocacy
BOC Accreditation
CPRS Registration
Gov’t Permits (for Regulated Goods)
Conditionally-Free Importations (Sec. 105
TCCP)
CO Assistance (for Bilateral Trade
Agreements)
Rulings (BOC/ Tariff Commission)
CBW Applications
Valuation and Classification Review
Committee (VCRC) Assistance
Transaction Audit Assistance
Post- Entry Audit Assistance
Customs Compliance Review (CCR)
Limited CCR
Voluntary Disclosure Program Availment
Customs Manual

Product Offerings – Customs Services
Customs Services Description
Consultancy and advisory services on issues related to customs rules and
Advisory
regulations, i.e. duties and taxes through written memos and opinions
Pre-clearing of transactions, various applications / confirmations with the
Advocacy
BOC, BIR and other government agencies
Bureau of Customs (BOC) Assistance in the preparation of documentary requirements; also facilitating
Accreditation the accreditation application either as importer or exporter
CPRS Registration is required prior to importation.
Client Profile Registration System
We provide assistance in the preparation and filing of documentary
(CPRS) Registration
requirements in support of the application.
As an example, we provide assistance in securing the NTC permit for
Assistance in securing Gov’t Permits
products (telecoms equipment) requiring prior approval by the NTC, we may
(for Regulated Goods)
also provide assistance in securing other import permits
Request for BOC/Tariff Commission Request for confirmation on the opinion of the Company, i.e. use of correct
Confirmation/Ruling customs valuation method, etc.
CBW Applications Customs Bonded Warehouse application, including ACFs
Conditionally-Free Importations (Sec. Specific importations are duty free, we may assist in securing confirmation
105 TCCP) and necessary approvals from the BOC
Assistance in connection with issues being raised before the BOC, such as any
VCRC Assistance
valuation or classification issue on a particular importation

Product Offerings – Customs Services
Customs Services Description
Certificate of Origin (for Bilateral Trade
Similar to TTRA, we assist in verifying and securing Certificate of Origin for
Agreements) goods covered under Free Trade Agreements
Evaluation of the company’s importation practices and procedures for a
specific taxable year through document analysis and interviews.
Customs Compliance Review (CCR) and
This will help the company identify possible risk areas and exposure in terms
Limited CCR of deficiency import tax and duties, non-compliant practices and ways to
address them
To determine the correctness of duties & taxes to be paid as well as other
Transaction Audit Assistance related issues specific to a particular transaction
If Company has been issued an Audit Notification Letter (ANL) by the BOC,
Post Entry Audit Assistance we are able to assist during the conduct of the post entry/release audit
It allows importers to voluntarily correct any erroneous, inaccurate or
Voluntary Disclosure Program (VDP)
insufficient information declared to the BOC at the time of entry of the goods
Availment without payment of penalties
Review of internal company customs procedures to determine sufficiency in
Customs Manual terms of controls & compliance with current customs laws rules &
regulations, and preparing a written customs manual
Process of harvesting key trade data to extract insights and opportunities to
Trade Data Analytics improve trade effectiveness

Thank you!
Page 178 ► Best Practices Approach in Managing Customs Changes

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Customs Updates:

A Seminar on Customs Modernization and

Atty. Victor C. De Dios

I. Background on the CMTA

Page 3 Customs Modernization and Tariff Act

Ratification by both Houses February 02, 2016

Transmittal to the Office of the President May 3, 2016

Signed into law by the President May 30, 2016

Page 4 Customs Modernization and Tariff Act

Page 5 Customs Modernization and Tariff Act

“A ll other laws, acts, executive orders, and CAOs,

► Presidential Decree No. 1464, otherwise known as the Tariff

Page 7 Customs Modernization and Tariff Act

Importation. - Act of bringing in of goods from a foreign territory

Exportation. - Act of, documentation, and process of bringing

Page 9 Customs Modernization and Tariff Act

Page 10 Customs Modernization and Tariff Act

► PHP 150,000 (6 months but not more than 5 years)

Subject to the following conditions:

 Home appliances and other durables brought in by returning OFWs, provided

 Covers, among others:

 Balikbayan boxes (brought in or sent by returning residents, OFWs or

Declarant: Owner of Imported

Page 14 Customs Modernization and Tariff Act

personal or household effects personal or household effects

goods of a commercial nature goods of a commercial nature

Page 15 Customs Modernization and Tariff Act

Declarants can now amend its goods

Page 16 Customs Modernization and Tariff Act

Php10 (Sec. 709)

Php10,000 (Sec. 423)

Page 17 Customs Modernization and Tariff Act

Page 18 Customs Modernization and Tariff Act

Page 19 Customs Modernization and Tariff Act

15th day from

15 days 15 days If paid within 1 year If paid beyond 1 year

Liable to pay surcharge of Liable to pay increased

Liable to pay 20 % per annum Legal interest

Page 20 Customs Modernization and Tariff Act

Payment Deadline for

Page 21 Customs Modernization and Tariff Act

Page 22 Customs Modernization and Tariff Act

► Declared through Export Declaration

Page 23 Customs Modernization and Tariff Act

► Retains the sequential application of 6 methods of valuation of

Page 25 Customs Modernization and Tariff Act

Page 26 Customs Modernization and Tariff Act

► TV may be used by related parties whenever the importer

(a) the TV in sales to unrelated buyers of identical or similar

(b) the customs value of identical or similar goods as determined

(c) the customs value of identical or similar goods as determined

Page 27 Customs Modernization and Tariff Act

► All trade goods that enter the Philippines must be classified

Page 29 Customs Modernization and Tariff Act

► AHTN CODE: 8-digit commodity nomenclature

Page 30 Customs Modernization and Tariff Act

► General Rule: MFN rates under the TCCP

► Exception: Preferential tariff rates under FTAs

Page 31 Customs Modernization and Tariff Act

 Certificate of Origin (CO)  CO issued by the BOC; or

Page 32 Customs Modernization and Tariff Act

“Unless otherwise provided by law,

Page 34 Customs Modernization and Tariff Act

Page 35 Customs Modernization and Tariff Act