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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B.

Aban
(PROF. CABANEIRO) A2011 1

subject to enforcement by the Bureau of Customs or


otherwise within its jurisdiction.

Chapter 12: TARIFF AND CUSTOMS CODE


IN GENERAL
CUSTOMS LAW does not refer only to the provisions of Tarif
and Customs Code. It also includes other laws and regulations
subject to enforcement by the Bureau of Customs.
Other laws subject to enforcement by the Bureau of
Customs:
1. NIRC Sec. 107. Importation of goods or articles subject to
VAT. The VAT must be paid before these goods are released from
Customs Custody.

Customs duties
Customs duties are duties which are charged upon
commodities on their being imported in or exported out
of a country

3. Regulations that may be issued by the CB, the


implementation of such regulation is vested in the Bureau of
Customs.

TARIFF means a book of rates; a table or catalogue drawn


usually in alphabetical order containing the names of several
states that hold commerce together.
Scope of tariff and customs laws
Section 3514 of the Tarif and Customs Code provides
that tarif and customs laws include not only the
provisions of the Code itself and regulations pursuant
thereto but all other laws and regulations which are

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

Extend not only to the provisions of the Tarif and


Customs Code but to all other laws as well as Central
Bank Circulars, the enforcement of which is entrusted to
the Bureau of Customs.

Division of the Tariff and Customs Code


Book I Tarif laws
Book II Customs laws

2. NIRC Sec. 131. Importation of Articles subject to excise


taxes. The payment of excise tax must be made before the
goods are released from Customs custody.

CUSTOMS DUTIES are duties which are charged upon


commodities on their being imported in or exported out of a
country.

JUICY NOTES

Garcia v. Executive Secretary: Customs duties, which


are assessed at the prescribed tarif rates, are very much
like taxes, which are frequently imposed for both revenue
raising and for regulatory purposes. This, it has been
held that Customs duties is the name given to taxes
on the importation and exportation of commodities, the
tarif or tax assessed upon merchandise imported from,
or exported to, a foreign country.

Flexible tariff clause (Flexible Power of the President)


Section 28(2), Article VI, Constitution: The Congress
may, by law, authorize the President to fix within
specified limits, and subject to such limitations and
restrictions as it may impose, tarif rates, import and
export quotas, tonnage and wharfage dues, and other
duties or imposts within the framework of the national
development program of the Government.

Section 401, Tariff and Customs Code:


In the
interest of national economy, general welfare and/or
national security, the President upon recommendation of
the National Economic and Development Authority, is
empowered:

TARIFF AND CUSTOMS LAWS. Page 1 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 2
1. To increase, reduce, or remove existing protective
rates of import duty, provided that the increase
should not be higher that 100% ad valorem;
2. To establish import quota or to ban imports or any
commodity; and
3. To impose additional duty on all imports not
exceeding 10% ad valorem
Additional notes:
1. An order issued by the President pursuant to the flexible
tarif clause shall take efect thirty (30) days after
promulgation, except in the imposition of additional duty
not exceeding ten percent (10%) ad valorem which shall
take efect at the discretion of the President.
2. In the case of imposition of additional duty, the
investigation
of
the
Tarif
Commission
and
recommendation of NEDA are needed.
ARTICLES SUBJECT TO CUSTOMS DUTIES
Goods for customs duty purposes

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 [Section 100, Tarif and
Customs Code]

The Code also imposes export tarif and premium duty or


certain articles.

Whether subject to duty or not, all imported articles shall


be entered through a custom house at the port of entry.

Articles, goods or merchandise

Articles when used with reference to importation or


exportation includes goods, wares, and merchandise and

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

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in general anything that may be made the subject of


importation or exportation.

Bastida v. Customs Collector:


The Revised
Administrative Code defines merchandise, when used
with reference to importation or exportation, to include
goods, wares and, in general, anything that may be made
the subject of importation or exportation. Checks, money
orders and dollar bills properly fall within the concept of
merchandise as used in the Revised Administrative Code.
The U.S. dollar are merchandise. Checks, as bills of
exchange, are negotiable instruments and may be
bought and sold like a commodity. Money orders, also
considered as bills of exchange of limited negotiability,
possess the same attributes as other negotiable
instruments. Thus, they may also be bought and sold like
checks.

Kinds of goods/merchandise
1. articles subject to duty
2. prohibited importations
3. conditionally-free importations
Articles subject to duty
As a general rule, all articles when imported from a
foreign country including those previously exported from
the Philippines are subject to duty unless otherwise
specifically provided in the Code.
Prohibited importations
1. Dynamite, ammunitions and other explosives, firearms
and weapons, except when authorized by law.
2. Written or printed articles containing any matter
advocating of inciting treason, rebellion or subversion
against the Philippine Government, or forcible resistance
to any law of the Philippines.

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 3
3. Written or printed articles, paintings, or other
representations of an obscene or immoral character.
4. Articles, instruments, drugs and substances designed and
intended to produce unlawful abortion and printed
materials promoting unlawful abortion.
5. Machines, apparatus or mechanical devices used in
gambling
6. Lottery and sweepstakes tickets except those authorized
by the Philippine Government
7. Articles made of precious metals but actual fineness of
quality not indicated.
8. Any adulterated or misbranded drug in violation of the
Food and Drugs Act.
9. Marijuana, opium poppies, or any other narcotic or
synthetic drugs declared habit-forming, or preparation
thereof, except when authorized by the Philippine
Government, and opium pipes and parts thereof.
10. All other articles and parts thereof, the importation of
which is prohibited by the law or rules and regulations
issued by competent authority.
Conditionally-free importations
Conditionally-free importations are articles which are
exempt from import duties upon compliance with the
formalities prescribed in or with regulations promulgated
by the Commissioner of Customs with the approval of the
Secretary of Finance.
Enumerate several conditionally-free importations
1. Aquatic products caught or gathered by fishing vessels of
Philippine registry

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

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2. Equipment for use in the salvage of vessels or aircraft,


not available locally, and cost of repairs excluding the
value of the article used, made in foreign countries upon
vessels or aircraft documented, registered or licensed in
the Philippines.
3. Articles brought into the Philippines for repair, processing
or reconditioning to be re-exported upon completion of
the repair, processing or reconditioning.
4. Medals, badges, cups, and other small articles bestowed
as trophies or prizes or those received or accepted as
honorary distinction.
5. Personal and household efects belonging to residents of
the Philippines returning from abroad, including jewelry,
precious stones and other articles of luxury, which were
formally declared and listed before departure.

Returning residents should have stayed out of the


country for at least 6 months.

OCWs may bring in used home appliances,


limited to one of every kinds, once a year, within
60 days from their return. However, when the
amount of the articles have exceeded P10, 000
the excess shall be subject to tax.

6. Personal and household efects and vehicles belonging to


foreign consultants and experts hired by, and/or
rendering service to, the government and their staf or
personal and families.
7. Professional instruments and implements, tools of trade,
occupation or employment, wearing apparel, domestic
animals, and personal and household efects belonging to
persons coming to settle in the Philippines or Filipinos
and/or their families and descendants who are now
residents or citizens of other countries, such parties
hereinafter referred to as overseas Filipinos, in quantities
and of the class suitable to the profession, rank or

TARIFF AND CUSTOMS LAWS. Page 3 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 4
position of the person importing them, for their own use
and not for barter or sale, accompanying such persons,
or arriving after within a reasonable time.
8. Importation for the use of foreign embassies, legations,
and other agencies of foreign governments which accord
the same privilege to the corresponding agencies of the
Philippines in their countries.
9. Imported articles donated to, or for the account of, any
duly registered relief organization, not operated for profit,
for free distribution among the needy, upon certification
by the DSWD or DECS as the case may be.
10. Animals (except race horses) and plants for scientific,
experimental,
propagation,
botanical,
breeding,
zoological and national defense purposes.

Basis of dutiable value


The dutiable value of an imported article subject to an Ad
Valorem rate of duty shall be the transaction value.

Classification of custom duties


1. Ordinary or regular customs duties
> Imposed and collected merely as a source of revenue.

Kinds of ordinary or regular customs duties


1. Ad valorem
> The duty is based on the market value of the price of
the imported article.
2. Specific
> The duty is based on the weight or volume of the
imported article.

Republic Act No. 8181 mandated the change of basis of


the dutiable value from the home consumption value to
the transaction value by January 1, 2000. Before such
date, export value was used as the basis for the
determination of the dutiable value as a transitional
device.

TRANSACTION VALUE
Transaction value is the price actually paid or payable for
the goods when sold for export to the Philippines.

KINDS OF DUTIES

2. Special customs duties


> Imposed and collected in addition to ordinary customs
duties usually protect local industries against foreign
competition.

JUICY NOTES

It is adjusted by adding certain expenses to the extent


that they are incurred by the buyer but are not included
in the price actually paid or payable for the imported
goods, i.e. commissions and brokerage fees; the value of
the materials, components, parts and items incorporated
in the imported goods; amount of royalties and license
fees; cost of transport; loading, unloading and handling
charges; and cost of insurance.

EXPORT VALUE
Export value is that which, at the time of exportation, the
same or identical, like or similar article is freely ofered
for sale in the principal export markets of the exporting
country for exportation to the Philippines, in the usual
wholesale quantities and in the ordinary course of trade
(excluding internal excise taxes to be remitted or
rebated).

Wholesale price in principal export markets of the


exporting country.

HOME CONSUMPTION VALUE


Wholesale price of goods in market of exporting country.
Procedure for determination of dutiable value

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

TARIFF AND CUSTOMS LAWS. Page 4 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 5
1. Determined by the declared value of the imported goods
by the importer.
2. If Commissioner of Customs has reason to doubt the truth
or accuracy of the declaration or documents provided in
support of the declared value of importation, he may
require the importer to give further explanation and
submit additional documents.
3. If Commissioner still has reasonable doubt as to the
accuracy of the declared value after the explanation and
additional documents are given, he may apply two
alternative methods, to wit:
a. The dutiable value shall be the transaction value of
identical goods sold for export to the Philippines at
or about the date of the exportation of the goods
being valued; or
b. If the dutiable value cannot be determined under the
preceding method, it shall be the transaction
value of similar goods sold for export to the
Philippines at or about the date of exportation of
the goods being valued.
4. If still not able to determine the dutiable value:
a. The unit price at which the imported goods or
identical or similar goods are sold domestically, in the
same condition as when imported, in the greatest
aggregate quantity, to persons not related to the
seller, at or about the time of the importation of the
goods being valued;
b. The computed value; or
c. Any other reasonable means consistent with GATT.
Reiteration of the sequence in determination of value
1st - Transaction value
2nd - Transaction value of identical goods
3rd - Transaction value of similar goods

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

JUICY NOTES

4th - Deductive value


5th - Computed value
6th - Other reasonable means or fallback value
IDENTICAL GOODS
Identical goods mean goods which are the same in all
respects, including physical characteristic, quality and
reputation.

Minor diferences in appearances shall not preclude


goods otherwise conforming to the definition from being
regarded as identical.

Should be from the same country, and the same


producer.

SIMILAR GOODS
Similar goods mean 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.
Reasonable doubt
Reasonable doubt refers to any condition that creates a
probable cause to make the Commissioner of Customs
believe in the inaccuracy of the invoice value of the
imported goods, as reflected by the importer in his
customs declaration, for valuation purposes.

Such condition may include, but is not limited to, any of


the following conditions:

1. If the sale or price is subject to some consideration for


which a value cannot be determined with respect to the
goods being valued; or
2. If part of the proceeds of any subsequent resale, disposal
or use of the goods by the buyer will accrue directly or
indirectly to the seller, unless an appropriate adjustment
can be made; or

TARIFF AND CUSTOMS LAWS. Page 5 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 6
3. If the buyer and the seller are related to one another, and
such relationship influenced the price of the goods.
RELATED SELLERS AND BUYERS
1. Officers or directors of one anothers businesses.
2. Legally recognized partners in business.
3. Employer and employee.
4. Any person who directly or indirectly owns, controls or
holds 5 % or more of the outstanding voting stock or
shares of both seller and buyer.
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 control a third person.
8. Members of the same family including brothers and
sisters (whether full or half-blood), spouse, ancestors,
and lineal descendants.
Basis
1.
2.
3.

for dutiable weight for specific customs duties


Gross weight
Legal weight
Net weight

KINDS OF SPECIAL CUSTOMS DUTIES


1. Dumping duty
2. Countervailing duty
3. Marking duty
4. Retaliatory duty or discriminatory duty
5. Duties imposed under the Flexible Tarif Clause
DUMPING DUTY
Duty imposed on a specific kind or class of foreign article
which is being imported into, or sold, or is likely to be
sold for export to or in the Philippines at a price less than
the fair value, the importation or sale of which might
injure or retard the establishment of an industry

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

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producing like goods in the Philippines, [Sec. 301, Tarif


and Customs Cods]
Dumping duty duty levied on imported goods where it appears
that a specific kind or class of foreign article being imported into
or sold is likely to be sold in the Phils. at a price less than its fair
value.

Imposed on specific kind or class of foreign article


which is being imported into, or sold or is likely to
be sold for exportation to or in the Phils. at a price
less than its fair value, the importation or sale of
which is likely to injure an industry imposing like
goods in the Philippines.

The duty is equal to the diference between the


actual purchase price and the fair value of the
articles in question in the country or exportation
as determined by the Sec. of Finance.

These are special duties imposed on imported articles.


This may be imposed subject to the f. requisites:
1. There must be a deliberate and continuous sale of imported
article in the Philippines as price lower than the prices in the
exporting country.
2. This must prejudice or cause or likely to cause injury to our
local industry.
Situation:
There are articles of foreign origin the prevailing
price of which in the US is equivalent to P100. These articles are
sold or dumped in the Phils. at lower than the prevailing price in
the US because they are saleable in the U.S.
So, this will prejudice our local industries. In order to
protect our local product or to discourage people from buying
this imported product, we should be impose special duties in
addition to the regular duties. Dumping duties should be
imposed.

TARIFF AND CUSTOMS LAWS. Page 6 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 7
COUNTERVAILING DUTY
Duty imposed on articles, upon the production,
manufacture or export of which any bounty or subsidy is
directly or indirectly granted in the country of origin
and/or exportation, and the exportation of which into the
Philippines will likely injure an industry in the Philippines
or retard or considerably retard the establishment of such
industry, [Sec. 302, Tarif and Customs Code].

Bounty is the cash award paid to an exporter or


manufacturer while subsidy refers to fiscal incentives, not
in the form of direct cash award, to encourage
manufacturers; or

The duty is equal to the ascertained or estimated amount


to the bounty or subsidy

Countervailing duty duty equal to the ascertained or estimated


amount of the subdsidy or bounty or subvention granted by the
foreign country on the production, manufacture, or exportation
into the Phils. of any article likely to injure an industry in the
Phils. or retard or considerably retard the establishment of such
industry.

Imposed on articles, upon the production,


manufacture or export of which any bounty or
subsidy is directly or indirectly, granted in the
country of origin and/exportation. No need to
show proof that the imports cause injuries to
domestic industries producing the same products.
The duty is equal to the ascertained or estimated
amount of the bounty or subsidy given.

Situation:
Sometimes imported products enjoys certain
subsidy from their government. So, they have an advantage.
Our local products for example, does not enjoy similar subsidy.
We should counter that advantage by imposing countervailing
duties. The purpose there is to protect our local products against
unfair competition.

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

JUICY NOTES

This represents the inland excise tax on locally


manufactured articles of the same kind to of-set this advantage.
As regards dumping duties, the extent of the special duty
is the amount that represents under-pricing.
As regards countervailing duties, the extent is the excise
inland tax or the amount of advantage enjoyed by that imported
article.
MARKING DUTY
Duty imposed on imported articles or containers which
have not been property marked in any official language
of the Philippines as to indicate the name of the country
or origin of the article. The purpose is to prevent the
deception of consumers. [Sec. 303, Tarif and Customs
Code].

The rate is 5% ad valorem.

The articles shall be deemed abandoned upon failure to


mark them within 30 days from notice.

Marking duty duty on ad valorem basis imposed for improperly


marked articles. The requirement that foreign importation must
be marked in any official language of the Phils., the name of the
country of origin of the article.

The purpose is to prevent deception of


consumers.
The articles must be properly marked, otherwise a
special duty of 5% of the value shall be imposed.

RETALIATORY DUTY
Duty imposed upon articles of a foreign country which
discriminates against Philippine commerce in such a
manner as to place it at a disadvantage compared with
the commerce of another foreign country, [Sec. 304,
Tarif and Customs Code].

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 8
Retaliatory or Discriminatory duty duty imposed on
imported goods whenever it is found as a fact that the country
of origin discriminates against the commerce of the Philippines
in such manner as to place it at a disadvantage compared with
the commerce of any foreign country.

The amount may be increased in an amount not


exceeding 100% ad valorem when the President
finds the public interest may be served thereby.

This may be imposed by the President of the


Philippines when our goods are discriminated
against.

As regards dumping, countervailing and marking


duties, it is the Sec of
Finance, upon
recommendation of the Tarif Commission, who
may impose these duties.

Question:
What is the extent of the flexible power of the
President of the Phils. under the TCC?
Answer:
That includes the power to impose discriminatory
duties. The President upon recommendation of the Tarif
Commission may increase the tarif rates by not more than 5x or
meaning 500x of the tarif rates. He may also decrease the tarif
rates by not less than 50%.
He can only exercise these powers in the interest of the
national economy, national security and general welfare of the
people.
DRAWBACKS
A drawback is a device resorted to for enabling a
commodity afected by taxes to be exported and sold in
foreign markets upon the same terms as if it had not
been taxed at all. It may be full or partial.

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

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The return of 99% of customs paid on imported articles


when they are re-exported forming part of domestically
produced articles.

The refund of 99% duty on imported fund when used for


propulsion vessels engaged in the foreign or coastwise
trade.

When drawbacks allowed


Drawbacks are allowed on the following commodities:
1. Fuel used on propulsion vessels;
2. Petroleum oils and oils obtained from bituminous
minerals, etc., eventually used for generation of
electric power and manufacture of city gas; and
3. Articles made of imported materials upon the
exportation of articles manufactured or produced
in the Philippines subject to certain conditions.
Other
1.
2.
3.
4.
5.
6.
7.

customs fees, dues, or charges payable


Harbor fees
Wharfage dues
Berthing fees
Storage charges
Arrastre charges
Tonnage dues
Other fees and charges

Harbor fees
Harbor fees are imposed on vessels entering into or
departing from a port of entry of the Philippines.
Wharfage dues
Wharfage dues are assessed against the cargo of a
vessel engaged in foreign or coastwise trade, based in
the quantity weight or measure received and/or
discharged by such vessel.

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 9
Berthing fees
Berthing fees are assessed against a vessel for mooring
or berthing at a pier, wharf, or river at any port in the
Philippines.
Storage charges
Storage charges are assessed on articles for storage in
customs premises, cargo sheds and warehouses.
Arrastre charges
Arrastre charges are imposed on all imported and
exported articles and baggage of passengers for their
handling, receiving and custody.
Tonnage dues
Tonnage dues are paid by the owner, agent, operator or
master of a vessel engaged in foreign trade based on the
net tonnage of the vessel or weight of the articles
discharged or laden.
Other fees and charges
Charged and collected for services rendered
documents issued by the Bureau of Customs.

and

REQUIREMENTS OF IMPORTATION UNDER THE TARIFF AND


CUSTOMS CODE
Liability of importer of duties
The Code provides that all articles imported into the
Philippines shall be held to be the property of the person
to whom the same are consigned; and the holder of a boll
of lading duly endorsed by the consignee therein named,
or if consigned to order by the consignor, shall be
deemed the consignee thereof. The underwriters of
abandoned articles and the salvors of articles saved from
a wreck at sea, along a coast, or in any area of the
Philippines, may be regarded as the consignees, [Sec.
1203, Tarif and Customs Code].

Unless otherwise relieved by laws or regulations, the


liability for duties, taxes, fees and other charges

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

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attaching on importation constitutes a personal debt due


from the importer to the government which can be
discharged only by payment in full of said duties and
charges.

It also constitutes a lien upon the articles imported which


may be enforced which such articles are in custody or
subject to the control of the government.

GOVERNMENT IMPORTATIONS
All importations by the government for its own use or
that of its subordinate branches or instrumentalities, or
corporations, agencies or instrumentalities owned or
controlled by the government shall be subject to the
duties, taxes, and other charges provided in the Tarif and
Customs Code, [Sec. 1205 Tarif and Customs Code].
When importation begins and when deemed terminated
Importation begins when carrying vessel or aircraft enters
the jurisdiction of the Philippines with an intent to unload.

Importation terminates upon payment of the duties and


other charges due upon the articles, or secured to be
paid, at the port of entry and the legal permit for
withdrawal shall have been granted.

In the case of articles that are free of duties, taxes and


other charges, importation is deemed terminated from
the time they have legally left the jurisdiction of the
customs.

Entry through customhouse


All articles imported into the Philippines, whether subject
to duty or note, shall be entered through a customhouse
at a port of entry. [Section 1201, Tarif and Customs
Code]

A port of entry means a domestic port open to both


foreign and coastwise trade, including airport of entry.
[Section 3514, Tarif and Customs Code]

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 10
Cargo manifest
All cargo, exported or imported, shall be included in the
cargo manifest, except the ships stores.

Commissioner v. Delgado: The evident purpose of the


provision requiring vessels to declare the correct weight
of their cargo is to curb smuggling due to
underdeclarations. Hence, imposing the maximum fine
on vessels which grossly fail to comply with the obligation
to declare the correct weight of their cargo truly
promotes the spirit and purpose of the law, since
imposing a minimum fine would only embolden would be
smugglers and foster negligence on the part of the
master of the vessel in checking the true weight of the
cargo.

Import entry
A declaration to the Bureau of Customs showing the
description, value, tarif classification and other
particulars of the imported article to enable the customs
authorities to determine the correct customs duties and
internal revenue taxes due on the importation.
Person authorized to make an import entry
1. Importer, being the holder of the bill of lading
2. A duly licensed customs broker, acting under
authority from the holder of a bill of lading
3. A duly empowered agent or attorney in fact for each
holder of a bill of lading
Import entry filed by person other than importer
If filed by a party other than the importer, the importer
himself is required to declare under oath and under
penalties of falsification or perjury that the declarations
and statements contained in the entry are true and
correct. Such statements constitute prima facie evidence
of knowledge and consent of the importer.
Period for filing of import entry

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Within thirty (30) days from the date of discharge of the


last package from the vessel.

ABANDONMENT
Abandonment is the renunciation by an importer of all his
interests and property rights in the imported article.

It may be express or implied.

Express abandonment
When the owner, importer or consignee of the imported
article expressly signifies in writing and under oath to the
Collector of Customs his intention to abandon his
shipment in favor of the government, within ten days
after filing of the import entry, he shall be relieved from
payment of duties, taxes and other charges and
expenses.

Article shall be delivered by the owner, importer or


consignee at such place which the Collector designates;
failure to comply shall make him liable for expenses that
may be incurred in connection with the disposition
thereof.

Implied abandonment
1. When the owner, importer, consignee or interested party,
after due notice, fails to file an entry within thirty (30)
days, which shall not be extendible, from the date of
discharge of the last package from the vessel or aircraft;
OR
2. Having filed an entry for his shipment, the owner,
importer or consignee, or other interested party fails to
claim his importation within fifteen (15) days, which shall
not be extendible, from the date of posting of the notice
to claim such importation.
Effects of abandonment

TARIFF AND CUSTOMS LAWS. Page 10 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 11
1. Owner, importer, consignee or other interested party
deemed to have renounced all of his interests and
property rights over the articles.
2. Abandoned article shall be ipso facto deemed the
property of the government and shall be disposed of in
accordance with the provisions of the Code.
3. It does not relieve owner or importer from any criminal
liability which may arise from any violation of law
committed in connection with the importation of the
abandoned article.
Smuggling or unlawful importation
Any person who shall fraudulently import or bring into the
Philippines, or assist in doing so, any article, contrary to
law, or shall receive, conceal, buy, sell, or in any manner
facilitate the transportation, concealment, or sale of such
article after importation, knowing the same to have been
imported contrary to law, shall be guilty of smuggling.

After
importation,
the
act
of
facilitating
the
transportation, concealment or sale of the unlawfully
imported article must be with the knowledge that the
article was smuggled.
However, upon trial, if the
defendant is found to have been in possession of such
article, this shall be sufficient to authorize the conviction
unless the defendant explains his possession to the
satisfaction of the court.

Fraudulent practices against customs revenue under


Section 3602
1. Entry of imported or exported articles by means of any
false or fraudulent invoice
2. Entry of goods at less than the true weight or measure.
3. Filing of any false or fraudulent entry for the payment of
drawbacks or refund of duties.

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

Three
1.
2.
3.

JUICY NOTES

meanings of term entry


Documents filed at the Customs House
Submission and acceptance of the documents
Procedure of passing the goods through the Customs
House

ADMINISTRATION
Who is in charge?
The offices charged with the administration and
enforcement of the law are the Tarif Commission and the
Bureau of Customs.
Functions of the Tariff Commission
The Commission shall investigate:
1. The administration of and the fiscal and industrial
efects of the countrys tarif and customs laws;
2. The relations between the rates of duty on raw
materials and finished or partly finished goods;
3. The efects of ad valorem and specific duties and of
compound specific and ad valorem duties;
4. All questions relative to the arrangement of
schedules and classifications of articles under the
tarif law;
5. The tarif relations between the Philippines and
foreign countries, commercial treaties, etc.
6. The volume of importations compared
domestic production and consumption;

with

7. Conditions, causes and efects relating to


competition of foreign industries with those of the
Philippines;
8. In general, to investigate the operation of customs
and tarif laws and to submit report of its
investigations; and

TARIFF AND CUSTOMS LAWS. Page 11 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 12
9. The nature, composition, and classification of
articles for customs revenue and other related
purposes which shall be furnished no NEDA, Board
of Investments, Central Bank and the Secretary of
Finance.
Duties, powers and jurisdiction of the Bureau of Customs
1. The assessment and collection of the lawful revenues
from imported articles and all other dues, fees, charges,
fines and penalties accruing under the tarif and customs
laws.

JUICY NOTES

IN GENERAL
Remedies available to the government
1. Seizure and forfeiture of goods and commodities
2. Judicial action against the taxpayer
Tax Remedies under the Tariff and Customs Code:

Remedies

Government

Impor

2. The prevention and suppression of smuggling and other


frauds upon the customs.

(1) Administrative or
extra-judicial

(a) Enforcement of tax lien


(b) Seizure

(a) Tax refund


(b) Abandonem
(c) Protest

3. The supervision and control over the entrance and


clearance of vessels and aircraft engaged in foreign
commerce.

(2) Judicial

(a) Filing of civil action


(b) Filing of criminal action
if there is fraud and it
must be serious

(a) Appeal to C
(b) Filing of cri
action again
Customs

4. The enforcement of tarif and customs laws and all other


laws, rules and regulations relating to tarif and customs
administration.
5. The supervision and control over the handling of foreign
mails arriving in the Philippines, for the purpose of the
collection of the lawful duty on the dutiable articles thus
imported and the prevention of smuggling through the
medium of such mails.
6. Supervision and control over 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.
7. Exclusive original jurisdiction over seizure and forfeiture
cases under the tarif and customs laws.

TAX REMEDIES

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

Cases arising under the tariff and customs code


1. Customs protest cases or those where the importer
questions the legality of the assessment and collection of
customs duties and other fees or charges. The issue
involved in these cases generally relates to the
correctness of the appraisal and/or classification of
imported goods.
2. Seizure and forfeiture cases or those where goods or
merchandise are ordered seized by customs authorities
and made subject to the penalty of forfeiture or fine for
violation of the customs laws. Here, the issue involved is
the legality of the importation of goods either because
the goods are in themselves prohibited importations or
their importation of efected contrary to law.
CUSTOMS PROTEST CASES
Procedure on customs protest cases

TARIFF AND CUSTOMS LAWS. Page 12 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 13
1. Firs of all, the Collector shall cause all articles entering
the jurisdiction of his district and destined for importation
through his port to be entered at the customhouse. He
shall cause all such articles to be appraised and
classified, and shall assess and collect the duties, taxes,
and other charges thereon, and shall hold possession of
all imported articles, upon which duties, taxes, and other
charges have not been paid or secured to be paid,
disposing of the same according to law. [Section 1206,
Tarif and Customs Code]
2. The party adversely afected by the ruling or decision of
the Collector whereby liability for duties, taxes, fees or
other charges are determined, may protest such ruling or
decision. [Section 2308, Tarif and Customs Code]
3. The protest, which must be in writing, is filed with the
Collector within fifteen (15) days. No protest shall be
considered unless payment of the amount due after final
liquidation (i.e. computation of the liability) has first been
made and the corresponding docket fee actually paid.
4. Every protest shall be filed in accordance with rules and
regulations promulgated for the purpose, and shall point
out the particular decision or ruling of the Collector to
which exception is taken or objection made, and shall
indicate with reasonable precision the particular ground
or grounds upon which the protesting party bases his
claim for relief. [Section 2310, Tarif and Customs Code]
5. The scope of a protest shall be limited to the subject
matter of a single adjustment or other independent
transaction; but any number of issues may be raised in a
protest with reference to the particular item or items
constituting the subject matter of the protest. Single
adjustment refers to the entire content of one liquidation,
including all duties, fees, surcharges or fines incident
thereto. [Section 2310, Tarif and Customs Code]

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

JUICY NOTES

6. When a protest in form is presented, the Collector shall


issue an order for hearing within fifteen (15) days from
receipt of the protest and hear the matter thus
presented. Upon the termination of the hearing, the
Collector shall render a decision within thirty (30) days,
and if the protest is sustained in whole or in part, he shall
make the appropriate order, the entry re-liquidated if
necessary.
7. The person aggrieved by the decision or action of the
Collector in any matter presented upon protest may
within fifteen (15) days after notification in writing by the
Collector of his action or decision, give written notice to
the Collector and one copy furnished to the
Commissioner of his desire to have the matter reviewed
by the Commissioner. Thereupon, the Collector shall
forthwith transmit all records of the proceedings to the
Commissioner, who shall approve, modify, or reverse the
action or decision of the Collector and take such steps
and make such orders as may be necessary to give efect
to his decision. [Section 2313, Tarif and Customs Code]
8. If in any case involving the assessment of duties, the
Collector renders a decision adverse to the Government,
such decision shall automatically be elevated to, and
reviewed by the Commissioner; and if the Collectors
decision would be affirmed by the Commissioner, such
decision shall automatically be elevated to, and be finally
reviewed by, the Secretary of Finance. However, if within
thirty (30) days form the receipt of the record of the case
by the Commissioner or by the Secretary of Finance, as
the case may be, no decision is rendered by either of
them, the decision under review shall become final and
executory. Any party aggrieved by either the decision of
the Commissioner or the Secretary of Finance may
appeal to the Court of Tax Appeals within thirty (30) days
from receipt of a copy of such decision. [Section 2315,
Tarif and Customs Code]

TARIFF AND CUSTOMS LAWS. Page 13 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 14
Incidentally, in case of appeals to the Court of Tax
Appeals from the decisions of the Secretary of Finance as a
consequence of the automatic review by the Secretary of
Finance of decisions emanating form Customs, the thirty-day
period of appeal under Republic Act No. 1125 will necessarily be
counted from the receipt of the decision of the Secretary of
Finance.
PROCEDURE IN PROTEST
Remedy
(1) File a protest

(2) If protest is
denied, Appeal
collectors ruling
(3) If CC affirm
collectors ruling,
Appeal
(4) If CTA affirm
collectors ruling,
Appeal
(5) If CA affirm
CTA, Appeal

Where
to file
Collecto
r
of
Custom
s

[Issues which
may be raised]
(a) Validity if the
assessment
or
collection
(b) Validity of
classification of
articles

Custom
s
Commis
sioner
(CC)

Questions of fact
or Question of
law

CT

Question of fact
or Question of
law

Question of fact
or
Question of law
Question of law

Prescriptive
Period
15 days from
the payment
of
Customs
duties
Within
15
days
from
receipt of the
Collectors
ruling
Within
30
days
from
receipt of the
decision
of
the CC.
Within
15
days
from
receipt of CTA
decision
Within
15
days
from
receipt of CA
decision

Automatic
review
and
supervisory
authority
Commissioner and Customs and Secretary of Finance

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

of

JUICY NOTES

If in any case involving the assessment of duties, the


Collector renders a decision adverse to the government;
such decision shall automatically be elevated to, and
reviewed, by the Commissioner.

If the Collectors decision would be affirmed by the


Commissioner, such decision shall be automatically elevated to,
and finally reviewed, by the Secretary of Finance.
However, if within thirty (30) days form receipt of the
record of the case by the Commissioner or the Secretary of
Finance, as the case may be, no decision is rendered by either or
them, the decision under review shall become final and
executory.
Any party aggrieved by either the decision of the
Commissioner or the Secretary of Finance may appeal to the
Court of Tax Appeals within thirty (30) days from receipt of a
copy of such decision.
Except as provided above, the supervisory authority of
the Secretary of Finance over the Bureau of Customs does not
extend to the administrative review of the ruling of the
Commissioner in matters appealed to the Court of Tax Appeals.

Automatic review is intended to protect the interest of


the government in the collection of taxes and customs
duties in seizure and protest cases which, without such
review, neither the Commissioner nor the Secretary of
Finance would probably know about.

Automatic review as a procedural rule applies to both


customs cases and seizure and forfeiture cases incident
to smuggling or unlawful importation or exportation.

Likewise, supervisory authority is exercised by the


Commissioner on seizure and forfeiture cases while the
case is still pending in the Office of the Collector of
Customs and before the decision of the Collector
becomes final.

TARIFF AND CUSTOMS LAWS. Page 14 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 15
Burden of proof in protest cases
In protest cases, the protestant has the burden of proving
the correctness of his contention for the issue is not
whether the Collector was wrong but whether the
importer is right.

SEIZURE AND FORFEITURE CASES


Nature of seizure and forfeiture proceedings
Proceedings in seizure cases are actions in rem directed
against the property seized, against the owner thereof.
Forfeiture proceedings are civil and are not criminal in
nature.
Proof beyond reasonable doubt is not required to warrant
forfeiture.
A customs seizure and forfeiture case is administrative
and civil in nature and is directed against the res or
imported articles and entails a determination of the
legality of their importation.
[Commissioner of
Customs v. Makasiar, GR No. 79307, August 29, 1989]
Forfeiture is in the nature of proceedings in rem and is
directed against the res. The fact that the owner of the
vessel had no actual knowledge that the vessel was
illegally used does not render the vessel immune from
forfeiture. This is so because forfeiture action is against
the vessel itself. [Vierneza v. Commissioner, 24 SCRA
294]
Doctrine of primary jurisdiction over seizure and
forfeiture cases
[Rallos v. Gako Doctrine 344 SCRA 178]
The prevailing doctrine is that the exclusive jurisdiction in
seizure and forfeiture cases vested in the Collector of

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

JUICY NOTES

Customs precludes a regular court from assuming


cognizance of such matter.
It is the settled rule that the Bureau of Customs acquires
exclusive jurisdiction over imported goods, for the
purpose of enforcement of the customs laws, from the
moment the goods are actually in its possession or
control, even if no warrant of seizure or detention had
previously been issued by the Collector of Customs in
connection with seizure and forfeiture proceedings.

Jurisdiction of the Bureau of Customs


The Bureau of Customs has the right of supervision and
police authority over all seas within the jurisdiction of the
Philippines and over all coasts, ports, airports, harbors,
bays, rivers and inland waters whether navigable from
the sea or not. [Section 603, Tarif and Customs Code]

When a vessel becomes subject to seizure by reason of


an act done in Philippine waters in violation of the tarif
and customs laws, a pursuit of such vessel begun within
the jurisdictional waters may continue beyond the
maritime zone, and the vessel may be seized on the high
seas. [Section 603, Tarif and Customs Code]
Imported articles which may be subject to seizure for
violation of tarif and customs laws may be pursued in
their transportation in the Philippines by land, water, or
air, and such jurisdiction exerted over them at any place
therein as may be necessary for the due enforcement of
the law.
In Asaali v. Commissioner [27 SCRA 312], the Supreme
Court held as valid the interception and seizure of a
vessel on the high seas, saying that the authority of a
nation within its territory is absolute and exclusive. The
power to secure itself form injury may certainly be
exercised beyond the limits of its territory.

Places where searches and seizures may be conducted


1. Right of police officer to enter enclosure without a
warrant, except a dwelling house
2. Search of dwelling house must be with proper warrant

TARIFF AND CUSTOMS LAWS. Page 15 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 16
3. Right to search vehicles or aircrafts and persons or
articles conveyed therein
4. Right to search vehicles, beasts and persons
5. Search of persons arriving from foreign countries
Right of police officer to enter enclosure without a
warrant
Any person exercising the police powers conferred under
said Code may at any time enter, pass through, or search
any land or enclosure or any warehouse, store or other
building, not being a dwelling house.
A warehouse, store or other building or enclosure used
for the keeping or storage of articles does not become a
dwelling house within the meaning hereof by reason of
the fact that a person employed as watchman lives in the
place, nor will the fact that his family stays therein with
him alter the case.

Search of dwelling house


A dwelling house may be entered and searched only
upon warrant issued by a judge of the court, upon sworn
application showing probably cause and particularly
describing the place to be searched and person or thing
to be seized.
Right to search vessels or aircraft and persons or articles
conveyed therein
It shall be lawful for any official or person exercising
police authority under the Tarif and Customs Code to go
aboard any vessel or aircraft within the limits of any
collection district, and to inspect, search and examine
said vessel or aircraft and any trunk, package, box or
envelope on board and to search any person on board
the said vessel or aircraft if under way, to use all
necessary force to compel compliance.
If it shall appear that any breach or violation of the
customs and tarif laws of the Philippines has been

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

JUICY NOTES

committed, whereby or in consequence of which such


vessels or aircraft, or the article, or any part thereof, on
board of or imported by such vessels or aircraft is liable
to forfeiture to make seizure of the same or any part
thereof.
The power of search hereinabove given shall extend to
the removal of any false bottom, partition, bulkhead or
other obstruction, so far as may be necessary to enable
the officer to discover whether any dutiable of forfeiture
articles may be concealed therein.
No proceeding herein shall give rise to any claim for the
damage thereby caused to article or vessel or aircraft.
It is not necessary that the vessel or aircraft is actually
carrying contraband.
It is not also essential that the vessel or aircraft come
from a foreign country.

Right to search vehicles, beasts and persons


It shall also be lawful for a person exercising authority as
aforesaid to open and examine any box, trunk, envelope
or other container, wherever found when he has
reasonable cause to suspect the presence therein of
dutiable or prohibited article or article introduced in the
Philippines contrary to law, and likewise to stop, search
and examine any vehicle, beast of person reasonably
suspected of holding or conveying such articles as
aforesaid.
Search of persons arriving from foreign countries
All persons coming into the Philippines from foreign
countries shall be liable to detention and search by the
customs authorities under such regulations as may be
prescribed relative thereto.
Procedure governing seizure and forfeiture cases
1. Warrant for detention of property. Bond.
Upon making any seizure, the Collector shall issue a
warrant for the detention of the property; and if the owner or
importer desires to secure the release of the property for
legitimate use, the Collector may surrender it upon the filing of a

TARIFF AND CUSTOMS LAWS. Page 16 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 17
sufficient bond, in an amount to be fixed by him, conditioned for
the payment of the appraised value of the article and/or any
fine, expenses and costs which may be adjudged in the case:
Provided that articles the importation of which is prohibited by
law shall not be released under bond.
2. Report seizure to Commissioner and Chairman,
Commission on Audit
3. Notification to owner or importer
4. Notification to unknown owner
5. Description, appraisal and classification of seized
property
6. Proceedings in case of property belonging to unknown
parties
7. Settlement of case by payment of fine or redemption of
forfeited property
Subject to approval of the Commissioner, the district
collector may, 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
ofer to pay to the collector a fine imposed by him upon the
property, or in case of forfeiture, the owner, exporter, importer
or consignee or his agent shall ofer to pay the domestic market
value of the seized article. The Commissioner may accept the
settlement of any seizure case on appeal in the same manner.
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.
8. Decision or action by collector in protests and seizure
cases
9. Review by Commissioner
The person aggrieved by the decision or action of the
Collector in any matter presented upon protest or by his action
in any case of seizure may, within fifteen (15) days after
notification in writing by the Collector of his action or decision,
give written notice to the Collector and one copy furnished to
the Commissioner of his desire to have the matter reviewed by
the Commissioner. Thereupon, the Collector shall forthwith
transmit all the records of the proceedings to the Commissioner,
who shall approve, modify or reverse the action or decision of

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

JUICY NOTES

the Collector and take such steps and make such orders as may
be necessary to give efect to his decision.
10. Notice of decision of Commissioner
Decision of the Commissioner of Customs shall be
appealed to the Court of Tax Appeals within thirty (30) days after
receipt of the decision. In case of automatic reviews, the
decision of the Secretary of Finance shall be appealed within the
same period after receipt of the decision of the Secretary.
11. Supervisory authority of Commissioner and of Secretary
of Finance in certain cases. Automatic review by the
Commissioner and Secretary on certain cases.
12. Authority of Commissioner to make compromise
Subject to the approval of the Secretary of Finance, the
Commissioner of Customs may compromise any case arising
under the Code or other laws or part of laws enforced by the
Bureau of Customs involving the imposition of fines, surcharges
and forfeitures unless otherwise specified by law.
Property not subject to forfeiture
The forfeiture of the vehicle, vessel, or aircraft shall not
be efected if it is established that the owner thereof or
his agent in charge of the means of conveyance used as
aforesaid has no knowledge of or participation in the
unlawful act.
However, a prima facie presumption shall exist against
the vessel, vehicle or aircraft under any of the following
circumstances:
1. If the conveyance has been used for smuggling at
least twice before;
2. If the owner is not in the business for which the
conveyance is generally used; and
3. It the owner is not financially in a position to own
such conveyance.
Burden of proof in seizure and/or forfeiture
In all proceedings taken for the seizure and/or forfeiture
of any vessel, vehicle, aircraft, beast or articles under the
provisions of the tarif and customs laws, the burden of
proof shall lie upon the claimant. Provided that probable
cause shall be first shown for the institution of such

TARIFF AND CUSTOMS LAWS. Page 17 of 18

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
(PROF. CABANEIRO) A2011 18

JUICY NOTES

proceedings and that seizure and/or forfeiture was


property made.

given the opportunity to prove or show the source of such


articles and the payment of duties and taxes thereon.

Commissioner of Customs v. Manila Star Ferry GR# L


31776-78
It is not a defense that the owner of the vessel sough to
be forfeited had no actual knowledge that his property
was used illegaly

Redemption of forfeited property


As a means of settlement, redemption of forfeited
property is not available when:
a.
When there is fraud.
b.
When the importation is absolutely prohibited
c.
When the release of property would be contrary to
law.

Seizure of other articles


The Commissioner of Customs and Collector of Customs
and/or any other customs office, with the prior
authorization in writing by the Commissioner, may
demand evidence of payment of duties and taxes on
foreign articles openly ofered for sale or kept in storage,
an dif no such evidence can be produced, such articles
may be seized and subjected to forfeiture proceedings.
Provided that during such proceedings, the person or
entity for whom such articles have been seized shall be

TARIFF AND CUSTOMS CODE (VITUG AQUINO)

Extent of Importers liability


The liability of an 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.

TARIFF AND CUSTOMS LAWS. Page 18 of 18

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