Customs Modernization and Tariff Act Airfreight and Related Provisions

REPUBLIC OF THE PHILIPPINES
DEPARTMENT OF FINANCE
BUREAU OF CUSTOMS
MANILA 1099
AIRFREIGHT AND RELATED CMTA

PROVISIONS
1
BUREAU OF CUSTOMS
MANILA 1099
AIRFREIGHT – TRANSACTION VALUE

SECTION 701, Paragraph 5 (CMTA)
In determining the transaction value, the following shall be added to the
price actually paid or payable for the imported goods:
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3. Cost of Transport of the imported goods from the port of

exportation to the port of entry in the Philippines;
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2
BUREAU OF CUSTOMS
MANILA 1099
The INVOICE AND GOODS DECLARATION MUST CONTAIN THE

FOLLOWING:
ACCURATE AND FAITHFUL ACCOUNT OF THE PRICES PAID OR PAYABLE FOR THE GOODS,
AND OTHERADJUSTMENTS (cost of transport, FREIGHT) TO
THE PRICE ACTUALLY PAID OR PAYABLE FOR THE GOODS AND THE ADJUSTMENTS AND
NOTHING HAS BEEN OMITTED THEREFROM OR CONCEALED WHEREBY THE
GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES MIGHT BE DEFRAUDED OF ANY
PART OF THE DUTIES AND TAXES LAWFULLY DUE ON THE GOODS.
SECTION 412. Paragraph 1 of the Customs Modernization and Tariff Act
3
BUREAU OF CUSTOMS
MANILA 1099
The INVOICE AND GOODS DECLARATION SHALL:
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(b.) To the best of the declarant’s information and belief, all the invoices and bills
of lading or airway bills relating to the goods are the only ones in existence
relating to the importation in question, and that these documents are in the same
state as when they were received by the declarant, and the declaration thereon
are in all respects genuine and true.
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4
BUREAU OF CUSTOMS
MANILA 1099
COMMERCIAL AND NON-COMMERCIAL INVOICE – Commercial invoice of

imported goods shall contain the following:
a. The agreed price or to be paid for the goods;

b. The adjustments to the price paid or to be paid as defined in Section 701 (I)
of this Act, if not yet included in the invoice, as may be applicable.
c. The names of the buyer, seller, and the time and place of sale;
d. The port of entry;
e. A sufficient description to enable the accurate identification of goods for
tariff classification, customs valuation, and statistical purposes, indicating
the correct commodity description, in customary term or commercial
designation, the grade or quality, numbers, marks or symbols under which
they are sold by the seller or manufacturer, together with the marks and
number of packages in which the goods are packed; (to be continued)
5
BUREAU OF CUSTOMS
MANILA 1099
COMMERCIAL AND NON-COMMERCIAL INVOICE – Commercial invoice of

imported goods shall contain the following:
f. The quantities in the weights or measures of the goods shipped; and

g. Any other fact deemed necessary for the proper examination, customs
valuation, and tariff classification of the goods as may be prescribed by
the rules and regulations.
6
BUREAU OF CUSTOMS
MANILA 1099
FREIGHT IS AN ADJUSTMENT IF IT IS NOT INCLUDED IN THE PRICE

DECLARED IN THE INVOICE.
THERE IS A NEED TO SPECIFY THE AMOUNT OF THE FREIGHT IN
THE INVOICE OR AS AN ADJUSTMENT:
1. IN ORDER FOR CUSTOMS TO DETERMINE THE FOB VALUE AND

COMPARE IT WITH THE TEST VALUES;
2. IT IS REQUIRED UNDER PENALTIES OF FALSIFICATION OR
PERJURY UNDER THE SECTION 412 IN RELATION TO SECTION 414
OF THE CMTA; AND
3. FAILURE TO DO SO CAN BE NOW A GROUND FOR FILING OF
CRIMINAL CHARGES AS UNDERVALUTION UNDER SECTION 1400
OF THE CMTA.
7
BUREAU OF CUSTOMS
MANILA 1099
TITLE IV : OFFENSES AND PENALTIES

CHAPTER 1- CRIMES AND OTHER OFFENSES
SECTION 1400: Misdeclaration, Misclassification, Undervaluation in Goods
Declaration.
There is undervaluation when:
(a) The declared value fails to disclose in full the price actually paid or payable or any dutiable value
adjustment to the price actually paid or payable;
(b) When an incorrect valuation method is used or the valuation rules are not properly observed,
resulting in a discrepancy in duty and tax to be paid between what is legally determined as the
correct value against the declared value.
No surcharge if below 10% difference or if value is rejected as a result of an official ruling or decision
under the customs dispute settlement process involving difficult or highly technical question relating to
the question relating to the application of customs valuation rules.
8
BUREAU OF CUSTOMS
MANILA 1099
IT APPEARS THAT UNDERVALUATION, IS NOW A CRIMINAL ACT NOT BECAUSE

THE VALUE DECLARED IS LOWER THAN ESTABLISHED VALUES.
UNDERVALUATION CAN BE A CRIMINAL ACT FOR THE MERE FAILURE TO:
1. DECLARE IN FULL THE PRICE ACTUALLY PAID OR PAYABLE

IRRESPECTIVE OF WHETHER THE PRICE CONCEALED IS P
1.00 OR P 1,000,000.00.
2. WRONG METHOD OF VALUATION USED OR THE VALUATION
RULES ARE NOT PROPERLY OBSERVED RESULTING IN A
DISCREPANCY IN DUTY AND TAX TO BE PAID BETWEEN WHAT IS
LEGALLY DETERMINED AS THE CORRECT VALUE AGAINST
THE DECLARED VALUE.
NOTE: WHAT IS PENALIZED IS THE ACT OF NOT DECLARING THE FULL PRICE AND ALL THE
ADJUSTMENTS IN THE TRANSACTION. THE AMOUNT UNDERVALUED IS IMMATERIAL.
9
BUREAU OF CUSTOMS
MANILA 1099
The SUPPLEMENTAL DECLARATION OF VALUATION (SDV) is a

chance for the importer to declare all adjustments or the full price
actually paid or payable. Importers are reminded that the SDV is another
document other than the invoice and goods declaration where they are
given the chance to prove good faith by carefully ticking the box of
adjustments that are present but are not quantifiable upon lodging of the
goods declaration.
Example: royalties, proceeds etch.. Remember, the mere

FAILURE to declare the adjustments, no matter how small, is an act of
undervaluation which is now criminalized under the CMTA. Hence, the
failure to tick the boxes on royalties and proceeds may be considered an
act of undervaluation.
10
GUIDE IN THE IMPOSITION OF SURCHARGE UNDER THE CMTA

BUREAU OF CUSTOMS
MANILA 1099
CMTA VIOLATION No Surcharge 500% Surcharge 250% Surcharge DTAF-DTAD/ DTAF

1. MISCLASSIFICATION  DAF-DAD = If there are altered statements or DTAF-DTAD= Difference x If more than 30% there
DIFFERENCE/DAF less documents presented or false 250% or TDTD x 250% is prima facie evidence
than 10% statements or information of fraud, for WSD
 Highly technical knowingly made.
1. MISDECLARATION  DAF-DAD = If there are altered statements or DTAF-DTAD= Difference x If more than 30% there
knowingly made.
1. UNDERVALUATION  DAF-DAD = If there are altered statements or DTAF-DTAD= Difference x If more than 30% there
 Highly technical knowingly made.
1st step is to check if there is no 2nd step is to look for false 3rd step. If the DAF-
surcharge by looking for the statements submitted or false DAD/DAF is more than
difference between the duty as statements and information 10% and 500% is not
found and the duty as declared KNOWINLGY MADE. The penalty of applicable, get DTAF-
divided by duty as found. 500% is lumped with WSD and DTAD/DTAF and multiply
FILING OF CRIMINAL CASES. 500% with 250%
cannot be implemented without
WSD and CRIMINAL CASES?
DAF- DUTY AS FOUND DTAF- DUTY AND TAX AS

DAD- DUTY AS DECLARED FOUND
DTAD- DUTY AND TAX AS
DECLARED
11
BUREAU OF CUSTOMS
MANILA 1099
ISSUES REGARDING THE IMPOSITION OF SURCHARGE UNDER

SECTION 1400:
1. 500% surcharge is lumped with WSD and application of fines and penalties.
Who will pay a surcharge if the goods will be seized and fines and penalties
are imposed?
2. The surcharge for shipments that were already released and eventually audited
by PCAG is multiplied to the difference between what was legally determined
and what was declared. However, shipments that are imposed with surcharge at
the assessment level are multiplied NOT WITH THE DIFFERENCE
BETWEEN WHAT WAS DECLARED AND WHAT WAS FOUND OUT BUT
WITH THE TOTAL DUTIES AND TAX DUE.
12
BUREAU OF CUSTOMS
MANILA 1099
The problem lies in the interpretation of the phrase “total duties and tax due”. The
surcharge to be imposed by PCAG after audit and for which the goods were already
released from customs is only six (6) times and 125% of the REVENUE LOSS, with
negligence or fraud respectively. The surcharge of 250% and 500% under Section 1400
under the CMTA to be imposed for misdeclared, misclassified and undervaluation is
interpreted by some as to be multiplied with the final duties and tax due, taken from the
controversial phrase “TOTAL DUTIES AND TAX DUE”.
, In my humble understanding, the phrase should be interpreted as the difference

between the duties and tax voluntarily assessed and paid by the importer and the duties
and tax that became due after the resolution of an issue and after post entry
modification. Hence, the interpretation that the difference between the declared value
and the post entry modified value is actually in line with the interpretation that it is
actually the REVENUE LOSS that must be multiplied with the surcharge after PCAG
audit mentioned under Section 1005, paragraph a and b of the CMTA.
13
BUREAU OF CUSTOMS
MANILA 1099
MASTER VS. HOUSE IN THE FREIGHT DECLARATION NORMALLY

RESULTS IN THE IMPOSITION OF SURCHARGES ESPECIALLY ON
AIRLIFTED CARGOES.
SECTION 108 of the CMTA allows the imposition of penalties for

inadvertent errors provided that there was no fraudulent intent or gross
negligence in the commission thereof. The penalties must not also be
EXCESSIVE.
The problem with the previous issue on the imposition of surcharge is very
common in the airports because the freight is very expensive. Hence, there
is really a need to reconcile Section 1400 of the CMTA with the other
provisions of the CMTA such as Sections 1005 and Section 108.
. 14
BUREAU OF CUSTOMS
MANILA 1099
RECOMMENDATIONS:
1. The remedy is for the transacting public to lobby for the suspension of the application of
Section 1400
2. Another option is to lobby from the Commissioner of Customs, who has the exclusive and
original jurisdiction to interpret the provisions of this Act subject to the review by the
Secretary of Finance to reconcile all conflicting provisions of the CMTA through the
Implementing Rules and Regulations or a Customs Administrative Order as provided for
under Section 201, paragraph 1 of the CMTA, to wit:
a. Exclusive and original jurisdiction to interpret the provisions of this Act, in

collaboration with other relevant government agencies, subject to review by the
Secretary of Finance;
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15
BUREAU OF CUSTOMS
MANILA 1099
ISSUES REGARDING THE IMPOSITION OF SURCHARGE UNDER

SECTION 1400:
1. 500% surcharge is lumped with WSD and application of fines and penalties.
Who will pay a surcharge if the goods will be seized and fines and penalties
are imposed?
2. The surcharge for shipments that were already released and eventually audited
by PCAG is multiplied to the difference between what was legally determined
and what was declared. However, shipments that are imposed with surcharge at
the assessment level are multiplied NOT WITH THE DIFFERENCE
BETWEEN WHAT WAS DECLARED AND WHAT WAS FOUND OUT BUT
WITH THE TOTAL DUTIES AND TAX DUE.
16
BUREAU OF CUSTOMS
MANILA 1099
OPTIONS RESORTED:
IF APPLICABLE, UPON FAILURE TO SUBMIT DOCUMENTS FOR

ASSESSMENT PURPOSES, CUSTOMS MAY IMPOSE A SURCHARGE OF
20% OF THE DUTIABLE VALUE OF
GOODS.
17
BUREAU OF CUSTOMS
MANILA 1099
SECTION 1402:
Failure or refusal of Party to give evidence or submit documents for
assessment, when the owner, importer or consignee of any imported goods
or the agent of either, fails or refuses, upon lawful demand in writing by any
customs officer to appear, lawfully depose, or submit to examination or to
answer any material question or refuses to produce record, accounts or
invoices in possession pertaining to the value, classification or disposition of
the goods in question and deemed material in assessing the same, the District
Collector shall assess a surcharge equivalent of 20% of the Dutiable Value
of the goods.
18
THANK YOU!
- SEGUNDO SIGMUNDFREUD Z. BARTE, Jr. 19

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REPUBLIC OF THE PHILIPPINES

AIRFREIGHT AND RELATED CMTA

AIRFREIGHT – TRANSACTION VALUE

3. Cost of Transport of the imported goods from the port of

The INVOICE AND GOODS DECLARATION MUST CONTAIN THE

SECTION 412. Paragraph 1 of the Customs Modernization and Tariff Act

The INVOICE AND GOODS DECLARATION SHALL:

SECTION 412. Paragraph 1 of the Customs Modernization and Tariff Act

COMMERCIAL AND NON-COMMERCIAL INVOICE – Commercial invoice of

a. The agreed price or to be paid for the goods;

COMMERCIAL AND NON-COMMERCIAL INVOICE – Commercial invoice of

f. The quantities in the weights or measures of the goods shipped; and

SECTION 412. Paragraph 1 of the Customs Modernization and Tariff Act

FREIGHT IS AN ADJUSTMENT IF IT IS NOT INCLUDED IN THE PRICE

1. IN ORDER FOR CUSTOMS TO DETERMINE THE FOB VALUE AND

TITLE IV : OFFENSES AND PENALTIES

There is undervaluation when:

IT APPEARS THAT UNDERVALUATION, IS NOW A CRIMINAL ACT NOT BECAUSE

UNDERVALUATION CAN BE A CRIMINAL ACT FOR THE MERE FAILURE TO:

1. DECLARE IN FULL THE PRICE ACTUALLY PAID OR PAYABLE

The SUPPLEMENTAL DECLARATION OF VALUATION (SDV) is a

Example: royalties, proceeds etch.. Remember, the mere

REPUBLIC OF THE PHILIPPINES

CMTA VIOLATION No Surcharge 500% Surcharge 250% Surcharge DTAF-DTAD/ DTAF

DAF- DUTY AS FOUND DTAF- DUTY AND TAX AS

ISSUES REGARDING THE IMPOSITION OF SURCHARGE UNDER

, In my humble understanding, the phrase should be interpreted as the difference

MASTER VS. HOUSE IN THE FREIGHT DECLARATION NORMALLY

SECTION 108 of the CMTA allows the imposition of penalties for

a. Exclusive and original jurisdiction to interpret the provisions of this Act, in

ISSUES REGARDING THE IMPOSITION OF SURCHARGE UNDER

IF APPLICABLE, UPON FAILURE TO SUBMIT DOCUMENTS FOR

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