Changes under the Customs Modernization and Tariff Act

SUITS THE C-SUITE By Mark Anthony P. Tamayo

Business World (06/27/2016 p.S1/2)

(Fourth of 5 parts)

In last weeks article, we listed down some of the changes introduced under the new
Customs Modernization and Tariff Act (CMTA), particularly the rules pertaining to related
party transactions as well as the penalties relating to unlawful importation and exportation,
misdeclaration, misclassification and underdeclaration of imported goods.

This article will continue to discuss the changes under the CMTA.

ABANDONMENT RULES

The abandonment of imported goods can either be express or implied.

An express abandonment occurs when an importer expressly signifies in writing to the

District Collector of his intention to abandon the imported goods. In such case, the goods
shall ipso facto be deemed property of the Government and may be sold or disposed of
generally at the port where the goods are located.

On the other hand, there is implied abandonment, in th e following cases, among others:

When an importer fails to file the goods declaration within 15 days (previously, a 30 -day
non-extendible period) or within the approved extended period of another 15 days from
notice of the date of discharge of the last package from the vessel or aircraft;
Having filed such a declaration, the importer fails to pay the assessed duties and taxes
within 15 days from receipt of notice of final assessment;
Failure to claim the goods within 30 days (previously, 15 days) fro m payment of duties
and taxes.

If the BoC has not disposed of the goods implied to be abandoned, the owner or importer
of goods may, within 30 days after the lapse of the prescribed period to file the declaration
(15 days, extendible for another 15 days), still reclaim the goods by complying with all
legal requirements and paying the corresponding duties, taxes, and other charges.

On the other hand, if the BoC has already sold the goods, the proceeds of the sale, after
deduction of any duty and tax and all other charges and expenses (such as, government
storage charges; expenses for the appraisal, advertisement, and sale of auctioned goods;
arrastre and private storage charges and demurrage charges; and freight, lighterage or
general average, on the voyage o f importation) shall be turned over to those persons
entitled to receive them. The balance will then be deposited to a forfeiture fund to be
managed by the BoC which shall be used to, among others, support its modernization
program and other operational efficiency and trade facilitation initiatives.

PERIOD OF STORAGE IN A CUSTOMS BONDED WAREHOUSE (CBW)

The general rule under the CMTA is that goods entered for warehousing may remain in a
CBW for a fixed period of one year from the time of their arrival, ex cept for perishable
goods where the storage period is three months from the date of arrival, extendible (for
valid reasons and upon written request) for another three months. This is a departure from
the current rule which fixes the storage period in a CBW to a maximum one year period,
regardless of whether the goods are perishable or not. Goods not withdrawn after the
expiration of the prescribed period shall be deemed abandoned.

The BoC Commissioner, in consultation with the Secretary of Trade and Industr y, shall also
establish reasonable storage period limits beyond the general one -year period for bonded
goods, the processing into finished goods of which require a longer period based on
industry standards and practice, subject to the approval of the Secre tary of Finance.

The unauthorized withdrawal of imported goods from the CBW shall be subject to a
surcharge of 50% of duties, taxes, customs fees and charges, found to be due and unpaid.
If the delinquency lasts for more than one year, the surcharge shall be increased by 25%
of the unpaid duties and taxes annually.

SELF-CERTIFICATION SYSTEM FOR ORIGIN PURPOSES

While the BoC may (upon request) determine the Philippine origin of goods for export
through the issuance of certificates of origin, the CMTA, in pre paration for the ASEAN -wide
implementation of the self -certification system, allows exporters (producers or
manufacturers of goods) duly accredited by the BoC to perform a self -certification
procedure as an alternative means of proving the Philippine ori gin of goods for export.

The introduction of a self -certification arrangement (in establishing the origin of Goods)
plays a critical role in achieving a free flow of goods within the ASEAN single market as it
is aimed at facilitating the utilization of Fre e Trade Agreements (FTAs). The system
effectively eliminates the need to present a Certificate of Origin (CO) to claim preference
under FTAs as it allows accredited exporters to self -declare that their products have
satisfied the ASEAN origin criteria by s imply affixing a declaration on the commercial
invoice.

This new system seeks to reduce compliances of exporters and administrative cost
associated with CO application. It likewise facilitates the release of shipments availing of
preferential tariff under FTAs.

ADVANCE CUSTOMS RULINGS

Importers (and exporters) oftentimes are faced with issues such as whether certain
payments to suppliers are dutiable or not, whether an article would fall under an identified
specific tariff heading or another, or whether rul es of origin requirements to qualify for the
availing the preferential rates under FTAs are met. Potentially, these issues may lead to
uncertainty in the entire trade transaction as these will have an impact on the amount of
duties to be paid and ultimatel y, on the end price of the product.

In order to promote higher certainty, predictability and reliability, the CMTA now adopts
the Revised Kyoto Convention (RKC) provision on advance (binding) rulings and recognizes
the right of importers and exporters, upo n written application, to seek advance rulings on
classification from the Tariff Commission, and valuation as well as rules of origin from the
BoC Commissioner. These rulings, once obtained, should provide applicants with more
certainty on the customs trea tment of their specific transaction or product.

Rulings are required to be issued within 30 days from receipt of the application and
supporting documents as may be required by regulation.

In the last part of this article, we will discuss the new rules on penalties that the BoC can
impose resulting from post clearance audit, record keeping requirements, and the
authority of the BoC Commissioner to compromise any administrative case involving the
imposition of fines and surcharges.