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Changes under the Customs Modernization and Tariff Act:
An Overview
SUITS THE C-SUITE By Mark Anthony P. Tamayo
Business World (06/06/2016 – p.S1/4)
(First of 5 parts)
On 30 May 2016, President Benigno S. C. Aquino III signed
Republic Act (RA) No. 10863, otherwise known as the Customs
Modernization and Tariff Act (CMTA), which amends the Tariff
and Customs Code of the Philippines (TCCP). It will become
effective on 16 June 2016 which is 15 days after it was published
in a major daily newspaper.
From a historical perspective, the first piece of tariff legislation was
passed by the United States Congress for the Philippines during the
American regime. This was known as the Philippine Tariff Act of
1909 which gave birth to the imposition of tariff on goods coming
from foreign countries and entering the Philippines.
In 1957, RA No. 1937 was crafted and passed by the Philippine
Congress as the first TCCP that codified customs laws for the
country, superseding the 48-year colonial regime of the Tariff Act
of 1909. It took effect on 1 July 1957.
Certain provisions of the TCCP eventually became obsolete, and
were updated through various presidential decrees issued by
Former President Marcos, as Chief Executive who, during the
Martial Law regime, exercised the powers of Congress. In 1972,
Presidential Decree (PD) No. 34 consolidated into one Code all
amendments made therein.
On 11 June 1978, RA No. 1464 was signed into law (revising PD
No. 34), which, in general, strengthened the punitive force of the
TCCP against smuggling and other forms of customs fraud.
Many changes in global and regional trade policies, rules and
processes have since then developed and evolved which have been
addressed (through legislative amendments of the TCCP and
administrative issuances) on a piecemeal basis.
The new CMTA aims to modernize customs laws, rules and
procedures to take into consideration the mandatory standards of
the Revised Kyoto Convention (the blueprint for modern and
efficient customs procedures of the World Customs Organization
[WCO] to which the Philippines is a signatory), international
agreements, recommendations from the business sectors and
industry groups as well as some of the best practices in customs
administration, among others. It seeks to transform the Bureau of
Customs (BoC) into a modern and efficient organization that is at
par with global standards.
The CMTA has both saving and repealing clauses. Laws, rules and
regulations previously issued pertaining to the importation of goods
that are consistent with the CMTA will remain valid unless the
same be repealed or amended. While those which are inconsistent
are expressly repealed, amended or modified accordingly.
This series of articles will point out some of the salient changes
introduced under the CMTA.
GOODS DECLARATION FOR CONSUMPTION
All imported goods will be subject to the lodgment of a goods
declaration (commonly known as entry declaration), which may be
for consumption, for warehousing, for admission, for conditional
importation or for customs transit, depending on the purpose.
As a general rule, goods declarations for consumption are cleared
though a “formal entry” process, except in the following instances
where goods may be cleared through “informal entry”: (i) goods of
a commercial nature with Free on Board or Free Carrier
Arrangement (FCA) value of less than Php 50,000 (which is an
increase from the previous thresholds of Php 2,000 per TCCP, as
amended, and USD 500 under Customs Memorandum Order No.
13-2010); or (ii) personal or household effects or goods, not in
commercial quantity, imported in passenger’s baggage or mail.
A goods declaration must now be lodged within 15 days
(previously, 30-day non-extendible period) from a BoC notice (sent
through electronic or personal service) informing the importers of
the date of discharge of the last package from the vessel or aircraft,
extendible for another 15 days (upon request by the importer based
on valid grounds). Once lodged, the BoC, after its examination,
shall issue a notice of assessment (of duties and taxes payable). The
importer has a period of 15 days from receipt of said notice within
which to pay the corresponding duties and taxes. In effect, this is
also the period within which the importer may contest the
assessment issued by the BoC at the border. Otherwise, the
assessment will be deemed final after the lapse of the 15-day period.
The failure to pay duties and taxes within the 15-day period shall
result in the imposition of a 10% surcharge (increased to 25% if
delinquency lasts for more than one year) based on the total
assessed amount or balance thereon as well as to a 20% interest per
annum computed from the date of final assessment.
After payment of duties and taxes, the importer will then have a
non-extendible period of 30 days (previously, 15 days from posting
of notice to claim) to claim the goods from customs custody.
If, at the time of importation, an importer does not have all the
information or supporting documents required to complete a goods
declaration, the CMTA now allows the lodging of a provisional
goods declaration (PGD). The PGD is a new concept that importers
can use particularly in instances where additional information
and/or collateral documents are required to be submitted at the
border. Under this concept, an importer would have to execute an
undertaking to complete the necessary information or submit the
supporting documents within 45 days (extendible for another 45
days) from the lodging of the PGD. Goods under PGD may be
released upon posting of a security equivalent to the amount
ascertained to be the applicable duties and taxes.
An assessment by the BoC at the border of a PGD shall be deemed
tentative and shall be completed upon final readjustment and
submission of the additional information or documentation required
to complete the declaration.
If an importer needs to amend a goods declaration already filed, the
CTMA, for valid reasons and with the approval of the BoC, also
permits the filing of an amended goods declaration. The
amendment, however, must be done prior to final assessment or
examination of the goods by the BoC.
Part 2
DE MINIMIS IMPORTATIONS
The CMTA acknowledges the e-commerce trend of increasing
number of small value consignments and thus, retained the
provision on de minimis values (small value importations) below
which no duties and taxes will be collected and with minimal
clearance procedures, including data requirements.
The de minimis threshold value has now been increased to
Php10,000 (previously, Php10) in response to the clamor of foreign
business groups. Thus, if the value of an importation does not
exceed Ph10,000, there will be no duties and taxes that will be
collectible by the BoC.
This threshold value is subject to review by the Finance Secretary
every three years.
RELIEF CONSIGNMENT

Goods such as food, medicine, equipment and materials for shelter,
donated or lease to government institutions and accredited private
entities for free distribution to or use of victims of calamities shall
be treated as relief consignment. Relief goods are exempt from
duties and taxes.
Upon declaration of a state of calamity, the clearance of such goods
will be a matter of priority.
Towards this end, restrictions on customs policies are now relaxed
under the CMTA. Special procedures are now provided to facilitate
their unimpeded entry. Among these procedures are: a) lodging of
a simplified or provisional goods declaration; b) pre-arrival
clearance; c) clearance beyond business hours without
corresponding charges; and d) examination shall be in exceptional
cases only.
The Department of Finance (DoF) and the Department of Social
Welfare and Development shall jointly issue implementing rules on
this.
CONDITIONALLY-FREE AND DUTY-EXEMPT
IMPORTATIONS
The CMTA introduces modifications to Section 105 of the TCCP,
as amended, on conditionally-free importations (now named
conditionally-free and duty-free importations under Section 800).
One of the more well-known privileges recognized under Section
800 is the duty and tax-free importation of personal and household
effects by “returning residents” which has been defined as nationals
who have stayed in a foreign country for a period of at least six
months.
The conditions for exemption (aside from the requirements that the
same should neither be of commercial quantity nor intended for
barter, sale or hire) are as follows:
· For those who have stayed in a foreign country for a period of at
least 10 years, the Free on Board (FoB) or Free Carrier
Arrangement (FCA) value shall not exceed P350,000 and that the
privilege is not availed of within 10 years prior to the returning
resident’s arrival.
· If the stay is at least five years, the FCA or FOB value shall not
exceed P250,000 and that the privilege is not availed of within five
years prior to the returning resident’s arrival.
· If the stay is less than five years, the FCA or FoB value shall not
exceed P150,000 and that the privilege is not availed of within six
months prior to the returning resident’s arrival.
In addition to the above, returning Overseas Filipino Workers
(OFWs) shall have the privilege to bring in tax and duty free home
appliances and other durables (limited to one of every kind) once
in a given calendar year accompanying them on their return or
arriving within a reasonable time (not exceeding 60 days after every
returning OFWs return).
Residents of the Philippines, OFWs or other Filipinos, while
residing abroad or upon their return to the Philippines, are also
allowed to bring in or send to their families or relatives in the
Philippines “balikbayan boxes” (containing personal and
household effects only) duty and tax-free, provided that the FCA
value shall not exceed P150,000 and the items are not in
commercial quantities or intended for barter, sale or for hire. This
can be availed up to three times in a calendar year.
Any amount in excess of the above threshold values shall, however,
be subject to duties and taxes.
Part 3
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RELATED PARTY TRANSACTIONS
The CMTA upholds the hierarchical application of the six methods
of valuation of imported goods, with Method 1 or the Transaction
Value (TV) of the imported goods being the primary method. The
TV is basically the “price paid or payable” for the goods when sold
for export to the Philippines, subject to certain adjustments such as
selling commissions and brokerage fees, cost of containers, cost of
packing, assists, royalties and license fees, cost of transport and
insurance, among others.
Under the rules, one of the limitations on the application of the TV
method is that, in cases of a related party transaction, the price
between the importer and its related foreign supplier should not be
influenced by such a relationship. The CMTA states that in order to
prove the absence of such influence, the importer must be able to
demonstrate that the declared value closely approximates one of the
following “test values” occurring at or about the same time:
· The TV in sales to unrelated buyers of identical or similar goods
for export to the same country of importation;
· The customs value of identical or similar goods as determined
using the Deductive Value Method; and
· The customs value of identical or similar goods as determined
using the Computed Value Method.
Aside from the application of test values, the WTO agreement also
recognizes the “circumstances of sale analysis” as a remedy in
proving the absence of such influence. This remedy, which is
likewise embodied under Customs Administrative Order (CAO)
No. 4-2004 and Customs Memorandum Order (CMO) No. 16-
2010, involves showing the arm’s length nature of the transaction
by proving that the price was:
· Settled in accordance with normal pricing practices of the
industry;
· Settled in a manner consistent with sales to unrelated buyers;
· 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.
Failure to establish either of the above proofs may result in the
declared TV to be rejected for purposes of customs appraisement
and the price will be determined using other methods of valuation
in their sequential order.
MISDECLARATION, MISCLASSIFICATION,
UNDERVALUATION IN GOODS DECLARATION
The CMTA has increased the surcharge penalty for misdeclaration,
misclassification and undervaluation of imported goods.
There is misdeclaration when the discrepancy pertains to quantity,
quality, description, weight, or measurement of the imported goods.
Misclassification, on the other hand, exists when insufficient or
wrong description of the goods or use of wrong tariff heading was
declared resulting in a discrepancy.
Undervaluation is present when:
· The declared value fails to disclose in full the price actually paid
or payable or any dutiable adjustment to the price; or
· When an incorrect valuation method is used; or
· The valuation rules are not properly observed.
Any misdeclaration, misclassification or undervaluation of
imported goods resulting in a discrepancy (in duty and tax to be
paid) between what is legally determined upon assessment and
what is declared will be subject to a fixed surcharge rate of 250%
of the duty and tax due (previously, 100% to 200% of the duty due).
Surcharge, however, will not be imposed when:

· The discrepancy in duty is less than 10%; or
· The importer’s declared value and/or tariff heading/classification:
· Relied on an official government ruling; or
· Is rejected in a formal customs dispute settlement process
involving difficult or highly technical questions relating to the
application of customs valuation rules and/or tariff classifications.
If the misdeclaration, misclassification or undervaluation is
intentional or fraudulent (such as when a false or altered document
is submitted or when false statements or information are knowingly
made), a 500% surcharge (of the duty and tax due) will be imposed
on the importer and to those who willfully participated in the
fraudulent act. The imported goods will be subject to seizure
regardless of the amount of the discrepancy.
The CMTA likewise adopts the previous rule under the TCCP, as
amended, on the existence of a prima facie evidence of fraud if the
discrepancy (in duty and tax to be paid) amounts to more than 30%.
UNLAWFUL IMPORTATION OR EXPORTATION
The CMTA provides stiffer penalties for smuggling (which can
either be outright or technical) which has been defined as 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. It likewise includes the exportation of
goods in any manner contrary to law.
Outright smuggling refers to the act of importing goods into the
country without complete customs-prescribed importation
documents, or without being cleared by customs or other regulatory
government agencies. In this case, imported goods are not
registered at all with the BoC or other government agencies.
Technical smuggling, on the other hand, refers to the act of
importing goods into the country by means of a fraudulent, falsified
or erroneous declaration of the goods as to its nature, kind, quality,
quantity or weight. In other words, technical smuggling takes place
through undervaluation, misclassification or underdeclaration of
the goods shipped.
The difference between outright smuggling and technical
smuggling lies in the use or non-use of legal trade channels when
bringing the goods into the country. Outright smuggling bypasses
the usual and normal procedure and process of clearing the cargo at
the BoC, while technical smuggling involves fraudulent acts during
the processing and releasing of the goods. In both instances,
however, the ultimate objective is to evade the payment of the
prescribed taxes, duties and other charges.
The penalty is imprisonment or a fine which ranges from Php
25,000 to Php 50,0000,000 depending on the value (up to Php
200,000,000) of the goods unlawfully imported, including duties
and taxes. If the value (or aggregate value) exceeds Php
200,000,000, the same shall be deemed as a heinous crime
punishable with a penalty of reclusion perpetua (imprisonment of
20 years and 1 day to 40 years) and a fine of not less than Php
50,000,000.
Each act of unlawful importation or exportation shall be deemed a
separate offense.
Part 4
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
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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 the 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)
from 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 of
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, except 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 Industry, 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 Secretary 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 preparation 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 origin 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 Free 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 simply 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 rules 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
ultimately, 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, upon 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 treatment 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.
Part 5
POST-CLEARANCE AUDIT
The CMTA states that the Bureau of Customs (BoC) may conduct
a “post-clearance audit” within three years from the date of final
payment of duties and taxes or customs clearance, as the case may
be. In the absence of any specific regulation, this provision of the
CMTA can be seen as a departure from Executive Order 155 (which
placed the audit function with the Department of Finance’s (DoF)
Fiscal Intelligence Unit) as well as the audit guidelines under DoF
Department Order (DO) Nos. 11-2014 and 44-2014.
The penalties for failure to pay correct duties and taxes on imported
goods, as may be found during post-clearance audit, are now
categorized into two degrees of culpability, as follows:
This is a departure from the previous degrees of penalties; (a)
negligence (50% to 200% of the revenue loss); (b) gross negligence
(250% to 400% of the revenue loss); and (c) 500% to 800% of the
revenue loss and/or criminal prosecution.
Furthermore, under the CMTA, no substantial penalty shall be
imposed on inadvertent errors amounting to simple negligence as
will be defined by the implementing rules. This rule was lifted from
Standard 3.39 of the Revised Kyoto Convention (RKC) as well as
from Article VIII of the World Trade Organization/General
Agreement on Tariffs and Trade (WTO/GATT), providing for the
non-imposition of penalties for errors when such errors are
inadvertent and where there has been no fraudulent intent or gross
negligence.
A penalty, which should not be excessive, may however be
imposed in order to discourage a repetition of such errors.
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RECORD-KEEPING REQUIREMENT
The CMTA states that all importers are required to keep relevant
importation documents, at their principal place of business, for a
period of three years from the date of final payment of duties and
taxes or customs clearance, as the case may be. This provision of
the CMTA can be seen as a reversion to the old rules and a
departure from the audit guidelines under DoF DO Nos. 11-2014,
which set the record retention period to 10 years from the date of
importation.
Economic zone locators are likewise required to keep records of
imported goods withdrawn from the zones and brought into the
customs territory.
If an importer who, after receiving a lawful demand in writing, fails
or refuses to produce relevant records, accounts or invoices
necessary to determine and assess the correct value and
classification of the imported goods at the border, the CMTA
empowers a District Collector to impose a 20% surcharge based on
the dutiable value of such goods.
On the other hand, if during post clearance audit, it was determined
that an importer auditee failed to keep the required records of
importation, the penalty that could be imposed by the BoC is a fine
of P1,000,000 (previously, a fine of not less than P100,000 but not
more than P200,000) and/or imprisonment of not less than three
years and one day but not more than six years (previously,
imprisonment of not less than two years and one day to six years).
Furthermore, the failure shall constitute a waiver of the importer’s
right to contest the results of the audit based on records kept by the
BoC.
AUTHORITY OF THE COMMISSIONER TO MAKE
COMPROMISE
Under the CMTA, the Commissioner may, subject to the further
approval of the Finance Secretary, compromise any administrative
case involving the imposition of fines and surcharges, including
those arising from the conduct of a post clearance audit, unless
otherwise specified by law. Although not an entirely new concept,
it nevertheless specifically mentions that the compromise powers
of the Commissioner include fines and surcharges arising from a
post clearance audit. This is a welcome reintroduction of a
voluntary disclosure concept for importers who would want to
correct their mistakes by voluntarily settling their deficiencies in
duties and taxes.
Cases involving forfeiture of goods shall, however, not be subject
to any compromise.
APPLICATION OF INFORMATION AND
COMMUNICATIONS TECHNOLOGY (ICT)
The BoC, in accordance with international standards, is mandated
under the CMTA to utilize ICT in enhancing customs control and
efficiency in customs operations geared towards a paperless
customs environment. Electronic documents, permits, licenses or
certificates will now be acceptable and will have the legal effect,
validity or enforceability as any other document or legal writing.
The utility of full automation will be felt once the “Single Window
Policy” is fully implemented.
MOVING FORWARD
The provisions introduced under the CMTA are basically trade
facilitation measures envisioned to hasten, simplify, harmonize and
clarify importation and exportation laws, rules and procedures.
These changes provide an opportunity for the BoC to effectively
implement these new rules towards achieving its primary role as a
trade facilitation institution. A simplified and streamlined trade

procedure could result in higher volume of trade which will
positively impact on revenue collection.
Importers, on the other hand, are expected to keep abreast of these
developments in order to avoid unnecessary cost (in terms of fines,
surcharges and other penalties) on their importations resulting from
non-compliance.
Note: Series of 5 related articles
SOURCE: http://www.sgv.ph
ADVANCE RULINGS FROM THE BUREAU OF CUSTOMS
AND THE TARIFF COMMISSION
SUITS THE C-SUITE
By Arlyn A. Sarmiento-Sy
Business World (09/04/2017 – p.S1/2)
(First of two parts)
It can be a nightmare for any importer to have imported goods held
at customs for questioning on its classification, valuation or origin,
more so if such goods were previously imported without any issues
and supported by sufficient documentation. In such a case, a legally
binding ruling would be very handy and prevent similar unexpected
but avoidable delays.
A published binding ruling from the Bureau of Customs (BoC) is
already possible under Republic Act No. 10863, or the Customs
Modernization and Tariff Act (CMTA), which was passed into law
on May 30, 2016. The establishment of the Advance Ruling System
is one of the important provisions of the law.
An advance ruling is an official, written and legally binding ruling
issued upon the request of an importer, exporter, or authorized
agent on matters of commodity classification, the proper
application of a specific method on customs valuation of specific
goods or as originating under the rules of origin (ROO) of the
applicable preferential trade agreement.
Under the CMTA, an application for advance ruling may be lodged
with the Tariff Commission (TC) if it involves tariff classification
of goods. The application may also be filed with the BoC for goods
valuation or origin concerns.
Historically, only published rulings on tariff classification may be
accessed through the Tariff Commission website but importers and
exporters may now secure their own rulings from the BoC. This
new advance ruling mechanism reduces operational uncertainty,
adds predictability to international trade, lessens costs and risks of
lodgment disputes, speeds up obtaining of clearances, and ensures
uniformity of treatment across various BoC ports and offices.
In general, under Section 1103 of the CMTA, an application for an
advance ruling shall cover only one product or item and must be
filed at least 90 days prior to importation or exportation of the
product or item.
Pursuant to Sections 1100, 1101, 1102 of the law, as implemented,
a ruling on classification, valuation and rules of origin,
respectively, shall be issued within 30 working days from the
receipt of the request or additional documents. The ruling only
benefits the requesting party, but may be cited by another applicant
in support of his own request. The BoC, however, is not bound to
recognize or apply such rulings to a similar importation.
The applicant may elevate an unfavorable ruling by way of an
appeal to the Court of Tax Appeals (CTA) within 30 days from
receipt of an adverse ruling or decision. However, the BoC rules
allow for a motion for reconsideration to the Customs
Commissioner before the appeal to the CTA. Moreover, decisions
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of the BoC and TC that are unfavorable to government are subject
to automatic review by the Secretary of Finance.
ADVANCE RULING ON TARIFF CLASSIFICATION
An application for advance ruling on tariff classification is initiated
by accomplishing TC Form No. 1 (Application for Advance Ruling
on Tariff Classification), which is available and downloadable at
the Tariff Commission website www.tariffcommission.gov.ph. It
must be submitted for pre-clearing together with the supporting
documents to the Commodity Specialist of the Tariff Commission.
Supporting documents which should be signed by the applicant or
its authorized representative on every page, could take the form of
actual samples, technical catalogs/brochures, duly certified
complete composition, plans, photographs or other documents or
information that may assist the Tariff Commission in determining
the correct classification of the goods that are the subject of the
application.
Once pre-cleared for filing, an order of payment is issued by the
Commodity Specialist. The applicant may proceed with the
payment of the filing fee of P500 per article, plus P10 legal research
fund fee (per article) and proceed to the cashier. The 30-day period
within which the Tariff Commission should act on the application
starts upon receipt by the accomplished TC form and attachments
as pre-cleared with the proof of payment.
Since the new rules took effect last year, the submission of
incomplete documents was noted as the usual cause of delay in the
issuance of advance tariff classification rulings. In particular,
applications either lack the required authorization letters, certain
important details and supporting documents. In some instances,
there are delays on the part of the applicant to provide additional
information and/or records when requested. Moreover, the
Commodity Specialists themselves may need sufficient time to
evaluate applications involving entirely new products and items not
commonly imported or devices/machines involving new
technology. Another challenge is the limited complement of
Commodity Specialists within the Commission to handle numerous
applications. Currently, only eight specialists belonging to the
Commodity Studies Division (CSD) are assigned to handle all
applications covering all 21 sections and 97 chapters of the ASEAN
Harmonized Tariff Nomenclature (AHTN).
Since it accepted requests for advance rulings under the CMTA, the
Tariff Commission has received over 650 applications, of which no
less than 500 have been processed and rulings issued. About 128
requests are pending resolution. Issued rulings and the status of
pending applications may be easily accessed through the Tariff
Commission website. Readers should note that since the 2017
version of the AHTN has already been implemented beginning July
28, 2017, advance rulings issued under Section 1100 of the CMTA
that were based on AHTN 2012 are no longer considered valid.
New classification rulings must be secured under the new AHTN.
Be that as it may, it is impressive that the Tariff Commission has
been able to issue over 500 rulings under the provisions of the
CMTA advanced ruling system. It is also noteworthy that the status
of pending applications can easily be tracked through their website.
These rulings have a binding effect upon the BoC unless overturned
by the Secretary of Finance.
Part 2
Advance rulings from the Bureau of Customs and the Tariff
Commission
SUITS THE C-SUITE By Arlyn A. Sarmiento-Sy
Business World (09/11/2017 – p.S1/4)
(Second of two parts)
 Page 6 of 6

In last week’s column, we discussed the Advance Ruling system
which was introduced under the provisions of Republic Act No.
10863, or the Customs Modernization and Tariff Act (CMTA),
which was passed into law on May 30, 2016. Importers and
exporters can now request an official, written and legally binding
ruling from the Tariff Commission or the Bureau of Customs (BoC)
on matters involving commodity classification, on the proper
application of a specific method on customs valuation of specific
goods or whether the goods qualify under rules of origin (ROO) of
an applicable preferential trade agreement.
After having discussed the procedures for application of the
Advance Ruling system for commodity classification with the
Tariff Commission, we will now look in more detail into the
specific procedures for applications to be filed with the BoC.
ADVANCE RULING FOR VALUATION AND
PREFERENTIAL RULES OF ORIGIN
On 28 November 2016, the BoC issued Customs Memorandum
Order (CMO) No. 30-2016 implementing Customs Administrative
Order (CAO) No. 03-2016, which establishes an advance ruling
system on customs valuation method and rules of origin of goods.
The BoC has been accepting applications through the Office of the
Customs Commissioner since the beginning of 2017. A Technical
Support Team for Advance Ruling (TST-AR) for Valuation and
ROO was formed specifically to ensure the smooth implementation
of the Advance Ruling system and establish a monitoring plan to
guide the implementation and evaluation of the effectiveness of any
such advance ruling. However, while the CMO provides that the
Management Information System and Technology Group (MISTG)
of the BoC shall develop a database system that will capture,
record, and generate reports on all data and information on advance
ruling requests and issuances, this is yet to be accomplished. We
should also consider that, in the light of the recent changes in the
leadership of the BoC, a new Commissioner may choose to
introduce changes to the current procedures.
request for an extension of this period. In case of failure to respond
or supply additional information or comply with any of the other
requirements, the request shall be rejected or deemed withdrawn.
Once issued, the BoC ruling is valid for three calendar years from
issuance, or from the date specified in the ruling. Before the three-
year period expires, the ruling may be revalidated by filing a request
for revalidation at least 90 calendar days before expiration. The
rules allow for a motion for reconsideration of a denial, or a
modification/revocation/invalidation of a ruling, within 15 calendar
days from receipt of the ruling or decision. If still unsuccessful, the
applicant may file an appeal to the CTA within 30 days from receipt
of denial of the motion for reconsideration.
While the BoC has been accepting applications for ruling after the
issuance of CMO 30-2016, there has so far been no published ruling
issued.
The key take-away here is that the procedures and the requirements
of the advance ruling system are now in place both at the Tariff
Commission and the BoC. The act of publishing to establish
transparency is now mandated by both agencies.
Given the challenges often encountered in the course of an
importation of goods, it is clearly advantageous for importers or
foreign exporters to be aware of and evaluate the benefits of
securing an advance ruling, which could help with making timely
business decisions based on legally binding rules.

An applicant for the advance ruling can be a natural or juridical

person who is an importer, foreign exporter, or its authorized agent.
A foreign exporter is defined as “a natural or juridical person
intending to export any goods or commodities from a foreign
country to the Philippines.” The definition of an exporter, however,
does not cover a local/Philippine exporter since the valuation and
origin of goods (for preferential treatment) to be exported from the
Philippines are properly within the jurisdiction of the specific
country of destination.

The application is initiated by the submission of the accomplished

application forms (Appendices A and B, CMO 30-2016 which are
also available online at the BoC website customs.gov.ph/forms),
proof of payment of the filing fee of P1,500 to the TST-AR at its
official e-mail address
tst.advanceruling.valuation@customs.gov.ph or
tst.advanceruling.roo@customs.gov.ph (for application for
valuation or origin, respectively) with the supporting documents.

The supporting documents for the application usually consist of

samples, technical catalogs/brochures, duly certified complete
composition, plans, photographs or other documents or details that
may assist the BoC in determining the correct valuation or origin of
the goods subject of the application for advance ruling.

The application must be submitted at least 90 calendar days before

the date of the importation, which is the date of lodgment of goods
declaration. Importing the goods that are subject of the ruling
within a period of less than 90 days after the filing of the application
would be deemed an implied withdrawal of the ruling request.

Once the application is filed, the TST-AR may require additional

information, which must be submitted within 30 calendar days from
receipt of Notice to Submit, although applicants have the option to