Tax II Tariffs and Customs-Gruba

7/31/2019 Tax II Tariffs and Customs-Gruba

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Starr Weigand 2011 Tax II | Gruba

TARIFFS AND CUSTOMS LAWS

Overview

* The 1978 TCC is a hodgepodge of old and new laws, continually being

amended to adopt to changing political and economic conditions. ** The

1978 TCC is divided into two parts:

(1) The Tariff Law [Sections 100519, 1978 TCC]; and

(2) The Customs Law [Sections 6013705, 1978 TCC].

*** In general, the Tariff Commission is the governing body in relation to

the Tariff Law, while the Bureau of Customs implements the Customs Law.

Tarriff Law

What are the more significant provisions of the Tarriff Law?

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, 1978 TCC] See Section 102 for a list of

prohibited importations and Section 105, both of the 1978 TCC,for conditionallyfree importations.

What are the prohibited importations? (Basically anything against the law,

morals, public policy, etc.)

Sec. 102. Prohibited Importations. The importation into the Philippines

of the following articles is prohibited:

a. Dynamite, gunpowder, ammunitions and other explosives, firearm and

weapons of war, and detached parts thereof, except when authorized by

law.

b. Written or printed article in any form containing any matter advocating

or inciting treason, rebellion, insurrection or sedition against the

Government of the Philippines, of forcible resistance to any law of the

Philippines, or containing any threat to take the life of or inflict bodily harm

upon any person in the Philippines.

c. Written or printed articles, photographs, engravings, lithographs,

objects, paintings, drawings or other representation of an obscene or

immoral character.

d. Articles, instruments, drugs and substances designed, intended or

adapted for preventing human conception or producing unlawful abortion,

or any printed matter which advertises or describes or gives directly or

indirectly information where, how or by whom human conception is

prevented or unlawful abortion produced.

e. Roulette wheels, gambling outfits, loaded dice, marked cards, machines,

apparatus or mechanical devices used in gambling, or in the distribution of

money, cigars, cigarettes or other articles when such distribution is

dependent upon chance, including jackpot and pinball machines or similar

contrivances.

f. Lottery and sweepstakes tickets except those authorized by the

Philippine Government, advertisements thereof and lists of drawings

therein.g. Any article manufactured in whole or in part of gold silver or other

precious metal, or alloys thereof, the stamps brands or marks of which do

not indicate the actual fineness or quality of said metals or alloys.

h. Any adulterated or misbranded article of food or any adulterated or

misbranded drug in violation of the provisions of the "Food and Drugs Act."

i. Marihuana, opium poppies, coca leaves, or any other narcotics or

synthetic drugs which are or may hereafter be declared habit forming by

the President of the Philippines, any compound, manufactured salt,

derivative, or preparation thereof, except when imported by the

Government of the Philippines or any person duly authorized by the

Collector of Internal Revenue, for medicinal purposes only.

j. Opium pipes and parts thereof, of whatever material.

k. All other articles the importation of which is prohibited by law.

What are the conditionallyfree importations?

Sec. 105. Conditionally Free Importations. The following articles shall

be exempt from the payment of import duties upon compliance with the

formalities prescribed in, or with the regulations which shall bepromulgated by the Commissioner of Customs with the approval of the

department head:

a. Animals and plants for scientific, experimental, propagation, botanical,

breeding, zoological and national defense purposes: Provided, That no live

trees, shoots, plants and moss, and bulbs, tubers and seeds for

propagation purposes may be imported under this section, except by order

of the Government of the Philippines or other duly authorized institutions:

Provided, further, That the free entry of animals for breeding purposes

shall be restricted to animals of a recognized breed, duly registered in the

book of record established for that breed: And Provided, finally, That

certificate of such record, and pedigree of such animal duly authenticated

by the proper custodian of such book of record, shall be produced and

submitted to the Collector of Customs, together with affidavit of the owner

or importer, that such animal is the identical animal described in said

certificate of record and pedigree.

b. Aquatic products (e.g., fish, crustaceans, mollusks, marine animals,

seaweed, fish oil, roe), including preparations or manufactures thereof,

caught or gathered by vessels of Philippine registry: Provided, That they

are imported in such vessels or in crafts attached thereto: And Provided,

further, That they have not been landed in any foreign territory or, if so

landed, they have been landed solely for transshipment without having

been advanced in condition.

c. Samples of the kind, in such quantity and of such dimensions or

construction as to render them unsalable or of no appreciable

commercial value, models not adapted for practical use and samples of

medicine properly marked "physicians' samples not for sale".

Commercial samples, except those that are not readily and easily

identifiable (e.g., precious and semiprecious stones, cut or uncut, and

jewelry set with precious or semiprecious stones), the value of any single

importation of which does not exceed ten thousand pesos, upon the giving

of a bond in an amount equal to one and onehalf times the ascertained

duties, taxes and other charges thereon, conditioned for the exportation of

said samples within six months from the date of the acceptance of the

import entry, or in default thereof, the payment of the corresponding

duties, taxes and other charges. If the value of any single consignment of

such commercial samples exceeds ten thousand pesos, the importer

thereof may select any portion of same not exceeding in value ten

thousand pesos for entry under the provisions of this subsection, and the

excess of the consignment may be entered in bond, or for consumption, as

the importer may elect.

d. Articles, including binnacles, propellers, and the like, the character of

which, as imported, prevents their use for other purposes than the

construction, equipment, or repair of vessels and aircraft, and life

preservers and life buoys, related equipment and parts and accessoriesthereof, which are necessary for the takeoff and landing and for the safe

navigation of vessels and aircraft.

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

identification and the giving of a bond in an amount equal to one and one

half times the ascertained duties, taxes and other charges thereon,

conditioned for the exportation thereof or payment of the corresponding

duties, taxes and other charges within six months from the date of

acceptance of the import entry: Provided, That the Collector of Customs


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may extend the time for exportation or payment of duties, taxes and other

charges for a term not exceeding six months from the expiration of the

original period.

f . Cost of repairs made in foreign countries upon vessels or aircraft

documented, registered or licensed in the Philippines, upon proof

satisfactory to the Collector of Customs (1) that adequate facilities for such

repairs are not afforded in the Philippines, or (2) that such vessels or

aircraft, while in the regular course of her voyage or flight was compelled

by stress of weather or other casualty to put into a foreign port to makesuch repairs in order to secure the safety seaworthiness or airworthiness of

the vessel or aircraft to enable her to reach her port of destination.

g. Articles brought into the Philippines for repair, processing or

reconditioning to be reexported upon completion of the repair,

processing or reconditioning: Provided, That the Collector of Customs

may, in his discretion, require the giving of a bond in an amount equal to

one and onehalf times the ascertained duties, taxes and other charges

thereon, conditioned for the exportation thereof or payment of the

corresponding duties, taxes and other charges within six months from the

date of acceptance of the import entry.

h. Medals, badges, cups and other small articles bestowed as trophies or

prizes, or those received or accepted as honorary distinctions.

i. Wearing apparel and household effects, including those articlesprovided for under subsections "j" and "k", and belonging to residents of

the Philippines returning from abroad, which were exported from the

Philippines by such returning residents upon their departure therefrom

or during their absence abroad, upon the identity of such articles being

established to the satisfaction of the Collector of Customs; personal and

household effects brought into the Philippines by returning residents, the

export value of which does not exceed five hundred pesos, solely for

personal or household use but not imported for the account of any other

person nor intended for barter, sale or hire: Provided, That such returning

residents have not received the benefit of any exemption hereunder within

one hundred and eighty days from and after the date of the last exemption

granted: And Provided, further, That in the event the total export value of

the imported article or articles exceeds the amount of five hundred pesos,

such article or articles shall be subject to duty only on the amount in excess

of five hundred pesos; articles of the same kind and class purchased in

foreign countries by residents of the Philippines during their absence

abroad and accompanying them upon their return to the Philippines, or

arriving within a reasonable time which in no case shall exceed ninety (90)

days before or after the owner's return, upon proof satisfactory to the

Collector of Customs that same have been in their use abroad for more

than one year; articles in any single shipment consigned to any single

person when the total export value of such shipment does not exceed one

hundred pesos: Provided, finally, That when the export value exceeds the

amount of one hundred pesos, only the amount in excess of one hundred

pesos shall be subject to duty.

j. Wearing apparel, articles of personal adornment, toilet articles,

portable tolls and instruments, theatrical costumes, and similar personal

effects, accompanying travelers or tourists in their baggage or arriving

within a reasonable time, in the discretion of the Collector of Customs,

before or after the owners, in use of and necessary and appropriate for thewear or use of such persons according to their profession or position for

the immediate purposes of their journey and their present comfort and

convenience: Provided, That this exemption shall not be held to apply to

articles intended for other persons or for barter, sale or hire: Provided,

further, That the Collector of Customs may, in his discretion, require a

bond in an amount equal to one and onehalf times the ascertained duties,

taxes and other charges upon articles classified under this subsection,

conditioned for the exportation thereof or payment of the corresponding

duties, taxes and other charges, within six months from the date of

acceptance of the import entry: And Provided, finally, That the Collector of

Customs may extend the time for exportation or payment of duties, taxes

and other charges for a term not exceeding six months from the expiration

of the original period.

k. Vehicles, horses, harness, bed and table linen, table service, furniture,

musical instruments and personal effects of like character, owned and

imported by travelers or tourists for their convenience and comfort, upon

identification and the giving of a bond in an amount equal to one and

onehalf times the ascertained duties, taxes and other charges thereon,conditioned for the exportation thereof or payment of the corresponding

duties, taxes and other charges within six months from the date of

acceptance of the import entry: Provided, That the Collector of Customs

may extend the time for exportation or payment of duties, taxes and other

charges for a term not exceeding six months from the expiration of the

original period.

l. Professional instruments and implements, tools of trade, occupation or

employment, wearing apparel, domestic animals, and personal and

household effects, including those of the kind and class provided for under

subsections "j" and "k" and belonging to persons coming to settle in the

Philippines, in quantities and of the class suitable to the profession, rank or

position of the person importing them, for their own use and not for barter

or sale, accompanying such persons, or arriving within a reasonable time,

in the discretion of the Collector of Customs, before or after the arrival of

their owners, upon the production of evidence satisfactory to the Collectorof Customs that such persons are actually coming to settle in the

Philippines, that the articles are brought from their former place of abode,

that change of residence is bona fide, and that the privilege of free entry

under this subsection has never been previously granted to them:

Provided, That neither merchandise of any kind, nor machinery or other

articles for use in manufacture, shall be classified under this subsection.

m. Animals, vehicles, portable theaters, circus and theatrical equipment,

including musical instruments, sceneries, panoramas, properties,

saddlery, wax figures and similar objects for public entertainment, and

other articles for display in public expositions, or for exhibition or

competition for prizes, and devices for projecting pictures and parts and

appurtenances therefor, upon identification and the giving of a bond in an

amount equal to one and onehalf times the ascertained duties, taxes and

other charges thereon, conditioned for exportation thereof or payment of

the corresponding duties, taxes and other charges within six months from

the date of acceptance of the import entry: Provided, That the Collector of

Customs may extend the time for exportation or payment of duties, taxes

and other charges for a term not exceeding six months from the expiration

of the original period; and technical and scientific films when imported by

technical, cultural and scientific institutions, and not to be exhibited for

profit: Provided, That if any of the said films is exhibited for profit, the

proceeds therefrom shall be subject to confiscation, in addition to the

penalty provided under section three thousand six hundred and ten of this

Code.

n. Articles (e.g., photographic, sound recording, electrical and other

equipment, vehicles, animals, costumes, apparel, properties, supplies,

unexposed motion picture films) brought by foreign producers for making

or recording motion pictures on location in the Philippines , upon

identification and the giving of a bond in an amount equal to one and onehalf times the ascertained duties, taxes and other charges thereon,

conditioned for exportation thereof or payment of the corresponding

duties, taxes and charges within six months from the date of acceptance of

the import entry. Unexposed motion picture films allowed free entry under

bond for exportation falling within this subsection and subsequently

exposed, whether or not developed, may be reexported free of import

duties, taxes and other charges.

Negative films, undeveloped, exposed outside the Philippines by resident

Filipino citizens or by producing companies of Philippine registry where the


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principal actors and artists employed for the production are Filipinos, upon

affidavit by the importer that such exposed films are the same films

previously exported from the Philippines. As used in this paragraph, the

terms "actors" and "artists" include the persons working the photographic

camera or other photographic and sound recording apparatus by means of

which the film is made.

o. Costumes, regalia and other articles, including office supplies and

equipment, imported for the official use of members and attaches of

foreign embassies, legations, consular officers and other representativesof foreign government: Provided, That the country which any such person

represents accords like privileges to corresponding officials of the

Philippines.

Articles imported for the personal or family use of the members and

attaches of foreign embassies, legations, consular officers and other

representatives of foreign governments: Provided, That such privilege shall

be accorded under special agreements between the Philippines and the

countries which they represent: And Provided, further, That the privilege

may be granted only upon specific instructions of the Department of

Finance in each instance which will be issued only upon request of the

Department of Foreign Affairs.

p. Regalia, gems, statuary, specimens or casts of sculptures imported for

the bona fide use and by the order of any society incorporated or

established solely for religious, philosophical, educational, scientific or

literary purposes, or for the encouragement of the fine arts, or for theuse and by the order of any institution of learning, public library,

museum, orphan asylum or hospital, and not for barter, sale or hire:

Provided, That the term "regalia" shall be held to embrace only such

insignia of rank or office or emblems as may be worn upon the person or

borne in the hand during public exercises or ceremonies of the society or

institution, and shall not include articles of furniture or fixtures, or ordinary

wearing apparel, nor personal property of individuals.

q. Musical organs imported for the bona fide use and by the owner of any

society incorporated or established for religious or educational purposes,

or, expressly for presentation thereto.

r. Scientific apparatus, instruments and utensils specially imported for the

bona fide use and by the order of any society or institution incorporated

or established solely for educational, scientific, or charitable purposes, or

for the encouragement of the fine arts, or for the bona fide use and by the

order of any institution of learning in the Philippines, and not for barter,

sale or hire.

s. Philosophical, historical, economic, scientific, technical and vocational

books specially imported for the bona fide use and by the order of any

society or institution, incorporated or established solely for philosophical,

educational, scientific, charitable or literary purposes, or for the

encouragement of the fine arts, or for the bona fide use of and by the

order of any institution of learning in the Philippines: Provided, That the

provisions of this subsection shall apply to books not exceeding two copies

of any one work when imported by any individual for his own use, and not

for barter, sale or hire.

Bibles, missals, prayerbooks, koran, ahadith and other religious books of

similar nature and extracts therefrom, hymnal and hymns for religious

uses, specially prepared books, music and other instrumental aids for thedeaf, mute or blind, and textbooks prescribed for use in any school in the

Philippines: Provided, That complete books published in parts in periodical

form shall not be classified herein.

t. Newsprint, whenever imported by or for publishers for the exclusive

use in the publication of newspapers.

u. Articles donated to public or private institutions established solely for

educational, scientific, cultural, charitable, health, relief, philanthropic or

religious purposes, for free distribution among, or exclusive use of, the

needy.

v. Food, clothing, housebuilding and sanitaryconstruction materials, and

medical, surgical and other supplies for use in emergency relief work,

when imported by or directly for the account of any victim, sufferer,

refugee, survivor or any other person affected thereby, or by or for the

account of any relief organization, not operated for profit, for distribution

among the distressed individuals, whenever the President shall, by

proclamation, declare an emergency to exist by reason of a state of war,pestilence, cholera, plague, famine, drought, typhoon, earthquake, fire,

flood and similar conditions: Provided, That the importation free of duty of

articles described in this herein subsection shall continue only during the

existence of such emergency, or within such limits and subject to such

conditions as the President may, by his proclamation, deem necessary to

meet the emergency.

w. Philippine articles previously exported from the Philippines and

returned without having been advanced in value or improved in

condition by any process of manufacture or other means, and upon which

no drawback or bounty has been allowed, and foreign articles when

returned after having been loaned and exported for use temporarily

abroad solely for exhibition, examination or experimentation, for

scientific or educational purposes, and foreign containers packed with

exported Philippine articles and returned empty if imported by or for the

account of the person or institution who exported them from thePhilippines and not for sale, subject to identification: Provided, That any

Philippine article falling under this subsection upon which drawback or

bounty has been allowed shall, upon reimportation thereof, be subject to

a duty under this subsection equal to the amount of such drawback or

bounty.

x. Large containers (e.g., demijohns, cylinders, drums, casks and other

similar receptacles of metal, glass or other material) which are, in the

opinion of the Collector of Customs, of such a character as to be readily

identifiable may be delivered to the importer thereof upon identification

and the giving of a bond in an amount equal to one and onehalf times the

ascertained duties, taxes and other charges thereon, conditioned for the

exportation thereof on payment of the corresponding duties, taxes and

other charges within one year from the date of acceptance of the import

entry.

y. Supplies or ship stores listed as such for the use of the vessel; supplies

which are intended for the reasonable requirements of the vessel in her

voyage outside the Philippines, including such articles transferred from a

bonded warehouse in any collection district to any vessel engaged in

foreign trade, for use or consumption of the passengers or its crew on

board such vessel as sea stores; or articles purchased abroad for sale on

board a vessel as saloon stores or supplies: Provided, That any surplus or

excess of such ship, sea or saloon stores arriving from foreign ports shall be

dutiable according to the corresponding heading or subheading.

z. Articles and salvage from vessels recovered after the period of two

years from the date of filing the marine protest or the time when the

vessel was wrecked or abandoned as determined by the Collector of

Customs, or such part of Philippine vessel or her equipment, wrecked or

abandoned in Philippine waters or elsewhere: Provided, That articles andsalvage recovered within the said period of two years shall be dutiable

according to the corresponding heading or subheading.

aa. Articles of easy identification exported from the Philippines for

repairs abroad and subsequently reimported: Provided, That the cost of

the repairs made to any such article shall pay a rate of duty of twentyfive

per cent ad valorem.

bb. Coffins or urns containing human remains, bones or ashes, and all


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articles for ornamenting said coffins or urns and accompanying same;

used personal and household effects, not merchandise, of deceased

persons, upon identification as such, satisfactory to the Collector of

Customs.

** Upon compliance with certain conditions, drawbacks may be allowed.

Section 106(e) of the 1978 TCC reads: e. Payment of the Drawbacks.

Claims for refund or tax credit eligible for such benefits shall be paid or

granted by the Bureau of Customs to claimants within sixty (60) days after

receipt of properly accomplished claims: xxx; Provided further, That as aresult of the refund or tax credit by way of drawback of customs duties,

there would necessarily result a corresponding refund or credit of internal

revenue taxes on the same importation, the Collector of Customs shall

likewise certify the same to the Commissioner of Customs who shall cause

the said refund or tax credit of internal revenue taxes to be paid, refunded

or credited in favor of the importer, with advice to the Commissioner of

Internal Revenue.

*** Section 201 of the 1978 TCC identifies the bases of dutiable value. The

methods of determining the dutiable value are as follows (by order of

preference):

(1) Transaction value an ad valorem rate of duty equivalent to the price

actually paid or payable for the goods when sold for export to the

Philippines, as adjusted;

(2) Transaction value of identical goods the transaction value of identical

goods sold for export to the Philippines and exported at or about the same

time as the goods being valued; identical goods shall mean goods which

are the same in all respects, including physical characteristics, quality and

reputation, discounting minor differences in appearances;

(3) Transaction value of similar goods the transaction value of similar

goods sold for export to the Philippines and exported at or about the same

time as the goods being valued; similar goods shall 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;

(4) Deductive value an amount based on the unit price at which the

imported gods or identical or similar imported goods are sold in the

Philippines, in the same condition as when imported, in the greatest

aggregate quantity, at or about the time of importation of the goods being

valued, to persons not related to the persons from whom they buy such

goods, as adjusted;

(5) Computed value the aggregate value of the cost or value of materials

and fabrication or other processing employed in producing the imported

goods, amount for profit and general expenses, freight, insurance fees and

other transportation expenses for the importation of the goods, among

others; and

(6) Fallback value an amount determined by using other reasonable

means and on the basis of data available in the Philippines.

**** Imported articles shall be deemed "entered" in the Philippines for

consumption when the specified entry form is properly filed and accepted,together with any related documents required by the provisions of this

Code and/or regulations to be filed with such form at the time of entry, at

the port or station by the customs official designated to receive such entry

papers and any duties, taxes, fees and/or other lawful charges required to

be paid at the time of making such entry have been paid or secured to be

paid with the customs official designated to receive such monies, provided

that the article has previously arrived within the limits of the port of entry.

Imported articles shall be deemed "withdrawn" from warehouse in the

Philippines for consumption when the specified form is properly filed and

accepted, together with any related documents required by any provisions

of this Code and/or regulations to be filed with such form at the time of

withdrawal, by the customs official designated to receive the withdrawal

entry and any duties, taxes, fees and/or other lawful charges required to

be paid at the time of withdrawal have been deposited with the customs

official designated to receive such payment. [Section 205, 1978 TCC]

What are the special duties imposable under the 1978 TCC? These are:

(1) Antidumping duty a special duty imposed on the importation of aproduct, commodity or article of commerce into the Philippines at less

than its normal value when destined for domestic consumption in the

exporting country which is the difference between the export price and the

normal value of such product, commodity or article [Section 301, 1978

TCC];

(2) Countervailing duty a special duty imposed on the importation of a

product, commodity or article of commerce into the Philippines when the

same is granted directly or indirectly by the government in the country of

origin or exportation any kind or form of specific

subsidy upon the production, manufacture or exportation of such product,

commodity or article, and the importation of such subsidized product,

commodity or article has caused or threatens to cause material injury to a

domestic industry or has materially retarded the growth or prevents the

establishment of a domestic industry as determined by the Tariff

Commission [Section 302, 1978 TCC];

(3) Marking duty every article of foreign origin imported into the

Philippines, as a general rule, must be marked in any official language of

the Philippines and in a conspicuous place as legibly, indelibly and

permanently as the nature of the article or container will permit in such

manner as to indicate to an ultimate purchaser in the Philippines the name

of the country of origin of such article; failure to comply with the

requirements by law shall subject to relevant article to a marking duty

[Section 303, 1978 TCC]; and

(4) Discriminatory duty a special duty that may be imposed by the

President of the Philippines when he finds that the public interest will be

served thereby, in case a product, commodity or article of commerce is

imported in a vessel of any of a foreign country and the President finds as a

fact that such country discriminates against the commerce of the

Philippines in such manner as to place the commerce of the Philippines at a

disadvantage compared with the commerce of any foreign country.

What is a flexible clause?

Section 401(a) of the 1978 TCC provides that in the interest of national

economy, general welfare and/or national security and subject to certain

prescribed limitations, the President, upon the recommendation of the

National Economic and Development Authority, is empowered to: (1)

increase, reduce or remove existing protective rates of import duty; (2) to

establish import quota or to ban imports of any commodity, as may be

necessary; and (3) to impose an additional duty on all imports not

exceeding 10% ad valorem whenever necessary.

Executive Secretary v. Southwing Heavy Industries, Inc. challenged the

constitutionality of a proviso in EO No. 156 issued by former PresidentArroyo which prohibited importation into the country, inclusive of the

Subic Bay Freeport, of all types of used motor vehicles, subject to certain

exceptions. The Supreme Court found that EO No. 156 both had

constitutional and statutory bases, i.e., there was explicit constitutional

and statutory permission authorizing the President to ban or regulate

importation of articles and commodities into the country. The High Court

cited Article VI, Section 28(2) of the Constitution which says that, [t]he

Congress may, by law, authorize the President to fix within specified limits,

and subject to such limitations and restrictions as it may impose, tariff


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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. The relevant statutes to execute this

constitutional provision are: (1) Section 401,1978 TCC; (2) Articles 4 and 7,

1987 Omnibus Investment Code; and (3) Section 2, 2000 Safeguard

Measures Act.

The subject proviso was declared valid insofar as it applied to the

Philippine territory outside the presently fencedin former Subic Naval

Base and void with respect to its application to the secured fencedin

former Subic Naval Base area. In other words, used motor vehicles thatcome into the Philippine territory via the secured fencedin former Subic

Naval Base area may be stored, used or traded therein, or exported out of

the Philippine territory, but they cannot be imported into the Philippine

territory outside of the secured fencedin former Subic Naval base area.

[Executive Secretary v. Southwing Heavy Industries, Inc., GR Nos. 164171,

164172 and 168741, 20 February 2006.]

Customs Law

SEC. 1204. Liability of Importer for Duties. Unless relieved by laws or

regulations, the liability for duties, taxes, fees and other charges attaching

on importation constitutes a personal debt due from the importer to the

government which can be discharged only by payment in full of all duties,

taxes, fees and other charges legally accruing. It also constitutes a lien

upon the articles imported whish may be enforced while such articles are

in custody or subject to the control of the government.

In Pilipinas Shell v Republic, Shell was assigned tax debit memos and the

corresponding tax credit certificates, which were cancelled, when it was

informed by the Sec. of Finance that they had been fraudulently issued and

transferred. He asked Shell to immediately pay the BoC and the Bureau of

Internal Revenue the value of the canceled TCCs as well as the related

penalties, surcharges and interests. The BoC later on demanded payment,

which was assailed by Shell. The Court held that An assessment or

liquidation by the BoC attains finality and conclusiveness one year from the

date of the final payment of duties except when:

(a) there was fraud;

(b) there is a pending protest or

(c) the liquidation of import entry was merely tentative.

None of the foregoing exceptions is present in this case. There was no

fraud as petitioner claimed (and was presumed) to be in good faith.

Respondent does not dispute this. Moreover, records show that petitioner

paid those duties without protest using its TCCs. Finally, the liquidation was

not a tentative one as the assessment had long become final and

incontestable. Under Art. 1204, import duties constitute a personal debt of

the importer that must be paid in full. The importers liability therefore

constitutes a lien on the article which the government may choose to

enforce while the imported articles are either in its custody or under its

control. When respondent released petitioner's goods, its (respondents)

lien over the imported goods was extinguished. Consequently, respondent

could only enforce the payment of petitioner's import duties in full by filing

a case for collection against petitioner. None of the letters sent by the BoC,

however, can be considered as a liquidation or an assessment of Shells

import tax liabilities that can be the subject of an administrative tax protest

proceeding before the respondent whose decision is appealable to theCTA. Shells import tax liabilities had long been computed and ascertained

in the original assessments, and Shell paid these liabilities using the TCCs

transferred to it as payment.

[Pilipinas Shell Petroleum Corporation v. Republic of the Philipines, GR No.

161953, 6 March 2008.]

In IntraStrata Assurance v Republic, Grand Textiles imported various items

for its manufacturing business. Without payment of the taxes, customs

duties, and charges due and for purposes of domestic consumption, Grand

Textile withdrew the imported goods from storage. The Bureau of Customs

demanded payment of the amounts due from Grand Textile as importer,

and from IntraStrata and PhilHome as sureties. All three failed to pay. The

government responded on January 14, 1983 by filing a collection suit

against the parties with the RTC of Manila. The lowers courts upheld Grand

textiles liability. In this case, the liability for payment was shared between

the importer and the surety. With IntraStrata as surety, the government

may proceed against it for the unpaid taxes and duties of Grand Textile.

[IntraStrata Assurance Corporation v. Republic of the Philippines, GR No.

156571, 9 July 2008.]

Sec. 1301, Imported articles must be entered in the customhouse at the

port of entry within thirty (30) days, which shall not be extendible , from

the date of discharge of the last package from the vessel or aircraft either

(a) by the importer, being holder of the bill of lading, (b) by a duly licensed

customs broker acting under authority from a holder of the bill or (c) by a

person duly empowered to act as agent or attorney in fact for each

holder: Provided, That where the entry is filed by a party other than the

importer, said importer shall himself be required to declare under oath and

under the penalties of falsification or perjury that the declarations and

statements contained in the entry are true and correct: Provided, further,

That such statements under oath shall constitute prima facie evidence of

knowledge and consent of the importer of violation against applicable

provisions of this Code when the importation is found to be unlawful ( R.A.

7651, June 04, 1993

Sec.1801, Abandonment, Kinds and Effects of. An imported article is

deemed abandoned under any of the following circumstances:

a. When the owner, importer, consignee of the imported article expressly

signifies in writing to the Collector of Customs his intention to abandon; or

b. 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 having filed such entry, fails to claim his importation within

fifteen (15) days, which shall not likewise be extendible, from the date of

posting of the notice to claim such importation. Any person who abandons

an article or who fails to claim his importation as provided for in the

preceding paragraph shall be deemed to have renounced all his interests

and property rights therein (R.A. 7651, June 04, 1993).

In Chevron Philippines v Commissioner of Customs, due to information

alleging deliberate concealment, manipulation and scheme employed by

petitioner and Pilipinas Shell in the importation of crude oil, thereby

resulting in huge losses of revenue for the government, an investigation

was conducted by the BoC. Later on, a demand was received by petitioner

for payment of the difference between 10% and 3% tariff rates, on its

previous shipment, as it paid using the 3% rate instead of the 10%. The BoC

later on demanded the amount of P1,180,170,769.21 representing the

total dutiable value of the importations. A petition for review was filed

with the CTA, which sided with the BoC. Under Section 1301 of the TCC,

imported articles must be entered within a nonextendible period of 30

days from the date of discharge of the last package from a vessel.

Otherwise, the BOC will deem the imported goods impliedly abandoned

under Section 1801. The term "entry" in customs law has a triple meaning.

It means (1) the documents filed at the customs house; (2) the submissionand acceptance of the documents and (3) the procedure of passing goods

through the customs house. The operative act that constitutes "entry" of

the imported articles at the port of entry is the filing and acceptance of the

"specified entry form" together with the other documents required by law

and regulations. Thus, under the TCC both the IED and IEIRD should be filed

within 30 days from the date of discharge of the last package from the

vessel or aircraft. As a result, the position of petitioner, that the import

entry to be filed within the 30day period refers to the IED and not the

IEIRD, has no legal basis. It was the law itself which considered the


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importation abandoned when it failed to file the IEIRDs within the allotted

time. It is enough that the importer fails to file the required import entries

within the reglementary period. The lawmakers could have easily retained

the words used in the old law (with respect to the intention to abandon)

but opted to omit them.

[Chevron Philippines, Inc. v. Commissioner of Customs, GR No. 178759, 11

August 2008.]

Sec. 1603, Finality of Liquidation. When articles have been entered and

passed free of duty or final adjustments of duties made, with subsequentdelivery, such entry and passage free of duty or settlements of duties will,

after the expiration of three (3) years from the date of the final payment of

duties, in the absence of, fraud or protest or compliance audit pursuant to

the provisions of this Code, be final and conclusive upon all parties, unless

the liquidation of the import entry was merely tentative." (R.A. 9135, April

27, 2001)

In Commissioner of Customs v Philippine Phosphate, respondent, a PEZA

registered entity, bought fuel and petroleum from Petron, and reimburses

the corresponding customs duties and taxes paid by Petron to the Bureau

of Customs. Later on, Philpohos filed a claim for refund which was denied.

The Court held that the termination of the importation does not

necessarily bar a claim for refund under Section 1603.

[Commissioner of Customs v. Philippine Phosphate Fertilizer Corporation,

GR No. 144440, 1 September 2004.]

Sec. 1708, Claim for Refund and Mode of Payment. All claims for refund

of duties shall be made in writing and forwarded to the Collector to whom

such duties are paid, who upon receipt of such claim, shall verify the same

by the records of his Office, and if found to be correct and in accordance

with law, shall certify the same to the Commissioner with his

recommendation together with all necessary papers and documents. Upon

receipt by the Commissioner of such certified claim he shall cause the same

to be paid if found correct. If a result of the refund of customs duties there

would necessarily result a corresponding refund of internal revenue taxes

on the same importation, the Collector shall likewise certify the same to

the Commissioner who shall cause the said taxes to be paid, refunded, or

tax credited in favor of the importer, with advice to the Commissioner of

Internal Revenue.

In Nestle Phil. v CA, petitioner imported milk and milk products form

various countries, and was assessed customs duties and advance sales

taxes. Such was paid but a protest was filed, alleging that higher values

were used in determining the amounts to be paid to the BoC. The SC held

that it is clear from the foregoing provision of the Tariff and Customs Code

that in all claims for refund of customs duties, the Collector to whom such

customs duties are paid and upon receipt of such claim is mandated to

verify the same by the records of his Office. If such claim is found correct

and in accordance with law, the Collector shall certify the same to the

Commissioner with his recommendation together with all the necessary

papers and documents. This is precisely one of the reasons why the Court

of Appeals upheld the dismissal of the case on the ground that the CTAs

jurisdiction under the Tariff and Customs Code is not concurrent with that

of the respondent Commissioner of Customs due to the absence of any

certification from the Collector of Customs of Manila. Accordingly,

petitioners contention that its claims for refund of alleged overpayment of

customs duties may be deemed established from the findings of the taxcourt in the C.T.A. Case on the Advance Sales Tax is not necessarily correct

in the light of the abovecited provision of the Tariff and Customs Code.

Any outright award for the refund of allegedly overpaid customs duties in

favor of petitioner on its subject importations is not favored in this

jurisdiction unless there is a direct and clear finding thereon.

[Nestle Philippines, Inc. v. Court of Appeals, GR No. 134114, 6 July 2001.]

Sec. 1802, Abandonment of Imported Articles. An abandoned article

shall ipso facto be deemed the property of the Government and shall be

disposed of in accordance with the provisions of this Code. Nothing in this

section shall be construed as relieving the 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. Any official or

employee of the Bureau of Customs or of other government knowledge of

the existence of an abandoned article or having control or custody of such

abandoned article, fails to report to the Collector within twenty four (24)

hours from the time the article is shall be punished with the penalties

prescribed in Paragraph 1, Section 3604 of this Code (R.A. 7651, June 04,

1993).

In RV Marzan v CA, the cargo, placed in the warehouse of petitioner, of the

respondent manufacturing company was deemed abandoned and thus,

were sought to be sold at public auction. But he warehouse burned. 2

years thereafter, complaint for damages filed by the owner of the cargo.

Such action was denied by the court. The owner insisted that it did not

abandon the goods because it did not receive the notice of abandonment

of the cargo from the Bureau of Customs. The SC held that District

Collector of Customs did not lose jurisdiction over the abandonment

proceedings. The loss of the cargo did not extinguish his incipient

jurisdiction in the said proceedings, nor render functus officio her

declaration that the subject shipment had been abandoned. It also held

that the trial court had no jurisdiction to resolve the issue of whether or

not the private respondent was the owner of the cargo before it was

gutted by fire.

[R.V. Marzan Freight, Inc. v. Court of Appeals, GR No. 128064, 4 March2004.]

Sec. 2301, Warrant for Detention of Property Cash 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 shall, with the approval of the

Commissioner of Customs, surrender it upon the filing of a cash bond, in an

amount to be fixed by him, conditioned upon 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 such importation shall not be

released under any bond when there is prima facie evidence of fraud in the

importation of the article: Provided, further, That articles the importation

of which is prohibited by law shall not be released under any circumstance

whomsoever, Provided, finally, That nothing in this section shall be

construed as relieving the owner or importer from any criminal liability

which may arise from any violation of law committed in connection with

the importation of the article (R.A. 7651, June 04, 1993).

In Asian Terminals v BautistaRicafort, importers questioned the

impounding made by the BoC of right hand vehicles in the ATI warehouse,

alleging that such importation was not illegal or against the law. The lower

court allowed the release of the vehicles upon the posting of a bond equal

to twice the value of the impounded vehicles. The SC held that the order of

the lower court was invalid, as it had no jurisdiction over the case. RTCs are

devoid of any competence to pass upon the validity or regularity of seizure

and forfeiture proceedings conducted by the Bureau of Customs and to

enjoin or otherwise interfere with these proceedings. It is the Collector of

Customs, sitting in seizure and forfeiture proceedings, who has exclusive

jurisdiction to hear and determine all questions touching on the seizure

and forfeiture of dutiable goods. The Regional Trial Courts are precluded

from assuming cognizance over such matters even through petitions ofcertiorari, prohibition or mandamus.

[Asian Terminals, Inc. v. BautistaRicafort, GR No. 166901, 27 October

2006.]

In Commissioner v CTA, a shipment of refined sugar was made subject of a

decree of abandonment and later on a notice of seizure. The warehouse

and the owner of the shipment moved to quash the same, alleging that

they had no notice thereof. the CoC upheld the validity thereof, thus the

Republic instituted proceedings for the seizure and forfeiture of the


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importation. The Collectors held that because LIFFC did not secure an

import allocation from the SRA, the shipment was an illegal importation of

refined sugar. They ordered its forfeiture in favor of the government.

Respondents filed a motion to release cargo for exportation upon filing of a

surety bond. This was granted by the CTA. Section 2301 of the TCCP states

that seized articles may not be released under bond if there is prima facie

evidence of fraud in their importation. Fraud is a "generic term embracing

all multifarious means which human ingenuity can devise and which are

resorted to by one individual to secure an advantage and includes all

surprise, trick, cunning, dissembling and any unfair way by which another ischeated." Since fraud is a state of mind, its presence can only be

determined by examining the attendant circumstances. Under Section

1202 of the TCCP, importation takes place when merchandise is brought

into the customs territory of the Philippines with the intention of unloading

the same at port. An exception to this rule is transit cargo entered for

immediate exportation. For an entry for immediate exportation to be

allowed under this provision, the following must concur:

(a) there is a clear intent to export the article as shown in the bill of lading,

invoice, cargo manifest or other satisfactory evidence;

(b) the Collector must designate the vessel or aircraft wherein the articles

are laden as a constructive warehouse to facilitate the direct transfer of

the articles to the exporting vessel or aircraft;

(c) the imported articles are directly transferred from the vessel or aircraftdesignated as a constructive warehouse to the exporting vessel or aircraft

and

(d) an irrevocable domestic letter of credit, bank guaranty or bond in an

amount equal to the ascertained duties, taxes and other charges is

submitted to the Collector (unless it appears in the bill of lading, invoice,

manifest or satisfactory evidence that the articles are destined for

transshipment).

None of the requisites above was present in this case. It clearly appears in

the Bill of Lading that the sugar was to be discharged at Manila, South

Harbor.

[Commissioner of Customs v. Court of Tax Appeals, GR Nos. 17151617, 13

February 2009.]

Sec. 2308, Protest and Payment under Protest in Civil Matters . When a

ruling or decision of the Collector is made whereby liability for duties,

taxes, fees or other charges are determined, except the fixing of fines in

seizure cases, the partly adversely affected may protest such ruling or

decision by present Collector at the time when payment of the amount

claimed to be due the government is made, or wit, (15) days thereafter, a

written protest setting forth his objection to the ruling or decision in

question with the reason's therefore. No protest shall be considered unless

payment of the amount due liquidation has first been made and the

corresponding docket fee, as provided for in Section 3301.

Sec. 2309, Protest Exclusive Remedy in Protestable Case. In all cases

subject to protest, the interested party who desires to have the action of

the Collector reviewed, shall make a protest, otherwise the action of the

Collector shall be final and conclusive against him, except as to matters

collectible for error in the manner prescribed in section one thousand

seven hundred and seven hereof.

In Nestle Phils. v CA, the Court said that under these provisions, it appears

that in all cases subject to protest, the claim for refund of customs duties

may be foreclosed only when the interested party claiming refund fails tofile a written protest before the Collector of Customs. This written protest

which must set forth the claimants objection to the ruling or decision in

question together with the reasons therefor must be made either at the

time when payment of the amount claimed to be due the government is

made or within fifteen (15) days thereafter. In conjunction with this right of

the claimant is the duty of the Collector of Customs to hear and decide

such protest in accordance and within the period of time prescribed by the

law.

Accordingly, once a written protest is seasonably filed with the Collector of

Customs the failure or inaction of the latter to promptly perform his

mandated duty under the Tariff and Customs Code should not be allowed

to prejudice the right of the party adversely affected thereby.

Technicalities and legalisms, however exalted, should not be misused by

the government to keep money not belonging to it, if any is proven, and

thereby enrich itself at the expense of the taxpayers. If the State expects its

taxpayers to observe fairness and honesty in paying their taxes, so must itapply the same standard against itself in refunding excess payments, if any,

of such taxes. Indeed the State must lead by its own example of honor,

dignity and uprightness.

[Nestle Philippines, Inc. v. Court of Appeals, GR No. 134114, 6 July 2001.]

In CJH Development v CIR, Pres. Ramos issued a proclamation creating an

SEZ in Camp John Hay, for which both the BIR and the BoC issued the

corresponding rules and regulations. When the proclamation was declared

null and void by the Court, the BIR demanded payment of taxes from

petitioner. Later on the BoC also demanded payment of duties and taxes of

petitioner for importations during the period when the proclamation was

still in effect. Petitioner questioned the retroactive applicability of the

previous court ruling. The SC held that the Tariff and Customs Code (TCC)

provides for the administrative and judicial remedies available to a

taxpayer who is minded to contest an assessment, subject of course to

certain reglementary periods. The TCC provides that a protest can be

raised provided that payment first be made of the amount due.30 The

decision of the Collector can be reviewed by the Commissioner of Customs

who can approve, modify or reverse the decision or action of the Collector.

If the party is not satisfied with the ruling of the Commissioner, he may file

the necessary appeal to the Court of Tax Appeals. Afterwards, the decision

of the Court of Tax Appeals can be appealed to this Court. The Court said

that petitioner filed the wrong remedy by filing a petitioner for declaratory

relief in the RTC.

[CJH Development Corporation v. CIR, GR No. 172457, 24 December 2008.]

Sec. 2402, Review by Court of Tax Appeals. The party aggrieved by the ruling of the Commissioner in any matter brought before him upon protest or by his

action or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the manner and within the period prescribed by law and regulations. Unless an

appeal is made to the Court of Tax Appeals in the manner and within the period prescribe by laws and regulations, the action or ruling of the Commissioner shall

be final and conclusive.

In Pilipinas Shell v Commissioner of Customs, the TCCs of Shells given to it by BOIregistered entites were cancelled, and since they were used to pay for its tax

liabilities, the Sec. of DOF required Shell to pay the said tax liabilities. 3 collection cases were filed by the CoC against Shell. Shell later on filed with the CTA a

Petition for Review questioning the BOC collection efforts for lack of legal and factual basis, which ruled in its favor. This was reversed by the CA. The SC held that

the present case does not involve a tax protest case within the jurisdiction of the CTA to resolve. These decisions of the respondent involving customs duties

specifically refer to his decisions on administrative tax protest cases, as stated in Section 2402 of the Tariff and Customs Code of the Philippines (TCCP). A tax

protest case, under the TCCP, involves a protest of the liquidation of import entries. A liquidation is the final computation and ascertainment by the collector of

the duties on imported merchandise, based on official reports as to the quantity, character, and value thereof, and the collectors own finding as to the applicable

rate of duty; it is akin to an assessment of internal revenue taxes under the National Internal Revenue Code where the tax liability of the taxpayer is definitely


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determined. None of these letters, however, can be considered as a liquidation or an assessment of Shells import tax liabilities that can be the subject of an

administrative tax protest proceeding before the respondent whose decision is appealable to the CTA. Shells import tax liabilities had long been computed and

ascertained in the original assessments, and Shell paid these liabilities using the TCCs transferred to it as payment. It is even an error to consider the letters as a

reassessment because they refer to the same tax liabilities on the same importations covered by the original assessments. The letters merely reissued the

original assessments that were previously settled by Shell with the use of the TCCs. However, on account of the cancellation of the TCCs, the tax liabilities of Shell

under the original assessments were considered unpaid; hence, the letters and the actions for collection. When Shell went to the CTA, the issues it raised in its

petition were all related to the fact and efficacy of the payments made, specifically the genuineness of the TCCs; the absence of due process in the enforcement

of the decision to cancel the TCCs; the facts surrounding the fraud in originally securing the TCCs; and the application of estoppel. These are payment and

collection issues, not tax protest issues within the CTAs jurisdiction to rule upon.

[Pilipinas Shell Petroleum Corporation v. Commissioner of Customs, GR No. 176380, 18 June 2009.]

Sec. 2503, Undervaluation, Misclassification and Misdeclaration in Entry. When the dutiable value of the imported articles shall be so declared and entered

that the duties, based on the declaration of the importer on the face of the entry would be less by ten percent (10%) than importers description on the face of

the entry would less by ten percent (10%) than should be legally collected based on the tariff classification of when (the dutiable weight, measurement or

quantity of imported articles is found upon examination to exceed by ten percent (10%) or more than the entered weight, measurement or quantity, a surcharge

shall be collected from the importer in an amount of not less than the difference between the full duty and the estimated duty based upon the declaration of the

importer, nor more than twice of such difference: Provided, That an undervaluation, misdeclaration in weight, measurement or quantity of more than thirty

percent (30%) between the value, weight, measurement or quantity declared in the entry, and the actual value, weight, quantity, or measurement shall

constitute a prima facie evidence of fraud penalized under Section 2530 of this Code: Provide, further, That any misdeclaration or undeclared imported

article/tems ound pon examination shall ipso facto be forfeited n favor of the Government to be disposed f pursuant to the provisions of this Code. When the

undervaluation, misdescription, misclassification or misdeclaration in the import entry is intentional, the importer shall be subject to penal provision under

Section 3602 of this Code (R.A. 7651, June 04, 1993).

In Secretary of Finance v Oro maura Shipping, the importation of a vessel was allowed by the DOF ts tax and dutyfree release to Glory Shipping Lines, subject to

the conditions imposed by MARINA. The Bureau of Customs (BOC) also required Glory Shipping Lines to post a bond in the amount equal to 150% of the duties,

taxes and other charges due on the importation, conditioned on the reexportation of the vessel upon termination of the charter period, but in no case to extendbeyond the year 1999. Such bond was posted and the vessel arrived. But, the bond expired, and was not renewed. The Collector of MActan assessed the vessels

duties and other charges, and sent demand letters to the respondent. Later on, Collector of the Port of Mactan ordered the forfeiture of the vessel in favor of the

Government, after finding that both Glory Shipping Lines and the respondent acted fraudulently in the transaction. The SC held that the petitioner can order the

reassessment of the vessel. When the undervaluation, misdescription, misclassification or misdeclaration in the import entry is intentional, the importer shall be

subject to the penal provision under Section 3602 of this Code. The 80% drop in valuation existing in this case renders the consideration and application of

Section 2503 unavoidable. Respondent never explained the considerable disparity between the dutiable value declared by Glory Shipping Lines and the dutiable

value it declared difference of P5,000,000.00 so as to overturn or contradict this prima facie finding of fraud. We note that the exercise of due diligence alone

would have alerted it to Glory Shipping Lines acquisition cost and the vessels declared value at its first entry. The respondent, being in the shipping business,

should have known the standard prices of vessels and that the value it proposed to MARINA, as described in the second phase above, is extraordinarily low

compared to the vessels originally declared valuation. All these strengthen, rather than weaken, the prima facie evidence of fraud that the law dictates when an

unconscionable disparity of valuations exists.

[Secretary of Finance v. Oro Maura Shipping Lines, GR No. 156946, 15 July 2009.]

Sec. 2530, Property Subject to Forfeiture under Tariff and Customs Laws. Any vehicle, vessel or aircraft, cargo, article and other objects shall, under the

following conditions be subjected to forfeiture:

a. Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully in the importation or exportation of articles or in conveying and/or

transporting contraband or smuggled articles in commercial quantities into or from any Philippine port or place. The mere carrying or holding on board

of contraband or smuggled articles in commercial quantities shall subject such vessel, vehicle, aircraft, or any other craft to forfeiture: Provided, That

the vessel, or aircraft or any other craft is not used as duly authorized common carrier and as such a carrier it is not chartered or leased;

b. Any vessel engaging in the coastwise which shall have on board any article of foreign growth, produce, or manufacture in excess of the amount

necessary for sea stores, without such article having been properly entered or legally imported; c. Any vessel or aircraft into which shall be transferred

cargo unladen contrary to law prior to the arrival of the importing vessel or aircraft at her port of destination; d. Any part of the cargo, stores or

supplies of a vessel or aircraft arriving from a foreign port which is unladen before arrival at the vessel's or aircraft's port of destination and without

authority from the customs officials; but such cargo, ship or aircraft stores and supplies shall not be forfeited if such unlading was due to accident,

stress of weather or other necessity and is subsequently approved by the Collector; e. Any article which is fraudulently concealed in or removed

contrary to law from any public or private warehouse, container yard or container freight station under customs supervision; f. Any article the

importation or exportation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and all other

articles which, in the opinion of the Collector, have been used, are or were entered to be used as instruments in the importation or the exportation of

the former; g. Unmanifested article found on any vessel or aircraft if manifest therefore is required; h. Sea stores or aircraft stores adjudged by the

Collector to be excessive, when the duties assessed by the Collector thereon are not paid or secured forthwith upon assessment of the same, i. Any

package of imported article which is found by the examining official to contain any article not specified in the invoice or entry, including all otherpackages purportedly containing imported articles similar to those declared in the invoice or entry to be. the contents of the misdeclared package;

Provided, That the Collector is of the opinion that the misdeclaration was contrary to law; j. Boxes, cases, trunks, envelopes and other containers of

whatever character used as receptacle or as device to conceal article which is itself subject to forfeiture under the tariff and customs laws or which is

so designed as to conceal the character of such articles;

c. k. Any conveyance actually being used for the transport of articles subject to forfeiture under the tariff and customs laws, with its equipage or

trappings, and any vehicle similarly used, together with its equipage and appurtenances including the beast steam or other motive power drawing or

propelling the same. The mere conveyance of contraband or smuggled articles by such beast or vehicle shall be sufficient cause for the outright seizure

and confiscation of such beast or vehicle but the forfeiture shall not be effected if it is established that the owner of the means of conveyance used as

aforesaid, is engaged as common carrier and not chartered or leased, or his agent in charge thereof at the time, has no knowledge of the unlawful act;


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1. Any article sought to be imported or exported

(1) Without going through a customhouse, whether the act was consummated, frustrated or attempted;

(2) By failure to mention to a customs official, articles found in the baggage of a person arriving from abroad;

(3) On the strength of a false declaration or affidavit executed by the owner, importer, exporter or consignee concerning the importation of such article;

(4) On the strength of a false invoice or other document executed by the owner, importer, exporter or consignee concerning the importation or exportation

of such article; and

(5) Through any other practice or device contrary to law by means of which such articles was entered hrough a customhouse to the prejudice of the

government.

In Republic v CTA, the SC provided the requisites for the forfeiture of goods under Section 2530(f), in relation to (1) (35), of the Tariff and Customs Code, which

are: (a) the wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the same person

of any invoice, letter or paper all touching on the importation or exportation of merchandise; (b) the falsity of such declaration, affidavit, invoice, letter or paper;

and (c) an intention on the part of the importer/consignee to evade the payment of the duties due. Fraud must be proved to justify forfeiture. It must be actual,

amounting to intentional wrongdoing with the clear purpose of avoiding the tax. Forfeiture is not favored in law nor in equity. Mere negligence is not equivalent

to the fraud contemplated by law. What is here involved is an honest mistake, not even directly attributable to private respondent, which will not deprive the

government of its right to collect the proper tax. Here, forfeiture proceedings were instituted, on the ground that the consignee in the ships manifest could not

be located at the address therein provided and was suspected of being a fictitious firm.

[Republic of the Philippines v. Court of Tax Appeals, GR No. 139050, 2 October 2001.]

In El Greco Ship Management v Commissioner, A shipment of rice from Manila to Albay was made the subject of a warrant of seizure and identification, as it was

said that it left the port without clearance from the Coast Guard. Later on, the whole ship was made subject to seizure. The consignees, to protect their rights,

filed with the RTC and action assailing the seizure. Pending the action, the vessel which was at port under the custody of the BoC, was hit by a typhoon, and was

lost. Petitioner, authorized agent of the owner of the vessel, intervened and sought to quash the warrant of seizure, as the vessel which was seized was not the

same vessel that was the subject thereof, which was granted. The SC ruled otherwise, as there was evidence on record to the contrary. The foreign registration

of M/V Neptune Breeze proves only that it was registered in a foreign country; but it does not render impossible the conclusions consistently reached by theLegaspi District Collector, the CTA Second Division and the CTA en banc, and presently by this Court, that M/V Neptune Breeze was the very same vessel used in

the conduct of smuggling activities in the name M/V Criston. The Court could not permit El Greco to evade the forfeiture of its vessel, as a consequence of its

being used in smuggling activities, by decrying denial of due process. In administrative proceedings, such as those before the BOC, technical rules of procedure

and evidence are not strictly applied and administrative due process cannot be fully equated with due process in its strict judicial sense. The essence of due

process is simply an opportunity to be heard or, as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek

reconsideration of the action or ruling complained of. The penalty of forfeiture is imposed on any vessel engaged in smuggling, provided that the following

conditions are present:

(1) The vessel is used unlawfully in the importation or exportation of articles into or from the Philippines;

(2) The articles are imported to or exported from any Philippine port or place, except a port of entry; or

(3) If the vessel has a capacity of less than 30 tons and is used in the importation of articles into any Philippine port or place other than a port of the Sulu Sea,

where importation in such vessel may be authorized by the Commissioner, with the approval of the department head." There is no question that M/V Neptune

Breeze, then known as M/V Criston, was carrying 35,000 bags of imported rice without the necessary papers showing that they were entered lawfully through a

Philippine port after the payment of appropriate taxes and duties thereon. This gives rise to the presumption that such importation was illegal. Consequently,

the rice subject of the importation, as well as the vessel M/V Neptune Breeze used in importation are subject to forfeiture.

[El Greco Ship Manning and Management Corporation v. Commissioner of Customs, GR No. 177188, 4 December 2008.]

Sec. 3601, Unlawful Importation. Any person who shall fraudulently import or bring into the Philippines, or assist in so doing, 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 and shall be punished with:

1 . A fine of not less than fifty pesos nor more than two hundred pesos and imprisonment of not less than five days nor more than twenty days; if the appraised

value, to be determined in the manner prescribed under this Code, including duties and taxes, of the article unlawfully imported does not exceed twenty five

pesos;

2. A fine of not less than eight hundred pesos nor more than five thousand pesos and imprisonment of not less than six months and one day nor more than four

years, if the appraised value, to be determined in the manner prescribed under this Code, including duties and taxes, of the article unlawfully imported exceeds

twenty five pesos but does not exceed fifty thousand pesos;

3. A fine of not less than six thousand pesos nor more than eight thousand pesos and imprisonment of not less than five years and one day nor more than eight

years, if the appraised value, to be determined in the manner prescribed under this Code, including duties and taxes, of the art,,: unlawfully imported is more

than fifty thousand pesos but does not exceed one hundred thousand pesos;

4. A fine of not less than eight thousand pesos nor more than ten thousand pesos and imprisonment of not less than eight years and one day nor more than

twelve years, if the appraised value to be determined in the manner prescribed under this Code, including duties and taxes, of the artic unlawfully imported

exceeds one hundred fifty thousand pesos;

5. The penalty of prison mayor shall be imposed when the crime of serious physical injuries shall have been committed and the penalty of reclusion perpetua to


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death shall be imposed when the crime of homicide shall have been committed by reason or on the occasion of the unlawful importation. In applying the above

scale of penalties, if the offender is an alien and the prescribed penalty is not death, he shall be deported after serving the sentence without further proceedings

for deportation. If the offender is a government official or employee, the penalty shall be the maximum as hereinabove prescribe and the offender shall suffer

and additional penalty of perpetual disqualification from public office, to vote and to participate in any public election. When, upon trial for violation of this

section, the defendant is shown to have had possession of the article in question, possession shall be deemed sufficient evidence to authorize conviction unless

the defendant shall explain the possession to the satisfaction of the court: Provided, however, That payment of the tax due after apprehension shall not

constitute a valid defense in any prosecution under this section.

In Remigio v Sandiganbayan, a container van, allegedly containing imported 25,000 kg. of sodium bicarbonate was intercepted by the Special Operations Group,

Economic Intelligence and Investigation Bureau (EIIB), and was found to contain the following: only 185 bags of sodium bicarbonate, tires, laser printers,Mercedes benz, dried fish, buckles, clothes, etc. The customs examiner determined that the correct duties and taxes that may be assessed on the shipment

amounted to P1,643,057.00. Criminal cases were filed against the customs examiners who allowed the withdrawal and release of the subject goods from the

port, and only one of them was held guilty by the lower court. The SC held that accused Remigio did not fraudulently assist in the importation of any article

contrary to law nor facilitated its transportation, knowing the same to have been imported contrary to law. All accused Remigio did was to prepare the import

entry based on the shipping and other documents required by the Bureau of Customs and file the same. Thus, he was acquitted. It is indeed ironical that the co

accused, the customs examiner who failed to do his duty of conducting a 100% examination of the shipment in violation of Sections 3604 and 3602 in relation to

Section 3601, Tariff and Customs Code of the Philippines was acquitted, yet petitioner was convicted of acts which did not constitute a statutory offense at the

time the event took place.

[Remigio v. Sandiganbayan, GR Nos. 14542223, 18 January 2002.]

In Rimorin v People, a cargo truck was intercepted by the group of Col. Lacson, which was found to be carrying 05 cases of blue seal or untaxed cigarettes were

found inside said truck. The cargo truck driver known only as Boy was able to escape while the other passengers or riders of said truck were apprehended,

namely: Police Sgt. Arturo Rimorin of Pasay City Police Force, Pat. Felicisimo Rieta of Kawit Police Force, and Gonzalo Vargas, a civilian. Rimorin was found guilty

of smuggling. The SC held that In order that a person may be deemed guilty of smuggling or illegal importation under the foregoing statute three requisites must

concur: (1) that the merchandise must have been fraudulently or knowingly imported contrary to law; (2) that the defendant, if he is not the importer himself,

must have received, concealed, bought, sold or in any manner facilitated the transportation, concealment or sale of the merchandise; and (3) that the defendantmust be shown to have knowledge that the merchandise had been illegally imported. If the defendant, however, is shown to have had possession of the illegally

imported merchandise, without satisfactory explanation, such possession shall be deemed sufficient to authorize conviction.

The prosecution competently established that (1) the 305 cases of untaxed blue seal cigarettes discovered inside the cargo truck were fraudulently imported;

and (2) petitioner was in control of the truck when it transported the cargo on October 15, 1979. Petitioner was unable to satisfactorily explain his possession of

the untaxed cigarettes, which the MISG agents seized from him and his coaccused. Rather, he feigns ignorance of the true nature of the cargo, which was found

by the Court to be incredible.

[Rimorin v. People of the Philippines, GR No. 146481, 30 April 2003.]

In Salvador v People, the accused along with 2 other persons, were found disembarking a parked minibus in the airport, with their abdominal areas bulging. When

searched, it was found that they had packages wrapped in packaging tape, which later on were found to contain jewelry, and several watches. All three were

charged with violating Section 3601 of the Tariff and Customs Code. Smuggling is thus committed by any person who (1) fraudulently imports or brings into the

Philippines or assists in importing or bringing into the Philippines any article, contrary to law, or (2) receives, conceals, buys, sells or in any manner facilitates the

transportation, concealment, or sale of such article after importation, knowing the same to have been imported contrary to law. Importation commences when

the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unload and is deemed terminated upon payment of the duties, taxes and

other charges due upon the articles and the legal permit for withdrawal has been issued, or where the articles are dutyfree, once the articles have left the

jurisdiction of the customs.

In the instant case, the prosecution established by positive, strong, and convincing evidence that petitioner and his coaccused were caught redhanded by a

team from the PAF Special Operations Squadron, while in the possession of highly dutiable articles inside the premises of the airport. The contraband items were

taken by petitioner and his coaccused from a PAL plane which arrived from Hong Kong on the night of June 3, 1994. Petitioner and his colleagues then attempted

to bring out these items in the cover of darkness by concealing them inside their uniforms. When confronted by the PAF team, they were unable to satisfactorily

explain why the questioned articles were in their possession. They could not present any document to prove lawful importation. Thus, their conviction must

necessarily be upheld. Clearly, the Court of Appeals committed no reversible error in affirming the trial courts Decision convicting petitioner and his coaccused.

[Salvador v. People of the Philippines, GR No. 146706, 15 July 2005.]

In Francisco v People, an information was filed against petitioner, and others, for violation of Section 3601 of the Tariff and Customs Code of the Philippines. The

imported items, consisting of dutiable electronic equipment and accessories, were all as assorted mens and ladies accessories. The SC upheld the lower courts

conviction. Smuggling is committed by any person who (1) fraudulently imports or brings into the Philippines any article contrary to law; (2) assists in so doing any

article contrary to law; or (3) receives, conceals, buys, sells or in any manner facilitates the transportation, concealment or sale of such goods after importation,

knowing the same to have been imported contrary to law. In applying the scale of penalties in Sec. 3601, if the offender is an alien and the prescribed penalty is

not death, he shall be deported after serving the sentence without further proceedings for deportation; if the offender is a government official or employee, the

penalty shall be the maximum as hereinabove prescribed and the offender shall suffer an additional penalty of perpetual disqualification from public office, tovote and to participate in any public election.

When, upon trial for violation of this section, the defendant is shown to have had possession of the article in question, possession shall be deemed sufficient

evidence to authorize conviction unless the defendant shall explain the possession to the satisfaction of the court: Provided, however, That payment of the tax

due after apprehension shall not constitute a valid defense in any prosecution under this section. There is no doubt that smuggling was committed in this case.

Accused helped conceal the true nature of the cargo. Under Number 4 of Article 3601 of the TCCP, if the appraised value, including the duties and taxes, of the

article illegally imported exceeds one hundred fifty thousand pesos, the person liable shall be punished with a fine of not less than eight thousand pesos nor more

than ten thousand pesos and imprisonment of not less than eight (8) years and one (1) day nor more than twelve (12) years. In the instant case, the domestic

value of the subject importation is P20,000,000.00. The SC modified the penalty imposed, which was increased to eight (8) years and one (1) day, as minimum, to


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twelve (12) years, as maximum.

[Francisco v. People of the Philippines, GR Nos. 177430 and 178935, 14 July 2009.]

Administrative and judicial proceedings in customs seizures and forfeitures

Title VI Administrative and Judicial Proceedings

Part 1 Search, Seizure and Arrest [Sections 22012212]

- No person who is unauthorized is allowed to enter the port or the BoC premises. No person may also obstruct a customshouse, warehouse, office,

wharf, street or other premises under the control of the Bureau of Customs.- Special surveillance over the coast is to be provided by the customs service, in addition to the surveillance provided by the Phil. Coast Guard.

- Persons having authority to enforce tariff and customs laws: officials of the BoC, Phil. Navy, BIR, and other generally empowered by law. And all these

persons may exercise such powers within the jurisdiction of the BoC.

- These authorized persons have the power to effect seizures and arrests, but are required to disclose their official character when questioned.

- They may seek for assistance from any police officer to carry out the search, seizure or arrest.

- They may at any time enter, pass through, or search any land or inclosure or any warehouse, store or other building, not being a dwelling house. But

they may only search a dwelling house upon a warrant issued by a Judge of the Court.

- They have power to go aboard any vessel or aircraft and inspect, search and examine or aircraft and any trunk, package, box or envelope on board,

and to search any person thereon.

- They may also open and examine any box, trunk, envelope or other container, found when he has reasonable cause to suspect the presence ther

Tax II Tariffs and Customs-Gruba

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