WHILE I AM NOT AROUND, I RELY ON YOU AS RESPONSIBLE LAW Under the old rules, there are three instances of

STUDENTS TO SUBMIT AN EXHAUSTIVE REPORT ON THE abandonment:

FOLLOWING TOPICS BELOW. THIS MUST BE HANDWRITTEN ON
GOOD QUALITY YELLOW PAD WRITING ONLY ON THE FRONT  Express and written notice to abandon from the
PAGES BOUND IN A FOLDER FOR SUBMISSION ON NOVEMBER 6, importer;
2017 AT THE FACULTY OFFICE THRU ATTY JUN CADUGO. I WILL
PERSONALLY GET FROM HIM THIS REPORTS ON NOV 6. THIS  Failure to file entry within 30 days from discharge
WILL ALSO BE INCLUDED IN THE FINAL EXAMINATIONS. from the vessel; and
COVERAGE OF THE FINAL EXAMS ARE TAX REMEDIES, NEW CTA,
LOCAL TAX, REAL PROP. TAX AND RA10863  Failure to claim the importation after the filing of
An act modernizing the customs and tariff administration (RA an import entry within 15 days from date of
10863 approved May 30,2016. ) posting of Notice to Claim such importation.
Emphasis on the following as compared with the existing
Customs and Tariff Code: When a shipment is declared “abandoned”, it becomes
- goods declaration for consumption automatically property of government and may be disposed by
- -de minimis importation donation or auction.
- Relief consignment
- Conditionally free and duty importations New Rules (Sections 1129 and 1130, CMTA)
- Related party transactions Under the CMTA, goods are deemed abandoned under the
- Misdeclaration, misclassification, undervaluation in goods following instances:
declaration
- Unlawful importation or expropriation  Express and written notice to abandon from the
- Abandonment rules importer;
- Period of storage in a customs bonded warehouse
- Advance customs rulings  Failure to file entry within 15 days from discharge
- Post clearance audit from the vessel or aircraft (note that the period
- Record keeping requirement may be extended for another 15 days upon
- Authority of the comm. to compromise request);
- Application of information and communications technology
Prof. Cabaneiro  Failure to pay the duties and taxes 15 days after
(sent with Gentle Effect) final assessment;

 Failure to claim the importation within 30 days

Customs Modernization and Tariff Act Series 1: Abandoned after payment; and
Goods Are Not Government Property
We have, in various public fora, discussed the benefits of the  Failure to claim the goods in customs bonded
Customs Modernization and Tariff Act or CMTA (Philippine warehouse within the prescribed period.
Republic Act 10863) in terms of trade facilitation and
Notice of abandonment shall be made by electronic notice or
simplifying customs processes. In the coming weeks and
personal service. Expressly abandoned goods under paragraph
months, we will write articles that will discuss various changes
(a) above shall ipso facto be deemed the property of the
under the CMTA and their impact on the trading community.
government.
For this issue, we will expound on the concept of
abandonment under the old and new rules, and the resulting
For impliedly abandoned goods under paragraphs (b), (c), (d)
benefit to importers.
and (e), an importer may reclaim the goods after compliance
with legal requirements and payment of corresponding duties,
Abandonment – New Rights and Benefits
taxes, and other charges within 30 days from lapse of the
Under the old rules, goods deemed ‘abandoned’ automatically
period to filed the import entry. When these goods are sold by
becomes government property. Under the new rules,
customs by public auction, the proceeds of the sale, after
abandoned goods are NOT government property and the
deduction of duty and tax and all other charges, shall be
importer has:
turned over to persons entitled to receive them.
 the right to reclaim the goods after payment of the In other words, the balance of the proceeds shall be returned
duty and tax, and all other charges and expenses; to the importer. In case there is no claimant, the balance shall
and be deposited to the Forfeiture Fund.
 the right over the proceeds of the sale, after Forfeiture Funds (Section 1151, CMTA)
deduction of any duty and tax, and all other All proceeds from public auction sales, after deduction of the
charges and expenses. charges and expenses and subject to the claim of the owner or
importer of an impliedly abandoned goods as discussed above,
Under the CMTA, importers should understand that even if shall be deposited in an account to be known as Forfeiture
there is failure to file the import entry within the prescribed Fund.
period, the goods do not become government property and
importers may (a) request for extension of the period to file The fund shall be managed by the Bureau of Customs and shall
the entry, (b) reclaim the goods, or (c) collect the proceeds if be used for the following:
the goods have already been sold.  outsource the management of the inventory,
safekeeping, maintenance and sale of abandoned
Old Rules (Section 1801, Tariff and Customs Code of the and forfeited goods;
Philippines)
  facilitate customs seizure, abandonment and and Article X (Publication & Administration of Trade
forfeiture proceedings and the disposition of Regulations) of the GATT 1994. As a whole, the convention
goods; provides a comprehensive set of over 600 legal and technical
provisions outlining the basic principles of modern customs
 enhance customs intelligence and enforcement procedures and practices.
capability; and
International Standards. Foremost among the governing
 support the modernization program, and other principles of the RKC is the requirement that customs should
operational efficiency and trade facilitation provide transparency and predictability for the importing,
initiatives. exporting, logistics, transport and forwarding industries. The
convention promotes trade facilitation and effective controls
through its legal provisions that detail the application of
Customs Modernization and Tariff Act Series 2: Background simple yet efficient procedures.
and History of CMTA
This is the second in a series of articles on the Philippine Specifically, the RKC provides core principles for the
Customs Modernization and Tariff Act. following:
For Series 1, click here.
Preliminary Work. Sometime in 2007, the Philippine Bureau  Predictability (standard principles for customs
of Customs (BoC) announced that the Revised Kyoto processing of goods, conveyances and persons
Convention (RKC) will be adopted before the end of the year moving across borders – clearance procedures)
and that the same will be implemented in the coming years.
Known formally as the “The International Convention on the  Transparency (provides all information relating to
Simplification and Harmonization of Customs procedures customs)
(Kyoto Convention)”, the original convention entered into
force in 1974.  Legal (prevents arbitrary or unfair actions by
customs)
In November 2007, BoC created an RKC Management Team to
push for accession to the convention and to lead the  Use of Information Technology
implementation of the RKC by preparing measures to ensure
compliance with the international agreement. Based on a
study conducted at that time, only about 55% of existing Initial Drafts. As an external consultant for the BoC RKC
customs laws and regulations were compliant with Management Team in 2008, we assisted BoC in drafting a bill,
international customs standards. with the main purpose of incorporating the principles and
provisions of the RKC into the TCCP. For the next 12 months,
Among the measures identified for the RKC implementation the team focused on writing the draft provisions and the
strategy were the following: revision of old provisions found inconsistent with the RKC.

 Support for the Senate ratification of the RKC and By the middle of 2009, a draft was submitted to the BoC
approval of legislative measures; management and soon thereafter, a draft bill was filed in
Congress, then entitled “Customs and Tariff Modernization
 Drafting of the omnibus bill to amend the Tariff and Act” (CTMA). The bill was not passed by the Lower House by
Customs Code of the Philippines (TCCP); the end of its term. In 2010, several versions of the CTMA were
filed in both houses. The Lower House was able to approve its
 Drafting of the Manuals of Operations to govern the version but the Senate failed to act on such bill.
main areas in customs operations (entry
processing, customs bonded warehouse, CMTA – RA 10863. In 2013, new versions were again filed. In
administrative and judicial proceedings, transit the early part of 2015, after the conduct of numerous public
goods, etc.); consultations in the Lower House, a technical working group
was created. The TWG was chaired by Rep. Sharon Garin and
 Infrastructure support (e.g. Information and was composed of representatives from the House Committee
Communication Technology); and on Ways and Means, BoC, Department of Finance and external
consultants.
 Provision for human resource training, capacity
building and change management. For the next 6 months, the TWG worked on the consolidated
bill, taking into consideration the adoption of the provisions of
What is the RKC? In order to meet the growing demands of both the RKC and the WTO Trade Facilitation Agreement (TFA),
governments and the international trading community, the the revision of all other old provisions and the inclusion of
original convention was revised and updated in June 1999. The anti-smuggling provisions. By the middle of 2015, a
World Customs Organization (WCO) Council adopted the RKC consolidated bill (now entitled ‘CMTA’ instead of ‘CTMA’) was
as the model for efficient and modern customs procedures in submitted to the mother committee in the Lower House and
the 21st century. To date, there are 105 countries which are by the third quarter of 2015, the bill was approved by the
signatories to the convention. mother committee. At about the same time, the Senate
Committee on Ways and Means also started conducting its
RKC was designed by the WCO to standardize and harmonize public hearings.
customs policies and procedures worldwide. It likewise serves
to implement customs-related principles developed by the In the last quarter of 2015, both houses approved the CMTA
World Trade Organization (WTO), such as the agreements and work started on the harmonization of the House and
contained in Article V (Freedom of Transit), Article VIII (Fees Senate versions. In January 2016, the bicameral committee
& Formalities Connected with Importation and Exportation) convened. On January 21, 2016, both houses ratified the final
version and thereafter, the same was transmitted to the  Creation of a Congressional Customs and Tariff
Office of the President. On May 30, 2016, Republic Act No. Oversight Committee to oversee the
10863 was signed and approved by the President. implementation of the CMTA.

Customs Modernization and Tariff Act Series 3: New Concepts

and Revised Policies Revised Policies. Many policies under the old law have
We have previously mentioned that while the initial draft of likewise been revised or amended such as the following:
the Customs Modernization and Tariff Act focused on the  Requirement that majority of the Deputy
adoption of the Revised Kyoto Convention, the final version Commissioners must come from the ranks;
not only adopted the RKC and the World Trade Organization
Trade Facilitation Agreement but it also included revisions of  Provision for the mandatory transfer of assessment
the old law based on proposals from the private and public officers after 3 years;
sectors as well as inclusion of additional anti-smuggling
provisions. As a result, the CMTA has radically departed from  Redefinition of the term ‘declarant’, to allow
many of the concepts and policies under the old law. importers to transact with the bureau, either
directly or through authorized representatives;
New Concepts. We have outlined below many of the major
concepts and policies as originally provided under the CMTA,  Provision for ‘restricted imports’ to cover imports
as follows: that are generally prohibited unless given prior
permits from certain regulating agencies;
 Expansion of the customs mandate to include trade
facilitation;  Provision to allow motion to quash or recall of a
Warrant of Seizure to prevent delay in the
 Promotion of ‘paperless’ transactions through the processing of shipments;
use of information and communication
technology;  Procedure allowing the submission of provisional
goods declarations in cases of incomplete
 Definition of “free zones” to harmonize rules and documents or information necessary to file the
regulations governing all special economic zones, import entry;
free ports and similar authorities;
 Additional conditions for the exercise of the power
 Provision for tax and duty status on ‘relief to visit and inspect commercial establishments by
consignments’ to, among others, promote non-customs personnel;
donations and international aid during calamities
and major disasters;  Provision for ‘transit’ shipments as against
‘transshipment’;
 Provision for legal interest in case of non-payment
of duties and taxes;  Redefinition of the concept of ‘abandonment’; and

 Procedure for advance ruling to allow early  Procedure allowing settlement while forfeiture
resolution of customs issues even if there is yet proceedings are ongoing.
no actual importation involved;
Implementation. Once fully implemented, the CMTA should in
 Provision on ‘Authorized Economic Operator’ or AEO, general provide for (a) less discretion on customs
an expansion of the original concept of
decision-making, (b) adoption of internal best practices, (c)
‘Authorized Operator’ under the RKC and an
clear, simplified and harmonized processes, and (c) reduced
adoption of the expanded program of the the
penalties for errors and omissions.
World Customs Organization (WCO) to promote
both trade compliance and security in the supply
Given the scope of work required, full implementation of
chain;
CMTA will take years, albeit many of the major policy reforms
will be issued piece-by-piece.
 Definition of ‘alerts’ to harmonize and simplify
rules on the apprehension of shipments, to make
Customs Modernization and Tariff Act Series 4: Title
the process transparent for the trading
1-Preliminary Provisions
community, and to prevent abuse by customs
Title I of the Customs Modernization and Tariff Act (CMTA) has
enforcement officers;
four chapters: Chapter 1 provides the short title; Chapter 2
 Provision for summary remedies such as distraint on the general and common provisions; Chapter 3 defines the
personal property and levy on real property to types of importation; and Chapter 4 is a special provision on
collect duties, taxes and other charges arising relief consignment.
from a customs audit;
Chapter 1 (Short Title)
 Creation of a Forfeiture Fund for the purpose of As previously mentioned, the original title of the initial bills
outsourcing customs functions, facilitating filed in Congress in 2008 was “Customs and Tariff
processes, capacity building, and modernization Modernization Act” or CTMA. The approved law revised the
through automation; and short title based on the misconception that the term tariff
refers to the Tariff Commission and that the term
modernization should properly refer to customs only.
In most customs jurisdictions, tariff administration is an
inherent function of the customs office and there is no Chapter 3 (Types of Importation)
separate office assigned to perform tariff administration. In This Chapter is based on the Section 100 and 101 of the Tariff
the Philippines, we have a separate agency known as the and Customs Code of the Philippines (TCCP). The main
Tariff Commission which is under the National Economic and difference under the CMTA is that the old provision on
Development Authority whereas the Bureau of Customs is prohibited importation has been redefined under 2 new
under the Department of Finance. section—one on prohibited goods per se and another on
restricted goods. Additionally, new provisions have been
Chapter 2 (General and Common Provisions) provided to define free and regulated goods.
We have outlined below the specific changes provided under
this chapter: Under Section 117, import permits for regulated goods may be
submitted after arrival of the goods but prior to release from
 ‘Declaration of Policy’ (Section 101) is a new customs custody. Old customs rules require that import
provision which specifically mentions the permits be issued prior to arrival of the goods and this rule
promotion of trade facilitation as a major affects many importations particularly telecom equipment
customs function. (Section 101) and IT products arriving at Ninoy Aquino International Airport.

 ‘Definition of Terms’ (Section 102) defines new Chapter 4 (Relief Consignment)

terms not previously provided in the old law such Under Section 105 of the old TCCP, donations to relief
as Admission, AWB (airway bill), AEO (Authorized organizations are duty free but subject to VAT. There is now a
Economic Operator), Carrier, Conditional specific chapter under CMTA which provides for tax and duty
Importation, Perishable Goods, Tentative Release, free treatment of goods considered as relief consignments.
Transit, Travelers and Third Party.
Please note that while Title I refers to preliminary provisions,
 Section 103 (When Importation Begins and Deemed this particularly chapter refers to special procedures for a
Terminated) expounds on the instances when specific type of importation. The original draft bills have
importation is deemed terminated. these provisions together with those provisions for travelers
and passenger baggage, postal matters and express shipment.
 Section 104 (When Duty and Tax is Due on Imported Customs Modernization and Tariff Act Series 5: Titles II and III
Goods) has a new provision providing for 20% (Customs in General)
legal interest on duties and taxes that are
already due and demandable.
Title II of the Philippine Customs Modernization and Tariff Act
 Section 105 (Effective Date of Rate of Import of (CMTA) has three chapters: chapter 1 (General
Duty) provides the applicable dates depending on Administration), chapter 2 (Customs Districts and Ports of
the type of goods such as those for consumption, Entry) and chapter 3 (Exercise of Police Authority). Title III
goods withdrawn from customs bonded has two chapters: chapter 1 (customs jurisdiction) and chapter
warehouses or from free zones and goods for 2 (customs control).
public auction. Title II (Bureau of Customs)
Chapter 1 (General Administration) covers the general duties
 Sections 106 (Declarant) has redefined the and functions of the Bureau of Customs (BOC) and covers
declarant to refer mainly to the owner of the about 6 sections. Among the salient features of this chapter
goods. Section 107 provides the rights and are as follows:
obligations of a declarant.  Requirement that there should be at least four (4)
but not more than six (6) Deputy Commissioners,
 Section 108 on penalties adopts the Revised Kyoto majority of whom shall come from the ranks of
Convention (RKC) policy that penalties should not the bureau;
be substantial for errors in the goods declaration
and those not involving gross negligence or fraud.  Expanded power of the Commissioner to include the
power to (i) exercise any customs power directly
 Section 109 promotes the use of ICT in customs or indirectly, and (ii) subject to approval of the
processes. Secretary of Finance, to assign or reassign any
customs officer;
 Section 110 adopts the RKC policy providing equal
treatment of parties transacting directly with  New limitation on assessment officers to remain in
customs or through representatives. their assignment for not more than 3 years;
 Section 111 and 112 is based on the RKC policy to  Enhanced functions for the bureau to include trade
provide transparency and accessibility to facilitation and border control; and
information not otherwise considered as
confidential in nature.  Submission of copies of goods declarations to
various government agencies in electronic copies
 Section 113 (Decision and Ruling) defines the (this repeals the previous requirement for
standards for issuing decisions, including advance manual copies).
rulings, relating to the importation and
exportation of goods. Section 114 provides the One issue relating to the appointment of Deputy
right to appeal a decision deemed adverse to an Commissioners is the requirement that majority come from
importer or exporter. the ranks apply to former customs officers.
With regard to the submission of electronic copies of goods Chapter 1 (Goods Declaration) covers general requirements
declaration to other government agencies, such requirement and has 19 sections dealing with the importation process.
puts pressure on the bureau to enhance its automated system While many of the provisions have been adopted from the old
to ensure such copies are made readily and easily available. code, among the salient features of this chapter are as
Chapter 2 (Port of Entry) retains many of the old provisions follows:
relating to this topic. The old provision on assignment of
customs officers and employees has been qualified with the  Goods declarations (for consumption, customs
requirement that such assignment may only be made within bonded warehouse (CBW), for admission to free
the bureau. zones, for conditional importation or for customs
We note that there had been previous instances of customs transit) are required for ALL importations,
officers being temporarily assigned to the Finance Department including goods bound for freeports and
and the new provision as mentioned now prohibits such Philippine Economic Zone Authority zones and
reassignment to offices other than the bureau. those directly discharged in freeports (e.g.
Chapter 3 (Exercise of Police Authority) defines the scope and Subic).
limitation of the police power as exercised by the
BOC. Among major changes under this chapter are as follows:  Goods declarations shall be submitted
 Law enforcement officers may exercise the power electronically and, when printed and certified,
to search, seize and/or arrest but only upon such printed copy shall be considered as
authorization of the Commissioner and such actionable documents for purposes of filing
deputized officers shall disclose the nature of administrative and criminal charges against the
their authority upon request; importer.

 Goods seized by deputized officers shall be  Customs can now allow provisional goods
physically turned over immediately to the declarations when some information or
bureau; supporting documents are not available to
complete a regular goods declaration, but such
 Port and airport authorities are obliged to provide information or document must be submitted
authorized customs officers with unhampered within 45 days.
access to all premises within their administrative
jurisdictions; and  Goods declarations are now required to be
submitted within 15 days from discharge from
 In the exercise of the power to inspect and visit aircraft or vessel. The period may be extended
commercial establishments and demand evidence for another 15 days. Under the rules on
of tax and duty payments, the owners of the abandonment, the importer may also reclaim the
establishments have 15 days to produce evidence abandoned goods within an additional 30 days.
before their goods may be subject to seizure.
 A new provision has been provided allowing advance
Under the past administrations, law enforcement agencies lodgement and clearance of goods. At present,
were allowed to exercise customs police authority without the the Bureau of Customs allows the advance filing
supervision and control of the BOC. The cited provision now of goods declaration even prior to the arrival of
has certain limitations. For one, these agencies must clearly the goods.
be authorized by the Commissioner and deputized officers
must at all times carry their written authorizations and  International standards on the mode of payment
present the same upon requested. and terms of trade are recognized. These
With regard to the exercise of police power in ports and standards include those developed by the
airports, this chapter now expressly provides that port and International Chamber of Commerce (ICC) on
airport authorities are required to provide unhampered access INCOTERMs and on international letter of credit
to customs police authorities. such as the Uniform Customs and Practice for
Title III (Customs Jurisdiction and Customs Control) Documentary Credits.
Many of the sections under this Title have been adopted from
the old code. Under chapter 2, BOC shall exercise control,
direction and management of customs offices, facilities, Chapter 2 (Examination of Goods) retains many of the old
warehouses, ports, airports, wharves, infrastructures and provisions relating to examination of goods. A provision has
other premises. In addition, the bureau may issue rules and been provided allowing customs to adopt non-intrusive
regulations to allow temporary operation of storage facilities technology (such as x-ray machines) in the examination of
especially for abandoned and overstaying cargoes. goods.
This expanded power of the bureau under this title clearly
impacts on the management and supervision of facilities and Chapter 3 (Assessment and Release) adopted many of the old
operators within ports and airports. provisions on the assessment process which includes the
Customs Modernization and Tariff Act Series 6: Titles IV and V valuation, classification and computation of taxes and duties
(Import and Export Clearance) on imported goods. Among the major changes under this
Title IV of the Customs Modernization and Tariff Act has four chapter are as follows:
chapters: chapter 1 (Goods Declaration), chapter 2
(Examination of Goods), chapter 3 (Assessment and Release)  A new provision provides a tax and duty exemption
and chapter four (Special Procedures). Title V has a single on goods with a de minimis value of Php10,000
chapter covering Export Clearance and Declaration. FOB or FCA.

Title IV (Import Clearance and Formalities)  In lieu of the old provision on tentative liquidation,
two provisions on tentative assessment have been
 provided to cover (i) goods subject to dispute Under Section 600, goods transferred from one customs office
settlement, and (ii) goods covered by provisional to another customs office (e.g. Port of Manila to Port of Davao)
declarations. but intended for domestic use (goods for consumption) are not
considered transit goods and are subject to the immediate
 Assessment shall be deemed FINAL after 15 days payment of duties and taxes.
from receipt of notice. Final assessment shall
also be deemed CONCLUSIVE after 3 years from Under Section 601, transit goods bound for CBWs, Free Zones,
date of final payment of duties and taxes. Within and goods covered by RA 10668 (An Act Allowing Foreign
that 3-year period, customs may conduct a post Vessels to Transport and Co-Load Foreign Cargoes for
clearance audit on the subject importation. Domestic Transshipment and for Other Purposes) are not
subject to the payment of duties and taxes. In the case of
goods covered by RA 10668, goods for consumption arriving at
Chapter 4 (Special Procedures) are new provisions covering a port of discharge (e.g. Port of Manila) for transfer to the
rules on travelers, passenger baggage, postal mail and express port of final destination (e.g. Port of Davao) using another
shipment (courier). Additional provision under Section 440 on foreign vessel shall be subjected to the payment of duties only
advance clearance and control on containerized cargoes has at the port of destination. In all other cases, goods for transit
been provided to allow customs to provide a load port survey or for transfer from one customs office to another shall be
program on containerized cargoes. subject to the payment of duties and taxes at the port of
discharge.
What is clearly new under this chapter is the mandate for
customs to provide a simplified process based on international Chapter 2 (Customs Transshipment) refers to goods for
practices for postal matters and courier shipments. With transshipment or goods that are transshipped through a port
regard to Section 440, the version approved by the Lower of entry for immediate exportation in the same port.
House required a load port survey for all containerized cargoes Transshipped goods will not be subject to the payment of
but the approved version only directs customs to implement a duties and taxes and shall be subject to re-exportation in the
voluntary program. same port within 30 days from arrival. The period for
exportation may be extended by the Commissioner upon
Title V (Export Clearance and Formalities) request.
Many of the sections under this Title have been adopted from
the old code. The only new provision is Section 503 (Rules of Section 604 also states that
Origin). Under this new provision, CMTA allows the bureau or “unless it shall appear in the bill of lading, airway bill, invoice,
any other designated government agency to determine the manifest, or other satisfactory evidence, that goods arriving in
origin of goods for export, and for exporters to adopt a the Philippines are destined for transshipment, no exportation
self-certification system accredited by the bureau or a thereof will be permitted…”.
designated government agency.
Title VII (Import Duty and Tax)
Customs Modernization and Tariff Act Series 7: Titles VI and VII Chapter 1 (Basis of Valuation) covers the rules on valuation,
(Transit, Transshipment and Valuation) specifically the different methods of valuation which are
Title VI of the Customs Modernization and Tariff Act has 5 principally based on the WTO Valuation Agreement. While the
sections under 2 chapters: chapter 1 (Customs Transit) and new rules are substantially based on the old ones, the new
chapter 2 (Customs Transshipment). Title VII has 15 sections rules are now provided in 7 sections unlike the old rules which
with 2 chapters: Chapter 1 (Basis of Valuation) and Chapter 2 are provided in a single section (Section 201, TCCP). Section
(Special Duties and Trade Remedy Measures). 700 sets the rules on the sequential application of the
valuation methods while the succeeding 6 sections outline the
Title VI (Customs Transit and Customs Transshipment) various methods of valuation.
Chapter 1 (Customs Transit) covers new rules on the
movement of goods from one customs office to another office. Section 707 clearly provides the basis for customs to verify the
Under the old rules, the term for such movement would be truth or accuracy of values as declared by importers.
‘transshipment’. Transit goods are generally not subject to Specifically, the section states that
duties and taxes. Transit may involve the following activities: “when a declaration has been presented and when the Bureau
has reason to doubt the truth or accuracy of the particulars or
 Goods imported through any port of entry (e.g. of documents produced in support of such declaration, it may
Clark) for transit to another port (e.g. Ninoy ask the importer to provide further explanation, including
Aquino International Airport) for immediate documents or other evidence, that the declared value
exportation; represents the total amount actually paid or payable for the
imported goods…”.
 Goods imported through any port of entry (e.g.
NAIA, Port of Manila or Manila International The same section also provides that when there is a valid
Container Port) for transit to a Free Zone such as valuation dispute, the importer has the right to secure the
a free port (e.g. Clark or Subic) or a Philippine release of the imported goods upon the posting of sufficient
Economic Zone Authority (PEZA) zone; guaranty equivalent to the duties and taxes subject of the
dispute. The amount of duties and taxes not subject to dispute
 Goods from a Free Zone (e.g. zone) for transit to a shall be paid prior to release of the goods.
port (e.g. MICP) for subsequent export; and
Chapter 2 (Special Duties and Trade Remedy Measures)
 Goods from a Free Zone (e.g. Subic) for transfer to substantially reiterates the old provisions on the right of
a PEZA zone or a customs bonded warehouse. compulsory acquisition of grossly undervalued goods and the
power of the President to increase duties on imported goods
arising from discrimination from a foreign country. The same code. The major change involves the provision on the
chapter outlines the additional duties that may also be prescription for the duty drawback claim (1 year) and for
imposed on imported duties such as: marking duty, safeguard refund application (12 months).
duty, dumping duty and countervailing duty. It should be noted here that while 1 year is normally
interpreted as a calendar year, the term “12 months” is
Customs Modernization and Tariff Act Series 8: Titles VIII, IX generally defined as equivalent to “three hundred sixty (360)
and X (Duty Exemption and Drawback; Post Clearance Audit) days”.
Title VIII of the Customs Modernization and Tariff Act has 22 Title X (Post Clearance Audit)
sections under 4 chapters as follows: Chapter 1 (Conditionally A major change under CMTA is the change in title from “Post
Tax and/or Duty Free Importation), Chapter 2 (Customs Entry Audit” to “Post Clearance Audit”, the latter being the
Warehouses), Chapter 3 (Free Zones) and Chapter 4 (Stores). commonly-used term by most customs jurisdictions worldwide.
Title IX has 14 sections under 2 chapters: Chapter 1 (Duty While many provisions are still based on the old code, among
Drawback) and Chapter 2 (Refund and Abatement). Title X of the substantial changes are as follows:
the CMTA has 7 sections covered by a single chapter on Post increase in the minimum penalty but decrease in the
Clearance Audit (PCA). maximum penalty in case of findings of underpayment of
Title IX (Tax and Duty Deferment, Preference and duties and taxes; and
Exemption) additional powers to the bureau to enable it to fully exercise
Chapter 1 (Conditionally Tax and/or Duty Free Importation) is its audit powers — power to issue summons to produce records
substantially based on Section 105 of the Tariff and Customs and to give testimony, and to exercise summary remedies such
Code of the Philippines. Among the substantial changes under as distraint of personal property and levy of real property to
this chapter are the following: implement its audit findings.
 Reduction of the security required from 150% to Sometime late 2013, the customs audit function was
100% of the ascertained duty and tax; transferred from the BOC to the Department of Finance. The
CMTA clearly provides that Post Clearance Audit (PCA) is a
 Duty exemption of goods subject to outward function and responsibility of the BOC. Customs is expected to
processing; and aggressively start its customs audits once the PCA office is
activated and a new head is appointed.
 Increase in tax and duty exemptions of OFWs and
returning residents for a minimum of
PhP150,000.

Chapter 2 (Customs Warehouses) covers the operations of

CBWs and CFWs. The provision on CBWs is substantially based
on the old code while the provisions on CFWs are akin to the
existing customs regulations on Authorized Customs Facility
(ACF). With regard to CBWs, the major change is the increase
in the period of storage to 1 year from the previous 9-month
requirement.
The provisions covering CFWs are new provisions, providing
customs the express power to supervise and control facilities
handling goods for import and export such as container yards,
container freight stations, seaport warehouses, and airport
warehouses.
Chapter 3 (Free Zones) are new provisions to cover
“non-customs” territories such as free ports (e.g. Subic, Clark
and PHIVIDEC) and PEZA zones. Under this chapter, customs
shall issue harmonized rules for Free Zones. Once the rules are
issued, new registration requirements for PEZA and Free Port
operators as well as new processing requirements for goods
admitted to or withdrawn from free zones will be provided. At
present, while goods admitted to PEZA zones are subject to
customs processing, many goods imported by freeports
operators (such as SBMA locators) are exempted from the
required goods declaration requirement. Specifically, Section
816 of the CMTA now provides that:
“Movement of Goods into and from Free Zones. – The entry of
goods into a free zone, whether directly or through the
customs territory, shall be covered by the necessary goods
declaration for admission or transit. Withdrawal from the free
zone into the customs territory shall be covered by the
necessary goods declaration for consumption or warehousing.”
Chapter 4 (Stores) provides new provisions to specifically
cover tax- and duty-free facilities storing goods for use of
international passengers and crew or for the operation and
maintenance (e.g. fuel, parts and equipment) of international
vessels and aircraft.
Title IX (Duty Drawback and Refund)
Chapter 1 (Duty Drawback) and Chapter 2 (Refund and
Abatement) are principally based on the provisions of the old