MACHINERY &
TARIFF AND CUSTOMS CODE
CUSTOMS LAW – does not refer only to the provisions of Tariff and Customs Code. It also includes other laws and regulations subject to enforcement by the Bureau of Customs.
Other laws subject to enforcement by the Bureau of Customs:
1. NIRC – Sec. 107. Importation of goods or articles subject to VAT. The VAT must be paid before these goods are released from Customs Custody.
2. NIRC – Sec. 131. Importation of Articles subject to excise taxes. The payment of excise tax must be made before the goods are released from Customs custody.
3. Regulations that may be issued by the CB, the implementation of such regulation is vested in the Bureau of Customs.
Customs duties – are duties which are charged upon commodities on their being imported in or exported out of a country.
Tariff – means a book of rates; a table or catalogue drawn usually in alphabetical order containing the names of several states that hold commerce together.
Offices charged with enforcement or administration of Customs laws 1. Tariff Commission (TC)
2. Bureau of Customs (BOC) Powers of TC: (TRACER)
The power of the TC are investigatory in nature: They investigate the following matters:
1. Matters relative to Tariff relations between the Philippines and the foreign countries. So, that includes commercial treaties.
2. Relation between the rate on raw materials and finished products.
3. Matters relative to the Arrangement of schedules of values 4. Matters pertinent to the Classification of articles 5. It shall also investigate the Effects of foreign competition.
6. It shall investigate the operation of the Tariff Laws and submit Report regarding the same.
After investigation, TC shall submit its report to the Bureau Commissioners or to Secretary of Finance.
POWERS OF THE BOC: (PERAS)
1. BOC has the power to Prevent and suppress smuggling and other frauds upon BOC.
Consistent with this power, the BOC has:
a. Power to control and supervise the clearance, as well as the entrance of vessels, aircrafts originating from foreign countries.
b. Police power to exercise over Harbor, Airport, River and Port.
c. The right of pursuit against vessel subject to seizure even if it is seized beyond the maritime zone. This is called the extra-territorial jurisdiction of the BOC. Sometimes, we call this right of pursuit. The BOC may exercise this power when:
c.1. the vessel was subject to seizure or forfeiture
c.2. there was violation of the Customs law committed within the Phils.
As regards smuggled goods imported not in accordance with the provisions of the Customs law, it may be pursued by the BOC even if it is transported through air, land or water.
Consistent with this power, the BOC may enter in a building, house, structure, enclosure and warehouse. No search warrant is required. As long as they reasonably believed that the place store smuggled goods, seizure or search may be made. But it must be shown that the place must not constitute a dwelling place or unit. This is also because if it is a dwelling place that is covered by the Constitutional provision where warrant must be secured.
Situation: Suppose the watchman or security guard and his family live in that place or building where smuggled goods are stored can there be seized without search warrant? Can we consider that a dwelling place?
Answer: No, that will make the building a dwelling place. Even if it is outside of its district such that it came from Zamboanga and was unloaded at Cebu, the collector of Cebu may still seize the goods. What is only required is that it came from a port of entry within the Phils.
2. Enforcement of the Tariff and Customs Law including other laws and regulation affecting the administration of Tariff laws.
3. Recommend to the Sec. of Finance needed rules and regulations necessary for the effective enforcement of the provisions of the TCC.
4. Assessment and collection of lawful revenues from imported articles. Also, assessment and collection of fines, penalties, fees and other charges accruing under the provisions of the TCC.
5. It has the exclusive and original jurisdiction over Seizure and forfeiture cases. Meaning, to the exclusion of regular courts.
Articles subject to Customs duties:
Articles means wares, merchandise, goods and anything which may be made subject of importation or exportation. Articles include Philippine money. So, if the Philippine money is transmitted or taken out of the Phils. without authority from the Central Bank, that may be the subject matter of seizure.
Articles subject to Customs duties:
1. Dutiable articles – are articles subject to Custom duties 2. Prohibited articles:
a. Absolutely prohibited articles: (SWING) 1. those prohibited by Special Laws 2. Weapons of War
3. Insidious, obscene or immoral articles 4. Narcotic or prohibited drugs 5. Gambling devices
b. Qualifiedly prohibited – meaning subject to restrictions or limitations. IF these limitations are not complied with. They will be prohibited.
3. Duty free imported articles – these are articles not subject to custom duties.
These are: (MASARAP)
a. Medals, badges used as trophies or awards b. Animals and plants for experimental purposes c. Sample articles
d. Aquatic resources e. Repair materials
f. Articles necessary for the take-off and landing of an airplane or for safe navigation of vessels
g. Articles for Public exposition. Included here are historical books and personal household effects
Customs duties may be classified as:
1. Regular or ordinary custom duties – these are the ad valorem tax and specific tax.
For purposes of determining the ad valorem tax, the basis must be the home consumption value. Home consumption value is the price stated in the commercial, trade or sales invoice. If there is a reasonable doubt as to this value, recourse may be had to the commercial and revenue attachė report, the BOC should refer to the available information that may help the BOC determine the applicable ad valorem tax.
Case: NCR-Japan has a subsidiary in the Phils. which is NCR-Phil. Ten adding machines were imported from NCR-Japan and they used, for purposes for determining ad valorem, the home consumption value, the price stated in the sales invoice. Instead, we should refer to the commercial revenue attaché report to determine the basis of that ad valorem tax.
2. Special custom duties: (DCMD) a. Dumping duties b. Countervailing duties
Note: The purpose of dumping and countervailing duties is to protect our local products against unfair foreign competition c. Marking duties – the purpose of this is to prevent possible public deception.
d. Discriminatory duties – duties which are imposed for the purpose of protecting our national interest
Dumping duty – duty levied on imported goods where it appears that a specific kind or class of foreign article being imported into or sold is likely to be sold in the Phils. at a price less than its fair value.
Imposed on specific kind or class of foreign article which is being imported into, or sold or is likely to be sold for exportation to or in the Phils. at a price less than its fair value, the importation or sale of which is likely to injure an industry imposing like goods in the Philippines.
The duty is equal to the difference between the actual purchase price and the fair value of the articles in question in the country or exportation as determined by the Sec. of Finance.
These are special duties imposed on imported articles. This may be imposed subject to the ff. requisites:
1. There must be a deliberate and continuous sale of imported article in the Philippines as price lower than the prices in the exporting country.
2. This must prejudice or cause or likely to cause injury to our local industry.
Situation: There are articles of foreign origin the prevailing price of which in the US is equivalent to P100. These articles are sold or dumped in the Phils. at lower than the prevailing price in the US because they are saleable in the U.S.
So, this will prejudice our local industries. In order to protect our local product or to discourage people from buying this imported product, we should be impose special duties in addition to the regular duties. Dumping duties should be imposed.
Countervailing duty – duty equal to the ascertained or estimated amount of the subdsidy or bounty or subvention granted by the foreign country on the production, manufacture, or exportation into the Phils. of any article likely to injure an industry in the Phils. or retard or considerably retard the establishment of such industry.
Imposed on articles, upon the production, manufacture or export of which any bounty or subsidy is directly or indirectly, granted in the country of origin and/exportation. No need to show proof that the imports cause injuries to domestic industries producing the same products. The duty is equal to the ascertained or estimated amount of the bounty or subsidy given.
Situation: Sometimes imported products enjoys certain subsidy from their government. So, they have an advantage. Our local products for example, does not enjoy similar subsidy. We should counter that advantage by imposing countervailing duties. The purpose there is to protect our local products against unfair competition.
This represents the inland excise tax on locally manufactured articles of the same kind to off-set this advantage.
As regards dumping duties, the extent of the special duty is the amount that represents under-pricing.
As regards countervailing duties, the extent is the excise inland tax or the amount of advantage enjoyed by that imported article.
Marking duty – duty on ad valorem basis imposed for improperly marked articles. The requirement that foreign importation must be marked in any official language of the Phils., the name of the country of origin of the article.
The purpose is to prevent deception of consumers.
The articles must be properly marked, otherwise a special duty of 5% of the value shall be imposed.
Retaliatory or Discriminatory duty – duty imposed on imported goods whenever it is found as a fact that the country of origin discriminates against the commerce of the Philippines in such manner as to place it at a disadvantage compared with the commerce of any foreign country.
The amount may be increased in an amount not exceeding 100% ad valorem when the President finds the public interest may be served thereby.
This may be imposed by the President of the Philippines when our goods are discriminated against.
As regards dumping, countervailing and marking duties, it is the Sec of Finance, upon recommendation of the Tariff Commission, who may impose these duties.
Question: What is the extent of the flexible power of the President of the Phils. under the TCC?
Answer: That includes the power to impose discriminatory duties. The President upon recommendation of the Tariff Commission may increase the tariff rates by not more than 5x or meaning 500x of the tariff rates. He may also decrease the tariff rates by not less than 50%.
He can only exercise these powers in the interest of the national economy, national security and general welfare of the people.
2. Other duties:
a. Storage fee – this is charged on the goods or articles stored in a warehouse under the control and supervision of the BOC.
Articles owned by the government are exempt from storage fee is these articles are stored in a government warehouse.
b. *Wharfage dues –
Even if there is no wharf where the goods may be unloaded, wharfage dues may still be imposed because it is not a duty or charge on the use of the wharf. Even if the goods are unloaded in a private wharf or seashore, wharfage dues still be imposed because this is a duty imposed on the cargoes or articles which are unloaded. These are taxes. These are not really custom duties. The significance of this is that when tax exemption is granted from all forms of taxes, this may be included. If the exemption is only from custom duties, wharfage dues is not included.
c. Arrastre charges – this is a duty imposed on goods or articles for handling, receiving or custody of such articles.
d. Tonnage fees – this is based on weight or tonnage of vessel.
e. Harbor fees
f. Berthing fees – this is imposed on the vessel for mooring berthing at a particular pier or port.
Berthing fees may only be imposed if the vessel is wharfed or berthed at national port. So, if it is wharfed at privately owned port, that is not subject to berthing fees.
Steps in the imposition of custom duties:
1. Declaration of goods or articles
2. Assessment by an appraiser. Determine the value applying the schedule of values stated in the tariff rates and that is subject to the approval of the Collector of Customs.
3. Liquidation which may be:
(a) Partial – means the value cannot be promptly ascertained.
(b) Final - meaning custom duties had been ascertained or finally determined.
If these duties are not paid by the taxpayer, the government or the BOC has the power to impose the following administrative sanctions:
(1) Surcharges may be imposed under certain situations (2) Fines may be imposed under certain situations (3) Seizure or forfeiture
Forfeiture is the penalty , seizure is the remedy.
Situations where goods may be seized or forfeited by the government:
(a) Articles, vessels, aircraft may be the subject matter of seizure if they are unlawfully used in the importation of foods into the Philippines or exportation of goods form the Phils.
Case:
Jose had a vessel, M/V Maria Victoria. It was unlawfully used for the importation of cargo. When this was seized by the government, Jose raised the defense of good faith.
Held:
(1) It is an action directed against the articles and in fact, the caption of the case is Republic of the Phils. vs. M/V Maria Victoria. It is a proceeding in rem, so good faith is not a defense.
(2) Even if the vessel did not carry the contraband, that may be the subject matter of seizure if the vessel facilities the importation of that contraband.
It is not also required that the vessel must come from the foreign country.
Case: Cruz was caught carrying a bulk of foreign currencies. These were seized by the government because she had no license issued by the CB to carry said sum of foreign currency.
Held: Cruz must prove that she had a license otherwise seizure was proper.
The burden of proof lies on the importer.
(b) Excessive sea stores.
Sea stores are the provisions of the vessel necessary for administration and maintenance.
(c) Excessive sea stores for aircraft.
Sea stores must be in the place where it should be displayed. If these are kept in the cabin of the crew, these may be the subject matter of seizure because these are considered excessive.
(d) Unlawful transfer of cargoes from one vessel to another before reaching the point of destination.
(e) Unmanifested articles (f) Prohibited articles (g) Devices, receptacles (h) Envelopes, boxes, trunks
(i) Beast
(j) Thing of value or money which is intended to influence BIR officers.
Tax Remedies under the Tariff and Customs Code:
Remedies Government Importer
(1) Administrative or extra-judicial
(a) Enforcement of tax lien (b) Seizure
(a) Tax refund (b) Abandonement (c) Protest
(2) Judicial (a) Filing of civil action (b) Filing of criminal action if there is fraud and it
(1) Articles must neither be prohibited nor irregular (2) The articles must be in the possession of the BOC
If the articles are prohibited or irregular, the remedy is seizure Abandonment may be express or implied.
Cases cognizable by the BOC
(1) Seizure cases on the part of the government and (2) Protest case on the part of the importer
Seizure cases: The issue here pertain to the validity of the importation because you may raise the defense that these are not prohibited importation.
Protest: The issue here is the validity of the assessment or collection, or the validity of the classification of articles where customs duties are imposed.
PROCEDURE IN PROTEST
Remedy Where to file [Issues which may be raised] Prescriptive Period
(1) File a protest Collector of Customs (a) Validity if the
assessment or collection
(b) Validity of classification of articles
15 days from the payment of Customs duties
(2) If protest is denied, Appeal
collector’s ruling Customs Commissioner (CC) Questions of fact or Question of law
Within 15 days from receipt of the ESTATE – refers to the mass of properties left by decedent or testator to his heirs or
beneficiaries.
TRUST – is the right to the property, real or personal, exercised by one person for the benefit of another parties.
Parties to a Trust:
a. Trustor or grantor - one who created the trust.
b. Trustee or fiduciary – one who may hold the property for the benefit of other person known as beneficiary. Sometimes, the fiduciary is also the beneficiary.
c. Beneficiary
☺ Estate may be the subject to tax if it is under administration. It may only be under administration or settlement if the properties of the decedent are settled under judicial settlement.
☺ If the estate is under judicial settlement, it is not subject to tax because that will not earn income considering that the heirs agreed to settle the estate extra-judicially.
☺ When we speak of judicial settlement, this may include estate or intestate proceedings.
☺ Trust may be subject to tax if the trust is irrevocable.
Non-taxable trust are:
1. Revocable Trust. The income here will be taxed insofar as the recipient of the same is concerned.
2. Employee’s Trust. So, if an employer establishes a pension trust for the benefit of the employees, that pension trust is not taxable.
The trust is revocable if the power to revest the title to the property of the trust is vested:
1. In the grantor or in conjunction with other person who does not have substantial adverse interest in the disposition of the property.
2. In any person who does not have substantial adverse interest in the disposition of the property.