Changes under the Customs Modernization and Tariff Act: An Overview

SUITS THE C-SUITE By Mark Anthony P. Tamayo

Business World (06/06/2016 – p.S1/4)

(First of 5 parts)

On 30 May 2016, President Benigno S. C. Aquino III signed Republic Act (RA) No. 10863, otherwise known as the Customs Modernization and Tariff Act (CMTA), which amends the Tariff and Customs Code of the Philippines (TCCP). It will become effective on 16 June 2016 which is 15 days after it was published in a major daily newspaper.

From a historical perspective, the first piece of tariff legislation was passed by the United States Congress for the Philippines during the American regime. This was known as the Philippine Tariff Act of 1909 which gave birth to the imposition of tariff on goods coming from foreign countries and entering the Philippines.

In 1957, RA No. 1937 was crafted and passed by the Philippine Congress as the first TCCP that codified customs laws for the country, superseding the 48-year colonial regime of the Tariff Act of 1909. It took effect on 1 July 1957.

Certain provisions of the TCCP eventually became obsolete, and were updated through various presidential decrees issued by Former President Marcos, as Chief Executive who, during the Martial Law regime, exercised the powers of Congress. In 1972, Presidential Decree (PD) No. 34 consolidated into one Code all amendments made therein.

On 11 June 1978, RA No. 1464 was signed into law (revising PD No. 34), which, in general, strengthened the punitive force of the TCCP against smuggling and other forms of customs fraud.

Many changes in global and regional trade policies, rules and processes have since then developed and evolved which have been addressed (through legislative amendments of the TCCP and administrative issuances) on a piecemeal basis.

The new CMTA aims to modernize customs laws, rules and procedures to take into consideration the mandatory standards of the Revised Kyoto Convention (the blueprint for modern and efficient customs procedures of the World Customs Organization [WCO] to which the Philippines is a signatory), international agreements, recommendations from the business sectors and industry groups as well as some of the best practices in customs administration, among others. It seeks to transform the Bureau of Customs (BoC) into a modern and efficient organization that is at par with global standards.

The CMTA has both saving and repealing clauses. Laws, rules and regulations previously issued pertaining to the importation of goods that are consistent with the CMTA will remain valid unless the same be repealed or amended. While those which are inconsistent are expressly repealed, amended or modified accordingly.

This series of articles will point out some of the salient changes introduced under the CMTA.

GOODS DECLARATION FOR CONSUMPTION

All imported goods will be subject to the lodgment of a goods declaration (commonly known as entry declaration), which may be for consumption, for warehousing, for admission, for conditional importation or for customs transit, depending on the purpose.

As a general rule, goods declarations for consumption are cleared though a “formal entry” process, except in the following instances where goods may be cleared through “informal entry”: (i) goods of a commercial nature with Free on Board or Free Carrier Arrangement (FCA) value of less than Php 50,000 (which is an increase from the previous thresholds of Php 2,000 per TCCP, as amended, and USD 500 under Customs Memorandum Order No. 13-2010); or (ii) personal or household effects or goods, not in commercial quantity, imported in passenger’s baggage or mail.

A goods declaration must now be lodged within 15 days (previously, 30-day non-extendible period) from a BoC notice (sent through electronic or personal service) informing the importers of the date of discharge of the last package from the vessel or aircraft, extendible for another 15 days (upon request by the importer based on valid grounds). Once lodged, the BoC, after its examination, shall issue a notice of assessment (of duties and taxes payable). The importer has a period of 15 days from receipt of said notice within which to pay the corresponding duties and taxes. In effect, this is also the period within which the importer may contest the assessment issued by the BoC at the border. Otherwise, the assessment will be deemed final after the lapse of the 15-day period.

The failure to pay duties and taxes within the 15-day period shall result in the imposition of a 10% surcharge (increased to 25% if delinquency lasts for more than one year) based on the total assessed amount or balance thereon as well as to a 20% interest per annum computed from the date of final assessment.

After payment of duties and taxes, the importer will then have a non-extendible period of 30 days (previously, 15 days from posting of notice to claim) to claim the goods from customs custody.

If, at the time of importation, an importer does not have all the information or supporting documents required to complete a goods declaration, the CMTA now allows the lodging of a provisional goods declaration (PGD). The PGD is a new concept that importers can use particularly in instances where additional information and/or collateral documents are required to be submitted at the border. Under this concept, an importer would have to execute an undertaking to complete the necessary information or submit the supporting documents within 45 days (extendible for another 45 days) from the lodging of the PGD. Goods under PGD may be released upon posting of a security equivalent to the amount ascertained to be the applicable duties and taxes.

An assessment by the BoC at the border of a PGD shall be deemed tentative and shall be completed upon final readjustment and submission of the additional information or documentation required to complete the declaration.

If an importer needs to amend a goods declaration already filed, the CTMA, for valid reasons and with the approval of the BoC, also permits the filing of an amended goods declaration. The amendment, however, must be done prior to final assessment or examination of the goods by the BoC.

In the second part of this article, we shall discuss more of the changes introduced under CMTA, particularly the new rules on relief importations, the increase in the threshold value of an informal goods declaration as well as those considered as small value importations.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessary represent the views of SGV & Co.

Mark Anthony P. Tamayo is a Partner of SGV & Co. and currently the Indirect Tax Country Leader and Head of the Global Trade & Customs practice of the firm.