Disaccreditation of importers

SUITS THE C-SUITE By Stephanie Vicente-Nava

First Published in Business World (06/09/2014)

A GREAT deal has been said about the new accreditation process imposed under Department of Finance Department Order (DO) No. 012-2014, dated Feb. 6. It would seem that there is a growing awareness among importers of the two-phase process for accreditation, the documents required to apply for a Bureau of Internal Revenue Importer Clearance Certificate (BIR-ICC) and a Bureau of Customs Importer Accreditation (BoC-IA), as well as the deadline to comply with the new accreditation rules. Most importantly, stakeholders now realize that their respective importer accreditation shall be deemed automatically canceled for failure to comply with the new accreditation rules on or before the scheduled deadlines, which may seriously disrupt business operations and cause large scale revenue loss.

While undergoing this new process, some importers have encountered various issues related to the preparation of the required documents, such as the processing time for securing a Certificate of Good Standing from the Securities and Exchange Commission, certified true copies of the Annual Income Tax Returns from the BIR’s District Offices and a National Bureau Investigation Clearance. Multinational foreign-owned corporations found it difficult to arrange for the personal appearance of their responsible or ranking officers, which is required by the BIR upon filing of the application for a BIR-ICC. Other importers are still coping with the challenges of satisfying the BIR’s criteria for accreditation prescribed under Revenue Memorandum Order (RMO) No. 10-2014, dated Feb. 10.

EXTENSION OF PERIOD TO COMPLY

In order give importers ample time to prepare and comply with the new accreditation requirements, DO No. 033-2014, dated May 21, was issued extending the period to file the proper applications with the BIR and BoC from the original deadline of May 22 to June 30 for importers with valid and existing accreditations.

To implement the above DO, the BoC issued Customs Memorandum Order (CMO) No. 11-2014, dated May 22, which contains a table of deadlines for compliance as follows:

· New applicants and those with I-CARE accreditations that expired before March 1 may apply for a BIR-ICC and BoC-IA any time before transacting with the BoC;

· Importers with I-CARE accreditations expiring between March 1 and May 31 must comply with the new accreditation process by May 31;

· Importers with I-CARE accreditations expiring between June 1 to 30 must comply on or before the expiration date of their existing I-CARE Accreditation; and

· Importers with I-CARE accreditations expiring from July 1 onwards must comply by June 30.

According to the CMO, the BoC will cancel all existing accreditations issued to importers who fail to meet the above deadlines effective July 1, or the date of the expiration of the existing accreditation.

PROVISIONAL BOC ACCREDITATION

The CMO also provides that an importer may secure a provisional or temporary BoC accreditation by submitting either of the following: 1) proof of application for a BIR-ICC consisting of the official receipt and the follow-up stub issued by the BIR Accounts Receivable Monitoring Division (ARMD); or 2) a provisional BIR-ICC, which is valid for a period of three months unless revoked sooner. As of the date of the drafting this article, the BIR has not released guidelines on the issuance of a provisional BIR-ICC.

While most importers are occupied with issues relating to accreditation, it is likewise important to understand the grounds for the disaccreditation of importers and its consequences.

ONE-YEAR BAN ON IMPORTING GOODS

The BIR’s ARMD is tasked with conducting a periodic verification of the compliance of importers issued with BIR-ICCs. In case of any findings of non-compliance with any of the BIR’s accreditation criteria, the ARMD, after due notice to the concerned importer, may cancel and revoke an importer’s existing BIR-ICC. The cancellation or revocation of the BIR-ICC has the effect of also canceling the BoC-IA since the latter is valid only for the same duration of the BIR-ICC. In this case, the concerned importer may file a request for reconsideration with the Assistant Commissioner of the BIR’s Collection Service and the Commissioner of Internal Revenue.

Another option for a disaccredited importer is to file a new application for accreditation with the ARMD when the circumstances that lead to the cancelation or revocation of the BIR-ICC have been rectified. However, the new application for a BIR-ICC may be filed only after the lapse of one year from the effective date of the disaccreditation. This means that the disaccredited importer will not be able to import goods into the Philippines for an entire year, which may cause severe supply shortages, slowdowns and eventually cessation of operations.

Hence, notwithstanding that the BIR-ICC is deemed valid for a period of three years, every importer should regularly perform a tax compliance review to ensure that the criteria for accreditation are continuously satisfied.

AUTOMATIC AUDIT BY THE BIR

The BoC may also suspend or cancel the accreditation of an importer for any inaccuracy or false information submitted in the application for a BoC-IA, non-compliance with the annual reportorial requirements, failure to report fraud upon customs revenue, and any violation in the sworn undertaking to abide by the regulations on the statement of full description of imported articles or the Tariff and Customs Code of the Philippines. In this case, the concerned importer may file for a request for the activation of his previous registration, which will be subject to the approval of the Deputy Commissioner of the Revenue Collection and Monitoring Group of the BoC.

The BoC-Accounts Management Office shall provide the BIR with a list of importers whose accreditations were suspended and canceled, as well as those disqualified for accreditation. The BIR, in turn, will endorse the list to the National Investigation Division for purposes of determining if there is tax fraud or evasion or the Revenue District Office or the Large Taxpayers District Office having jurisdiction over the concerned importer for the purposes of conducting a regular tax audit.

Hence, an importer who is disqualified or disaccredited by the BoC will be subject to an automatic audit by the BIR for potential deficiency internal revenue taxes. Such being the case, it is likewise important for importers to evaluate customs practices and procedures, review compliance with documentation, reportorial and other administrative requirements of the BoC. Doing so will not only to avoid possible exposure to deficiency duties and taxes, but also to ensure the uninterrupted right to import goods into the Philippines and avoid unnecessary disruptions to trade or business.

Stephanie Vicente-Nava is a senior director of SGV & Co.

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 necessarily represent the views of SGV & Co.