MODULE 13

Transfer and Business Taxation

SESSION TOPIC: Tariff and Customs Code

LEARNING OUTCOMES
The following specific learning objectives are expected to be realized at the end of the
session:
1. To be able to explain the functions of the Bureau of Customs and the Tariff
Commission
2. To be able to explain, apply and evaluate the nature of tariff and customs
duties
3. To be able to determine the basis of assessment of duty
4. To be able to identify the documents required for the importation and
exportation of goods

KEY POINTS
Bureau of Customs CMTA

CORE CONTENT
The Philippines Customs apply a value added tax (VAT) for imported goods at 12
percent. This modules includes the functions of the Bureau of Customs, Functions of
the Tariff Commission, Nature of Tariff and customs duties, Basis of assessment of duty,
documents required for importation of goods and documents required for export of
goods

IN-TEXT ACTIVITY
RA NO. 10863.
Otherwise known as the Customs Modernization and Tariff ACT (CMTA) amends the
Tariff and Customs Code of the Philippines (TCCP). The CMTA was enacted to comply
with the country’s commitment to be bound by the terms of the International Convention
on the Simplification and Harmonization of Customs Procedures (the Revised Kyoto
Convention (“RKC”) to which the Philippines is a signatory

Bureau of Customs
The Bureau of Customs (the “Bureau”) shall be headed by a Commissioner and shall
be assisted by at least four (4) but not more than six (6) Deputy Commissioners. The
Commissioner shall be appointed by the President of the Philippines. The Deputy
Commissioners shall also be appointed by the President, and at least majority of whom
shall come from the ranks of the Bureau (Sec 200, R.A. No. 10863)

Functions of the Bureau of Customs

The Bureau shall exercise the following duties and functions:

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 (a) Assessment and collections of customs revenues from imported goods and other
dues, fees, charges, fines and penalties accruing under R.A. No. 10863);
(b) Simplifications and harmonization of customs procedures to facilitate movement
of goods in international trade;
(c) Border control to prevent entry of smuggled goods;
(d) Prevention and suppression of smuggling and other customs fraud;
(e) Facilitation and security of international trade and commerce through an
informed compliance program;
(f) Supervision and control over the entrance and clearance of vessels and aircraft
engaged in foreign commerce;
(g) Supervision and control over the handling of foreign malls arriving in the
Philippines for the purpose of collecting revenue and preventing the entry of
contraband;
(h) Supervision and control on all import and export cargoes, landed or stored in
piers, airports, terminal facilities; including yards and freight stations for the
protection of government revenue and prevention of entry of contraband.
(i) Conduct a compensation study with the end view of developing and
recommending to the President a competitive compensation and renumeration
system to attract and retain highly qualified personnel while ensuring that the
Bureau remains financially sound and sustainable
(j) Exercise of exclusive original jurisdiction over forfeiture cases under R.A. No.
10863; and
(k) Enforcement of R.A. No. 10863 and all other laws, rules, and regulations related
to customs administration (Sec 202, R.A. No. 10863)

The Tariff Commission

The Tariff Commission is the key adviser to the executive and legislative branches of
the government on tariff and related matters. It is an independent collegial adjudicating
body on trade remedy cases.

Functions of the Tariff Commission

The Commission shall have the following functions
(a) Adjudicate cases on the application of trade remedies against imports pursuant
to Sections 711, 712 and 713 of R.A. No. 10863;
(b) Study the impact of tariff policies and programs on national competitiveness and
consumer welfare in line with the economic objectives of the government;
(c) Administer the Philippine tariff schedules and tariff nomenclatures;
(d) Issue advance rulings on tariff classification of imported goods and render rulings
on disputes over tariff classification of goods pursuant to Section 1100 of R.A.
No. 10863, except in cases involving goods on which the Commission has
provided advance ruling on tariff classification.
Under Section 1100 of R.A. No. 10863, and importer or exporter may file a
written application for an advance ruling on the tariff classification of goods with

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 the Commission. The Commission shall render a ruling within 30 days from
receipt of a properly documented application
(e) Provide the President and Congress with independent analysis, information and
technical support on matters related to tariff and nontariff measures affecting
Philippines industries and exports for policy guidance;
(f) Analyze the nature and composition, and the classification of goods according to
tariff commodity classification and heading number for customs and other related
purposes, which information shall be furnished the NEDA, DTI, DA, DOF, DENR,
and BSP;
(g) Review the trade agreements for negotiation and trade agreements entered into
by the Philippines and make recommendations, if necessary, on the consistency
of the terms of the agreements with the national policy objectives; and
(h) Conduct public consultations and public hearings pursuant to its functions.

Nature of Tariff and Customs Duties

(a) Tariff and customs duties may either be (1) ad valorem (based on the value of
the imported article), or (2) specific (based on quantity)
(b) Liability for duties, taxes, fees and other charges attached to importation
constitutes a personal debt and demandable against the imported in favor of the
government and shall be discharged only upon payment of duties, taxes, fees
and other charges
(c) The levying of tariff and customs may be delegated to the President of the
Philippines
(d) Such tariff or duty attaches to imported goods.

Beginning and Termination of Importation

Importation begins when the carrying vessel or aircraft enters the Philippine territory
with the intention to unload therein.

Importation is terminated when:

(a) The duties, taxes and other charges due upon the goods have been paid or
secured to be paid at the port of entry unless the goods are free from duties,
taxes and other charges, and legal permit for withdrawal has been granted; or
(b) In case the goods are deemed free of duties, taxes and other charges, the goods
have legally left the jurisdiction of the Bureau of Customs.
Articles Subject to Duties
All articles, when imported to the Philippines, are subject to duty upon importation
except as otherwise specifically provided for in R.A. No. 10863 or in other laws. An
imported article shall be subject to import duties even though previously exported.

Effective Date of Import Duty

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Imported goods shall be subject to the rate of import duties existing at the time of
importation or upon withdrawal from the warehouse for consumption.

In case of withdrawal from the free zones for introduction to the customs territory, the
duty rate at the time of withdrawal shall apply.

In case of goods sold at a customs public auction, the duty rates at the date of the
auction shall apply.

Types of Importation
Imported goods shall be deemed entered in the Philippines for consumption when the
goods declaration is electronically lodged, together with any required supporting
documents, with the pertinent customs office.

Under CMTA, the types of importation and (exportation) are:

(a) Free – goods that may be legally traded in and out of the country without need
for import and export permits, clearances, or licenses (Sec. 116, R.A. No. 10863)
(b) Regulated – goods that shall be imported (or exported) only after securing the
necessary goods declaration, clearances, licenses, and any other requirements
prior to importation (or exportation). Moreover, necessary documents should be
issued by the appropriate regulatory agencies before such goods could legally
be brought into the Philippines (Sec. 117 R.A. No. 10863)
(c) Prohibited – goods which are inherently destructive; and which are prohibited by
law such as (1) treasonous materials, (2) those intended to produce unlawful
abortions, (3) obscene or immoral materials, (4) goods where the fineness of
quality of precious materials thereof is not indicated, (5) unadulterated or
misbranded goods or drugs for human consumption, (6) goods which infringe
upon intellectual property rights, and (7) all other goods whose importation or
exportation are prohibited by law (Sec 118, R.A. No. 10863);
(d) Restricted – goods which are prohibited to be imported or exported, unless
authorized by law or regulation. These include (1) firearms and parts thereof, (2)
gambling machines and paraphernalia, (3) lottery and sweepstakes tickers, (4)
narcotics or synthetic drugs which are habit forming, (5) opium pipes or parts
thereof, and (6) any other goods whose importation and exportation are
restricted.
(e) Conditionally tax and/or duty exempt – goods which shall be exempt from import
duties upon compliance with formalities prescribed by the regulations. Provided,
if such goods are sold, hired, or used for purposes other than they were intered
for and without prior payment of the duties, the same shall be subject to
forfeiture.

SECTION 201. Basis of Dutiable Value. -

(A) Method One. - Transaction Value. - The dutiable value of an imported article
subject to an ad valorem rate of duty shall be the transaction value, which shall be the

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price actually paid or payable for the goods when sold for export to the Philippines,
adjusted by adding:
(1) The following to the extent that they are incurred by the buyer but are not
included in the price actually paid or payable for the imported goods:
(a) Commissions and brokerage fees (except buying commissions);
(b) Cost of containers;
(c) The cost of packing, whether for labour or materials;
(d) The value, apportioned as appropriate, of the following goods and services:
materials, components, parts and similar items incorporated in the imported
goods; tools; dies; moulds and similar items used in the production of imported
goods; materials consumed in the production of the imported goods; and
engineering, development, artwork, design work and plans and sketches
undertaken elsewhere than in the Philippines and necessary for the production
of imported goods, where such goods and services are supplied directly or
indirectly by the buyer free of charge or at a reduced cost for use in connection
with the production and sale for export of the imported goods;
(e) The amount of royalties and license fees related to the goods being valued that
the buyer must pay either directly or indirectly, as a condition of sale of the
goods to the buyer;
(2) The value of any part of the proceeds of any subsequent resale, disposal or use
of the imported goods that accrues directly or indirectly to the seller;
(3) The cost of transport o f the imported goods from the port of exportation to t he p
ort of entry in the Philippines;
(4) Loading, unloading and handling charges associated with the transport of the
imported goods from t -e country of exportation to the port of entry in the
Philippines; and
(5) The cost of insurance.

(B) Method Two. - Transaction Value of Identical Goods. - Where the dutiable value
cannot be determined under method one, the dutiable value shall be 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. Minor
differences in appearances shall not preclude goods otherwise conforming to the
definition from. being regarded as identical.
(C) Method Three. - Transaction Value of Similar Goods. - Where the dutiable value
cannot be determined under the preceding method, the dutiable value shall be 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. The quality of the goods, their reputation and the existence of a

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trademark shall be among the factors to be considered in determining whether goods
are similar.

(D) Method Four. - Deductive Value. - The dutiable value of the imported goods
under this method shall be the deductive value which shall be based on the unit price at
which the imported goods or identical or similar imported goods and resold in the
Philippines, I n t he same condition as when imported, in the greatest aggregate
quantity, at or about the time of the importation of the goods being valued, to persons
not related to the persons from whom they buy such goods, subject to deductions for
the

(E) Method Five. - Computed Value. - The dutiable value under this method shall be
the computed value which shall be the sum of:

(1) The cost or the value of materials and fabrication or other processing employed
in producing the imported goods;
(2) The amount for profit and general expenses equal to that usually reflected in the
sale of goods of the same class or kind as the goods being valued which are
made by producers in the country of exportation for export to the Philippines;
(3) The freight, insurance fees and other transportation expenses for the importation
of the goods;
(4) Any assist, if its value is not included under paragraph (1) hereof, and

SUMMARY
The Bureau of Customs is one of main generating revenues of the government.

SELF-ASSESSMENT
Quiz. Multiple Choice Questions

REFERENCES
Refer to the references listed in the syllabus of the subject.

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