CUSTOMS MODERNIZATION AND TARIFF ACT

Republic Act 10863

Section 100: Short Title

Republic Act 10863, also known as the “Customs Modernization and
Tariff Act (CMTA)”, was enacted on May 30, 2016, and became effective
on June 16, 2016. The CMTA aims to modernize customs regulations in
the Philippines to enhance trade efficiency and revenue collection. It
comprises 18 titles, 43 chapters, and 314 sections.

Section 101: Declaration of Policy

The CMTA establishes a clear policy framework to:

 Enhance Government Revenue: Protect and increase government
income through effective customs management.
 Facilitate International Trade: Ensure that customs processes are
fair and transparent to promote trade.
 Prevent Customs Fraud: Implement measures to combat illegal
activities related to customs.
 Modernize Administration: Upgrade customs operations using
contemporary practices and technology.

To achieve these goals, the State shall:

1. Develop programs for continuous enhancement of customs
systems.
2. Adopt transparent customs regulations consistent with international
standards.
3. Establish accessible customs information for stakeholders.
4. Collaborate with other government agencies and the private sector.
5. Provide fair administrative remedies for customs grievances.
6. Utilize modern practices and technology in customs administration.
7. Promote professionalism among customs personnel.

Section 102: Key Terms and Definitions

 Abatement - Reduction or diminution of duties and taxes where

payment has not been made.
Example: A business may receive an abatement on duties if it can prove
financial hardship.
 Actual or Outright Exportation - Customs procedure for goods
leaving Philippine territory permanently.
Example: A company shipping products to another country as part of a
sale.
 Admission - Bringing imported goods into a free zone directly or
through transit.
Example: Goods entering a special economic zone for processing before
distribution.
 Airway Bill (AWB) - Document used for airfreight that specifies the
consignee's right to claim goods.
Example: An airline issues an AWB when cargo is shipped
internationally.
 Appeal - Remedy for individuals aggrieved by Bureau actions
seeking redress.
Example A business can appeal a penalty imposed by the Bureau of
Customs.
 Assessment - Process of determining duties and taxes due on
goods.
Example: Customs assesses a shipment's value to calculate applicable
duties.
 Authorized Economic Operator (AEO) - Accredited entities
promoting secure international trade supply chains.
Example: A certified importer that meets WCO standards for security in
trade.
 Bill of Lading (B/L) - Document issued for waterborne freight
indicating the consignee's right to claim goods.
Example: Shipping lines provide B/Ls to clients upon loading cargo.
 Bureau - Refers to the Bureau of Customs in the Philippines.
 Carrier - Person or entity responsible for transporting goods.
Example: Airlines or shipping companies acting as carriers of cargo.
 Clearance - Completion of necessary formalities for goods to enter
or exit customs territory.
 Commission - Refers to the Tariff Commission responsible for
tariff-related matters.
 Conditional Importation - Procedure allowing temporary
admission of goods under specific conditions without full duties.
 Customs Broker - Individual holding a valid certificate who
facilitates customs transactions on behalf of clients.
 Customs Office - Administrative unit authorized to perform
functions under customs laws.
 Customs Officer - Personnel exercising discretion in performing
Bureau functions, distinct from clerical roles.
 Customs Territory - Areas in the Philippines where customs laws
are enforced (e.g., ports, airports).
 Entry - Process of bringing imported goods into customs territory,
including free zones.
 Exportation - Process of sending goods out of Philippine territory.
 Export Declaration - Statement indicating procedures for exporting
goods as required by customs.
 Flexible Clause (1.) Power to adjust tariff rates within limits set by
law. (2.) Authority to establish import quotas or bans as necessary.
(3). Ability to impose additional duties on imports when needed
 Foreign Exporter - Entity whose name appears on export
documentation regardless of manufacturer's name.
 Free Zone - Special economic zones registered with PEZA under
specific laws providing tax incentives.
 Goods - Articles subject to importation or exportation, including
merchandise and wares.
 Goods Declaration - Statement indicating procedures for
importing goods required by customs authorities.
 Importation - Act of bringing goods into Philippine territory from
abroad.
 Freight Forwarder - Local entity facilitating transport of goods
without assuming carrier responsibilities.
 International Freight Forwarder - Responsible for consolidating
shipments for international transport from origin to destination.
 Jurisdictional Control - Bureau's authority over all seas within
Philippine territory and related transport areas.
 Lodgement - Registration of a goods declaration with the Bureau.
 Non-Vessel Operating Common Carrier (NVOCC) - Entity
providing transport services without owning vessels, managing
shipments across multiple modes.
 Outright Smuggling - Importing goods without proper
documentation or clearance from customs authorities.
 Perishable Good - Goods that deteriorate quickly in value or
condition, subject to auction if not sold promptly.
 Port of Entry - Domestic port open to trade, including principal
ports (chief entry points) and subports (under jurisdiction).
 Port of Discharge - Definition refers to where vessels unload
shipments for delivery to consignees.
 Reexportation - Definition refers to exporting imported goods back
out of the country, also known as entrepot trade.
 Release of Goods - Definition refers to permitting cleared goods'
disposal by concerned parties after customs procedures are
completed.
 Refund - Definition refers to returning duties and taxes paid on
imported goods under specific conditions.
 Security - Definition refers to any form of guarantee ensuring
obligations are met with the Bureau (e.g., cash bond).
 Smuggling - Definition refers to fraudulent import actions or
assisting in such activities knowingly involving smuggled goods.
 Taxes - Definition refers to all fees imposed under this Act collected
by the Bureau related to imports/exports.
 Technical Smuggling - Definition refers to fraudulent declarations
regarding imported goods' nature or value aimed at evading
taxes/duties.
 Tentative Release - Definition refers to releasing goods pending
valuation disputes upon cash bond provision equivalent to
duties/taxes due.
 Transit - Definition refers to transporting goods under customs
control between offices or free zones without alteration.
 Transshipment - Definition refers to transferring goods between
different transport means under customs control within one office
area.
 Traveler - Definition refers to anyone temporarily entering or leaving
a country, including residents and non-residents.
 Third Party - Definition refers to individuals dealing with the Bureau
on behalf of another concerning import/export activities.

Section 103: When Importation Begins and is Deemed Terminated

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

Importation is deemed terminated when:

1. 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
exempt from duties, taxes, and other charges, and a legal permit for
withdrawal has been granted.
2. In cases where the goods are free from duties, taxes, and other
charges, the goods have legally left the jurisdiction of the Bureau.

Section 104: When Duty and Tax are Due on Imported Goods
 All imported goods into the Philippines are subject to duty upon
importation, including previously exported goods.
 Unpaid duties, taxes, and other charges shall incur a legal interest
of 20% per annum from the date of final assessment under Section
429.
 Legal interest also applies to any fine or penalty imposed.
 Upon payment, the Bureau shall issue a receipt or document as
proof of payment.
 SSDT (Statement of Settlement for Duties and Taxes) is issued
as documentation of settlement.

Section 105: Effective Date of Rate of Import Duty

 Imported goods are subject to the import duty rates effective on the
date of importation or withdrawal from the warehouse for
consumption.
 In the case of withdrawal from free zones, the duty rate at the time
of withdrawal applies.
 For goods sold at a customs public auction, duty rates at the auction
date apply.
Seizure and Forfeiture
 A seizure refers to the act of customs officials taking possession of
goods suspected of violating customs laws, potentially leading to
confiscation due to smuggling, incorrect declaration, or prohibited
activities.

Key Points:
 Reasons for Seizure: Smuggling, misdeclaration of value, or
prohibited items.
 Legal Authority: Customs officers have the power to seize goods
under relevant customs laws.
 Procedure: A seizure notice is issued, outlining reasons and next
steps for the owner.
 Forfeiture: If a violation is confirmed, the seized goods become
government property.
 Forfeiture is the process of the government taking ownership of
illegally imported/exported goods.

What Can Be Forfeited?

 Imported/exported goods  Cargo, stores, or supplies of
 Vehicles, vessels, or aircraft a vessel
 Packages and receptacles
Circumstances Leading to Forfeiture:
 Goods are in customs  Goods were concealed or
possession. sold illegally.
 Goods were knowingly
imported illegally.
Fate of Forfeited Goods:
 The government takes  Goods are disposed of
ownership. according to the law.

Section 106: Declarant

 A declarant is a consignee or a person who has the right to dispose
of the goods (owner).

Who Can Be a Declarant?

 The importer (holder of the bill of lading)
 The exporter (owner of the goods to be shipped out)
 A customs broker authorized by the importer or bill holder
 A person empowered as an agent or attorney-in-fact
If the declarant is a juridical person (company), a responsible officer
may sign the goods declaration.

Goods Declaration Process:

 The declarant or a licensed customs broker processes the
declaration.
 Only one person (either the declarant or broker) signs the
document.
 A transition period of two years applies before some provisions take
full effect.

Section 107: Rights and Responsibilities of the Declarant

 Difference Between Declarant and Licensed Customs Broker
 Declarant: Responsible for the accuracy of the declaration and
payment of duties, taxes, and charges.
 Licensed Customs Broker: Responsible for accuracy but not for
payment.
 Both must sign the declaration if a customs broker assists the
declarant.

Section 108: Penalties for Errors in Goods Declaration

 No substantial penalties for unintentional errors with no fraudulent
intent.
 A penalty may be imposed to discourage repetition but must not be
excessive.

Section 109: Application of Information and Communications

Technology (ICT)
 The Bureau shall utilize Information and Communication
Technology for customs control and a paperless environment.
 Trade and logistics information shall be exchanged nationally and
regionally.
 Security of data and communication shall comply with local and
international standards.
 A disaster preparedness and recovery plan shall be implemented.
 ‘’Electronic documents, permits, licenses, and certificates’’ shall
have legal validity.

Section 110: Relationship Between the Bureau and Third Parties

 Parties may transact business with the Bureau directly or through a
designated third party.
 Transactions made directly and through a third party must be
treated equally.
 Third parties have the same rights and obligations as the
designating party.

Section 111: Information of General Application

 All customs laws, decisions, rulings, circulars, memoranda, and
orders must be published.
 Information should be readily accessible to interested parties.
 Any new amendments must be made available before
implementation when possible.
Section 112: Information of a Specific Nature
 Information requests must be for legitimate use.
 A reasonable fee may be required for providing such information.
 Information should be released within a reasonable time.

Section 113: Decision and Ruling

 The Bureau shall issue binding and advance decisions/rulings upon
request regarding import/export matters.
 Decisions must be issued within 30 days upon submission of
required documents.
 If a ruling is unfavorable, reasons must be provided, and the
party is informed of the right to appeal.

Section 114: Right of Appeal, Forms, and Grounds

 Affected parties may appeal Bureau decisions within ‘’15 days’’ of
receiving the ruling.
 Appeals must be in writing, stating specific grounds.
 The Bureau may allow additional time for supporting evidence.

Types of Importation
Section 115: Treatment of Importation
 Goods are considered "entered" when the declaration and
supporting documents are electronically lodged with customs.

Section 116: Free Importation and Exportation

 All goods may be freely imported/exported unless restricted by law.

Section 117: Regulated Importation and Exportation

 Regulated goods require necessary clearances, licenses, or
declarations.
 Some requirements may be submitted after arrival but before
customs release.

Section 118: Prohibited Importation and Exportation

 Certain goods ‘’cannot’’ be imported/exported, including:
 Treasonous, rebellious, or threatening materials
 Abortion-related drugs or printed materials
 Obscene materials
 Misbranded/adulterated food or drugs
 Infringing goods under IP laws
 Other goods prohibited by law

Section 119: Restricted Importation and Exportation

 Unless authorized, import/export of the following is restricted:
 Explosives, firearms, weapons of war
 Gambling devices and machines
 Lottery tickets (except advertisements)
 Dangerous drugs and narcotics
 Opium pipes and accessories
Section 120: Relief Consignment
 Goods such as food, medicine, and shelter materials donated for
disaster victims are ‘’exempt from duties and taxes’’.
 Priority clearance is given during calamities.
 Simplified customs procedures apply.

Section 121: Duty and Tax Treatment

 Relief consignments ‘’imported during a state of calamity and
intended for disaster victims are duty and tax-exempt.