INTERNATIONAL TRADE

ORGANIZATIONS, AGREEMENT AND

RULES OF ORIGIN
 PART ONE – TARIFF POLICY

I. Customs Modernization and Tariff Act

II. The Tariff Reform Program / Comprehensive Review of the MFN Tariff
Structure
III. The Rice Tariffication Law
IV. Jewelry Industry Development Act of 1998
V. Philippine Tariff Finder
 WHAT IS THE CUSTOMS MODERNIZATION AND
TARIFF ACT?

1. What is the Customs Modernization and Tariff Act?

• Republic Act (RA) No. 10863, otherwise known as the “Customs
Modernization and Tariff Act (CMTA).”
• was signed into law on 30 May 2016
• to protect and enhance government revenue, institute fair, and transparent
customs and tariff management that will efficiently facilitate international
trade, prevent and curtail any form of customs fraud and illegal acts and
modernize customs and tariff administration.
 WHAT IS THE CUSTOMS MODERNIZATION
AND TARIFF ACT?
• It repealed Presidential Decree (PD) No. 1464 (Tariff and Customs Code of the
Philippines of 1978, as amended), and PD No. 1853 of 1982 which requires
deposits of duties at the time of opening of letter of credit covering imports
and for other purposes.
 WHAT ARE THE OBJECTIVES OF CMTA?

• To Develop and implement programs for the continuous enhancement of

customs systems and processes that will harmonize customs procedures;
• Adopt clear and transparent customs rules, regulations, policies and
procedures, consistent with international standards and customs best
practices;
• Establish a regime of transparency of and accessibility to customs
information, customs laws, rules, regulations, administrative policies,
procedures and practices, in order to ensure informed and diligent
compliance with customs practices and procedures by stakeholders;
 WHAT ARE THE OBJECTIVES OF CMTA?

• Consult, coordinate and cooperate with other government agencies and the
private sector in implementing and developing customs policy;
• Provide a fair and expeditious administrative and judicial appellate remedy for
customs related grievances and matters;
• Employ modern practices in customs administration and utilize information and
communications technology in the implementation of customs functions; and
• Institute professionalism and meritocracy in customs tax administration by
attracting and retaining competent and capable customs officers and
personnel to enforce the provisions of this Act.
 WHAT ARE THE PROHIBITED OR RESTRICTED
IMPORTATION AND EXPORTATION UNDER CMTA?
The importation of the following goods are prohibited:
• Written or printed goods in any form containing any matter advocating or
inciting treason, rebellion, insurrection, sedition against the government of
the Philippines, or forcible resistance to any law of the Philippines, or written
or printed goods containing any threat to take the effect of, or inflict bodily
harm upon any persons in the Philippines;
• Goods, instruments, drugs and substances designed, intended or adapted for
producing unlawful abortion, or any printed matter which advertises,
describes or gives direct or indirect information where, how or by whom
unlawful abortion is committed;
 WHAT ARE THE PROHIBITED OR RESTRICTED
IMPORTATION AND EXPORTATION UNDER CMTA?

• Written or printed goods, negatives of cinematographic films, photographs,

engravings, lithographs, objects, paintings, drawings or other representation
of an obscene or immortal character;
• Any goods manufactured in the whole or in part of gold, silver or other
precious materials or alloys and the stamp, brand or mark does not indicate
the actual fineness of quality of the metals or alloys;
• Any adulterated or misbranded food or goods for human consumption or any
adulterated or misbranded drug in violation of relevant laws and regulations.
 WHAT ARE THE PROHIBITED OR RESTRICTED
IMPORTATION AND EXPORTATION UNDER CMTA?
• Infringing goods as defined under the Intellectual Property Code and related
laws; and
• All other goods or parts thereof; which importation and exportation are
explicitly prohibited by law or rules and regulations issued by the competent
authority.
 WHAT ARE THE PROHIBITED OR RESTRICTED
IMPORTATION AND EXPORTATION UNDER CMTA?

Except when authorized by law or regulation, the importation or exportation of

the following goods are prohibited:
• Dynamite, gunpowder, ammunitions and other explosives, firearms and
weapons of war, or parts thereof;
• Roulette wheels, gambling outfits, loaded dice, marked cards, machines,
apparatus or mechanical devices used in gambling or the distribution of
money, cigars, cigarettes or other goods when such distribution is dependent
on chance, including jackpot and pinball machines or similar contrivances, or
parts thereof;
 WHAT ARE THE PROHIBITED OR RESTRICTED
IMPORTATION AND EXPORTATION UNDER CMTA?
• Lottery and sweepstakes tickets, except advertisements thereof and lists of drawings
therein;
• Marijuana, opium, poppies, coca leaves, heroin or other narcotics or synthetic drugs which
are or may hereafter be declared habit forming by the President of the Philippines, or any
compound, manufactured salt, derivative, or preparation thereof, except when imported by
the government of the Philippines or any person dully authorized by the Dangerous Drugs
Board, for medicinal purposes;
• Opium pipes or parts thereof, of whatever material; and
• Any other goods whose importation and exportation are restricted.

The restriction to import or export the above stated goods shall include the restriction on
their transit.
 WHAT ARE THE FUNCTIONS OF TARIFF
COMMISSION (HEREIN REFERRED TO AS THE
“COMMISSION”)
• Adjudicate cases on the application of trade remedies against imports
pursuant to Sections 711, 712 and 713 of this Act;
• Study the impact of tariff policies and programs on national competitiveness
and consumer welfare in line with the economic objectives of the government;
• Administer the Philippine tariff schedules and tariff nomenclatures;
• Issue advance rulings on tariff classification of imported goods and render
rulings on disputes over tariff classification of goods pursuant to Section 1100
of this Act, except in cases involving goods on which the Commission has
provided advance ruling on tariff classification;
 WHAT ARE THE FUNCTIONS OF TARIFF
COMMISSION (HEREIN REFERRED TO AS THE
“COMMISSION”)
• Provide the President and Congress with independent analysis, information and
technical support on matters related to tariff and nontariff measures affecting
Philippine industries and exports for policy guidance;
• 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;
• 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;
 WHAT ARE THE FUNCTIONS OF TARIFF
COMMISSION (HEREIN REFERRED TO AS THE
“COMMISSION”)
• Conduct public consultations and public hearings pursuant to its functions; and
• Deputize or delegate, to appropriate government agency its function of
rendering rulings on disputes over tariff classification of goods, until the
plantilla positions necessary for undertaking such function have been
approved and filled-up: Provided, That such delegation of function shall not
extend beyond three (3) years from the effectivity of this Act.
 WHAT ARE THE PROVISIONS REGARDING
RULINGS ON TARIFF CLASSIFICATION AND RULES
OR ORIGIN (ROO) UNDER THE CMTA?
• On Tariff Classification:
Under Section 1100, an importer or exporter may file a written application for an
advance ruling on the tariff classification of goods with the Commission. The
Commission shall render a ruling within thirty (30) days from, receipt of a properly
documented application.
When a declared tariff classification of goods, not subject of a pending application for
advance ruling, is in dispute, the importer, exporter, or the Bureau shall submit the
matter to the Commission for a ruling, without prejudice to the application of Section
1106 of this Act on "protest": Provided, That such rulings of the Commission on
commodity classification shall be binding upon the Bureau, unless the Secretary of
Finance shall rule otherwise.
WHAT ARE THE PROVISIONS REGARDING RULINGS
ON TARIFF CLASSIFICATION AND RULES OR ORIGIN
(ROO) UNDER THE CMTA?
• On Rules of Origin:
Under Section 1102, an importer or exporter may file a written application for a
ruling on whether the goods qualify as originating under the rules of origin of
the applicable preferential trade agreement. The application for an advance
ruling on origin shall be filed with the Commissioner who shall act on the
application within thirty (30) days from receipt of the application and
supporting documents as may be required by rules and regulations.
 WHAT ARE THE PROVISIONS ON TARIFF
MODIFICATION UNDER CMTA?
• Section 1608. Flexible Clause
• Section 1609. Promotion of Foreign Trade
 II. TARIFF REFORM PROGRAM

What is Tariff Reform Program?

• Is the review/restructuring of the Philippine Tariff system that
government undertakes on a continuing basis to make the tariff
structure responsive to the needs of the economy taking into
account changing patterns in trade and advancements in
technology.
 TRP-I (1981-1985)

• Covered all headings from Chapter 1-97 of Section 104 of the

Tariff and Customs Code of the Philippines
• Tariff modification were stage over a five year period to cushion
the impact of the changes on the various sectors of the
economy.
• On nominal tariff , the tariff band was narrowed from 10% -
100% to 10%-50%
 TRP-I (1981-1985)

In this institutions of tariff reforms a review of existing protective

rates was conducted to remove or phase out the ff:
• Those that were excessive
• Those which outlive their usefulness
• Where the burden of protection outweighed the return
 TRP-II (1991-1995)

• The new package of tariff adjustments under TRP-Il was promulgated under
Executive Order (EO) 470 signed on 20 July 1991 and took effect on 24 August
1991.
• The number of Harmonized Commodity Description and Coding System or
Harmonized System (HS) lines was reduced by 10%, from 6,193 tariff lines to
5,581 lines due to the simplification of the tariff nomenclature, e.g. tariff lines
that would eventually have the same rates of duty were combined into a single
line, for ease of customs administration.
• On Nominal Tariff- Almost 95% of total tariff lines were dutiable at 3%, 10%,
20% and 30% in July 1995 and the rest at 0%, 5%, 15%, 25% and 50%.
 TRP-II (1991-1995)

The rationale of TRP-II was to reduce the overall level of protection

and disperse tariff protection within and across industries.
TRP-II aimed at achieving the following:
a) More efficient resource allocation;
b) Improved access of industry to essential inputs at lower prices;
c) Availability of more affordable and better-quality goods for
consumers; and
d) Enhanced competitiveness of local industries in the domestic
and export markets
 TRP-III (1994-1998)

• Further liberalized the trade environment by reducing the level

and tariff rates towards a uniform level of protection across all
sectors.
• It was aimed at promoting global competitiveness, simplifying
the tariff structure for ease of customs administration, and
providing a level playing field for local manufacturers vis-á-vis
foreign competition.
 IMPLEMENTATION OF TRP III

The issuance of EO 189 on July 1994 marked on the set of TRP-III.

Other EOs issued were:
• EO 264 (effective 28 August 1995) which contained the tariff
modifications industrial products.
• EO 288 (effective 15 January 1996) which set in place the tariff
reductions on non-sensitive agricultural products.
 IMPLEMENTATION OF TRP III

• EO 313 (effective 07 May 1996) which provided interim tariff

protection sensitive agricultural products as part of the country's
commitment being a member of the World Trade Organization
(WTO), and identified a total of 170 tariff lines subjected to tariff
quotas;
• EO 461 (effective 04 January 1998) which imposed 3% duty on
imported crude oil and refined petroleum product.
 TRP-IV (1997-2004)

• Was initiated to review and evaluate the impact of the pace of

tariff reductions on the competitiveness of local industries.
• It was intended to smoothen the pace of the schedule of tariff
reduction for deserving industries and to correct any remaining
distortions in the tariff structure.
 IMPLEMENTATION OF TRP-IV

TRP-IV was concluded with the issuance of the following EOs:

• EO 465 (took effect on 22 January 1998) provided the re-calibrated tariffs for the
Philippine Winner products.
• EO 486 (took effect on 10 July 1998)- provided the re-calibrated tariffs for the
residual items not covered by the Philippine Winners, and reduced the number of
tariff lines subject to tariff quotas from 170 under EO 313 to 144; and
• EO 334 (took effect on 03 January 2001) provided the tariff schedule from 2001 to
2004 for all products (excluding meat products under Hs Chapter 2, rice, corn and
sugar); and provided the tariff band of 0%- 5% (except for some sensitive
agricultural products at 30%) in 2004.
 GAINS FROM TRP

• Competitiveness of local industries

• Address bias against agriculture
• Eliminate tariff distortions
• Trade facilitation
COMPREHENSIVE REVIEW OF
THE MFN TARIFF STRUCTURE
 WHY IS COMPREHENSIVE REVIEW
UNDERTAKEN?
• It is undertaken to lay down the MFN tariff structure of all
products falling under Chapters 1 to 97 of Section 104 of the
TCCP (Section 1611 of CMTA).
• This periodic review aims to provide transparency and
predictability for industries to undertake strategic business
planning over a spread of five (5) years.
 WHEN WAS IT UNDERTAKEN?

• A comprehensive tariff review was carried out in 2005 to set the

tariff structure from 2006 to 2010.
• Its results took effect in 2007 with the issuance of EO 574 which
provided a dynamic landscape leading to the recalibration of the
Philippine Tariff structure consistent with the promotion of
Philippine industries.
• In 2010, another round of comprehensive tariff review was
undertaken to put in place the MFN tariff structure from 2011 to
2015.
 WHEN WAS IT UNDERTAKEN?

• This said review was intended assist the business community, plan
their trade strategies, enhance certainty in trade facilitation and
create opportunities for growth and greater employment.
• The review was concluded with the issuance of EO 61 on October
17, 2011 which took effect on January 14, 2012.
 WHEN WAS THE LATEST COMPREHENSIVE
REVIEW?
• Another review was undertaken in 2015 to lay down the MFN tariff
structure for 2016 to 2020.
• This said review was concluded upon the issuance of EO 20 on April
27, 2017 which promotes the local industry competitiveness and
addresses the issue of tariff distortion on raw materials and finished
goods, compliance with international tariff commitments and
preservation of policy flexibility for international trade negotiations,
and adoption of tariff modifications previously approved by the
Committee on Tariff and Related Matters (CTRM).
 WHEN WAS THE LATEST COMPREHENSIVE
REVIEW?
• This 2015 review also reinstated the zero tariffs on agricultural
inputs due to the expiration of Republic Act (RA) 8435, otherwise
known as “The Agriculture and Fisheries Modernization Act of
1997’’ (AFMA) as amended by RA 9281.
 EFFECTIVE PROTECTION RATE

• The effective protection rate (EPR) is

defined as the percentage excess of
domestic value added, made possible by
the imposition of tariffs and other
protective measures on the products and its
inputs, over world market value added.
Generally, EPR estimates are used to gain
information on the amount of government-
provided protection that an industry
receives.
 III.
THE RICE TARIFFICATION LAW
 WHAT IS "THE RICE TARIFFICATION
LAW"?
On 14 February 2019, the President signed into law Republic Act
(RA) No. 1120 “RICE LIFTING FOR THE PURPOSE THE QUANTITATIVE
IMPORT RESTRICTION ON RICE AND FOR OTHER PURPOSE.” taking
effect on 5 March 2019, this new law amends RA 8178, therwise known
as the "Agricultural Tariffication Act”. It provides for the repeal of all
other laws, and provisions of law, prescribing quantitative import and
export restrictions, or granting government agencies the power to
impose such import restrictions on agricultural products, or hindering
the liberalization of the importation, exportation, and trading of rice
and the tariffication of quantitative import restrictions.
 WHAT ARE THE OBJECTIVES OF THE RICE
TARIFFICATION LAW?
 fulfill the country's international commitment to the World Trade Organization. Replace the
QR on rice with tariff, another form of protection that is more transparent and generate
revenues to support the sector.
 ensure the availability of rice in the domestic market for the accessibility of the majority of
the population by allowing private traders (big or small) to participate in importing rice
 lower domestic rice prices to levels that would be affordable to the majority of the population
 make domestic market function effectively and efficiently with reduced/no government
intervention.
 provide farmers equivalent protection with the imposition of 35% or higher tariff rates on rice
imports and preferential assistance to rice farmers, adversely affected by tariffication.
 provide opportunity for farmers to earn more in the world market. The law also lifted the
restriction on rice exports to encourage farmers to produce much better-quality heirloom/
traditional rice geared to exports.
WHAT WAS THE ROLE OF THE TARIFF COMMISSION
IN THE IMPLEMENTATION OF THIS LAW?
Section 5 of RA No. 11203 provides for the tariff equivalent of the quantitative
import restrictions (QRs) that were lifted. Among others, said Section
prescribes that the bound rates on rice imported outside the Association of
Southeast Asian Nations (ASEAN) region shall be 180% or the tariff equivalent
calculated by the Tariff Commission in accordance with a World Trade
Organization (WTO) methodology and approved by the National Economic and
Development Authority (NEDA) Board, whichever is higher.
The Commission submitted its Report On the Calculation of the Tariff
Equivalent of the Quantitative Import Restrictions For Rice Originating From All
Member States of the World Trade Organization Except From the Member
States of the Association of Southeast Asian Nations to the NEDA Board in
March 2019.
 WHERE WERE THE IRRS OF THIS LAW
ISSUED?
Joint Memorandum Circular No. 01-2019 of the National Economic
and Development Authority (NEDA), Department of Agriculture (DA),
and Department of Budget and Management (DBM) was issued on 05
April 2019.
Among the salient provisions in the IRR are guidelines on the
President's powers and the enforcement of safeguard measures in case
of emergency situations like the sudden rise or drop in domestic prices.
It is noted that RA No. 11203 already took effect on 05 March
2019 with its self- executing provisions such as on applicable tariff
rates.
 IV.
JEWELRY INDUSTRY
DEVELOPMENT ACT OF 1998
WHAT IS JEWELRY INDUSTRY DEVELOPMENT ACT OF
1998

• Republic Act 8502

• Signed on February 13, 1998
• Took effect on July 09, 1998
• IRR of RA 8502 promulgated by DOF & BOC took effect on
January 25, 1999
 WHAT ARE THE INCENTIVES GRANTED UNDER
RA 8502?

• Zero duty on materials for use by a jewelry enterprise;

• Exemption from the imposition of excise tax on all goods known
as jewelry, whether real or imitation; and to all goods made of
ornamented, mounted or fitted with precious or semi-precious
metals or imitations of it;
• Zero duty on imported capital equipment, including spare parts
and tooling's thereof;
 WHAT ARE THE INCENTIVES GRANTED UNDER
RA 8502?

• Additional deduction from taxable income of fifty percent (50%)

of expenses incurred in training approved by the appropriate
agency;
• Gold and silver sales by the Bangko Sentral ng Pilipinas to
jewelry enterprises wider minimal margins;
• Authority for jewelry enterprises to buy gold and silver directly
from other sources;
 WHAT ARE THE INCENTIVES GRANTED UNDER
RA 8502?

• Inclusion of locally-manufactured jewelry in the government's

tourist duty free shops including the promotion, advertisement
and sale thereof
• Availment of incentives provided by other special laws (RA
7844, RA 7916, EO 226); Provided, That the activity is export-
oriented and that there is no double availment of the same
incentives.
 WHAT IS JEWELRY ENTERPRISE?

Refers to an enterprise engaged in any aspect involved in the

manufacture of jewelry, which include;
1. Manufacture of fine jewelry;
2. Manufacture of imitation jewelry;
3. Cutting and polishing, forming of precious stones or in producing
imitations thereof;
4. Refining and/or forming of precious metals and/or imitations of
precious metals; manufacture and/or processing of other raw
materials and parts used in the manufacture of jewelry
 HOW CAN JEWELRY ENTERPRISE AVAIL THE
INCENTIVES UNDER RA 8502

• Jewelry enterprises must be duly registered with the

Board of Investments (SEC 4 of RA 8502)
 WHAT IS THE ROLE OF THE TARIFF COMMISSION IN
THE IMPLEMENTATION OF RA 8502?

• Provide expertise in the tariff classification and

preparation of the list of products and equipment
entitled to tax and duty exemption
V. PHILIPPINE TARIFF FINDER
 WHAT IS THE PHILIPPINE TARIFF FINDER?

• Philippine Tariff Finder (PTF) was developed by the Tariff Commission (TC) as an
online frontline service to facilitate the public’s need for quick and accurate
information on Philippine tariff rates. This service provides access to all twelve
(12) Philippine tariff schedules.
• The Philippine Tariff Finder (PTF) was launched in 2013 to commemorate the
Tariff Commission's 60th anniversary.
• The facility was upgraded in 2015. The database has been expanded to include
Rules of Origin under different Free Trade Agreements (FTAs), as well as
applicable tariff rates under reciprocity agreements under several FTAs.