Title VI of the Customs Modernization and Tariff Act has 5 sections under 2 chapters: chapter 1 (Customs Transit) and chapter 2 (Customs Transshipment). Title VII has 15 sections with 2 chapters: Chapter 1 (Basis of Valuation) and Chapter 2 (Special Duties and Trade Remedy Measures).
Title VI (Customs Transit and Customs Transshipment)
Chapter 1 (Customs Transit) covers new rules on the movement of goods from one customs office to another office. Under the old rules, the term for such movement would be ‘transshipment’. Transit goods are generally not subject to duties and taxes. Transit may involve the following activities:
- Goods imported through any port of entry (e.g. Clark) for transit to another port (e.g. Ninoy Aquino International Airport) for immediate exportation;
- Goods imported through any port of entry (e.g. NAIA, Port of Manila or Manila International Container Port) for transit to a Free Zone such as a free port (e.g. Clark or Subic) or a Philippine Economic Zone Authority (PEZA) zone;
- Goods from a Free Zone (e.g. zone) for transit to a port (e.g. MICP) for subsequent export; and
- Goods from a Free Zone (e.g. Subic) for transfer to a PEZA zone or a customs bonded warehouse.
Under Section 600, goods transferred from one customs office to another customs office (e.g. Port of Manila to Port of Davao) but intended for domestic use (goods for consumption) are not considered transit goods and are subject to the immediate payment of duties and taxes.
Under Section 601, transit goods bound for CBWs, Free Zones, and goods covered by RA 10668 (An Act Allowing Foreign Vessels to Transport and Co-Load Foreign Cargoes for Domestic Transshipment and for Other Purposes) are not subject to the payment of duties and taxes. In the case of goods covered by RA 10668, goods for consumption arriving at a port of discharge (e.g. Port of Manila) for transfer to the port of final destination (e.g. Port of Davao) using another foreign vessel shall be subjected to the payment of duties only at the port of destination. In all other cases, goods for transit or for transfer from one customs office to another shall be subject to the payment of duties and taxes at the port of discharge.
Chapter 2 (Customs Transshipment) refers to goods for transshipment or goods that are transshipped through a port of entry for immediate exportation in the same port. Transshipped goods will not be subject to the payment of duties and taxes and shall be subject to re-exportation in the same port within 30 days from arrival. The period for exportation may be extended by the Commissioner upon request.
Section 604 also states that
“unless it shall appear in the bill of lading, airway bill, invoice, manifest, or other satisfactory evidence, that goods arriving in the Philippines are destined for transshipment, no exportation thereof will be permitted…”.
Title VII (Import Duty and Tax)
Chapter 1 (Basis of Valuation) covers the rules on valuation, specifically the different methods of valuation which are principally based on the WTO Valuation Agreement. While the new rules are substantially based on the old ones, the new rules are now provided in 7 sections unlike the old rules which are provided in a single section (Section 201, TCCP). Section 700 sets the rules on the sequential application of the valuation methods while the succeeding 6 sections outline the various methods of valuation.
Section 707 clearly provides the basis for customs to verify the truth or accuracy of values as declared by importers. Specifically, the section states that
“when a declaration has been presented and when the Bureau has reason to doubt the truth or accuracy of the particulars or of documents produced in support of such declaration, it may ask the importer to provide further explanation, including documents or other evidence, that the declared value represents the total amount actually paid or payable for the imported goods…”.
The same section also provides that when there is a valid valuation dispute, the importer has the right to secure the release of the imported goods upon the posting of sufficient guaranty equivalent to the duties and taxes subject of the dispute. The amount of duties and taxes not subject to dispute shall be paid prior to release of the goods.
Chapter 2 (Special Duties and Trade Remedy Measures) substantially reiterates the old provisions on the right of compulsory acquisition of grossly undervalued goods and the power of the President to increase duties on imported goods arising from discrimination from a foreign country. The same chapter outlines the additional duties that may also be imposed on imported duties such as: marking duty, safeguard duty, dumping duty and countervailing duty.
The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs and Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. ACT provides trade intelligence through industry updates and features; columns written by customs and trade professionals and experts; and specially commissioned reports.For questions, please email him at firstname.lastname@example.org or email@example.com (www.customstrade.asia).