In a previous article (PortCalls, April 10, 2006), we wrote about CMO 7-2007 which provides for new rules governing assessment disputes (valuation and classification issues) brought before the Valuation and Classification Review Committee (VCRC). With the establishment of a review and ruling body known as Central Valuation and Classification Review and Ruling Committee (CVCRRC), what is now the impact of the new rules on the existing VRCR procedures?
Doubt as to Value or Classification. Under present customs rules and procedures, customs has the right to satisfy itself as to the truth or accuracy of any statement, document or declaration presented for customs valuation purposes. The documentary requirements to support the declarations to customs normally include the commercial invoice, packing list, bill of lading (or air way bill) and other transport documents. When there is an issue as to the value declared, additional submissions may be required to support the following position: (a) that there is a sale for export and (b) that the declared price is the price actually paid for the imported article covered by the sale.
To answer the question of whether there is a “sale for export”, the following basic questions must first be addressed: (a) who are the parties; (b) is there property involved; (b) is there a transfer of ownership involving a financial consideration; and (c) is there exportation from one country to another. As previously mentioned, a sale requires a “buyer” who agrees to obtain certain goods for a certain amount and a “seller” who agrees to transfer ownership of those goods for the said amount. And when parties agree, there is a sale.
From a commercial perspective, a sale should start with a tender offer or a purchase order, followed by a confirmation or contract of sale. The sale contract itself may contain the provisions for payment. Normally, international sale transactions are executed through banking institutions.
Sale for Export. Financial consideration in a “sale for export” usually refers to the payment. Payment may be made directly or indirectly, may be made to a third party if the supplier provides so, or may be made in cash or in kind. Commercial transactions usually involve the use of banking instruments such as letters of credit, cable transfers, negotiable instruments, etc. The submission of the documentary evidence of the “sale for export” and “price paid” should serve as one of the bases for the acceptability of the declared price to customs.
When customs rejects the declared price or classification of importers in the import entry, it is the burden of the importer to prove the acceptability of the declarations to customs. In such a case, the importer normally has two options: (a) pay under protest and (b) request for release under tentative liquidation.
Protest vs. Tentative Release. Customs rules provide that when there is a dispute as to the assessment of the collector of customs on the liability of the importer for taxes and duties payable on the imported goods, the importer may file a written protest within 15 days from payment of taxes and duties (Section 2308, TCCP). The protest is normally filed with the law division of the port concerned. In case of a favorable ruling, the same shall be automatically reviewed by the Commissioner of Customs and the Secretary of Finance. A final ruling favorable to the importer should result in the issuance of a Tax Credit Certificate.
In case customs rejects the value or classification declared for the imported article, another option for the importer is to raise the issue before the Valuation and Classification Review Committee (VCRC) of the port (collection district) concerned.
A payment under protest is a tedious process. In contrast and as provided in the old rules, the procedure in the VCRC is summary in nature, and in case of a favorable ruling, a tax refund may immediately be issued to the importer. With the issuance of CMO 7-2007, a decision favorable to the importer is now subject to automatic review of the CVRRC.
Review of VCRC Rulings. The general procedures at the VCRC of the various collection districts should still remain even with the issuance of the CMO 7-2007. With regard to the old procedure allowing the immediate issuance of the refund check upon a favorable VCRC ruling, the new rules will now require a ruling by the CVCRRC affirming the VCRC ruling to allow the issuance of the refund check.
As specifically provided in the new rules, CVCRRC, headed by the Commissioner, shall now automatically review or take cognizance of the following: (a) VCRC cases pending for three calendar months from filing; (b) VCRC rulings favorable to the importer or adverse to the government; (c) appeals from the VCRC rulings filed within 15 days; and (d) review of the Commissioner of Customs, motu propio or upon written request by any office or unit of the customs organization.
The new rules also empower the Office of the Commissioner to review any VCRC decision, with or without any appeal filed before the CVCRRC. With this issuance, the procedures for valuation and classification disputes under the VCRC system have now become similar to the “Payment under Protest” system. The major difference though is that a CVCRRC ruling favorable to the importer or adverse to the government is not subject to automatic review by the Secretary of Finance and a refund check, instead of a tax credit certificate, is issued in case of a favorable CVCRRC ruling to the importer.