|
Specific Focus Areas
in a Customs Audit
IN our previous article, we mentioned that the Post
Entry Audit (PEA) Group of the Bureau of Customs (BoC)
has already issued numerous Audit Notifica-tion Letters
(ANLs) addressed to major importers in various industries
(e.g. garments and textile, automotive, pharmaceutical,
food, steel, consumer goods and other major importing
industries) and that audit proper is already ongoing
for several of the companies.
Trade Profile of the Company. Based on the implementing
rules and guidelines on the audit process and consistent
with international best practices, we expect customs
to initiate the audit by first securing a "trade
profile" of the company - nature of the business,
background and organizational set up, volume and value
of imports/exports, type and classification of products,
trading arrangements, taxes (VAT and excise) and duties
paid, history of customs issues, corporate officers
and staff involved in the trading activities, availment
of tariff privileges, etc. In preparation for possible
customs audit, a company is therefore advised to prepare
a trade profile kit containing most, if not all, of
the above information.
Audit Readiness of Records. Once the customs
audit team gains a general understanding of the company's
trading business, the auditors will now require the
presentation of specific import documents and business
records. Most companies have a policy of retaining company
records for 5 years. Unfortunately, while companies
are normally ready to present records in case of BIR
audit, we expect companies to have problems submitting
the specific information requirements in case of a custom
audit. For one, customs will require a list of import
documents with reference to import entry numbers. Unfortunately,
most companies keep records based on an internal record
system (e.g. SAP) without reference to import entry
numbers. We expect delays in the companies' presentation
of specific import records.
Second, customs will require numerous business records
from the company such as inventory records, exception
reports, subsidiary ledgers, trial balance, etc., in
the course of audit. Most of these records will certainly
be financial records. Considering that financial records
are more designed for tax compliance and internal company
audit, we again expect companies having a hard time
providing the specific financial data required by customs.
Focus Areas for Audit. During the course of
the audit proper, we expect customs to conduct the audit
on the following focus areas:
a. Internal Control and Customs Declaration Process
b. Record Keeping
c. Customs Value Information
d. Customs Classification and Product Description
e. Inventory Control; Goods Quantity
f. Licensing, Marking and Rules of Origin
g. Tariff Preferences (e.g. AFTA-CEPT, AFMA)
h. CBW, BOI and PEZA operations.
Internal Control and Customs Declaration Process.
Part of the audit will be a review of existing policies
or procedures on how imports are declared to customs.
The main concern here is whether the importer exercises
"reasonable care" in the customs declaration
process and whether there are controls and procedures
within the company to ensure the completeness and accuracy
of what was declared. Is there an internal company system
to verify what the customs broker is doing? Is there
a level of comfort as to the accuracy and completeness
of what is being submitted to customs by the customs
broker, in both the import entry and the supplemental
declaration of value (SDV)? Are there existing company
policies in the documentation and import declaration
process flow?
Record Keeping. Part of the risk assessment
and system review in an audit is to check whether the
company has an established system of keeping import
records and business information as required by the
customs audit law. Does the system enable customs to
easily access records for audit purposes? Companies
should note that the longer it takes to present the
records, the more likely customs will assume the existence
of non-compliance issues. This can complicate the process
resulting in customs taking more time to conduct the
audit.
Customs Value Information. Customs will first
check on the appropriate method of valuation used for
declaring to customs, with focus on the verification
of actual payment against what is declared. Additional
issue will be the verification of actual VAT payments
to customs as against what was declared to BIR as input
VAT. Customs will also focus on any additional financial
outflow to suppliers and affiliate companies (e.g. retroactive
price increase, management fees, technical assistance
fees, royalty and license fees, quality assurance charges
and R&D costs) to check on whether the same may
be treated as possible additions to the dutiable value.
Other Audit Issues. The auditors will check
the inventory records of the company, including those
used for manufacturing, to check on possible exception
reports of over shipment. Sampling of specific products
can be taken to verify the correctness of the product
classification, description, licensing (import permits)
and marking. A review of the availment of special tariff
privileges granted under the tariff code and special
laws (AFTA CEPT, AFMA) can be made by the audit group.
In the course of the audit, customs will likely conduct
an interview of the company's customs brokers and verify
records of the customs brokers as against importer's
records. In general, the extent of the audit will depend
on the complexity of the trading transactions and the
number of non-compliance issues of the specific company
being audited.
An international trade and customs consultant and
licensed customs broker, the author is a Fellow at WTI.PH
and a Partner of DLUGMS Law Office. Please contact aouvero@dlugms.com
or (632) 4050021 / 29 for your comments.
Back to Top
Customs Treatment of PEZA Domestic
Sales
GENERALLY, customs rules and regulations apply only
when foreign goods previously entered into the export
or free trade zone are taken out of the zone into the
country. With the implementation of the Post Entry Audit
(PEA) system, a question for companies located in PEZA
zones and other free trade zones (e.g. Subic, Clark)
is whether these companies are covered by the custom
audit system. Assuming that the PEZA companies are covered
by PEA, will the customs audit be limited to compliance
issues relating to sales made to domestic companies
outside of the zone?
In general, the PEA system allows customs to audit companies
to check on compliance with customs rules and regulations
within 3 years from date of importation and specifically,
to verify the correctness of the taxes and duties paid
on such importation. Likewise, the system provides that
importers should keep specific import records and business
information within the 3-year period. Failing to keep
the records required exposes the company to possible
fines and penalties. Considering that most PEZA-located
companies are engaged in export production and that
PEZA zones are treated as separate customs territories,
are these companies indeed covered by the PEA? Can customs
conduct compliance audit of such companies?
Export Processing Zones and Free Trade Zones. Under
RA 7916 (otherwise known as the Special Economic Zone
Act of 1995), as amended by RA 8748, an Export Processing
Zone (EPZ) has the following characteristics
:
a) It is a specialized industrial estate located physically
and/or administratively outside customs territory.
b) It is predominantly oriented to export production.
c) Enterprises located in EPZs are allowed to import
capital equipment and raw materials free from duties,
taxes and other import restrictions.
In contrast, a Free Trade Zone (FTZ) is described as
follows:
a) It is an isolated policed area adjacent to a port
of entry (as a seaport) and/or airport.
b) It is where imported goods may be unloaded for immediate
transshipment or stored, repacked, sorted, mixed, or
otherwise manipulated without being subject to import
duties.
c) The movement of imported goods from the free trade
area to a non-free trade area in the country shall be
subject to import duties.
Domestic Sales Outside of the Zone. Section 26 (Domestic
Sales) of RA 7916, provide that "Goods manufactured
by an ECOZONE enterprise shall be made available for
immediate retail sales in the domestic market, subject
to payment of corresponding taxes on the raw materials
and other regulations that may be adopted by the Board
of the PEZA.".
The implementing rules also provide that merchandise
of foreign origin which has not undergone any processing,
manufacturing or manipulation while in the ECOZONE,
shall, when sent to the customs territory, be subject
to the laws and regulations governing imported merchandise.
Further, where said foreign merchandise is combined
with or made part of any domestic article, the duties
and taxes to be assessed on the final product shall
be based on the value of such imported merchandise (except
when the final product is exempt) and internal revenue
taxes on the value added.
In theory therefore, only the foreign merchandise component
of the goods processed and manufactured in the zone
and subsequently entered into the Philippine customs
territory shall be subject to duties and taxes. Section
3, Part V of the implementing rules specifically provides
that "the duties and taxes to be assessed on the
final product shall be based on the value of such imported
merchandise (except when the final product is exempt)
and internal revenue taxes on the value added".
In practice, however, customs has varying ways of arriving
at the duty treatment of processed raw materials. Some
ports will collect only on the foreign merchandise while
other collect taxes and duties even on the value-added
activities performed within the zone.
Customs Audit of PEZA activities. Based on our own understanding
of the PEA law and implementing rules, PEZA companies
are accordingly not exempt from the coverage of the
PEA law. The remaining concern is to what extent is
the customs audit applicable on PEZA activities. First,
PEZA companies are certainly covered by the record keeping
requirements. Second, domestic sales of processed goods
outside of the zone will likewise be the subject of
customs audit. In fact, we would assume that the duty
treatment of processed materials together with the inventory
of raw materials will be the main area of the audit.
Considering, however, that customs does not have clear
rules and guidelines on the valuation treatment of processed
materials coming from PEZA zones, we are concerned that
such issue will be a contentious one when customs audits
a company. To manage possible risks of non-compliance
in case of an audit, it is important for PEZA companies
to secure an advance customs ruling on such issue. Otherwise,
PEZA companies will have major disagreements with auditors
once customs starts the audit of domestic sales of PEZA
companies.
An international trade and customs consultant and licensed
customs broker, the author is a Fellow at WTI.PH and
a Partner of DLUGMS Law Office. Please contact aouvero@dlugms.com
or (632) 4050021 / 29 for your comments.
Back to Top
Incoterms and its
Implication on Customs Valuation
Scenario. AutoHaus Germany (AG) is a
global manufacturer of luxury vehicles. It recently
shipped 50 completely built units (CBUs) of OPRA 242
to Autohaus Pinas (AP), a sales and distribution subsidiary.
AG has an agreement with Pan Global, a third party logistics
(3PL) provider, for the global distribution of its vehicles
and auto parts. As a logistics provider, Pan Global
provides AG with the following services: (a) air and
sea freight, (b) multi-modal transport, (c) customs
brokerage, and (d) warehousing and distribution. Pan
Global arranged the shipping, transport and delivery
of the 50 OPRA units to the Philippines under the following
trading term: "DDU AutoHaus Sta Rosa Laguna Phils
Incoterms 2000". While the units were being transported
to Sta. Rosa, one truck loaded with 6 units was "hijacked".
The rest of 50 units were safely delivered to the AP
warehouse in Sta. Rosa, Laguna.
(a) What is obligation of the buyer AP? The seller
AG?
(b) What is the dutiable value of the goods?
(c) Who is responsible for customs facilitation and
clearance?
(d) Who is responsible for the payment of duties and
taxes?
(e) Is the transport cost from Port of Manila to Sta
Rosa dutiable?
(f) Who takes the risk for the 4 units that were "hijacked"?
The answer to the above questions will require a serious
study of the meaning of the term Delivered Duty Paid
(DDP).
Incoterms in International Trading. Logistics in international
trade generally involves the use of international trading
terms (e.g. Incoterms, UCP 500, etc.). The use of these
terms determines the obligations and rights of the buyer
and seller in the movement of goods in the supply chain,
from sourcing and procurement of raw materials and supplies
to customer order fulfillment. From an operational perspective,
logistics services will involve the following:
(a) adoption of international trading terms (Incoterms
and documentary credits);
(b) use of transport providers, freight forwarders
and shipping agents;
(c) availment of warehousing and distribution centers;
and
(d) customs clearance, inspection, security and compliance.
International Commercial Terms 2000. Introduced
by the International Chamber of Commerce (ICC) in 1936,
with the latest version (2000) involving 13 terms, Incoterms
provides an international standard for international
sales and purchase contracts (cross border transactions)
and sets the rules for interpreting the international
trade terms. As a standard trading term used by the
buyer and seller in an international sale transaction,
it is widely accepted by governments, legal authorities
and trading community.
In general, the use of Incoterms serves to protect the
interest of the buyer and the seller by managing risks
in case of loss, by allocating transport and insurance
costs between the parties, by defining responsibility
for customs formalities, by minimizing disputes in the
absence of well-defined sales contracts and by supplementing
international sales contracts. Specifically, Incoterms
defines the roles and responsibilities as to the following:
(a) Delivery (where and when the seller fulfills obligation
to deliver/transfer of ownership);
(b) Documents (who provides what documents, whether
manual or electronic);
(c) Risks (who bears the risk of loss or damage at
any point of transit / Transfer of Risk); and
(d) Costs (who pays for what).
Implication to Customs Valuation. Under Section 201
of the Tariff and Customs Code, as amended (TCCP), the
dutiable value of an imported article is the "transaction
value, which shall be the price actually paid or payable
for the goods when sold for export to the Philippines",
adjusted by adding the following costs: freight and
transport costs, insurance, royalty payments, assists,
subsequent payments and commissions. Thus, the dutiable
value is computed by getting the price paid or payable
plus the adjustments mentioned above.
Importers normally negotiate their trading terms on
a CIF basis. The question here is whether the CIF invoice
value is equivalent to the dutiable value. The term
CIF presupposes that freight and transport costs including
insurance have been included in the invoice price and
thus, we may assume that the invoice price (which is
the transaction value for the imported goods) is the
dutiable value. In case of an FOB invoice value, we
normally add freight and transport costs and insurance
to arrive at the dutiable value.
In recent years, we have seen the increasing use of
terms such as Free Carrier (FCA), Delivered Duty Unpaid
(DDU) and Delivered Duty Paid (DDP), Carriage Paid To
(CPT) and many other unfamiliar terms. A study of the
some of the Incoterms will indicate that the standard
costs provided in the invoice may include costs which
are not necessarily dutiable. As an example, the DDP
invoice value normally includes the amount for taxes
and duties payable and as such, the amount to be declared
to customs should be less than the invoice value (i.e.,
after deducting the taxes and duties payable at the
port of destination).
In conclusion, importers, forwarders and customs brokers
should carefully review the Incoterms (especially terms
other than CIF or FOB) when determining what is to be
declared to customs as the dutiable value. Otherwise,
importers run the risk of committing overpayment or
underpayment in the taxes and duties on imported articles.
An international trade and customs consultant and licensed
customs broker, the author is a Fellow at WTI.PH
and a Partner of DLUGMS Law Office. Please contact aouvero@dlugms.com
or (632) 4050021 / 29 for your comments.
Back to Top
Understanding the
13 Incoterms
Two weeks ago, we wrote on the implication
of Incoterms in the customs valuation of imported goods.
As a sequel, the following article enumerates the various
international commercial terms commonly know as Incoterms
and provides some pointers for understanding and using
them in international sales transactions.
International Commercial Terms 2000. Introduced by the
International Chamber of Commerce (ICC) in 1936, Incoterms
provides an international standard for international
sales and purchase contracts (cross border transactions)
and sets the rules for interpreting the international
trade terms. In general, the scope of the Incoterms
relates to the rights and obligations of the parties
to a contract of sale with respect to the delivery of
goods sold excluding intangibles rights. Specifically,
Incoterms defines the roles and responsibilities as
to the following:
a) Delivery (where and when the seller fulfills obligation
to deliver/transfer of ownership);
b) Documents (who provides what documents, whether
manual or electronic);
c) Risks (who bears the risk of loss or damage at
any point of transit / Transfer of Risk); and
d) Costs (who pays for what).
The 13 Incoterms. Since 1936, ICC has updated the Incoterms
six times to keep up with the developments in international
trade and commercial practice. The English text is the
original and official version of Incoterms 2000, which
has been endorsed by the United Nations Commission on
International Trade Law (UNCITRAL).
Every Incoterms is referred to by a three-letter abbreviation.
The latest version, Incoterms 2000, involves 13 terms
as follows:
1. "E" Family (Departure Term)
EXW - Ex Works (Énamed place)
2. "F" Family (Shipment Term, Main Carriage
Unpaid)
FCA - Free Carrier (Énamed place)
FAS - Free Alongside Ship (Énamed port of shipment)
FOB - Free on Board (Énamed port of shipment)
3. "C" Family (Shipment Term, Main Carriage
Paid)
CFR - Cost and Freight (Énamed port of destination)
CIF - Cost, Insurance and Freight (Énamed port
of destination)
CPT - Carriage Paid To (Énamed place of destination)
CIP - Carriage and Insurance Paid To (Énamed
place of destination)
4. "D" Family (Delivery Term)
DAF - Delivered at Frontier (Énamed place)
DES - Delivered Ex Ship (Énamed port of destination)
DEQ - Delivered Ex Quay (Énamed port of destination)
DDU - Delivered Duty Unpaid (Énamed place of
destination)
DDP - Delivered Duty Paid (Énamed place of
destination)
Pointers for Using Incoterms 2000. As mentioned above,
each of the Incoterms provides the rights and obligations
of the buyer and the seller as to the delivery of the
goods, the documents required, the transfer of risk
of loss or damage, and the costs to be incurred.
Below are some pointers when using the Incoterms:
a) First, buy a copy of Incoterms 2000 from ICC.
b) Specify that the term applicable is Incoterms 2000
to prevent misunderstandings and possible conflicts.
c) Study carefully the rights and obligations outlined
in each of the Incoterms. Make sure each party agree
to the rights and obligations provided in the Incoterms.
d) Some of the Incoterms refer exclusively to a specific
mode of transport. The terms FAS, FOB, CFR, CIF, DES
and DEQ refer only to transport by sea while the rest
of the Incoterms can be applied to any mode of transport.
e) Although the old term C&F or CNF no longer
exists, it is persistently still being misused. Use
the proper term CFR instead.
f) Always confirm with trading partner the specific
Incoterms to be used in a particular sale transaction.
g) Confirm with the other party the rights and obligations
outlined under the specific Incoterms used.
h) Do not try to change or add to the duties or obligations
provided in the Incoterms. If there are any changes
to any particular duties or obligations provided in
the specific Incoterms used, this must be agreed upon
and put in writing. Better still the changes should
be included in the standard sales contract.
i) Confirm and verify the applicable Incoterms as
against the terms and conditions in the sales contract,
if there is any. In case of conflict, confirm with
the trading partner that the contract prevails over
the Incoterms.
j) Inform the bank and insurance company of the Incoterms
used to notify them of the rights and obligations
of the parties.
k) The Incoterms used will determine the agreed price
for the goods sold in terms of the costs to be incurred
or paid by the buyer.
l) Finally, study the Incoterms used in order to determine
the dutiable value to be declared to customs at the
port of destination.
An international trade and customs consultant and licensed
customs broker, the author is a Fellow at WTI.PH
and a Partner of DLUGMS Law Office. Please contact aouvero@dlugms.com
or (632) 4050021 / 29 for your comments.
Back to Top
Establishing a Customs
Bonded Warehouse (CBW)
UNDER Section 1901 of the Tariff and
Customs Code of the Philippines (TCCP) and Customs Administrative
Order No. 2 - 1991 (CAO 2-91), the Bureau of Customs
shall be responsible for the licensing, supervision
and control of all Customs Bonded Warehouses (CBWs).
Under CAO 2-91, CBWs have different classifications
depending on its nature and purpose.
Types of CBWs. In general, CBWs may be categorized into
the following:
a) Customs Bonded Manufac-turing Warehouse
- Garment/Textile Manufacturing Bonded Warehouse
- Miscellaneous Manufacturing Bonded Warehouse
- Common Bonded Manufacturing Warehouse
b) Public/Private Bonded Warehouse
c) Customs Bonded Trading Warehouse
d) Multinational Regional Warehouse
Moratorium on certain CBWs. Since 1998, however, the
Bureau of Customs (BoC) has imposed a moratorium on
the issuance of licenses on all applications for specific
types of CBWs as provided under CMO 3-98 (e.g. trading,
common, public and private CBWs). Since that time, there
had been a number of instances where the BoC granted
an exception to the moratorium.
Unless there are reasonable justifications for the grant
of a license and depending on the circumstances of the
application (e.g. Industry-Specific types), the BoC
will generally deny an application to operate a Public/Private
or Trading CBW. It is our understanding, however, that
the BoC is presently undertaking a review of its rules
and regulations concerning the application process,
operation, supervision and audit of bonded warehouses
which could eventually lead to the lifting of the moratorium
or at the very least, the relation of the rules on such
application.
Benefits of CBWs. A customs warehouse is generally applicable
for companies involved in "temporary importation"
- importations which are tax and duty free for reasons
provided by law (e.g. imports for export production
or for sale to free trade zones). Without a CBW, an
importer will generally pay taxes and duties on those
imports and upon submission of proof of exportation,
secure a tax and duty drawback for those payments. A
CBW therefore should not only help ease the cash flow
position of the company but should also eliminate the
transaction cost for securing those drawbacks. In addition,
a CBW should also reduce operational costs and promote
efficiencies in the supply chain and inventory management.
Thus, a CBW may result in the following:
• direct control of the supply chain and inventory;
• computerized and integrated supply chain and
inventory system;
• lower administrative and financial costs;
• efficient and cost-effective storage and distribution
system; and
• immediate availability of raw materials and
supplies on a "just-in-time" basis.
Documentary Requirements. When applying for a CBW license,
the applicant will normally have to prepare the following
documents:
• SEC Registration, including Articles and By-Laws
• Lease Contract or Evidence of Ownership of
Proposed Warehouse
• Warehouse / Plant Location and Layout
• Mayor's Permit for Warehouse
• Financial Statements
• Income Tax Returns
• List of Machinery and Equipment
• List of Materials to be Imported
•Formula of Manufacture/ Conversion (for manufacturing
operations)
Once the documents are ready, the same will be submitted
to the Bureau of Customs together with the formal application.
Procedure for Application. A formal application is normally
submitted to the District Collector of the Port concerned.
The CBW division of the port concerned will assess the
application before the same is endorsed to the District
Collector. In case the endorsement is favorably acted
upon, the District Collector will submit the application
to the CBW Committee for study before it is submitted
to the Customs Commissioner.
At any given time, the applicant should be ready with
executive summaries, power point presentations and briefing
papers for submission or presentation during meetings.
The applicant should also be able to arrange plant visits
and ocular inspections by customs.
Implementation Issues. Once the CBW license is issued,
the applicant will have to contend with the following
implementation concerns:
• Maintenance of a system of inventory and documentation
of movements and controls (including electronic systems)
consistent with the CBW compliance requirements;
• Liquidation and audit of warehousing entries
involving imported articles;
• Import valuation, classification and other
customs issues;
• Technical training of staff and customs broker;
and
• Other issues related to the operation of the
CBW and to compliance with general customs rules and
procedures.
An international trade and customs consultant and licensed
customs broker, the author is a Fellow at WTI.PH
and a Partner of DLUGMS Law Office. Please contact aouvero@dlugms.com
or (632) 4050021 / 29 for your comments.
back to top
Managing Your Customs
Issues (1)
FOR many years and until the present,
the management of customs operations - releasing goods
from customs custody - has always been outsourced to
customs brokerage firms or logistics companies. For
importers, customs operation has always been considered
from a logistics perspective and not from a compliance
perspective.
The advent of the post-entry audit and
the recent issuance by customs of Audit Notification
Letters (ANLs) to numerous companies has brought about
concerns on the level of compliance of importers and
the level of technical competence of customs brokers.
A lot of times, importers are faced with difficult issues
with customs and customs brokers are required to handle
the same. While some of the problems may be resolved
through the normal procedures, a lot of times the problem
may result in serious concerns that may end in the seizure
or forfeiture of the imported articles.
On many occasions, we have seen how the
problem of the importer, while complicated as it is,
has been exacerbated by the lack of technical competence
of the customs broker staff not only in analyzing the
problem but also in finding the correct remedy to solve
the particular concern. As a result of mismanagement
of customs issues, we regularly see importers transferring
from their existing customs broker to another broker.
We have outlined below some of the basic
administrative procedures that customs brokers and importers
normally avail to resolve customs issues.
Customs Administrative Procedures. In
general, customs administrative procedures refer to
laws, rules and regulations applicable to customs cases
and issues and may be categorized as follows:
a) Abandonment
b) Valuation and Classification Disputes
c) Protest and Payment under Protest
d) Seizure and Forfeiture
e) Additional Assessment
f) Compliance Audit
Abandonment Proceeding. Under Section
1801 of the Tariff and Customs Code of the Philippines
(TCCP), there are three instances of abandonment:
a) When there is express and written notice to abandon
from the importer;
b) When there is failure to file entry within 30 days
from discharge from the vessel; and
c) When there is failure to claim the importation
after the filing of an import entry within 15 days
from date of posting of Notice to Claim such importation.
When a shipment is declared "abandoned"
by customs, a common remedy is to file a request to
lift the order of abandonment on any of the following
grounds: (1) 30 days has not lapsed (30th day is a non-working
day); (2) there is lack of notice of abandonment; and
(3) there is lack of Notice to Claim the importation.
A preventive measure for the importer
is to file a written notice with the District Collector
of the importer's intent to file entry and release goods
prior to the lapse of the 30-day period. A word of caution
though - some ports do not allow this practice.
Valuation and Classification Disputes.
When valuation or classification issues are raised against
a particular shipment (either by the customs computer
system or by the appraiser/ examiner), an importer has
two options. One, the importer may raise the issue before
the Valuation and Classification Review Committee (VCRC)
of the port concerned. Another option would be the payment
under protest of the amount of duties and taxes additionally
assessed. The VCRC process is an internal customs procedure
at the level of the Collection District. A protest or
payment under protest, on the other hand, is a process
that will require the importer securing the final approval
of the Secretary of Finance. A VCRC case is theoretically
easier to handle than a protest for two main reasons:
(1) an importer can secure a cash refund on the amount
under dispute through the VCRC mechanism while a protest,
if favorably decided, can only result in a cash refund;
and (2) a VCRC case is decided solely by the District
Collector while a protest will have to be processed
through the numerous offices of customs and finance
department.
Protest and Payment under Protest. We
have mentioned above that protest and payment under
protest is available when a shipment is subject to valuation
or classification issues. In addition, this procedure
may also apply to other circumstances when there is
legal doubt as to the assessment or additional assessment
being made by customs. For example, there might be issues
as to the effectivity date of the executive order providing
a lower tariff rate, in which case, an importer may
have to pay under protest. As mentioned above, a protest
is a tedious process requiring appearance in various
offices (e.g. law division, district collector, legal
service, office of the commissioner, finance department).
In addition, the issuance of the tax credit certificate
will require too much documentation and clearances.
As a general advice, an importer should always avail
of the remedy under the VCRC system before going through
the protest process.
Our next article will discuss the procedures
when filing a protest and other customs administrative
procedures such as seizure and forfeitures, and additional
assessments.
The author is an international trade
and customs lawyer, and a licensed customs broker. He
is also a lecturer on customs and international commerce.
Please contact aouvero@dlugms.com
or (632) 4050021 / 29 for your comments.
back to top
Managing Your Customs
Issues (2)
In our previous article, we discussed
the customs administrative procedures applicable in
(a) abandon-ment pro-ceedings, (b) valuation and classification
disputes, and (c) protest and payment under protest.
The succeeding paragraphs will touch on the procedures
for filing the protest as well as other administrative
remedies (e.g. seizures and forfeiture proceedings,
Alert Order, Hold Order and Warrant of Seizure and Detention).
Procedures in Protest. The rules in "payment
under protest" provide the following requirements:
a) it must be made in writing (citing decision or
ruling and the grounds for the protest);
b) it must refer to specific transaction / import
entry (or many entries if facts and ground are the
same);
c) it must be filed at time of payment of amount under
protest or within 15 days from payment;
d) docket Fees must be paid (non payment will result
in dismissal); and
e) sample articles may be required.
Upon filing of the protest, the District
Collector will order the hearing of the case and will
decide within 30 days from termination of the hearing.
In case of adverse decision, an importer may file a
written receipt Notice of Appeal to the District Collector
copy furnished the Commissioner within 15 days from
written notice of decision. In case the Commissioner
reverses the decision of the District Collector resulting
in a favorable outcome to the importer, the decision
shall be subject to automatic review by the Finance
Secretary. In case the Commissioner affirms the decision
of the District Collector, the decision will be final
and executory although the importer may still file an
appeal before the Court of Tax Appeals (CTA).
Automatic Review of Protest Cases. At
any time that a decision is made favorable to the importer,
said decision will always be subject to automatic review
by either the Commissioner (for decisions made by the
District Collector) and the Finance Secretary (for decisions
made by the Commissioner).
Additionally, the Finance Sectary shall
automatically review the protest cases under the following
circumstances:
a) when the value of importation subject of seizure
is more than P5 million; or
b) where there is failure of the Commissioner to render
decision within 30 days from receipt of the records.
(Reference: Sec. 2313, TCCP, CAO 9-93 and CMO 3-2002)
Seizure and Forfeiture Proceedings. A seizure proceeding
normally involves the following:
a) lawful taking into possession of any vessel, aircraft,
cargo, article, animal or other movable property;
b) seized property is subject to forfeiture or liable
for any fine imposed; and
c) proceedings normally result from a hold or alert
orders on shipments.
In addition, foreign articles openly offered
for sale may be seized for failure to show evidence
of payment of duties and taxes.
Alert / Hold Orders. An Alert Order is
generally issued to require spot-checking or 100% physical
examination of the subject shipment and to warn concerned
customs officials to exert extra diligence in examining
the shipment and reviewing the import documents. It
is issued based on derogatory information or suspected
violation of customs laws, rules and regulations. As
a rule, an Alert Order must be recorded by the Office
of the Commissioner and must contain a dry seal of the
Commissioner.
A Hold Order is issued when the subject
shipment has been examined and is already being processed
for release. It is issued against a shipment when customs
has valid reasons to believe that shipment has violated
existing customs laws rules and regulations.
Procedures for Alert / Hold Orders. An
Alert or Hold Order must be issued only by authorized
customs officials: Commissioner, Dep. Comm., IEG, District
Collector, Chief, ESS and Chief, CIIS. The issuance
of such order may result in any of the following recommendations:
a) issuance of a Warrant for Seizure and Detention
(WSD)
b) payment of additional taxes and duties including
fines
c) lifting of alert / hold order
(Reference: CMOs 92-91, 104-92 and 4-94)
Warrant of Seizure and Detention (WSD).
A WSD is issued by the District Collector upon determination
of probable cause of violation of customs laws, rules
and procedures. Upon issuance of the warrant, the District
Collector must perform the following:
a) report the seizure to Customs Commissioner
and Chairman, Commission on Audit;
b) notify the importer in writing; and
c) prepare description, appraisal and classification
of seized property
(Our next and last article on the topic
will touch on the procedures in WSD cases and appeal
procedures under the Post-Entry Audit system.)
The author is an international trade
and customs lawyer, and a licensed customs broker. He
is also a lecturer on customs and international commerce.
Please contact aouvero@dlugms.com
or (632) 4050021 / 29 for your comments.
You are now viewing: Across
Borders Archives : 2004 Q3
back to top |
