Temporary Imports
and Admissions
PART of international trade and customs practices
is the concept of ÒTemporary ImportsÓ or ÒTemporary
AdmissionsÓ, which are the general terms used to refer
to articles that are imported temporarily under certain conditions
but to be subsequently re-exported at a future time. The international
agreements governing such importations are provided in the
ATA Carnet and the Revised Kyoto Convention (RKC).
Benefits of Temporary Admissions. While the Philippines is
not a signatory to both international agreements, there are
many reasons why importers and exporters should be familiar
with these trading practices. For one, many of the provisions
of both agreements are provided in Section 105 (Conditionally-Free
Importations) of the Tariff and Customs Code of the Philippines,
as amended (TCCP). Second, many countries have long adopted
these agreements into their national legislation and exports
to these countries may be covered by any of these trading
practices. RKC alone has at least 46 signatories while ATA
Carnets are recognized in about 66 countries and territories.
The Philippine government has already officially announced
that it will soon accede to the RKC.
The RKC, otherwise known as the ÒInternational Convention
on the Simplification and Harmonization of Customs Procedures
(Kyoto Convention)Ó, defines temporary admission as
the Òthe customs procedure under which certain goods
can be brought into a customs territory conditionally relieved
totally or partially from payment of import duties and taxes;
such goods must be imported for a specific purpose and must
be intended for re-exportation within a specified period and
without having undergone any change except normal depreciation
due to the use made of themÓ.
RKC Standards. The RKC provides standards for implementation
by countries that are signatories to the convention. Among
these standards are as follows:
a) National legislation shall enumerate the cases in which
temporary admission may be granted.
b) Goods temporarily admitted shall be afforded total conditional
relief from import duties and taxes, except for those cases
where national legislation specifies that relief may be only
partial.
c) Temporary admission shall not be limited to goods imported
directly from abroad, but shall also be granted for goods
already placed under another Customs procedure.
d) Temporary admission should be granted without regard to
the country of origin of the goods, the country from which
they arrived or their country of destination.
e) Temporarily admitted goods shall be allowed to undergo
operations necessary for their preservation during their stay
in the Customs territory.
f) Returning residents shall be permitted to re-import free
of import duties and taxes personal effects and their means
of transport for private use which they took with them at
the time of their departure from the country and which were
in free circulation in that country.
g) Customs shall not require a customs document or security
for the temporary admission of personal effects of non-residents
unless they exceed, in value or quantity, the limits laid
down in national legislation; or they are deemed by the customs
to be a risk to the revenue.
Inward and Outward Processing. The RKC likewise provides
standards for the temporary exportation of articles that are
intended for manufacturing, processing or repair and subsequent
importation. The convention provides that goods admitted for
inward processing shall be afforded total conditional relief
from import duties and taxes. However, import duties and taxes
may be collected on any products, including waste, deriving
from the processing or manufacturing of goods admitted for
inward processing that are not exported or treated in such
a way as to render them commercially valueless. Also, it is
required that national legislation shall enumerate the cases
in which prior authorization is required for outward processing
and specify the authorities empowered to grant such authorization.
ATA Carnet. ATA Carnet is basically an international customs
document that is used by travelers temporarily to import certain
goods into a country without having to engage in the customs
formalities usually required for the importation of goods,
and without having to pay duty or value-added taxes for such
goods. A Carnet is a security that participating countries
accept as a guarantee for the non payment of customs duties
that may become due on goods temporarily imported and not
exported as required. ÒATAÓ is the acronym for
the combined French and English words ÒAdmission Temporaire-Temporary
Admission.Ó
Generally, a carnet is valid for one year from the date of
issuance and shall normally cover goods such as: commercial
samples; professional equipment; and articles for presentation
or use at trade fairs, shows, exhibitions and the like. A
carnet, however, does not cover perishable or consumable items,
or goods for processing or repair. Articles specifically listed
on an ATA carnet can be imported to and exported from any
of the member countries as many times as needed during the
one-year life of the carnet.
The author is an international trade and customs consultant,
and a licensed customs broker. He is a lecturer on logistics,
indirect tax, customs and supply chain. Please contact agatonuvero@yahoo.com
for your comments.
Conflicting PEZA Rules for
Customs Brokers
The proposed amendments to RA 9280 (The Customs
Brokers Act of 2004) are still pending in Congress, hopefully
to be deliberated and passed by the bicameral committee before
the end of the term of the present congress. As written in
a previous article, the proposed amendments do not seem to
address many of the issues raised by various parties with
regard to RA 9280.
In the meantime, many government agencies have been issuing
conflicting rules in regards to the customs broker practice.
For one, while the Securities and Exchange Commission (SEC)
has long recognized and allowed the registration of general
professional partnerships (GPP) of customs brokers, the Bureau
of Customs (BOC) has yet to issue specific application forms
for professional partnerships even if existing rules already
allow the accreditation of GPPs. BOC has likewise prohibited
corporate customs brokers from further transacting with customs.
Second, while PEZA has prohibited corporate customs brokers
from further registering, it has yet to issue specific accreditation
requirements for GPPs. In addition, PEZA procedures are not
very clear as to who is allowed or qualified to process import
and export entries at the economic zones and based on present
practices, many PEZA registered companies, who are not registered
as customs brokers, are actually being allowed to process
import and export entries in the economic zones.
Customs Accreditation of GPPs. Part IX of CAO 3-2006A specifically
provides that ÒCustoms brokers who have pooled their
professional expertise, talents and resources to form a general
professional partnership (GPP) pursuant to the provisions
on PARTNERSHIP (Title IX of Book IV) of RA 386 (Civil Code
of the Philippines) may, at any time, file an application
for official recognition of its juridical personality with
the BOC which shall be separate and distinct from the personality
of each of the partners, who must be customs brokers as defined
in this CAOÓ.
The documentary requirements for accreditation are as follows:
a) Duly accomplished application for recognition in three
(3) typewritten copies;
b) Payment of the nonrefundable amount of Php500.00 as processing
fee and the amount of Php1,000.00 per partner as recognition
fee;
c) Articles of General Partnership with the corresponding
Certificate of Registration;
d) Taxpayer Identification Number (TIN);
e) VA T Registration Certificate;
f) SSS Certificate of Membership;
g) Mayor’s Business Permit (current);
h) Fidelity bond in the amount of One Hundred Thousand (Php100,000.00)
pesos;
i) Certified list of the firm’s bona fide customs representatives
signed by the Managing Partner together with their corresponding
NBI clearance (not more than three (3) months old) and SSS
ID Card; and
j) Privilege Tax Receipt.
Notwithstanding the fact that CAO 3-2006A expressly provides
the basis and procedures for accreditation of GPPs, the BOC
to date has not issued a single accreditation for a GPP.
Conflicting PEZA Rules. Present PEZA rules only allow individual
customs brokers to be registered, to the exclusion of corporate
customs brokers. However, the actual practice in the economic
zones is that while corporate customs brokers are now disallowed
to process import and export entries, any other entity duly
registered with PEZA (e.g. transport companies and freight
forwarders) is allowed to process such export and import entries.
In other words, while corporate customs brokers have been
prohibited from transacting in the economic zones, transport
and forwarding companies have taken over many of the previous
functions of the customs brokers, whether corporate and individual.
In some of the economic zones, PEZA authorities are very strict
in requiring that only registered employees of the customs
brokers are allowed to process import and export entries even
if the reality is that many, if not most, clearance transactions
in the zones are now provided by transport and forwarding
companies.
Corporate customs brokers have now lobbied congress to amend
the RA 9280 and to allow corporate customs brokers to continue
transacting with BOC and PEZA. The present practices at PEZA
seem to have placed both corporate and individual customs
brokers at a clear disadvantage.
Obviously, PEZA needs to provide clear guidelines on the
Òregistered activitiesÓ of customs brokers,
transport providers and freight forwarders. It also needs
to issue specific registration requirements for GPPs. Failing
that, contending groups will soon start raising compliance
issues in regards to customs broker operations at the PEZA
zone.
The author is an international trade and customs consultant,
and a licensed customs broker. He is a lecturer on logistics,
indirect tax, customs and supply chain. Please contact agatonuvero@yahoo.com
for your comments.
Customs Voluntary Disclosure
Program (VDP)
THE draft rules on the customs Voluntary
Disclosure Program (VDP) are reportedly being finalized and
should be issued in the coming weeks. The VDP is said to be
akin to the amnesty and voluntary assessment programs of the
Bureau of Internal Revenue as it allows importers to disclose
errors or mistakes in import declarations and make additional
payments for duties and taxes without the imposition of fines
and penalties. The VDP is an expansion of the concept of the
voluntary disclosure under the old rules which provides for
the benefit of compromise on the penalties but not an exemption
from fines and penalties.
In general, the VDP should benefit compliant importers who
are willing and ready to pay additional taxes and duties,
without the imposition of fines and penalties, on errors and
mistakes found on the import declarations of previous importations
entered within the 3-year audit period.
International Best Practice. In most developed countries,
part of the customs audit system is a voluntary disclosure
program where companies are able to pay additional taxes and
duties on the imported articles prior to a customs audit in
case of error or mistake. Under said program, only interest
charges may normally be collected for the delayed payments
and no fines or penalties imposed against the importer. The
voluntary disclosure program, however, does not apply when
the import transactions are coupled with fraud, in which case,
the disclosure may be converted into a fraud investigation.
Old Rules on Disclosure. Under the old rules, there are no
clear provisions for voluntary disclosure prior to the issuance
of an audit notice or even prior to the conduct of an audit.
However, the implementing rules provide that a company may
volunteer to pay additional taxes and duties even after the
issuance of the audit notice but prior to the conduct of the
audit proper. The voluntary disclosure, however, does not
exempt the importer from the imposition of fines and penalties
although the rules provide that in case of such voluntary
disclosure, the imposable fines may be compromised.
As provided under Customs Administrative Order (CAO) No.
4-2004, there are specific requirements for disclosure in
case of receipt of an Audit Notification Letter (ANL). First,
the under payment must be paid in full. Second, the disclosure
must be made prior to the commencement of the audit proper.
Third, there must be no fraud involved. Fourth, the fines
and penalties sought to be compromised must be recommended
by the Customs Commissioner and approved by the Secretary
of Finance.
Voluntary Disclosure Program. Under the proposed VDP, voluntary
disclosure shall be available even prior to the receipt of
an ANL or upon receipt of the ANL but prior to the scheduled
date of field audit. The proposed program requires the importer
to file an application and make a tender of payment of all
underpayment resulting from any errors and mistake on import
entries filed within the 3-year audit period. The disclosure
must cover all relevant import entries. The application may
be denied even if the payment has been accepted by customs.
Benefits under the VDP. Unlike the present rules which merely
provide the benefit of compromise on the penalty, the VDP
provides for numerous benefits to the disclosing party which
files a valid and timely application with a tender of payment.
One, the importer shall not be subject to fines and penalties
with regard to the covered import entries and customs issues
disclosed. Second, the importer shall be accorded the status
of Òlast priorityÓ for customs audit selection
under certain conditions such as submission of a customs compliance
program, compliant behavior upon random profiling and tender
of payment of an amount beyond the Òde minimisÓ
value as established by customs in its implementing rules.
Under the VDP, import entries not covered by the application
for voluntary disclosure shall remain subject to the penalty
regime provided under the post-entry audit rules in case an
audit is conducted on these import entries. Also, when fraud
or bad faith is uncovered, the application for voluntary disclosure
shall be denied and a full formal audit shall be conducted
without prejudice to the conduct of a formal fraud investigation.
Any money received by customs in such cases shall automatically
be applied on the deficiency in duties and taxes as disclosed.
Application and Tender of Payment. For importers qualified
under the program, the importer must submit a verified (pro
forma) application which shall identify, among others, the
transactions being disclosed with specific reference to the
import entry number and computation of deficiencies, type
of article imported, and nature of the error or mistake (e.g.,
additions to the price paid or payable, such as assists, royalty
or license fee, proceeds from subsequent re-sale; mistake
in the tariff heading and duty rate; and improper use of preferential
duty rate) resulting in the underpayment of duties and taxes,
year of importation, and port(s) of entry.
The application must be accompanied by a tender of payment
of the duty and tax deficiency on the disclosed transactions,
with the undertaking that the importer shall honor the tender
of payment regardless of whether it is found qualified or
not to avail of the program at the time of application or
at any time during the verification process.
Upon verification and once the application is accepted, the
importer shall be notified of such acceptance and henceforth,
avail of the benefits under the program.
The author is an international trade and customs consultant,
and a licensed customs broker. He is a lecturer on logistics,
indirect tax, customs and supply chain. Please contact agatonuvero@yahoo.com
for your comments.
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