CASE STUDY 1. A local manufacturer, Santa Barbara Company (SBC), imports various articles on a Delivered Duty Paid (DDU) terms of trade. The foreign supplier hires a logistics company, ABC Express, to ship the goods to the Port of Manila. ABC Express has a local subsidiary – ABC Express Philippines. ABC Express Philippines hired licensed customs brokers as full-time employees to “prepare, sign, file and process” import declarations with customs. ABC likewise paid for the duties and taxes, arrastre, wharfage and other port charges. Can ABC Express hire licensed customs brokers as full-time and regular employees to “prepare, sign, file and process” the import declarations? Can ABC Express advertise their customs broker services? Can the company’s employees, who are not licensed customs brokers, assist the customs brokers in processing the import entries with customs? Can the logistics company pay the duties and taxes, arrastre, wharfage, and other port charges? Can SBC hire licensed customs brokers as its full-time employees to “prepare, sign, file and process” import declarations with customs? Is the importer required to deal directly with the customs broker? Can an importer authorize the logistics company to hire a customs broker to provide customs clearance services?
CASE STUDY 2. SBC likewise imports raw materials for its manufacturing facilities. The raw materials are imported from offshore suppliers mostly on CIF terms of trade. PanPacificGlobal (PPG), a multinational forwarder, is the accredited forwarder of SBC. PPG hires a licensed customs broker to “prepare, sign, file and process” import declarations with customs. Upon release from customs custody, the raw materials are delivered to SBC warehouse using PPG transport facilities. Can an integrated logistics provider hire an independent customs broker to “prepare, sign, file and process” import declarations with customs?
Discussion on the Case Studies. Can ABC Express hire licensed customs brokers as full time and regular employees to “prepare, sign, file and process” the import declarations? RA 9280 prohibits corporations from engaging in the customs brokerage business. While there is no express prohibition with regard to the hiring of full-time licensed customs brokers, the arrangement here raises issues on the independence and arms’ length nature of the customs broker service provided and as such, there is a high risk that such arrangement may be considered as a dummy operation or may be found to violate the prohibition on corporate practice. Can SBC hire licensed customs broker as its full-time employees to “prepare, sign, file and process” import declarations with customs? The same argument here applies in regard to the independence and arms’ length nature of the service provided. To manage the risk of non-compliance, SBC should instead hire the licensed customs brokers as independent contractors, not as full-time employees. Can ABC Express advertise their customs broker services? RA 9280 expressly prohibits entities or individuals who are not licensed customs brokers from advertising or offering themselves as customs brokers. As discussed above, the risk of non-compliance is high in case the company hires full-time licensed customs brokers. Advertising as a customs broker is clearly prohibited as far as ABC Express is concerned. To manage this concern, the company may provide that customs clearance services are done by professional customs brokers. Can the company’s employees, who are not licensed customs brokers, assist the customs brokers in processing the import entries with customs? While this is not expressly prohibited under RA 9280, customs rules however provide that customs representatives must be full-time and regular employees of the individual customs broker duly accredited by the Bureau of Customs. Can the logistics company pay the duties and taxes, arrastre, wharfage, and other port charges? Yes, logistics companies can pay or advance the duties and taxes, arrastre, wharfage, and other port charges. More so in the case of DDP shipments where the importer has already paid in advance such costs to the supplier. What is expressly prohibited by law is for the customs brokers to pay or advance such costs. While companies can no longer engage in the customs broker service, they are not however prohibited from such financing activities. Is the importer required to deal directly with the customs broker? Can an importer authorize the logistics company to hire a customs broker to provide customs clearance services? There is nothing in the law or the implementing rules that require importers to deal only and directly with customs brokers. Importers may authorize their integrated logistics providers to hire a customs broker, who is an independent service provider, to provide customs clearance services. Can an integrated logistics provider hire an independent customs broker to “prepare, sign, file and process” import declarations with customs? So long as the independence and arms’ length nature of the customs broker service is maintained, logistics companies may continue to manage its importer-clients and outsource customs clearance services to an independent service provider – an individual customs broker or a professional partnership.
