Our first article for this series discussed the various customs administrative procedures applicable in (a) abandonment proceedings, (b) valuation and classification disputes, and (c) protest and payment under protest. A succeeding article touched 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). This last article on this series will focus on the procedures in WSD cases and appeal procedures under the Post Entry Audit system.
Procedures in WSD Cases. As previously written, a WSD is issued by the District Collector upon determination of probable cause of violation of customs laws, rules and procedures. Subject to the approval of the Commissioner and except when there is prima facie evidence of fraud, an importer may generally secure the release of the seized goods upon posting of a cash bond.
In the alternative and subject to the same conditions for posting a cash bond, an importer may settle the case by payment of fine while the case is pending or in case of forfeiture, by redemption of forfeited property. As provided in Section 2307, TCCP, the fine shall be determined by the District Collector which shall be from 20% to 80% of the landed cost. In case of redemption, the redemption price shall be based on the domestic market value. An issue for many importers is that under CAO 4-94, the fine has been pegged at 60%. In practice however, the discretion to decide the amount of fine remains with the District Collector subject to the approval of the Customs Commissioner.
As provided in the rules, the formal hearing for seizure proceedings shall be scheduled within 15 days from the issuance of the WSD. Thereafter, the importer is given a written notice and opportunity to defend itself. The District Collector shall render the decision within 30 days from the termination of the hearing.
Appeal Procedure in WSD cases. In case the decision of the District Collector is unfavorable, the importer may file a written Notice of Appeal to the District Collector, copy furnished the Commissioner, within 15 days from receipt of the decision. The case shall then be endorsed to the Commissioner for review. In case the Commissioner decides favorably for the importer, the case shall be subject to automatic review by the Secretary of Finance. In case the Commissioner affirms the adverse decision of the District Collector, the decision will be final and the importer may file a Petition for Review with the Court of Tax Appeals (CTA).
When a case is decided in favor of an importer, the decision shall be subject to automatic review by the Commissioner. If the decision of the District Collector is affirmed by the Commissioner, the importer may proceed to file a Petition for Review with the CTA.
Appeal in Post Entry Audit (PEA) Cases. The appeal process provided in CMO 1-2002 refers to instances where the importer/customs broker questions the adverse findings in the Final Audit Report and Recommendation (FARR) in case of a Post Entry Audit (PEA). CMO 1-2002 generally provides for the procedure for determining the administrative liability and imposition of fines as recommended in the FARR after the conduct of a customs compliance audit.
In case of adverse findings after the conduct of the audit, the PEA Group shall file the necessary administrative complaint before the Commissioner. The complaint shall then be forwarded to the Legal Service for hearing and decision. During the hearing, the importer shall be given written notice and shall be allowed to defend itself against the allegation in the complaint. Instead of formal hearings, the importer may opt to just submit memoranda and other written documents and after which, the case may be submitted for resolution. Once a resolution is made by the Legal Service and approved by the Commissioner, the importer may file a Petition for Review with the CTA within 30 days from receipt of the decision in case of adverse findings.
Effective Management of Customs Issues. During the numerous occasions that we have handled customs administrative cases, we have been able to observe a common thread in all the cases. Among these observations are as follows:
- Importers are generally not aware of the implications of what is being declared to customs. That being the case, importers tends to be haphazard with their import documentation.
- Customs broker staff are generally not prepared to handle highly technical customs issues. A lot of times, cases arose due to the misreading of the gravity or complexity of the issues involving a particular shipment. On many occasions, we have seen how this lack of technical competence resulted in the seizure of the shipment.
- Administrative cases are costly and can takes years before they are resolved. For example, WSD cases normally take at least 3 months before resolution. Abandonment cases can be resolved in a shorter period. VCRC cases take at least 3 months on average. Refund cases and payments under protest should take at least 6 months before resolution. Some refund cases, the ones endorsed to the Budget Department, can take years.
By and large, customs issues can result in administrative cases against the shipment and the importer. If not properly managed, this can further result in the seizure of goods and the filing of an administrative and/or criminal complaint against the importer. Being knowledgeable in customs rules should therefore minimize the risks involved in importations and consequently, prevent unnecessary costs and expense.
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 firstname.lastname@example.org or (632) 4050021 / 29 for your comments.