Customs Modernization and Tariff Act Series 8: Titles VIII, IX and X (Duty Exemption and Drawback; Post Clearance Audit)

International trade and customs expert Atty Agaton Teodoro Uvero

Series 1, click here.
Series 2, click here.
Series 3, click here.
Series 4, click here.
Series 5, click here.
Series 6, click here.
Series 7, click here.

Title VIII of the Customs Modernization and Tariff Act has 22 sections under 4 chapters as follows: Chapter 1 (Conditionally Tax and/or Duty Free Importation), Chapter 2 (Customs Warehouses), Chapter 3 (Free Zones) and Chapter 4 (Stores). Title IX has 14 sections under 2 chapters: Chapter 1 (Duty Drawback) and Chapter 2 (Refund and Abatement). Title X of the CMTA has 7 sections covered by a single chapter on Post Clearance Audit (PCA).


Title IX (Tax and Duty Deferment, Preference and Exemption)

Chapter 1 (Conditionally Tax and/or Duty Free Importation) is substantially based on Section 105 of the Tariff and Customs Code of the Philippines. Among the substantial changes under this chapter are the following:


  • Reduction of the security required from 150% to 100% of the ascertained duty and tax;
  • Duty exemption of goods subject to outward processing; and
  • Increase in tax and duty exemptions of OFWs and returning residents for a minimum of PhP150,000.


Chapter 2 (Customs Warehouses) covers the operations of CBWs and CFWs. The provision on CBWs is substantially based on the old code while the provisions on CFWs are akin to the existing customs regulations on Authorized Customs Facility (ACF). With regard to CBWs, the major change is the increase in the period of storage to 1 year from the previous 9-month requirement.


The provisions covering CFWs are new provisions, providing customs the express power to supervise and control facilities handling goods for import and export such as container yards, container freight stations, seaport warehouses, and airport warehouses.


Chapter 3 (Free Zones) are new provisions to cover “non-customs” territories such as free ports (e.g. Subic, Clark and PHIVIDEC) and PEZA zones. Under this chapter, customs shall issue harmonized rules for Free Zones. Once the rules are issued, new registration requirements for PEZA and Free Port operators as well as new processing requirements for goods admitted to or withdrawn from free zones will be provided. At present, while goods admitted to PEZA zones are subject to customs processing, many goods imported by freeports operators (such as SBMA locators) are exempted from the required goods declaration requirement. Specifically, Section 816 of the CMTA now provides that:


“Movement of Goods into and from Free Zones. – The entry of goods into a free zone, whether directly or through the customs territory, shall be covered by the necessary goods declaration for admission or transit. Withdrawal from the free zone into the customs territory shall be covered by the necessary goods declaration for consumption or warehousing.”


Chapter 4 (Stores) provides new provisions to specifically cover tax- and duty-free facilities storing goods for use of international passengers and crew or for the operation and maintenance (e.g. fuel, parts and equipment) of international vessels and aircraft.


Title IX (Duty Drawback and Refund)

Chapter 1 (Duty Drawback) and Chapter 2 (Refund and Abatement) are principally based on the provisions of the old code. The major change involves the provision on the prescription for the duty drawback claim (1 year) and for refund application (12 months).


It should be noted here that while 1 year is normally interpreted as a calendar year, the term “12 months” is generally defined as equivalent to “three hundred sixty (360) days”.


Title X (Post Clearance Audit)

A major change under CMTA is the change in title from “Post Entry Audit” to “Post Clearance Audit”, the latter being the commonly-used term by most customs jurisdictions worldwide. While many provisions are still based on the old code, among the substantial changes are as follows:


increase in the minimum penalty but decrease in the maximum penalty in case of findings of underpayment of duties and taxes; and

additional powers to the bureau to enable it to fully exercise its audit powers — power to issue summons to produce records and to give testimony, and to exercise summary remedies such as distraint of personal property and levy of real property to implement its audit findings.


Sometime late 2013, the customs audit function was transferred from the BOC to the Department of Finance. The CMTA clearly provides that Post Clearance Audit (PCA) is a function and responsibility of the BOC. Customs is expected to aggressively start its customs audits once the PCA office is activated and a new head is appointed.


The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs and Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. He was also Bureau of Customs Deputy Commissioner for Assessment and Operations Coordinating Group (2013-2016). For questions, please email him at or (