Philippine President Benigno Aquino III on May 30 signed into law the long-awaited Customs Modernization and Tariff Act (CMTA).
Republic Act (RA) No. 10863 or “An Act Modernizing the Customs and Tariff Administration” updates the Tariff and Customs Code of the Philippines (TCCP) and overhauls Bureau of Customs (BOC) operations. It simplifies and harmonizes customs procedures, pushes for full customs automation, and aligns the TCCP with international standards and practices, ultimately making it easier for traders, importers and exporters to comply with border requirements.
“Finally, after more than five years in Congress, CMTA has become a law. With this legislation, PH customs should be at par with international standards and best practices. Currently, most of customs regulations and practices are based on more than 50-year-old policies and laws. At best, the law should address many of the issues involving tedious and complex customs processes. If properly implemented, this should result in simplified processes for the transacting public,” Atty Agaton Teodoro Uvero, Bureau of Customs deputy commissioner for Assessment and Operations, told PortCalls. Uvero was detailed at the Department of Finance early in the year to ensure passage of the measure.
In a phone interview with PortCalls, Customs commissioner Alberto Lina said he was “elated” that the “long overdue” measure has finally been signed.
He cited some of the salient provisions of the new measure: the higher tax-free provision for balikbayan (personal effects) boxes; the increase in the de minimis value; and the requirement that more than half of the deputy commissioners (there are five now) should be organic. The latter, he said, ensures continuity of programs.
Lina noted that full BOC automation is one of his priority recommendations to the next Customs commissioner.
He said the law’s implementing rules and regulations (IRR) are currently being drafted and for completion before the current administration steps down on June 30.
The outgoing BOC chief said he has already submitted transition papers to BOC’s mother agency, the Department of Finance.
In a separate statement, Lina hailed the signing of RA 10863 as a “milestone” for the outgoing Aquino administration.
“Emphasizing the ease of trade through streamlined processes, the CMTA will establish the requisite foundation for a cashless, faceless and paperless environment in Customs, reducing corruption and technical smuggling that will result to enhanced revenues.
“Efforts are already underway to attune current BOC systems to the new provisions in the CMTA focused on business process re-engineering, computer-based systems development, organizational development, capacity building, and external communication and education.
“I am very pleased that in my short time in the BOC, and with the dedication and hard work of the Customs workforce, I was able to shepherd this overdue bill into law, with the support from our colleagues in Congress for prioritizing the measure.”
Senate ways and means committee chairman and CMTA sponsor Juan Edgardo Angara, for his part, said: “RA 10863 generally aims to simplify, modernize and align with global best practices the country’s customs procedures including import clearances and valuations, making the release of goods much faster, regardless of whether you are an individual entrepreneur or a large multinational.
“It also mandates the use of information and communications technology and other appropriate applications that speed up not only the inner-workings of Customs, but also make it more transparent.
“The CMTA reinforces BOC functions as trade facilitator rather than just being a revenue-generating agency, and imposes higher penalties against smuggling.”
Angara added, “The CMTA aims to overhaul and modernize the bureau which has long been perceived as one of the most corrupt and underperforming government agencies in the country. Kahit si President-elect Rodrigo Duterte ay gusto nang buwagin ang ahensiyang ito. Pero umaasa tayo na sa pamamagitan ng mahigpit na pagpapatupad ng batas na ito at sa tulong ng bagong administrasyong Duterte, magbabago at maisasaayos ang kalakaran ng Customs. (Even President-elect Rodrigo Duterte wants the agency abolished but we are hoping that with strict implementation of this law and the help of the new administration, practices at the BOC will change.)”
Five key provisions
At the recent Mindanao Shipping Conference in Davao City, Uvero said five provisions of the new law have been identified for adoption ahead of the release of its IRR.
READ: Customs modernization act now awaiting PH President’s signature
The first priority provision is on relief consignment, stipulating that donations to calamity victims must be both duty- and tax-free. Donations were previously duty-free but not value added tax-free. Under the CMTA, donations coursed through other non-government organizations that are not accredited by the Department of Social Welfare and Development will be duty- and tax-free, Uvero said.
BOC is also looking at issuing orders to implement the declarant provision. Under the CMTA, the engagement of customs brokers is mandatory only for two years, beyond which it is optional.
On the urgent list too is the increase in the de minimis value to P10,000 from P10 for articles brought into the country duty-free through the postal office, by courier companies, or by hand. In order to permanently do away with the outdated values, the measure provides for an automatic indexation of the amounts every three years to account for inflation.
Yet another priority is the issuance of rules to implement the CMTA provision raising the amount of exemption for a balikbayan box to P150,000 from the previous P10,000. The same amount of exemption will be granted to returning overseas Filipino workers.
“With the increase in the values, we lessen the discretion of the Customs officials to inspect goods and collect taxes, thus minimizing cases of corruption and smuggling,” Angara said in a statement.
Returning residents who have stayed in a foreign country for less than five years will get a P150,000 exemption; those who have been residing abroad for more than five years but less than 10 years, P250,000; and those overseas for 10 years or more, P350,000.
The fifth priority provision is embodied in CMTA’s Section 402, which states that all goods declared for consumption should be cleared through a formal entry process, except for goods of a commercial nature with Free on Board or Free Carrier value of less than P50,000, and personal and household effects or goods that are not in commercial quantity and are imported in a passenger’s baggage or mail.
Uvero noted this eliminates the tedious process of formal entry processing air travellers usually go through upon entry into the Philippines.
Other provisions
Aside from amending existing laws, Uvero said the CMTA redefines such concepts as the free zone, which will soon include special economic zones other than those registered with the Philippine Economic Zone Authority. Free zones will encompass Clark Freeport Zone, Poro Point Freeport Zone, John Hay Special Economic Zone, Subic Bay Freeport Zone, Aurora Special Economic Zone, Cagayan Special Economic Zone and Freeport, Zamboanga City Special Economic Zone, Freeport Area of Bataan, and other freeports to be established by law.
A permanent office that will implement the Authorized Economic Operator (AEO) program will also be created; an executive order for this has already been drafted. Right now, an ad hoc office without personnel is in charge of the program, Uvero pointed out.
The AEO is a concept under the World Customs Organization SAFE Framework of Standards to Secure and Facilitate Global Trade. It represents a customs-to-business partnership to enhance international supply chain security and facilitate movement of legitimate goods. It is a voluntary certification scheme that will help certain economic operators in the global supply chain adopt “acceptable control measures” to enhance cargo security. The BOC issued rules for the adoption of the AEO program in the Philippines in late 2013.
Another new provision states that unpaid duties, taxes, and other charges will incur legal interest of 20% per annum, computed from the date of final assessment when payment becomes due and demandable.
Advance ruling and dispute settlement, as well as alert orders, will likewise be part of the law and have simplified procedures and processes.
Regulated imports will not be seized, as BOC will only require consignees to produce the necessary import permits. If no such permits can be presented, consignees will be made to pay penalties and fines. This, Uvero said, is to prevent seized containers from languishing at terminals.
There will be differentiation in the classification of customs bonded warehouses (CBWs) for manufacturing and exports from customs facilities and warehouses, which are off-dock container freight station/container yards, arrastre operators, and bonded warehouses in airports.
Moreover, the allowed period of storage in CBWs is extended to one year from the previous three months. Those that need more than one year, such as shipbuilders, will be able to request an extension from the Customs commissioner.
Settling pending seizure cases by paying the fine or redeeming the forfeited goods is also clarified to prevent discretion on the part of customs officers.
As for abandoned shipments, Uvero said that instead of becoming government property, CMTA will have them auctioned and the proceeds used to pay for the shipment’s duties and taxes and other expenses. Any excess from the proceeds will go to the cargo owner, he said.
Under CMTA, fines and penalties for administrative cases have also been lowered, while criminal cases such as fraud and smuggling merit heftier penalties.
Uvero concluded that the CMTA provides lesser discretion for customs officials, uses international best practices, and applies clear and simplified rules. – Roumina Pablo
