IV.

Tariff and Customs Code of 1978, as

amended

A. Tariff and duties, defined

It is the name given to taxes on the importation and exportation of

commodities, the tariff or tax assessed upon merchandise imported from, or
exported to, a foreign country (Garcia v. Executive Secretary, G.R. No. 101273,
July 03, 1992)

NB: Customs duties and tariffs are synonymous with one another
because they both refer to taxes imposed on imported and exported wares,
articles or merchandise.

Tariff includes:

1. Customs duties, toll or tribute payable upon merchandise to

the general government;
2. Rate of customs; or
3. List of articles liable to duties.

B. General rule: all imported articles are subject to duty.

All articles imported from any country into the Philippines, shall be
subject to duty upon each importation, even though previously exported from
the Philippines, except as otherwise specifically provided for in the Tariff and
Customs Code or in other laws. (Sec. 101, TCC)

1. Importation by the government taxable

GR: All importations by the government for its own use or that of
its subordinate branches or instrumentalities, or corporations, agencies or
instrumentalities owned or controlled by the government shall be subject to the
duties, taxes, fee and other charges provided for in the Tariff and Customs Code.
(Sec. 1205, TCC)
XPNs:
1. If expressly exempted under a special law;
2. If imported as conditionally-free importations.
3. Those granted to government agencies,
instrumentalities or government-owned or controlled corporations with existing
contracts, commitments, agreements or obligations (requiring such exemptions)
with foreign countries.

C. Purpose for imposition*

D. Flexible tariff clause

The term "flexible tariff clause" refers to the authority given to the
President to adjust tariff rates under Section 401 of the Tariff and Customs Code,
which is the enabling law that made effective the delegation of the taxing power to
the President under the Constitution.

Article VI, Section 28, paragraph 2 (Phil. Consti.)

The Congress may, by law, authorize the President to

fix within specified limits, and subject to such limitations and restriction as it
may impose, tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the framework of the national
development program of the Government.

Section 401 of the Tariff and Customs Code (TCC)

In the interest of national economy, general welfare

and/or national security, and subject to the limitations provided in the TCC, the
President, upon recommendation of the National Economic and Development
Authority (NEDA), is empowered to:
1. Increase, reduce or remove existing protective
rates of import duty (including any necessary change in classification). The existing
rates may be increased or decreased to any level, in one or several stages but in no
case shall the increased rate of import duty be higher than a maximum of one
hundred (100) per cent ad valorem;
2. Establish import quota or to ban imports of any
commodity, as may be necessary;
3. Impose an additional duty on all imports not
exceeding ten (10%) percent ad valorem whenever necessary.

Limitations imposed on the flexible tariff clause

1. Conduct by the Tariff Commission of an investigation in a

public hearing - The Commission shall also hear the views and recommendations of
any government office, agency or instrumentality concerned. The Commission shall
submit their findings and recommendations to the NEDA within thirty (30) days after
the termination of the public hearings. The NEDA thereafter submits its
recommendation to the President (Sec. 401 paragraph b, TCC).

2. The power of the President to increase or decrease the rates

of import duty within the abovementioned limits fixed in the Code shall include the
modification in the form of duty. In such a case, the corresponding ad valorem or
specific equivalents of the duty with respect to the imports from the principal
competing foreign country for the most recent representative period shall be used
as bases (Sec. 401 paragraph c, TCC).

E. Requirements of importation

1. Beginning and ending of importation

Importation begins when the conveying vessel or aircraft enters the

jurisdiction of the Philippines with intention to unload therein.
 Importation is deemed terminated upon payment of duties, taxes and
other charges due upon the articles, or secured to be paid, at the port of
entry; and upon grant of the legal permit for withdrawal; In case the
articles are free of duties, taxes and other charges, until they have legally
left the jurisdiction of the customs. (Sec. 1202, TCC).

2. Obligatons of importer

a) Cargo manifest

It is a listing of the passengers or cargoes carried by a vessel or

aircraft, whether engaged in the coastwise (domestic) or foreign trade.

A manifest in coastwise trade for cargo and passengers

transported from one place or port in the Philippines to another is required
when one or both of such places is a port of entry (Sec. 906, TC). Manifests
are also required of a vessel from a foreign port (Sec. 1005, TCC).

Unmanifested cargo is subject to forfeiture whether the act of

smuggling is established or not under the principle of res ipsa loquitur. It is
enough that the cargo was unmanifested and that there was no showing
that payment of duties thereon had been made for it to be subject to
forfeiture.

b) Import entry

It is a declaration to the Bureau of Customs showing the

description, value, tariff classification and other particulars of the imported
article to enable the customs authorities to determine the correct customs
duties and internal revenue taxes due on the importation.

GR: All imported articles shall be subject to formal or

informal entry.
XPN: Except containers for re-export subject to
conditionally free-importation. (Sec. 1302, TCC as amended by RA 9135)

Kinds:

1. Informal entry

a. Articles of a commercial nature intended for sale,

barter or hire, the dutiable value of which is P2,000 or less

b. Personal household effects or articles, not in

commercial quantity, imported in passengers baggage, mail or otherwise,
for personal use

2. Formal entry
 a. Articles of a commercial nature intended for
sale, barter, or hire, the dutiable value of which is more than
P2,000.00;

b. Articles for, which the Collector may, upon

the recommendation of the Tariff Commission for the protection of a
local industry, or the revenue, require formal entry regardless of
value and whatever purpose and nature of the importation.

NB: All imported articles are subject to Formal and

Informal entry except importation admitted free of duty for the official
use of embassies, legation and other agencies of foreign governments
who accord like privileges to corresponding agencies of the Philippines.
c) Declaration of correct weight or value

It is a government form accomplished by an importer or his

representative, which is ultimately submitted to the proper office of the
Bureau of Customs as a basis for inspection of the importations of an
importer and for the computation of the correct customs duties and
internal revenue taxes due on importation. (Consumption entry)

d) Liability for payment of duties

The Philippines adopts the self-assessment system. Thus, it is

the importer which initially determines the customs duties and other
charges due from him and pays the same. However, his computation and
payment is subject to the review of the taxing authorities.

e) Liquidation of duties

Liquidation is the final computation and ascertainment by the

Collector of Customs of the duties due on imported merchandise based on
official reports as to the quantity, character and value thereof, and the
Collector of Customs' own finding as to the applicable rate of duty. It is akin
to an assessment of internal revenue taxes under the NIRC where the tax
liability of the taxpayer is definitely determined.

Liquidation is considered to have been made when the entry is

officially stamped liquidated (Pilipinas Shell Petroleum Corporation v.
Republic of the Philippines, etc., G. R. No. 161953, Mar. 6, 2008).

f) Keeping of records

The Bureau of Customs shall examine, inspect and verify the

books, records and documents necessary or relevant for the purpose of
collecting the proper duties and taxes.

All importers are required to keep at their principal place of

business, in the manner prescribed by regulations to be issued by the
Commissioner of Customs and for a period of three (3) years from the date
 of importation, all the records of their importations and/or books of
accounts, business and computer systems and all customs commercial
data including payment records relevant for theverification of the accuracy
of the transaction value declared by the importers/customs brokers on the
import entry. (Sec. 3514, TCC; Sec. 8, R.A. 9135)

F. Importation in violation of tax credit certificate

1. Smuggling

Any act of a person who shall:

1. Fraudulently import or bring into the Philippines, any article,

contrary to law; or
2. Assist in so doing; or
3. Receive, conceal, buy, sell or in any manner facilitate the
transportation, concealment, or sale of such article after importation,
knowing the same to have been imported contrary to law. (Sec. 3601, TCC)

NOTE: The Philippines is divided into various ports of entry. Entry

in any place other than those ports will be considered smuggling.

Elements:

1. That the merchandise must have been fraudulently or

knowingly imported contrary to law;
2. That the defendant, if he is not the importer himself, must
have received, concealed, bought, sold or in any manner facilitated the
transportation, concealment or sale of the merchandise; and
3. That the defendant must be shown to have knowledge that
the merchandise has been illegally imported.

Proof before a person may be found guilty of smuggling:

GR: Mere possession of the articles in question.

XPN: If defendant could explain that his possession is lawful.

2. Other fraudulent practices

Types of valuation frauds:

1. Undervaluation reporting lower values than the actual

transaction value
2. Overvaluation reporting values higher than the transaction
value
3. False invoice description through reporting lower qualities in
the invoice not identifying branded items as such
4. False country of origin
 Fraudulent practices considered as criminal offenses against Customs
Revenue Laws:

1. Unlawful importation
2. Entry of imported or exported article by means of any false or
fraudulent practices, invoice, declaration, affidavit, or other documents
3. Entry of goods at less than their true weights or measures or
upon a classification as to quality or value
4. Payment of less than the amount due
5. Filing any false or fraudulent claim for the payment of
drawback or refund of duties upon the exportation of merchandise
6. Filing any affidavit, certificate or other document to secure to
himself or others the payment of any drawback, allowance or refund of
duties on the exportation of merchandise greater than that legally due
thereon. (Sec. 3602, TCC)

G. Classification of goods

The term articles refer to goods, wares and merchandise and in

general, anything that may be the subject of importation or exportation. (Sec.
3574, TCC)

NB: The term merchandises may include checks and money order, as
well as dollar bills which are not legal tender in the Philippines. (Batisda v.
Commsissioner of Customs, 35 SCRA 448)

1. Taxable importation/Articles subject to duty

All articles when imported from a foreign country including those

previously exported from the Philippines are subject to duty unless
otherwise specifically provided for in the Tariff and Customs Code(Sec. 100,
TCCP).

2. Prohibited importation/Articles of prohibited importation

3. Conditionally-free importation
4. Absolutely-free or Duty free importation

H. Classification of duties

1. Ordinary/regular duties

These are taxes imposed or assessed upon merchandise from, or

exported to, a foreign country for the purpose of raising revenues.

a) Ad valorem

methods of valuation

(i) Transaction value

 (ii) Transaction value of identical goods
(iii) Transaction value of similar goods
(iv) Deductive value
(v) Computed value
(vi) Fallback Value

b) Specific duty
c) Alternating
duty
d) compound duty

2. Special duties

These are additional import duties imposed on specific kinds of

imported articles under certain conditions. They are imposed for the
protection of consumers and manufacturers, as well as Philippine products
from undue competition posed by foreign made products.

a) Dumping duties
b) Countervailing
duties
c) Marking duties
d) Retaliatory/discriminatory
duties
e) Safeguard

I. Remedies
1. Government
a) Administrative/extrajudicial
(i) Search, seizure, forfeiture,
arrest
b) Judicial
(i) Rules on appeal including jurisdiction
2. Taxpayer
a) Protest
b) Abandonment
c) Abatement and refund