2. What are Customs Duties?

"Customs duties" 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. (Nestle Philippines, Inc. vs. CA, GR No.
134114 dated July 6, 2001)

3. What is the statutory basis for the collection of customs duties and taxes?
All articles, when imported from any foreign 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
TCCP and in other laws. (Sec. 100 of the TCCP)

4. Are importations made by the government subject to customs duties and taxes?

Yes, except those provided for in Section 105 of the TCCP, all importations of 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, fees and other charges provided for in the TCCP. (Sec. 1205 of the
TCCP)

6. What is the flexible tariff clause?

It refers to the authority given to the President to adjust tariff rates under Section 401 of the TCCP. (Nague)

7. When may the power under the flexible tariff clause be exercised by the President?
Upon recommendation of the National Economic and Development Authority (NEDA) and in the interest of national
economy, general welfare and/or national security. (Sec. 401a of the TCCP)

8. What may the President do in the exercise of his power under the flexible tariff clause?

a) Increase, reduce or remove existing protective rates of import duty (including any necessary change in classification).
Limitation: rate of increase shall not be higher than a maximum of 100% ad valorem;
b) Establish import quota or to ban imports of any commodity;
c) Impose an additional duty on all imports not exceeding 10% ad valorem; and,
d) Modify the form of duty.
Before any recommendation is submitted to the President, conduct of investigation, public hearings, hearing of views
and recommendations of government offices by the Tariff Commission is necessary except under letter c); (Sec. 401 of
the TCCP)

10. When does importation begin and when does it end?

Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unload
therein.
It is clear from the provision of the law that mere intent to unload is sufficient to commence an importation. (Feeder
International Line, Pte., Ltd. vs. CA, GR No. 94262 dated May 31, 1991)
Importation is deemed terminated upon the payment of duties, taxes and other charges due upon the articles, or
secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case said articles
are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs. (Sec. 1202 of the
TCCP)
As long as the importation has not been terminated, the imported goods remain under the jurisdiction of the Bureau of
Customs. Importation is deemed terminated only upon the payment of the duties, taxes and other charges upon the
articles, or secured to be paid, at the port of entry and the legal permit for withdrawal shall have been granted. The
payment of the duties, taxes, fees and other charges must be in full. (Papa vs. Mago, GR No. L-27360 dated February 28,
1968)

11. Will mere possession of merchandise on board a vessel in Philippine waters constitute importation of the said
merchandise?
No, the mere possession of merchandise on board a vessel in the Philippine waters is not of itself sufficient to amount to
an importation of the same. There must be proof of an intent to import. (U. S. vs. Jose, 34 Phil. Rep., 840; U. S. vs. Ah
Sing, 36 Phil. Rep., 978. cited in US vs. Chu Loy, GR No. L-12594 dated January 31, 1918)
12. Glory Shipping Lines (GSL) imported one (1) unit of shipping vessel which was authorized by the Department of
Finance subject to the posting of a re-export bond. After expiration of the re-export bond, GSL, however, refused to
pay the correct amount of taxes after demand and thereafter sold the same to Oro Maura Shipping Lines (OMSL).
OMSL separately filed for the importation of the same vessel.

Was the importation made by OMSL separate from that of GSLs importation?
No, with the knowledge that the vessel was released under a re-export bond, OMSL should have known that this original
entry was subject to specific conditions, among them, the obligation to guarantee the re-export of the vessel within a
given period, or otherwise to pay the customs duties on the vessel. It should have known, too, of the conditions of the
vessels release under the re-export bond and of the state of GSLs status of compliance.
There was an original but incomplete importation by GSL that OMSL could not have simply disregarded proceeds from
knowledge of the vessels history and the application of the relevant law. In this respect, Section 1202 of the TCCP
provides:
Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to
unlade therein. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the
articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case
said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs.
In order for an importation to be deemed terminated, the payment of the duties, taxes, fees and other charges of the
item brought into the country must be in full. For as long as the importation has not been completed, the imported item
remains under the jurisdiction of the BOC. From the perspective of process, the importation that originally started with
GSL was therefore never completed and terminated, so that the OMSLs present importation is merely a continuation
of that original process. (Secretary of Finance vs. Oro Maura Shipping Lines, GR No. 156946, July 15, 2009).

18. Who are those considered as owners of imported articles?

a) The consignee;
b) Holder of a bill of lading duly endorsed by the consignee therein named;
c) The consignor, if consigned to order;
d) The underwriters of abandoned articles; and,
e) Salvors of articles saved from wreck at sea, along a coast or in any area of the Philippines. (Sec. 1203 of the TCCP)

30. Who is liable for the payment of import duties?

Unless relieved by laws or regulations, the liability for duties, taxes, fess, and other charges attaching on importation
constitute a personal debt due from the importer to the government which can be discharged only by payment in full of
all duties, taxes, fees and other charges legally accruing. It also constitutes a lien upon the articles imported which may
be enforced while such articles are in custody or subject to the control of the government. (Sec. 1204 of the TCCP)
31. Glory Shipping Lines (GSL) imported one (1) unit of shipping vessel which was authorized by the Department of
Finance subject to the posting of a re-export bond. After expiration of the re-export bond, GSL, however, refused to
pay the correct amount of taxes after demand and thereafter sold the same to Oro Maura Shipping Lines (OMSL).
OMSL separately filed for the importation of the same vessel.

Did the transfer of ownership of the vessel extinguish the liability to pay the tax?
No, an important factual circumstance that the CTA and the CA appear to have completely overlooked is that the vessel
first entered the Philippines through the Port of Mactan and it was the Collector of the Port of Mactan who first
acquired jurisdiction over the vessel when he approved the vessels temporary release from the custody of the BOC,
after GSL filed Ordinary Re-Export Bond No. C(9) 121818.
When this re-export bond expired on March 22, 1994, GSL filed a letter dated May 10, 1994 guaranteeing the renewal of
the re-export bond on or before May 20, 1994, otherwise the duties, taxes and other charges on the vessel would be
paid. Therefore, when May 20, 1994 came and went without the renewal of the vessels re-export bond, the obligation
to pay customs duties, taxes and other charges on the importation in the amount of P1,296,710.00 arose and attached
to the vessel. Undoubtedly, this lien was never paid by GSL, thus it continued to exist even after the vessel was sold to
the respondent. Section 1204 of the TCCP in this regard states:
Section 1204. Liability of Importer for Duties. Unless relieved by laws or regulations, the liability for duties, taxes, fees
and other charges attaching on importation constitutes a personal debt due from the importer to the government
which can be discharged only by payment in full of all duties, taxes, fees and other charges legally accruing. It also
constitutes a lien upon the articles imported which may be enforced while such articles are in custody or subject to the
control of the government.
As defined by Blacks Law Dictionary, a lien is a claim or charge on property for payment of some debt, obligation or
duty. In this particular instance, the obligation is a tax lien that attaches to imported goods, regardless of ownership.
Consequently, when the respondent bought the vessel from Glory Shipping Lines on December 2, 1994, the obligation to
pay the BOC P1,296,710.00 as customs duties had already attached to the vessel and the non-renewal of the re-export
bond made this liability due and demandable. The subsequent transfer of ownership of the vessel from Glory Shipping
Lines to the respondent did not extinguish this liability. (Brion, J., Secretary of Finance vs. Oro Maura Shipping Lines, GR
No. 156946, July 15, 2009).
32. What is liquidation under the TCCP?

Liquidation is the final computation and ascertainment by the Collector of the duties due on imported merchandise,
based on official reports as to the quantity, character, and value thereof, and the Collectors own finding as to the
applicable rate of duty.
Assessments inform taxpayers of their tax liabilities. Under the TCCP, the assessment is in the form of a liquidation made
on the face of the import entry return and approved by the Collector of Customs. 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.
A liquidation is considered to have been made when the entry is officially stamped "liquidated." (Pilipinas Shell
Petroleum Corporation vs. Republic, GR No. 161953 dated March 6, 2008)
A liquidation is the final computation and ascertainment by the collector of the duties on imported merchandise, based
on official reports as to the quantity, character, and value thereof, and the collectors own finding as to the applicable
rate of duty; it is akin to an assessment of internal revenue taxes under the National Internal Revenue Code where the
tax liability of the taxpayer is definitely determined. (Pilipinas Shell Petroleum Corporation vs. Commissioner of Customs,
G.R. No. 176380 dated June 18, 2009)

33. When can there be a tentative liquidation under the TCCP?

If to determine the exact amount due under the law in whole or in part some future action is required, the liquidation
shall be deemed to be tentative as to the item or items affected and shall to that extent be subject to future and final
readjustment and settlement within six (6) months from date of Tentative liquidation. The entry in such case shall be
stamped "Tentative liquidation". (Sec. 1602 of the TCCP)
34. When does liquidation become final? (similar to the prescriptive period under the NIRC)

When articles have been entered and passed free of duty or final adjustments of duties made, with subsequent delivery,
such entry and passage free of duty or settlements of duties will, after the expiration of three (3) years from the date of
the final payment of duties, in the absence of fraud or protest or compliance audit pursuant to the provisions of this
Code, be final and conclusive upon all parties, unless the liquidation of the import entry was merely tentative. (Sec. 1603
of the TCCP)
The liquidation of an import entry shall be deemed final and conclusive upon all parties after the expiration of three (3)
years from the date of final payment of the duties due, except where:
a) Fraud has been committed; or
b) A protest has been filed under the provision of Section 2308 of the TCCP; or
c) Where the import entry is selected for post audit within the three (3) year period required for record-keeping
provided that once started, the audit can be completed beyond said period; or
d) The liquidation of import entry was merely tentative. (CAO No. 4-2004 dated November 8, 2004)

37. What is the legal basis for a Post Entry Audit of importers even after release of the goods?
"Section 3515. Compliance Audit or Examination of Records. - The importers/customs brokers shall allow any customs
officer authorized by the Bureau of Customs to enter during office hours any premises or place where the records
referred to in the preceding section are kept to conduct audit examination, inspection, verification and/or investigation
of those records either in relation to specific transactions or to the adequacy and integrity of the manual or electronic
system or systems by which such records are created and stored. For this purpose, a duty authorized customs officer
shall be full and free access to all books, records, and documents necessary or relevant for the purpose of collecting the
proper duties and taxes.
In addition, the authorized customs officer may make copies of, or take extracts from any such documents. The records
or documents must, as soon as practicable after copies of such have been taken, be returned to the person in charge of
such documents.
A copy of any such document certified by or on behalf of the importer/broker is admissible in evidence in all courts as if
it were the original.
An authorized customs officer is not entitled to enter any premises under this Section unless, before so doing, the officer
produces to the person occupying or apparently in charge of the premises written evidence of the fact that he or she is
an authorized officer. The person occupying or apparently in charge of the premises entered by an officer shall provide
the officer with all reasonable facilities and assistance for the effective exercise of powers under this Section.
Unless otherwise provided herein or in other provisions of law, the Bureau of Customs may, in case of disobedience,
invoke the aid of the proper regional trial court within whose jurisdiction the matter falls. The court may punish
contumacy or refusal as contempt. In addition, the fact that the importer/broker denies the authorized customs officer
full and free access to importation records during the conduct of a post-entry audit shall create a presumption of
inaccuracy in the transaction value declared for their imported goods and constitute grounds for the Bureau of Customs
to conduct a re-assessment of such goods.
This is without prejudice to the criminal sanctions imposed by this Code and administrative sanctions that the Bureau of
Customs may impose against contumacious importers under existing laws and regulations including the authority to
hold delivery or release of their imported articles."

38. How is the offense of Unlawful Importation or Smuggling committed?

Any person who shall fraudulently import or bring into the Philippines, or assist in so doing, any article, contrary to law,
or shall 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 of the TCCP)
39. What are the requisites of smuggling or illegal importation?

a) that the merchandise must have been fraudulently or knowingly imported contrary to law;

b) 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,

c) that the defendant must be shown to have knowledge that the merchandise had been illegally imported. If the
defendant, however, is shown to have had possession of the illegally imported merchandise, without satisfactory
explanation, such possession shall be deemed sufficient to authorize conviction. (Rieta vs. People, GR No. 147817 dated
August 12, 2004)

40. What is the legal effect of possession of smuggled goods?

When, upon trial for a violation of Sec. 3601 of the TCCP, the defendant is shown to have or to have had possession of
the article in question, such possession shall be deemed sufficient evidence to authorize conviction, unless the
defendant shall explain the possession to the satisfaction of the court. (Sec. 3601 of the TCCP)

41. What is the effect of payment of the tax due in Smuggling Cases?

Payment of the tax due after apprehension shall not constitute a valid defense in any prosecution under Sec. 3601 of the
TCCP. (Sec. 3601 of the TCCP)

46. Which commodities are allowed exemption from payment of import duties subject to certain conditions?
The following articles shall be exempt from the payment of import duties upon compliance with the formalities
prescribed in, or with, the regulations which shall be promulgated by the Commissioner of Customs with the approval
of the Secretary of Finance; Provided, That any article sold, bartered, hired or used for purposes other than that they
were intended for without prior payment of the duty, tax or other charges which would have been due and payable at
the time of entry if the article had been entered without the benefit of this section, shall be subject to forfeiture and
the importation shall constitute a fraudulent practice against customs revenue punishable under Section Thirty-six
hundred and two, as amended of the TCCP: Provided, further, That a sale pursuant to a judicial order or in liquidation of
the estate of a deceased person shall be subject to the preceding proviso, without prejudice to the payment of duties,
taxes and other charges: Provided, finally, That the President may upon recommendation of the Secretary of Finance,
suspend, disallow or completely withdraw, in whole or in part, any of the conditionally-free importation under this
section:
a) Aquatic products (e.g., fishes, crustaceans, mollusks, marine animals, seaweeds, fish oil, roe), caught or gathered by
fishing vessels of Philippine registry: Provided, That they are imported in such vessels or in crafts attached thereto:
And provided, further, That they have not been landed in any foreign territory or, if so landed, they have been
landed solely for transshipment without having been advanced in condition;

b) Equipment for use in the salvage of vessels or aircrafts, not available locally, upon identification and the giving of a
bond in an amount equal to one and one-half times the ascertained duties, taxes and other charges thereon,
conditioned for the exportation thereof or payment of the corresponding duties, taxes and other charges within six
(6) months from the date of acceptance of the import entry: Provided, That the Collector of Customs may extend
the time for exportation or payment of duties, taxes and other charges for a term not exceeding six (6) months
from the expiration of the original period;

c) Cost of repairs, excluding the value of the article used, made in foreign countries upon vessels or aircraft documented,
registered or licensed in the Philippines, upon proof satisfactory to the Collector of Customs: (1) that adequate
facilities for such repairs are not afforded in the Philippines, or (2) that such vessels or aircrafts, while in the
regular course of her voyage or flight was compelled by stress of weather or other casualty to put into a foreign
port to make such repairs in order to secure the safety, seaworthiness or airworthiness of the vessel or aircraft to
enable her to reach her port of destination;

d) Articles brought into the Philippines for repair, processing or reconditioning to be re-exported upon completion of the
repair, processing or reconditioning: Provided, That the Collector of Customs shall require the giving of a bond in an
amount equal to one and one-half times the ascertained duties, taxes and other charges thereon, conditioned for
the exportation thereof or payment of the corresponding duties, taxes and other charges within six (6) months
from the date of acceptance of the import entry;

e) Medals, badges, cups and other small articles bestowed as trophies or prizes, or those
received or accepted as honorary distinction;

f) Personal and household effects belonging to residents of the Philippines returning from abroad including jewelry,
precious stones and other articles of luxury which were formally declared and listed before departure and
identified under oath before the Collector of Customs when exported from the Philippines by such returning
 residents upon their departure therefrom or during their stay abroad; personal and household effects including
wearing apparel, articles of personal adornment (except luxury items), toilet articles, instruments related to one's
profession and analogous personal or household effects, excluding vehicles, watercraft, aircraft and animals
purchased in foreign countries by residents of the Philippines which were necessary, appropriate and normally used
for their comfort and convenience during their stay abroad, accompanying them on their return, or arriving within
a reasonable time which, barring unforeseen and fortuitous events, in no case shall exceed sixty (60) days after the
owner's return: Provided, That the personal and households effects shall neither be in commercial quantities nor
intended for barter, sale or hire and that the total dutiable value of which shall not exceed Ten Thousand Pesos
(P10,000.00): Provided, further, That the returning resident has not previously availed of the privilege under this
section within three hundred sixty five (365) days prior to his arrival: Provided, finally, That a fifty percent (50%) ad
valorem duty across the board shall be levied and collected on the personal and household effects (except luxury
items) in excess of Ten Thousand Pesos (P10,000.00);

The phrase "returning residents" shall refer to nationals who have stayed in a foreign country for a period of at least
six (6) months.

(f-1) In addition to the privilege granted under the immediately preceding paragraph, Returning overseas contract
workers shall have the privilege to bring in, duty and tax free, used home appliances, limited to one of every kind
once in a given calendar year accompanying them on their return, or arriving within a reasonable time which, barring
unforeseen and fortuitous events, in no case shall exceed sixty (60) days after the owner's return upon presentation
of their original passport at the Port of Entry: Provided, That any excess of Ten Thousand Pesos (P10,000.00) for
personal and household effects and/or of the number of duty and tax-free appliances as provided for under this
section, shall be subject to the corresponding duties and taxes provided under this Code.
Overseas Contract Workers shall be understood to mean: holders of valid passports duly issued by the Department of
Foreign Affairs and certified by the Department of Labor and Employment/Philippine Overseas Employment Agency
for overseas employment purposes. It covers all nationals working in a foreign country under employment contracts,
including Middle East Contract Workers, entertainers, domestic helpers, regardless of their employment status in
the foreign country.
g) Wearing apparel, articles of personal adornment, toilet articles, portable tools and instruments, theatrical costumes
and similar effects accompanying travelers, or tourists or arriving within a reasonable time before and after their
arrival in the Philippines, which are necessary and appropriate for the wear and use of such persons according to the
nature of the journey, their comfort and convenience: Provided, That this exemption shall not apply to articles
intended for other persons or for barter, sale or hire: Provided, further, That the Collector of Customs may, in his
discretion, require either a written commitment or a bond in an amount equal to one and one-half times the
ascertained duties, taxes and other charges conditioned for the exportation thereof or payment of the
corresponding duties, taxes and other charges within three (3) months from the date of acceptance of the import
entry: And Provided finally, That the Collector of Customs may extend the time for exportation or payment of
duties, taxes and other charges for a term not exceeding three (3) months from the expiration of the original period;

(g-1) Personal and household effects and vehicles belonging to foreign consultants and experts hired by, and/or
rendering service to, the government, and their staff or personnel and families, accompanying them or arriving
within a reasonable time before or after their arrival in the Philippines, in quantities and of the kind necessary and
suitable to the profession, rank or position of the person importing them, for their own use and not for barter, sale
or hire provided that, the Collector of Customs may in his discretion require either a written commitment or a bond
in an amount equal to one and one-half times the ascertained duties, taxes and other charges upon the articles
classified under this subsection; conditioned for the exportation thereof or payment of the corresponding duties,
taxes and other charges within six (6) months after the expiration of their term or contract; And Provided, finally,
That the Collector of Customs may extend the time for exportation or payment of duties, taxes and other charges
for term not exceeding six (6) months from the expiration of the original period;

h) Professional instruments and implements, tools of trade, occupation or employment, wearing apparel, domestic
animals, and personal and household effects belonging to persons coming to settle in the Philippines or Filipinos
and/or their families and descendants who are now residents or citizens of other countries, such parties hereinafter
 referred to as Overseas Filipinos, in quantities and of the class suitable to the profession, rank or position of the
persons importing them, for their own use and not for barter or sale, accompanying such persons, or arriving within
a reasonable time, in the discretion of the Collector of Customs, before or after the arrival of their owners, which
shall not be later than February 28, 1979 upon the production of evidence satisfactory to the Collector of Customs
that such persons are actually coming to settle in the Philippines, that change of residence was bona fide and that
the privilege of free entry was never granted to them before or that such person qualifies under the provisions of
Letters of Instructions 105, 163 and 210, and that the articles are brought from their former place of abode, shall be
exempt from the payment of customs duties and taxes: Provided, That vehicles, vessels, aircrafts, machineries and
other similar articles for use in manufacture, shall not be classified hereunder;

i) Articles used exclusively for public entertainment, and for display in public expositions, or for exhibition or competition
for prizes, and devices for projecting pictures and parts and appurtenances thereof, upon identification, examination,
and appraisal and the giving of a bond in an amount equal to one and one-half times the ascertained duties, taxes
and other charges thereon, conditioned for exportation thereof or payment of the corresponding duties, taxes and
other charges within six (6) months from the date of acceptance of the import entry; Provided, That the Collector of
Customs may extend the time for exportation or payment of duties, taxes and other charges for a term not
exceeding six (6) months from the expiration of the original period; and technical and scientific films when imported
by technical, cultural and scientific institutions, and not to be exhibited for profit: Provided, further, That if any of
the said films is exhibited for profit, the proceeds therefrom shall be subject to confiscation, in addition to the
penalty provided under Section Thirty-six hundred and ten as amended, of the TCCP;

j) Articles brought by foreign film producers directly and exclusively used for making or recording motion picture films on
location in the Philippines, upon their identification, examination and appraisal and the giving of a bond in an
amount equal to one and one-half times the ascertained duties, taxes and other charges thereon, conditioned for
exportation thereof or payment of the corresponding duties, taxes and other charges within six (6) months from the
date of acceptance of the import entry, unless extended by the Collector of Customs for another six (6) months;
photographic and cinematographic films, undeveloped, exposed outside the Philippines by resident Filipino citizens or
by producing companies of Philippine registry where the principal actors and artists employed for the production are
Filipinos, upon affidavit by the importer and identification that such exposed films are the same films previously
exported from the Philippines. As used in this paragraph, the terms "actors" and "artists" include the persons
operating the photographic cameras or other photographic and sound recording apparatus by which the film is
made;

k) Importations for the official use of foreign embassies, legations, and other agencies of foreign governments: Provided,
That those foreign countries accord like privileges to corresponding agencies of the Philippines;

Articles imported for the personal or family use of the members and attaches of foreign embassies, legations, consular
officers and other representatives of foreign governments: Provided, That such privilege shall be accorded under
special agreements between the Philippines and the countries which they represent: And Provided, further, That the
privilege may be granted only upon specific instructions of the Secretary of Finance in each instance which will be
issued only upon request of the Department of Foreign Affairs;

Note: All imported articles, except articles considered importations for the official use of foreign embassies, legations,
and other agencies of foreign governments (subject to reciprocity) shall be subject to a formal or informal entry.
(Sec. 1302 of the TCCP)

l) Imported articles donated to, or for the account of, any duly registered relief organization, not operated for profit, for
free distribution among the needy, upon certification by the Department of Social Welfare and Development or
the Department of Education, as the case may be;

m) Containers, holders and other similar receptacles of any material including kraft paper bags for locally manufactured
cement for export, including corrugated boxes for bananas, mangoes, pineapples and other fresh fruits for export,
except other containers made of paper, paperboard and textile fabrics, which are of such character as to be
 readily identifiable and/or reusable for shipment or transportation of goods shall be delivered to the importer
thereof upon identification, examination and appraisal and the giving of a bond in an amount equal to one and one-
half times the ascertained duties, taxes and other charges within six (6) months from the date of acceptance of the
import entry;

n) Supplies which are necessary for the reasonable requirements of the vessel or aircraft in her voyage or flight outside
the Philippines, including articles transferred from a bonded warehouse in any collection district to any vessel or
aircraft engaged in foreign trade, for use or consumption of the passengers or its crew on board such vessel or
aircrafts as sea or air stores; or articles purchased abroad for sale on board a vessel or aircraft as saloon stores or air
store supplies: Provided, That any surplus or excess of such vessel or aircraft supplies arriving from foreign ports or
airports shall be dutiable;

o) Articles and salvage from vessels recovered after a period of two (2) years from the date of filing the marine protest
or the time when the vessel was wrecked or abandoned, or parts of a foreign vessel or her equipment, wrecked,
abandoned in Philippine waters or elsewhere: Provided, That articles and salvage recovered within the said period of
two (2) years shall be dutiable;

p) Coffins or urns containing human remains, bones or ashes, used personal and household effects (not merchandise) of
the deceased person, except vehicles, the value of which does not exceed ten thousand pesos (P10,000.00), upon
identification as such;

q) Samples of the kind, in such quantity and of such dimension or construction as to render them unsalable or of no
appreciable commercial value; models not adapted for practical use; and samples of medicines, properly marked
"sample-sale punishable by law," for the purpose of introducing a new article in the Philippine market and
imported only once in a quantity sufficient for such purpose by a person duly registered and identified to be
engaged in that trade: Provided, That importations under this subsection shall be previously authorized by the
Secretary of Finance: Provided, however, That importation of sample medicine shall be previously authorized by the
Secretary of Health that such samples are new medicines not available in the Philippines: Provided, finally, That
samples not previously authorized and/or properly marked in accordance with this section shall be levied the
corresponding tariff duty.

Commercial samples, except those that are not readily and easily identifiable (e.g., precious and semi-precious
stones, cut or uncut, and jewelry set with precious stones), the value of any single importation of which does not
exceed ten thousand pesos (P10,000.00) upon the giving of a bond in an amount equal to twice the ascertained
duties, taxes and other charges thereon, conditioned for the exportation of said samples within six (6) months from
the date of the acceptance of the import entry or in default thereof, the payment of the corresponding duties, taxes
and other charges. If the value of any single consignment of such commercial samples exceeds ten thousand pesos
(P10,000.00), the importer thereof may select any portion of same not exceeding in value of ten thousand pesos
(P10,000.00) for entry under the provision of this subsection, and the excess of the consignment may be entered in
bond, or for consumption, as the importer may elect;
r) Animals (except race horses), and plants for scientific, experimental, propagation, botanical, breeding, zoological and
national defense purposes: Provided, That no live trees, shoots, plants, moss, and bulbs, tubers and seeds for
propagation purposes may be imported under this section, except by order of the Government or other duly
authorized institutions: Provided, further, That the free entry of animals for breeding purposes shall be restricted to
animals of recognized breed, duly registered in the book of record established for that breed, certified as such by
the Bureau of Animal Industry: Provided, furthermore, That certificate of such record, and pedigree of such animal
duly authenticated by the proper custodian of such book of record, shall be produced and submitted to the
Collector of Customs, together with affidavit of the owner or importer, that such animal is the animal described in
said certificate of record and pedigree: And Provided, finally, That the animals and plants are certified by the
National Economic and Development Authority as necessary for economic development;

s) Economic, technical, vocational, scientific, philosophical, historical, and cultural books and/or publications: Provided,
That those which may have already been imported but pending release by the Bureau of Customs at the effectivity
 of this Decree may still enjoy the privilege herein provided upon certification by the Department of Education,
Culture and Sports that such imported books and/or publications are for economic, technical, vocational, scientific,
philosophical, historical or cultural purposes or that the same are educational, scientific or cultural materials
covered by the International Agreement on Importation of Educational Scientific and Cultural Materials signed by
the President of the Philippines on August 2, 1952, or other agreements binding upon the Philippines.

Educational, scientific and cultural materials covered by international agreements or commitments binding upon
the Philippine Government so certified by the Department of Education, Culture and Sports.
Bibles, missals, prayer books, Koran, Ahadith and other religious books of similar nature and extracts therefrom,
hymnal and hymns for religious uses;
t) Philippine articles previously exported from the Philippines and returned without having been advanced in value or
improved in condition by any process of manufacture or other means, and upon which no drawback or bounty has
been allowed, including instruments and implements, tools of trade, machinery and equipment, used abroad by
Filipino citizens in the pursuit of their business, occupation or profession; and foreign articles previously imported
when returned after having been exported and loaned for use temporarily abroad solely for exhibition, testing and
experimentation, for scientific or educational purposes; and foreign containers previously imported which have
been used in packing exported Philippine articles and returned empty if imported by or for the account of the
person or institution who exported them from the Philippines and not for sale, barter or hire subject to
identification: Provided, That any Philippine article falling under this subsection upon which drawback or bounty
has been allowed shall, upon re-importation thereof, be subject to a duty under this subsection equal to the
amount of such drawback or bounty.

u) Aircraft, equipment and machinery, spare parts commissary and catering supplies, aviation gas, fuel and oil, whether
crude or refined, and such other articles or supplies imported by and for the use of scheduled airlines operating under
Congressional franchise: Provided, That such articles or supplies are not locally available in reasonable quantity,
quality and price and are necessary or incidental for the proper operation of the scheduled airline importing the
same;

v) Machineries, equipment, tools for production, plants to convert mineral ores into saleable form, spare parts, supplies,
materials, accessories, explosives, chemicals, and transportation and communication facilities imported by and for
the use of new mines and old mines which resume operations, when certified to as such by the Secretary of
Environment and Natural Resources upon the recommendation of the Director of Mines and Geosciences Bureau,
for a period ending five (5) years from the first date of actual commercial production of saleable mineral products:
Provided, That such articles are not locally available in reasonable quantity, quality and price and are necessary or
incidental in the proper operation of the mine; and aircrafts imported by agro-industrial companies to be used by
them in their agriculture and industrial operations or activities, spare parts and accessories thereof;

w) Spare parts of vessels or aircraft of foreign registry engaged in foreign trade when brought into the Philippine
exclusively as replacements or for the emergency repair thereof, upon proof satisfactory to the Collector of Customs
that such spare parts shall be utilized to secure the safety, seaworthiness or airworthiness of the vessel or aircraft,
to enable it to continue its voyage or flight;

x) Articles of easy identification exported from the Philippines for repair and subsequently reimported upon proof
satisfactory to the Collector of Customs that such articles are not capable of being repaired locally: Provided, That
the cost of the repairs made to any such article shall pay a rate of duty of thirty per cent ad valorem;

y) Trailer chassis when imported by shipping companies for their exclusive use in handling containerized cargo, upon
posting a bond in an amount equal to one and one-half times the ascertained duties, taxes and other charges due
thereon to cover a period of one year from the date of acceptance of the entry, which period for meritorious
reasons may be extended by the Commissioner of Customs from year to year, subject to the following conditions:

1. That they shall be properly identified and registered with the Land Transportation Office;
 2. That they shall be subject to customs supervision fee to be fixed by the Collector of Customs and subject to
the approval of the Commissioner of Customs;
3. That they shall be deposited in the Customs zone when not in use; and
4. That upon the expiration of the period prescribed above, duties and taxes shall be paid, unless otherwise re-
exported.

51. What are the methods of determining the dutiable value of an imported article?

a) Method 1 Transaction Value;

b) Method 2 Transaction Value of Identical Goods;
c) Method 3 Transaction Value of Similar Goods;
d) Method 4 Deductive Value;
e) Method 5 Computed Value; and,
f) Method 6 Fall Back Value.

52. How are the methods applied?

The principal method used is Method 1 or the transaction value. For cases in which there is no transaction value,
or where the transaction value is not acceptable as the customs value because the price has been distorted as a
result of certain conditions, the WTO Valuation Agreement lays down five other methods of customs valuation,
to be applied in the prescribed hierarchical order.
The sequence of Methods 4 and 5 can be switched at the request of the importer (not, however, at the
discretion of the customs officer) except when the Commissioner of Customs finds difficulty in determining the
dutiable value of the imported article under Method 5. (WTO)
53. How is Method 1 Transaction Value determined?

The price actually paid or payable is the total payment made or to be made by the buyer to or for the benefit of the
seller for the imported goods, and includes all payments made as a condition of sale of the imported goods by the buyer
to the seller, or by the buyer to a third party to satisfy an obligation of the seller.
It is the price actually paid or payable of the goods when sold for export to the Philippines adjusted by adding the
following value components not included in the price actually paid or payable:
a) Selling Commissions and Brokerage;
b) Assists;
c) Royalty and license fees;
d) Packing and Container Costs;
e) Proceeds of subsequent resale;
f) Insurance; and,
g) Freight.

The following adjustments are excluded:

a) Charges for construction, erection, assembly, maintenance, technical assistance, undertaken after importation;
b) Cost of transport after importation;
c) Philippine duties and taxes; and,
d) Permissible deductions, e.g., trade discounts. (WTO and RA No. 9135)

54. What are the limitations on the use of Method 1 Transaction Value?

The use of the Method 1 Transaction Value is acceptable if the following conditions are present:
a) There must be an evidence of sale for export to the Philippines;
b) No restriction as to disposition or use of the goods by the buyer;
c) Sale of goods must not be subject to conditions or considerations;
d) No part of the proceeds of subsequent resale, disposition, or use of the goods by the buyer will accrue to the seller;
and,
e) Prices of goods must not be influenced by relationship between the buyer and the seller. (WTO and RA No. 9135)

61. When may an Anti-Dumping Duty be imposed?

Anti-dumping duty refers to a special duty imposed on the importation of a product, commodity or article of commerce
into the Philippines at less than its normal value when destined for domestic consumption in the exporting country,
which is the difference between the export price and the normal value of such product, commodity or article.
Whenever any product, commodity or article of commerce imported into the Philippines at an export price less than its
normal value in the ordinary course of trade for the like product, commodity or article destined for consumption in the
exporting country is causing or is threatening to cause material injury to a domestic industry, or materially retarding the
establishment of a domestic industry producing the like product. (Sec. 301 of the TCCP)

63. When may a Countervailing Duty be imposed?

Whenever any product, commodity or article of commerce is granted directly or indirectly by the government in the
country or origin or exportation, any kind or form of specific subsidy upon the production, manufacture or exportation
of such product, commodity or article, and the importation of such subsidized product, commodity or article has caused
or threatens to cause material injury to a domestic industry or has materially retarded the growth or prevents the
establishment of a domestic industry as determined by the Tariff Commission. (Sec. 302 of the TCCP)

65. What is a Marking Duty?

Marking duty refers to a duty on ad valorem basis imposed for improperly marked articles. The law requires that foreign
importations must be marked in any official language of the Philippines the name of the country of origin of the article.
(Nague and UP Law Center)

66. What is the rationale for the imposition of a Marking Duty?

In order to protect consumers from the deceptive practice of passing of imported articles, as coming from a particular
country other than its actual country of origin. (Customs Memorandum Order 121-88 dated October 13, 1988)

67. How much Marking Duty may be imposed?

The Commissioner of Customs may impose a Marking Duty not to exceed 5% ad valorem of the articles subject to
marking. (Sec. 303 of the TCCP)

68. What is a Discriminatory or Retaliatory Duty?

This is a duty imposed on imported goods whenever it is found as a fact that the country of origin discriminates against
the commerce of the Philippines in such a manner as to place the commerce of the Philippines at a disadvantage
compared with the commerce of any foreign country. (Nague and UP Law Center)

69. When may a Safeguard Duty be imposed?

The Secretary of the Department of Trade and Industry in the case of non-agricultural products or the Secretary of the
Department of Agriculture in the case of agricultural products shall apply a general safeguard measure upon a positive
final determination of the Tariff Commission that a product is being imported in to the country in increased quantities,
whether absolute or relative to the domestic production, as to be a substantial cause of serious injury or threat thereof
to the domestic industry; however in the case of non-agricultural products; the Secretary shall first establish that the
application of such safeguard measure will be in the public interest. (Republic Act No. 8800)
70. May the DTI Secretary impose general safeguard measures in the absence of a positive final determination by the
Tariff Commission?

No, the plain meaning of Section 5 of Republic Act No. 8800 shows that it is the Tariff Commission that has the power to
make a "positive final determination." This power lodged in the Tariff Commission, must be distinguished from the
power to impose the general safeguard measure which is properly vested on the DTI Secretary.
All in all, there are two condition precedents that must be satisfied before the DTI Secretary may impose a general
safeguard measure on grey Portland cement. First, there must be a positive final determination by the Tariff Commission
that a product is being imported into the country in increased quantities (whether absolute or relative to domestic
production), as to be a substantial cause of serious injury or threat to the domestic industry. Second, in the case of non-
agricultural products the Secretary must establish that the application of such safeguard measures is in the public
interest. (Southern Cross Cement Corporation vs. Philippine Cement Manufacturers Corporation, GR No. 158540 dated
July 8, 2004)

71. Who are the persons having police authority under the TCCP?

For the enforcement of the customs and tariff laws, the following persons are authorized to effect searches, seizures
and arrests comformably with the provisions of said laws:
a) Officials of the Bureau of Customs, district collectors, deputy collectors, police officers, agents, inspectors and guards
of the Bureau of Customs;
b) Officers of the Philippine Navy and other members of the Armed Forces of the Philippines and national law
enforcement agencies when authorized by the Commissioner;
c) Official of the Bureau of Internal Revenue on all cases falling within the regular performance of their duties, when
then the payment of internal revenue taxes are involved; and,
d) Officers generally empowered by law to effect arrests and execute processes of courts, when acting under direction
of the Collector. (Sec. 2203 of the TCCP)

72. Raul Boac (Boac) is a member of the Philippine National Police - Criminal Investigation and Detection Group
(PNP-CIDG). He and his team flagged down three (3) container vans with alleged contraband in violation of Customs
Laws. Boac and his members did not have any written authority from the Commissioner of Customs or District
Collector. Is Boac guilty of violating Sec. 2203 (d) of the TCCP?

No, the act of flagging down the vehicles is not among those proscribed by Sec. 2203 of the Tariff and Customs Code.
Mere flagging down of the container vans is not punishable under the said law.
In this case, the prosecution failed to show that Boac and his team members committed the acts prohibited by Sec. 2203
of the Tariff and Customs Code. There is no such evidence, testimonial or otherwise, that identifies Boac as responsible
for the alleged illegal search. Hence, acquittal is in order.
The jurisdiction of the Commissioner of Customs is clearly with regard to customs duties. Should the PNP suspect
anything, it should coordinate with the BOC and obtain the written authority from the Collector of Customs in order to
conduct searches, seizures, or arrests. Coordination is emphasized in the laws. While it is an admitted fact that there
was no such coordination initiated by the PNP-CIDG in this instance, nevertheless, Boac and his team members cannot
be convicted under the Tariff and Customs Code since there is no evidence that they did actually search the container
vans. (Boac vs. People, GR No. 180597 dated November 7, 2008)

73. May a dwelling house be searched without a warrant pursuant to a customs law violation?

No, a dwelling house may be entered and searched only upon warrant issued by a judge or justice of the peace, upon
sworn application showing probable case and particularly describing the place to be searched and person or thing to be
seized.
For the more effective discharge of his official duties, any person exercising the powers herein conferred, may at
anytime enter, pass through, or search any land or enclosure or any warehouse, store or other building, not being a
dwelling house.
A warehouse, store or other building or enclosure used for the keeping of storage of articles does not become a dwelling
house within the meaning hereof merely by reason of the fact that a person employed as watchman lives in the place,
nor will the fact that his family stays there with him alter the case. (Secs. 2208 and 2209 of the TCCP)

75. What are some of the important doctrines laid down by the Supreme Court involving customs seizures and
forfeitures?

a) There is no question that Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of
seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with
these proceedings
The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and
determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are
precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or
mandamus.
The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the policy of
placing no unnecessary hindrance on the government's drive, not only to prevent smuggling and other frauds upon
Customs, but more importantly, to render effective and efficient the collection of import and export duties due the
State, which enables the government to carry out the functions it has been instituted to perform. (Jao vs. CA, GR
No. 104604 dated October 6, 1995)

b) Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, such act does not deprive the
Bureau of Customs of jurisdiction thereon. (R.V. Marzan Freight, Inc. vs. CA, GR No. 128064 dated March 4, 2004)

c) The decision of the Collector of Customs in seizure proceedings, concerns the res rather than the persona. The
proceeding is a probe on contraband or illegally imported goods. These merchandise violated the revenue law of
the country, and as such, have been prevented from being assimilated in lawful commerce until corresponding
duties are paid thereon and the penalties imposed and satisfied either in the form of fine or of forfeiture in favor of
the government who will dispose of them in accordance with law. The importer or possessor is treated differently.
The fact that the administrative penalty be falls on him is an inconsequential incidence to criminal liability. By the
same token, the probable guilt cannot be negated simply because he was not held administratively liable. The
Collector's final declaration that the articles are not subject to forfeiture does not detract his findings that untaxed
goods were transported in respondents' car and seized from their possession by agents of the law. Whether
criminal liability lurks on the strength of the provision of the Tariff and Customs Code adduced in the information
can only be determined in a separate criminal action. Respondents' exoneration in the administrative cases cannot
deprive the State of its right to prosecute. But under our penal laws, criminal responsibility, if any, must be proven
not by preponderance of evidence but by proof beyond reasonable doubt.
Considering, therefore, that proceedings for the forfeiture of goods illegally imported are not criminal in nature
since they do not result in the conviction of the wrongdoer nor in the imposition upon him of a penalty, proof
beyond reasonable doubt is not required in order to justify the forfeiture of the goods. In this case, the degree of
proof required is merely substantial evidence which means such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion. (Feeder International Line, Pte., Ltd. vs. CA, GR No. 94262 dated May
31, 1991)
d) The acquittal in a criminal proceeding is not a bar to a forfeiture proceeding. Thus, it has been held that since the
forfeiture proceedings is one in rem under which the offense is attached primarily to the thing rather than the
offender, the forfeiture proceedings stands independent of, and wholly unaffected by, any criminal proceeding in
personam and is not barred by a conviction of the individual under a criminal charge. (Acting Commissioner of
Customs vs. CTA, GR No. 62636 dated April 27, 1984)

e) Forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is
in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination
of the legality of their importation. In this proceeding, it is in legal contemplation the property itself which commits
 the violation and is treated as the offender, without reference whatsoever to the character or conduct of the
owner. The issue here is limited to whether the imported goods should be forfeited and disposed of in accordance
with law for violation of the Tariff and Customs Code. Hence, the ruling of the District Collector in the forfeiture
case, insofar as the aspect of fraud is concerned, is not conclusive; nor does it preclude the importer from invoking
absence of fraud in the redemption proceedings. (Transglobe International, Inc. vs. CA, GR No. 126634 dated
January 25, 1999)

76. What are the procedures involving seizure/forfeiture cases under the TCCP?

1. Issuance and Service of Warrant Sec. 2301 of the TCCP provides that Upon making any seizure, the Collector shall
issue a warrant for the detention of the property.
a. Determination of Probable Cause that the articles were imported or attempted to be exported contrary to
the TCCP and other related laws;
b. Issuance of Warrant of Seizure and Detention (WSD); and,
c. Service of WSD to the person who has temporary custody of the imported articles.
2. Seizure and Turnover of the RES; - Sec. 2301 of the TCCP owner/importer to secure immediate release of his seized
properties; Upon showing of a reasonable ground for legitimate use, by posting a sufficient cash bond, subject to
the following conditions:
i. Cash bond not less than the appraised value of the article plus fine, expenses, and costs that may be
adjudged in the case;
ii. No prima facie evidence of fraud attendant to the importation;
iii. Importation of article is not prohibited by law; and,
iv. Release under cash bond (Under RA 9135, surety bond and other sufficient instrument is permitted) - has
been approved by the Commissioner. (Customs Administrative Order No. 9-93 dated November 16, 1993)
3. Description, Appraisal and Classification of Seized Articles Section 2305 of the TCCP provides that the Collector shall
also cause a list and particular description and/or classification of the property seized xxx.;

4. Notification of the Seizure

a. Section 2303 of the TCCP. Notification to Owner or Importer. The Collector shall give the owner or
importer of the property or his agent a written notice of the seizure and shall give him an opportunity to be
heard in reference to the delinquency which was the occasion of such seizure.
b. Section 2304 of the TCCP. Notification to Unknown Owner. Notice to an unknown owner shall be
effected by posting a notice for fifteen (15) days in the public corridor of the customhouse of the district in
which the seizure was made, and, in the discretion of the Commissioner, by publication in a newspaper or
by such other means as he shall consider desirable.
c. Section 2306 of the TCCP. Proceedings in Case of Property Belonging to Unknown Parties. If, within fifteen
days after the notification prescribed in Sec. 2304 of the TCCP, no owner or agent can be found or
appears before the Collector, the latter shall declare the property forfeited to the government to be sold at
auction in accordance with law.
5. Hearing
a. Section 2307 of the TCCP. Settlement of Seizure Case by payment of fine or redemption of forfeited property:
i. Case is pending before the Collector:
1. Subject to approval of the Commissioner;
2. There is no fraud;
 3. Importation is not absolutely prohibited or release is not contrary to law;
4. the district collector may while the case is still pending, accept the settlement of any seizure case
provided that the owner, importer, exporter, or consignee or his agent shall offer to pay to the collector a fine imposed
by him upon the property, or in case of forfeiture, the owner, exporter, importer or consignee or his agent shall offer to
pay for the domestic market value of the seized article. or,
ii. if on appeal meaning the case is now with the Commissioner:
1. Same matter as i - The Commissioner may accept the settlement of any seizure case on appeal in
the same manner;
2. Upon payment of the fine or payment of the domestic market value the property shall be forthwith
released and all liability (except criminal liability) which may or might attach to the property by virtue of the offense
which was the occasion of the seizure and all liability which might have been incurred under any bond given by the
owner or agent in respect to such property shall thereupon be deemed to be discharged.

b. Instances wherein settlement or redemption is not allowed:

1. Forfeiture has become final and executory;
2. Importation is attended with fraud;
3. The importation is absolutely prohibited; and,
4. Where the release of the property would be contrary to law; (Nague)

Decision of Collector Adverse to the Claimant Decision of Collector Adverse to the Government.

Collector declares forfeiture of articles or
fixes a fine or take such other action as may be
proper (Sec. 2312)
Published Value of imported article is less than
P5M automatic review by the Commissioner of
Customs (Commissioner) (Sec. 2313);
Published Value of imported article is P5M or
more automatic review by the Secretary Of
Finance (Secretary) (Sec. 2313);
Records of the case are elevated within five (5)
days from the promulgation of the decision of the
Collector.

Published Value of imported article is less than

Claimant appeals to the Commissioner within 15
days from receipt of notice of decision;
Appeal by filing a Notice of Appeal with the
Collector copy furnished to the Commissioner.
Collector shall transmit all records of the
proceedings to the Commissioner; (Sec. 2313)
P5M Commissioner decides:
Commissioner decides in favor of the
Government Claimant must file a Petition for
Review within 30 days from receipt of the Decision
of the Commissioner with the Court of Tax Appeals
(CTA) Division;
Commissioner rules in favor of the Claimant

Claimant appeals to the Commissioner and the
Commissioner decides:
Commissioner decides in favor of the Claimant
decision becomes Final and Executory and is not
subject to further appeal; (Sec. 2313)
Commissioner decides in favor of the
Government - Claimant must file a Petition for
Review within 30 days from receipt of the Decision
of the Commissioner with the CTA Division;
Published Value of imported article is P5M or
more Secretary decides:
Secretary rules in favor of the Government -
Claimant must file a Petition for Review within 30
days from receipt of the Decision of the Secretary
with the CTA Division. (Sec. 2315)
Secretary rules in favor of the Claimant
decision becomes Final and Executory and is not
subject to further appeal. (Sec. 2313)
Secretary does not rule within 30 days from
 receipt of records decision of the Collector or
Commissioner, as the case may be, becomes Final
and Executory and is not subject to further appeal.
(Sec. 2313)

79. When may a vehicle, vessel or aircraft be subject to forfeiture under the TCCP?

a) Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully in the importation or exportation of
articles or in conveying and/or transporting contraband or smuggled articles in commercial quantities into or from
any Philippine port or place. The mere carrying or holding on board of contraband or smuggled articles in
commercial quantities shall subject such vessel, vehicle, aircraft or any other craft to forfeiture;

Provided, That the vessel, or aircraft or any other craft is not used as duly authorized common carrier and as such a
carrier it is not chartered or leased;
b) Any vessel engaging in the coastwise trade which shall have on board any article of foreign growth, product or
manufacture in excess of the amount necessary for sea stores, without such article having been properly
entered or legally imported;
c) Any conveyance actually being used for the transport of articles subject to forfeiture under the tariff and customs
laws, with its equipage or trappings, and any vehicle similarly used, together with its equipage and
appurtenances including the beast, steam or other motive power drawing or propelling the same. The mere
conveyance of contraband or smuggled articles by such beast or vehicle shall be sufficient cause for the
outright seizure and confiscation of such beast or vehicle, but the forfeiture shall not be effected if it is
established that the owner of the means of conveyance used as aforesaid, is engaged as common carrier and
not chartered or leased, or his agent in charge thereof at the time has no knowledge of the unlawful act. (Sec.
2530 of the TCCP)
Moreover, in Sec. 2531 of the TCCP, the forfeiture of the vehicle, vessel, or aircraft shall not be effected if it is
established that the owner thereof or his agent in charge of the means of conveyance used as aforesaid has no
knowledge of or participation in the unlawful act: Provided, however, That a prima facie presumption shall exist
against the vessel, vehicle or aircraft under any of the following circumstances:
1. If the conveyance has been used for smuggling at least twice before;
2. If the owner is not in the business for which the conveyance is generally used; and,
3. If the owner is not financially in a position to own such conveyance.

Note also that the burden of proof in seizure and forfeiture cases is with the claimant. (Sec. 2535 of the TCCP.)
80. Mr. Jose D. Cruz is a driver of a taxi cab. While in the Manila International Airport, he was engaged by a passenger
who loaded three (3) boxes in his taxi cab. When they were about to depart, elements of the National Customs Police
stopped the cab and upon investigation, found that the three (3) boxes loaded therein contained articles smuggled
out of the Manila International Airport. As a consequence, the apprehending officers recommended that the three (3)
boxes, its contents and the taxi cab be seized and made subject of a forfeiture proceeding under Section 2530 (k) of
the Tariff and Customs Code as amended. Is the recommendation correct? Why?

The recommendation to seize the taxi cab is not correct. Sec. 2530 k provides that the forfeiture shall not be effected
if it is established that the owner of the means of conveyance is engaged as a common carrier or his agent at the time
has no knowledge of the unlawful act. The taxi cab is a common carrier, and we presume that the driver had no
knowledge of the unlawful act. (1979 CBLE Question Nague citing M. Tejam)

81. Will lack of knowledge by the owner that a vessel is being used illegally in the importation of goods absolve the
vessel from forfeiture?

No, pursuant to the Section 2530 of the TCCP, the vessel is clearly subject to forfeiture in favor
of the Government. Forfeiture proceedings are in the nature of proceedings in rem (Vierneza vs. Commissioner of
Customs, 24 SCRA 394) and are directed against the res. The fact that private respondent has allegedly no actual
knowledge that M/B "Maria Victoria-P" was used illegally does not render the vessel immune from forfeiture. This is so
because the forfeiture proceedings in this case was instituted against the vessel itself. Private respondent's defense that
he has no actual knowledge that the vessel was used illegally is personal to him but cannot absolve the vessel from
liability of forfeiture.
Moreover, Section 2530 of the TCCP prescribes in an unequivocal term the imposition of the penalty of forfeiture in
cases of unlawful importation of foreign articles regardless of whether such importation occurred with or without the
knowledge of the owner of the vessel. (Commissioner of Customs vs. CTA, GR No. L-31733 dated September 20, 1985).

82. When are Protest Proceedings applicable in customs cases?

Customs protest may be availed in the following instances:

a) Findings by examiners/appraisers of the erroneous value and classification of the imported articles; and,
b) Unfavorable decision of the Value and Classification Review Committee (VCRC). (Nague)

Note, however, that the unfavorable decision of the VCRC may also be the subject of the following remedies:
a) Appeal to the Commissioner within fifteen (15) days from receipt of the adverse VCRC decision subject to the
condition that the importer shall undergo voluntary Post Entry Audit; (CMO 37-2001 dated December 7, 2001)
or,
b) Appeal the adverse VCRC decision to the Central Valuation Classification Review and Ruling Committee (CVCRRC).
The decision of the CVCRRC is subject to one (1) motion for reconsideration which should be filed within five (5)
days from receipt of the decision. When no motion for reconsideration is filed or when the same is denied, the
CVCRRC resolution shall become final at the Assessment level. However, the aggrieved importer may pay under
formal protest pursuant to Section 2308 of the TCCP, as amended. (Please see procedure under No. 85 below)
(CMO 7-2006 dated March 15, 2006).

83. What is the nature of a tax protest case under the TCCP?

A tax protest case, under the TCCP, involves a protest of the liquidation of import entries. A liquidation is the final
computation and ascertainment by the collector of the duties on imported merchandise, based on official reports as to
the quantity, character, and value thereof, and the collectors own finding as to the applicable rate of duty; it is akin to
an assessment of internal revenue taxes under the National Internal Revenue Code where the tax liability of the
taxpayer is definitely determined. (Pilipinas Shell Petroleum Corporation vs. Commissioner of Customs, G.R. No. 176380
dated June 18, 2009)

84. Pilipinas Shell (Shell) is engaged in the importation of petroleum products. It paid customs duties and taxes
through the use of Tax Credit Certificates (TCCs). Subsequently, the One Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center (the Center) informed Shell that it was cancelling the said TCCs because they were found to be
fraudulently obtained. Accordingly, the Commissioner of Customs demanded payment of the unpaid tax. Shell
protested the cancellation of the TCCs and demand for payment through letters sent to the Commissioner of
Customs. Instead of acting on the letters, the Bureau of Customs filed a collection case with the Regional Trial Court.
Within 30 days from receipt of summons in the collection case, Shell filed a petition for review with the Court of Tax
Appeals.

a) Does the Court of Tax Appeals have jurisdiction over the case?
No, Section 7 of RA No. 1125, as amended, states:
Sec. 7. Jurisdiction. The CTA shall exercise:
(a) Exclusive appellate jurisdiction to review by appeal xxx;
xxx xxx xxx
4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money
charges, seizure, detention, or release or property affected, fines, forfeitures or other penalties in relation
thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs;
These decisions of the respondent involving customs duties specifically refer to his decisions on administrative tax
protest cases, as stated in Section 2402 of the Tariff and Customs Code of the Philippines (TCCP):
Section 2402. Review by Court of Tax Appeals. The party aggrieved by a ruling of the Commissioner in any
matter brought before him upon protest or by his action or ruling in any case of seizure may appeal to the Court
of Tax Appeals, in the manner and within the period prescribed by law and regulations.
Unless an appeal is made to the Court of Tax Appeals in the manner and within the period prescribed by laws and
regulations, the action or ruling of the Commissioner shall be final and conclusive.
A tax protest case, under the TCCP, involves a protest of the liquidation of import entries. A liquidation is the final
computation and ascertainment by the collector of the duties on imported merchandise, based on official reports as to
the quantity, character, and value thereof, and the collectors own finding as to the applicable rate of duty; it is akin to
an assessment of internal revenue taxes under the National Internal Revenue Code where the tax liability of the
taxpayer is definitely determined.

In the present case, the facts reveal that Shell received three sets of letters:
a. the Centers November 3 letter, signed by the Secretary of Finance, informing it of the cancellation of the TCCs;
b. the respondents November 19 letter requiring it to replace the amount equivalent to the amount of the cancelled
TCCs used by Shell; and,
c. the respondents collection letters issued through Atty. Valera, formally demanding the amount covered by the
cancelled TCCs.
None of these letters, however, can be considered as a liquidation or an assessment of Shells import tax liabilities
that can be the subject of an administrative tax protest proceeding before the respondent whose decision is
appealable to the CTA. Shells import tax liabilities had long been computed and ascertained in the original assessments,
and Shell paid these liabilities using the TCCs transferred to it as payment. It is even an error to consider the letters as a
"reassessment" because they refer to the same tax liabilities on the same importations covered by the original
assessments. The letters merely reissued the original assessments that were previously settled by Shell with the use of
the TCCs. However, on account of the cancellation of the TCCs, the tax liabilities of Shell under the original assessments
were considered unpaid; hence, the letters and the actions for collection. When Shell went to the CTA, the issues it
raised in its petition were all related to the fact and efficacy of the payments made, specifically the genuineness of the
TCCs; the absence of due process in the enforcement of the decision to cancel the TCCs; the facts surrounding the fraud
in originally securing the TCCs; and the application of estoppel. These are payment and collection issues, not tax
protest issues within the CTAs jurisdiction to rule upon.
We note in this regard that Shell never protested the original assessments of its tax liabilities and in fact settled them
using the TCCs. These original assessments, therefore, have become final, incontestable, and beyond any subsequent
protest proceeding, administrative or judicial, to rule upon.

b) Since the Court of Tax Appeals does not have jurisdiction over the case, what should have been the proper remedy
availed by Shell?

To be very precise, Shells petition before the CTA principally questioned the validity of the cancellation of the TCCs a
decision that was made not by the respondent, but by the Center. As the CTA has no jurisdiction over decisions of the
Center, Shells remedy against the cancellation should have been a certiorari petition before the regular courts, not a
tax protest case before the CTA. Records do not show that Shell ever availed of this remedy. Alternatively, as we held in
Shell v. Republic of the Philippines, the appropriate forum for Shell under the circumstances of this case should be at
the collection cases before the RTC where Shell can put up the fact of its payment as a defense.
Parenthetically, our conclusions are fully in step with what we held in Shell v. Republic that a case becomes ripe for filing
with the RTC as a collection matter after the finality of the respondents assessment. We hereby confirm that this
assessment has long been final, and this recognition of finality removes all perceived hindrances, based on this case, to
the continuation of the collection suits. In Dayrit v. Cruz, we declared on the matter of collection
that:
[A] suit for the collection of internal revenue taxes, where the assessment has already become final and executory, the
action to collect is akin to an action to enforce the judgment. No inquiry can be made therein as to the merits of the
original case or the justness of the judgment relied upon. (Brion, J., Pilipinas Shell Petroleum Corporation vs.
Commissioner of Customs, G.R. No. 176380 dated June 18, 2009)
85. What are the procedures involving protest cases under the TCCP?

1. Collector issues a ruling or decision / VCRC / CVCRRC issues decision;

2. Payment under Protest after final liquidation (Sec. 2308);
3. File a Protest with the Collector within 15 days from payment (Sec. 2308);
4. Failure to protest renders the action of the Collector final and conclusive (Sec. 2309);
5. Hearing within 15 days from receipt of the protest and the Collector a renders decision within 30 days after hearing
(Sec. 2312):
Decision of the Collector adverse to the Decision of the Collector adverse to the
importer/owner (Sec. 2308) Government Case is automatically reviewed by
the Commissioner (Sec. 2315)

Importer/owner appeals to the Commissioner Commissioner decides in favor of the

within 15 days from receipt of notice of decision;
Appeal is made by filing a Notice of Appeal with
the Collector copy furnished to the Commissioner.
Collector shall transmit all records of the
proceedings to the Commissioner; (Sec. 2313)
importer/owner Automatic Review to the
Secretary; (Sec. 2315)
Commissioner decides in favor of the
Government importer/owner must file a Petition
for Review within 30 days from receipt of the
decision of the Commissioner with the CTA
Division; (Sec. 2402)
Commissioner does not decide within 30 days
from receipt of the records decision of the
Collector becomes Final and Executory and is not
subject to further appeal.; (Sec. 2315)

Importer/owner appeals to the Commissioner and
the Commissioner decides:
Commissioner decides in favor of the
importer/owner decision is automatically
appealed to the Secretary. (Sec. 2315 and CAO 3-
2002 dated January 2, 2002) [See further
procedure in the next column]
Commissioner decides in favor of the
Government importer/owner must file a Petition
for Review within 30 days from receipt of the
decision of the Commissioner with the CTA
Division; (Secs. 2402 and 2315)
Automatic Review by the Secretary and the
Secretary decides:
Secretary decides in favor of the Government
importer/owner must file a Petition for Review
within 30 days from receipt of the decision of the
Secretary with the CTA Division;
Secretary decides in favor of the
importer/owner decision becomes Final and
Executory and is not subject to further appeal.
(Sec. 2315)
Secretary does not decide within 30 days
decision of the Commissioner becomes Final

86. What is the judicial procedure with respect to customs cases?

1. Appeal to the Court of Tax Appeals Division within 30 days from receipt of the decision via Petition for Review under
Rule 42 in the following cases:

a) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money
charges, seizure, detention or release of property affected, fines, forfeitures of other penalties in
 relation thereto, or other matters arising under the Customs Law or other laws administered by the
Bureau of Customs;

b) Decisions of the Secretary of Finance on customs cases elevated to him automatically for review from
decisions of the Commissioner of Customs adverse to the Government under Section 2315 of the Tariff
and Customs Code; and,

c) Decisions of the Secretary of Trade and Industry, in the case of non-agricultural product, commodity or article,
and the Secretary of Agriculture, in the case of agricultural product, commodity or article, involving
dumping and countervailing duties under Section 301 and 302, respectively, of the Tariff and Customs
Code, and safeguard measures under Republic Act No. 8800, where either party may appeal the
decision to impose or not to impose said duties;

2. Party aggrieved by the decision of the Court of Tax Appeals Division should file a motion for reconsideration or new
trial (mandatory) with the Court of Tax Appeals Division within 15 days from receipt of the decision.

3. From a denial of the motion for reconsideration or new trial, the Party aggrieved may appeal to the Court of Tax
Appeals En Banc via Petition for review under Rule 43 within 15 days from receipt of the said denial.

4. Party aggrieved by the decision of the Court of Tax Appeals En Banc may file a motion for reconsideration or new trial
(optional) within 15 days from receipt of the said decision.

5. Party aggrieved by the decision of the Court of Tax Appeals En Banc or denial of the motion for reconsideration or
new trial may file an appeal with the Supreme Court via Petition for Review on Certiorari under Rule 45 within 15 days
from receipt of said decision or denial.

87. What is the rationale for providing an automatic review involving the decision made by the Collector which is
adverse to the Government?
It is intended to protect the interest of the Government in the collection of taxes and customs duties in those seizure
and protest cases which, without the automatic review provided therein, neither the Commissioner of Customs nor the
Secretary of Finance would probably ever know about. Without the automatic review by the Commissioner of Customs
and the Secretary of Finance, a collector in any of our country's far-flung ports, would have absolute and unbridled
discretion to determine whether goods seized by him are locally produced, hence, not dutiable or of foreign origin, and
therefore subject to payment of customs duties and taxes. His decision, unless appealed by the aggrieved party (the
owner of the goods), would become final with 'the no one the wiser except himself and the owner of the goods. The
owner of the goods cannot be expected to appeal the collector's decision when it is favorable to him. A decision that is
favorable to the taxpayer would correspondingly be unfavorable to the Government, but who will appeal the collector's
decision in that case certainly not the collector.
Evidently, it was to cure this anomalous situation (which may have already defrauded our government of huge amounts
of uncollected taxes), that the provision for automatic review by the Commissioner of Customs and the Secretary of
Finance of unappealed seizure and protest cases was conceived to protect the government against corrupt and
conniving customs collectors. (Yaokasin vs. Commissioner of Customs, GR No. 84111 dated December 22, 1989)

88. What are the kinds of abandonment?

a) Express abandonment There is an express abandonment when the owner, importer or consignee signifies with the
Collector of Customs in writing his intention to abandon his importation in favor of the government; and,
b) Implied abandonment There is an implied abandonment when:
i. The importer, owner, consignee or interested party after due notice, fails to file an entry for the importation
within a non-extendible period of thirty (30) days from the date of the discharge of the last package from the vessel
or aircraft; and,
 ii. Having filed an entry for shipment, an interested party fails to claim his importation within a non-extendible
period of fifteen (15) days from the date of posting of the notice to claim such importation. (Sec. 1801 of the
TCCP)

89. What are the effects of abandonment?

a) Renunciation of all interest and property rights; and,

b) The abandoned article shall be ipso facto be deemed the property of the government and to be disposed off in
accordance with the TCCP.

However, abandonment shall not relieve an owner or importer from any criminal liability which may arise from any
violation of law committed in connection with the importation of the abandoned article. (Sec. 1802 of the TCCP)

90. What is the form of a claim for refund in involving customs duties?

All claims for refund of duties shall be made in writing, and forwarded to the Collector to whom such duties are paid,
who upon receipt of such claim shall verify the same by the records of his office, and if found to be correct and in
accordance with law, shall certify the same to the Commissioner with his recommendation together with all necessary
papers and documents. Upon receipt by the Commissioner of such certified claim he shall cause the same to be paid if
found correct. (Sec. 1708 of the TCCP)

91. Nestle imported several milk products and was assessed of higher customs duties. Nestle paid the customs duties
and seasonably filed a protest. The Companys protest was not acted upon for almost six (6) years. Within the 6 year
period under Article 1145 in relation to Article 2154 of the Civil Code (solutio indebiti), Nestle filed a claim for refund
with the Court of Tax Appeals.
Does Article 2154 and 1145 of the Civil Code apply to Nestles claim for refund?

The petitioner is mistaken in its contention that its claims for refund of allegedly overpaid customs duties are governed
by Article 2154 of the New Civil Code on quasi-contract, or the rule on solutio indebiti, which prescribes in six (6) years
pursuant to Article 1145 of the same Code.

Sections 2308 and 2309 of the Tariff and Customs Code provide that:
"Sec. 2308. Protest and Payment upon Protest in Civil Matter: When a ruling or decision of the collector is made
whereby liability for duties, taxes, fees, or other charges are determined, except the fixing of fines in seizures
cases, the party adversely affected may protest such ruling or decision by presenting to the Collector at the
time when payment of the amount claimed to be due the government is made, or within fifteen (15) days
thereafter, a written protest setting forth his objection to the ruling or decision in question, together with the
reasons therefor. No protest shall be considered unless payment of the amount due after final liquidation has
first been made and the corresponding docket fee, as provided for in Section 3301."
"Sec. 2309. Protest Exclusive Remedy in Protestable Case. In all cases subject to protest, the interested party
who desires to have the action of the collector reviewed, shall make a protest, otherwise, the action of the
collector shall be final and conclusive against him, x x x. "
"SEC. 2312. Decision or Action by the collector in Protest and Seizure Cases. When a protest in a proper form is
presented in a case where protest is required, the collector shall issue an order for hearing within fifteen (15)
days from receipt of the protest and hear the matter thus presented. Upon termination of the hearing, the
Collector shall render a decision within thirty (30) days, and if the protest is sustained, in whole or in part, he
shall make the appropriate order, the entry reliquidated necessary, xxx,"
In the light of the abovecited provisions of the Tariff and Customs Code, it appears that in all cases subject to protest,
the claim for refund of customs duties may be foreclosed only when the interested party claiming refund fails to file a
written protest before the Collector of Customs. This written protest which must set forth the claimant's objection to
the ruling or decision in question together with the reasons therefor must be made either at the time when payment of
the amount claimed to be due the government is made or within fifteen (15) days thereafter. In conjunction with this
right of the claimant is the duty of the Collector of Customs to hear and decide such protest in accordance and within
the period of time prescribed by the law.
Accordingly, once a written protest is seasonably filed with the Collector of Customs the failure or inaction of the latter
to promptly perform his mandated duty under the Tariff and Customs Code should not be allowed to prejudice the right
of the party adversely affected thereby. Technicalities and legalisms, however exalted, should not be misused by the
government to keep money not belonging to it, if any is proven, and thereby enrich itself at the expense of the tax
payers. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same
standard against itself in refunding excess payments, if any, of such taxes. Indeed the State must lead by its own
example of honor, dignity and uprightness.
Here, it is undisputed that the inaction of the Collector of Customs of Manila for nearly six (6) years on the protests
seasonably filed by the petitioner has caused the latter to immediately resort to the CTA. The petitioner did so on the
mistaken belief that its claims are governed by the rule on quasi-contract or solutio indebiti which prescribes in six (6)
years under Article 1145 of the New Civil Code.
This belief or contention of the petitioner is misplaced. In order for the rule on solutio indebiti to apply it is an
essential condition that petitioner must first show that its payment of the customs duties was in "excess of what was
required by the law at the time when the subject sixteen (16) importations of milk and milk products were made.
Unless shown otherwise, the disputable presumption of regularity of performance of duty lies in favor of the Collector
of Customs.
In the present case, there is no factual showing that the collection of the alleged overpaid customs duties was more than
what is required of the petitioner when it made the aforesaid separate importations. There is no factual finding yet by
the government agency concerned that petitioner is indeed entitled to its claim of overpayment and, if true, for how
much it is entitled. It bears stress that in determining whether or not petitioner is entitled to refund of alleged
overpayment of customs duties, it is necessary to determine exactly how much the Government is entitled to collect as
customs duties on the importations. Thus, it would only be just and fair that the petitioner-taxpayer and the
Government alike be given equal opportunities to avail of the remedies under the law to contest or defeat each other's
claim and to determine all matters of dispute between them in one single case. If the State expects its taxpayers to
observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess
payments, if truly proven, of such taxes. Indeed, the State must lead by its own example of honor, dignity and
uprightness. (Nestle Philippines, Inc. vs. CA, GR No. 134114 dated July 6, 2001)
Note: It appears that there is no provision in the TCCP providing for a prescriptive period to file a judicial refund case
with the CTA. Based on the Nestle Case, the judicial claim for refund must be filed after a decision has already been
rendered by the Commissioner. In the Nestle Case, because of the delay and inaction of the Collector to decide the
refund/protest filed by Nestle the Supreme Court remanded and allowed the CTA to take cognizance of the case even
if the Collector has not yet decided the refund/protest filed by Nestle. It also appears that in refund cases, the
procedure on customs protest must be followed.

92. In the case of an EPZA (now PEZA) registered enterprise filing a claim for refund of customs duties, what is the
prescriptive period to file the said claim?

This leads to another question well-worth resolving what is the prescriptive period which a duly registered enterprise
should observe in applying for a refund to which it is entitled under the EPZA Law? The EPZA Law itself is silent on the
matter, and the prescriptive periods under the Tariff and Customs Code and other revenue laws are inapplicable, by
specific mandate of Section 17(1) of the EPZA Law. This does not mean though that prescription will not lie, as the Civil
Code provisions on solutio indebiti may find application. The Civil Code is not a customs and internal revenue law. The
Court has in the past sanctioned the application of the provisions on solutio indebiti in cases when taxes were collected
thru error or mistake. Solutio indebiti is a quasi-contract, thus the claim for refund must be commenced within six (6)
years from date of payment pursuant to Article 1145(2) of the New Civil Code. (Commissioner of Customs vs. Philippine
Phosphate Fertilized Corporation, GR No. 144440 dated September 1, 2004)