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By: Mark Anthony P. Tamayo on January 31, 2019

Last of two parts
In last week’s article, we discussed briefly the coverage of a post clearance audit (PCA) under customs administrative order (CAO) 01-2019 and the potential issues that may be raised by the post clearance audit group (PCAG) of the Bureau of Customs (BoC).

In this article, we shall discuss other salient features under the CAO and the penalties that may be imposable during a PCA.


Record-keeping requirements

As a control measure, all importers, beneficial or true owners of imported goods, their customs brokers and agents as well as registered locators in the special economic zones and free ports are required to maintain and keep all records of their importations, books of accounts, business and computer systems and all other customs commercial data including payment records relevant for the verification of, among others, the accuracy of the transaction value declared by them or their customs brokers.

There is a long list of documents required to be kept. Generally, however, the required documents relate to company or entity structure, ordering and purchase documentation, shipping, importation, exports, and transportation documentation, manufacturing, stock, and resale documentation, banking and accounting information, charts and code of accounts, ledgers, financial statements, accounting instruction manuals, and systems and program documentation that describes the accounting system used by the importer.

The above documents must be retained for a period of 3 years from the date of filing of the import entry. This is a departure from the old rule (Department Order 11-2014) which required them to be kept for 10 years.

Non-compliance with this requirement may subject erring importers to penalties which may include, among others, the suspension or cancellation of the importers’ accreditation with the BoC, the payment of 20 percent surcharge on the dutiable value of the goods for which no records were kept, the hold delivery or release of subsequent imported articles to answer for the fine and any revised assessment, or criminal prosecution and/or a fine of P1 million. The failure to produce the requested documents would also constitute a waiver of the right to contest the results of the audit based on records kept by the BoC.


Penalties imposable during PCA

Any importer who, after being subjected to compliance audit, is found to have incurred deficiencies in duties and taxes paid for imported goods, shall be penalized according to 2 degrees of culpability, namely:

Negligence. The applicable penalty is an administrative fine of 125 percent of the revenue loss. A 25 percent penalty shall be imposed on inadvertent error amounting to simple negligence.

Fraud. The applicable penalty is an administrative fine equivalent to 6 times the revenue loss and/or imprisonment of not less than 2 years, but not more than 8 years.

Aside from the administrative fine, a 20 percent interest (per annum) on deficiency duties, taxes and other charges (plus fines and penalties, if any) can now be imposed under the CMTA. The interest is counted 15 days from the date of final assessment.


Prior disclosure program

A prior disclosure program (PDP) has been reintroduced under the CAO as a compliance and revenue measure whereby importers are accorded the chance to report plain errors or innocent mistakes in the goods declaration resulting to deficiency in duties, taxes and other charges on past importations.

The PDP is in line with the general power of the BoC commissioner under the CMTA to compromise any administrative case involving the imposition of fines and surcharges, including those arising from the conduct of a PCA.

Excluded from the coverage are cases a) already pending with any other customs office, b) already filed and pending in courts; and c) about goods declaration involving Fraud.

Importers could avail of the PDP either before or after receipt of an ANL. In the latter case, however, the period to manifest an intention to avail of a PDP must be made before the commencement of audit (which is within 60 calendar days from the service of the ANL) by the PCAG.

If such intention is made, the conduct of the audit proper will be deferred and the importer must submit (within a period of 90 calendar days from the receipt of the ANL) a duly accomplished application for prior disclosure stating the errors in the goods declaration and tender payment of the deficiency duties, taxes and penalties.

For PD availment prior to receipt of ANL, there is a waiver of the administrative fine imposable and the applicant would just have to pay the basic deficiency duties and taxes due plus interest.

For PD availment after receipt of ANL, the applicant would have to pay the basic deficiency duties and taxes with a reduced penalty of 10 percent plus interest.

In case the disclosure involves dutiable royalties, proceeds on any subsequent resale that accrues directly or indirectly to the seller of goods, or any subsequent payments to the seller, the applicant would just have to pay the basic deficiency duties and taxes due without penalty provided that the applicant files for PDP within 30 calendar days from date of payment to the seller. Otherwise, the penalty and interest will apply.


No more forever

As importers may soon undergo PCA, one of the best practices is to carefully plan the duty aspects of their intended importations. If importations had already been made, the next logical thing to do is to review the company’s possible exposure and risk areas to a potential deficiency duty assessment and adopt corrective measures to strengthen its compliance with existing BOC rules and regulations.

Audit readiness is the key to survive a PCA. The time-tested best practice is to conduct a regular self-assessment for the purposes of determining errors in the past that could result to potential exposure to penalties. This approach should enable importers to immediately adopt corrective measures such as, among others, the availment of a PD. Importers should realize though that as in every compromise, neither side gets fully what they want.

(Mark Anthony P. Tamayo is a CPA-Lawyer and a Partner of Mata-Perez, Tamayo & Francisco Law Offices (MTF Counsel). He is a specialist in corporate, tax, customs & international trade advisory, planning, controversy, compliance and litigation.) This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at or visit MTF website at


From The Manila Time Website on January 31, 2019

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Euney Marie J. Mata-Perez

Mark Anthony P. Tamayo

Gerardo Maximo V. Francisco