Forfeiture under Section 224 of the CMTA
By: Atty. Kaeth Louis C. Estrada on October 29, 2026
BUSINESSES engaged in the importation of goods are subject to applicable duties and taxes, and failure to comply with customs laws carries legal repercussions.
The Bureau of Customs (BOC) has the authority to inspect and visit business establishments pursuant to Section 224 of the Customs Modernization and Tariff Act (CMTA). This provision provides that “the Commissioner or any customs officer who is authorized in writing by the Commissioner, may demand evidence of payment of duties and taxes on imported goods openly for sale or kept in storage. In the event that the interested party fails to produce such evidence within fifteen (15) days, the goods may be seized and subjected to forfeiture proceedings.”
In this regard, Customs Administrative Order 10-2020 (Seizure and Forfeiture Proceedings and Appeals Process, May II, 2020) provides that, upon lawful demand by the commissioner or an authorized customs officer, the owner or possessor of imported goods has 15 days to present and establish: (a) proof of payment of the correct duties and taxes or of exemption therefrom; (b) proof of local purchase and payment of the correct duties and taxes by the original importer; or (c) proof that the goods were locally produced or manufactured.
During this 15-day period, the goods are placed under constructive customs custody. If the interested party fails to produce the required evidence within 15 days, the goods become subject to seizure and forfeiture proceedings.
These statutory principles were applied in the case of Magic Glow Liquid Solutions Inc. v. BOC (CTA Case 11123). In that case, the company operated a warehouse in San Simon, Pampanga. The BOC issued a letter of authority (LOA) and implemented it through a mission order (MO), authorizing the inspection of the company’s premises for customs enforcement.
During the inspection, customs authorities allegedly found various items in the company’s warehouses. One warehouse contained textile rolls and foams bearing famous marks; another contained assorted dishwashing liquids, lubricants, beads, pendants, used machines, plastic bottles, tissue/alcohol bottles, motorcycle accessories and chemicals. The BOC demanded proof that duties and taxes had been paid, but the company allegedly failed to provide valid receipts within the 15-day period prescribed by Section 224 of the CMTA. The BOC then subjected the goods to seizure and forfeiture proceedings.
The company argued that the BOC lacked jurisdiction over the seized goods, claiming they were locally purchased raw materials, long-owned machines and accessories, and finished dishwashing products manufactured in the Philippines — not imported goods in customs custody. The BOC, however, maintained that the seizure was lawful because the company failed to provide proof of local purchase or payment of duties and taxes, and that the Commissioner of Customs and customs officers acted within their statutory authority.
Based on these facts, the Court of Tax Appeals (CTA) found that forfeiture of the subject goods was proper under Section 224 of the CMTA. The court emphasized that the company’s failure to establish local origin or provide proof of tax payment left the legal basis for seizure unrebutted.
First, the delivery receipts and sales invoices do not comply with the invoicing requirements prescribed by law and relevant Bureau of Internal Revenue regulations. As such, they cannot be considered valid sales or commercial invoices issued in the ordinary course of business. Second, the delivery receipts do not include the full names and addresses of the sender and recipient. More importantly, delivery receipts merely acknowledge the transfer or delivery of goods; they do not establish ownership, purchase or payment.
Thus, reliance on defective and noncompliant sales invoices, and delivery receipts cannot overcome the presumption of regularity in customs seizure and forfeiture proceedings. Not only are these documents noncompliant with applicable invoicing requirements, but they are also insufficient to prove lawful acquisition, local manufacture or payment of the proper duties and taxes.
Furthermore, the CTA rejected the company’s reliance on constitutional protections against unreasonable searches and seizures. Jurisprudence recognizes the validity of warrantless customs searches of warehouses and other non-dwelling premises in enforcing customs laws. In this case, the inspection was conducted pursuant to a duly issued LOA and MO, and within the scope of the customs officers’ lawful authority. Consequently, the inspection and the ensuing seizure and forfeiture proceedings do not violate the company’s constitutional rights.
Ultimately, the cited CTA decision underscores the stringent compliance standards imposed on businesses storing commercial goods. Under Section 224 of the CMTA, the owner or possessor must produce valid, legally compliant proof of duty payment, lawful local purchase or local manufacture within the strict 15-day window. Reliance on defective sales invoices or delivery receipts will not rebut the presumption of regularity afforded to customs enforcement. To safeguard operations against administrative seizure and forfeiture, businesses must maintain meticulous inventory records and strictly comply with statutory invoicing requirements.
Kaeth Louis C. Estrada is an Associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). 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 info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com
The article was published at the More to Follow Column at The Manila Times on October 29, 2026. Please see this link.