By: Mark Anthony Tamayo on July 19, 2018

It’s common for regular importers to be oblivious of the mistakes and errors in the details of particulars of their previously filed goods declarations relative to their past shipments of goods into the country. Importers generally consider their declarations correct and final once the imported goods are released from the Bureau of Customs (BOC) without any issues.

Importers should realize though that the BOC’s verification powers don’t only cover the examination of the declarations made at the border (i.e., before release of goods from the BOC). They also include the power to subsequently audit and examine the books and import records of importers through the Post Clearance Audit (PCA) system to capture deficiencies in duties and taxes. The BOC’s PCA power can generally be exercised within three years from the date of final payment of duties and taxes or customs clearance as the case may be.

The penalties that may be imposed at the border include, among others, a surcharge relating to misclassification, misdeclaration or undervaluation of the imported goods. On the other hand, the penalty that may be imposed for deficient duties and taxes after the conduct of PCA includes a fine of 125% of the revenue loss (for negligence) or 600% of the revenue loss (in cases of fraud).

Prior disclosure program

A new Customs Administrative Order (CAO) covering the PCA and Prior Disclosure Program (PDP) is coming out very soon. The proposed CAO seeks to reestablish a program similar to the previous Voluntary Disclosure Program (VDP) under CAO No. 5-2007 which essentially complements the BOC’s PCA system.

The PCA aims to verify past shipments of importers to uncover deficiencies in the payment of duties and taxes and to impose the corresponding fines and penalties.

The PDP, on the other hand, is a compliance and remedial measure which reinstates a liberal mechanism so importers can correct plain errors or innocent mistakes in their import entry declarations by paying the basic deficiency duties and taxes with substantial mitigation or cancellation of the otherwise imposable fine. It basically supplements Section 1131 of the Customs Modernization and Tariff Act (CMTA) which authorizes the BOC Commissioner to enter into a compromise with importers on matters on the imposition of fines and surcharges.

Under the proposed CAO, it excludes from the PDP coverage goods declarations which are a) the subject of pending cases with any other customs office; b) covered by cases already filed and pending in courts and; c) Fraud cases. The CMTA likewise excludes cases involving forfeiture proceeding.

Procedural requirements

Under the proposed CAO, importers may avail of the PDP prior to receipt of an Audit Notification Letter (ANL) or upon receipt of the ANL, but prior to the scheduled date of field audit by the BOC PCA group.

Importers who want to enroll in the PDP must submit a duly accomplished form stating the errors in the goods declaration and tender payment of the deficiency duties and taxes.

The PCA Group shall then verify the accuracy of the deficiency duties and tax computation and determine if all errors are fully disclosed.

When fraud or bad faith is uncovered, the PDP application shall be denied and a full audit shall proceed without prejudice to the conduct of a formal fraud investigation. Any money received by customs in such cases shall automatically be applied on the deficiency in duties and taxes as disclosed.

The PDP application is required to be approved by the BOC Commissioner and the DOF Secretary.

Benefit under the proposed PDP

Under the proposed PDP rules, the benefits in the availment of the program are as follows:

For PDP availment prior to receipt of ANL, the 125% administrative fine (for negligence) may be waived and the importer may just have to pay the basic deficiency duties and taxes due, plus 20% interest (which is now imposable under the CMTA) per annum.

For PDP availment after receipt of ANL but before audit proper, the importer may be subject to a reduced penalty of 10% (as compared to the imposable fine of 125% of the revenue loss in case of negligence) in addition to payment of the basic deficiency duties and taxes due, plus interest.

For PDP availment on a) royalties, and b) other proceeds on any subsequent resale that accrues directly or indirectly to the seller of goods, the payment of deficiency duties and taxes due shall be without penalty if the importer files for PDP within 45 days from date of payment to the seller/licensor. Otherwise, the 10% (with ANL) rate will apply.

To avail or not to avail?

Errors and mistakes are normally committed when all that matters to the importer is the speedy release of their imported goods from the BOC without due regard to the accuracy of information provided in the declarations.

Importers should be aware that declarations are executed under oath and that they’re responsible (not their customs brokers) for the accuracy of the goods declarations and for the payment of the correct duties, taxes and other charges due.

The increased pressure on the BOC to meet its yearly collection targets signals a closer scrutiny on importers – including their past importations. Given this environment, importers should act proactively by conducting internal compliance review to identify possible risk areas and exposure while adopting corrective measures to strengthen compliance with BOC rules and regulations.

Where issues are discovered, the PDP merits consideration. While PDP was developed to generate additional revenue for BOC, it also serves the interest of importers as an important customs risk management tool to limit customs exposure for past importations.

#importation #priordisclosure #remedy #audutnotificationletter #CustomsModernizationandTariffAct

Mark Anthony P. Tamayo is a CPA-Lawyer and a Partner of Mata-Perez, Tamayo & Francisco Law Offices (MTF Counsel). His areas of practice are, among others, corporate, tax, international trade & customs. 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.

From the The Manila Times Website on July 19, 2018

http://www.manilatimes.net/the-remedy-of-prior-disclosure-for-importers/421022/