By MARK ANTHONY TAMAYO
March 19, 2020

First of two parts

Under the self-assessment scheme, importers are responsible for reporting the details of their importations with the Bureau of Customs (BoC). These details — which must be reflected in the goods declaration — include the value of the imported goods and their tariff classification, rate of duty, and customs duty and taxes payable.

The lodgement of the goods declaration may thereafter trigger the shipment to documentary check or physical inspection at the border. In the process, various issues may be raised by customs officers.

Due to the coronavirus disease 2019 (Covid-19) outbreak, importers and stakeholders may check the status of their entry, particularly if there are problems or issues in their goods declaration, through the BoC’s online services, such as its Portal and Goods Declaration and Verification System (GDVS). These online services are accessible at www.customs.gov.ph.

New dispute settlement rules
In the past, certain dispute settlement committees (i.e. BoC-SGS Import Valuation and Classification Committee and the Valuation and Classification Review Committee) were created and tasked to handle import issues raised at the border. The advent of the Customs Modernization and Tariff Act (CMTA) in the middle of 2016, however, required the necessity to review the policies and procedures under the old rules on dispute settlement to align them with that law and international best practices.

Recently, the BoC issued Customs Administrative Order (CAO) 02-2020 on March 5, which shall take effect on April 4. CAO 02-2020 provides the guidelines for dispute settlement and protest arising from customs valuation, tariff classification, rules or origin, and other customs issues, which may affect the assessment of duties, taxes and other charges.

Under CAO 02-2020, in case of a dispute and the importer disagrees with the findings of the customs officer, he may elevate the matter to the BoC principal appraiser, and thereafter to the chief of the Formal Entry Division, then to the deputy collector for assessment, and finally to the district collector (DC).

The DC is given the discretion to determine whether a disputed issue involves a “difficult or highly technical question.” The decision will in turn determine if the imported goods, subject of review, may be tentatively released (under a tentative assessment) from the custody of the BoC.

A tentative release of goods would entail the payment of duties and taxes as declared in the goods declaration as well as the posting of a cash bond or any sufficient security (e.g., surety bond, standby letter of credit or irrevocable letter of credit) to cover the upgraded amount of duties, taxes and other charges that is disputed.

A favorable ruling for the importer would result to the refund or cancellation of bond or security posted. In case of an adverse ruling, the posted security (under a tentative assessment) shall be made to answer for the deficiency in duties and taxes. In the absence of a tentative assessment, the importer shall be liable to pay the additional duties and taxes, as adjudged.

Tariff classification issue

The BoC typically challenges the correctness of the importer’s declared tariff classification of the goods in order to reclassify these and impose a higher duty rate. A higher duty rate results in a higher customs duty payable, and as a consequence, a higher value-added tax (VAT) base, and VAT payable. When the importer disagrees with the tariff reclassification made by the DC, a valid tariff classification dispute exists.

If the DC adopts the findings of the customs officer, he shall notify the aggrieved importer of such ruling (stating his or her reasons) with a directive to pay the duties and taxes based on the reclassification made by the customs officer.

The ruling can be appealed through a protest filed by the importer to the BoC Commissioner within 15 days from receipt thereof; or if payment was made as a result of the adverse ruling, within 15 days from such payment.
Importers should note that if the commissioner fails to act on the protest within 30 days from receipt, the ruling of the DC shall be deemed affirmed. In such case, the aggrieved importer has two options: elevate the protest case either directly to the Court of Tax Appeals (CTA); or submit the matter to the Tariff Commission (TC) for a ruling, which will then be appealable to the CTA in case the decision of the TC is still unfavorable.

Assuming, however, that the issue involves a “difficult or highly technical classification issue” that requires further review and evaluation, CAO 02-2020 requires the DC to refer the matter to the TC for a ruling. A “difficult or highly technical classification issue” exists if: an article is classifiable under two or more headings, subheadings or Association of Southeast Asian Nations Harmonized Tariff Nomenclature (AHTN) chapters; or the description of a product is not specifically provided for in any AHTN heading or subheading.

The above procedure is also in line with TC Order 2018-01 dated Oct. 17, 2018, where tariff classification disputes can be initiated either through the endorsement of the BoC, or by importer’s or exporter’s filing of a case, when the BOC has a different tariff classification.

In case the ruling of the TC is favorable to the importer, the same shall be binding upon the BoC. This, however, does not preclude the bureau from appealing said ruling to the secretary of the Department of Finance for further review.
On the other hand, if the ruling of the TC or the Finance secretary is adverse to the importer, he or she may appeal the ruling to the CTA within 30 days from receipt thereof.

Next week, the author shall discuss other salient features of CAO 02-2020.

To be concluded next Thursday

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