TARIFF AND DUTY RATESTypes of duty:
- Import Duty
All imported goods for consumption are subject to the payment of import duty prior to release of unless otherwise exempted in accordance with law by the Department of Finance.
- Value Added Tax (VAT)
All imported goods are also subject to the payment of VAT at the uniform rate of 10% of the total landed cost. Even if the shipment is duty free, it may still be subject to VAT.
- Ad Valorem Tax
A few commodities, like passenger automobiles, jewelry, alcohol, tobacco, etc. may also be subject to the payment of Ad Valorem Tax aside from the import duty and VAT. The rate of Ad Valorem Tax depends on the make-up of the commodity such as the engine displacement cost in case of automobiles, or alcohol content in case of beverages. Like VAT, Ad Valorem Tax is an internal revenue tax, the collection of which is delegated to the Bureau of Customs in so far as imported goods are concerned. Imported goods subject to Ad Valorem shall be covered by an Authority to Release Imported Goods (ATRIG) issued by the Bureau of Internal Revenue before they can be released from the port.
The rate of import duty varies depending on the commodity imported, ranging from 3 to 50%. The schedule of rates is listed under Section 104, Tariff and Customs Code of the Philippines (TCCP), as amended.
Under the unilateral tariff reduction programme, Section 104 has been modified and amended reducing the tariff structure of most commodities to its present level under Executive order (EO) 470; EO 189 which reduced the tariff on capital equipment, EO 204 on textile, textile articles and chemical inputs; and EO 264 which gradually reduces thetariff further to the uniform rate of 3% for raw materials and 10% for finished products by year 2003, and finally to a flat rate by year 2004.
Payment of Duties
Duty is paid will all the other taxes and charges due on the shipment prior to release of the goods for consumption. Payments are made through banks which are electronically connected to Customs. Under the automated On-line Release System(OLRS), when the fact of payment made through the banks are relayed to Customs, Customs in turn keys in such payment and lifts the hold status of the shipment allowing the port operator to release the goods to the importer or his representative.
Certain commodities are exempt from the payment of import duties upon compliance with formalities prescribed and approved by the Secretary of Finance. Section 105, TCCP governs what is termed as Conditionally-Free Importations. Other special laws also provide tax and duty-free treatment on certain importations.
VALUING YOUR PRODUCTSValuation for Customs purposes is based on the Fair Market Value of the Philippines (FMV), a system peculiar to the Philippines. The basic principle of the FMV is that the dutiable value of an imported article is the cost of SAME, LIKE, SIMILAR articles as bought and sold or offered for sale freely in the usual wholesale quantities. In the ordinary course of trade on the date of exportation or where there is none on such date, then on the date nearest to the date of exportation in the following principal markets in the descending order of preference:
- Exporting country;
- Country of manufacture or origin
- SGS-CRF (Societe Generale de Surveillence-Clean Report of Findings);
- Published value;
- Domestic wholesale price of such or similar article in Manila or other principal markets in the Philippines.
CLEARING IMPORTSGeneral information:
Imported goods coming to the Philippines by air and sea are required to be manifested by the carrier. Upon arrival of the carrier, an inward foreign manifest must be submitted to Customs. There are four major steps involved in the processing of import documents:
- Examination and appraisal;
- Pre-liquidation and payment; and
- Release of goods from the customs zone
Philippines Customs introduces Formal and Informal Entry. Goods imported for commercial purposes where dutiable value of which is less than USD 500, personal or household effects not in commercial quantity being brought into the Philippines in passenger's baggage and mail for personal use will be cleared on Informal Entry. Other shipments will be cleared through a Formal Entry.
A separate form for Formal and Informal Entry are applied which must also be completed with the bill of lading, packing list, commercial invoice.
All imported goods are required to undergo pre-shipment inspection (PSI) which will be conducted by the government contracted inspection company in the port of exportation. The goods must also be covered by a Clean Report of Findings (CRF), issued following the PSI, and that should be attached to the entry.
Types of duty that are applicable in the Philippines:
- Import Duty
- Value Added Tax (VAT)
- Ad Valorem Tax
CLEARING EXPORTSGeneral information:
Goods for importation may be declared by exporters or their authorised agents and they must complete an Export Declaration (ED) form which can be obtained from any Authorised Agent Bank (AAB) of the Banko Sentral ng Pilipinas (BPS). The price disclosed on the ED shall be the fair market value of the current market price of the goods exported on the date of sale.
ED should be accompanied with the following documents:
- Commercial invoice
- Packing list In the case of goods classified under regulated exportation, clearance of goods will be issued by the concerned government agency.
GOODS WITH PROHIBITIONS, CONTROLS, AND RESTRICTIONSThese are commodities which are not allowed for importation under existing laws:
- Dynamite, gunpowder, ammunition and other explosives, fire-arms and weapons of war, and parts thereof, except when authorised by law;
- Written or printed articles in any form containing any matter advocating or inciting treason, or rebellion, insurrection, sedition or subversion against the government of the Philippines, or forcible resistance to any law of the Philippines;
- Written or printed articles, negatives or cinematographic film, photographs, engravings, lithographs, objects, paintings, drawings or other representation of an obscene or immoral character;
- Articles, instruments, drugs, substances designed, intended or adapted for producing unlawful abortion, or any printed matter which advertises or describes or gives directly or indirectly information regarding where, how or by whom unlawful abortion is produced;
- Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or mechanical devices used in gambling;
- Lottery and sweeptakes tickets except those authorised by the Philippines government, advertisement thereof, and lists of drawings therein;
- Any article manufactured in whole or in part of gold, silver or other precious metals or alloys thereof;
- Any adulterated or misbranded articles of food or drug;
- Marijuana, opium or any other narcotics or synthetic drugs;
- Opium pipes and parts thereof, of whatever material; and
- All other articles or part thereof, the importation of which is prohibited by law or rules and regulation issued by competent authority (as amended by Presidential Decree no. 34).
- Onions, potatoes, garlic and cabbages, except for seeding purposes; Republic Act (RA) no. 296
- Coffee (RA no. 2712)
- Used clothing and rags (RA no. 4653)
- Toy guns (Letter of Instruction no. 1264)
TEMPORARY ADMISSIONIn the Philippines, temporary imports are among those referred to as Conditionally-Free imporations wherein certain articles for specific purposes may be allowed to be imported without payment of duties but upon posting of a bond equivalent to 150% of the ascertained taxes and duties due conditioned for the re-exportation thereof within a specified period or the payment of taxes and duties as ascertained.
Temporary imports which may be availed of by filling an application to this effect with the Department of Finance cover the following:
- Articles brought for repair, processing or reconditioning to be re-exported upon completion of the repair, processing or reconditioning within six-months from acceptance of the entry.
- Personal and household effects and vehicles belonging th foreign consultants and experts hired by and/or rendering service to the government, and their staff of personnel and families accompanying them or arriving within a reasonable time, in quantities and of the kind necessary and suitable to the profession, rank or position of the person importing them, which shall be re-exported within six months after the expiration of their term of contract, extendable by another six months on meritious grounds.
- Articles used exclusively for public entertainment, and for public display or exhibition or competition for prizes, and devices for projecting pictures and parts and appurtenances which shall be re-exported within six months from acceptance of the Entry.
- Articles brought by foreign film procedures directly and exclusively used for making or recording motion picture films on location in the Philippines which shall be re-exported within six months from acceptance of entry, extendable by another six months.
The Philippines has taken steps to accede the ATA Carnet Convention. Along this line, the Tenth Congress of the Philippines is Senate Bill no. 1380 proposes to amend among others Section 105 of the Tariff and Customs Code of the Philippines by reducing the bond requirement for the temporary release of conditionally-free shipments from the present 150% to not more than 100% of the ascertained taxes and duties.
OBTAINING REFUNDS/DRAWBACKS ON YOUR DUTY PAYMENTAll imported fuel used by vessels in foreign and coastwise trade are subject to refund or tax credit up to 99% of the duty paid upon such fuel. Petroleum oils, oils obtained from bituminous minerals, and crude oils used to generate electric power or the manufacture of city gas are subject to refund or tax credit up to 50%.
Exported articles locally manufactured or produced from imported materials in whole or in part are also subject to refund or tax credit up to 99% of the duty paid on the imported materials so used, including the packaging and labelling thereof provided that there are no locally available substitutes for the imported materials used. Provided further that the manufactured articles are exported within one (1) year from the importation of the materials used and that the claim for refund or tax credit shall be made within on (1) year from the exportation of the manufactured articles.
Section 106 of TCCP governs claims for duty drawbacks.
LICENSES/BONDED WAREHOUSESArticles made in whole or in part of imported materials may be manufactured in bonded warehouse without the payment of duty on the imported materials used in the manufacture of such article, including the containers, brands and labels used in placing it in condition for exportation, if the manufactured product is exported within nine (9) months, extendable by another three (3) months on meritorious grounds, from the date of transfer or conveyance of the imported materials into the manufacturing bonded warehouse. The imported materials shall however be covered with a warehousing bond which may be liquidated upon the exportation of the manufactured products.
The Collector of Customs subject to the approval of the Commissioner of Customs may allow the establishment of manufacturing bonded warehouse which shall be under the supervision of a designated Customs officer. Before commencing business, the operator of the manufacturing bonded warehouse shall file a list of all articles, intended to be manufactured in such warehouse and state the formula of manufacture, including the names and quantities of the ingredients therein. He also files a satisfactory bond for the faithful observance of all laws and regulations governing its operations aside from the warehousing bond put up for the imported materials.
The Collector of Customs keeps an account of all articles entered into the bonded warehouse. A sworn monthly return, verified by the Customs officer assigned thereat, shall be made by the manufacturer containing details for exportation within the prescribed period, as well as the wastage shall also be subject to the corresponding duties.