CUSTOMS OUTLINE

TARIFF AND CUSTOMS CODE OF THE PHILIPPINES

1. POWERS AND JURISDICTION OF CUSTOMS

Section 601. Chief Officials of Bureau of Customs. — The Bureau of Customs shall have one chief and one assistant chief, to be known respectively at the Commissioner (hereinafter known as the "Commissioner") and Assistant Commissioner of Customs, who shall each receive an annual compensation in accordance with the rates prescribed by existing laws. The Assistant Commissioner of Customs shall be appointed by the proper department head.

Sec. 602. Functions of the Bureau. — The general duties, powers and jurisdiction of the bureau shall include:

a. The assessment and collection of the lawful revenues from imported articles and all other dues, fees, charges, fines and penalties accruing under the tariff and customs laws.

b. The prevention and suppression of smuggling and other frauds upon the customs.

c. The supervision and control over the entrance and clearance of vessels and aircraft engaged in foreign commerce.

d. The general supervision, control and regulation of vessels engaged in the carrying of passengers and freight or in towage in coastwise trade and in the bays and rivers of the Philippines.

e. The prohibition and suppression of unnecessary noises, such as explosion of gasoline engines, the excessive blowing of whistles or sirens, and other needless and disturbing sounds made by water craft in the ports of the Philippines or in parts of rivers included in such ports.

f. The exclusion, if the conditions of traffic should at any time so require, of vessels of more than one hundred and fifty tons from entering, berthing or mooring in the Pasig River.

g. The admeasurement, registration, documenting and licensing of vessels built or owned in the Philippines, the recording of sales, transfers and encumbrances of such vessels, and the performance of all the duties pertaining to marine registry.

h. The inspection of Philippine vessels, and supervision over the safety and sanitation of such vessels.

i. The enforcement of the lawful quarantine regulations for vessels entering Philippine ports.

j. The enforcement of the tariff and customs laws and all other laws, rules and regulations relating to the tariff and customs administration.

k. The licensing of marine officers who have qualified in the examination required by law to be carried on Philippine vessels, the determination of the qualifications of pilots, the regulation of this service, and the fixing of the fees which they may charge.

l. The supervision and control over the handling of foreign mails arriving in the Philippines, for the purpose of the collection of the lawful duty on dutiable articles thus imported and the prevention of smuggling through the medium of such mails.

Sec. 603. Territorial Jurisdiction. — For the due and effective exercise of the powers conferred by law and to the extent requisite therefor, said bureau shall have the right of supervision and police authority over all seas within the jurisdiction of the Philippines and over all coasts, ports, airports, harbors, bays, rivers and inland waters navigable from the sea.

When a vessel becomes subject to seizure by reason of an act done in Philippine waters in violation of the tariff and customs laws, a pursuit of such vessel begun within the jurisdictional waters may continue beyond the maritime zone, and the vessel may be seized on the high sea. Imported articles which may be subject to seizure for violation of the tariff and customs laws may be pursued in their transportation in the Philippines by land, water or air and such jurisdiction exerted over it at any place therein as may be necessary for the due enforcement of the law.

Sec. 604. Jurisdiction over Premises Used for Customs Purposes. — The Bureau of Customs shall, for customs purposes, have exclusive control, direction and management of custom-

houses, warehouses, offices, wharves, and other premises in the respective ports of entry, in all cases without prejudice to the general police powers of the city or municipality wherein such premises are situated.

Sec. 605. Enforcement of Port Regulation of Bureau of Quarantine. — Customs officials and employees shall cooperate with the quarantine authorities in the enforcement of the port quarantine regulations promulgated by the Bureau of Quarantine and shall give effect to the same in so far as they are connected with matters of shipping and navigation.

Sec. 606. Power of the President to Subject Premises to Jurisdiction of Bureau of Customs. — When any public wharf, landing place, street or land, not previously under the jurisdiction of the Bureau of Customs, in any port of entry, is necessary or desirable for any proper customs purpose, the President of the Philippines may, by executive order, declare such premises to be under the jurisdiction of the Bureau of Customs, and thereafter the authority of such Bureau in respect thereto shall be fully effective.

Sec. 607. Annual Report of Commissioner. — The annual report of the Commissioner shall, among other things, contain a compilation of the (a) volume and value of articles imported into the Philippines and the corresponding customs duties assessed and collected thereon itemized in accordance with the tariff classification provided in this Code and (b) volume and value of articles exported from the Philippines for the preceding year.

Sec. 608. Commissioner to Make Rules and Regulations. — The Commissioner shall, subject to the approval of the department head, make all rules and regulations necessary to enforce the provisions of this Code.

Sec. 2208. Right of Police Officer to Enter Inclosure. — For the more effective discharge of his official duties, any person exercising the powers herein conferred, may at anytime enter, pass through, or search any land or inclosure or any warehouse, store or other building, not being a dwelling house.

A warehouse, store or other building or inclosure used for the keeping of storage of articles does not become a dwelling house within the meaning hereof merely by reason of the fact that a person employed as watchman lives in the place, nor will the fact that his family stays there with him alter the case.

Sec. 2209. Search of Dwelling House. — A dwelling house may be entered and searched only upon warrant issued by a judge or

justice of the peace, upon sworn application showing probable case and particularly describing the place to be searched and person or thing to be seized.

Sec. 2210. Right to Search Vessels or Aircrafts and Persons or Articles Conveyed Therein. — It shall be lawful for any official or person exercising police authority under the provisions of this Code to go abroad any vessel or aircraft within the limits of any collection to go aboard any vessel or aircraft within the limits of any collection district, and to inspect, search and examine said vessel or aircraft and any trunk, package, box or envelope on board, and to search any person on board the said vessel or aircraft and to this end to hail and stop such vessel or aircraft if under way, to use all necessary force to compel compliance; and if it shall appear that any breach or violation of the customs and tariff laws of the Philippines has been committed, whereby or in consequence of which such vessels or aircrafts, or the article, or any part thereof, on board of or imported by such vessel or aircraft, is liable to forfeiture, to make seizure of the same or any part thereof. The power of search hereinabove given shall extend to the removal of any false bottom, partition, bulkhead or other obstruction, so far as may be necessary to enable the officer to discover whether any dutiable or forfeitable articles may be concealed therein.

No proceeding herein shall give rise to any claim for the damage thereby caused to article or vessel or aircraft.

Sec. 2211. Right to Search Vehicles, Beasts and Persons. — It shall also be lawful for a person exercising authority as aforesaid to open and examine any box, trunk, envelope or other container, wherever found where he has reasonable cause to suspect the presence therein of dutiable or prohibited article or articles introduced into the Philippines contrary to law, and likewise to stop, search and examine any vehicle, beast or person reasonably suspected of holding or conveying such article as aforesaid.

Sec. 2212. Search of Persons Arriving From Foreign Countries. — All persons coming into the Philippines from foreign countries shall be liable to detention and search by the customs authorities under such regulations as may be prescribed relative thereto.

Female inspectors may be employed for the examination and search of persons of their own sex.

CASES:

JAO VS. CA

FACTS:

The Office of the Director, Enforcement and Security Services (ESS), Bureau of Customs, received information regarding the presence of untaxed vehicles and parts in the premises owned by Pat Hao located along Quirino Avenue, Paranaque and Honduras St., Makati.

After conducting a surveillance of the two places, respondent Major Jaime Maglipon, Chief of Operations and Intelligence of the ESS, recommended the issuance of warrants of seizure and detention. District Collector of Customs Titus Villanueva issued the warrants of seizure and detention.

Maglipon coordinated with the local police to assist in the execution of the respective warrants of seizure and detention. The team searched the two premises.

They were barred from entering the place, but some members of the team were able to force themselves inside and were able to inspect the premises and noted that some articles were present which were not included in the list contained in the warrant.

Amended warrants of seizure and detention were subsequently issued by Villanueva.

Consequently customs personnel started hauling the articles pursuant to the amended warrants.

Narciso Jao and Bernardo Empeynado filed a case for Injunction and Damages with prayer for Restraining Order and Preliminary Injunction before RTC Makati Branch 56on August 27, 1990 against respondents.

On the same date, the trial court issued a Temporary Restraining Order. Respondents filed a Motion to Dismiss on the ground that RTC has no jurisdiction over the subject matter, claiming that it was the Bureau of Customs that had exclusive jurisdiction over it. RTC denied motion to dismiss. Respondents filed MFR . MFR was denied.CA set aside the questioned orders of the trial court and enjoined it from further proceeding with the Case. The appellate court also dismissed the said civil case.

ISSUE:

WON the RTC has jurisdiction over cases questioning the validity of seizure and forfeiture proceedings conducted by the Bureau of Customs

HELD: NO.

The RTC is devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings .

The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus.

It is likewise well-settled that the provisions of the Tariff and Customs Code and RA1125 "An Act Creating the Court of Tax Appeals," specify the proper for a and procedure for the ventilation of any legal objections or issues raised concerning these proceedings.

Actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court of Appeals.

The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the government's drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform.

The illegality of a seizure by the Collector of Customs does not deprive the Bureau of Customs of jurisdiction thereon. The allegations of petitioners regarding the propriety of the seizure should properly be ventilated before the Collector of Customs. We have had occasion to declare:

The Collector of Customs when sitting in forfeiture proceedings constitutes a tribunal expressly vested by law with jurisdiction to hear and determine the subject matter of such proceedings without any interference from the Court of First Instance.

(AuyongHian v. Court of Tax Appeals, et al., 19 SCRA 10

REPUBLIC VS. BOCAR

FACTS:

VIERNEZA VS. COMMISSIONER OF CUSTOMS

FACTS:

ENRILE VS. VINUYA

FACTS:- The then Collector of Customs of the Port of Manila issued a warrant of seizure and detention against the Cadillac car involved in this case, the owner-claimant being a certain Rodolfo Ceza, as the taxes and duties had not been paid.lh/CITE> The warr- It was moreover shown in the petition that the owner, Rodolfo Ceza, had sold such car to one Francisco Dee from whom respondent Vinuya acquired the same.

- Vinuya filed a complaint for replevin in the sala of respondent Judge on the ground of alleged illegality of the seizure which, in the opinion of respondents, did not confer jurisdiction on the Collector of Customs.

- Petitioners filed a motion to dismiss on the ground that forfeiture proceedings had already been instituted before the Collector of Customs who has the sole jurisdiction to determine questions affecting the disposition of property under seizure as well as the absence of a cause of action. This was denied for lack of merit. Thus this petition.

ISSUE

WON the court of first instance is vested with jurisdiction to entertain a complaint for replevin for the recovery of a Cadillac car, subject of a seizure and forfeiture proceeding in the Bureau of Customs

HELD NO.

The prevailing doctrine is that the exclusive jurisdiction in seizure and forfeiture cases vested in the Collector of Customs precludes a court of first instance from assuming cognizance over such a matter. Thishas been so, as noted, since Pacis v. Averia.

Reasoning

a. The existence of the power and the regularity of the proceeding taken under it are distinct from each other.

The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction.

It does not mean however that correspondingly a court of first instance is vested with competence when clearly in the light of the above decisions the law has not seen fit to do so.

b. "the Court of First Instance should yield to the jurisdiction of the Collector of Customs. The jurisdiction of the Collector of Customs is provided for in Republic Act 1937i which took effect on July 1, 1957, much later than the Judiciary Act of 1948ii. It is axiomatic that a later law prevails over a prior statute.

c. Moreover, on grounds of public policy, it is more reasonable to conclude that the legislators intended to divest the Court of First Instance of the prerogative to replevin a property which is a subject of a seizure and forfeiture proceedings for violation of the Tariff and Customs Code. Otherwise, actions for forfeiture of property for violation of Customs laws could easily be undermined by the simple devise of replevin."

d. Section 2303 of the Tariff and Customs Code requires the Collector of Customs to give to the owner of the property sought to be forfeited written notice of the seizure and to give him the opportunity to be heard in his defense. This provision clearly indicates the intention of the

law to confine in the Bureau of Customs the determination of all questions affecting the disposal of property proceeded against in a seizure and forfeiture case. The judicial recourse of the property owner is not in the Court of First Instance but in the Court of Tax Appeals, and only after exhausting administrative remedies in the Bureau of Customs."e Collector of Customs is not final. An appeal lies to theDISPOSITIONThe writ of certiorari prayed for is granted, respondent Judge being clearly without jurisdiction.

PAPA VS. MAGO

FACTS:In a recent decision of this Court, Papa v. Mago, where the seizure of alleged smuggled goods was effected by a police officer without a search warrant, this Court, through Justice Zaldivar, stated: "Petitioner Martin Alagao and his companion policemen had authority to effect the seizure without any search warrant issued by a component court. The Tariff and Customs Code does not require said warrant in the instant case. The Code authorizes persons having police authority under Section 2203 of the Tariff and Customs Code to enter, pass through or search any land, inclosure, warehouse, store or building, not being a dwelling house and also to inspect, search and examine any vessel or aircraft and any trunk, package, box or envelope or any person on board, or stop and search and examine any vehicle, beast or person suspected of holding or conveying any dutiable or prohibited article introduced into the Philippines contrary to law, without mentioning the need of a search warrant in said cases. But in the search of a dwelling house, the Code provides that said "dwelling house may be entered and searched only upon warrant issued by a judge or justice of the peace ... ." It is our considered view, therefore, that except in the case of the search of a dwelling house, persons exercising police authority under the customs law may effect search and seizure without a search warrant in the enforcement of customs laws."

COMCUS VS. CA

FACTS:

2. ADMINISTRATIVE PROCEEDINGS

Sec. 2301. Warrant for Detention of Property — Bond. — Upon making any seizure, the Collector shall issue a warrant for the detention of the property; and if the owner or importer desires to secure the release of the property for legitimate use, the Collector may surrender it upon the filing of a sufficient bond, in an amount to be fixed by him, conditioned for the payment of the appraised value of the article and/or any fine, expenses and costs which may be adjudged in the case: Provided, That articles the importation of which is prohibited by law shall not be released under bond.

Sec. 2302. Report of Seizure To Commissioner and Auditor. — When a seizure is made for any cause, the Collector of the district wherein the seizure is effected shall immediately make report thereof to the Commissioner and to the Auditor General.

Sec. 2303. Notification to Owner or Importer. — The Collector shall give the owner or importer of the property or his agent a written notice of the seizure and shall give him an opportunity to be heard in reference to the delinquency which was the occasion of such seizure.

For the purpose of giving such notice and of all other proceedings in the matter of such seizure, the importer, consignee or person holding the bill of lading shall be deemed to be the "owner" of the article included in the bill.

For the same purpose, "agent" shall be deemed to include not only any agent in fact of the owner of the seized property but also any person having responsible possession of the property at the (missing) of the seizure, if the owner or his agent in fact is unknown or cannot be reached.

Sec. 2304. Notification to Unknown Owner. — Notice to an unknown owner shall be effected by posting a notice for fifteen days in the public corridor of the customhouse of the district in which the seizure was made, and, in the discretion of the Commissioner, by publication in a newspaper or by such other means as he shall consider desirable.

Sec. 2305. Description and Appraisal and Classification of Seized Property. — The Collector shall also cause a list and particular description of the property seized to be prepared and an appraisement or classification of the same at its wholesale value in the local market in the usual wholesale quantities to be made by at least two appraising

officials, if there are such officials at or near the place of seizure; in the absence of such officials, then by two competent and disinterested citizens of the Philippines, to be selected by him for that purpose, residing at or near the place of seizure, which list and appraisement shall be properly attested to by such Collector and the persons making the appraisal.

Sec. 2306. Proceedings in Case of Property Belonging to Unknown Parties. — If, within fifteen days after the notification prescribed in section twenty-three hundred and four of this Code, no owner or agent can be found or appears before the Collector, the latter shall declare the property forfeited to the government to be sold at auction in accordance with law.

Sec. 2307. Settlement of Case by Payment of Fine or Redemption of Forfeited Property. — If, in any seizure case, the owner or agent shall, while the case is yet before the Collector of the district of seizure, pay to such Collector the fine imposed by him or, in case of forfeiture, shall pay the appraised value of the property, or, if after appeal of the case, he shall pay to the Commissioner the amount of the fine as finally determined by him, or, in case of forfeiture, shall pay the appraised value of the property, such property shall be forthwith surrendered, and all liability which may or might attach to the property by virtue of the offense which was the occasion of the seizure and all liability which might have been incurred under any bond given by the owner or agent in respect to such property shall thereupon be deemed to be discharged.

Redemption of forfeited property shall not be allowed in any case where the importation is absolutely prohibited or where the surrender of the property to the person offering to redeem the same would be contrary to law.

Sec. 2308. Protest and Payment upon Protest in Civil Matters. — When a ruling or decision of the Collector is made whereby liability for duties, fees, or other money charge is determined, except the fixing of fines in seizure cases, the party adversely affected may protest such ruling or decision by presenting to the Collector at the time when payment of the amount claimed to be due the Government is made, or within thirty days thereafter, a written protest setting forth his objections to the ruling or decision in question, together with the reasons therefor. No protest shall be considered unless payment of the amount due after final liquidation has first been made.

Sec. 2309. Protest Exclusive Remedy in Protestable Case. — In all cases subject to protest, the interested party who desires to have the action of the Collector reviewed, shall make a protest, otherwise,

the action of the Collector shall be final and conclusive against him, except as to matters correctible for manifest error in the manner prescribed in section one thousand seven hundred and seven hereof.

Sec. 2310. Form and Scope of Protest. — Every protest shall be filed in accordance with the prescribed rules and regulations promulgated under this section and shall point out the particular decision or ruling of the Collector to which exception is taken or objection made, and shall indicate with reasonable precision the particular ground or grounds upon which the protesting party bases his claim for relief.

The scope of a protest shall be limited to the subject matter of a single adjustment or other independent transaction; but any number of issue may be raised in a protest with reference to the particular item or items constituting the subject matter of the protest.

"Single adjustment", as hereinabove used, refers to the entire content of one liquidation, including all duties, fees, surcharges or fines incident thereto.

Sec. 2311. Samples to be Furnished by Protesting Parties. — If the nature of the articles permit, importers filing protests involving questions of fact must, upon demand, supply the Collector with samples of the articles which are the subject matter of the protests. Such samples shall be verified by the custom official who made the classification against which the protest are filed.

Sec. 2312. Decision or Action by Collector in Protest and Seizure Cases. — When a protest in proper form is presented in a case where protest in required, the Collector shall reexamine the matter thus presented, and if the protest is sustained, in whole or in part, he shall enter the appropriate order, the entry reliquidated if necessary.

In seizure cases, the Collector, after a hearing, shall in writing make a declaration of forfeiture or fix the amount of the fine or take such other action as may be proper.

Sec. 2313. Review by Commissioner. — T he person aggrieved by the decision or action of the Collector in any matter presented upon protest or by his action in any case of seizure may, within fifteen days after notification in writing by the Collector of his action or decision, give written notice to the Collector of his desire to have the matter reviewed by the Commissioner. Thereupon the Collector shall forthwith transmit all the records of the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision of the Collector and take such steps and make such orders as may be necessary to give effect to his decision.

Sec. 2314. Notice of Decision of Commissioner. — Notice of the decision of the Commissioner shall be given to the party by whom the case was brought before him for review, and in seizure cases such notice shall be effected by personal service if practicable.

Sec. 2315. Supervisory Authority of Commissioner And of Department Head in Certain Cases. — If in any case involving the assessment of duties the importer shall fail to protest the ruling of the Collector, and the Commissioner shall be of the opinion that the ruling was erroneous and unfavorable to the Government, the latter may order a reliquidation; and if the ruling of the Commissioner in any unprotested case should, in the opinion of the department head, be erroneous and unfavorable to the Government, the department head may require the Commissioner to order a reliquidation.

Except as in the preceding paragraph provided, the supervisory authority of the department head over the Bureau of Customs shall not extend to the administrative review of the ruling of the Commissioner in matters appealed to the Court of Tax Appeals.

3. WHEN IMPORTATION BEGINS AND TERMINATED

Section 1201. Articles to Be Imported Only Through Customhouse. — All articles imported into the Philippines, whether subject to duty or not, shall be entered through a customhouse at a port of entry.

Sec. 1202. When Importation Begins and Deemed Terminated. — Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unlade therein. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs.

Sec. 1210. Disposition of Imported Articles Remaining on Vessel After Time for Unlading. — Imported articles remaining on board any vessel after the expiration of the said period for discharge, and not reported for transshipment to another port, may be unladen by the customs authorities and stored at the vessel's expense.

Articles so stored may be claimed and entered at any time within fifteen days after discharge or such longer period not beyond thirty days as the Collector shall approve. If not entered it shall be sold at public auction at the next ensuing regular sale, though at any time prior to sale it may be entered for consumption or warehouse, and be withdrawn upon payment of duties, taxes and other charges, and expenses.

EFFECT OF FAILURE TO FILE ENTRY

ABANDONMENT OF IMPORTED ARTICLES

Sec. 1801. Abandonment, Kinds and Effect of— Abandonment is express when it is made direct to the Collector by the interested party in writing, and it is implied when, from the action or omission of the interested party, an intention to abandon can be clearly inferred. The failure of any interested party to file the import entry within fifteen days or any extension thereof from the discharge of the vessel or aircraft, shall be implied abandonment. An implied abandonment shall not be effective until the article is declared by the Collector to have been abandoned after notice thereof is given to the interested party as in seizure cases.

Any person who abandons an imported article renounces all his interests and property rights therein.

Sec. 1802. Abandonment of Imported Articles. — The owner or importer of any articles may, within ten days after filing of the import entry, abandon to the Government all or a part of the articles included in an invoice, and, thereupon, he shall be relieved from the payment of duties, taxes and all other charges and expenses due thereon: Provided, That the portion so abandoned is not less than ten per cent of the total invoice and is not less than one package, except in cases of articles imported for personal or family use. The article so abandoned shall be delivered by the owner or importer at such place within the port of arrival as the Collector shall designate, and upon his failure to so comply, the owner or importer shall be liable for all expenses that may be incurred in connection with the disposition of the articles.

Nothing in this section shall be construed as relieving such owner or importer from any criminal liability which may arise from any violation of law committed in connection with the importation of the abandoned article.

CHEVRON PHILIPPINES VS. COMMISSIOER OF CUSTOMS

Effective date of reduction of tariff rate from 10% to 3% per RA 8180 (Apr 16, 1996) while importations arrived in the Phils prior to Apr 16, 1996; Import Entry Declarations [IED] were filed prior to said later date but the Import Entry Internal Revenue Declarations [IEIRD] were filed after said date. Chevron paid customs duties at3%. Three years later, an informer reported the transactions and investigation conducted. The CBOC declared the importations abandoned for failure to enter them within 30 days from unloading and issued assessments for more than P1 Billion. Hence the appeal to CTA division which ruled that 10% applied per Sec 204, 205 and 1408; there was fraud but no abandonment. Both parties went to CTA en banc, which ruled that there was abandonment because IEIRD was not filed within 30 days per Sec 1301 in relation to Sec 205, thus abandonment ensued per Sec 1801 and 1802; notice of abandonment per CMO 15-94was not necessary because Chevron had knowledge; and agreed there was fraud for failure file entry that was intended to avoid higher rate of duties.

Issues: 1. whether “entry” under Section 1301 in relation to Section 1801 of the TCC refers to the IED or the IEIRD?

\ The filing of the IEIRDs has several important purposes: to ascertain the value of the imported articles, collect the correct and final amount of customs duties and avoid smuggling of goods into the country. Entry refers to both. They must be filed within 30 days.

2. whether fraud was perpetrated by petitioner? yes

There was fraud. Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is taken of another. It is a question of fact and the circumstances constituting it must be alleged and proved in the court below. The finding of the lower court as to the existence or non-existence of fraud is final and cannot be reviewed here unless clearly shown to be erroneous. In this case, fraud was established by the IPD-CIIS of the BOC. Both the CTA First Division anden banc agreed completely with this finding. Chevron bid edits time to avail of lower rate. Hence, due to the presence of fraud, the one year prescriptive period of the finality of liquidation under Section 1603 was inapplicable and

3. whether the importations can be considered abandoned under Section 1801. Yes.

Per Sec 1801 as amended by RA 7651. Notice was not necessary because BOC learned of fraud after 3 years and importations had been released. Abandoned article ipso facto deemed the property of the government per Sec 1802. This section cannot be questioned as unconstitutional collaterally. Besides, there is clear intent to do away with seizure proceedings in abandonment. Ordered to pay P893Million plus 6% legal interest per annum accruing from the date of promulgation of this decision until its finality. Upon finality of this decision, the sum so awarded shall bear interest at the rate of twelve percent (12%) per annum until its full satisfaction.

4. ARTICLES SUBJECT TO DUTY

Section 101. Imported Articles Subject to Duty. — All articles, when imported from any foreign country into the Philippines, shall be subject to duty upon each importation, even though previously exported from the Philippines, except as otherwise specifically provided for in this Code or in other laws.

Sec. 1205. Importations by the Government. — Except as otherwise specifically provided, all importations by the government for its own use or that of its subordinate branches on instrumentalities, or corporations, agencies or instrumentalities owned or controlled by the government, shall be subject to the duties, taxes, fees and other charges provided for in this Code: Provided, however, That upon certification of the head of the department or political subdivision concerned, with the approval of the Auditor General, that the imported article is actually being used by the government or any of its political subdivision concerned, the amount of duty, tax, fee or charge shall be refunded to the government or the political subdivision which paid it.

EFFECTIVITY DATE OF RATE OF DUTY

Sec. 205. Effective Date of Rates of Import Duty. — Imported articles shall be subject to the rate or rates of import duty existing at the time of entry, or withdrawal from warehouse in the Philippines, for consumption.

On and after the day when this Code shall go into effect all articles previously imported, for which no entry has been made, and all articles previously entered without payment of duty and under bond for warehousing, transportation, or any other purpose, for which no permit of delivery to the importer or his agent has been issued, shall be

subject to the rates of duty imposed by this Code and to no other duty, upon the entry, or withdrawal thereof from warehouse, for consumption.

On articles abandoned or forfeited to, or seized by, the government, and then sold at public auction, the rate of duty and the tariff in force on the date of the auction shall apply: Provided, That duty based on the weight, volume and quantity of articles shall be levied and collected on the weight, volume and quantity at the time of their entry into the warehouse or the date of abandonment, forfeiture and/or seizure.

TYPES OF DUTIES

kinds of tariffs or customs duties

1. Regular tariff or customs duties - these are taxes imposed or assessed upon merchandise from, or exported to, a foreign country for the purpose of raising revenues.

2. Special tariffs or custom duties - these are additional import duties imposed on specific kinds of imported articles under certain conditions. They are imposed for the protection of consumers and manufacturers, as well as Philippine products from undue competition posed by foreign made products, specifically:

a. Safeguard dutiesb. Dumping dutiesc. Countervailing dutiesd. Marking dutiese. Retaliatory duties

a. SAFEGUARD DUTIES

Safeguard measures are defined as “emergency" actions with respect to increased imports of particular products, where such imports have caused or threaten to cause serious injury to the importing Member's domestic industry.

It is a measure provided by the State to protect domestic industries and producers from increased imports which cause or threaten to cause serious injury to those domestic industries and producers.

Authorized person to impose safeguard measures

1. Secretary of Agriculture – If the article in question is an agricultural product;2. Secretary of Trade and Industry – If the article is non-agricultural product.

The factual findings of the Tariff Commission on the existence or non-existence of conditions warranting the imposition of general safeguard measures binding upon the DTI Secretary

The positive final determination by the Tariff Commission operates as an indispensable requisite to the imposition of the safeguard measure. Congress in enacting the SMA and prescribing the roles to be played therein by the Tariff Commission and the DTI Secretary did not envision that the President, or his/her alter ego, could exercise supervisory powers over the Tariff Commission- the Tariff Commission does not fall under the administrative supervision of the DTI.

B. DUMPING DUTIES

Sec. 301. Dumping Duty. —

a. Whenever the Secretary of Finance (hereinafter called the Secretary") has reason to believe, from invoices or other papers or from information made available to him by any government agency or interested party, that a specific kind or class of foreign article, whether dutiable or duty-free, is being sold or is likely to be sold for exportation to, or in, the Philippines, at a price less than its fair value, as hereinafter defined, the importation or sale of which might injure, or prevent the establishment of, or is likely to injure an industry in the Philippines, he shall so advise the Tariff Commission>

b. The Commission, upon receipt of such advice from the Secretary, shall conduct an investigation to —

1. Verify if the kind or class of articles in question is being sold or is likely to be sold for exportation to, or in, the Philippines at a price less than its fair value;

2. Determine if , as a result thereof, an industry in the Philippines is being injured or is likely to be injured or is prevented from being established by reason of the importation or sale of such kind or class of article into the Philippines; and

3. Ascertain the difference, if any, between the purchase price or, in the absence thereof, the exporter's sales price, and the fair value of the article. The Commission shall submit its findings to the Secretary within one month after receipt of the aforesaid advice.

c. The Secretary shall, within fifteen days from the report of the Commission, decide whether the article in question is being imported in violation of this section and shall give due notice of such finding and shall direct the Commissioner of Customs to cause the dumping duty, to be levied, collected and paid, as prescribed in this section, in addition to any other duties, taxes and charges imposed by law on such article.

d. The "dumping duty" as provided for in subsection "e" hereof shall be equal to the difference between the purchase price or, in the absence thereof, the exporter's sales price, and the fair value of the article.

e. For the purpose of this section — 1. The "fair value" of an article shall be its foreign market

value, or, in the absence of such value, its cost of production.

2. The "purchase price" of an imported article shall be the price at which such article has been purchased or agreed to be purchased, prior to the time of exportation, by the person by whom or for whose account the article is imported, plus, when not included in such price —

(a) The cost of all containers and coverings and all other costs, charges and expenses incident to placing the article in condition, packed ready for shipment to the Philippines;

(b) The amount of any export tax paid in the country of exportation on the exportation of the article to the Philippines;

(c) The amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the article to the Philippines; and

(d) The amount of any taxes imposed in the country of exportation upon the manufacturer, producer or seller, in respect to the manufacture, production or sale of the article, which have been rebated, or which have not been collected, be reason of the exportation of the article of the Philippines.

Any additional costs, charges and expenses incident to bringing the article from the place of shipment in the country of

exportation to the place of delivery in the Philippines and Philippine customs duties imposed thereon shall not be included.

3. The "exporter's sale price" of an imported article shall be the price at which such article is sold or agreed to be sold in the Philippines, before or after the time of exportation, by or for the account of the exporter, including —

(a) The cost of all containers and coverings and all other costs, charges and expenses incident to placing the article in condition, packed ready for shipment to the Philippines;

(b) The amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the article to the Philippines; and

(c) The amount of any taxes imposed in the country of exportation upon the manufacturer, producer or seller in respect to the manufacture, production or sale of the article, which have been rebated, or which have not been collected, by reason of its exportation to the Philippines. The following amount, if included, shall be deducted —

(1) The amount of costs, charges and expenses, and Philippine customs duties, incident to bringing the article from the place of shipment in the country of exportation to the place of delivery in the Philippines;

(2) The amount of commissions, if any, for selling in the Philippines the particular article under consideration;

(3) An amount equal to the expenses, if any, generally incurred by or for the account of the exporter in the Philippines in selling identical or substantially identical article; and

(4) The amount of any export tax paid in the country of exportation on the exportation of the article to the Philippines.

4. The "foreign market value" of an imported article shall be the price, at the time of exportation of such article to the Philippines, at which such or similar article is sold or freely offered for sale to all purchasers in the principal markets of the country from which exported, in the usual wholesale quantities and in the ordinary course of trade for home consumption (or, if not sold or offered for sale for home consumption, then for exportation to countries other than the Philippines), including the cost of all containers and coverings

and all other costs, charges and expenses incident to placing the article in condition packed ready for shipment to the Philippines, except that in the case of articles purchased or agreed to be purchased by the person by whom or for whose account the article is imported, prior to the time of exportation, the foreign market value shall be ascertained as of the date of such purchase or agreement to purchase. In the ascertainment of foreign market value for the purpose of this section, no pretended sale or offer for sale, and no sale or offer for sale intended to establish a fictitious market, shall be taken into account.

5. The "cost of production" of an imported article shall be the sum of —

(a) The cost of materials of, and of fabrication, manipulation or other process employed in manufacturing or producing, identical or substantially identical article, at a time preceding the date of shipment of the particular article under consideration which would ordinarily permit the manufacture or production of the particular article under consideration in the usual course of business; (b) The usual general expenses not less than 10 per cent of such cost, in the case of identical or substantially identical articles; (c) The cost of all containers and coverings, and all other costs, charges and expenses incident to placing the particular article under consideration in condition, packed ready for shipment to the Philippines; and (d) An addition for profit not less than 8 per cent of the sum of the amounts determined under subparagraphs (a) and (b) hereof, equal to the profit which is originally added, in the case of articles of the same general character as the particular article under consideration, by manufacturers or producers in the country of manufacture or production who are engaged in the same general trade as the manufacturer or producer of the particular article under consideration.

f. For the purposes of this section the "exporter" of an imported article shall be the person by whom or for whose account the article is imported into the Philippines —

1. If such person is the agent or principal of the exporter, manufacturer or producer; or

2. If such person owns or controls, directly or indirectly, through stock ownership or control or otherwise, any interest in the business of the exporter, manufacturer or producer; or

3. If the exporter, manufacturer or producer owns or controls, directly or indirectly, through stock ownership or control or otherwise, any interest in any business conducted by such persons; or

4. If any person or persons, jointly or severally, directly or indirectly, through stock ownership or control or otherwise, own

or control in the aggregate 20 per cent or more of the voting power or control in the business carried on by the person by whom or for whose account the article is imported into the Philippines, and also 20 per cent or more of such power or control in the business of the exporter, manufacturer or producer.

g. Pending investigation and final decision of the case, the article in question, and articles of the same specific kind or class subsequently imported under similar circumstances, shall be released to the owner, importer, consignee or agent upon the giving of a bond in an amount equal to the double the estimated value thereof. Articles which may have been delivered under the provision of section fifteen hundred and three of this Code prior to the institution of the investigation provided in this section shall, pending final decision, be ordered returned to the custody of the collectors of customs unless released under bond in accordance with this section.

h. Any aggrieved party may only appeal the amount of dumping duty that is levied and collected by the Commissioner of Customs to the Court of Tax Appeals in the same manner and within the same period provided for by law in the case of appeals from decisions of the Commissioner of Customs.

i. (1) The article, if it has not been previously released under bond as

provided in subsection "g" hereof, shall be released after payment by the party concerned of the corresponding dumping duty in addition to any other duties, taxes and charges, if any, or re-exported by the owner, importer, consignee or agent, at his option and expense, upon the filing of a bond in an amount equal to double the estimated value of the article, conditioned upon the presentation of a landing certificate issued by a consular officer of the Philippines at the country of destination; or

(2) If the article has been previously released under bond , as provided in subsection "g" hereof, the party concerned shall be required to pay the corresponding dumping done in addition to any other duties, taxes and charges, if any.

j. Any investigation to be conducted by the Commission under this section shall include a hearing or hearings where the owner, importer, consignee or agent of the imported article, the local producers of a like article, other parties directly affected, and such other parties as in the judgment of the Commission are entitled to appear, shall be given an opportunity to be heard and to present evidence bearing on the subject matter.

k. It shall be the duty of collectors of customs at all ports of entry to levy and collect the dumping duty in accordance with subsection "d" hereof on the specific kind or class of article as to which the Secretary has made a decision of dumping.

It shall also be their duty to bring to the attention of the Secretary, thru the Commissioner of Customs, any case coming within their notice which may, in their opinion, require action as provided in this section.

l. The Secretary shall promulgate all rules and regulations necessary to carry out the provisions of this section.

f. COUNTERVAILING DUTIES

Sec. 302. Countervailing Duty. — a. On articles dutiable under this Code, upon the production, manufacture or export of which any bounty, subsidy or subvention is directly or indirectly granted in the country of origin and/or exportation, and the importation of which has been determined by the Secretary, after investigation and report of the Commission, as likely to materially injure an established industry, or prevent or considerably retard the establishment of an industry in the Philippines, there shall be levied a countervailing duty equal to the ascertained or estimated amount of such bounty, subsidy or subvention: Provided, That the exception of any exported article from a duty or tax imposed on like articles when destined for consumption in the country of origin and/or exportation or the refunding of such duty or tax, shall not be deemed to constitute a grant of a bounty, subsidy or subvention within the meaning of this section; however, should an article be allowed drawback by the country of origin and/or exportation, only the ascertained or estimated excess of the amount of the drawback over the total amount of the duties and/or internal taxes, if any, shall constitute a bounty, subsidy or subvention.

b. The Commission, on its own motion or upon application of any interested party, when in its judgment there is good and sufficient reason therefor, shall ascertain, determine or estimate the net amount of such bounty, subsidy or subvention and shall transmit to the Secretary the amounts so ascertained, determined or estimated, if any. Wherever it is ascertained that the conditions which necessitated the imposition of the countervailing duty have ceased to exist, and the Commission shall so certify to the Secretary, the latter shall take the necessary steps to suspend or discontinue the imposition of such duty.

c. The Secretary shall make all rules and regulations necessary to carry out the provisions of this section.

g. Marking duties

Sec. 303. Marking of Imported Articles and Containers. —

a. Marking of Articles. — Except as hereinafter provided, every article of foreign origin (or its container, as provided in subsection "b" hereof) imported into the Philippines shall be marked in any official language of the Philippines and in a conspicuous place as legibly, indelibly and permanently as the nature of the article (or container) will permit in such manner as to indicate to an ultimate purchaser in the Philippines the name of the country of origin of the article. The Commissioner of Customs shall, with the approval of the department head, issue rules and regulations to —

(1) Determine the character of words and phrases or abbreviations thereof which shall be acceptable as indicating the country of origin and prescribe any reasonable method of marking, whether by printing, stenciling, stamping, branding, labeling or by any other reasonable method, and a conspicuous place on the article or container where the marking shall appear;

(2) Require the addition of any other words or symbols which may be appropriate to prevent deception or mistake as to the origin of the article or as to the origin of any other article with which such imported article is usually combined subsequent to importation but before delivery to an ultimate purchaser; and

(3) Authorize the exception of any article from the requirements of marking if —

(a) Such article is incapable of being marked; (b) Such article cannot be marked prior to shipment to the

Philippines without injury; (c) Such article cannot be marked prior to shipment to the

Philippines, except at an expense economically prohibitive of its importation;

(d) The marking of a container of such article will reasonably indicate the origin of such article;

(e) Such article is a crude substance; (f) Such article is imported for use by the importer and not

intended for sale in its imported or any other form; (g) Such article is to be processed in the Philippines by the importer

or for his account otherwise than for the purpose of concealing the origin of such article and in such manner that any mark contemplated by this section would necessarily be obliterated, destroyed or permanently concealed;

(h) An ultimate purchaser, by reason of the character of such article or by reason of the circumstance of its importation, must

necessarily know the country of origin of such article even though it is not marked to indicate its origin;

(i) Such article was produced more than twenty years prior to its importation into the Philippines; or

(j) Such article cannot be marked after importation except at an expense which is economically prohibitive, and the failure to mark the article before importation was not due to any purpose of the importer, producer, seller or shipper to avoid compliance with this section.

b. Marking of Containers. — Whenever an article is excepted under subdivision (3) of subsection "a" of this section from the requirements of marking, the immediate container, if any, of such article, or such other container or containers of such article as may be prescribed by the Commissioner of Customs with the approval of the department head, shall be marked in such manner as to indicate to an ultimate purchaser in the Philippines the name of the country of origin of such article in any official language of the Philippines, subject to all provisions of this section, including the same exceptions as are applicable to articles under subdivision (3) of subsection "a".

c. Marking Duty for Failure to Mark. — If at the time of importation any article (or its container, as provided in subsection "b" hereof), is not marked in accordance with the requirements of this section, there shall be levied, collected and paid upon such article a marking duty of 5 per cent ad valorem, which shall be deemed to have accrued at the time of importation, except when such article is exported or destroyed under customs supervision and prior to the final liquidation of the corresponding entry.

d. Delivery Withheld until Marked. — No imported article held in customs custody for inspection, examination or appraisement shall be delivered until such articles and/or their containers, whether released or not from customs custody, shall have been marked in accordance with the requirements of this section and until the amount of duty estimated to be payable under subsection "c" of this section shall have been deposited. Nothing in this section shall be construed as excepting any article or its container from the particular requirements of marking provided for in any provisions of law.

e. The failure or refusal of the owner or importer to mark the articles as herein required within a period of thirty days after due notice shall constitute as an act of abandonment of said articles and their disposition shall be governed by the provisions of this Code relative to abandonment of imported articles.

h. Retaliatory duties

Sec. 304. Discrimination by Foreign Countries. —

a. The President, when he finds that the public interest will be served thereby, shall by proclamation specify and declare new or additional duties in an amount not exceeding 50 per cent of the existing rates as hereinafter provided upon articles wholly or in part the growth or product of, or imported in a vessel of, any foreign country whenever he shall find as a fact that such country —

(1) Imposes, directly or indirectly, upon the disposition in, or transportation in transit through or re-exportation from such country of any article wholly or in part the growth or product of the Philippines any unreasonable charge, exaction, regulation or limitation which is not equally enforced upon the like articles of every foreign country; or

(2) Discriminates in fact against the commerce of the Philippines, directly or indirectly, by law or administrative regulation or practice, by or in respect to any customs, tonnage, or port duty, fee, charge, exaction, classification, regulation, condition, restriction or prohibition, in such manner as to place the commerce of the Philippines at a disadvantage compared with the commerce of any foreign country.

b. If at any time the President shall find it to be a fact that any foreign country has not only discriminated against the commerce of the Philippines, as aforesaid but has, after the issuance of a proclamation as authorized in subsection "a" of this section, maintained or increased its said discriminations against the commerce of the Philippines, the President is hereby authorized, if he deems it consistent with the interests of the Philippines, to issue a further proclamation directing that such product of said country or such articles imported in its vessels as he shall deem consistent with the public interests, shall be excluded from importation into the Philippines.

c. Any proclamation issued by the President under the authority of this section shall, if he deems it consistent with the interests of the Philippines, extend to the whole of any foreign country or may be confined to any subdivision or subdivisions thereof; and the President shall, whenever he deems the public interests require, suspend, revoke, supplement or amend any such proclamation.

d. All articles imported contrary to the provisions of this section shall be forfeited to the Government of the Philippines and shall be liable to be seized, prosecuted and condemned in like manner and under the same regulations, restrictions and provisions as may from time to time be

established for the recovery, collection, distribution and remission of forfeiture to the government by the tariff and customs laws. Whenever the provision of this section shall be applicable to importations into the Philippines of articles wholly or in part the growth or product of any foreign country, they shall be applicable thereto whether such articles are imported directly or indirectly.

e. It shall be the duty of the Commission to ascertain and at all times to be informed whether any of the discriminations against the commerce of the Philippines enumerated in subsections "a" and "b" of this section are practiced by any country; and if and when such discriminatory acts are disclosed, it shall be the duty of the Commission to bring the matter to the attention of the President, together with recommendation.

f. The Secretary shall make such rules and regulations as are necessary for the execution of such proclamation as the President may issue in accordance with the provisions of this section.

g. The authority granted herein to the President shall be exercised only when Congress is not in session.

Other types of fees charged by the Bureau of Customs

1. Arrastre charge – is the amount due for the handling, receiving and custody of the imported or exported article or the baggage of the passenger.

2. Wharfage dues – counterpart of license, charged not for the use of any wharf but for a special fund known as the Port Works Fund

3. Berthing fee – are levied on a vessel coming or mooring within specified places or waters of a port. No berthing charges may be collected from vessels moored at municipal/private ports.

4. Harbor fee – collected port charges on the different activities of a vessel engaged in foreign trade for entrance into or departure from a port of entry.

5. Tonnage dues—collected port charges on the different activities of a vessel engaged in foreign trade for coming to the Philippines from a foreign port or for going to a foreign port from the Philippines.

PROHIBITED IMPORTATIONS

Sec. 102. Prohibited Importations. — The importation into the Philippines of the following articles is prohibited:

a. Dynamite, gunpowder, ammunitions and other explosives, firearm and weapons of war, and detached parts thereof, except when authorized by law.

b. Written or printed article in any form containing any matter advocating or inciting treason, rebellion, insurrection or sedition against the Government of the Philippines, of forcible resistance to any law of the Philippines, or containing any threat to take the life of or inflict bodily harm upon any person in the Philippines.

c. Written or printed articles, photographs, engravings, lithographs, objects, paintings, drawings or other representation of an obscene or immoral character.

d. Articles, instruments, drugs and substances designed, intended or adapted for preventing human conception or producing unlawful abortion, or any printed matter which advertises or describes or gives directly or indirectly information where, how or by whom human conception is prevented or unlawful abortion produced.

e. Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or mechanical devices used in gambling, or in the distribution of money, cigars, cigarettes or other articles when such distribution is dependent upon chance, including jackpot and pinball machines or similar contrivances.

f. Lottery and sweepstakes tickets except those authorized by the Philippine Government, advertisements thereof and lists of drawings therein.

g. Any article manufactured in whole or in part of gold silver or other precious metal, or alloys thereof, the stamps brands or marks of which do not indicate the actual fineness or quality of said metals or alloys.

h. Any adulterated or misbranded article of food or any adulterated or misbranded drug in violation of the provisions of the "Food and Drugs Act."

i. Marihuana, opium poppies, coca leaves, or any other narcotics or synthetic drugs which are or may hereafter be declared habit forming by the President of the Philippines, any compound, manufactured salt, derivative, or preparation thereof, except when imported by the Government of the Philippines or any person duly authorized by the Collector of Internal Revenue, for medicinal purposes only.

j. Opium pipes and parts thereof, of whatever material.

k. All other articles the importation of which is prohibited by law.

CUSTOMS VALUATION

R.A. 9135

(a) TRANSACTION VALUE SYSTEM

"SEC. 201. Basis of Dutiable Value. –

(A) Method One. – Transaction Value. - The dutiable value of an imported article subject to an ad valorem rate of duty shall be the transaction value, which shall be the price actually paid or payable for the goods when sold for export to the Philippines, adjusted by adding:

(1) The following to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the imported goods:

(a) Commissions and brokerage fees (except buying commissions);

(b) Cost of containers;

(c) The cost of packing, whether for labour or materials;

(d) The value, apportioned as appropriate, of the following goods and services: materials, components, parts and similar items incorporated in the imported goods; tools; dies; moulds and similar items used in the production of imported goods; materials consumed in the production of the imported goods; and engineering, development, artwork, design work and plans and sketches undertaken elsewhere than in the Philippines and necessary for the production of imported goods, where such goods and services are supplied directly or indirectly by the buyer free of charge or at a reduced cost for use in connection with the production and sale for export of the imported goods;(e) The amount of royalties and license fees related to the goods being valued that the buyer must pay, either directly or indirectly, as a condition of sale of the goods to the buyer;

(2) The value of any part of the proceeds of any subsequent resale, disposal or use of the imported goods that accrues directly or indirectly to the seller;

(3) The cost of transport of the imported goods from the port of exportation to the port of entry in the Philippines;

(4) Loading, unloading and handling charges associated with the transport of the imported goods from the country of exportation to the port of entry in the Philippines; and

(5) The cost of insurance.

All additions to the price actually paid or payable shall be made only on the basis of objective and quantifiable data.

No additions shall be made to the price actually paid or payable in determining the customs value except as provided in this Section: Provided, That Method One shall not be used in determining the dutiable value of imported goods if:

(a) There are restrictions as to the disposition or use of the goods by the buyer other than restrictions which:

(i) Are imposed or required by law or by Philippine authorities;

(ii) Limit the geographical area in which the goods may be resold; or

(iii) Do not substantially affect the value of the goods.

(b) The sale or price is subject to some condition or consideration for which a value cannot be determined with respect to the goods being valued;

(c) Part of the proceeds of any subsequent resale, disposal or use of the goods by the buyer will accrue directly or indirectly to the seller, unless an appropriate adjustment can be made in accordance with the provisions hereof; or

(d) The buyer and the seller are related to one another, and such relationship influenced the price of the goods. Such persons shall be deemed related if:

(i) They are officers or directors of one another’s businesses;

(ii) They are legally recognized partners in business;

(iii) There exists an employer-employee relationship between them;

(iv) Any person directly or indirectly owns, controls or holds five percent (5%) or more of the outstanding voting stock or shares of both seller and buyer;

(v) One of them directly or indirectly controls the other;

(vi) Both of them are directly or indirectly controlled by a third person;

(vii) Together they directly or indirectly control a third person; or

(viii) They are members of the same family, including those related by affinity or consanguinity up to the fourth civil degree.

Persons who are associated in business with one another in that one is the sole agent, sole distributor or sole concessionaire, however described, of the other shall be deemed to be related for the purposes of this Act if they fall within any of the eight (8) cases above.

(B) Method Two. – Transaction Value of Identical Goods. – Where the dutiable value cannot be determined under method one, the dutiable value shall be the transaction value of identical goods sold for export to the Philippines and exported at or about the same time as the goods being valued. "Identical goods" shall mean goods which are the same in all respects, including physical characteristics, quality and reputation. Minor differences in appearances shall not preclude goods otherwise conforming to the definition from being regarded as identical.

(C) Method Three. – Transaction Value of Similar Goods. – Where the dutiable value cannot be determined under the preceding method, the dutiable value shall be the transaction value of similar goods sold for export to the Philippines and exported at or about the same time as the goods being valued. "Similar goods" shall mean goods which, although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable. The quality of the goods, their reputation and the existence of a trademark shall be among the factors to be considered in determining whether goods are similar. If the dutiable value still cannot be determined through the successive application of the two immediately preceding methods, the dutiable value shall be determined under method four or, when the dutiable value still cannot be determined under that method, under method five, except that, at the request of the importer, the order of application of methods four and five shall be reversed: Provided, however, That if the Commissioner of Customs deems that he will experience real difficulties in determining the dutiable value using method five, the Commissioner of Customs may refuse such a request in which event the dutiable value shall be determined under method four, if it can be so determined.

(D) Method Four. – Deductive Value. – The dutiable value of the imported goods under this method shall be the deductive value which shall be based on the unit price at which the imported goods or identical or similar imported goods are sold in the Philippines, in the same condition as when imported, in the greatest aggregate quantity, at or about the time of the importation of the goods being valued, to persons not related to the persons from whom they buy such goods, subject to deductions for the following:

(1) Either the commissions usually paid or agreed to be paid or the additions usually made for profit and general expenses in connection with sales in such country of imported goods of the same class or kind;

(2) The usual costs of transport and insurance and associated costs incurred within the Philippines; and

(3) Where appropriate, the costs and charges referred to in subsection (A) (3), (4) and (5); and

(4) The customs duties and other national taxes payable in the Philippines by reason of the importation or sale of the goods.

If neither the imported goods nor identical nor similar imported goods are sold at or about the time of importation of the goods being valued in the Philippines in the conditions as imported, the customs value shall, subject to the conditions set forth in the preceding paragraph hereof, be based on the unit price at which the imported goods or identical or similar imported goods sold in the Philippines in the condition as imported at the earliest date after the importation of the goods being valued but before the expiration of ninety (90) days after such importation.

If neither the imported goods nor identical nor similar imported goods are sold in the Philippines in the condition as imported, then, if the importer so requests, the dutiable value shall be based on the unit price at which the imported goods, after further processing, are sold in the greatest aggregate quantity to persons in the Philippines who are not related to the persons from whom they buy such goods, subject to allowance for the value added by such processing and deductions provided under Subsections (D)(1), (2), (3) and (4) hereof.

(E) Method Five. – Computed Value. – The dutiable value under this method shall be the computed value which shall be the sum of:

(1) The cost or the value of materials and fabrication or other processing employed in producing the imported goods;

(2) The amount for profit and general expenses equal to that usually reflected in the sale of goods of the same class or kind as the goods being valued which are made by producers in the country of exportation for export to the Philippines;

(3) The freight, insurance fees and other transportation expenses for the importation of the goods;

(4) Any assist, if its value is not included under paragraph (1) hereof; and

(5) The cost of containers and packing, if their values are not included under paragraph (1) hereof.

The Bureau of Customs shall not require or compel any person not residing in the Philippines to produce for examination, or to allow access to, any account or other record for the purpose of determining a computed value. However, information supplied by the producer of the goods for the purposes of determining the customs value may be verified in another country with the agreement of the producer and provided they will give sufficient advance notice to the government of the country in question and the latter does not object to the investigation.

(F) Method Six. – Fallback Value. – If the dutiable value cannot be determined under the preceding methods described above, it shall be determined by using other reasonable means and on the basis of data available in the Philippines.

If the importer so requests, the importer shall be informed in writing of the dutiable value determined under Method Six and the method used to determine such value.

No dutiable value shall be determined under Method Six on the basis of:

(1) The selling price in the Philippines of goods produced in the Philippines;

(2) A system that provides for the acceptance for customs purposes of the higher of two alternative values;

(3) The price of goods in the domestic market of the country of exportation;

(4) The cost of production, other than computed values, that have been determined for identical or similar goods in accordance with Method Five hereof;

(5) The price of goods for export to a country other than the Philippines;

(6) Minimum customs values; or

(7) Arbitrary or fictitious values.

If in the course of determining the dutiable value of imported goods, it becomes necessary to delay the final determination of such dutiable value, the importer shall nevertheless be able to secure the release of the imported goods upon the filing of a sufficient guarantee in the form of a surety bond, a deposit, cash or some other appropriate instrument in an amount equivalent to the imposable duties and taxes on the imported goods in question conditioned upon the payment of customs duties and taxes for which the imported goods may be liable: Provided, however, That goods, the importation of which is prohibited by law shall not be released under any circumstance whatsoever.

Nothing in this Section shall be construed as restricting or calling into question the right of the Collector of Customs to satisfy himself as to the truth or accuracy of any statement, document or declaration presented for customs valuation purposes. When a declaration has been presented and where the customs administration has reason to doubt the truth or accuracy of the particulars or of documents produced in support of this declaration, the customs administration may ask the importer to provide further explanation, including documents or other evidence, that the declared value represents the total amount actually paid or payable for the imported goods, adjusted in accordance with the provisions of Subsection (A) hereof.

If, after receiving further information, or in the absence of a response, the customs administration still has reasonable doubts about the truth or accuracy of the declared value, it may, without prejudice to an importer’s right to appeal pursuant to Article 11 of the World Trade Organization Agreement on customs valuation, be deemed that the customs value of the imported goods cannot be determined under Method One. Before taking a final decision, the Collector of Customs shall communicate to the importer, in writing if requested, his grounds for doubting the truth or accuracy of the particulars or documents produced and give the importer a reasonable opportunity to respond. When a final decision is made, the customs administration shall communicate to the importer in writing its decision and the grounds therefor."

(b) POST ENTRY AUDIT

"SEC. 3515. Compliance Audit or Examination of Records. - The importers/customs brokers shall allow any customs officer authorized by the Bureau of Customs to enter during office hours any premises or place where the records referred to in the preceding section are kept to conduct audit examination, inspection, verification and/or investigation of those records either in relation to specific transactions or to the adequacy and integrity of the manual or electronic system or systems by which such records are created and stored. For this purpose. A duty authorized customs officer shall be full and free access to all books, records, and documents necessary or relevant for the purpose of collecting the proper duties and taxes.

In addition, the authorized customs officer may make copies of, or take extracts from any such documents. The records or documents must, as soon as practicable after copies of such have been taken, be returned to the person in charge of such documents.

A copy of any such document certified by or on behalf of the importer/broker is admissible in evidence in all courts as if it were the original.

An authorized customs officer is not entitled to enter any premises under this Section unless, before so doing, the officer produces to the person occupying or apparently in charge of the premises written evidence of the fact that he or she is an authorized officer. The person occupying or apparently in charge of the premises entered by an officer shall provide the officer with all reasonable facilities and assistance for the effective exercise of powers under this Section.

Unless otherwise provided herein or in other provisions of law, the Bureau of Customs may, in case of disobedience, invoke the aid of the proper regional trial court within whose jurisdiction the matter falls. The court may punish contumacy or refusal as contempt. In addition, the fact that the importer/broker denies the authorized customs officer full and free access to importation records during the conduct of a post-entry audit shall create a presumption of inaccuracy in the transaction value declared for their imported goods and constitute grounds for the Bureau of Customs to conduct a re-assessment of such goods.

This is without prejudice to the criminal sanctions imposed by this Code and administrative sanctions that the Bureau of Customs may impose against contumacious importers under existing laws and

regulations including the authority to hold delivery or release of their imported articles."

"SEC. 3516. Scope of the Audit. –

(a) The audit of importers shall be undertaken:

(1) When firms are selected by a computer-aided risk management system, the parameters of which are to be based on objective and quantifiable data and are to be approved by the Secretary of Finance upon recommendation of the Commissioner of Customs. The criteria for selecting firms to be audited shall include, but not be limited to, the following:

(a) Relative magnitude of customs revenue from the firm;(b) The rates of duties of the firm’s imports;(c) The compliance tract records of the firm; and(d) An assessment of the risk to revenue of the firm’s import activities.

(2) When errors in the import declaration are detected;

(3) When firms voluntarily request to be audited, subject to the approval of the Commissioner of Customs.

(b) Brokers shall be audited to validate audits of their importer clients and/or fill information gaps revealed during an audit of their importers clients."

"SEC. 3517. Documents in Foreign Language. - Where a document in a foreign language is presented to a customs officer in relation to the carrying out of any duty or the exercise of any power of the Bureau of Customs under this Code, said document in a foreign language must be accompanied with a translation in the official language of this country."

"Sec. 3518. Records to Be Kept by Customs. – The Bureau of Customs shall likewise keep a record of audit results in a database of importer and broker profiles, to include but not be limited to:

(a) Articles of Incorporation;(b) The company structure, which shall include but not be limited to: (1) Incorporators and Board of Directors;

(2) Key officers; and(3) Organizational structure;

(c) Key importations;

(d) Privileges enjoyed;(e) Penalties; and(f) Risk category (ies)."

6. IMPORTATION IN VIOLATION OF TCCP

PENAL PROVISION

Sec. 3601. Unlawful Importation. — Any person who shall fraudulently import or bring into the Philippines, or assist in so doing, any article, contrary to law, or shall receive, conceal, buy, sell, or in any manner facilitate the transportation, concealment, or sale of such article after importation, knowing the same to have been imported contrary to law…PUNISHABLE BY a fine of not less than P600 nor more than P5,000 and imprisonment for not less than 6 months nor more than 2years and, if the offender is an alien, he shall be deported after serving the sentence.

When, upon trial for a violation of this section, the defendant is shown to have or to have had possession of the article in question, such possession shall be deemed sufficient evidence to authorize conviction, unless the defendant shall explain the possession to the satisfaction of the court.

Sec. 3602. Various Fraudulent Practices Against Customs Revenue. — Any person who makes or attempts to make any entry of imported or exported article by means of any false or fraudulent invoice, declaration, affidavit, letter, paper, or by means of any false statement, written or verbal, or by means of any false or fraudulent practice whatsoever, or shall be guilty of any willful act or omission by means of whereof the Government might be deprived of the lawful duties, taxes and other charges, or any portion thereof, accruing from the article or any portion thereof, embraced or referred to in such invoice, declaration, affidavit, letter, paper, or statement, or affected by such act or omission, shall, for each offense…PUNISHABLE BY a fine of not less than P600 nor more than P5,000 and by imprisonment for not less than 6months nor more than 2years and if the offender is an alien, he shall be deported after serving the sentence.

PROPERTIES SUBJECT TO FORFEITURE

Sec. 2530.Property Subject to Forfeiture Under Tariff and Customs Laws. — Any vessel or aircraft, cargo, articles and other objects shall, under the following conditions, be subject to forfeiture:

a. Any vessel or aircraft, including cargo, which shall be used lawfully in the importation or exportation of articles into or from any Philippine port or place except a port of entry; and any vessel which, being of less than thirty tons capacity shall be used in the importation of articles into any Philippine port or place except into a port of the Sulu sea where importation in such vessel may be authorized by the Commissioner, with the approval of the department head.

b. Any vessel engaging in the coastwise trade which shall have on board any article of foreign growth, product or manufacture in excess of the amount necessary for sea stores, without such article having been properly entered or legally imported.

c. Any vessel or aircraft into which shall be transferred cargo unladen contrary to law prior to the arrival of the importing vessel or aircraft at her port of destination.

d. Any part of the cargo of a vessel or aircraft arriving from a foreign port which is unladen before arrival at the vessel's or aircraft's port of destination and without authority from the proper customs official; but such cargo shall not be forfeited if such unlading was due to accident, stress of weather or other necessity and is subsequently approved by the Collector.

e. Any article which is fraudulently concealed in or removed from any public or private warehouse under customs supervision.

f. Any article of prohibited importation or exportation, the importation or exportation of which is effected or attempted contrary to law, and all other articles which, in the opinion of the Collector, have been used, are or were intended to be used as instrument in the importation or exportation of the former.

g. Unmanifested article found on any vessel or aircraft, if manifest therefor is required.

h. Sea stores or stores for aircraft adjudged by the Collector to be excessive, when the duties assessed by the Collector thereon are not paid or secured forthwith upon assessment of the same.

i. Any package of imported article which is found by the examining official to contain any article not specified in the invoice or entry, including all other packages purportedly containing imported articles similar to those declared in the invoice or entry to be the contents of the misdeclared package, provided the Collector is of the opinion that the misdeclaration was caused with fraudulent intent.

j. Boxes, cases, trunks, envelopes and other containers of whatever character used as receptacles or as devices to conceal article which is itself subject to forfeiture under the customs and tariff laws or which is so designed as to conceal the character of such article.

k. Any beast actually being used for the conveyance of article subject to forfeiture under the customs and tariff laws with its equipage or trappings, and any vehicles similarly used, together with its equipage and appurtenances, including the beast, team or other motive power drawing or propelling the same; but the forfeiture shall not be effected if it is established that the owner of the means of conveyance used as aforesaid or his agent in charge thereof at the time, has no knowledge of the unlawful act.

l. Any money or thing of value offered as a bribe or for the purpose of exerting improper influence over a customs official or employee.

m. Any article sought to be imported or exported: (1) Without going through a customhouse, whether the act was

consummated, frustrated or attempted;

(2) By failure to mention to a customs official, articles found in the baggage of a person arriving from abroad.

(3) On the strength of a false declaration or affidavit executed by the owner, importer, exporter or consignee concerning the importation or exportation of such article.

(4) On the strength of a false invoice or other document executed by the owner, importer, exporter or consignee concerning the importation or exportation of such article.

(5) Through any other fraudulent practice or device by means of which such articles was entered through a customhouse to the prejudice of the government.

Sec. 2531. Conditions Affecting Forfeiture of Article. — As regards imported or exported article or articles whereof the importation or exportation is merely attempted, the forfeiture shall be effected only when and while the article is in the custody or within the jurisdiction of the customs authorities or in the hands or subject to the control of the importer, exporter, original owner, consignee, agent or other person effecting the importation, entry or exportation in question, or in the hands or subject to the control of some person who shall receive, conceal, buy, sell or transport the same or aid in any such acts, with knowledge that the article was imported, or was the subject of an attempt at importation or exportation, contrary to law.

COMMISSIONER OF CUSTOM VS. MANILA STAR FERRY

Doctrine:

Section 2530(a) of the Tariff and Customs Code in unmistakable terms provides that a vessel engaged in smuggling "in a port of entry" cannot be forfeited. This is the clear and plain meaning of the law. It is not within the province of the Court to inquire into the wisdom of the law, for indeed, we are bound by the words of the statute.

Forfeiture proceedings are proceedings in rem and are directed against the res. It is no defense that the owner of the vessel sought to be forfeited had no actual knowledge that his property was used illegally. The absence or lack of actual knowledge of such use is a defense personal to the owner himself which cannot in any way absolve the vessel from the liability of forfeiture.

Facts:

Private respondents Manila Star Ferry, Inc. and the United Navigation & Transport Corporation are domestic corporations engaged in the lighterage business and are the owners and operators, respectively, of the tugboat Orestes and the barge-lighter UN-L-106. Private respondent Ceaba Shipping Agency, Inc. (Ceaba) is the local shipping agent of the Chiat Lee Navigation Trading Co. of Hongkong, the registered owner and operator of the S/S Argo, an ocean-going vessel.

On June 12, 1966, the S/S Argo, the Orestes and the UN-L-106, as well as two wooden bancas of unknown ownership, were apprehended for smuggling by a patrol boat of the Philippine Navy along the Explosives Anchorage Area of Manila Bay. The patrol boat caught the crew of the S/S Argo in the act of unloading foreign-made goods onto the UN-L-106, which was towed by the Orestes and escorted by the two wooden bancas. All of the goods consisting of 330 cases of foreign-made cigarettes, assorted ladies' wear, clothing material and plastic bags were not manifested and declared by the vessel for discharge in Manila. No proper notice of arrival of the S/S Argo was given to the local customs authorities.

Consequently, seizure and forfeiture proceedings were separately instituted before the Collector of Customs for the Port of Manila against the S/S Argo and its cargo, the Orestes, the UN-L-106 and the two bancas, charging them with violations of Section 2530 (a), (b) and (c) of the Tariff and Customs Code. Criminal charges were likewise filed against the officers and crew of said vessels and watercraft.

The Collector of Customs rendered a consolidated decision declaring the forfeiture of said vessels and watercraft in favor of the Philippine government by virtue of Section 2530 (a) and (b) of the Tariff and Customs Code.

On separate appeals taken by all the respondents therein, except the owner of the two wooden bancas, the Acting Commissioner of Customs found the Collector's decision to be in order and affirmed the same accordingly.

The same respondents separately elevated the matter to the Court of Tax Appeals, which substantially modified the decision of the Commissioner of Customs, ordering only the payment of a fine, in lieu of the forfeiture of vessels. In its decision, the Court of Tax Appeals held that while the S/S Argo was caught unloading smuggled goods in Manila Bay, the said vessel and the goods cannot be forfeited in favor of the government because the Port of Manila is a port of entry (R.A. 1937, Sec. 701).

The Commissioner of Customs argues that the phrase "except a port of entry" should mean "except a port of destination," and inasmuch as there is no showing that the Port of Manila was the port of destination of the S/S Argo, its forfeiture was in order.

Hence, this petition for review under Rule 44 of the Revised Rules of Court

Issues:

1. Whether or not the S/S Argo, a vessel engaged in smuggling "in a port of entry", can be forfeited.

2. Are forfeiture proceedings in rem?

Held:

1. Section 2530(a) of the Tariff and Customs Code in unmistakable terms provides that a vessel engaged in smuggling "in a port of entry" cannot be forfeited. This is the clear and plain meaning of the law. It is not within the province of the Court to inquire into the wisdom of the law, for indeed, we are bound by the words of the statute. Neither can we put words in the mouths of the lawmaker. A verba legis non est recedendum.It was only in 1972, after this case was instituted, when the questioned exception ("except a port of entry") in Section 2530(a) of the Tariff and Customs Code was deleted by P.D. No. 74.

Nevertheless, although the vessel cannot be forfeited, it is subject to a fine of not more than P10,000.00 for failure to supply the requisite manifest for the unloaded cargo under Section 2521 of the Tariff and Customs Code.

The barge-lighter UN-L-106 and the tugboat Orestes, on the other hand, are subject to forfeiture under paragraph (c) of Section 2530 of the Tariff and Customs Code. The barge-lighter and tugboat fall under the term "vessel" which includes every sort of boat, craft or other artificial contrivance used, or capable of being used, as a means of transportation on water (R.A. No. 1937, Section 3514). Said section 2530 (c) prescribes the forfeiture of any vessel or aircraft into which shall be transferred cargo unladen contrary to law before the arrival of the vessel or aircraft at her port of destination. Manila was not the port of destination, much less a port of call of the S/S Argo, the importing vessel. The S/S Argo left Hongkong and was bound for Jesselton, North Borneo, Djakarta and Surabaja, Indonesia; and yet it stopped at the Port of Manila to unload the smuggled goods onto the UN-L-106 and the Orestes.

2. Forfeiture proceedings are proceedings in rem and are directed against the res. It is no defense that the owner of the vessel sought to be forfeited had no actual knowledge that his property was used illegally. The absence or lack of actual knowledge of such use is a defense personal to the owner himself which cannot in any way absolve the vessel from the liability of forfeiture.

WHEREFORE, the consolidated Decision dated September 30, 1969 of respondent Court of Tax Appeals in C.T.A. Cases Nos. 1836, I837 and 1839 is MODIFIED as follows: (1) that the S/S Argo through respondent Ceaba Shipping Agency, Inc. is ordered to pay a fine of P10,000.00, to be satisfied from the deposit of the same amount by respondent Ceaba to the Cashier of this Court per Resolution of July 9, 1978; (2) that the Cashier of this Court is ordered to release the said amount for payment to the Commissioner of Customs, within thirty (30) days from the date this decision becomes final; and 3) the tugboat Orestes and the barge-lighter UN-L-106 of respondents Manila Star Ferry, Inc. and the United Navigation & Transport. Corporation respectively, are ordered forfeited in favor of the Philippine Government.