Customs Modernization and Tariff Act Series 11: Titles XVI (Tariff Administration and...

Customs Modernization and Tariff Act Series 11: Titles XVI (Tariff Administration and Nomenclature)


Series 1, click here.
Series 2, click here.
Series 3, click here.
Series 4, click here.
Series 5, click here.
Series 6, click here
Series 7, click here
Series 8, click here.
Series 9, click here.
Series 10, click here.

This is the 11th and our last article on this series on the CMTA.

Title XVI (Tariff Administration and Policy)

This Title has 13 sections covered by 3 chapters. Most of the provisions are based on the old code.

Chapter 1 (Tariff Commission) restates many of the old provisions in relation to the composition, powers and functions of the Tariff Commission. With respect to the functions of the commission as provided in Section 1603, a major change is the provision that provides that the commission “shall issue advance rulings on tariff classification of imported goods and render rulings on disputes over tariff classification”. Under this Section, the commission has been expressly provided the power and function to adjudicate classification issues on imported goods. The same section restates the jurisdiction of the commission over trade remedy measures – dumping, safeguard and countervailing duties.

Chapter 2 (Flexible Tariffs) restates the old provisions on “flexible clause” and “promotion of foreign trade”. The flexible clause empowers the President to:

  • increase, reduce or remove existing rates of import duty;
  • establish import quotas or ban imports of any commodity; and
  • impose additional duty on all imports not exceeding 10% ad valorem.

Chapter 3 (Tariff Nomenclature and Rate of Duty) restates most of the old provisions and provides the tariff classification and duty system for imported and exported goods.  The chapter is composed of 3 sections as follows:

  • General Rules on Interpretation (Section 1610)
  • Tariff Nomenclature and Rates of Import Duty (Section 1611)
  • Tariff Nomenclature and Rates of Export Duty (Section 1612)

Understanding the Tariff System

For importers and customs brokers, the computation of taxes and duties payable on imported articles is principally based on the value, classification and quantity of the importation.

While the dutiable value is normally reflected on the invoice price, certain adjustments (depending on the INCOTERM used) may be made on the invoice price to arrive at the dutiable value. With regard to classification (product nomenclature and tariff rate), the principal basis for classifying the product and determining the duty rate is provided in Section 1611 of the CMTA.

For imported articles regularly imported, particularly raw materials and unprocessed articles, classification can be straightforward and simple. For finished and processed goods, and new products, especially those involving composites or mixtures, classification is a more complicated process. On not a few occasions, imported articles may ostensibly be classifiable under two separate headings located in different chapters or sections.  The challenge is how to identify the proper or correct classification of the imported article.

The present product classification system provided is mainly based on the 8-digit ASEAN Harmonized Tariff Nomenclature (AHTN), the first 6 digits of which is based on the Harmonized System (HS) while the seventh and eight digit codes are assigned to ASEAN subheadings with more than 10,000 tariff lines. Beyond the 8-digit level, member countries of ASEAN are allowed to create new national subheadings.

Prior to the adoption of the AHTN, modifications may be made only beyond the 6-digit system of the HS system, which was reserved for national sub-headings. With the adoption of the AHTN in 2004, modifications were allowed beyond the 8-digit level. In other words, further subdivisions for national governments of ASEAN member countries were permitted only beyond the 8-digit level.

The purpose of national sub-headings is to provide varying tariff rates on similar articles, data and statistical profile, in-quota and out-quota rates, preferential rates or rules of origin. When implementing the tariff system, the Philippines must be consistent with the GRI and the Section/Chapter/Heading Notes. Non-application of GRI and the notes is a violation of the commitments provided under the HS Convention.

A usual recourse when confronted with doubt as to the classification of a particular imported goods is to first refer to the “Philippine Standard Commodity Classification (PSCC)”, which provides for classification of products based on their common names.  Many articles, however, are not provided in the PSCC. In such a situation, we may refer to the Section/Chapter/Heading Notes and the GRI. Further reference may be made on the Explanatory Notes to the HS Convention. It must be noted that the headings under the HS system are arranged in systematic order (i.e., degree of processing) and, where appropriate, subdivided into sub-headings.

The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs and Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. ACT provides trade intelligence through industry updates and features; columns written by customs and trade professionals and experts; and specially commissioned reports. For questions, please email him at (


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