The Philippine Bureau of Customs (BOC) has issued rules on the Philippine government’s right to acquire undervalued imported goods.
Customs Administrative Order (CAO) No. 16-2019, signed by Finance Secretary Carlos Dominguez III on October 10 and Customs Commissioner Rey Leonardo Guerrero on September 27, implements the section on the government’s right of compulsory acquisition (Section 709) under Republic Act No. 10863, or the Customs Modernization and Tariff Act (CMTA).
Compulsory acquisition is the power of the government to acquire imported goods when the importer’s declared customs value is unconscionably low.
Undervaluation is wrongful declaration committed when the declared value fails to disclose in full the price actually paid or payable, or to disclose any dutiable adjustment to the price actually paid or payable; or when an incorrect valuation method is used or the valuation rules are not properly observed, resulting in a discrepancy in duty and tax to be paid between what is legally determined as the correct value against the declared value.
CAO 16-2019 applies to all imported goods suspected to be undervalued, including consumption, warehousing, transshipment, and consolidated goods and postal items.
In his book “Understanding International Trade, tariff and Customs”, Atty. Agaton Teodoro Uvero, former BOC deputy commissioner and current Asia Customs & Trade editorial chairman, said CMTA’s Section 709 substantially reiterates the old provisions on the right to compulsory acquisition of grossly undervalued goods under the Tariff and Customs Code of the Philippines.
Uvero noted, however, this facility has never been implemented by BOC mainly for two reasons: there was no budget allotted for acquiring undervalued goods, and goods wilfully undervalued may be seized so there was no need to acquire them.
Under CAO 16-2019, the Customs commissioner has the sole authority to exercise, motu proprio, or upon the recommendation of the district collector, the power of compulsory acquisition.
A badge or sign of undervaluation includes duty benchmarking, or the practice of paying uniform duty on certain categories of goods, disregarding the quality, quantity, and the actual value of the goods.
Another badge is when a commodity is valued unconscionably low, as when BOC, after applying all the methods of valuation, still finds a discrepancy of at least 30% in the value declared as against other references.
Likewise a badge of undervaluation is when there is information or report coming from the customs administrations of other countries or based on valid industry complaint or on the recommendation of reputable and recognized organizations or chambers that such importation is unconscionably low.
Goods subject of compulsory acquisition will be disposed of through public auction, negotiated sale or other mode of disposition allowed under CMTA, subject to appropriate rules and regulations. The floor price should consider the cost of storage and all other expenses related to the safekeeping of the goods pending appeal.
Payment to the importer will be made in cash based on the price equal to the declared customs value plus any duties already paid on the goods. – Roumina Pablo