[ REPUBLIC ACT NO.

10863, May 30, 2016 ]

AN ACT MODERNIZING THE CUSTOMS AND TARIFF ADMINISTRATION

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

TITLE I

PRELIMINARY PROVISIONS

CHAPTER 1

 SHORT TITLE

SECTION 100. Short Title. — This Act shall be known as the "Customs Modernization and Tariff Act (CMTA)".

CHAPTER 2

GENERAL AND COMMON PROVISIONS

SEC. 101. Declaration of Policy.  — It is hereby declared the policy of the State to protect and enhance government
revenue, institute fair and transparent customs and tariff management that will efficiently facilitate international trade,
prevent and curtail any form of customs fraud and illegal acts, and modernize customs and tariff administration.
Towards this end, the State shall:

(a) Develop and implement programs for the continuous enhancement of customs systems and processes that will
harmonize customs procedures;

(b) Adopt clear and transparent customs rules, regulations, policies and procedures, consistent with international
standards and customs best practices;

(c) Establish a regime of transparency of and accessibility to customs information, customs laws, rules, regulations,
administrative policies, procedures and practices, in order to ensure informed and diligent compliance with customs
practices and procedures by stakeholders;

(d) Consult, coordinate and cooperate with other government agencies and the private sector in implementing and
developing customs policy;

(e) Provide a fair and expeditious administrative and judicial appellate remedy for customs related grievances and
matters;

(f) Employ modern practices in customs administration and utilize information and communications technology in the
implementation of customs functions; and (g) Institute professionalism and meritocracy in customs tax administration
by attracting and retaining competent and capable customs officers and personnel to enforce the provisions of this
Act.

SEC. 102. Definition of Terms. - As used in this Act:

(a) Abatement refers to the reduction or diminution, in whole or in part, of duties and taxes where payment has not
been made;

(b) Actual or Outright Exportation  refers to the customs procedure applicable to goods which, being in free
circulation, leave the Philippine territory and are intended to remain permanently outside it;

(c) Admission refers to the act of bringing imported goods directly or through transit into a free zone;

(d) Airway Bill (AWB)  refers to a transport document for airfreight used by airlines and international freight forwarders
which specify the holder or consignee of the bill who has the right to claim delivery of the goods when they arrive at
the port of destination. It is a contract of carriage that includes carrier conditions, such as limits of liability and claims
procedures. In addition, it contains transport instructions to airlines and carriers, a description of the goods, and
applicable transportation charges;

(e) Appeal refers to the remedy by which a person who is aggrieved or adversely affected by any action, decision,
order, or omission of the Bureau, seeks redress before the Bureau, the Secretary of Finance, or competent court, as
the case may be;

(f) Assessment refers to the process of determining the amount of duties and taxes and other charges due on
imported and exported goods;

(g) Authorized Economic Operator (ABO) refers to the importer, exporter, customs broker, forwarder, freight
forwarder, transport provider, and any other entity duly accredited by the Bureau based on the World Customs
Organization (WCO) Framework of Standards to Secure and Facilitate Global Trade, the Revised Kyoto Convention
(RKC), the WCO Supply Chain Management Guidelines and the various national best practices to promote trade
facilitation and to provide a seamless movement of goods across borders through secure international trade supply
chains with the use of risk management and modern technology;

(h) Bill of Lading (B/L) refers to a transport document issued by shipping lines, carriers and international freight
forwarders or non-vessel operating common carrier for water-borne freight. The holder or consignee of the bill has the
right to claim delivery of the goods at the port of destination. It is a contract of carriage that includes earner
conditions, such as limits of liability and claims procedures. In addition, it contains transport instructions to shipping
lines and carriers, a description of the goods, and applicable transportation charges;

(i) Bureau refers to the Bureau of Customs;

(j) Carrier refers to the person actually transporting goods or in charge of or responsible for the operation of the
means of transport such as airlines, shipping lines, freight forwarders, cargo consolidators, non-vessel operating
common carriers and other international transport operators;

(k) Clearance refers to the completion of customs and other government formalities necessary to allow goods to enter
for consumption, warehousing, transit or transshipment, or to be exported or placed under another customs
procedure;

(l) Commission refers to the Tariff Commission;

(m) Conditional Importation refers to the customs procedure known under the RKC as temporary admission in which
certain goods can be brought into a customs territory conditionally relieved, totally or partially, from payment of import
duties and taxes; such goods must be imported for a specific purpose and must be intended for reexportation within a
specified period and without having undergone any substantial change except due to normal depreciation;

(n) Customs Broker refers to any person who is a bona fide holder of a valid Certificate of Registration/Professional
Identification Card issued by the Professional Regulatory Board and Professional Regulation Commission pursuant to
Republic Act No. 9280, as amended, otherwise known as the "Customs Brokers Act of 2004";

(o) Customs Office refers to any customs administrative unit that is competent and authorized to perform all or any of
the functions enumerated under customs and tariff laws;

(p) Customs Officer, as distinguished from a clerk or employee, refers to a person whose duty, not being clerical or
manual in nature, involves the exercise of discretion in performing the function of the Bureau. It may also refer to an
employee authorized to perform a specific function of the Bureau as provided in this Act;

(q) Customs Territory refers to areas in the Philippines where customs and tariff laws may be enforced;

(r) Entry refers to the act, documentation and process of bringing imported goods into the customs territory, including
goods coming from free zones;

(s) Exportation refers to the act, documentation, and process of bringing goods out of Philippine territory;

(t) Export Declaration refers to a statement made in the manner prescribed by the Bureau and other appropriate
agencies, by which the persons concerned indicate the procedure to be observed for taking out or causing to be
taken out any exported goods and the particulars of which the customs administration shall require;

(u) Flexible Clause refer to the power of the President upon recommendation of the National Economic and
Development Authority (NEDA): (1) to increase, reduce or remove existing protective tariff rates of import duty, but in
no case shall be higher than one hundred percent (100%) ad valorem; (2) to establish import quota or to ban
importation of any commodity as may be necessary; and (3) to impose additional duty on all import not exceeding ten
percent (10%) ad valorem, whenever necessary;

(v) Foreign Exporter refers to one whose name appears on documentation attesting to the export of the product to the
Philippines regardless of the manufacturer's name in the invoice;

(w) Free Zone refers to special economic zones registered with the Philippine Economic Zone Authority (PEZA)
under Republic Act No. 7916, as amended, duly chartered or legislated special economic zones and freeports such
as Clark Freeport Zone; Poro Point Freeport Zone; John Hay Special Economic Zone and Subic Bay Freeport Zone
under Republic Act No. 7227, as amended by Republic Act No. 9400; the Aurora Special Economic Zone under
Republic Act No. 9490, as amended; the Cagayan Special Economic Zone and Freeport under Republic Act No.
7922; the Zamboanga City Special Economic Zone under Republic Act No. 7903; the Freeport Area of Bataan under
Republic Act No. 9728; and such other freeports as established or may be created by law;

(x) Goods refer to articles, wares, merchandise and any other items which are subject of importation or exportation;

(y) Goods Declaration refers to a statement made in the manner prescribed by the Bureau and other appropriate
agencies, by which the persons concerned indicate the procedure to be observed in the application for the entry or
admission of imported goods and the particulars of which the customs administration shall require;

(z) Importation refers to the act of bringing in of goods from a foreign territory into Philippine territory, whether for
consumption, warehousing, or admission as defined in this Act;

(aa) Freight Forwarder refers to a local entity that acts as a cargo intermediary and facilitates transport of goods on
behalf of its client without assuming the role of a carrier, which can also perform other forwarding services, such as
booking cargo space, negotiating freight rates, preparing documents, advancing freight payments, providing
packing/crating, trucking and warehousing, engaging as an agent/representative of a foreign non-vessel operating as
a common carrier/cargo consolidator named in a master bill of lading as consignee of a consolidated shipment, and
other related undertakings;

(bb) International Freight Forwarder refers to persons responsible for the assembly and consolidation of shipments
into single lot, and assuming, in most cases, the full responsibility for the international transport of such shipment
from point of receipt to the point of destination;

(cc) Jurisdictional Control refers to the power and rights of the Bureau in exercising supervision and police authority
over all seas within the jurisdiction of the Philippine territory and over all coasts, ports, airports, harbors, bays, rivers
and inland waters whether navigable or not from the sea;

(dd) Lodgement refers to the registration, of a goods declaration with the Bureau; r (ee) Non-Vessel Operating
Common Carrier (NVOCC) refers to an entity, which may or may not own or operate a vessel that provides a point-to-
point service which may include several modes of transport and/or undertakes group age of less container load (LCL)
shipments and issues the corresponding transport document;

(ff) Outright Smuggling refers to an act of importing goods into the country without complete customs prescribed
importation documents, or without being cleared by customs or other regulatory government agencies, for the
purpose of evading payment of prescribed taxes, duties and other government charges;

(gg) Perishable Good refers to goods liable to perish or goods that depreciate greatly in value while stored or which
cannot be kept without great disproportionate expense, which may be proceeded to, advertised and sold at auction
upon notice if deemed reasonable;

(hh) Port of Entry refers to a domestic port open to both domestic and international trade, including principal ports of
entry and subports of entry. A principal port of entry is the chief port of entry of the Customs District wherein it is
situated and is the permanent station of the District Collector of such port.  Subports of entry are under the
administrative jurisdiction of the District Collector of the principal port of entry of the Customs District. Port of entry as
used in this Act shall include airport of entry;

(ii) Port of Discharge, also called Port of Unloading, refers to a place where a vessel, ship, aircraft or train unloads its
shipments, from where they will be dispatched to their respective consignees;
(jj) Reexportation means exportation of goods which have been imported;

(kk) Release of Goods refers to the action by the Bureau to permit goods undergoing clearance to be placed at the
disposal of the party concerned;

(ll) Refund refers to the return, in whole or in part, of duties and taxes paid on goods;

(mm) Security refers to any form of guaranty, such as a surety bond, cash bond, standby letter of credit or irrevocable
letter of credit, which ensures the satisfaction of an obligation to the Bureau;

(nn) Smuggling refers to the fraudulent act of importing any goods into the Philippines, or the act of assisting in
receiving, concealing, buying, selling, disposing or transporting such goods, with full knowledge that the same has
been fraudulently imported, or the fraudulent exportation of goods. Goods referred to under this definition shall be
known as smuggled goods;

(oo) Taxes refer to all taxes, fees and charges imposed under this Act and the National Internal Revenue Code
(NIRC) of 1997, as amended, and collected by the Bureau;

(pp) Technical Smuggling refers to the act of importing goods into the country by means of fraudulent, falsified or
erroneous declaration of the goods to its nature, kind, quality, quantity or weight, for the purpose of reducing or
avoiding payment of prescribed taxes, duties and other charges;

(qq) Tentative Release refers to a case where the assessment is disputed and pending review, an importer may put
up a cash bond equivalent to the duties and taxes due on goods before the importer can obtain the release of said
goods;

(rr) Transit refers to the customs procedure under which goods, in its original form, are transported under customs
control from one customs office to another, or to a free zone;

(ss) Transshipment refers to the customs procedure under which goods are transferred under customs control from
the importing means of transport to the exporting means of transport within the area of one customs office, which is
the office of both importation and exportation;

(tt) Traveler refers to any person who temporarily enters the territory of a country in which he or she does not
normally resides (non-resident), or who leaves that territory, and any person who leaves the territory of a country in
which he or she normally resides (departing resident) or who returns to that territory (returning resident); and

(uu) Third Party refers to any person who deals directly with the Bureau, for and on behalf of another person, relating
to the importation, exportation, movement or storage of goods.

SEC. 103. When Importation Begins and Deemed Terminated. – Importation begins when the carrying vessel or
aircraft enters the Philippine territory with the intention to unload therein. Importation is deemed terminated when:

(a) The duties, taxes and other charges due upon the goods have been paid or secured to be paid, at the port of
entry unless the goods are free from duties, taxes and other charges and legal permit for withdrawal has been
granted: or

(b) In case the goods are deemed free of duties, taxes and other charges, the goods have legally left the jurisdiction
of the Bureau.

SEC. 104. When Duty and Tax are Due on Imported Goods. – Except as otherwise provided for in this Act or in other
laws, all goods, when imported into the Philippines, shall be subject to duty upon importation, including goods
previously exported from the Philippines.

Unpaid duties, taxes and other charges, shall incur legal interest of twenty percent (20%) per annum computed from
the date of final assessment under Section 429 of this Act, when payment becomes due and demandable. The legal
interest shall likewise accrue on any fine or penalty imposed.

Upon payment of the duties, taxes and other charges, the Bureau shall issue the necessary receipt or document as
proof of such payment.

SEC. 105. Effective Date of Rate of Import Duty. – Imported goods shall be subject to the import duty rates under the
applicable tariff heading that are effective at the date of importation or upon withdrawal from the warehouse for
consumption. In case of withdrawal from free zones for introduction to the customs territory, the duty rate at the time
of withdrawal shall be applicable on the goods originally admitted, whether withdrawn in its original or advanced form.

In case of goods sold at customs public auction, the duty rates at the date of the auction, shall apply for purposes of
implementing Section 1143(a) of this Act.

SEC. 106. Declarant. – A declarant may be a consignee or a person who has the right to dispose of the goods. The
declarant shall lodge a goods declaration with the Bureau and may be:

(a) The importer, being the holder of the bill of lading; or

(b) The exporter, being the owner of the goods to be shipped out; or

(c) A customs broker acting under the authority of the importer or from a holder of the bill; or

(d) A person duly empowered to act as agent or attorney-in-fact for each holder.

In case the consignee or the person who has the right to dispose of the goods is a juridical person, it may authorize a
responsible officer of the company to sign the goods declaration as declarant on its behalf.

The goods declaration submitted to the Bureau shall be processed by the declarant or by a licensed customs
broker: Provided, That for importations, a transition period of two (2) years from the effectivity of this Act is hereby
provided during which subparagraph (d) of this section shall not be implemented by the Bureau: Provided,
further, That after two (2) years from the effectivity of this Act, subparagraph (d) of this section shall take into effect
consistent with international standards and customs best practices.

SEC. 107. Rights and Responsibilities of the Declarant. – The declarant shall be responsible for the accuracy of the
goods declaration and for the payment of all duties, taxes and other charges due on the imported goods. The
licensed customs broker shall likewise be responsible for the accuracy of the goods declaration but shall not be
responsible for the payment of duties, taxes and other charges due on the imported goods.

The declarant shall sign the goods declaration, even when assisted by a licensed customs broker, who shall likewise
sign the goods declaration.

SEC. 108. Penalties for Errors in Goods Declaration. – The Bureau shall not impose substantial penalties for errors
when such errors are inadvertent and there was no fraudulent intent or gross negligence in the commission
thereof: Provided, That in order to discourage repetition of such errors, a penalty may be imposed but shall not be
excessive.

SEC. 109. Application of Information and Communications Technology. – In accordance with international standards,
the Bureau shall utilize information and communications technology to enhance customs control and to support a
cost-effective and efficient customs operations geared towards a paperless customs environment.

The Bureau shall communicate, exchange and process trade- and logistics-related information in the national and
regional level for the efficient and prompt clearance of goods and commodities in a technology-neutral and secured
infrastructure for business, industries, and government.

The security of data and communication shall be in a manner that is consistent with applicable local and
internationally accepted standards on information security.

The Bureau shall likewise include as part of its systems and processes, a disaster preparedness and recovery plan to
ensure business continuity by maintaining its uptime goal for its electronic and online services.

For purposes of customs procedures, electronic documents, permits, licenses or certificates shall be acceptable and
shall have the legal effect, validity or enforceability as any other document or legal writing: Provided, That when the
prescribed requirements are duly complied with, the Bureau shall:

(a) Recognize the authenticity and reliability of electronic documents;

(b) Transmit approval in the form of electronic data messages or electronic documents; and
(c) Require and/or accept payments and issue receipts acknowledging such payments through systems using
electronic data messages or electronic documents.

The introduction and implementation of information and communications technology shall be undertaken with due
consultation with directly affected parties and stakeholders.

SEC. 110. Relationship Between the Bureau and Third Parties. – Parties may transact business with the Bureau
either directly or through a designated third party to act on their behalf.

The customs transactions directly transacted by a party shall not be treated less favorably or be subject to more
stringent requirements than those transacted through a designated third party.

A designated third party shall have the same rights and obligations as the designating party when transacting
business with the Bureau.

Subject to the provisions of existing laws, treaties, convention and international agreements, the Secretary of Finance
shall make the necessary guidelines for the defined relationship of the Bureau and third parties.

SEC. 111. Information of General Application. – All laws, decisions, rulings, circulars, memoranda and orders of the
Bureau shall be published in accordance with law.

To foster an informed compliance regime, the Bureau shall ensure that all relevant and available information of
general application pertaining to customs operations and procedures which are not confidential or intended for the
Bureau's internal use only, shall be readily accessible to any interested person.

Any new information, amendment or changes in customs law, administrative procedures or requirements, shall, as far
as practicable, be made readily available prior to its effective date of implementation unless advance notice is
precluded.

SEC. 112. Information of a Specific Nature. – The Bureau shall provide information, not otherwise confidential or for
the Bureau's internal use only, relating to a specific matter as may be requested by an interested party for legitimate
use.

The Bureau may require the payment of a reasonable fee in providing such information. The requested information
shall be release d within reasonable time from the filing of the request and payment of the required fee.

SEC. 113. Decision and Ruling. – The Bureau shall, consistent with Section 1502 of this Act, issue binding and
advance decision and ruling at the request of an interested party on matters pertaining to importation or exportation of
goods.

Upon written request of the interested party, the Bureau shall notify the party of its decision in writing within the period
specified in this Act or by regulation. Should the decision be adverse to the requesting interested party, the reasons
thereof shall be indicated and the party shall be advised of the party's right of appeal.

The ruling and decision shall be issued by the Bureau within thirty (30) days from the submission of the necessary
documents and information.

SEC. 114. Right of Appeal, Forms and Ground. – Any party adversely affected by a decision or omission of the
Bureau pertaining to an importation, exportation, or any other legal claim shall have the right to appeal within fifteen
(15) days from receipt of the questioned decision or order.

An appeal in writing shall be filed within the period prescribed in this Act or by regulation and shall specify the
grounds thereof.

The Bureau may allow a reasonable time for the submission of supporting evidence to the appeal.

CHAPTER 3

TYPES OF IMPORTATION

SEC. 115. Treatment of Importation. – Imported goods shall be deemed "entered" in the Philippines for consumption
when the goods declaration is electronically lodged, together with any required supporting documents, with the
pertinent customs office.

SEC. 116. Free Importation and Exportation. – Unless otherwise provided by law or regulation, all goods may be
freely imported into and exported from the Philippines without need for import and export permits, clearances or
licenses.

SEC. 117. Regulated Importation and Exportation. – Goods which are subject to regulation shall be imported or
exported only after securing the necessary goods declaration or export declaration, clearances, licenses, and any
other requirements, prior to importation or exportation. In case of importation, submission of requirements after arrival
of the goods but prior to release from customs custody shall be allowed but only in cases provided for by governing
laws or regulations.

SEC. 118. Prohibited Importation and Exportation. – The importation and exportation of the following goods are
prohibited:

(a) Written or printed goods in any form containing any matter advocating or inciting treason, rebellion, insurrection,
sedition against the government of the Philippines, or forcible resistance to any law of the Philippines, or written or
printed goods containing any threat to take the life of, or inflict bodily harm up on any person in the Philippines;

(b) Goods, instruments, drugs and substances designed, intended or adapted for producing unlawful abortion, or any
printed matter which advertises, describes or gives direct or indirect information where, how or by whom unlawful
abortion is committed;

(c) Written or printed goods, negatives or cinematographic films, photographs, engravings, lithographs, objects,
paintings, drawings or other representation of an obscene or immoral character;

(d) Any goods manufactured in whole or in part of gold, silver or other precious metals or alloys and the stamp, brand
or mark does not indicate the actual fineness of quality of the metals or alloys;

(e) Any adulterated or misbranded food or goods for human consumption or any adulterated or misbranded drug in
violation of relevant laws and regulations;

(f) Infringing goods as defined under the Intellectual Property Code and related laws; and

(g) All otter goods or parts thereof which importation and exportation are explicitly prohibited by law or rules and
regulations issued by the competent authority.

SEC. 119. Restricted Importation and Exportation. – Except when authorized by law or regulation, the importation
and exportation of the following restricted goods are prohibited:

(a) Dynamite, gunpowder, ammunitions and other explosives, firearms and weapons of war, or parts thereof;

(b) Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or mechanical devices used in
gambling or the distribution of money, cigars, cigarettes or other goods when such distribution is dependent on
chance, including jackpot and pinball machines or similar contrivances, or parts thereof; (c) Lottery and sweepstakes
tickets, except advertisements thereof and lists of drawings therein;

(d) Marijuana, opium, poppies, coca leaves, heroin or other narcotics or synthetic drugs which are or may hereafter
be declared habit forming by the President of the Philippines, or any compound, manufactured salt, derivative, or
preparation thereof, except when imported by the government of the Philippines or any person duly authorized by the
Dangerous Drugs Board, for medicinal purposes;

(e) Opium pipes or parts thereof, of whatever material; and

(f) Any other goods whose importation and exportation are restricted.

The restriction to import or export the above stated goods shall include the restriction on their transit.

CHAPTER 4

RELIEF CONSIGNMENT
SEC. 120. Relief Consignment. – Goods such as food, medicine, equipment and materials for shelter, donated or
leased to government institutions and accredited private entities for free distribution to or use of victims of calamities
shall be treated and entered as relief consignment.

Upon declaration of a state of calamity, clearance of relief consignment shall be a matter of priority and subject to a
simplified customs procedure. The Bureau shall provide for:

(a) Lodging of a simplified goods declaration or of a provisional or incomplete goods declaration subject to completion
of the declaration within a specified period;

(b) Lodging, registering and checking of the goods declaration and supporting documents prior to the arrival of the
goods, and their release upon arrival;

(c) Clearance beyond the designated hours of business or away from customs offices and waiver of any
corresponding charges; and

(d) Examination and/or sampling of goods only in exceptional circumstances.

The Department of Finance (DOF) and the Department of Social Welfare and Development (DSWD) shall jointly
issue the rules and regulations for the implementation of tins provision.

SEC. 121. Duty and Tax Treatment. – Relief consignment, as defined in Section 120, imported during a state of
calamity and intended for a specific calamity area for the use of the calamity victims therein, shall be exempt from
duties and taxes.

TITLE II

BUREAU OF CUSTOMS

CHAPTER 1

GENERAL ADMINISTRATION

SEC. 200. Chief Officials of the Bureau. – The Bureau shall be headed by a Commissioner and shall be assisted by
at least four (4) but not more than six (6) Deputy Commissioners.

The Commissioner shall be appointed by the President of the Philippines.

The Deputy Commissioners shall also be appointed by the President and at least majority of whom shall come from
the ranks of the Bureau.

SEC. 201. Powers and Functions of the Commissioner. – The Commissioner shall have the following powers and
functions:

(a) Exclusive and original jurisdiction, to interpret the provisions of this Act, in collaboration with other relevant
government agencies, subject to review by the Secretary of Finance;

(b) Exercise any customs power, duties and functions, directly or indirectly;

(c) Review any action or decision of any customs officer performed pursuant to the provisions of this Act;

(d) Review and decide disputed assessments and other matters related thereto, subject to review by the Secretary of
Finance and exclusive appellate jurisdiction of the Court of Tax Appeals (CTA);

(e) Delegate the powers vested under this Act to any customs officer with the rank equivalent to division chief or
higher, except for the following powers and functions:

(1) Promulgation of rules and regulations;

(2) Issuance, revocation or modification of rulings; and

(3) Compromise or abate of customs obligations.

(f) Assignment or reassignment of any customs officer subject to the approval of the Secretary of
Finance: Provided, That District Collectors and other customs officers that perform assessment functions shall not
remain in the same area of assignment for more than three (3) years; and

(g) Perform all other duties and functions as may be necessary for the effective implementation of this Act and other
customs related laws.

SEC. 202. Functions of the Bureau. – The Bureau shall exercise the following duties and functions:

(a) Assessment and collection of customs revenues from imported goods and other dues, fees, charges, fines and
penalties accruing under this Act;

(b) Simplification and harmonization of customs procedures to facilitate movement of goods in international trade;

(c) Border control to prevent entry of smuggled goods;

(d) Prevention and suppression of smuggling and other customs fraud;

(e) Facilitation and security of international trade and commerce through an informed compliance program

(f) Supervision and control over the entrance and clearance of vessels and aircraft engaged in foreign commerce;

(g) Supervision and control over the handling of foreign mails arriving in the Philippines for the purpose of collecting
revenues and preventing the entry of contraband;

(h) Supervision and control on all import and export cargoes, landed or stored in piers, airports, terminal facilities,
including container yards and freight stations for the protection of government revenue and prevention of entry of
contraband;

(i) Conduct a compensation study with the end view of developing and recommending to the President a competitive
compensation and remuneration system to attract and retain highly qualified personnel, while ensuring that the
Bureau remains financially sound and sustainable;

(j) Exercise of exclusive original jurisdiction over forfeiture cases under this Act; and

(k) Enforcement of this Act and all other laws, rules and regulations related to customs administration.

SEC. 203. Annual Report of the Commissioner. – The Commissioner shall submit to the President, the Congress of
the Philippines and the NEDA an annual report on the performance of the Bureau, on or before March 31 of the
following year.

SEC. 204. Promulgation of Rules and Regulations. – The Commissioner, subject to the approval of the Secretary of
Finance, shall promulgate rules and regulations for the enforcement of this Act. The Commissioner shall regularly
prepare and publish an updated customs manual, and the rules, regulations and decisions of the Bureau. The
Commissioner shall furnish the Congress of the Philippines, the NEDA and the Tariff Commission with electronic
copies of department orders, administrative orders, circulars, and rules and regulations promulgated pursuant to this
Act.

SEC. 205. Copies of Goods Declaration. – The Commissioner shall regularly furnish the NEDA, the Philippine
Statistics Authority (PSA), the Bureau of Internal Revenue (BIR.) and the Tariff Commission electronic copies of all
customs goods declaration processed and cleared by the Bureau.

Upon request, the Tariff Commission shall have access to, and the right to be furnished with copies of liquidated
goods declaration and other documents supporting the goods declaration as finally filed in the Commission on Audit
(COA).

For this purpose, the Bureau shall maintain electronic records of goods declaration and other documents supporting
the declaration.
 CHAPTER 2

CUSTOMS DISTRICTS AND PORTS OF ENTRY

SEC. 206. Customs Districts. – For administrative purposes, the Philippines shall be divided into as many Customs
Districts as necessary, the respective limits of which may be changed from time to time by the Commissioner, with
the approval of the Secretary of Finance.

Each Customs District shall be supervised by one (1) District Collector, assisted by as many Deputy District
Collectors as may be necessary.  The choice of the location of a District Office, its business hours and the staffing
pattern thereof, shall be based on the particular requirements of each district.

SEC. 207. Ports of Entry. – All ports of entry shall be under the supervision and control of a Customs District.  A
District Collector shall be assigned in the principal ports of entry while a Deputy District Collector may be assigned to
other types of ports of entry.

The principal ports of entry shall be located in Aparri, San Fernando, Manila, Manila International Container Port,
Ninoy Aquino International Airport, Subic, Clark, Batangas, Legaspi, Iloilo, Cebu, Tacloban, Surigao, Cagayan de
Oro, Zamboanga, Davao, Limay and such other ports that may be created pursuant to this Act.

For the effective enforcement of the Bureau's functions and without hampering business and commercial operations
of the ports, sea ports and airport authorities and private ports and airport operators shall provide suitable areas for
examination and for other customs equipment free of charge within, a definite period of time, as agreed with private
port and airport operations, if any.

SEC. 208. Power of the President to Open and Close Any Port.  – Upon the recommendation of the Secretary of
Finance, the President may open or close any port of entry. Upon closure of a port of entry, the existing personnel
shall he reassigned by the Commissioner, subject to the approval of the Secretary of Finance,

SEC. 209. Assignment of Customs Officers and Employees to Other Duties. – The Commissioner, with the approval
of the Secretary of Finance, may assign any employee of the Bureau to any port, service, division or office of the
Bureau within the Bureau's staffing pattern or organizational structure, or may assign any employee other duties:
Provided, That such assignment shall not affect the employee's tenure of office nor result in a change of status,
demotion in rank and/or salary deduction.

SEC. 210. Duties of the District Collector. – The District Collector shall have the following duties in their assigned
Customs District:

(1) Ensure entry of all imported goods at the customs office;

(2) Prevent importation and exportation of prohibited goods;

(3) Ensure legal compliance of regulated goods and facilitate the flow of legitimate trade;

(4) Examine, classify and value imported goods;

(5) Assess and collect duties, taxes and other charges on imported goods;

(6) Hold and dispose imported goods in accordance with this Act;

(7) Prevent smuggling and other customs fraud; and

(8) Perform other necessary duties that may be assigned by the Commissioner for the effective implementation of this
Act.

Subject to the supervision and control of the District Collector, the duties and functions of the District Collector may
be delegated to the Deputy District Collector. The Deputy District Collector assigned to a sub-port shall be under the
supervision and control of the District Collector of the corresponding principal port.

SEC. 211. Temporary Succession of Deputy District Collector to Position of Acting District Collector. – In the absence
or disability of a District Collector or, in case of vacancy, the Deputy District Collector shall temporarily discharge the
duties of the District Collector. Should there be no Deputy District Collector, the District Collector shall designate, in
writing, a senior ranking customs officer to temporarily perform the duties of the District Collector. In case there are
two (2) or more senior ranking customs officers with equal length of service, a drawing of lots shall be undertaken.
The District Collector shall report the designation to the Commissioner within twenty-four (24) hours after the
designation.

SEC. 212. Records to be Kept by Customs Officers. – District Collectors, Deputy District Collectors, and customs
officers acting in such capacities must maintain permanent records of official transactions and turn-over all records
and official papers to their respective successors or other authorized officials.  The records shall be made available
for inspection by other authorized officials of the Bureau.

If required, the District Collector shall affix the official dry seal of the Bureau on all documents and records requiring
authentication.

SEC. 213. Reports of the District Collector to the Commissioner. – The District Collector shall report to the
Commissioner any probable or initiated litigation within the Customs District and shall submit regular monthly reports
on all district transactions.

CHAPTER 3

EXERCISE OP POLICE AUTHORITY

SBC. 214. Persons Exercising Police Authority. – For the effective implementation of this Act, the following persons
are authorized to effect search, seizure, and arrest:

(a) Officials of the Bureau, District Collectors, Deputy District Collectors, police officers, agents, inspectors and
guards of the Bureau;

(b) Upon authorization of the Commissioner, officers and members of the Armed Forces of the Philippines (AFP) and
national law enforcement agencies; and

(c) Officials of the BIR on all cases falling within the regular performance of their duties, when payment of internal
revenue taxes is involved.

All officers authorized by the Commissioner to exercise police authority shall at all times coordinate with the
Commissioner.

Goods seized by deputized officers pursuant to this section shall be physically turned-over immediately to the
Bureau, unless provided under existing laws, rules and regulations.

For this purpose, mission orders shall clearly indicate the specific name carrying out the mission and the tasks to be
carried out.

Subject to the approval of the Secretary of Finance, the Commissioner shah1 define the scope, areas covered,
procedures and conditions governing the exercise of such police authority including custody and responsibility for the
seized goods.  The rules and regulations to this effect shall be furnished to the concerned government agencies and
personnel for guidance and compliance.

All seizures pursuant to this section must be effected in accordance with the provisions on the conduct of seizure
proceedings provided for in Chapters 3 and 4 of Title XI of this Act.

SEC. 215. Place Where Authority May be Exercised. – All persons exercising police authority as described in the
preceding section shall, only exercise powers within customs premises as provided for in Section 303 of this Act, and
within the limits of the authority granted by the Commissioner.

Port and airport authorities in all ports of entry shall provide authorized customs officers with unhampered access to
all premises within their administrative jurisdiction.

SEC. 216. Exercise of Power of Seizure. – Any person exercising police authority under this Act has the power and
duty to seize any vessel, aircraft, cargo, goods, animal or any other movable property when the same is subject to
forfeiture or when they are subject of a fine imposed under this Act.

SEC. 217. Duty of Officer to Disclose Official Character. – For the proper exercise of police authority, any authorized
person shall disclose the nature of the authority upon being questioned at the time of exercise thereof and shall
exhibit the corresponding written authority issued by the Commissioner.

SEC. 218. Authority to Require Assistance and Information. – Any person exercising police authority may demand the
assistance of and request information from the Philippine National Police (PNP), the AFP and other national law
enforcement agencies, when necessary, to effect any search, seizure or arrest.  It shall be the duty of any police
officer and other national law enforcers to give such lawful assistance.

SEC. 219. Authority to Enter Properties. – Any person exercising police authority may, at any time, enter, pass
through, and search any land, enclosure, warehouse, store, building or structure not principally used as a dwelling
house.

When a security personnel or any other employee lives in the warehouse, store, or any building, structure or
enclosure that is used for storage of goods, it shall not be considered as a dwelling house for purposes of this Act.

SEC. 220. Authority to Search Dwelling House. – A dwelling house may be entered and searched only upon warrant
issued by a Judge of a competent court, the sworn application thereon showing probable cause and particularly
describing the place to be searched and the goods to be seized.

SEC. 221. Authority to Search Vessels or Aircrafts and Persons or Goods Conveyed Therein. – Any person
exercising police authority under this Act may board, inspect, search and examine a vessel or aircraft and any
container, trunk, package, box or envelope found on board, and physically search and examine any person thereon.
In case of any probable violation of this Act, the person exercising police authority may seize the goods, vessel,
aircraft, or any part thereof.

Such power to search includes removal of any false bottom, partition, bulkhead, or any other obstruction for the
purpose of uncovering any concealed dutiable or forfeitable goods.

The proceeding herein authorized shall not give rise to any claim for damage caused to the goods, vessel or aircraft,
unless there is gross negligence or abuse of authority in the exercise thereof.

SEC. 222. Authority to Search Vehicles, Other Carriers, Persons and Animals. – Upon reasonable cause, any person
exercising police authority may open and examine any box, trunk, envelope, or other container for purposes of
determining the presence of dutiable or prohibited goods. This authority includes the search of receptacles used for
the transport of human remains and dead animals. Such authority likewise includes the power to stop, search, and
examine any vehicle or carrier, person or animal suspected of holding or conveying dutiable or prohibited goods.

SEC. 223. Authority to Search Persons Arriving From Foreign Countries. – Upon reasonable cause, travelers arriving
from foreign countries may be subjected to search and detention by the customs officers.  The dignity of the person
under search and detention shall be respected at all times. Female inspectors may be employed for the examination
and search of persons of their own sex.

SEC. 224. Power to Inspect and Visit. – The Commissioner or any customs officer who is authorized in writing by the
Commissioner, may demand evidence of payment of duties and taxes on imported goods openly for sale or kept in
storage. In the event that the interested party fails to produce such evidence within fifteen (15) days, the goods may
be seized and subjected to forfeiture proceedings: Provided, That during the proceedings, the interested party shall
be given the opportunity to prove or show the source of the goods and the payment of duties and taxes
thereon: Provided, further, That when the warrant of seizure has been issued but subsequent documents presented
evidencing proper payment are found to be authentic and in order, the District Collector shall, within fifteen (15) days
from the receipt of the motion to quash or recall the warrant, cause the immediate release of the goods seized,
subject to clearance by the Commissioner: Provided, finally, That the release thereof shall not be contrary to law.

TITLE III

CUSTOMS JURISDICTION AND CUSTOMS CONTROL

CHAPTER 1

CUSTOMS JURISDICTION

 SEC. 300. Customs Jurisdiction. – For the effective implementation of this Act, the Bureau shall exercise jurisdiction
over all seas within Philippine territory and all coasts, ports, airports, harbors, bays, rivers and inland waters whether
navigable or not from the sea and any means of conveyance.

The Bureau shall pursue imported goods subject to seizure during its transport by land, water and air and shall
exercise jurisdiction as may be necessary for the effective enforcement of this Act. When a vessel or aircraft
becomes subject to seizure for violation of this Act, a pursuit of such vessel or aircraft which began within the
territorial waters or air space may continue beyond the same, and the vessel or aircraft may be seized in the high
seas or international air space.

CHAPTER 2

CUSTOMS CONTROL

SEC. 301. Customs Control Over Goods. – All goods, including means of transport, entering or leaving the customs
territory, regardless of whether they are liable to duties and taxes, shall be subject to customs control to ensure
compliance with this Act.

In the application of customs control, the Bureau shall employ audit-based controls and risk management systems,
use automation to the fullest extent possible, and adopt a compliance measurement strategy to support risk
management.

The Bureau shall seek to cooperate and conclude mutual administrative assistance agreements with other customs
administrations to enhance customs control. The Bureau shall consult, coordinate, and cooperate with other
government regulatory agencies, free zones authorities, and the customs stakeholders, in general, to enhance
customs control.

SEC. 302. Enforcement of Port Regulation of the 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 insofar as connected with matters of shipping and navigation.

SEC. 303. Control Over Premises Used for Customs Purposes. – The Bureau shall, for customs purposes, have
exclusive control, direction and management of customs offices, facilities, warehouses, ports, airports, wharves,
infrastructure and other premises in the Customs Districts, in all cases without prejudice to the general police powers
of the local government units (LGUs), the Philippine Coast Guard and of law enforcement agencies in the exercise of
their respective functions.

SEC. 304. Power of the President to Subject Premises to Customs Jurisdiction. – When public interest requires, the
President may, by executive order, declare any public wharf, landing place, infrastructure, street or land, in any port
of entry under the jurisdiction of the Bureau as may be necessary, for customs purposes and/or to authorize a port or
terminal operator to transfer overstaying cargoes in an inland depot or terminal.

SEC. 305. Trespass or Obstruction of Customs Premises. – No person shall enter or obstruct a customs office,
warehouse, port, airport, wharf, or other premises under the control of the     Bureau without prior authority, including
the streets or alleys where these faculties are located.

SEC. 306. Special Surveillance for the Protection of Customs Revenue and Prevention of Smuggling. – The Bureau
shall conduct surveillance on vessels or aircrafts entering Philippine territory and on imported goods entering the
customs office: Provided, That the function of the Philippine Coast Guard to prevent and suppress the illegal entry of
these goods, smuggling and other forms of customs fraud and violations of maritime law and its proper surveillance of
vessels entering and/or leaving Philippine territory as provided in Republic Act No. 9993, otherwise known as the
"Philippine Coast Guard Law of 2009", shall continue to be in force

SEC. 307. Temporary Storage of Goods. – Subject to the rules and regulations to be issued by the Secretary of
Finance, the Commissioner shall establish a system for temporary storage of imports prior to goods declaration in
case of abandoned or overstaying-goods.

TITLE IV

IMPORT CLEARANCE AND FORMALITIES

CHAPTER 1

GOODS DECLARATION
SEC. 400. Goods to be Imported through Customs Office. – All goods imported into the Philippines shall be entered
through a customs office at a port of entry, or may be admitted to or removed from a free zone as defined in this Act,
as the case may be.

SEC. 401. Importations Subject to Goods Declaration. – Unless otherwise provided for in this Act, all imported goods
shall be subject to the lodgement of a goods declaration. A goods declaration may be for consumption, for customs
bonded warehousing, for admission, for conditional importation, or for customs transit.

SEC. 402. Goods Declaration for Consumption. – All goods declaration for consumption shall be cleared through a
formal entry process except for the following goods which shall be cleared through an informal entry process:

(a) Goods of a commercial nature with Free on Board (FOB) or Free Carrier At (FCA) value of less than fifty thousand
pesos (P50,000.00). Every three (3) years after the effectivity of this Act, the Secretary of Finance shall adjust this
amount as provided herein to its present value, using the Consumer Price Index (CPI) as published by the PSA; and

(b) Personal and household effects or goods, not in commercial quantity, imported in a passenger's baggage or mail.

The Commissioner may adjust the value of goods of commercial nature that shall be cleared through an informal
entry process without prejudice to the periodic adjustment period in subparagraph (a) of this section.

All importations entered through a formal entry process shall be covered by a letter of credit or any verifiable
commercial document evidencing payment or in cases where there is no sale for export, by any commercial
document indicating the commercial value of the goods.

SEC. 403. Provisional Goods Declaration. – Where the declarant does not have all the information or supporting
documents required to complete the goods declaration, the lodging of a provisional goods declaration may be
allowed: Provided, That it substantially contains the necessary information required by the Bureau and the declarant
undertakes to complete the information or submit the supporting documents within forty-five (45) days from the filing
of the provisional goods declaration, which period may be extended by the Bureau for another forty-five (45) days for
valid reasons.

If the Bureau accepts a provisional goods declaration, the duty treatment of the goods shall not be different from that
of goods with complete declaration. 'I Goods under a provisional goods declaration may be released upon posting of
any required security equivalent to the amount ascertained to be the applicable duties and taxes.

SEC. 404. Owner of Imported Goods. – All goods imported into the Philippines shall be deemed to be the property of
the consignee or the holder of the bill of lading, airway bill or other equivalent transport document if duly endorsed by
the consignee therein, or, if consigned to order, duly endorsed by the consignor. The underwriters of abandoned
goods and the salvors of goods saved from wreck at sea, coast, or in any area of the Philippines, may be regarded as
the consignees. SEC. 405. Liability of Importer for Duties and Taxes. – Unless relieved by laws or regulations, the
liability for duties, taxes, fees, and other charges attached to importation constitutes a personal debt due and
demandable against the importer in favor of the government and shall be discharged only upon payment of duties,
taxes, fees and other charges. It also constitutes alien on the imported goods which may be enforced while such
goods are under customs' custody.

SBC. 406. Importations by the Government. – Except those provided for in Section 800 of this Act, all importations by
the government for its own use or that of its subordinate branches or instrumentalities, or corporations, agencies or
instrumentalities owned or controlled by the government, shall be subject to the duties, taxes, fees and other charges
under this Act.

SEC. 407. Goods Declaration and Period of Filing. . – As far as practicable, the format of the goods declaration shall
conform with international standards. The data required in the goods declaration shall be limited to such particulars
that are deemed necessary for the assessment and collection of duties and taxes, the compilation of statistics and
compliance with this Act. The Bureau shall require the electronic lodgement of the goods declaration.

The Bureau shall only require supporting documents necessary for customs control to ensure that all requirements of
the law have been complied with. Translation of supporting documents shall not be required except when necessary.

Goods declaration must be lodged within fifteen (15) days from the date of discharge of the last package from the
vessel or aircraft. The period to file the goods declaration may, upon request, be extended on valid grounds for
another fifteen (15) days: Provided, That the request is made before the expiration of the original period within which
to file the goods declaration: Provided, however, That the period of the lodgement of the goods declaration maybe
adjusted by the Commissioner.

SEC. 408. Lodgement and Amendment of Goods Declaration. – The Bureau shall permit the electronic lodgement of
the goods declaration at any designated customs office. The Bureau shall, for valid reason and under terms and
conditions provided by regulation, permit the declarant to amend the goods declaration that has already been
lodged: Provided, That the request to amend the goods declaration, together with the intended amendments, must be
received prior to final assessment or examination of the goods.

SEC. 409. Advance Lodgement and Clearance. – The Bureau may provide for the lodgement and clearance of goods
declaration and supporting documents prior to the arrival of the goods under such terms and conditions as may be
provided by rules and regulations to be promulgated under this Act.

SEC. 410. Entry of Goods in Part for Consumption and in Part for Warehousing. – Goods declaration covered by one
bill of lading or airway bill over goods which are meant in part for consumption and in part for warehousing may be
both entered simultaneously for release at the port of entry.

SEC. 411. Contents of Goods Declaration. – Goods declaration shall contain the names of the consignee, importing
vessel or aircraft port of departure, port of destination and date of arrival, the number and marks of packages, or the
quantity, if in bulk, the nature and correct commodity description of the goods contained therein, its value as set forth
in a proper invoice, and such other information as may be required by rules and regulations.  Where the declarant
does not have all the information required to make the goods declaration, a provisional or incomplete goods
declaration shall, for certain cases and for reasons deemed valid by the Bureau, be allowed to be
lodged: Provided, That it contains the particulars deemed necessary by the Bureau for the acceptance of the entry
filed and that the declarant undertakes to complete it within forty-five (45) days from the filing of the provisional goods
declaration in accordance with Section 403 of this Act

SEC. 412. Statements to be Provided in the Goods Declaration. – No entry of imported goods shall be allowed unless
the goods declaration has been lodged with the Bureau.  The goods declaration shall, under penalties of falsification
or perjury, contain the following statements:

(a) The invoice and goods declaration contain an accurate and faithful account of the prices paid or payable for the
goods and other adjustments to the price actually paid or payable, and that nothing has been omitted therefrom or
concealed whereby the government of the Republic of the Philippines might be defrauded of any part of the duties
and taxes lawfully due on the goods; and

(b) To the best of the declarant's information and belief, all the invoices and bills of lading or airway bills relating to
the goods are the only ones in existence relating to the importation in question, and that these documents are in the
same state as when they were received by the declarant, and the declaration thereon are in all respects genuine and
true.

Goods declaration shall be submitted electronically pursuant to Republic Act No. 8792, otherwise known as the
"Electronic Commerce Act of 2000". Such declarations when printed and certified by a competent customs officer as
a faithful reproduction of the electronic submission shall be considered as actionable documents for purposes of
prosecuting a declarant if the declarations are found to be fraudulent.

SEC. 413. Description of Goods. – Under such terms and conditions prescribed under the rules and regulations, the
description of the goods in the goods declaration must be sufficient and specific in detail to enable the goods to be
identified for customs valuation, statistical purposes, and classification to the appropriate tariff heading and
subheading in the currency of the invoice, and in such other particulars necessary for the proper assessment and
collection of duties and taxes. The quantity and value of each of the several classes of goods shall be separately
declared according to their respective headings or subheadings and the totals of each heading or subheading shall
be duly shown.

SEC. 414. Commercial and Noncommercial Invoice. – Commercial invoice of imported goods shall contain the
following:

(a) The agreed price paid or to be p aid for the goods;

(b) The adjustments to the price paid or to be paid as defined in Section 701(1) of this Act, if not yet included in the
invoice, as may be applicable;
(c) The names of the buyer, seller, and the time and place of sale;

(d) The port of entry;

(e) A sufficient description to enable the accurate identification of goods for tariff classification, customs valuation,
and statistical purposes, indicating the correct commodity description, in customary term or commercial designation,
the grade or quality, numbers, marks or symbols under which they are sold by the seller or manufacturer, together
with the marks and number of packages in which the goods are packed;

(f) The quantities in the weights or measures of the goods shipped; and

(g) Any other fact deemed necessary for the proper examination, customs valuation, and tariff classification of the
goods as may be prescribed by rules and regulations.

To the extent possible, the above requirements shall also apply to goods imported but not covered by sale, such as
goods on consignment or lease, samples, or donations, covered by a consignment, pro forma invoice, or other
noncommercial invoice.

SEC. 415. Mode of Payment and Terms of Trade. – Subject to existing laws and rules on foreign currency exchange,
the internationally accepted standards and practices on the mode of payment or remittance covering import and
export transactions, including standards developed by international trading bodies such as the International Chamber
of Commerce (ICC) on trading terms (incoterms) and on international letters of credit such as the Uniform Customs
and Practice for Documentary Credits (UCPDC), shall be recognized.

SEC. 416. Examination of Samples. – Customs officers shall see to it that representative samples taken during
examination shall be properly receipted for and retained within a reasonable period of time.  The quantity and value of
the samples taken shall be noted in the specified box of goods declaration or electronic form. Such samples shall be
duly labeled as will definitely identify them with the importation for which they are taken.

SEC. 417. Forwarding of Cargo and Remains of Wrecked Vessel or Aircraft. – When vessels or aircrafts are wrecked
within the Philippines, the original owners or consignees of the cargo, or by its underwriters, in ease of abandonment,
may seek approval from the Bureau to forward the goods saved from the wreck to the ports of destination without
going through, the customs office in the district in which the goods were cast ashore or unloaded. Upon approval, the
goods may be forwarded with particular manifests and duly certified by a customs officer in charge of the goods.

The owner of the vessel or aircraft may be permitted to export the remains of the wreck upon proper examination and
inspection. The remains of a wrecked vessel shall include not only its hull and rigging, but also all sea stores, goods
and equipment, such as sails, ropes and chain anchors.

SEC. 418. Derelicts and Goods from Abandoned Wrecks. – Derelicts and all goods recovered from sea or from
abandoned wrecks shall be under the jurisdiction of the port where the goods arrive, and shall be retained in the
custody of the Bureau. If not claimed by the owner, underwriter or salvor, the same shall be deemed as property of
the government.

When such goods are brought into port by lighters or other craft, each vessel shall submit a manifest of their
respective cargo.

The customs officer nearest the scene of the wreck shall take charge of the goods saved and shall give immediate
notice to the District Collector or the nearest customs office.

In order to prevent any attempt to commit fraud, the District Collector shall be represented at the salvage of the cargo
by customs officers who shall examine and receive the inventory made on the cargo.

Derelicts and goods salvaged from foreign vessels or aircrafts recovered from sea or wreck are prima facie dutiable
and may be entered for consumption or warehousing. If claimed to be of Philippine production, and consequently
conditionally duty-free, proof must be submitted as in ordinary cases of reimportation of goods. Foreign goods landed
from a vessel or aircraft in distress is dutiable if sold or disposed of in the Philippines.

Before any goods taken from a recent wreck are admitted to the customs territory, the same shall be appraised, and
the owner or importer shall have the same right to appeal as in ordinary importation.
No part of a Philippine vessel or aircraft or its equipment, wrecked either in Philippine or foreign waters, shall be
subject to duty.

CHAPTER 2

EXAMINATION OF GOODS

SEC. 419. Examination of Goods. – Examination of goods, when required by the Bureau, shall be conducted
immediately after the goods declaration has been lodged. Priority in the examination shall be given to live animals,
perishable goods and other goods requiring immediate examination.

Whenever necessary, a system of coordination and joint examination of goods shall be established by the Bureau
and other regulatory agencies under existing laws and regulations.

As a general rule, the Bureau may examine the goods in the presence of the declarant or an authorized
representative.  Examination of the goods in the absence of the declarant or authorized representative may be
allowed in exceptional circumstance and for valid and justifiable grounds, as may be defined by regulations
promulgated by the Secretary of Finance, upon recommendation of the Commissioner.  The Bureau may require the
declarant to be present or to be represented at the examination of the goods or to render any assistance necessary
to facilitate the examination.

The Bureau shall take samples of the goods only when needed to establish the tariff description and value of goods
declared, or to ensure compliance with this Act. Samples drawn shall be as minimal as possible.

SEC. 420. Conditions for Examination.. – Pursuant to internationally accepted standards, the Bureau may adopt
nonintrusive examination of goods, such as the use of x-ray machines.

Physical examination of the goods shall be conducted when:

(a) It is directed by the Commissioner on account of a derogatory information;

(b) The goods are subject to an Alert Order issued by competent authority;

(c) The goods are electronically selected for physical examination;

(d) There are issues and controversies surrounding the goods declaration and the import clearance process; or

(e) The importer or declarant requests for the examination of the goods.

The Commissioner may exempt from physical examination the goods of authorized economic operators or of those
provided for under any existing trade facilitation program of the Bureau.

Physical examination, when required, shall be conducted in an expeditious manner.

SEC. 421. Duties of Customs Officer Tasked to Examine the Imported Goods., – In the examination, classification,
and valuation of the goods, the customs officer shall:

(a) Determine whether the packages for examination and their contents are in accordance with the goods declaration,
invoice and other pertinent documents;

(b) Take samples of the imported goods for examination or laboratory analysis when necessary;

(c) Issue a receipt for a sample taken and retained during examination; and

(d) Report whether the goods have been correctly declared as to value, quantity, measurement, weight, tariff
classification and not imported contrary to law.

Failure on the part of the customs officer to perform the above duties shall be penalized according to Section 1431 of
Title XIV of this Act.

SEC. 422. Customs Expenses Constituting Charges on Goods. – The cost of examination shall be for the account of
the importer or exporter, subject to proper accounting and documentation.  All expenses incurred by the Bureau for
the handling or storage of goods and other necessary operations shall be chargeable against the goods, and shall
constitute a lien thereon.

CHAPTER 3

ASSESSMENT AND RELEASE

SEC. 423. Determination of the De Minimis Value. – No duties and taxes shall be collected on goods with an FOB or
FCA value often thousand pesos (P10,000.00) or below. The Secretary of Finance shall adjust the de minimis value
as provided herein every three (3) years after the effectivity of this Act.  The value herein stated shall be adjusted to
its present value using the CPI, as published by the PSA.

SEC. 424. Duty of Customs Officer Tasked to Assess Imported Goods. – For purposes of assessing duties and taxes
on imported goods, the customs officer shall classify, value, and determine the duties and taxes to be paid. The
customs officer shall prepare and submit an assessment report as established under this Act.

SEC. 425. Tentative Assessment of Goods Subject to Dispute Settlement. – Assessment shall be deemed tentative if
the duties and taxes initially assessed are disputed by the importer. The assessment shall be completed upon final
readjustment based on the tariff ruling in case of classification dispute, or the final resolution of the protest case
involving valuation, rules of origin, and other customs issues.

The District Collector may allow the release of the imported goods under tentative assessment upon the posting of
sufficient security to cover the applicable duties and taxes equivalent to the amount that is disputed.

SEC. 426. Tentative Assessment of Provisional Goods Declaration. – Assessment of a provisional goods declaration
shall be deemed tentative and such assessment shall be completed upon final readjustment and submission by the
declarant of the additional information or documentation required to complete the declaration within the period
provided in Section 403 of this Act.

SEC. 427. Readjustment of Appraisal, Classification or Return. – Such appraisal, classification or return, as finally
passed upon and approved or modified by the District Collector, shall not be altered or modified in any manner,
except:

(1) Within one (1) year after payment of the duties, upon statement of error in conformity with Section 912 of this Act,
as approved by the District Collector;

(2) Within fifteen (15) days after such payment, upon request for reappraisal or reclassification addressed to the
Commissioner by the District Collector, if the appraisal or classification is deemed to be low;

(3) Upon request for reappraisal and/or reclassification, in the form of a timely protest addressed to the District
Collector by the interested party if the latter should be dissatisfied with the appraisal or return; or

(4) Upon demand by the Commissioner after the completion of compliance audit in accordance with the provisions of
this Act.

SEC. 428. Assessment of Duty on Less Than Entered Value. – Duty shall not be assessed in any case upon an
amount less than the entered value, unless by direction of the Commissioner in cases when the importer certifies at
the time of entry that the entered value is higher than the dutiable value and that the goods are so entered in order to
meet increases made by the appraiser in similar cases then pending re-appraisement; and the lower assessment
shall be allowed only when the importer's contention is sustained by a final decision, and shall appear that such
action of the importer was taken in good faith after due diligence and inquiry.

SEC. 429. Final Assessment. – Assessment shall be deemed final fifteen (15) days after receipt of the notice of
assessment by the importer or consignee.

SEC. 430. Period of Limitation. – In the absence of fraud and when the goods have been finally assessed and
released, the assessment shall be conclusive upon all parties three (3) years from the date of final payment of duties
and taxes, or upon completion of the post clearance audit.

SEC. 431. Release of Goods after Payment of Duties and Taxes. – Goods declared shall be released when duties
and taxes and other lawful charges have been paid or secured and all the pertinent laws, rules and regulations have
been complied with.
When the Bureau requires laboratory analysis of samples, detailed technical documents or expert advice, it may
release the goods before the results of such examination are known after posting of sufficient security by the
declarant.

SEC. 432. Release of Goods to the Holder of Bill of Lading or Airway Bill. – Any customs officer who releases goods
to the consignee or lawful holder of the bill of lading or airway bill shall not be liable for any defect or irregularity in its
negotiation unless the customs officer has notice of the defect or irregularity.

SEC. 433. Release of Goods Without Production, of Bill of Lading or Airway Bill. – No customs officer shall release
goods to any person without the submission of the bill of lading or airway bill covering the goods, except on written
order of the carrier or agent of the vessel or aircraft, in which case neither the government nor the customs officer
shall be held liable for any damage arising from wrongful release of the goods: Provided, That when the release of
goods is made against such written order, the customs officer shall require the submission of a copy of the bill.

SEC. 434. Release of Goods Upon Order of Importer. – An importer may issue a written authorization for the release
of goods stored in a bonded warehouse to another person.  Such authorization shall not relieve the importer from
liability for the duties, taxes and other charges due on the goods unless the person to whom the release was
authorized assumes such liability.

SEC. 435. Withholding Release Pending Satisfaction of Lien. – When the District Collector is duly notified through a
lawful order of a competent court of a Hen for freight, lighterage or general average upon any imported goods, the
District Collector shall withhold the release of the goods unless the claim has been paid or secured.  In case of
disagreement, the District Collector may release the goods after payment of the freight and lighterage due on the
quantity or weight landed as actually determined.

SEC. 436. Fine or Surcharge on Goods. – Goods subject to any fine or surcharge shall be released only after the
payment of the fine or surcharge.

CHAPTER 4

SPECIAL PROCEDURES

SEC. 437. Traveler and Passenger Baggage. – The Bureau shall provide simplified customs procedure for traveler
and baggage processing based on international agreements and customs best practices.

Travelers shall be permitted to export goods for commercial pm-poses, subject to compliance with the necessary
export formalities and payment of export duties, taxes and charges, if any.

SEC. 438. Postal Item or Mail. – Postal item or mail shall include letter-post and parcels, as described in international
practices and agreements, such as the Acts of the Universal Postal Union (AUPU), currently in force.

A simplified procedure shall be used in the clearance of postal item or mail, including the collection of the applicable
duties and taxes on such items or goods.

When all the information required by the customs are available in the special declaration form for postal items as
provided in the AUPU or similar international agreements, the special declaration form and supporting documents
shall be the goods declaration. However, a separate goods declaration shall be required for the following:

(a) Goods whose value fall within the level that the Commissioner has determined to be taxable and thus must be
covered by a goods declaration;

(b) Prohibited and regulated goods;

(c) Goods, the exportation of which must be certified; and

(d) Imported goods under a customs procedure other than for consumption. '

SEC. 439. Express Shipment – The Bureau shall provide simplified customs procedures based on international
standards and customs best practices for air shipments considered as time-sensitive and requiring pre-arrival
clearance.  Express shipments of accredited air express cargo operators may be released prior to the payment of the
duty, tax and other charges upon posting of a sufficient security.
SEC. 440. Establishment of Advance Customs Clearance and Control Program. – The Bureau may establish and
implement a voluntary program on advance customs clearance and control on containerized cargoes. The details of
the voluntary advance customs clearance shall be subject to the rules and regulations to be issued by the Bureau
after conducting the necessary public hearings and consultations with the concerned sectors.

TITLE V

EXPORT CLEARANCE AND FORMALITIES

CHAPTER 1

 EXPORT CLEARANCE AND DECLARATION

SEC. 500. Export Declaration. – All goods exported from the Philippines, whether subject to export duty or not, shall
be declared through a competent customs office through an export declaration, duly signed electronically or
otherwise by the party making the declaration.

The description of the goods in the export declaration must contain sufficient and specific information for statistical
purposes as well as for the proper valuation and classification of the goods.

SEC. 501. Export Product to Conform to Standard Grades. – If applicable, products shall conform to export standard
grades established by the government.  The packaging of the said goods shall likewise be labeled and marked, in
accordance with related laws and regulations.  Export declaration may not be granted for goods violating the
aforementioned requirements.

SEC. 502. Lodgement and Processing of Export Declaration. – The Bureau shall promulgate rules and regulations to
allow manual and electronic lodgement and processing of the export declaration.

SEC. 503. Rules of Origin.. – Pursuant to the applicable rules of origin, the Bureau or any other designated
government agency may determine the origin of goods for export and, if appropriate, issue the corresponding
certificates of origin.  However, the exporter may adopt a self-certification system: Provided, That it is duly accredited
by the Bure au or any other authorized government agencies.

TITLE VI

CUSTOMS TRANSIT AND TRANSSHIPMENT

CHAPTER 1

CUSTOMS TRANSIT

SEC. 600. Customs Transit in the Customs Territory. – Customs transit within the customs territory shall be allowed
for goods except those intended for consumption, to be transported as follows:

(a) From port of entry to another port of entry as exit point for outright exportation;

(b) From port of entry to another port of entry or inland customs office;

(c) From inland customs office to a port of entry as exit point for outright exportation; and

(d) From one port of entry or inland customs office to another port of entry or inland customs office.

A transit permit is required for goods transported under customs transit. However, transfer of goods in customs transit
from one means of transport to another shall be allowed: Provided, That any customs seal or fastening is not broken
or tampered.

The party responsible for the compliance of the obligations imposed on customs transit shall ensure that the goods
are presented intact and in due course at the customs office of destination.  Failure to comply with the
aforementioned obligations or like-wise failure to follow a prescribed itinerary or period for delivery of the goods may
immediately subject the goods to the corresponding duties, taxes and other applicable fines, penalties, and
surcharges.
SBC. 601. Duty and Tax on Goods Intended for Transit. – Transit goods admitted for storage in a customs bonded
warehouse, or for outright exportation at the port of destination or inland customs office, and goods intended for
transit covered by Republic Act No. 10668, otherwise known as "An Act Allowing Foreign Vessels to Transport and
Co-Load Foreign Cargoes for Domestic Transshipment and for Other Purposes", shall not be subject to the payment
of duties and taxes at the port of entry: Provided, That any conditions and security required by the Bureau are
complied with.

Goods for consumption and other goods intended for customs transit not covered by the immediately preceding
paragraph shall be subject to the payment of duties and taxes at the port of discharge.

SEC. 602. Carrier's Security. – Carriers that transport imported goods that shall be placed under customs transit from
a port of entry to other ports, shall post a general transportation security amounting to at least fifty thousand pesos
(P50,000.00). Such security shall ensure the complete and immediate delivery of goods to the customs officer at the
port of destination and the payment of pertinent customs charges and expenses and other transfer costs. The amount
of the security may be adjusted by the Commissioner, upon approval of the Secretary of Finance.

CHAPTER 2

CUSTOMS TRANSSHIPMENT

SEC. 603. Customs Transshipment. – Goods admitted for transshipment shall not be subject to the payment of duties
and taxes: Provided, That the goods declaration for customs transshipment particularly indicates such nature of the
goods, duly supported by commercial or transport documents or evidence as required by the Bureau.

Goods for transshipment must be exported from the Philippines within thirty (30) days from arrival thereof.  The
Commissioner may allow an extension of such period after the establishment of valid reasons.

SEC. 604. Goods Entered for Immediate Reexportation. – Where an intent of reexportation of the goods is shown by
the bill of lading, invoice, manifest, or other satisfactory evidence, the whole or a part of a bill comprising not less than
one package may be entered for immediate reexportation under security.  The District Collector shall designate the
vessel or aircraft in which the goods are loaded constructively as a warehouse to facilitate the direct transfer of the
goods to the exporting vessel or aircraft.

Unless it shall appear in the bill of lading, airway bill, invoice, manifest, or other satisfactory evidence, that goods
arriving in the Philippines are destined for transshipment, no exportation thereof will be permitted except under entry
for immediate reexportation under sufficient security in an amount equal to the ascertained duties, taxes and other
charges.

Upon the reexportation of the goods, and the production of proof of landing beyond the limits of the Philippines, the
security shall be released.

TITLE VII

IMPORT DUTY AND TAX

CHAPTER 1

BASIS OF VALUATION

SEC. 700. Sequential Application of Valuation Methods. – Imported goods shall be valued in accordance with the
provisions of Section 701 of this Act whenever the conditions prescribed therein are fulfilled.

Where the customs value cannot be determined under the provisions of Section 701 of this Act, it is to be determined
by proceeding sequentially through the succeeding sections hereof to the first such section under which the customs
value can be determined.  Except as provided in Section 704 of this Act, it is only when the customs value cannot be
determined under the provisions of a particular section that the provisions of the next section in the sequence can be
used.

If the importer does not request that the order of Sections 704 and 705 of this Act be reversed, the normal order of
the sequence is to be followed. If the importer so requests but it is impossible to determine the customs value under
Section 705 of this Act, the customs value shall be determined under Section 704.
When the customs value cannot be determined under Sections 701 through 705, it may be determined under Section
706 of this Act.

SEC. 701, Transaction Value System – Method One. – The transaction value shall be the price actually paid or
payable for the goods when sold for export to the Philippines adjusted in accordance with the provisions of tins
section: Provided, That:

(a) There are no 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 not subject to some condition or consideration for which a value cannot be determined with
respect to the goods being valued; and

(c) The buyer and the seller are not related, or where the buyer and the seller are related, that the transaction value is
acceptable for customs purposes under the provisions hereof.

For purposes of this Act, persons shall be deemed related only if:

(i) They are officers or directors of one another's business;

(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 stocks
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 cited in the preceding paragraph.

In a sale between related persons, the transaction value shall be accepted as basis for customs valuation whenever
the importer demonstrates that such value closely approximates one of the following occurring at or about the same
time:

(a) The transaction value in sales to unrelated buyers of identical or similar goods for export to the same country of
importation;

(b) The customs value of identical or similar goods as determined under the provisions of Section 704 of this Act; or

(c) The customs value of identical or similar goods are determined under the provisions of Section 705 of this Act.

In determining the transaction value, the following shall be added to the price actually paid or payable for the
imported goods:

(1) 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) Cost of packing, whether for labor or materials;

(d) 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; and

(e) 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) 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) 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) Cost of insurance.

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

SEC. 702. Transaction Value of Identical Goods – Method Two. – 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.  For purposes of this section,
"Identical goods" refer to 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.

If, in applying this section, more than one transaction value of identical goods are found, the lowest value shall be
used to determine the customs value.

SEC. 703. Transaction Value of Similar Goods - Method Three. – 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. For purposes of this section, "Similar
goods" refer to goods which, although not alike in all respects, have like characteristics and similar component
materials which enable them to perform the same functions and to be commercially interchangeable. The quality of
the goods, its reputation and the existence of a trademark shall be among the factors to be considered in determining
whether goods are similar.

If, in applying this section, more than one transaction value of identical goods are found, the lowest such value shall
be used to determine the customs value.

SEC. 704. Deductive Value – Method Four. – Where the dutiable value cannot be determined under the preceding
method, the dutiable value shall be the deductive value unless otherwise requested by the importer as provided in
Section 700 hereof. 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;
(3) Where appropriate, the costs of: (i) transport of the imported goods from the port of exportation to the port of entry
in the Philippines; (ii) 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 (iii) insurance; 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 they were imported, the customs value shall, subject to the
conditions set forth in the preceding paragraph, be based on the unit price at which the imported goods or identical or
similar imported goods sold in the Philippines in the condition they were imported and 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 (1), (2), (3) and (4) hereof.

SEC. 705. Computed Value – Method Five. – Where the dutiable value cannot be determined under the preceding
method, the dutiable value shall be the computed value of 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 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 that said producer will give sufficient advance notice to the
government of the country in question and that the latter does not object to the investigation.

SEC. 706. Fallback Value–Method Six. – 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 (2) 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.

SEC. 707. Ascertainment of the Accuracy of the Declared Value. – Nothing in this section shall be construed as
restricting or calling into question the right of the Bureau to ascertain the truth or accuracy of any statement,
document or declaration presented for customs valuation purposes. When a declaration has been presented and
when the Bureau has reason to doubt the truth or accuracy of the particulars or of documents produced in support of
such declaration, it 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 Section 701 of this Act.

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 posting of a sufficient security in an amount equivalent to the duties and taxes in dispute conditioned on
the payment of additional duties and taxes, if any, as may be determined: Provided, That prohibited goods shall not
be released under any circumstance.

If, after receiving further information, or in the absence of a response, the Bureau still has reasonable doubts on the
truth or accuracy of the declared value, it may deem that the customs value of the imported goods cannot be
determined under method one, without prejudice to an importer's right to appeal pursuant to Section 1104 of this Act.
Before taking a final decision, the District Collector shall communicate to the importer, in writing if requested, the
grounds for doubting the truth or accuracy o£ the particulars or documents produced and give the importer a
reasonable opportunity to respond. When a final decision is made, the Bureau shall communicate its decision, and
the grounds therefor in writing.

SEC. 708. Exchange Rate. – For the assessment and collection of import duty upon imported goods and for other
purposes, the value and prices thereof quoted in foreign currency shall be converted into the currency of the
Philippines at the current rate of exchange or value specified or published, from time to time, by the Bangko Sentral
ng Pilipinas (BSP).

CHAPTER 2

SPECIAL DUTIES AND TRADE REMEDY MEASURES

SEC. 709. Government's Right of Compulsory Acquisition. – In order to protect government revenues against
undervaluation of goods, the Commissioner may, motu proprio or upon the recommendation of the District Collector,
acquire imported goods under question for a price equal to their declared customs value plus any duties already paid
on the goods, payment for which shall be made within ten (10) working days from issuance of a warrant signed by the
Commissioner for the acquisition of such goods.

An importer who is dissatisfied with a decision of the Commissioner pertaining to this section may, within twenty (20)
working days after the date on which notice of the decision is given, appeal to the Secretary of Finance, and
thereafter If still dissatisfied, to the CTA as provided for in Section 1136 of this Act.

Where no appeal is made by the importer, or upon reaffirmation of the Commissioner's decision during the appeals
process, the Bureau or its agents shall sell the acquired goods pursuant to existing laws and regulations.

Nothing in this section limits or affects any other powers of the Bureau with respect to the disposition of the goods or
any liability of the importer or any other person with respect to an offense committed in the importation of the goods.

SEC. 710. Marking of Imported Goods and Containers. – (A) Marking of Goods, – Except as hereinafter provided, all
goods of foreign origin imported into the Philippines or their containers, as provided in subsection (B) hereof shall be
conspicuously marked in any official language of the Philippines as legibly, indelibly and permanently as the nature of
the goods or container will permit and in such manner as to indicate to an ultimate purchaser in the Philippines the
name of the country of origin of the goods. Pursuant thereto, the Commissioner shall, with the approval of the
Secretary of Finance:

(1) Determine the character of words and phrases or abbreviation 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 in a conspicuous place on the goods or container where
the marking' shall appear;

(2) Require the addition of other words or symbols which may be appropriate to prevent deception or mistake as to
the origin of the goods or as to the origin of any other goods with which such imported goods is usually combined
subsequent to importation but before delivery to an ultimate purchaser; and
(3) Authorize the exception of any goods from the requirements of marking if:

(i) Such goods are incapable of being marked;

(ii) Such goods cannot be marked prior to shipment to the Philippines without injury;

(iii) Such goods cannot be marked prior to shipment to the Philippines, except at an expense economically prohibitive
of their importation;

(iv) The marking of a container of such goods will reasonably indicate the origin of such goods;

(v) Such goods are crude substances;

(vi) Such goods are imported for use by the importer and not intended for sale in their imported or any other form;

(vii) Such goods are to be processed in the Philippines by the importer or for the importer's account other than for the
purpose of concealing the origin of such goods and in such manner that any mark contemplated by this section would
necessarily be obliterated, destroyed, or permanently concealed;

(viii) An ultimate purchaser, by reason of the character of such goods or by reason of the circumstances of their
importation, must necessarily know the country of origin of such goods even though they are not marked to indicate
their origin;

(ix) Such goods were produced more than twenty (20) years prior to their importation into the Philippines; or

(x) Such goods cannot be marked after importation except at an expense which is economically prohibitive, and the
failure to mark the goods 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 goods are exempt under paragraph (3) of subsection (A) of this section from
the requirements of marking, the immediate container, if any, of such goods, or such other container or containers of
such goods, 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 goods in any official language of the Philippines, subject to all provisions of this section,
including the same exceptions as are applicable to goods under paragraph (3) of subsection (A).

(C) Pine for Failure to Mark. – If, at the time of importation any good 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 good a marking duty of five percent (5%) of dutiable value, which shall be deemed to have accrued at the
time of importation,

(D) Release Withheld Until Marked. – No imported goods held in customs custody for inspection, examination, or
assessment shall be released until such goods or their containers 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.

(E) The failure or refusal of the owner or importer to mark the goods as herein required within a period of thirty (30)
days after due notice shall constitute as an act of abandonment of said goods and their disposition shall be governed
by the provisions of this Act relative to abandonment of imported goods.

SEC. 711. Dumping Duty. –

The provisions of Republic Act No. 8752, otherwise known as the "Anti-Dumping Act of 1999", are hereby adopted.

SEC. 712. Safeguard Duty. – The provisions of Republic Act No. 8800, otherwise known as the "Safeguard Measures
Act", are hereby adopted.

SEC. 713. Countervailing Duty. –

The provisions of Republic Act No. 8751, otherwise known as "An Act Strengthening the Mechanisms for the
Imposition of Countervailing Duties on Imported Subsidized Products, Commodities or Articles of Commerce in Order
to Protect Domestic Industries from Unfair Trade Competition, Amending for the Purpose Section 302, Part 2, Title II,
Book I of Presidential Decree No. 1464", otherwise known as the "Tariff and Customs Code of the Philippines, as
Amended", are hereby adopted.

SEC. 714. Discrimination by Foreign Countries. – Without prejudice to the Philippine commitment in any ratified
international agreements or treaty, the following recourse shall be applicable in case of discrimination by foreign
countries:

(a) When the President finds that the public interest will be served thereby, the President shall, by proclamation,
specify and declare new or additional duties in an amount not exceeding one hundred percent (100%) ad
valorem upon goods wholly or in part the growth or product of, or imported in a vessel of any foreign country
whenever the President shall find as a fact that such country:

(1) Imposes, directly or indirectly, upon the disposition or transportation in transit or through reexportation from such
country of any goods 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 goods 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 discrimination against the commerce of the Philippines, the
President is hereby authorized, if deemed consistent with the interests of the Philippines and of public interest, to
issue a further proclamation directing that such product of said country or such goods imported in their vessels be
excluded from importation into the Philippines.

(c) Any proclamation issued by the President under this section shall, if the President deems it consistent with the
interest of the Philippines, extend to the whole of any foreign country or may be confined to any subdivision or
subdivisions thereof:  Provided, That the President may, whenever the public interest requires, suspend, revoke,
supplement or amend any such proclamation.

(d) All goods 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 or 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 goods wholly or in part the growth or product of any foreign
country, it shall be applicable thereto, whether such goods are imported directly or indirectly.

(e) It shall be the duty of the Commission to ascertain and at all times 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, and to recommend measures to address such discriminatory acts.

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

TITLE VIII

TAX AND DUTY DEFERMENT, PREFERENCE AND EXEMPTION

CHAPTER 1

CONDITIONALLY TAX AND/OR DUTY-EXEMPT IMPORTATION

SEC. 800. Conditionally Tax and/or Duty-Exempt Importation. – The following goods shall be exempt from the
payment of import duties upon compliance with the formalities prescribed in the regulations which shall be
promulgated by the Commissioner with the approval of the Secretary of Finance: Provided, That goods sold,
bartered, hired or used for purposes other than what they were intended for and without prior payment of the duty, tax
or other charges which would have been due and payable at the time of entry if the goods had been entered without
the benefit of this section, shall be subject to forfeiture and the importation shall constitute a fraudulent practice
against customs laws: Provided, however, That a sale pursuant to a judicial order or in liquidation of the estate of a
deceased person shall not be subject to the preceding proviso, without prejudice to the payment of duties, taxes and
other charges: Provided, further, That the President may, upon the recommendation of the Secretary of Finance,
suspend, disallow or completely withdraw, in whole or in part, any conditionally free importation under this section:

(a) Aquatic products such as fishes, crustaceans, mollusks, marine animals, seaweeds, fish oil, roe, caught or
gathered by fishing vessels of Philippine registry: Provided, That they are imported in such vessels or in crafts
attached thereto: Provided, however, That they have not been landed in any foreign territory or, if so landed, that they
have been landed solely for transshipment without having been advanced in condition;

(b) Equipment for use in the salvage of vessels or aircrafts, not available locally, upon identification and the giving of
a security in an amount equal to one hundred percent (100%) of the ascertained duties, taxes and other charges
thereon, conditioned for the exportation thereof or payment of corresponding duties, taxes and other charges within
six (6) months from the date of acceptance of the goods declaration: Provided, That the Bureau may extend the time
for exportation or payment of duties, taxes and other charges for a term not exceeding sis (6) months from the
expiration of the original period;

(c) Cost of repairs, excluding the value of the goods used, made in foreign countries upon vessels or aircraft
documented, registered or licensed in the Philippines, upon proof satisfactory to the Bureau: (1) that adequate
facilities for such repairs are not afforded in the Philippines; or (2) that such vessels or aircrafts, while in the regular
course of their voyage or flight, were compelled by stress of weather or other casualty to put into a foreign port to
make such repairs in order to secure the safety, seaworthiness, or airworthiness of the vessels or aircrafts to enable
them to reach their port of destination;

(d) Goods brought into the Philippines for repair, processing or reconditioning to be reexported upon completion of
the repair, processing or reconditioning: Provided, That the Bureau shall require security equal to one hundred
percent (100%) of the duties, taxes and other charges thereon, conditioned for the exportation thereof or payment of
the corresponding duties, taxes and other charges within six (6) months from the date of acceptance of the goods
declaration;

(e) Medals, badges, cups, and other small goods bestowed as trophies or prizes, or those received or accepted as
honorary distinction;

(f) Personal and household effects belonging to returning residents including household appliances, jewelry, precious
stones, and other goods of luxury which were formally declared and listed before departure and identified under oath
before the District Collector when exported from the Philippines by such returning residents upon their departure
therefrom or during their stay abroad; personal and household effects including wearing apparel, goods of personal
adornment, toilet goods, instruments related to one's profession and analogous personal or household effects,
excluding luxury items, vehicles, watercrafts, aircrafts and animals purchased in foreign countries by residents of the
Philippines which were necessary, appropriate, and normally used for their comfort and convenience during their stay
abroad, accompanying them on their return, or arriving within a reasonable time which, barring unforeseen and
fortuitous events, in no case shall exceed sixty (60) days after the owner's return.

For purposes of this section, the phrase "returning residents" shall refer to nationals who have stayed in a foreign
country for a period of at least sis (6) months. Returning residents shall have tax and duty exemption on personal and
household effects: Provided, That:

(1) It shall not be in commercial quantities;

(2) It is not intended for barter, sale or for hire; and

(3) Limited to the FCA or FOB value of:

(i) Three hundred fifty thousand pesos (P350,000.00) for those who have stayed in a foreign country for at least ten
(10) years and have not availed of this privilege within ten (10) years prior to returning resident's arrival;

(ii) Two hundred fifty thousand pesos (P250,000.00) for those who have stayed in a foreign country for a period of at
least five (5) but not more than ten (10) years and have not availed of this privilege within five (5) years prior to
returning resident's arrival; or

(iii) One hundred fifty thousand pesos (P150,000.00) for those who have stayed in a foreign country for a period of
less than five (5) years and have not availed of this privilege within six (6) months prior to returning resident's arrival.
Any amount in excess of the above-stated threshold shall be subject to the corresponding duties and taxes under this
Act.

Every three (3) years after the effectivity of this Act, the Secretary of Finance shall adjust the amount herein stated to
its present value using the CPI as published by the PSA.

In addition to the privileges granted under the immediately preceding paragraph, returning Overseas Filipino Workers
(OFWs) shall have the privilege to bring in, tax and duty-free, home appliances and other durables, limited to one of
every kind once in a given calendar year accompanying them on their return, or arriving within a reasonable time
which, barring unforeseen and fortuitous events, in no case shall exceed sixty (60) days after every returning OFW's
return upon presentation of their original passport at the port of entry: Provided, That any amount in excess of FCA
value of one hundred fifty thousand pesos (P150,000.0,0) for personal and household effects or of the number of
duty-free appliances as provided for under this section, shall be subject to the corresponding taxes and
duties: Provided, further, That every three (3) years after the effectivity of this Act, the Secretary of Finance shall
adjust the amount herein stated to its present value using the CPI as published by the PSA;

(g) Residents of the Philippines, OFWs or other Filipinos while residing abroad or upon their return to the Philippines
shall be allowed to bring in or send to their families or relatives in the Philippines balikbayan boxes which shall be
exempt from applicable duties and taxes imposed under the NIRC of 1997, as amended: Provided, That balikbayan
boxes shall contain personal and household effects only and shall neither be in commercial quantities nor intended
for barter, sale or for hire and that the FCA value of which shall not exceed one hundred fifty thousand pesos
(P150,000.00): Provided, further, That every three (3) years after the effectivity of this Act, the Secretary of Finance
shall adjust the amount herein stated to its present value using the CPI as published by the PSA: Provided,
finally, That residents of the Philippines, OFWs or other Filipinos can only avail of this privilege up to three (3) times in
a calendar year. Any amount in excess of the allowable non-dutiable value shall be subject to the applicable duties
and taxes;

(l) For purposes of this Act, OFWs refer to holders of valid passports duly issued by the Department of Foreign Affairs
(DFA) and certified by the Department of Labor and Employment (DOLE) or the Philippine Overseas Employment
Administration (POEA) for overseas employment purposes. They cover all Filipinos, working in a foreign country
under employment contracts, regardless of their professions, skills or employment status in a foreign country; and (2)
Calendar Year refers to the period from January 1 to December 31.

(h) Wearing apparel, goods of personal adornment, toilet goods, portable tools and instruments, theatrical costumes
and similar effects accompanying travelers, or tourists, or arriving within a reasonable time before or after their arrival
in the Philippines, which, are necessary and appropriate for the wear and use of such persons according to the
nature of the journey, their comfort and convenience: Provided, That this exemption shall not apply to goods intended
for other persons or for barter, sale or hire: Provided, however, That the Bureau may require either a written
commitment or a security in an amount equal to one hundred percent (100%) of the ascertained duties, taxes and
other charges thereon, conditioned for the exportation thereof or payment of the corresponding duties, taxes and
other charges within three (3) months from the date of acceptance of the goods declaration: Provided, further, That
the Bureau may extend the time for exportation or payment of duties, taxes and other charges for a term not
exceeding three (3) months from the expiration of the original period.

Personal and household effects and vehicles belonging to foreign consultants and experts hired by, or rendering
service to, the government, and their staff or personnel and families accompanying them or arriving within a
reasonable time before or after their arrival in the Philippines, in quantities and of the kind necessary and suitable to
the profession, rank or position of the person importing said items, for their own use and not for barter, sale or
hire: Provided, That the Bureau may require either a written commitment or a security in an amount equal to one
hundred percent (100%) of the ascertained duties, taxes and other charges thereon, upon the goods classified under
this subsection; conditioned for the exportation thereof or payment of the corresponding duties, taxes and other
charges within three (3) months after the expiration of their term or contract: Provided, however, That the Bureau may
extend the time for exportation or payment of duties, taxes and other charges for a term not exceeding three (3)
months from the expiration of the original period;

(i) Professional instruments and implements, tools of trade, occupation or employment, wearing apparel, domestic
animals, and personal and household effects belonging to persons coming to settle in the Philippines or Filipinos or
their families and descendants who are now residents or citizens of other countries, such parties hereinafter referred
to as overseas Filipinos, in quantities and of the class suitable to the profession, rank or position of the persons
importing said items, for their own use and not for barter or sale, accompanying such persons, or arriving within a
reasonable time: Provided, That the Bureau may, upon the production of satisfactory evidence that such persons are
actually coming to settle in the Philippines and that the goods are brought from their former place of abode, exempt
such goods from the payment of duties and taxes: Provided, further, That vehicles, vessels, aircrafts, machineries
and other similar goods for use in manufacture, shall not fall within this classification and shall therefore be subject to
duties, taxes and other charges;

(j) Goods used exclusively for public entertainment, and for display in public expositions, or for exhibition or
competition for prizes, and devices for projecting pictures and parts and appurtenances thereof, upon identification,
examination, and appraisal and the giving of a security in an amount equal to one hundred percent (100%) of the
ascertained duties, taxes and other charges thereon, conditioned for exportation thereof or payment of the
corresponding duties, taxes and other charges within three (3) months from the date of acceptance of the goods
declaration: Provided, That the Bureau may extend the time for exportation or payment of duties, taxes and other
charges for a term not exceeding three (3) months from the expiration of the original period; and technical and
scientific films when imported by technical, cultural and scientific institutions, and not to be exhibited for
profit: Provided, further, That if any of the films is exhibited for profit, the proceeds therefrom shall be subject to
confiscation, in addition to the penalty provide under this Act;

(k) Goods brought by foreign film producers directly and exclusively used for mailing or recording motion picture films
on location in the Philippines, upon their identification, examination and appraisal and the giving of a security in an
amount equal to one hundred percent (100%) of the ascertained duties, taxes and other charges thereon,
conditioned for exportation thereof or payment of the corresponding duties, taxes and other charges within three (3)
months from the date of acceptance of the goods declaration, unless extended by the District Collector for another
three (3) months; photographic and cinematographic films, underdeveloped, exposed outside the Philippines by
resident Filipino citizens or by producing companies of Philippine registry where the principal actors and artists
employed for the production are Filipinos, upon affidavit by the importer and identification that such exposed films are
the same films previously exported from the Philippines, As used in this paragraph, the terms "actors" and "artists"
include the persons operating the photographic camera or other photographic and sound recording apparatus by
which the film is made;

(l) Importations for the official use of foreign embassies, legations and other agencies of foreign
governments: Provided, That those foreign countries accord like privileges to corresponding agencies of the
Philippines. Goods imported for the personal or family use of members and attaches of foreign embassies, legations,
consular officers and other representatives of foreign governments: Provided, however, That such privilege shall be
accorded under special agreements between, the Philippines and the countries which they represent: Provided,
further, That the privilege may be granted only upon specific instructions of the Secretary of Finance pursuant to an
official request of the DFA on behalf of members or attaches of foreign embassies, legations, consular officers and
other representatives of foreign governments.

(m) Imported goods donated to or, for the account of the Philippine government or any duly registered relief
organization, not operated for profit, for free distribution among the needy, upon certification by the DSWD or the
Department of Education (DepED), or the Department of Health (DOH), as the case may be;

(n) Containers, holders and other similar receptacles of any material including kraft paper bags for locally
manufactured cement for export, including corrugated boxes for bananas, mangoes, pineapples and other fresh fruits
for export, except other containers made of paper, paperboard and textile fabrics, which are of such character as to
be readily identifiable and/or reusable for shipment or transportation of goods shall be delivered to the importer
thereof upon identification, examination and appraisal and the giving of a security in an amount equal to one hundred
percent (100%) of the ascertained duties, taxes and other charges thereon, within six (6) months from the date of
acceptance of the goods declaration;

(o) Supplies which are necessary for the reasonable requirements of the vessel or aircraft in its voyage or flight
outside the Philippines, including goods transferred from a bonded warehouse in any Customs District to any vessel
or aircraft engaged in foreign trade, for use or consumption of the passengers or its crew on board such vessel or
aircraft as sea or air stores; or goods purchased abroad for sale on board a vessel or aircraft as saloon stores or air
store supplies: Provided, That any surplus or excess of such vessel or aircraft supplies arriving from foreign ports or
airports shall be dutiable;

(p) Goods and salvage from, vessels recovered after a period of two (2) years from the date of filing the marine
protest or the time when the vessel was wrecked or abandoned, or parts of a foreign vessel or its equipment,
wrecked or abandoned in Philippine waters or elsewhere: Provided, That goods and salvage recovered within the
said period of two (2) years shall be dutiable;

(q) Coffins or urns containing human remains, bones or ashes, used personal and household effects (not
merchandise) of the deceased person, except vehicles, the FCA value of which does not exceed one hundred fifty
thousand pesos (P15 0,000.00), upon identification as such: Provided, That every three (3) years after the effectivity
of this Act, the value herein stated shall be adjusted to its present value using the CPI as published by the PSA;

(r) Samples of the kind, in such quantity and of such dimension or construction as to render them unsaleable or of no
commercial value; models not adapted for practical use; and samples of medicines, properly marked "sample-sale
punishable by law", for the purpose of introducing new goods in the Philippine market and imported only once in a
quantity sufficient for such purpose by a person duly registered and identified to be engaged in that
trade: Provided, That importations under this subsection shall be previously authorized by the Secretary of
Finance: Provided, however, That importation of sample medicines shall have been previously authorized by the
Secretary of Health, and that such samples are new medicines not available in the Philippines; Provided, further, That
samples not previously authorized or properly marked in accordance with this section shall be levied the
corresponding tariff duty.

Commercial samples, except those that are not readily and easily identifiable as in the case of precious and semi-
precious stones, cut or uncut, and jewelry set with precious or semi-precious stones, the value of any single
importation of which does not exceed FCA value of fifty thousand pesos (P50.000.00) upon the giving of a security in
an amount equal to the ascertained duties, taxes and other charges thereon, conditioned for the exportation of said
samples within three (3) months from the date of the acceptance of the goods declaration or in default thereof, the
payment of the corresponding duties, taxes and other charges: Provided, That if the FCA value of any single
consignment of such commercial samples exceeds fifty thousand pesos (P50,000.00), the importer thereof may
select any portion of the same not exceeding the FCA value of fifty thousand pesos (P50.000.00) for entry under the
provision of this subsection, and the excess of the consignment may be entered in bond, or for consumption, as the
importer may elect: Provided, further. That every three (3) years after the effectivity of this Act, the Secretary of
Finance shall adjust the amount herein stated to its present value using the CPI as published by the PSA. (s)
Animals, except race horses, and plants for scientific, experimental propagation or breeding, and for other botanical,
zoological and national defense purposes: Provided, That no live trees, shoots, plants, moss and bulbs, tubers and
seeds for propagation purposes may be imported under this section, except by order of the government or other duly
authorized institutions: Provided, however, That the free entry of animals for breeding purposes shall be restricted to
animals of recognized breed, duly registered in the record or registry established for that breed, and certified as such
by the Bureau of Animal Industry (BAI):

Provided, further, That the certification of such record, and pedigree of such animal duly authenticated by the proper
custodian of such record or registry, shall be submitted to the District Collector, together with the affidavit of the
owner or importer that such animal is the animal described in said certificate of record and pedigree: Provided,
finally, That the animals and plants are certified by the NEDA as necessary for economic development;

(t) Economic, technical, vocational, scientific, philosophical, historical and cultural books or publications, and religious
books like Bibles, missals, prayer books, the Koran, Ahadith and other religious books of similar nature and extracts
therefrom, hymnal and hymns for religious uses: Provided, That those which may have already been imported but are
yet to be released by the Bureau at the effectivity of this Act may still enjoy the privilege herein provided upon
certification by the DepED that such imported books and/or publications are for economic, technical, vocational,
scientific, philosophical, historical or cultural purposes or that the same are educational, scientific or cultural materials
covered by the International Agreement on Importation of Educational Scientific and Cultural Materials (IAESCM)
signed by the President of the Philippines on August 2,1952, or other agreements binding upon the Philippines.
Educational, scientific and cultural materials covered by international agreements or commitments binding upon the
Philippine government so certified by the DepED.

(u) Philippine goods previously exported from the Philippines and returned without having been advanced in value or
improved in condition by any process of manufacturing or other means, and upon which no drawback or bounty has
been allowed, including instruments and implements, tools of trade, machinery and equipment, used abroad by
Filipino citizens in the pursuit of their business, occupation or profession; and foreign goods previously imported when
returned after having been exported and loaned for use temporarily abroad solely for exhibition, testing and
experimentation, for scientific or educational purposes; and foreign containers previously imported which have been
used in packing exported Philippine goods and returned empty if imported by or for the account of the person or
institution who exported them from the Philippines and not for sale, barter or hire subject to
identification: Provided, That Philippine goods falling under this subsection upon which drawback or bounty have
been, allowed shall, upon reimportation thereof, be subject to a duty under this subsection equal to the amount of
such drawback or bounty;

(v) Aircraft, equipment and machinery, spare parts, commissary and catering supplies, aviation gas, fuel and oil,
whether crude or refined except when directly or indirectly used for domestic operations, and such other goods or
supplies imported by and for the use of scheduled airlines operating under congressional franchise: Provided, That
such goods or supplies are not locally available in reasonable quantity, qualify and price and are necessary or
incidental to the proper operation of the scheduled airline importing the same;

(w) Machineries, equipment, tools for production, plans to convert mineral ores into saleable form, spare parts,
supplies, materials, accessories, explosives, chemicals, and transportation and communications facilities imported by
and for the use of new mines and old mines which resume operations, when certified to as such by the Secretary of
the Department of Environment and Natural Resources (DENR), upon the recommendation of the Director of Mines
and Geosciences Bureau, for a period ending five (5) years from the first date of actual commercial production of
saleable mineral products: Provided, That such goods are not locally available in reasonable quantity, quality and
price and are necessary or incidental in the proper operation of the mine; and aircrafts imported by agro-industrial
companies to be used by them in their agriculture and industrial operations or activities, spare parts and accessories
thereof, when certified to as such by the Secretary of the Department of Agriculture (DA) or the Secretary of the
Department of Trade and Industry (DTI), as the case may be;

(x) Spare parts of vessels or aircraft of foreign registry engaged in foreign trade when brought into the Philippines
exclusively as replacements or for the emergency repair thereof, upon proof satisfactory to the District Collector that
such spare parts shall be utilized to secure the safety, seaworthiness or airworthiness of the vessel or aircraft, to
enable it to continue its voyage or flight;

(y) Goods exported from the Philippines for repair, processing or reconditioning without having been substantially
advanced in value, and subsequently reimported in its original form and in the same state: Provided, That in case the
reimported goods advanced in value, whether or not in their original state, the value added shall be subject to the
applicable duty rate of the tariff heading of the reimported goods; and

(z) Trailer chassis when imported by shipping companies for their exclusive use in handling containerized cargo,
upon posting a security in an amount equal to one hundred percent (100%) of the ascertained duties, taxes and other
charges due thereon, to cover a period of one (1) year from the date of acceptance of the entry, which period, for
meritorious reasons, may be extended by the Commissioner from year to year, subject to the following conditions:

(1) That they shall be properly identified and registered with the Land Transportation Office (LTO);

(2) That they shall be subject to customs supervision fee to be fixed by the District Collector and subject to the
approval of the Commissioner;

(3) That they shall be deposited in the customs territory when not in use; and

(4) That upon the expiration of the period prescribed above, duties and taxes shall be paid unless otherwise
reexported.

(aa) Any officer or employee of the DFA, including any attache, civil or military or member of the staff assigned to a
Philippine diplomatic mission abroad by the Department or any similar officer or employee of other departments
assigned to any Philippine consular office abroad, or any AFP military personnel accorded assimilated diplomatic
rank or on duty abroad who is returning from a regular assignment abroad, for reassignment

to the home office, or who dies, resigns, or is retired from the service, after the approval of this Act, shall be exempt
from the payment of all duties and taxes on personal and household effects, including one (1) motor car which must
have been ordered or purchased prior to the receipt by the mission or consulate of the order of recall, and which must
be registered in the name of the officer or employee: Provided, That this exemption shall apply only to the value of
the motor car and to the aggregate assessed value of the personal and household effects, the latter not to exceed
thirty percent (30%) of the total amount received by the officer or employee in salary and allowances during the latest
assignment abroad, but not to exceed four (4) years: Provided, however, That this exemption shall not be availed of
more than once every four (4) years: Provided, further, That the officer or employee concerned must have served
abroad for not less than two (2) years.

The provisions of general and special laws, to the contrary notwithstanding, including those granting franchises, there
shall be no exemption whatsoever from the payment of duties except as provided for in this Act; those granted to
government agencies, instrumentalities or government-owned or -controlled corporations (GOCCs) with existing
contracts, commitments, agreements, or obligations with foreign countries requiring such exemption; those granted to
international institutions, associations or organizations entitled to exemption pursuant to agreements or special laws;
and those that may be granted by the President upon prior recommendation of the NEDA in the interest of national
economic development.
 CHAPTER 2

CUSTOMS WAREHOUSES

SEC. 801. Establishment and Supervision of Customs Bonded Warehouses. – When the business of the port
requires such facilities, the District Collector, subject to the approval of the Commissioner, shall designate and
establish warehouses for use as public and private bonded warehouses, yards, or for other special purposes. All such
warehouses and premises shall be subject to the supervision of the District Collector who shall impose such
conditions as may be deemed necessary for the protection of the revenue, and of the goods stored therein. In the
exercise of the District Collector's supervisory functions herein and in the Bureau's implementation of this chapter,
existing contracts of private operators with appropriate government agency or regulator, such as, but not limited to,
the Philippine Ports Authority (PPA), Subic Bay Metropolitan Authority (SBMA) and Phividec Industrial Authority (PIA)
and their respective authorities and powers already granted by law pertinent to such contracts, shall not be impaired
or adversely affected.

Goods manufactured in whole or in part of imported materials, and intended for exportation, may be made and
manufactured in a bonded manufacturing warehouse subject to the following conditions:

(1) The manufacturer shall file sufficient security for the faithful observance of all laws, rules and regulations
applicable thereto; (2) The application for the establishment of bonded warehouses must be made in writing and filed
with the customs officer, describing the premises, the location, and capacity of the same, and the purpose for which
the building is to be used, pursuant to Section 804 of this Act;

(3) From the receipt of the application, the customs officer shall examine the premises, evaluate its location,
construction, and means provided for the safekeeping of the goods;

(4) The customs officer may authorize the establishment of the customs bonded warehouse, and accept a bond for its
operation and maintenance if the applicant was compliant with the prescribed requirements; and

(5) The operator of the bonded warehouse shall pay an annual supervision fee in an amount to be fixed by the
Commissioner.

SEC. 802. Types of Customs Bonded Warehouses (CBWs). – Customs bonded warehouses may be classified as
either manufacturing or nonmanufacturing.

Manufacturing customs bonded warehouse may be of the following types: (a) miscellaneous customs bonded
warehouse; (b) customs common bonded warehouse; or (c) industry-specific bonded warehouse.

Nonmanufacturing customs bonded warehouse include: (a) public bonded warehouse; (b) private bonded warehouse;
or (c) other customs facilities.

SEC. 803. Types of Customs Facilities and Warehouses (CFWs). — Customs facilities and warehouses shall include:

(a) Container yard;

(b) Container freight station;

(c) Seaport warehouses; and

(d) Airport warehouses.

Subject to consultation with the NEDA and the DTI, and based on prevailing economic circumstances, the Secretary
of Finance may, upon the recommendation of the Commissioner, create or dissolve certain types of warehouses.

SEC. 804. Application for Operation of a Customs Warehouse. – Application for the establishment of CBW and CFW
shall be filed with the District Collector where the CBW or CFW is located, describing the premises, location, capacity
and purpose thereof.

Upon receipt of such application, the District Collector shall examine the premises of such proposed warehouse,
particularly its location, construction and storage facilities. The District Collector, with the approval of the
Commissioner, may authorize the establishment of customs warehouses, and accept the required security for its
operation and maintenance. The operator of such CBW and CFW shall pay an annual supervision fee, as determined
by the Commissioner.

SEC. 805. Responsibility of Operators. – The operator of a CBW or CFW shall comply with the customs requirements
on establishment, security, suitability and management, including stock-keeping and accounting- of the goods, of the
CBW or CFW.

Upon lawful demand, the operator of a CBW or CFW shall allow authorized representatives of the Bureau access to
the premises at a reasonable time, and to all documents, books and records of accounts pertaining to the operations
of the CBW or CFW.

In case of loss of the goods stored in a CBW or CFW due to operator's gross negligence or willful misconduct, the
operator shall be liable for the payment of duties and taxes due thereof. The government assumes no legal
responsibility over the safekeeping of goods stored in any customs warehouse, yard or premises.

SEC. 806. Customs Control Over CBWs and CFWs. – The Bureau shall, for customs purposes, exercise control over,
direct and manage CBWs and CFWs pursuant to Section 303 of this Act and likewise over the goods thereat
pursuant to Section 301 of this Act: Provided, That the Bureau shall not be liable for any loss or damage of the goods
stored for safekeeping in any CBW, CFW, yard or premises.

SEC. 807. Discontinuance of CBW and CFW. – The use of any CBW and CFW may be discontinued by the District
Collector when conditions so warrant, or upon receipt of a written request from the operator thereof: Provided, That
all the requirements of the laws and regulations have been complied with by said operator. Where dutiable goods are
stored in such premises, the same must be removed at the risk and expense of the operator: Provided,
however, That the premises shall not be relinquished, and its use shall not be discontinued until after a careful
examination of the account of the warehouse shall have been made. Discontinuance of the use of any warehouse
shall be effective upon approval thereof by the District Collector who shall, within ten (10) days, inform the
Commissioner of such action in writing.

Notice of discontinuance made by the operator shall not result in the discharge from any duties, taxes, fees and other
charges imposed on dutiable goods in said warehouse.

SEC. 808. Warehousing Security on Goods Stored in CBWs. – For goods declared in the entry for warehousing in
CBWs, the District Collector shall require the importer to post a sufficient security equivalent to the computed duties,
taxes and other charges, conditioned upon the withdrawal of the goods within the period prescribed by Section 811 of
this Act or the payment of duties, taxes and other charges and compliance with all importation requirements.

SEC. 809. Withdrawal of Goods from CBWs. – – Imported goods shall be withdrawn from the CBWs when the
necessary withdrawal permit has been filed, together with any related document required by any provision of this Act
and other regulations.

Goods entered under sufficient security as provided in Section 1507 of this Act may be withdrawn at any time for
consumption, transit, or exportation. The withdrawal must be made by the CBW operator or its duly authorized
representative.

SEC. 810. Release of Goods from CFWs. – Imported goods shall be released when the goods declaration is
electronically lodged, together with any related document required by any provision of this Act and other regulations.
All goods entered into the CFWs shall be subject to the filing of a goods declaration within the period specified under
Section 407 of this Act.

SEC. 811. Period of Storage in CBWs. – Goods entered for warehousing may remain in a CBW for a maximum
period of one (1) year from the time of its arrival thereat. For perishable goods, the storage period shall be three (3)
months from the date of arrival, extendable for valid reasons, and upon written request, to another three (3) months.
Goods not withdrawn after the expiration of the prescribed period shall be deemed as abandoned, as provided under
Section 1129 of this Act.

The Commissioner shall, in consultation with the Secretary of Trade and Industry, establish a reasonable storage
period limit beyond one (1) year for bonded goods for manufacturing and intended for exp ort, the processing into
finished products of which requires a longer period based on industry standard and practice, subject to the approval
of the Secretary of Finance.

SEC. 812. Exemption from Duty of Goods in CBWs. – Goods duly entered for warehousing in CBWs shall be exempt
from duty and tax within the allowed period for storage unless withdrawn for consumption, exportation or transit to a
free zone or another CBW, in which case, such withdrawal will be subject to the applicable rules and regulations on
the liquidation of the warehousing entry.

SEC. 813. Records to be Kept by CBW Operators. – An account shall be kept by the Bureau of all goods delivered to
a CBW, and a report shall be made by the CBW operator containing a detailed statement of all imported goods
entered and withdrawn from the CBW. The Bureau shall specify the format of the report and may require electronic
submission.

All documents, books, and records of accounts concerning the operation of any CBW shall, upon demand, be made
available to the District Collector or the representative of the District Collector for examination or audit. For record
purposes, all documents shall be kept for three (3) years.

CHAPTER 3

FREE ZONES

SEC. 814. When Goods are Admitted and Withdrawn. – Imported goods shall be admitted into a free zone when the
goods declaration, together with required documents as required by existing laws and regulations, are electronically
lodged with the Bureau and other relevant government authorities at the time of admission.

Imported goods shall be withdrawn from the free zone for entry to the customs territory when the goods declaration is
electronically lodged, together with required documents at the time of the withdrawal from the free zone.

SEC. 815. Exemption from Duty and Tax of Goods in Free Zones. – Unless otherwise provided by law and in
accordance with the respective laws, rules and regulations of the free zone authorities, goods admitted into a free
zone shall not be subject to duty and tax.

SEC. 816. Movement of Goods into and from Free Zones. – The entry of goods into a free zone, whether directly or
through the customs territory, shall be covered by the necessary goods declaration for admission or transit.
Withdrawal from the free zone into the customs territory shall be covered by the necessary goods declaration for
consumption or warehousing.

Transfer of goods from one free zone into another free zone shall likewise be covered by the necessary transit
permit.

The implementing rules and regulations on the transit of goods admitted into, exported from, withdrawn into the
customs territory, and moved between free zones shall be formulated and issued jointly by the Bureau and the free
zone authorities.

SEC. 817. Coordination With Free Zone Authority. – To ensure compliance with customs laws and regulations, the
Bureau shall coordinate with the governing authority of the free zone.

CHAPTER4

STORES

SEC. 818. Stores for Consumption. – Stores for consumption shall include:

(a) Goods intended for use by the passengers and the crew on board vessels, aircrafts, or trains, whether or not sold;
and

(b) Goods necessary for the operation and maintenance of vessels, aircrafts, or trains including fuel and lubricants
but excluding spare parts and equipment which are either on board upon arrival or are taken on board during the stay
in the customs territory of vessels, aircrafts, or trains used, or intended to be used, in international traffic for the
transport of persons for remuneration or for the industrial or commercial transport of goods, whether or not for
remuneration.

SEC. 819. Stores to be Taken Away. – For purposes of this chapter, "stores to be taken away" means goods for sale
to the passengers and the crew of vessels, aircrafts, or trains with a view to being landed, which are either on board
upon arrival or are taken on board during the stay in the customs territory of vessels, aircrafts, or trains used, or
intended to be used, in international traffic for the transport of persons for remuneration or for the industrial or
commercial transport of goods, whether or not for remuneration.
SEC. 820. Exemption from Duties and Taxes of Stores. – Customs treatment of stores should apply uniformly,
regardless of the country of registration or ownership of vessels, aircraft, or trains. Stores which are carried in a
vessel, aircraft, or train arriving in the customs territory shall be exempted from import duties and taxes provided that
they remain on board. Stores for consumption by the passengers and the crew imported as provisions on
international express vessels, aircrafts, or trains shall be exempted from import duties and taxes: Provided, That:

(a) Such goods are purchased only in the countries crossed by the international vessels and aircrafts in question; and

(b) Any duties and taxes chargeable on such goods in the country where they were purchased are paid.

Stores necessary for the operation and maintenance of vessels, aircrafts, or trains which are on board these means
of transport shall be exempted from import duties and taxes: Provided, further, That they remain on board while these
means of transport are in the customs territory. The Bureau shall allow the issue of stores for use on board during the
stay of a vessel

in the customs territory in such quantities as the customs authority deems reasonable with due regard to the number
of the passengers and the crew and to the length of the stay of the vessel in the customs territory. The Bureau should
allow the issue of stores for use on board by the crew while the vessel is undergoing repairs in a dock or
shipyard: Provided, finally, That the duration of stay in a dock or shipyard is considered to be reasonable.

When an aircraft is to land at one or more airports in the customs territory, the Bureau should allow the issuance of
stores for consumption on board both during the stay of the aircraft at such intermediate airports and during its flight
between such airports.

The Bureau shall require a carrier to take appropriate measures to prevent any unauthorized use of the stores
including sealing of the stores, when necessary. It shall require the removal of stores from the vessel, aircraft, or
trains for storage elsewhere during its stay in the customs territory only when the Bureau considers it necessary.

Vessels, aircrafts, or trains which depart for an ultimate foreign destination shall be entitled to take on board,
exempted from duties and taxes, the following:

(1) Stores in such quantities as the Bureau deems reasonable with due regard to the number of the passengers and
the crew, to the length of the voyage or Sight, and to any quantity of such stores already on board; and

(2) Stores necessary for the operation and maintenance of a vessel, aircraft, or train, in such quantities as are
deemed reasonable for operation and maintenance during the voyage or flight, after due regard of the quantity of
such stores already on board.

Replenishment of stores that are exempted from duties and taxes shall be allowed for vessels, aircrafts, or trains
which have arrived in the customs territory, and which need to replenish their stores for the journey to their final
destination in the customs territory, subject to the same conditions provided in this Chapter. SEC. 821. Goods
Declaration for Stores. – When a declaration concerning stores on board vessels arriving in the customs territory is
required by the Bureau, the information required shall be kept to the minimum and as may be necessary for customs
control.

The quantities of stores which are supplied to vessels during its stay in the customs territory should be recorded on
the required goods declaration concerning stores.

The Bureau shall not require the presentation of a separate declaration of remaining stores on board a vessel, an
aircraft or a train. No separate declaration concerning stores should be required upon departure of vessels from the
customs territory. When a declaration is required concerning stores taken on board the vessels or aircrafts upon
departure from the customs territory, the information required shall be kept to the minimum as may be necessary for
customs control.

When a vessel, aircraft, or train arrives in the customs territory, stores on board shall:

(a) Be cleared for consumption or placed under another customs procedure, subject to compliance with the
conditions and formalities applicable in each case; or

(b) Subject to prior authorization by the Bureau, be transferred respectively to another vessel, aircraft, or train
assigned to an international route.
 TITLE IX

DUTY DRAWBACK AND REFUND

CHAPTER 1

DUTY DRAWBACK

SEC. 900. Basis of Duty Drawback. – (A) On Fuel Used for Propulsion of Vessels. – On all fuel imported into the
Philippines used for propulsion of vessels engaged in trade with foreign countries, or in the coastwise trade, a refund
or tax credit shall be allowed not exceeding ninety-nine percent (99%) of the duty imposed by law upon such fuel,
which shall be paid or credited under such rules and regulations as may be prescribed by the Commissioner with the
approval of the Secretary of Finance.

(B) On Petroleum Oils and Oils Obtained from Bituminous Minerals, Crude, Eventually Used for Generation of
Electric Power and for the Manufacture of City Gas. – On petroleum oils and oils obtained from bituminous materials,
crude oil imported by nonelectric utilities, sold directly or indirectly, in the same form or after processing, to electric
utilities for the generation of electric power and for the manufacture of city gas, a refund or tax credit shall be allowed
not exceeding fifty percent (50%) of the duty imposed by law upon such oils, which shall be paid or credited under
such rules and regulations as may be prescribed by the Commissioner with the approval of the Secretary of Finance.

(C) On Goods Made from Imported Materials. – Upon exportation of goods manufactured or produced in the
Philippines, including the packing, covering, putting up, marking or labeling thereof either in whole or in part of the
imported materials for which duties have been paid, a refund or tax credit shall be allowed for the duties paid on the
imported materials so used including the packing, covering, putting up, marking or labeling thereof, subject to the
following conditions:

(1) The actual use of the imported materials in the production or manufacture of the goods exported with their
quantity, value, and amount of duties paid thereon, should be established satisfactorily;

(2) The duties refunded or credited shall not exceed one hundred percent (100%) of duties paid on the imported
materials used;

(3) There is no determination by the NEDA of the requirement for certification on nonavailability of locally-produced or
manufactured competitive substitutes for the imported materials used at the time of importation;

(4) The exportation shall be made within one (1) year after the importation of materials used and claim of refund or
tax credit shall be filed within six (6) months from the date of exportation; and

(5) When two or more products result from the use of the same imported materials, an apportionment shall be made
on its equitable basis.

SEC. 901. Payment of Drawbacks. – Eligible claims for refund or tax credit shall be paid or granted by the Bureau to
claimants within sixty (60) days after receipt of properly accomplished claims: Provided, That a registered enterprise
under Republic Act No. 5186, otherwise known as the "Investment Incentives Act", or Republic Act No. 6135,
otherwise known as the "Export Incentives Act of 1970", which has previously enjoyed tax credits based on customs
duties paid on imported raw materials and supplies, shall not be entitled to a drawback under this section with respect
to the same importation subsequently processed and reexported.

The Secretary of Finance may, upon the recommendation of the Commissioner, promulgate rules and regulations
allowing partial payments of drawbacks pursuant to this section,

SEC. 902. Prescription of Drawback Claim. – A claim and application for a drawback shall prescribe if it is not filed
within one (1) year from the date of importation in case of Section 900, paragraphs (A) and (B) and within one (1)
year from the date of exportation in the case of Section 900, paragraph (C), subject to such rules and regulations as
may be issued by the Commissioner, upon approval of the Secretary of Finance.

CHAPTER 2

REFUND AND ABATEMENT

SEC. 903. Refund of Duties and Taxes. – Refund shall be granted where it is established that duties and taxes have
been overcharged as a result of an error in the assessment or goods declaration.

Where permission is given by the Bureau for goods originally declared for a customs procedure with payment of
duties and taxes to be placed under another customs procedure, a refund shall be made of any duties and taxes
charged in excess of the amount due under the new procedure, subject to such regulation issued for the purpose.

A refund shall not be granted if the amount of duties and taxes involved is less than five thousand pesos
(P5,000.00): Provided, That the Secretary of Finance, in consultation with the Commissioner, may adjust the
minimum amount specified in this Act, taking into account the CPI as published by the PSA.

SEC. 904. Abatement of Duties and Taxes. – When goods have not yet been released for consumption or have been
placed under another customs procedure, provided that no other offense or violation has been committed, the
declarant shall neither be required to pay the duties and taxes nor be entitled to refund thereof in any of the following
cases:

(a) When, at the request of the declarant, the goods are abandoned, or as determined by the Bureau, the goods are
destroyed or rendered commercially valueless while under customs control. Any cost herein incurred shall be borne
by the declarant;

(b) When goods are destroyed or irrecoverably lost by accident or force majeure, the remaining waste or scrap after
destruction, if taken into consumption, shall be subject to the duties and taxes that would be applicable on such waste
or scrap if imported in same state; and

(c) When there are shortages due to the nature of the goods.

SEC. 905. Abatement for Damage Incurred During Voyage. – Except as otherwise provided, no abatement of duties
shall be made on account of damage incurred or deterioration suffered during the voyage of importation; and duties
will be assessed on the actual quantity imported as determined by the customs officers concerned.

SEC. 906. Abatement or Refund of Duty on Missing Package. – When any package appearing on the manifest or bill
of lading or airway bill is missing, an abatement or refund of the duty shall he made if it is certified by the importer or
consignee, under pain of penalty for falsification or perjury, and upon production of proof satisfactory to the Collector
concerned, that the package in question has not been unlawfully imported into the Philippines.

SEC. 907. Abatement or Refund for Deficiency in Contents of Packages. – If, upon opening of any package, a
deficiency in the quantity of the goods is found to exist based upon the invoice, such deficiency shall be certified,
under pain of penalty for falsification or perjury, by the customs officers concerned and upon the production of proof
showing that the shortage occurred before the arrival of the goods in the Philippines. Upon sufficient proof thereof,
the proper abatement or refund of the duty shall be made.

SEC. 908. Abatement or Refund of Duties on Goods Lost or Destroyed After Arrival. – The Bureau may abate or
refund the amount of duties accruing or paid on any goods that have been lost due to injury, theft, destruction through
fire or through any other causes, upon satisfactory proof of the same, under any of the following circumstances:

(a) While 'within the territory of any port of entry, prior to unloading' under the Bureau's supervision;

(b) While remaining in customs custody after unloading;

(c) While in transit from the port of entry to any port in the Philippines; and

(d) While released under sufficient security for export except in case of loss by theft.

SEC. 909. Abatement and Refund of Defective Goods. – Under conditions to be set by the Commissioner, and with
the approval of the Secretary of Finance, an abatement and refund shall be granted on imported or exported goods
which are found defective or otherwise not in accordance with, the agreed specifications at the time of importation or
exportation and are returned either to the supplier or to another person designated by the supplier, subject to the
following conditions:

(a) The goods have not been worked, repaired, or used in the country of importation, and are reexported within, a
reasonable time; and

(b) The goods have not been worked, repaired, or used in the country to which, they were exported, and are
reimported within a reasonable time.

Use of the goods shall, however, not hinder the refund if such use was indispensable to discover the defects or other
circumstances which caused the reexportation or reimportation of the goods.

As an alternative to reexportation or reimportation, the goods may be expressly abandoned or destroyed or rendered
commercially valueless under customs control as the Bureau may decide. In such, case, the importer shall not be
entitled to an abatement or a refund if it does not defray the costs of such abandonment, destruction, or rendition.

SEC. 910. Abatement of Duty on Dead or Injured Animals. – Where it is certified, under pain of penalty for falsification
or perjury, and upon production of proof satisfactory to the Bureau that an animal subject of importation dies or
suffers injury before arrival, or while in customs custody, the duty due thereon shall be abated provided that its
carcass on board or in customs custody is removed in the manner required by the Bureau and at the expense of the
importer.

SEC. 911. Investigation Required in Case of Abatements and Refunds. – The Customs Officer concerned shall, in all
cases of abatement or refund of duties, submit an examination report as to any fact discovered which indicates any
discrepancy and cause the corresponding adjustment on the goods declaration.

SEC. 912. Refund Arising from Correction of Errors. – Manifest clerical errors made on an invoice or entry, errors in
return of weight, measure and gauge, when duly certified under penalties of falsification or perjury by the surveyor or
examining officer when there are such officers at the port, and errors in the distribution of charges on invoices not
involving any question of law and certified under penalties of falsification or perjury by the examining customs officer,
may be corrected in the computation of duties, if such errors are discovered before the payments of duties, or if
discovered within one (1) year after release from customs custody of imported goods upon written request and notice
of error from the importer, or upon statement of error certified by the District Collector.

For the purpose of correcting errors specified in the next preceding paragraph, the Bureau is authorized to make
refunds within the statutory time limit.

SEC. 913. Claims for Refund. – All claims and application for refund of duties and taxes shall be made in writing and
filed with the Bureau within twelve (12) months from the date of payment of duties and taxes.

If, as a result of the refund of duties, a corresponding refund of internal revenue taxes on the same importation
becomes due, the Bureau shall cause the refund of internal revenue taxes in favor of the importer after issuance of a
certification from the Commissioner of Internal Revenue, when applicable.

The importer may file an appeal of a denial of a claim for refund or abatement, whether it is a full or partial denial, with
the Commissioner within thirty (30) days from the date of the receipt of the denial.  The Commissioner shall render a
decision within thirty (30) days from the receipt of all the necessary documents supporting the application.  Within
thirty (30) days from receipt of the decision of the Commissioner, the case may also be appealed to the CTA.

Notwithstanding the provisions in the preceding paragraphs, the filing of claims for refund of national internal revenue
taxes shall be governed by the provisions provided under the NIRC of 1997, as amended.

TITLE X

POST CLEARANCE AUDIT

SEC. 1000. Audit and Examination of Records. – Within three (3) years from the date of final payment of duties and
taxes or customs clearance, as the case may be, the Bureau may conduct an audit examination, inspection,
verification, and investigation of records pertaining to any goods declaration, which shall include statements,
declarations, documents, and electronically generated or machine readable data, for the purpose of ascertaining the
correctness of the goods declaration and determining the liability of the importer for duties, taxes and other charges,
including any fine or penalty, to ensure compliance with this Act.

SEC. 1001. Scope of the Audit.  – The audit of importers shall be conducted when firms are selected by a computer-
aided risk management system, the parameters of which are to be based on objective and quantifiable data, subject
to the approval of the Secretary of Finance upon recommendation of the Commissioner. The criteria for selecting
firms to be audited shall include:

(a) Relative magnitude of customs revenue to be generated from the firm; (b) The rates of duties of the firm's imports;
(c) The compliance track records of the firm; and

(d) An assessment of the risk to revenue of the firm's import activities.

SEC. 1002. Access to Records. – Any authorized officer of the Bureau shall be given by the importer and customs
broker full and free access to the premises where the records are kept, to conduct audit examination, inspection,
verification, and investigation of those records relevant to such investigation or inquiry.

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

A customs officer is not entitled to enter the 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 of being duly authorized.
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 the officer's authority under this section.

Unless otherwise provided herein or in other provisions of law, the Bureau 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 or customs broker denies the authorized customs officer full
and free access to importation records during the conduct of a post clearance audit shall create a presumption of
inaccuracy in the transaction value declared for their imported goods and constitute grounds for the Bureau to
conduct a reassessment of such goods.

In addition, the imposition of the appropriate criminal sanctions provided under this Act and other administrative
sanctions may be concurrently invoked against contumacious importers, including the suspension of the delivery or
release of their imported goods.

SEC. 1003. Requirement to Keep Records. – (a) All importers are required to keep at their principal place of
business, in the manner prescribed by regulations to be issued by the Commissioner and for a period of three (3)
years from the date of final payment of duties and taxes or customs clearance, as the case may be, all records
pertaining to the ordinary course of business and to any activity or information contained in the records required by
this title in connection with any such activity.

For purposes of the post clearance audit and Section 1005 of this Act, the term importer shall include the following:

(1) Importer-of-record or consignee, owner or declarant, or a party who:

(i) Imports goods into the Philippines or withdraws such goods into the Philippine customs territory for consumption or
warehousing; files a claim for refund or drawback; or transports or stores such goods carried or held under security;
or

(ii) Knowingly causes the importation or transportation or storage of imported goods referred to above, or the filing of
refund or drawback claim.

(2) An agent of any party described in paragraph (1); or

(3) A person whose activities require the filing of a goods declaration.

A person ordering imported goods from a local importer or supplier in a domestic transaction shall be exempted from
the requirements imposed by this section unless:

(1) The terms and conditions of the importation are controlled by the person placing the order; or

(2) The circumstances and nature of the relationship between the person placing the order and the importer or
supplier are such that the former may be considered as the beneficial or true owner of the imported goods; or

(3) The person placing the order had prior knowledge that they will be used in the manufacture or production of the
imported goods.

(b) All parties engaged in customs clearance and processing are required to keep at their principal place of business,
in the manner prescribed by regulations to be issued by the Commissioner and for a period of three (3) years from
the date of filing of the goods declaration, copies of the abovementioned records covering the transactions handled.

(c) Locators or persons authorized to bring imported goods into free zones, such as the special economic zones and
free ports, are required to keep subject-records of all its activities, including in whole or in part, records on imported
goods withdrawn from said zones into the customs territory for a period of three (3) years from the date of filing of the
goods declaration.

Failure to keep the records required by this Act shall constitute a waiver of this right to contest the results of the audit
based on records kept by the Bureau.

SEC. 1004. Power of the Commissioner to Obtain Information and Issue Summons. – For the effective
implementation of the post clearance audit functions of the Bureau, the Commissioner is hereby authorized to:

(a) Obtain on a regular basis from any person, in addition to the person who is the subject of a post clearance audit or
investigation, or from any office or officer of the national and local governments, government agencies and
instrumentalities, including the BSP and GOCCs, any information such as costs and "volume of production, receipts
or sales and gross income of taxpayers, and the names, addresses, and financial statements of corporations,
regional operating headquarters of multinational companies, joint accounts, associations, joint ventures or consortia
and registered partnerships, and their members, whose business operations or activities are directly or indirectly
involved in the importation or exportation of imported goods or products manufactured from imported component
materials;

(b) Summon the person liable for duties and taxes or required to file goods declaration, or any officer or employee of
such person, or any person having possession, custody, or care of the books of accounts and other accounting
records containing entries relating to the business of the person liable for duties and taxes, or any other person, to
appear before the Commissioner or the duly authorized representative at a time and place specified in the summons
and to produce such books, papers, records, or other data, and to give testimony;

(c) Take such, testimony of the person concerned, under oath, as may be relevant or material to such inquiry; or

(d) Obtain information from banks or other financial institutions on commercial documents and records pertaining
specifically to payments relevant to import transaction.

The provisions of the foregoing paragraphs notwithstanding, nothing in this section shall be construed as granting the
Commissioner the authority to inquire into bank deposits of persons or entities mentioned in this Title.

SEC. 1005. Failure to Pay Correct Duties and Taxes on Imported Goods. – Any person who, after being subjected to
post clearance audit and examination as provided in Section 1000 of this Act, is found to have incurred deficiencies
in. duties and taxes paid for imported goods, shall be penalized according to two (2) degrees of culpability subject to
any mitigating, aggravating, or extraordinary factors that are clearly established by available evidence as described
hereunder:

(a) Negligence. – When a deficiency results from an offender's failure, through an act or acts of omission or
commission, to exercise reasonable care and competence in ensuring that a statement made is correct, the offender
shall be charged for committing negligence, and, if found guilty shall be penalized with a fine equivalent to one
hundred twenty-five percent (125%) of the revenue loss: Provided, That subject to Section 108 of this Act, no
substantial penalty shall be imposed on an inadvertent error amounting to simple negligence, as defined by rules
promulgated by the Secretary of Finance, upon recommendation of the Commissioner;

(b) Fraud. – When the material false statement or act in connection with the transaction was committed or omitted
knowingly, voluntarily and intentionally, as established by clear and convincing evidence, the offender who is charged
for committing fraud and is found guilty thereof, shall be penalized with a fine equivalent to six (6) times of the
revenue loss and/or imprisonment of not less than two (2) years, but not more than eight (8) years.

The decision of the Commissioner, upon proper hearing, to impose penalties as prescribed in this section may be
appealed in accordance with Section 1104 of this Act.

SEC. 1006. Records to be Kept by the Bureau. – The Bureau shall keep a database of importer and broker profiles
which shall include a record of audit results and the following information and papers:

(a) Articles of Incorporation;

(b) The company structure, which shall include, but not limited to, incorporators and board of directors key officers,
and organizational structure;

(c) Key importations;

(d) Privileges enjoyed;

(e) Penalties; and (1) Risk categories.

The Bureau shall furnish the BIR and the DOF a copy of the final audit results within thirty (30) days from the
issuance thereof.

TITLE XI

ADMINISTRATIVE AND JUDICIAL PROCEDURES

CHAPTER 1

ADVANCE RULING AND DISPUTE SETTLEMENT

SEC. 1100. Classification Ruling. – An importer or exporter may file a written application for an advance ruling on the
tariff classification of goods with the Commission. The Commission shall render a ruling within thirty (30) days from,
receipt of a properly documented application.

When a declared tariff classification of goods, not subject of a pending application for advance ruling, is in dispute,
the importer, exporter, or the Bureau shall submit the matter to the Commission for a ruling, without prejudice to the
application of Section 1106 of this Act on "protest": Provided, That such rulings of the Commission on commodity
classification shall be binding upon the Bureau, unless the Secretary of Finance shall rule otherwise.

SEC. 1101. Valuation Ruling. – An importer or exporter may file a written application for an advance valuation ruling
on the proper application of a specific method on customs valuation of specific goods as prescribed in Title VII,
Chapter 1 of this Act.

The application for a valuation ruling shall be filed with the Commissioner who shall issue a ruling within thirty (30)
days from submission of the application form and supporting documents as may be required by rules and regulations.

When the valuation method of goods not subject of an application for advance valuation ruling or the declared
customs value is in dispute, the matter shall be resolved in accordance with Section 1106 of this Act on "protest".

SEC. 1102. Ruling on the Rules of Origin. – An importer or exporter may file a written application for a ruling on
whether the goods qualify as originating under the rules of origin of the applicable preferential trade agreement. The
application for an advance ruling on origin shall be filed with the Commissioner who shall act on the application within
thirty (30) days from receipt of the application and supporting documents as may be required by rules and
regulations.

When the declared origin of the goods, not subject of a request for advance ruling on origin, is in dispute, the matter
shall be resolved in accordance with Section 1106 of this Act on "protest".

SEC. 1103. Conditions for Application and Effect of Advance Ruling. – An application for an advance ruling shall
cover only one (1) product or item. The application for advance ruling shall be filed at least ninety (90) days before
the importation or exportation of the product or item, as the case may be.

SEC. 1104. Administrative and Judicial Appeals. – An aggrieved party may, within thirty (30) days from receipt of an
adverse ruling or decision, appeal the same to the CTA without prejudice to the authority of the Secretary of Finance
to review decisions adverse to the government in accordance with Sections 1127 and 1128 of this Act, as the case
may be.

SEC, 1105. Implementing Rules and Regulations. – The Secretary of Finance, upon the recommendation of the
Bureau and the Commission, shall promulgate rules and regulations to implement the preceding provisions on
advance ruling.
 CHAPTER 2

PROTEST

SEC. 1106. Protest – When a ruling or decision of the District Collector or customs officer involving goods with
valuation, rules of origin, and other customs issues is made, except the fixing of fines in seizure cases, the party
adversely affected may appeal by way of protest against such ruling or decision by presenting to the Commissioner at
the time when payment of the amount claimed to be due the government is made, or within fifteen (15) days
thereafter, a written protest setting forth the objection to the ruling or decision in question and the reasons therefore.

Subject to the approval of the Secretary of Finance, the Commissioner shall provide such rules and regulations as to
the requirement for payment or nonpayment of the disputed amount and in case of nonpayment, the release of the
importation under protest upon posting of sufficient security.

SEC. 1107. Protest Exclusive Remedy in Protestable Case. – In all cases subject to protest, the interested party who
desires to have the action of the District Collector reviewed, shall file a protest as provided in Section 1106 of this Act,
otherwise the action of the District Collector shall be final and conclusive.

SEC. 1108. Form and Scope of Protest. – A protest shall be filed in accordance with the prescribed rules and
regulations promulgated under this section. It shall specify the particular decision or ruling of the District Collector for
which protest is being made, and shall indicate the particular ground or grounds upon which the protesting party
bases the claim for relief. The scope of a protest shall be limited to the particular goods subject of a goods
declaration, but any number of issues may be raised in a protest with reference to the goods declaration constituting
the subject matter of the protest.

SEC. 1109. Samples to be Furnished by Protesting Parties. – If the nature of the goods permit, importers filing
protests involving questions of fact must, upon demand, present to the Commissioner samples of the goods which
are the subject matter of the protest. The samples of the goods shall be verified by the customs officer who made the
classification, against which the protests are filed.

SEC. 1110. Decision in Protest. – When a protest is filed in proper form, the Commissioner shall render a decision
within thirty (30) days from receipt of the protest. In case the protest is sustained, in whole or in part, the appropriate
order shall be made, and the entry reassessed, if necessary.

CHAPTER 3

ALERT ORDERS

SEC. 1111. Alert Orders. – Alert orders are written orders issued by customs officers as authorized by the
Commissioner on the basis of derogatory information regarding possible noncompliance with this Act. An alert order
will result in the suspension of the processing of the goods declaration and the conduct of physical or nonintrusive
inspection of the goods within forty-eight (48) hours from issuance of the order. Within forty-eight (48) hours or, in the
case of perishable goods, within twenty-four (24) hours from inspection, the alerting officer shall recommend the
continuance of processing of goods in ease of a negative finding, or issuance of a warrant of seizure and detention if
a discrepancy between the declaration and actual goods is found. The Bureau's information system shall immediately
reflect the imposition or lifting of an alert order.

Derogatory information shall indicate the violations and other necessary specifics thereof. For this purpose, the
following shall not be considered derogatory information:

(a) General allegations of undervaluation;

(b) General allegations of misclassification without providing the appropriate tariff heading and duty of the shipment to
be alerted;

(c) General allegations of over-quantity without indicating the source of information supporting the allegation;

(d) General allegations of misdeclaration in the entry without indicating the suspected actual contents thereof; and

(e) General allegations of importations contrary to law without indicating the specific law or rule to be violated.

No alert order shall be issued on account of allegations of undervaluation unless said undervaluation is caused by the
submission to customs of forged or spurious invoice or other commercial documents.

An alert order may be issued only after lodgement of the goods declaration and prior to the release of goods from
customs custody. Under no circumstances shall, the suspension of the processing of goods declaration be allowed
except through an alert order issued by an authorized customs officer.

The costs of the physical inspection shall be borne by the Bureau: Provided, That such cost shall be reimbursed by
the owner prior to the release of the goods if the physical inspection results in the assessment of additional duties or
taxes or the issuance of a warrant of seizure.

The Commissioner shall be notified of the recommendation by the alerting officer within twenty-four (24) hours from
the issuance of the alert order. Alert orders shall be dated and assigned a unique reference number in series which
shall be the basis for reporting to and monitoring by the Commissioner and the Secretary of Finance.

The Bureau shall create a central clearing house for alert orders and shall submit reports quarterly on the status
thereof.

SEC. 1112. Alert Orders on Perishable Goods. – When the subject of the alert order are perishable goods, the
Bureau shall attach to the recommendation a certificate stating that the goods are perishable.

CHAPTER 4

SEIZURE AND FORFEITURE

SEC. 1113. Property Subject to Seizure and Forfeiture. – Property that shall be subject to seizure and forfeiture
include:

(a) Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully in the importation or exportation of
goods or in conveying or transporting smuggled goods in commercial quantities into or from any Philippine port or
place. The mere carrying or holding on board of smuggled goods in commercial quantities shall subject such vehicle,
vessel, aircraft, or any other craft to forfeiture: Provided, That the vehicle, vessel, aircraft or any other craft is not used
as a common carrier which has been chartered or leased for purposes of conveying or transporting persons or cargo;

(b) Any vessel engaging in the coastwise trade which shall have on board goods of foreign growth, produce, or
manufacture in excess of the amount necessary for sea stores, without such goods having been properly entered or
legally imported;

(c) Any vessel or aircraft into which shall be transferred cargo unloaded contrary to law prior to the arrival of the
importing vessel or aircraft at the port of destination;

(d) Any part of the cargo, stores, or supplies of a vessel or aircraft arriving from a foreign port which is unloaded
before arrival at the vessel's or aircraft's port of destination and without authority from the customs officer; but such
cargo, ship, or aircraft stores and supplies shall not be forfeited if such unloading was due to accident, stress of
weather, or other necessity and is subsequently approved by the District Collector;

(e) Goods which are fraudulently concealed in or removed contrary to law from any public or private warehouse,
container yard, or container freight station under customs supervision;

(f) Goods, the importation or exportation of which are effected or attempted contrary to law, or any goods of
prohibited importation or exportation, and all other goods which, in the opinion of the District Collector, have been
used, are or were entered to be used as instruments in the importation or the exportation of the former;

(g) Unmanifested goods found on any vessel or aircraft if manifest therefor is required;

(h) Sea stores or aircraft stores adjudged by the District Collector to be excessive, when the duties and taxes
assessed by the District Collector thereon are not paid or secured forthwith upon assessment of the same;

(i) Any package of imported goods which is found upon examination to contain goods not specified in the invoice or
goods declaration including all other packages purportedly containing imported goods similar to those declared in the
invoice or goods declaration to be the contents of the misdeclared package;

(j) Boxes, cases, trunks, envelopes, and other containers of whatever character used as receptacle or as device to
conceal goods which are subject to forfeiture under this Act or which are so designed as to conceal the character of
such goods;

(k) Any conveyance actually used for the transport of goods subject to forfeiture under this Act, with its equipage or
trappings, and any vehicle similarly used, together with its equipment and appurtenances. The mere conveyance of
smuggled goods by such transport vehicle shall be sufficient cause for the outright seizure and confiscation of such
transport vehicle but the forfeiture shall not be effected if it is established that the owner of the means of conveyance
used as aforesaid, is engaged as common carrier and not chartered or leased, or that the agent in charge thereof at
the time, has no knowledge of the unlawful act; and

(1) Goods sought to be imported or exported:

(1) Without going through a customs office, whether the act was consummated, frustrated, or attempted;

(2) Found in the baggage of a person arriving from abroad and undeclared by such person;

(3) Through a false declaration or affidavit executed by the owner, importer, exporter, or consignee concerning the
importation of such, goods;

(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 goods; or

(5) Through any other practice or device contrary to law by means of which such goods entered through a customs
office to the prejudice of the government.

SEC. 1114. Properties not Subject to Forfeiture in, the Absence of Prima Facie Evidence. – The forfeiture of the
vehicle, vessel, or aircraft shall not be effected if it is established that the owner thereof or the agent in charge of the
means of conveyance used as aforesaid has no knowledge of or participation in the unlawful act: Provided, That
a prima facie presumption shall exist against the vehicle, vessel, or aircraft under any of the following circumstances:

(a) If the conveyance has been used for smuggling before;

(b) If the owner is not in the business for which the conveyance is generally used; and

(c) If the owner is not financially in a position to own such conveyance.

SEC. 1115. Conditions Affecting Forfeiture of Goods. – The forfeiture shall be effected only when and while the
goods are in the custody or within the jurisdiction of customs officers, or in the possession or custody of or subject to
the control of the importer, exporter, original owner, consignee, agent of another person effecting the importation,
entry or exportation in question, or in the possession or custody of or subject to the control of persons who shall
receive, conceal, buy, sell, or transport the same, or aid in any of such acts, with knowledge that the goods were
imported, or were the subject of an attempt at importation or exportation contrary to law.

SEC. 1116. Seizure or Release of Goods. – The District Collector shall issue an order of release or a warrant of
seizure within five (5) days, or two (2) days in case of perishable goods, upon the recommendation of the alerting
officer or any other customs officer. The District Collector shall immediately make a report of such seizure or release
to the Commissioner.

SBC. 1117. Warrant of Seizure or Order of Release. – The District Collector shall have the authority to issue a
warrant of seizure of the goods upon determination of the existence of probable cause and in case of nonexistence
thereof, the issuance of order of release. In case the District Collector issued an order of release, the District
Collector shall immediately transmit all the records to the Commissioner who shall automatically review within forty-
eight (48) hours, or within twenty-four (24) hours in case of perishable goods. When no decision is made by the
Commissioner within the prescribed period, the imported goods shall be deemed released.

The lifting of the alert order shall be issued by the District Collector only upon the affirmation of the decision of the
District Collector by the Commissioner, or after the lapse of the period of review by the Commissioner, whichever is
earlier.

SEC. 1118. Sale of Perishable Goods During Forfeiture Proceedings. – Upon motion of the importer of the perishable
goods, the goods may be sold at a public auction during the pendency of the forfeiture proceedings. The proceeds of
the auction shall be held in escrow until the final resolution of the proceedings.
SEC. 1119. Service of Warrant of Seizure. – The District Collector shall cause the service of warrant of seizure to the
owner or importer of the goods or the authorized representative thereof. The owner or importer shall be given an
opportunity to be heard during the forfeiture proceedings.

For the purpose of serving the warrant, the importer, consignee, or person holding the bill of lading or airway bill shall
be deemed the "owner" of the goods. For the same purpose, "authorized representative" shall include any agent of
the owner and if the owner or the agent is unknown, any person having possession of the goods at the time of the
seizure.

Service of warrant to an. unknown owner shall be effected by posting the warrant for fifteen (15) days in a public
place at the concerned district, and by electronic or printed publication.

SEC. 1120. Description, Classification and Valuation of Seized Goods. – The District Collector shall cause the
preparation of a list and particular description, classification, and valuation of the goods seized and valuation of
identical or similar goods.

SEC. 1121. Proceedings in Case of Property Belonging to Unknown Parties. – If, within fifteen (15) days after service
of warrant, no owner or agent can be found or appears before the District Collector, the seized goods shall be
forfeited ipso facto in favor of the government to be disposed of in accordance with this Act.

SEC. 1122. Seizure of Vessel or Aircraft for Delinquency of Owner or Officer. – When the owner, agent, master, pilot
in command or other responsible officer of any vessel or aircraft becomes liable for any violation of this Act, the
vessel or aircraft may be seized and be subjected to forfeiture proceedings for the settlement of any fine or penalty
for which such person is liable. In determining whether or not to seize a vessel or aircraft, the Bureau shall take into
account the amount of fine or penalty in relation to the commercial impact that may be caused to international trade
by the seizure or detention as well as the value of the vessel or aircraft.

SEC. 1123. Burden of Proof in Forfeiture Proceedings. – In all proceedings for the forfeiture of any vehicle, vessel,
aircraft, or goods under this Act, the burden of proof shall be borne by the claimant.

SEC. 1124. Settlement of Pending Seizure Case by Payment of Fine or Redemption of Forfeited Goods. – Subject to
the approval of the Commissioner, the District Collector may allow the settlement by payment of fine or the
redemption of forfeited goods, during the course of the forfeiture proceeding. However, the Commissioner may
accept the settlement by redemption of any forfeiture case on appeal. No settlement by payment of fine shall be
allowed when there is fraud or when the discrepancy in duties and taxes to be paid between what is determined and
what is declared amounts to more than thirty percent (30%).

In case of settlement by payment of fine, the owner, importer, exporter, or consignee or agent shall offer to pay a fine
equivalent to thirty percent (30%) of the landed cost of the seized goods. In case of settlement by redemption, the
owner, importer, exporter, or consignee or agent shall offer to pay the redeemed value equivalent to one hundred
percent (100%) of the landed cost.

Upon payment of the fine or payment of the redeemed value, the goods shall be released and all liabilities which may
attach to the goods shall be discharged without prejudice to the filing of administrative or criminal case.

Settlement of any seizure case by payment of the fine or redemption of forfeited goods shall not be allowed when
there is fraud, or where the importation is prohibited or the release of the goods is contrary to law.

SEC. 1125. Decision in Forfeiture Cases. – In forfeiture cases, the District Collector shall issue an order for hearing
within fifteen (15) days, or five (5) days in case of perishable goods, from issuance of the warrant. The District
Collector shall render a decision within thirty (30) days upon termination of the hearing, or within ten (10) days in case
of perishable goods. The decision shall include a declaration of forfeiture, the imposition of a fine or such other action
as may be proper.

CHAPTER 5

APPEAL IN PROTEST AND FORFEITURE CASES

SEC. 1126. Appeal to the Commissioner. – In forfeiture cases, the person aggrieved by the decision of a District
Collector may, within fifteen (15) days or five (5) days in case of perishable goods, from receipt of the decision, file a
written notice of appeal, together with the required appeal fee to the District Collector, furnishing a copy to the
Commissioner. The District Collector shall immediately transmit all the records of the proceedings to the
Commissioner, who shall review and decide on the appeal within thirty (30) days from receipt of the records, or fifteen
(15) days in the case of perishable goods: Provided, That if within thirty (30) days, no decision is rendered, the
decision of the District Collector under appeal shall be deemed affirmed. An appeal filed beyond the period herein
prescribed shall be dismissed.

Appeals to protest cases shall be governed by Section 114 of this Act.

The decision of the Commissioner may be served through the recognized modes of service under existing law.

SEC. 1127. Automatic Review in Forfeiture Cases. – The Commissioner shall automatically review any decision by
the District Collector adverse to the government. The entire records of the case shall be elevated within five (5) days
from the promulgation of the decision. The Commissioner shall decide on the automatic review within thirty (30) days,
or within ten (10) days in the case of perishable goods, from receipt of the records. When no decision is rendered
within the prescribed period or when a decision adverse to the government is rendered by the Commissioner
involving goods with FOB or FCA value of ten million pesos (P10,000,000.00) or more, the records of the decision of
the Commissioner, or of the District Collector under review, as the case may be, shall be automatically elevated
within five (5) days for review by the Secretary of Finance. The decision issued by the Secretary of Finance, whether
or not a decision was rendered by the Commissioner within thirty (30) days, or within ten (10) days in the case of
perishable goods, from receipt of the records, shall be final upon the Bureau.

SEC. 1128. Automatic Review by the Secretary of Finance in Other Cases. – In cases not involving protest or
forfeiture, the Commissioner shall automatically review any decision by the District Collector that is adverse to the
government. The records of the case shall be elevated to the Commissioner within five (5) days from the
promulgation of the decision. The Commissioner shall decide on the automatic review within thirty (30) days from
receipt of the records, or within ten (10) days in the case of perishable goods. When no decision is rendered within
the prescribed period or when any decision rendered by the Commissioner is adverse to the government, the records
of the ease under review shall be automatically elevated within five (5) days for the review of the Secretary of
Finance. The decision issued by the Secretary of Finance, whether or not a decision was rendered by the
Commissioner within thirty (30) days from receipt of the records, or within ten (10) days in the case of perishable
goods, shall be final upon the Bureau.

CHAPTER 6

ABANDONMENT

SEC. 1129. Abandonment, Kinds and Effects of. – Imported goods are deemed abandoned under any of the
following circumstances:

(a) When the owner, importer, or consignee of the imported goods expressly signifies in writing to the District
Collector the intention to abandon the same; or

(b) When the owner, importer, consignee, or interested party after due notice, fails to file the goods declaration within
the prescribed period in Section 407 of this Act: Provided, That the term goods declaration shall include provisional or
incomplete goods declaration deemed valid by the Bureau as provided in Section 403 of this Act.  For this purpose, it
is the duty of the District Collector to post a list of all packages discharged and their consignees, whether
electronically or physically in the District Office, or send a notice to the consignee within five (5) days from the date of
discharge; or

(c) Having filed such goods declaration, the owner, importer, consignee or interested party after due notice, fails to
pay the assessed duties, taxes and other charges thereon, or, if the regulated goods failed to comply with Section
117 of this Act, within fifteen (15) days from the date of final assessment: Provided, That if such regulated goods are
subject of an alert order and the assessed duties, taxes and other charges thereof are not paid within fifteen (15)
days from notification by the Bureau of the resolution of the alert order, the same shall also be deemed abandoned;
or

(d) Having paid the assessed duties, taxes and other charges, the owner, importer or consignee or interested party
after due notice, fails to claim the goods within thirty (30) days from payment.  For this purpose, the arrastre or
warehouse operator shall report the unclaimed goods to the District Collector for disposition pursuant to the
provisions of this Act; or

(e) When the owner or importer fails to claim goods in customs bonded warehouses within the prescribed period.
The due notice requirement under this section may be provided by the Bureau through electronic notice or personal
service: Provided, That for non-regular importers, notification shall be by registered mail or personal service. For this
purpose, the accreditation of importers, exporters, and other third parties shall include provision for mandatory receipt
of electronic notices.

SEC. 1130. Treatment and Disposition of Abandoned Goods. – Expressly abandoned goods under paragraph (a) of
Section 1129 of this Act shall ipso facto be deemed the property of the government and shall be disposed of in
accordance with the provisions of this Act.

If the Bureau has not disposed of the abandoned goods, the owner or importer of goods impliedly abandoned may, at
any time within thirty (30) days after the lapse of the prescribed period to file the declaration, reclaim the goods
provided that all legal requirements have been complied with and the corresponding duties, taxes and other charges,
without prejudice to charges and fees due to the port or terminal operator, as well as expenses incurred have been
paid before the release of the goods from customs custody.

When the Bureau sells goods which have been impliedly abandoned, although no offense has been discovered, the
proceeds of the sale, after deduction of any duty and tax and all other charges and expenses incurred as provided in
Section 1143 of this Act, shall be turned over to those persons entitled to receive them or, when this is not possible,
held at their disposal for a specified period. After the lapse of the specified period, the balance shall be transferred to
the forfeiture fund as provided in Section 1151 of this Act.

CHAPTER 7

OTHER ADMINISTRATIVE PROCEEDINGS

SEC. 1131. Authority of the Commissioner to Make Compromise. – Subject to the approval of the Secretary of
Finance, the Commissioner may compromise any administrative case arising under this Act involving the imposition
of fines and surcharges, including those arising from the conduct of a post clearance audit, unless otherwise specified
by law.

Cases involving forfeiture proceedings shall however not be subject to any compromise.

CHAPTER 8

CIVIL REMEDIES FOR THE COLLECTION OF DUTIES AND TAXES

SEC. 1132. Remedies for the Collection of Duties, Taxes, Fines, Surcharges, Interests, and Other Charges. – The
civil remedies for the collection of import duties, taxes, fees, or charges resulting from the conduct of a post clearance
audit shall be obtained by:

(a) Distraint of goods, chattels, or effects, and other personal property of whatever character, including stocks and
other securities, debts, credits, bank accounts, and interest in and rights to personal property, and by levy upon real
property and interest in rights to real property; and (b) Civil or criminal action.

Either or both of these remedies may be pursued at the discretion of the Bureau: Provided, That the remedies of
distraint and levy shall not be allowed when the amount of duties and taxes involved is not more than ten thousand
pesos (10,000.00).

The Bureau shall advance the amounts needed to defray costs of collection by means of civil or criminal action,
including the preservation or transportation of personal property distrained and the advertisement and sale thereof, as
well as of real property and improvements thereon.

SEC. 1133. Constructive Distraint of the Property. – To safeguard the interest of the government, the Commissioner
may place under constructive distraint the property of a delinquent importer who, in the opinion of the Commissioner,
is retiring from any business subject to duty and tax, or is intending to leave the Philippines, or to remove the property
therefrom, or to hide or conceal the property, or to perform any act tending to obstruct the proceedings for collecting
the duty and tax due, or which may be due.

The constructive distraint of personal property shall be effected by requiring the importer or any person in possession
or control of such property to sign a receipt covering the property, to obligate to preserve the distrained property on
the state and condition at the time of the government's seizure of the same, and not to dispose of the same in any
manner whatsoever, without the express authority of the Commissioner.

In case the importer or the person in possession and control of the property sought to be placed under constructive
distraint refuses or fails to sign the receipt herein referred to, the customs officer effecting the constructive distraint
shall proceed to prepare a list of such property and, in the presence of two (2) witnesses, leave a copy thereof in the
premises where the property distrained is located, after which the said property shall be deemed to have been placed
under constructive distraint.

SEC. 1134. Summary Remedies. – (A) Distraint of Personal Property. – Upon failure of the person owing any
delinquent duty, tax and other charges to pay at the time required, the Commissioner shall seize and distraint the
goods, chattels or effects, and the personal property, including stocks and other securities, debts, credits, bank
accounts, and interests in and rights to personal property of such persons, in sufficient quantity to satisfy the duty, tax
or other charge and the expenses of the distraint and the cost of the subsequent sale.

The officer serving the warrant of distraint shall make or cause to be made an account of the goods, chattels, effects,
or other personal property distrained, a copy of which, signed by the said officer, shall be left either with the owner or
person from whose possession such goods, chattels, or effects or other personal property were taken, or at the
dwelling or other place of business of such person and with someone of suitable age and discretion, to which list shall
be added a statement of the sum demanded and note of the time and place of sale.

Stocks and other securities shall be distrained by serving a copy of the warrant of distraint upon the importer and
upon the president, manager, treasurer, or other responsible officer of the corporation, company or association, which
issued the said stocks or securities.

Debts and credits shall be distrained by leaving with the person owing the debts or having in his/her possession or
under his/her control such credits, or with his/her agent, a copy of the warrant of distraint. The warrant of distraint
shall be sufficient authority to the person owing the debts or having in his possession or under his control any credits
belonging to the importer to pay to the Commissioner the amount of such debts of credits.

Bank accounts shall be garnished by serving a warrant of garnishment upon the importer and upon the president,
manager, treasurer, or other responsible officer of the bank Upon the receipt of the warrant of garnishment, the bank
shall turn over to the Commissioner so much of the bank accounts as may be sufficient to satisfy the claim of the
government.

A report on the distraint shall, within ten (10) days from receipt of the warrant, be submitted by the Commissioner to
the Secretary of Finance: Provided, That the Commissioner shall have the power to lift such order of distraint subject
to the rules and regulations promulgated pursuant to this Act.

(B) Levy on Real Property. – After the expiration of the period within which to pay the duty, tax and other charges as
prescribed in this section, real property may be levied upon, before, simultaneously, or after the distraint of personal
property belonging to the importer. To this end, the Commissioner or the duly authorized representative shall prepare
a duly authenticated certificate showing the name of the importer and the amounts of the duty and tax and penalty
due. The certificate shall operate with the force of a legal execution throughout the Philippines.

The levy shall be effected by writing upon the certificate a description of the property on which levy is made. At the
same time, written notice of the levy shall be mailed to or served upon the register of deeds of the province or city
where the property is located and upon the importer, or if the latter is not in the Philippines, upon the agent or the
manager of the business from which the liability arose, or if there be none, to the occupant of the property in question.

In case the warrant of levy on real property is not issued before or simultaneously with the warrant of distraint on
personal property, and the personal property of the importer is not sufficient to satisfy the duty and tax due, the
Commissioner or a duly authorized representative shall, within thirty (30) days after execution of the distraint, proceed
with the levy on the real property of the importer.

Within ten (10) days after receipt of the warrant, a report on any levy shall be submitted by the levying officer to the
Commissioner: Provided, That the Commissioner may lift such warrants of levy issued, subject to the rules and
regulations promulgated pursuant to this Act.

CHAPTER 9

JUDICIAL PROCEEDINGS
SEC. 1135. Supervision and Control over Criminal and Civil Proceedings. – Civil and criminal actions and
proceedings instituted on behalf of the Government under the authority of this Act or other laws enforced by the
Bureau shall be brought in the name of the government of the Philippines and shall be prosecuted and handled by
the Bureau with the assistance of the Department of Justice (DOJ): Provided, That the determination of the existence
of probable cause and the subsequent filing of any criminal or civil case with the proper court against violators of this
Act shall exclusively belong to the DOJ: Provided, however, That no civil or criminal action for the recovery of duties
or the enforcement of any fine, penalty or forfeiture under this Act shall be filed in court without the approval of the
Commissioner.

SEC. 1136. Review by the CTA. – Unless otherwise provided in this Act or by any other law, the party aggrieved by
the ruling or decisions of the Commissioner may appeal to the CTA, in the manner and within the period prescribed
by law and regulations. Decisions of the Secretary of Finance when required by this Act, may likewise be appealed to
the CTA.

Unless an appeal is made to the CTA in the manner and within the period prescribed by law and regulations, the
ruling or decision of the Commissioner or the Secretary of Finance shall be final and executory.

SEC. 1137. Exclusive Jurisdiction of the Bureau. – Jurisdiction over imported goods and goods for exportation shall
be exclusive to the Bureau, or the Secretary of Finance, when under review by the latter, subject to the proceedings
described in this title.

Except for the CIA, no court may issue any order or decision until all the remedies for administrative appeal have
been exhausted.

SEC. 1138. Fraud Investigation and Prosecution. – No criminal case for violation of this title shall be instituted without
the approval of the Commissioner pursuant to the provisions of this Act.

The Bureau shall have the power to investigate and institute smuggling cases committed within its
jurisdiction: Provided, That in case of inquest, the same may be instituted by the apprehending customs officer.

CHAPTER 10

DISPOSITION OF PROPERTY IN CUSTOMS CUSTODY

SEC. 1139. Goods Subject to Disposition. – Goods in customs custody that are in the following conditions and status
shall be subject to disposition:

(a) Abandoned goods;

(b) Goods entered under warehousing entry but not withdrawn, or those whose duties and taxes have not been paid
within the period prescribed under Section 811 of this Act;

(c) Forfeited goods, other than prohibited, restricted and regulated goods; after liability have been established by the
proper administrative or judicial proceedings in conformity with the provisions of this Act; and

(d) Goods subject to a valid lien for customs duties, taxes and other charges collectible by the Bureau, after the
expiration of the period allowed for payment thereof.

SEC. 1140. Place of Disposition of Goods. – Upon the order of the District Collector, goods may be sold or otherwise
disposed of at the port where the goods are located, unless the Commissioner shall direct its transfer to another port.

SEC. 1141. Mode of Disposition. – The goods subject to disposition may be donated to another government agency
or declared for official use of the Bureau, after approval of the Secretary of Finance, or sold at a public auction within
thirty (30) days after a ten (10)-day notice posted at a public place at the port where the goods are located and
published electronically or in a newspaper of general circulation.

For purposes of donating the goods as above described, goods suitable for shelter or consisting of foodstuffs,
clothing materials or medicines may be donated to the DSWD.

SEC. 1142. Disqualification to Participate in Auction Sale. – No customs officer or employee, their spouses and
relatives within the fourth degree of consanguinity or affinity shall be allowed to bid directly or indirectly, in any
customs auction.

SEC. 1143. Disposition of Proceeds. – The following expenses and obligations shall be paid from the proceeds of the
sale in the order provided:

(a) Customs duties, except in the case of forfeited goods;

(b) Taxes and other charges due the government;

(c) Government storage charges;

(d) Expenses for the appraisal, advertisement, and sale of auctioned goods;

(e) Arrastre and private storage charges and demurrage charges; and

(f) Freight, lighterage or general average, on the voyage of importation, of which due notice shall have been given to
the District Collector.

The Commissioner is authorized to determine the maximum charges to be recovered by private entities concerned
under subsections (e) and (f) of this section.

SEC. 1144. Disposition of Perishable Goods. – Perishable goods as defined under this Act when certified as such by
the Bureau, may be sold at a public auction within five (5) days, after a three (3)-day notice.

For this purpose, perishable goods shall include goods liable to perish or be wasted, or those that depreciate greatly
in value while stored, or which cannot be kept without great disproportionate expense. The Bureau shall proceed to
advertise and sell the same at auction upon notice as shall be deemed to be reasonable. SEC. 1145. Disposition of
Goods Injurious to Public Health. – Goods in the custody of the Bureau which, in the opinion of the District Collector
are injurious to public health, shall be seized. The District Collector shall, if the matter is not disposable under the
provisions relating to food and drugs, appoint three (3) members to constitute a Board to examine the goods. The
Board shall be composed of one (1) representative from either the DOH or other appropriate government agency or
the local government unit (LGU) concerned, and two (2) representatives from the Bureau. If the goods are found to
be injurious to public health, the Board shall report this to the District Collector, who shall order its destruction in an
appropriate manner or order its reexportation in accordance with this Act.

The District Collector shall immediately coordinate with the health and quarantine officers at the port of entry for the
disposition of goods injurious to public health.

SEC. 1146. Disposition of Prohibited Good. – Prohibited goods, as provided in Section 118 of this Act, shall be
destroyed, except paragraph (d) thereof which shall be turned over to the BSP. All goods suitable for shelter,
foodstuffs, clothing materials or medicines may be disposed in accordance with Section 1141 of this Act.

SEC. 1147. Disposition of Restricted Goods. – Restricted goods as described in Section 119 of this Act shall be
disposed as follows:

(a) Dynamite, gunpowder, ammunitions and other explosives, firearms and weapons of war, and parts thereof shall
be turned over to the AFP;

(b) Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or mechanical devices used in
gambling or the distribution of money, cigars, cigarettes, or other goods when such distribution is dependent on
chance, including jackpot and pinball machines or similar contrivances, or parts thereof shall be turned over to the
appropriate government body or agency;

(c) Lottery and sweepstakes tickets, except advertisements thereof, and lists of drawings therein shall be turned over
to the appropriate government body or agency;

(d) Marijuana, opium, poppies, coca leaves, heroin, or other narcotics or synthetic drugs which are or may hereafter
be declared habit forming by the President of the Philippines, or any compound, manufactured salt, derivative, or
preparation thereof, shall be turned over to the Dangerous Drugs Board;

(e) Opium pipes and parts thereof, of whatever material, shall be turned over to the Dangerous Drugs Board; and
(f) All other restricted goods which are highly dangerous to be kept or handled shall be destroyed in a manner as the
District Collector deems appropriate. Otherwise, the restricted goods shall be turned over to the proper government
agency for appropriate handling.

SEC. 1148. Disposition of Regulated Goods. – Regulated goods shall be disposed of in a manner to be determined
by the appropriate regulatory agency. In the event that the regulatory agency allows the disposition of the regulated
goods with commercial value and capable of legitimate use, these shall be disposed of in accordance with Section
1141 of this Act.

SEC. 1149. Disposition of Unsold Goods for Want of Bidders. – Goods subject to sale at public auction by the Bureau
shall be sold at a price not less than the landed cost of the goods adjusted for normal depreciation.

Goods which remain unsold after at least two (2) public biddings either due to the lack of bidders or for the lack of an
acceptable bid, may be donated to another government agency or declared for official use of the Bureau. If the goods
are not suitable either for official use or donation, these may be subject to reexport as government property or sold
through a negotiated sale. In case of negotiated sale, the same shall be subject to the approval of the Secretary of
Finance and executed in the presence of a representative of the COA. For purposes of donating the goods as above
described, goods suitable for shelter or consisting of foodstuffs, clothing materials or medicines may be donated to
the DSWD.

SEC. 1150. Disposition of Smuggled Goods. – Smuggled goods, when forfeited, shall be disposed of as provided in
Section 1148 of this Act.

SEC. 1151. Forfeiture Fund. – All proceeds from public auction sales after deduction of the charges as provided in
Section 1143 of this Act and subject to the claim of the owner or importer of an impliedly abandoned goods as
provided in Section 1130 of this Act, shall be deposited in an account to be known as Forfeiture Fund.

The Fund shall be in the name of and shall be managed by the Bureau which is hereby authorized, subject to the
usual government accounting rules and regulations, to utilize it for the following purposes:

(a) To outsource, subject to the rules on government procurement established by law, the management of the
inventory, safekeeping, maintenance and sale of goods enumerated in Section 1139 of this Act to private service
providers: Provided, That the Bureau shall retain jurisdictional control and supervision over these goods as well as
the operations of the service provider so contracted;

(b) To facilitate customs seizure, abandonment and forfeiture proceedings and the disposition of goods under Section
1139 of this Act, particularly those to be disposed of other than through public sale;

(c) To enhance customs intelligence and enforcement capability to prevent smuggling; and

(d) To support the modernization program and other operational efficiency and trade facilitation initiatives of the
Bureau.

The DOF and the Department of Budget and Management (DBM) shall, upon the recommendation of the Bureau,
issue a joint regulation to implement the provisions of this section.

TITLE XII

THIRD PARTIES

CHAPTER 1

CUSTOMS SERVICE PROVIDERS

SEC. 1200. Customs Brokers and Other Service Providers. – Upon the recommendation of the Commissioner, the
Secretary of Finance shall issue the necessary rules and regulations for the registration of customs brokers and the
accreditation of other customs service providers to ensure compliance with this Act and the rules and regulations that
shall be promulgated to implement it.

CHAPTER 2

CARRIERS, VESSELS, AND AIRCRAFTS

SEC. 1201. Ports Open to Vessels and Aircrafts Engaged in Foreign Trade. – Vessels and aircrafts engaged in
foreign trade shall visit designated ports of entry only except as otherwise especially allowed by law: Provided, That
no existing and valid government contract covering the handling of import and export cargo shall be diminished or
impaired. Every vessel or aircraft arriving within a Customs District of the Philippines from a foreign port shall dock at
the designated port of entry and shall be subject to the authority of the District Collector of the port while within its
jurisdiction.

SEC. 1202. Control of Customs Officer Over Boarding or Leaving of Incoming Vessel and Over Other Vessel
Approaching the Former. – Upon the arrival in port of any vessel engaged in foreign trade, it shall be unlawful for any
person, except the pilot, consul, quarantine officers, customs officers, or other duly authorized persons, to board or
leave the vessel without permission of the customs officer concerned. It shall likewise be unlawful for any tugboat,
rowboat, or other craft to go alongside such vessel and for any person so authorized to board the vessel to take any
unauthorized person to board the same, or allow loitering near or alongside such vessel.  Unauthorized tugboats and
other vessels shall keep away from such vessel engaged in foreign trade at a distance of not less than fifty (50)
meters.

SEC. 1203. Documents to be Produced by the Master Upon Entry of Vessel. – Upon entry of a vessel engaged in
foreign trade, the master thereof shall present the following certified documents to the customs boarding officers:

(a) The vessel's general declaration;

(b) The original manifest of all cargoes destined for the port, to be returned with the endorsement of the boarding
officers;

(c) Three (3) copies of the original manifest, one of which, upon certification by the boarding officer as to the
correctness of the copy, shall be returned to the master;

(d) A copy of the cargo stowage plan;

(e) Two (2) copies of the store list;

(f) One (1) copy of the passengers list;

(g) One (1) copy of the crew list;

(h) The original copy of all through cargo manifest, for deposit with the customs officer who has jurisdiction over the
vessel while in port;

(i) The passengers manifest containing the names of all foreigners, in conformity with the requirements of the
immigration laws in force in the Philippines;

(j) One (1) copy of the original duplicate of fully accomplished bill of lading;

(k) The shipping goods and register of the vessel of Philippine registry; and

(l) Such other related documents.

SEC. 1204. Manifest Required of Vessel from Foreign Port. – Every vessel from a foreign port must have on board a
complete manifest of all its cargoes.

All cargoes intended to be landed at a port in the Philippines must be described in separate manifests for each port of
call. Each manifest shall include the port of departure and the port of delivery with, the marks, numbers, quantity, and
description of the packages and the names of the consignees. Every vessel from a foreign port must have on board
complete manifests of passengers and baggage, in the prescribed form, setting forth the destination and all
particulars required by immigration laws. Every vessel shall present to the proper customs officers upon arrival in
ports of the Philippines a complete list of all sea stores then on board. If the vessel does not carry cargo or
passengers, the manifest must show that no cargo or passenger is carried from the port of departure to the port of
destination in the Philippines.

A true and complete copy of the cargo manifest shall be electronically sent in advance by the shipping company,
NVOCC, freight forwarder, cargo consolidator, or their agents within the cut-off period as may be determined by the
Bureau before the arrival of the carrying vessel at the port of entry. Upon arrival of the carrying vessel, the shipping
company, NVOCC, freight forwarder, cargo consolidator, or their agents shall provide two (2) hard copies of the cargo
manifest to the Bureau in case the port of entry is either the Port of Manila (PoM) or the Manila International
Container Port (MICP), and one (1) copy only in the case of the other ports of entry.

A cargo manifest shall in no case be changed or altered after entry of vessel, except by means of an amendment,
under oath, by the master, consignee or agent thereof, which shall be attached to the original
manifest: Provided, That after the invoice and/or goods declaration covering an importation have been received and
recorded in the office of the appraiser, no amendment of the manifest shall be allowed, except when it is obvious that
a clerical error or any other discrepancy has been committed in the preparation of the manifest, without any
fraudulent intent, the discovery of which would not have been made until after examination of the importation has
been completed. SEC. 1205. Translation of Manifest. – The cargo manifest and each copy thereof shall be
accompanied by a translation in English, if originally written in another language.

SEC. 1206. Manifests for the Commission on Audit and District Collector. – Upon arrival of a vessel from a foreign
port, the Bureau shall provide electronic copies of the manifest to the Chairperson of the COA. The master shall
immediately present to the District Collector the original copy of the cargo manifest properly endorsed by the boarding
officer, and for inspection, the ship's register, or other documents in lieu thereof, together with the clearance and
other papers granted to the vessel at the port of departure for the Philippines.

SEC. 1207. Production of Philippine Crew. – The master of a Philippine vessel returning from abroad shall produce
the entire crew listed in the vessel's shipping crew manifest. If any member is missing, the master shall produce proof
satisfactory to the District Collector that the member has died, or absconded, has been forcibly impressed into
another service, or has been discharged. In case of discharge in a foreign country, the master shall produce a
certificate from the consul, vice consul, or consular agent of the Philippines there residing, showing that such
discharge was effected with the consent of the aforesaid representative of the Philippines.

SEC. 1208. Record of Arrival and Entry of Vessels and Aircraft. – A record shall be made and kept open to public
inspection in every Customs District of the date of arrival and entry of all vessels and aircraft.

SEC. 1209. Arrest of Vessel or Aircraft Departing Before Entry Made. – When a vessel or aircraft arriving within the
limits of a Customs District from a foreign port departs or attempts to depart before entry shall have been made, not
being thereunto compelled by stress of weather, duress of enemies, or other necessity, the District Collector of the
port may cause the arrest and bring back such vessel or aircraft to the most convenient port with the assistance of
other concerned agencies.

SEC. 1210. Discharge of Ballast. – When not brought to port as goods, ballast of no commercial value may be
discharged upon permit granted by the District Collector for the purpose.

SEC. 1211. Time of Unloading Cargo. – Unloading of cargo from a vessel or aircraft from a foreign port during official
nonworking hours shall be allowed subject to payment of service fees by shipping lines, airlines, or other interested p
arties at rates prescribed by the Commissioner.

SEC. 1212. Entrance of Vessel through Necessity. – When a vessel from a foreign port is compelled, by stress of
weather or other necessity to put into any other port than that of its destination, the master within twenty-four (24)
hours after its arrival, shall make a protest under oath setting forth the causes or circumstances of such necessity.
This protest, if not made before the District Collector, must be produced and lodged with the District Collector.

Within the same time, the master shall make a report to the District Collector if any part of the cargo was unloaded
from necessity or lost by casualty before arrival, and produce sufficient proof to the District Collector of such
necessity or casualty before the latter who shall give the approval thereto and the unloading shall be deemed to have
been lawfully effected.

SEC. 1213. Unloading of Vessel in Port from Necessity. – If a situation arises where the unloading of the vessel is
required pending sojourn in port, the District Collector shall, upon sufficient proof of the necessity, grant a permit
therefore, and the goods shall be unloaded and stored under the supervision of customs officers.

At the request of the master of the vessel or the owner thereof, the District Collector may grant permission to enter
the port and pay duties, taxes and other charges on, and dispose of, such part of the cargo as may be perishable in
nature or as may be necessary to defray the expenses attending the vessel.

Upon departure, the cargo, or a part thereof, may be reloaded on board the vessel, and the vessel may proceed with
the same to its destination, subject only to the charge for storing and safekeeping of the goods and the fees for
entrance and clearance. No port charges shall be collected on vessels entering through stress of weather, duress or
other urgent necessities.

SEC. 1214. Entry and Clearance of Vessels of a Foreign Government. – The entry and clearance of transport or
supply ship of a foreign government shall be in accordance with the agreement by and between the Philippines and
the foreign government.

SEC. 1215. Clearance of Vessel for Foreign Port. – Before a clearance shall be granted to any vessel bound to a
foreign port, the master or the agent thereof shall present to the District Collector the following properly authenticated
documents:

(a) A bill of health from the quarantine officer or officer of the public health service in the port;

(b) Three (3) copies of the manifest of export cargo, one of which, upon certification by the customs officer as to the
correctness of the copy, shall be returned to the master;

(c) Two (2) copies of the passengers list, showing foreigners and other passengers;

(d) The register and shipping goods, if the vessel is of Philippine registry;

(e) Clearance issued by the last port of entry; and

(f) A certificate from the Philippine Postal Corporation to the effect that it received timely notice of the sailing of the
vessel: Provided, That the District Collector shall not permit any vessel to sail for a foreign port if the master or agent
thereof refuses to receive bags of mail delivered to the same by the Philippine Postal Corporation for transport upon
reasonable compensation. In case the Postmaster General and the master or agent do not come to an agreement
concerning the amount of the compensation to be paid for the carriage of the mail, the matter shall be submitted for
decision to a Board of Referees to be composed of three (3) members appointed, respectively, by the Philippine
Postal Corporation, the agency of the company to which the vessel concerned belongs, and the Bureau, who shall fix
a reasonable rate of compensation.

SEC. 1216. Detention of Warlike Vessel Containing Arms and Munitions. – District Collectors shall report to the
proper authorities or detain any vessel of commercial registry manifestly built for warlike purposes and about to
depart from the Philippines with a cargo consisting principally of arms and munitions of war,

when the number of men shipped on board or other circumstances render it probable that such vessel is intended to
be employed by the owner or owners to cruise or commit hostilities upon the subjects, citizens, or property of any
foreign principality or state, or of any colony, district, or people with whom the Philippines is at peace, until the
decision of the President of the Philippines is rendered thereon, or until the owner or owners shall give a security, in
double the value of the vessel and cargo, that it will not be so employed, if in the discretion of the District Collector
such security will prevent the violation of the provisions of this section.

SEC. 1217. Oath of Master of Departing Vessel. – The master of a departing vessel shall state under oath that:

(a) All cargoes conveyed on the vessel, destined for the Philippines, have been duly discharged or accounted for;

(b) A true copy of the outgoing cargo manifest has been furnished to the Bureau;

(c) No letters or packets, not enclosed in properly stamped envelope sufficient to cover postage, have been received
or will be conveyed, except those relating to the vessel; and that all mails placed on board the vessel before its last
clearance from the Philippines have been delivered at the proper foreign port; and

(d) If clearing without passenger, the vessel will not carry upon the instant voyage, from the Philippine port; any
passenger of any class, or other person not entered upon the ship's declaration.

SEC. 1218. Extension of Time for Clearance. – At the time of clearance, the master of a departing vessel shall be
required to indicate the time of intended departure, and if the vessel should remain in port forty-eight (48) hours after
the time indicated, the master shall report to the District Collector for an extension of time of departure, and without
such extension the original clearance shall be nullified.

SEC. 1219. Advance Notice of Aircraft Arrival. – (A) Nonscheduled Arrivals. – Before an aircraft comes into any area
in the Philippines from any place outside thereof, a timely notice of the intended flight shall be furnished to the District
Collector or other customs officer-in-charge at or nearest the intended place of first landing, and to the quarantine and
immigration officers-in-charge at or nearest such place of landing. If dependable facilities for giving notice are not
available before departure, the use of any radio equipment shall be appropriate as long as it will result in the giving of
adequate and timely notice of the aircraft's approach, otherwise landing shall be made at a place equipped with
navigational facilities. If, upon landing in any area, the government officers have not arrived, the pilot-in-command
shall hold the aircraft and any baggage and goods thereon intact and keep the passengers and crew members in a
segregated place until the inspecting officers arrive.

(B) Scheduled Arrivals. – Such advance notice will not be required in the case of an airline arriving in accordance with
the regular schedule filed with the District Collector for the Customs District in which the place of first landing area is
situated, and also with the quarantine and immigration officers-in-charge of such place.

SEC. 1220. Landing at International Airport of Entry. – Except in case of emergency or forced landings, aircraft
arriving in the Philippines from any foreign port or place shall make the first landing at an international airport of entry,
unless permission to land elsewhere other than at an international airport of entry is first obtained from the
Commissioner. In such cases, the owner, operator, or person in charge of the aircraft shall pay the expenses incurred
in inspecting the aircraft, goods, passengers, and baggage carried thereon, and such aircraft shall be subject to the
authority of the District Collector at the airport while within its jurisdiction.

Should an emergency or forced landing be made by an aircraft coming into the Philippines at a place outside the
jurisdiction of the latter, the pilot-in-command shall not allow goods, baggage, passenger, or crew member to be
removed or to depart from the landing place without permission of a customs officer, unless such removal or
departure is necessary for purposes of safety, communication with customs officers, or preservation of life, health, or
property. As soon as practicable, the pilot-in-command, or a member of the crew-in-charge, or the owner of the
aircraft, shall communicate with the customs officer at the intended place of first landing or at the nearest international
airport or other customs port of entry in the area and make a full report of the circumstances of the flight and of the
emergency or forced landing.

SEC. 1221. Report of Arrival and Entry of Aircraft. – The pilot-in-command of any aircraft arriving from a foreign port
or place shall immediately report its arrival to the District Collector at the airport of entry or to the customs officer
detailed to meet the aircraft at the place of first landing. Upon arrival, such aircraft shall be boarded by a quarantine
officer, and after pratique or health clearance is granted, shall be boarded by a customs officer; subsequently no
person shall be permitted to board or leave the aircraft without the permission of the customs officer. The pilot-in-
command or any other authorized agent of the owner or operator of the aircraft shall make the necessary entry. No
such aircraft shall, without previous permission from the District Collector, depart from the place of first landing or
discharge goods, passengers, or baggage.

SEC. 1222. Documents Required in Making Entry for Aircraft. – (a) For the purpose of making entry, there shall be
presented to the boarding customs officer four (4) copies of a general declaration which shall contain the following
data, unless any of such data is otherwise presented on a separate official form:

(1) Name of owner or operator of aircraft, registration marks and nationality of aircraft, and flight number of
identification;

(2) Points of clearance and entry, and date of arrival;

(3) Health and customs clearance at the last airport of departure;

(4) Itinerary of aircraft, including information as to airport of origin and departure dates;

(5) Names and nationality of crew members;

(6) Passengers manifest showing places of embarkation and destination;

(7) Cargo manifest showing information as to airway bill number, the number of packages related to each airway bill
number, nature of goods, destination, and gross weight, together with a copy of each airway bill securely attached
thereto;

(8) Store list; and

(9) Such other documents as may be required by the Bureau.

(b) The general declaration shall be written in English and duly signed by the pilot-in-command or operator of the
aircraft, or the authorized agent. The section on health, and customs clearances, however, shall be signed only by
the pilot-in-command or when necessary, by a crew member when the general declaration itself has been signed by
a non-crew member. If the aircraft does not carry cargoes or passengers, such facts must be shown in the manifest.

(c) A cargo manifest shall in no case be changed or altered after entry of the aircraft, except by means of an
amendment by the pilot-in-command or authorized agent thereof, under oath, and attached to the original
manifest: Provided, That after the invoice and/or goods declaration covering an importation have been received and
recorded in the office of the appraiser, no amendment shall be allowed except when it is obvious that a clerical error
or any other discrepancy has been committed without any fraudulent intent in the preparation of the manifest, the
discovery of which could not have been made until after complete examination of the importation.

SEC. 1223. Manifests for the Commission on Audit (COA) and District Collector. – Upon arrival of an aircraft from a
foreign port, the Bureau shall provide electronic copies of the manifest to the Chairperson of the COA. The master
shall immediately present to the District Collector the original copy of the cargo manifest properly endorsed by the
boarding officer, and for inspection, the aircraft's register or other documents in lieu thereof, together with the
clearance and other papers granted to the aircraft at the port of departure for the Philippines.

SEC. 1224. Clearance of Aircraft for Foreign Port. – (a) Any aircraft bound to a foreign port shall, before departure, be
granted clearance by the Commissioner at an airport of entry where such aircraft has been authorized to make its
landing; and

(b) Before clearance shall be granted to an aircraft bound to a foreign port, there shall be presented to the District
Collector or to the customs officer detailed at the place of departure four (4) copies of a general declaration signed by
the pilot-in-command or authorized agent of an aircraft which shall contain the following data; (1) Name of owner or
operator of aircraft, registration marks and nationality of aircraft, and flight number of identification;

(2) Port of clearance, data thereof and destination;

(3) Health and customs clearance;

(4) Itinerary of aircraft, including information as to airport of destination and departure date;

(5) Names and nationality of crew members;

(6) Passengers manifest showing places of destination;

(7) Export cargo manifest showing information as to airway bill number, the number of packages related to each
airway bill number, nature of goods, destination, and gross weight, together with a copy of each airway bill securely
attached thereto; and

(8) Store list showing stores loaded.

SEC. 1225. Oath of Person-in-Charge of Departing Aircraft. – The pilot-in-command or authorized agent of such
departing aircraft shall also state under oath to the effect that:

(a) All cargoes conveyed on the aircraft destined to the Philippines have been duly discharged and accounted for;
and

(b) The aircraft has not received nor will convey any letter or packet not enclosed in properly stamped envelope
sufficient to cover postage, except those relating to the cargo of the aircraft, and that there was delivery to the proper
foreign port of all mails placed on board said aircraft before clearance from the Philippines.

If an aircraft is cleared to depart without passengers, the aircraft shall not carry any passenger thereon.

A record shall be made and kept open to public inspection in every customs office at an airport of entry of the dates of
arrival and entry of all aircraft.

CHAPTER 3

OTHER THIRD PARTIES

SEC. 1226. Supervision and Regulation of Third Parties. – Third parties transacting with the Bureau on behalf of
importers and consignees shall be treated equally as true importers or consignees.

Third parties transacting with the Bureau shall be liable for acts committed in violation of this Act and related laws.

Upon the recommendation of the Commissioner, the Secretary of Finance shall issue rules and regulations to govern
and regulate the conduct of all third parties dealing directly with

the Bureau in relation to the importation, exportation, movement, storage and clearance of goods for and on behalf of
another person. The rules and regulations shall provide for specific conditions when third parties may or may not
directly transact with the Bureau and shall provide a written notice in case such third parties are, for valid reasons,
barred from transacting with the Bureau. Third party is defined under Section 102(uu) of this Act. For purposes of this
section, third parties may also refer to logistics providers; importers, exporters, carriers, airlines, shipping lines,
shipping agents, forwarders, consolidators, port and terminal operators, and warehouse operators, if such persons or
entities transacted with the Bureau.

CHAPTER 4

AUTHORIZED ECONOMIC OPERATORS (AEOs)

SEC. 1227. Treatment of Authorized Economic Operators (AEOs). – The Bureau shall promulgate the necessary
procedures and requirements for the compliance of Authorized Economic Operators (AEOs). For AEOs who have
displayed diligence in complying with the rules and the submission of official customs requirements, and have
satisfactorily managed their commercial records, the Bureau shall extend the following incentives:

(a) Release of the goods upon provision of the minimum information necessary to identify the goods and permit the
subsequent completion of the final goods declaration;

(b) Grant of clearance of the goods at the declarant's premises or another place authorized by the Bureau; and

(c) Other special procedures such as:

(i) Allowing a single goods declaration for all imports or exports in a given period where goods are imported or
exported frequently by the same person;

(ii) Use of commercial records to self-assess their duty and tax liability and, where appropriate, to ensure compliance
with other customs requirements; and

(iii) Allowing the lodgement of goods declaration by means of an entry in the records by the authorized person to be
supported subsequently by a supplementary goods declaration.

SEC. 1228. Trade Facility for AEO. – The Secretary of Finance shall, upon the recommendation of the
Commissioner, issue the necessary rules:

(a) To supervise and regulate the conduct and operations of the AEO s, consistent with international best practices,
the World Customs Organization (WCO) framework of standards to secure and facilitate global trade, and other
international conventions and agreements;

(b) To develop a trade facilitation program for AEOs and other authorized persons consistent with international best
practices and international conventions and agreements; and

(c) To recognize existing facilities where the authority or right to operate AEOs has been granted by the relevant
government agency or regulator through a contract, where the Bureau shall:

(i) Only require an endorsement by the relevant agency or regulator;

(ii) Issue a certificate of authority as a matter of course; and

(iii) Ensure that the term of the certificate of authority shall be coterminous with the applicable government contract or
any extension thereof.
The Bureau shall implement the provisions of this chapter without interfering, or impeding AEO operations as well as
existing operations of wharves, container yards, container freight stations, warehouses, examination areas and other
facilities located in customs territory and/or in airports and seaports. The Bureau shall likewise ensure that any
subsequent rules, regulations, orders or memoranda issued in relation to AEOs shall be consistent with the
appropriate government agency's or regulator's prevailing operating procedures and international hest practices.

Existing contracts of private operators with appropriate government agency or regulator, such as, but not limited to,
the PPA, SBMA. and PIA and their respective authorities and powers already granted by law pertinent to such
contract, shall not be impaired or adversely affected with the Bureau's implementing rules and regulations on AEOs.

TITLE XIII

CUSTOMS FEES AND CHARGES

SEC. 1300. Customs Dues, Fees and Charges. – For services rendered and documents issued by the Bureau, dues,
fees and charges shall be collected as may be provided under existing regulations issued by the Secretary of
Finance, upon the recommendation of the Commissioner.

SEC. 1301. General Provision on the Authority to Increase or Decrease Dues, Fees and Charges. –The Secretary of
Finance may, upon the recommendation of the Commissioner, increase or decrease the dues, fees and charges
collectible by the Bureau to protect the interest of the government.

TITLE XIV

OFFENSES AND PENALTIES

CHAPTER 1

CRIMES AND OTHER OFFENSES

SEC. 1400. Misdeclaration, Misclassification, Undervaluation, in Goods Declaration. – Misdeclaration as to quantity,

quality, description, weight, or measurement of the goods, or misclassification through insufficient or wrong
description of the goods or use of wrong tariff heading resulting to a discrepancy in duty and tax to be paid between
what is legally determined upon assessment and what is declared, shall be subject to a surcharge equivalent to two
hundred fifty percent (250%) of the duty and tax due. No surcharge shall be imposed when the discrepancy in duty is
less than ten percent (10%), or when the declared tariff heading is rejected in a formal customs dispute settlement
process involving difficult or highly technical question of tariff classification, or when the tariff classification declaration
relied on an official government ruling.

There is undervaluation when: (a) the declared value fails to disclose in full the price actually paid or payable or any
dutiable adjustment to the price actually paid or payable; or (b) 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. When the undervaluation is established without the need
to go through the formal dispute settlement process provided for in this Act, a surcharge shall be imposed equivalent
to two hundred fifty percent (250%) of the duty and tax due. No surcharge shall be imposed when the discrepancy in
duly is less than ten percent (10%); or the declared value is rejected as a result of an official ruling or decision under
the customs dispute settlement process involving difficult or highly technical question relating to the application of
customs valuation rules.

A discrepancy in duty and tax to be paid between what is legally determined and what is declared amounting to more
than thirty percent (30%) shall constitute a prima facie evidence of fraud.

When the misdeclaration, misclassification or undervaluation is intentional or fraudulent, such as when a false or
altered document is submitted or when false statements or information are knowingly made, a surcharge shall be
imposed equivalent to five hundred percent (500%) of the duty and tax due and that the goods shall be subject to
seizure regardless of the amount of the discrepancy without prejudice to the application of fines or penalties provided
under Section 1401 of this Act against the importer and other person or persons who willfully participated in the
fraudulent act.

SEC. 1401. Unlawful Importation or Exportation. – Any person who shall fraudulently import or export or bring into or
outside of the Philippines any goods, or assist in so doing, contrary to law, or shall receive, conceal, buy, sell, or in
any manner facilitate the transportation, concealment, or sale of such goods after importation, or shall commit
technical smuggling as defined in this Act shall be penalized by:

(a) Imprisonment of not less than thirty (30) days and one (1) day but not more than six (6) months, or a fine of not
less than twenty-five thousand pesos (P25,000.00) but not more than seventy-five thousand pesos (P75,000.00), or
both, if the appraised value of the goods unlawfully imported, to be determined in the manner prescribed under this
Act, including duties and taxes, of the goods unlawfully imported does not exceed two hundred fifty thousand pesos
(P250,000.00);

(b) Imprisonment of not less than six (6) months and one (1) day but not more than one (1) year, or a fine of not less
than seventy-five thousand pesos (P75,000.00) but not more than one hundred fifty thousand pesos (P150,000.00),
or both, if the appraised value of the goods unlawfully imported, to be determined in the manner prescribed under this
Act, including duties and taxes, exceeds two hundred fifty thousand pesos (P250,000.00) but not more than five
hundred thousand pesos (P500,000.00);

(c) Imprisonment of not less than one (1) year and one (1) day but not more than three (3) years, or a fine of not less
than one hundred fifty thousand pesos (P150,000.00) but not more than three hundred thousand pesos
(P300,000.00) or both, if the appraised value of the goods unlawfully imported, to be determined in the manner
prescribed under this Act, including duties and taxes, exceeds five hundred thousand pesos (P500,000.00) but not
more than one million pesos (P 1,000,000.00);

(d) Imprisonment of not less than three (3) years and one (1) day but not more than six (6) years, or a fine of not less
than three hundred thousand pesos (P300,000.00) but not more than one million five hundred thousand pesos (P
1,500,000.00), or both, if the appraised value of the goods unlawfully imported, to be determined in the manner
prescribed under this Act, including duties and taxes, exceeds one million pesos (P1,000,000.00) but not more than
five million pesos (P5,000,0 00.00);

(e) Imprisonment of not less than six (6) years and one (1) day but not more than twelve (12) years, or a fine of not
less than one million five hundred thousand pesos (P 1,500,000.00) but not more than fifteen million pesos
(P15,000,000.00), or both, if the appraised value of the goods unlawfully imported, to be determined in the manner
prescribed under this Act, including duties and taxes, exceeds five million pesos (P5,000,000.00) but not more than
fifty million pesos (P50,000,000.00);

(f) Imprisonment of not less than twelve (12) years and one (1) day but not more than twenty (20) years, or a fine of
not less than fifteen mill-inn pesos (P15,000,000.00) but not more than fifty million pesos (P50,000,000.00), or both, if
the appraised value of the goods unlawfully imported, to be determined in the manner prescribed under this Act,
including duties and taxes, exceeds fifty million pesos (P50,000,000.00) but not more than two hundred million pesos
(P200,000,000.00);

(g) If the appraised value of the goods unlawfully imported to be determined in the manner prescribed under this Act,
including duties and taxes, exceeds two hundred million pesos (P200,000,000.00) or if the aggregate amount of the
appraised value of the goods which are the subject of unlawful importation committed in more than one instance,
including duties and taxes, exceeds two hundred million pesos (P200,000,000.00), the same shall be deemed as a
heinous crime and shall be punishable with a penalty of reclusion perpetua and a fine of not less than fifty million
pesos (P50,000,000.00); and

(h) The penalty of prision mayor shall be imposed when the crime of serious physical injuries shall have been
committed, and the penalty of reclusion perpetua shall be imposed when the crime of homicide shall have been
committed by reason or on the occasion of the unlawful importation.

In applying the above scale of penalties, an offender who is a foreigner shall be deported without further proceedings
after serving the sentence. If the offender is a public officer or employee, the penalty which is the next higher in
degree shall be imposed in addition to the penalty of perpetual disqualification from public office, and disqualification
to vote and to participate in any public election. If the offender fails to pay the fine, subsidiary imprisonment shall be
served.

When, upon trial for violation of this section, the defendant is shown to have had possession of the goods in question,
possession shall be deemed sufficient evidence to authorize conviction unless the defendant shall explain the
possession to the satisfaction of the court: Provided, That each act of unlawful importation or exportation shall be
deemed as a separate offense: Provided, however, That payment of the tax due after apprehension shall not
constitute a valid defense in any prosecution, under this section: Provided, further, That outright smuggling shall also
be punishable under this section: Provided, finally, That the rights and privileges provided in this Act for the importers,
consignees, exporters, service providers, third parties and other third parties who committed this offense shall be
revoked.

SEC. 1402. Failure or Refusal of Party to Give Evidence or Submit Documents for Assessment. – When the owner,
importer or consignee of any imported goods, or the agent of either, fails or refuses, upon lawful demand in writing by
any customs officer to appear, lawfully depose, or submit to examination or to answer any material question or
refuses to produce records, accounts or invoices in possession pertaining to the value, classification or disposition of
the goods in question and deemed material in assessing the same, the District Collector shall assess a surcharge of
twenty percent (20%) on the dutiable value of the goods which is the subject of the importation.

SEC. 1403. Other Fraudulent Practices Against Customs Revenue. – Any person who makes or attempts to make
any entry of imported or exported goods by means of any false or fraudulent statement, document or practice or
knowingly and willfully files any false or fraudulent claim for payment of drawback or refund of duties shall, for each
act, be punished in accordance with the penalties prescribed in Section 1401 of this Act.

SEC. 1404. Failure to Declare Baggage. – Whenever dutiable goods are not declared by any person arriving within
the Philippines, such goods shall be seized and the person may obtain release of such goods, if not imported
contrary to any law, upon payment of a surcharge equivalent to thirty percent (30%) of the landed cost of such goods,
in addition to all duties, taxes and other charges due. Nothing in this section shall preclude the filing of criminal action
against the offender.

SEC. 1405. Vessel, Seacraft, or Aircraft Departing Before Undergoing Customs Formalities. – Any vessel, seacraft,
or aircraft arriving within the limits of a Customs District from a foreign port which departs before undergoing customs
formalities, without being compelled to do so by stress of weather, pursuit or duress of enemies, or other necessity,
shall be liable for a fine of not less than one hundred thousand pesos (P100,000.00) but not more than three hundred
thousand pesos (P300,000.00).

SEC. 1406. Obstruction to Boarding Officer. – If the master or pilot-in-command or any member of the complement of
any vessel or aircraft arriving at the Philippine port obstructs or hinders any officer from lawfully going on board such
vessel or aircraft for the purpose of enforcing this Act, or intentionally causes any officer to be so obstructed or
hindered, the vessel or aircraft shall be liable to a fine of not less than one hundred thousand pesos (P100,000.00)
but not more than three hundred thousand pesos (P300,000.00).

SEC. 1407. Unlawful Boarding or Leaving of Vessel or Aircraft. – If, upon arrival at the Philippine port, any master of
a vessel or pilot-in-command of an aircraft engaged in a foreign trade permits any person to board or leave the vessel
or aircraft without the permission of the customs officer-in-charge, the owner or operator of such vessel or aircraft
shall he liable for a fine of not less than one hundred thousand pesos (100,000.00) but not more than three hundred
thousand pesos (P300,000.00).

SEC. 1408. Unloading of Cargo Before Arrival at Port of Entry. – If, upon the arrival within the limits of any Customs
District of the Philippines of any vessel or aircraft engaged in foreign trade, the master or pilot-in-command thereof
permits any part of the cargo to be unloaded before arrival at the port of entry, and without authority from a proper
customs officer, the owner, operator, or agent of such vessel or aircraft shall he liable for a fine of not less five
hundred thousand pesos (P500,000.00) but not more than two million pesos (P2,000,000.00): Provided, That no fine
shall accrue upon satisfactory proof to the proper District Collector that the unloading was rendered necessary by
stress of weather, accident or other necessity: Provided, however, That the fine imposed herein shall be without
prejudice to the application of fines or penalties provided under Section 1401 of this Act.

SEC. 1409. Unloading of Cargo at Improper Time or Place After Arrival. – The owner or operator of any vessel or
aircraft from which cargo is discharged upon arrival in the Philippines at a time or place other than that designated by
the District Collector, shall be fined not less one hundred thousand pesos (P100,000.00) but not more than three
hundred thousand pesos (P300,000.00): Provided, That no fine shall accrue upon satisfactory proof to the proper
District Collector that the unloading was rendered necessary by stress of weather, accident or other necessity.

SEC. 1410. Failure to Exhibit or Deposit Documents. – When the master of a vessel or pilot-in-command of an
aircraft engaged in foreign trade fails to submit to the District Collector at the time of entry of the vessel or aircraft the
register or other documents in lieu thereof, together with the clearance and other documents granted by the customs
officers to the vessel or aircraft at the last foreign port of departure, or fails to exhibit any certificate or other
documents required to be then exhibited, the owner or operator of such vessel or aircraft shall be liable for a fine of
not less than one hundred thousand pesos (P100.000.00) but not more than three hundred thousand pesos
(P300,000.00).

SEC. 1411. Bringing of Unmanifested Arms, Explosives or War Equipment. – The owner, operator, or agent of a
vessel or aircraft arriving at a port in the Philippines bearing cargo consisting of firearms, gunpowder, cartridges,
dynamite or any other explosives, munitions or equipment of war not contained in the manifest of the vessel or
aircraft, or which are concealed on board, shall be liable for a fine of not less than five hundred thousand pesos
(P500,000.00) but not more than one million pesos (P1,000,000.00).

SEC. 1412. Failure to Supply Advance and Requisite Manifests. – Failure to transmit the electronic manifest within
the required time as may be prescribed by the Bureau, prior to arrival of the carrying vessel or aircraft at the port of
entry shall make the owner, operator, or agent of the vessel or aircraft liable for a fine of not less than one hundred
thousand pesos (P100,000.00) but not more than three hundred thousand pesos (P300,000.00).

If the transit time from port of origin to port of entry is at least seventy-two (72) hours, the shipping or forwarding
agent of the carrier or the vessel who fails to submit the manifest at least twenty-four (24) hours before entry shall
likewise be liable for a fine of not less than one hundred thousand pesos (P100,000.00) but not more than three
hundred thousand pesos (P300,000.00).

SEC. 1413. Disappearance of Manifested Goods. – When any package or goods mentioned in the manifest meant to
be unloaded at the port of destination is not unloaded upon the arrival of the vessel or aircraft, its agent shall be liable
for a fine of not less than one hundred thousand pesos (P100,000.00) but not more than three hundred thousand
pesos (P300,000.00) unless the disappearance of the package or the goods in question was not due to the
negligence of the master of the vessel or pilot-in-command of an aircraft, and is explained to the satisfaction of the
District Collector.

The owner, operator, or agent of a vessel or aircraft shall be liable for the payment of the same fine when a package
or goods listed in the manifest does not tally materially in character or otherwise with the description thereof in the
manifest.

SEC. 1414. Discrepancy Between Actual and Declared Weight of Manifested Goods. – If the gross weight of goods
or package described in the manifest or bill of lading exceeds the declared weight by more than ten percent (10%),
and such discrepancy was due to the negligence of the master or pilot-in-command, the owner, employee, operator
or agent of the importing vessel or aircraft shall be liable for a fine of not more than twenty percent (20%) of the value
of the package or goods in respect to which the deficiency exists.

SEC. 1415. Discrepancy With the Master's or Pilot's-in-Command Report. – When a vessel or aircraft arriving from a
foreign port is compelled by necessity to unload in another port other than the port of entry and permission is granted
by the District Collector for the unloading of the vessel or aircraft or the delivery of any part of the cargo and it shall be
found that there is discrepancy between the cargo unloaded and the report of the master or the pilot-in-command and
such discrepancy is not satisfactorily explained, the owner, operator or agent of the vessel or aircraft shall be liable
for a fine of not less than one hundred thousand pesos (P100,000.00) but not more than three hundred thousand
pesos (P300,000.00).

SEC. 1416. Failure to Report Fraud. – A master, pilot-in-command or other officer, owner or agent of any vessel or
aircraft trading with or within the Philippines who has knowledge of the commission of fraud that shall result in the
loss or diminution of customs revenue but fails to report all information relative thereto to the Distract Collector shall
be penalized with imprisonment of not less than six (6) months and one (1) day but not more than one (1) year and
shall be liable for a fine of not less than one hundred thousand pesos (P100,000.00) but not more than three hundred
thousand pesos (P300,000.00).  If the offender is a foreigner, the offender shall be deported after serving the
sentence.  If the offender is a public officer or employee, the offender shall suffer additional penalty of perpetual
disqualification to hold public office, to vote and to participate in any election. All the benefits due from service in the
government, including the separation and retirement benefits, shall be forfeited.

SEC. 1417. False Statement of Vessel's or Aircraft's Destination. – When the master or pilot-in-command of a vessel
or aircraft loaded with goods shall make a false statement as to the next destination of such vessel or aircraft when
that information is required by a customs officer, the owner or operator of such vessel or aircraft shall be liable for a
fine of not less than one hundred thousand pesos (P100,000.00) but not more than three hundred thousand pesos
(P300,000.00). The arrival of a vessel or aircraft at a different port other than the one it had been originally authorized
and cleared for without having been impelled to do so by necessity, shall be prima facie proof that the original
statement of the actual destination of the vessel or aircraft was false.

SEC. 1418. Affixing Seals. – Any person who, without authority, affixes or attaches a customs seal, fastening, or any
mark, or fastening purporting to be a customs seal, to any vessel, aircraft, vehicle, warehouse, or package, shall be
penalized with imprisonment of not less than six (6) months and one (1) day but not more than one (1) year, and shall
be liable for a fine of not less than one hundred thousand pesos (P100,000.00) but not more than three hundred
thousand pesos (P300,000.00). If the offender is a foreigner, the offender shall be deported after serving the
sentence. If the offender is a public officer or employee, the offender shall suffer an additional penalty of perpetual
disqualification to hold public office and disqualification from exercising the right to vote and to participate in any
election.

SEC. 1419. Breaking of Seal Placed by Customs Officers. – If any seal placed by a customs officer upon any vessel
or aircraft or compartment thereof, or upon any box, trunk or other package of goods on board is broken, the owner,
operator, or agent of the vessel or aircraft shall be liable for a fine of not less than one hundred thousand pesos
(P100,000.00) but not more than three hundred thousand pesos (P300,000.00) for each broken or destroyed seal.

SEC. 1420. Breaking of Lock or Fastening Placed by Customs Officers. – If any lock or other fastening device placed
by a customs officer upon any hatch door, or other means of communication in the hold of a vessel or aircraft, or
other part thereof for the security of the same during the night time, is unlawfully opened, broken or removed, or if any
of the goods contained in the hold or in the other compartments so secured is clandestinely abstracted and landed,
the owner, operator, or agent of the vessel or aircraft shall be liable for a fine of not less than one hundred thousand
pesos (P100,000.00) but not more than three hundred thousand pesos (P300.000.00).

SEC. 1421. Removal, Breakage, and Alteration of Marks. – Any person who, without authority, willfully removes,
breaks, injures, defaces or alters any customs seal or other fastening or mark placed upon any vessel, vehicle, on
land, sea or air, warehouse or package containing merchandise or baggage in bond or in customs custody, shall be
punished with the penalty prescribed in Section 1420 hereof.

SEC. 1422. Unauthorized Withdrawal of Imported Goods from Bonded Warehouse. – Any person who causes the
unauthorized withdrawal of imported goods stored from a CBW shall be liable for payment of a surcharge of fifty
percent (50%) of duties, taxes, customs fees, and charges, found to be due and unpaid. The amount of surcharge
shall be added to the duties, taxes and charges due on the goods withdrawn. If the delinquency lasts for more than
one (1) year, the surcharge shall be increased by twenty-five percent (25%) of the unpaid duties and taxes annually:
Provided, That where the withdrawal is attended with fraud, such as when a fake or altered withdrawal permit is
submitted, the warehouse operator shall be held liable under the pertinent provisions of this Act, without prejudice to
the suspension or revocation of the warehousing privileges granted by the Bureau pursuant to this Act.

SEC. 1423. Removing or Repacking Goods in Warehouse. – Any person who fraudulently conceals, removes, or
repacks merchandise in any warehouse or fraudulently alters, defaces, or obliterates any mark or numbers placed
upon packages deposited in such warehouse, or shall aid or abet any such acts, shall be punished with the penalties
prescribed in Section 1418 hereof.

Merchandise so concealed, removed, or repacked, or packages upon which marks, numbers or the values thereof
have been so altered, defaced, or obliterated shall be forfeited in favor of the government.

SEC. 1424. Removing Goods from Customs Custody. – Any person who enters any warehouse, or any vehicle
loaded with or containing merchandise with intent to unlawfully remove therefrom any merchandise or baggage in
such vessel, vehicle or warehouse or otherwise in customs custody or control, or any person who receives or
transports any merchandise or baggage unlawfully removed from any such vessel, vehicle or warehouse, or shall aid
or abet such removal, shall suffer the penalties provided in Section 1401 hereof.

SEC. 1425. Failure to Pay Duties, Taxes and Other Charges. – For failure to pay the duties, taxes and other charges
of an assessment within fifteen (15) days from the date of final assessment, a surcharge of ten percent (10%) of the
total assessed amount or balance thereon shall be added and collected, which surcharge shall be increased to
twenty-five percent (25%) if the delinquency lasts for more than one (1) year.

SEC. 1426. Breach of Security. – Upon breach of security require d to be filed under this Act, the District Collector,
subject to the approval of the Commissioner, may accept in satisfaction thereof a smaller stun than that mentioned in
the penalty clause of the security, but in no case less than the amount necessary to indemnify the government for the
damage occasioned by such breach.

SEC. 1427. Failure to Keep Importation Records and Full Access to Customs Officers. – Any person who fails to
keep all the records of importations or books of accounts, business and computer systems and all customs
commercial data in the manner prescribed under this Act, shall be punished with imprisonment of not less than three
(3) years and one (1) day but not more than six (6) years and/or a fine of one million pesos (Pl,000,000.00). This
penalty shall likewise be imposed against importers and brokers who deny an authorized customs officer full and free
access to such records, books of accounts, business and computer systems, and all customs commercial data
including payment records, without prejudice to the imposition of the administrative sanctions by the Bureau against
contumacious importers, including the authority to hold delivery or release of their imported goods.

SEC. 1428. Concealment or Destruction of Evidence of Fraud. – Any person who willfully conceals or destroys any
invoice, book, or document relating to any goods liable to duty after an inspection thereof has been demanded by the
District Collector or at any time conceals or destroys any such invoice, book, or document for the purpose of
suppressing any evidence of fraud therein contained, shall be penalized with imprisonment of not less than three (3)
years and one (1) day but not more than six (6) years and shall be liable for a fine of not less than three hundred
thousand pesos (P300,000.00) but not more than one million pesos (P1,000,000.00).

SEC. 1429. Other Offenses. – The owner or operator of a vessel, aircraft or train shall be liable for a fine for the
following acts:

(a) For anchoring at any dock, pier, wharf, quay, or bulkhead other than a port of entry, a fine of not less than five
hundred thousand pesos (P500,000.00) but not more than one million pesos (P1,000,000.00) for overseas vessels;

(b) For dumping of garbage or slops over the sides of the vessel within three (3) miles from the nearest coastline, a
fine of not less than one million pesos (P1,000,000.00) but not more than ten million pesos (P10,000,000.00);

(c) For dumping or causing to spread crude oil, kerosene, or gasoline in the bay or at the piers within three (3) miles
from the nearest coastline, a fine of not less than one million pesos (P1,000,000.00) but not more than ten million
pesos (P 10,000,000.00) for each offense;

(d) For loading gasoline or any other petroleum products at a place other than that designated, by the regulations, a
fine of not less than five hundred thousand pesos (P500,000.00) but not more than one million pesos (P1,000,000.00)
for each offense;

(e) For causing the emission and spread of harmful gas, fumes and chemicals, a fine of not less than one million
pesos (P1,000,000.00) but not more than ten million pesos (P10,000,000.00) for each offense; and

(f) For transporting hazardous waste, radioactive waste and other toxic substances as provided under the Basel
Convention and Republic Act No. 6969, otherwise known as the "Toxic Substances and Hazardous and Nuclear
Wastes Control Act of 1990", the penalty shall be forfeiture of the vessel in favor of the government.

The fines imposed herein shall be without prejudice to the application of fines or penalties provided under special
laws and regulations.

SEC. 1430. Violations of this Act and Rules and Regulations in General. – Any person who violates any other
provision of this Act or the rules and regulations issued pursuant thereto, shall be penalized with imprisonment of not
less than thirty (30) days and one (1) day but not more than one (1) year, or be liable for a fine of not less than one
hundred thousand pesos (P100,000.00) but not more than three hundred thousand pesos (P300,000.00), or both. If
the offender is a foreigner, the offender shall be deported after serving the sentence. If the offender is a public officer
or employee, the offender shall be disqualified from holding public office, from exercising the right to vote and to
participate in any public election for ten (10) years.

CHAPTER 2

PENALTIES IMPOSED UPON BUREAU EMPLOYEES

SEC. 1431. Statutory Offenses of Officers and Employees. – Every officer, agent, or employee of the Bureau or of
any other agency of the government charged with the enforcement of the provisions of this Act, who shall be found
guilty of any delinquency as described below shall be penalized with imprisonment of not less than six (6) years and
one (1) day but not more than twelve (12) years, and perpetual disqualification to hold public office, from exercising
the right to vote and to participate in any public election and a fine of not less than five hundred thousand pesos
(P500,000.00), but not more than one million pesos (P1,000,000.00):

(a) Extortion or willful oppression under color of law;

(b) Knowingly demanding other or greater sums that are authorized by law or receive any fee, compensation, or
reward except as by law prescribed, for the performance of any duty;

(c) Willfully neglecting to give receipts, as required by law, for any sum collected in the performance of duty, or who
willfully neglect to perform any of the duties enjoined bylaw;
(d) Conspiring or colluding with another or others to defraud the customs revenue or otherwise violate the law;

(e) Providing an opportunity for any person to defraud the government of customs revenue or failing to do any act
with the intent to enable any person to defraud the government of customs revenue;

(f) Negligently or designedly permitting the violation of the law by any other person;

(g) Making or signing for any false entry or entries in any book, making or signing any false certificate or return in any
case where the law requires the making by them of such entry certificate or return;

(h) Failing to report knowledge or information to their superior officer about an act or acts of fraud committed in
revenue collection as required by law;

(i) Demanding or accepting or attempting, without authority, to collect directly or indirectly as payment or otherwise,
any sum of money or other thing of value for the compromise, adjustment, or settlement of any charge or complaint
for any violation or alleged violation of law;

(j) Unlawfully disclosing confidential information gained during any investigation or audit, or using such information for
personal gain or to the detriment of the government, the Bureau, or third parties.

All the benefits due from service in the government, including separation and retirement benefits, of an officer, agent,
or employee of the Bureau or of any other agency of the government charged with the enforcement of the provisions
of this Act found guilty of the foregoing violations shall be forfeited.

SEC. 1432. Failure to Report Fraud. – Any employee of the Bureau who has knowledge of any fraud committed
against the government pertaining to customs revenue, and who fails to report all information relative thereto to the
District Collector, shall be penalized with imprisonment of not less than six (6) years and one (1) day but not more
than twelve (12) years and a fine of not less than five hundred thousand pesos (P500,000.00) but not more than one
million pesos (1,000,000.00). The offender shall suffer the additional penalty of perpetual disqualification to hold
public office, to vote and to participate in any election. All the benefits of the offender due from service in the
government, including separation and retirement benefits, shall be forfeited.

SEC. 1433. Liability for Other Offenses. – The fines and penalties imposed in this chapter shall be without prejudice
to the application of fines or penalties provided under Chapter 1 of this title and special laws and regulations.

TITLE XV

MISCELLANEOUS PROVISIONS

SEC. 1500. Information, Decisions, and Rulings. – The Bureau shall ensure that all information of general application
pertaining to customs, including revisions or amendments thereto, shall be available to the general public.

SEC. 1501. Period to Issue Ruling. – Unless otherwise provided in this Act, the issuing authority shall act on the
application for ruling within thirty (30) days from receipt of the application and supporting documents as may be
required by regulation. Within three (3) days from issuance of a ruling, the issuing authority shall notify the requesting
party of such ruling.

SEC. 1502. Publication and Confidentiality of Certain Information in Ruling – The Bureau and the Commission shall
regularly publish its rulings in a manner accessible to the public. For this purpose, each application for ruling shall be
assigned a title and unique ruling number for easy reference. The publication shall contain information on the goods
involved, the body or summary of the ruling, particularly the grounds relied upon to support the ruling, but shall
exclude the name of the requesting party and other information which by their very nature are confidential, including
those which the requesting party indicated in its application as confidential in nature. Except in the context of judicial
proceedings, any disclosure of confidential information under this section shall not be made except upon the written
consent of the beneficiary of the advance ruling.

SEC. 1503. Duty of District Collector to Report Rulings to the Commissioner. – When any new or unsettled question
shall be determined by a District Collector, and if the matter is not otherwise appealed for review in the ordinary
course, the District Collector shall notify the Commissioner of the decision and submit an adequate statement of the
facts involved.
SEC. 1504. Application of Established Ruling or Decision. – A ruling or decision of the Commissioner which
determines the construction or application of any provision of law imposing customs duties and taxes, and which
changes any existing established valuation, classification, rules of origin and other customs rules, interpretation or
practice shall not take effect until thirty (30) days after public notice shall have been given in the form of a published
decision. When the ruling or decision favors the taxpayers, it shall become effective immediately.

SEC. 1505. Authority of Official to Administer Oaths and Take Testimony. – The Commissioner, District Collectors
and their deputies, and other customs officers especially deputized by the District Collector shall have authority to
administer oaths and take testimony in connection with any matter within the jurisdiction of the Bureau and, in
connection therewith, may require the production of relevant papers, documents, books and records in accordance
with law.

SEC. 1506. General Security. – In cases where securities are required to be given under the provisions of this Act
and related customs laws, the District Collector, instead of requiring separate special security where transactions of a
particular party are numerous, may accept general security extending over such periods of time and covering such
transactions of the party in question as may be satisfactory to the District Collector.

SEC. 1507. Security. – The Bureau shall prescribe the forms and amount of security required to guarantee the
payment of duties and taxes and other obligations provided for in this Act.

Any party required to provide security shall have the option to choose from any form of security prescribed by the
Bureau. The Bureau may not require security if satisfied that an obligation to the Bureau will be fulfilled, but shall
require and accept a general security from declarants who regularly declare goods at different offices in customs
territory under such terms and conditions as maybe determined by the Commissioner.

The required amount of security shall be the lowest possible and shall not exceed the amount of imposable duties,
taxes and other charges.

When the obligation under which the security was required has been satisfied, the security shall be discharged
immediately.

SEC. 1508. Customs Service Fees. – Customs personnel may be assigned by a District Collector to render overtime
work and other customs services and shall be paid for such services by the Bureau, according to service fees fixed
by the Commissioner and approved by the Secretary of Finance. The Bureau may charge additional customs service
fees when applicable, subject to the rates prescribed under existing rules and regulations.

SEC. 1509. Testimony in Writing. – When testimony is taken in any proceeding or matter under the authority of the
Bureau, either party may require that the testimony shall be made in writing, and when so taken, the written testimony
shall be filed with the Office of the District Collector and to be preserved for use or reference until the final decision
has been reached.

SEC. 1510. District Collector Not Liable in Respect to Ruling in Customs Cases. – Every District Collector or other
officials of the Bureau shall not be in any way personally liable on account of any official ruling or decision as to which
the person claiming to be aggrieved has the right to obtain either an administrative or judicial review. Except for
misdelivery of goods, a District Collector may not, in the absence of abuse of authority, be liable to any person for any
loss occasioned either by the official act or the acts of the subordinates.

SEC. 1511. Interest Prohibited to be Held by Customs Employees. – Any person employed under the authority of the
government in the assessment of duties, taxes, fees and other charges in connection with imports or exports, shall
not own, either in whole or in part, any vessel or aircraft or act as attorney, agent or consignee for the owner of any
vessel or aircraft or of any cargo loaded on board the vessel or aircraft; and shall not import or be involved, directly or
indirectly, in the importation of any goods for sale into the Philippines.

SEC. 1512. Reward to Persons Instrumental in the Actual Collection of Additional Revenues Arising from the
Discovery of Violations of this Act. – A cash reward equivalent to twenty percent (20%) of the actual proceeds from
the sale of smuggled goods and confiscated goods or actual collection of additional revenues shall be given to the
customs and non-customs informers or whistleblowers who are instrumental in the collection of additional revenues
arising from the discovery of violations of this Act in accordance with the rules and regulations to be issued by the
Secretary of Finance.

SEC. 1513. Outsourcing of Non-Sovereign Customs Functions to Private Entities. – Subject to the approval of the
Secretary of Finance, the Bureau may outsource any of its non-sovereign and ancillary function to a qualified and
competent private entity in accordance with, government rules on service procurement.

SEC. 1514. International Standards and Best Practices. – The Bureau may adopt international standards and best
practices in customs administration laid down by international agreement or convention pertaining to trade facilitation,
supply chain security, and related matters, whether or not the Philippines is a signatory to such international
agreement or convention.

TITLE XVI

TARIFF ADMINISTRATION AMD POLICY

CHAPTER I

TARIFF COMMISSION

SEC. 1600. Chief Officials of the Tariff Commission and Qualifications. – The officials of the Tariff Commission shall
consist of a Chairperson and two (2) Commissioners to be appointed by the President of the Philippines. The
Chairperson and the Commissioners shall be natural-born citizens of the Philippines, of good moral character and
proven integrity, and who, by experience and academic training possess the necessary qualifications requisite for
developing expert knowledge of tariff and trade related matters. During their terms of office, the Chairperson and the
Commissioners shall not engage in the practice of any profession, or intervene directly or indirectly in the
management or control of any private enterprise which may, in anyway, be affected by the functions of their office.
They shall not be, directly or indirectly, financially interested in any contract with the government, or any subdivision
or instrumentality thereof.

SEC. 1601. Appointment and Compensation of Officials and Employees. – All employees of the Commission shall be
appointed by the Chairperson in accordance with, the Civil Service Law except as the private secretaries to the
offices of the Chairperson, Commissioners and Executive Director.

SEC. 1602. Official Seal. – The Commission is authorized to adopt an official seal.

SEC. 1603. Functions of the Commission. – The Commission shall have the following functions:

(a) Adjudicate cases on the application of trade remedies against imports pursuant to Sections 711, 712 and 713 of
this Act;

(b) Study the impact of tariff policies and programs on national competitiveness and consumer welfare in line with the
economic objectives of the government;

(c) Administer the Philippine tariff schedules and tariff nomenclatures;

(d) Issue advance rulings on tariff classification of imported goods and render rulings on disputes over tariff
classification of goods pursuant to Section 1100 of this Act, except in cases involving goods on which the
Commission has provided advance ruling on tariff classification;

(e) Provide the President and Congress with independent analysis, information and technical support on matters
related to tariff and nontariff measures affecting Philippine industries and exports for policy guidance;

(f) Analyze the nature and composition, and the classification of goods according to tariff commodity classification
and heading number for customs and other related purposes, which information shall be furnished the NEDA, DTI,
DA, DOF, DENR, and BSP;

(g) Review the trade agreements for negotiation and trade agreements entered into by the Philippines and make
recommendations, if necessary, on the consistency of the terms of the agreements with the national policy objectives;

(h) Conduct public consultations and public hearings pursuant to its functions; and

(i) Deputize or delegate, to appropriate government agency its function of rendering rulings on disputes over tariff
classification of goods, until the plantilla positions necessary for undertaking such function have been approved and
filled-up: Provided, That such delegation of function shall not extend beyond three (3) years from the effectivity of this
Act.
SEC. 1604. Reports of the Commission. –The Commission shall place at the disposal of the President and any
Member of the Congress of the Philippines all information at its command. It shall conduct such investigation and
submit reports as may be required by the President and the Congress of the Philippines. It shall likewise report to the
President and Congress on the first Monday of December of each year and hereafter, a statement of methods
adopted and a summary of all reports made during the year.

SEC. 1605. Access to Documents and Assistance to the Commission. – The Commission or its duly authorized
representative shall have access to any document, paper or record pertinent to the subject matter under
investigation, in the possession of any person, firm, copartnership, corporation, or association engaged in the
production, importation, or distribution of goods under investigation, and shall have power to summon witnesses, take
testimony, administer oaths, and to issue subpoena duces tecum requiring the production of books, papers, or
documents relating to the matter under investigation. The Commission may also request the views,
recommendations, and assistance of any government office, agency, or instrumentality who shall be expected to
cooperate fully with the Commission.

SEC. 1606. Sworn and Verified Statements. – The Commission may order the taking of sworn statements at any
stage of any proceeding or investigation before it. The sworn statements must be made before a person duly
authorized to administer oaths.

The Commission is authorized to require any importer, grower, producer, manufacturer or seller to file with the
Commission a statement, under oath, giving the selling prices in the Philippines of goods imported, grown, produced,
fabricated or manufacture d by such person.

SEC. 1607. Implementing Rules and Regulations. – The Commission shall promulgate and adopt such rules and
regulations as may be necessary to carry out the provisions of this Act.

CHAPTER 2

FLEXIBLE TARIFF

SEC. 1608. Flexible Clause. – (a) In the interest of the general welfare and national security, and, subject to the
limitations prescribed under this Act, the President, upon the recommendation of the NEDA, is hereby empowered to:

(1) Increase, reduce, or remove existing rates of import duty including any necessary change in classification. The
existing rates may be increased or decreased to any level, in one or several stages, but in no case shall the
increased rate of import duty be higher than a maximum of one hundred percent (100%) ad valorem; (2) Establish
import quotas or ban imports of any commodity, as may be necessary; and

(3) Impose an additional duty on all imports not exceeding ten percent (10%) ad valorem whenever
necessary: Provided, That upon periodic investigations by the Commission and recommendation of the NEDA, the
President may cause a gradual reduction of rates of import duty granted in Section 1611 of this Act, including those
subsequently granted pursuant to this section.

(b) Before any recommendation is submitted to the President by the NEDA pursuant to the provisions of this section,
except in the imposition of an additional duty not exceeding ten percent (10%) ad valorem, the Commission shall
conduct an investigation and shall hold public hearings wherein interested parties shall be afforded reasonable
opportunity to be present, to produce evidence and to be heard. The Commission shall also hear the views and
recommendations of any government office, agency, or instrumentality. The Commission shall submit its findings and
recommendations to the NEDA within thirty (30) days after the termination of the public hearings.

(c) The power of the President to increase or decrease rates of import duty within the limits fixed in subsection (a)
hereof shall include the authority to modify the form of duty.  In modifying the form of duty, the corresponding ad
valorem or specific equivalents of the duly with respect to imports from the principal competing foreign country for the
most recent representative period shall be used as basis.

(d) Any order issued by the President pursuant to the provisions of this section shall take effect thirty (30) days after
promulgation, except in the imposition of additional duty not exceeding ten percent (10%) ad valorem which shall take
effect at the discretion of the President.

(e) The power delegated to the President as provided for in this section shall be exercised only when Congress is not
in session.
(f) The power herein delegated may be withdrawn or terminated by Congress through a joint resolution.

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

SEC. 1609. Promotion of Foreign Trade. – (a) For the purpose of expanding foreign markets for Philippine products
as a means of assisting in the economic development of the country, in overcoming domestic unemployment, in
increasing the purchasing power of the Philippine peso, and in establishing and maintaining better relations between
the Philippines and other countries, the President, shall, from time to time:

(1) Enter into trade agreements with foreign governments or instrumentalities thereof; and

(2) Modify import duties, including any necessary change in classification and other import restrictions as are required
or appropriate to carry out and promote foreign trade with other countries: Provided, That in modifying import duties
or fixing import quota, the requirements prescribed in subsection (a) of Section 1608 of this Act shall be
observed: Provided, however, That any modification in import duties and the fixing of import quotas pursuant to the
various trade agreements the Philippines has entered into, shall not be subject to the limitations of aforesaid
subsection (a) of Section 1608.

(b) The duties and other import restrictions as modified in subsection (a) of this section, shall apply to goods which
are the growth, produce, or manufacture of the specific country, whether imported directly or indirectly, with which the
Philippines has entered into a trade agreement: Provided, That the President may suspend the application of any
concession to goods which are the growth, produce, or manufactured product of the specific country because of acts
or policies which tend to defeat the purposes set in this section, including the operations of international cartels; and
the duties and other import restrictions as negotiated shall be in force and effect from and after such time as specified
in the order, without prejudice to the Philippine commitments in any ratified international agreement or treaty.

(c) Nothing in this section shall be construed to give any authority to cancel or reduce in any manner the
indebtedness of any foreign country to the Philippines or any claim of the Philippines against any foreign country.

(d) Before any trade agreement is concluded with any foreign government or instrumentality thereof, reasonable
public notice of the intention to negotiate an agreement with such government or instrumentality shall be given in
order that interested persons may have an opportunity to present their views to the Commission. The Commission
shall seek information and advice from the DTI, DA, DOF, DENR, DFA and BSP, and from such other sources as it
may deem appropriate.

(e) In advising the President, on a trade agreement entered into by the Philippines, the following shall be observed:

(1) The Commission shall determine whether or not the domestic industry has suffered or is being threatened with
injury and whether or not the wholesale prices at which the domestic products are sold are reasonable, taking into
account the cost of raw materials, labor, overhead, a fair return on investment, and the overall efficiency of the
industry.

(2) The NEDA shall evaluate the report of the Commission and submit recommendations to the President.

(3) Upon receipt of the report of the findings and recommendations of the NEDA, the President may prescribe
adjustments in the rates of import duties, withdraw, modify or suspend, in whole or in part, any concession under any
trade agreement, establish import quota, or institute such other import restrictions, as the NEDA recommends to be
necessary in order to fully protect domestic industry and the consumers, subject to

the condition that the wholesale prices of the domestic products shall be reduced to, or maintained at, the level
recommended by the NEDA unless, for good cause shown, an increase thereof, as recommended by the NEDA is
authorized by the President. Should increases be made without such authority, the NEDA shall immediately notify the
President who shall allow the importation of competing-products in such quantities as to protect the public from the
unauthorized increase in wholesale prices.

(f) This section shall not prevent the effectivity of any executive agreement or any future preferential trade agreement
with any foreign country.

(g) The NEDA and the Commission shall promulgate such reasonable procedures, rules and regulations as they may
deem necessary to execute their respective functions under this section.
 CHAPTER 3

TARIFF NOMENCLATURE AND RATE OF DUTY

SEC. 1610. General Rules for the Interpretation (GRI). –The classification of goods and its tariff nomenclature as
provided pursuant to this Act shall be governed by the following principles:

(1) The titles of sections, chapters and subchapters are provided for easy reference only. For legal purposes,
classification shall be determined according to the terms of the headings and any relative section or chapter notes
and, provided such headings or notes do not otherwise require, according to the following1 provisions:

(2)(a) Any reference in a heading to the goods shall be taken to include a reference to the same in their incomplete or
unfinished form or state: Provided, That the incomplete or unfinished goods have the essential character, as
presented, of the complete or finished goods. It shall also be taken to include a reference to the same, in their
complete or finished form or state (or falling- to be classified as complete or finished by virtue of this Rule), presented
unassembled or disassembled.

(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures or
combinations of that material or substance with other materials or substances. Any reference to goods of a given
material or substance shall be taken to include a reference to goods consisting wholly or partly of such material or
substance. The classification of goods consisting of more than one material or substance shall be according to the
principles of Rule 3.

(3) When by application of Rule 2(b) or for any other reason, goods are, prima facie, classifiable under two (2) or
more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to headings providing a more general
description. However, when two (2) or more headings each refer to part only of the materials or substances contained
in mixed or composite goods or to part only of the items in a set put up for retail sale, those headings are to be
regarded as equally specific in relation to those goods, even if one of them gives a more complete or precise
description of the goods.

(b) Mixtures, composite goods consisting of different materials or made up of different components, and goods put up
in sets for retail sale, which cannot be classified by reference to 3(a), shall be classified as if they consisted of their
essential character, insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified under the heading which
occurs last in numerical order among those which equally merit consideration;

(4) Goods which cannot be classified in accordance with the above Rules shall be classified under the heading
appropriate to the goods to which they are most akin.

(5) In addition to the foregoing provisions, the following Rules shall apply with respect to the goods referred to therein:

(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and similar
containers, specially shaped or fitted to contain specific goods or set of goods, suitable for long-term use and
presented with the goods for which they are intended, shall be classified with such goods when of a kind normally
sold therewith. The Rule does not, however, apply to containers which give the whole its essential character; and

(b) Subject to the provisions of Rule 5(a), packing materials and packing containers presented with the goods therein
shall be classified with the goods if they are of a kind normally used for packing such goods. However, this provision
does not apply when such packing materials or packing containers are clearly suitable for repetitive use.

(6) For legal purposes, the classification of goods in the subheadings of a heading shall be determined according to
the terms of those subheadings and any related subheading notes and, mutatis mutandis, to the above Rules, on the
understanding that only subheadings at the same level are comparable. For the purposes of the Rule, the relative
section and Chapter Notes also apply, unless the context otherwise requires.

SEC. 1611. Tariff Nomenclature and Rates of Impart Duty. – The provisions of Section 104 on Rates of Import Duty
of Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of the Philippines of 1978, as
amended, specifically providing for the tariff sections, chapters, headings and subheadings and the rates of import
duty, shall still apply and shall supplement this Act. There shall be levied, collected and paid upon all imported goods
the rates of duty indicated thereon except as otherwise specifically provided for in this Act:  Provided, That the
maximum rate shall not exceed one hundred percent (100%) ad valorem.

The rates of duty provided or subsequently fixed pursuant to Sections 1608 and 1609 of this Act shall be subject to
periodic investigation by the Tariff Commission and may be revised by the President, upon the recommendation of
the NEDA.

It shall also apply to all products, whether imported directly or indirectly, of all foreign countries, which do not
discriminate against Philippine export products. An additional one hundred percent (100%) across-the-board duty
shall be levied on the products of any foreign country which discriminates against Philippine export products.

SEC. 1612. Tariff Nomenclature and Rates of Export Duty. – The provisions of Section 514 on Export Products
Subject to Duty and Rates of Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of
1978, as amended, specifically providing for the export products subject to duty and rates, shall still apply and shall
supplement this Act.

TITLE XVII

CONGRESSIONAL OVERSIGHT COMMITTEE

SEC. 1700. Congressional Oversight Committee. – The Congressional Customs and Tariff Oversight Committee,
herein referred to as the Committee, is hereby constituted in accordance with the provisions of this Act. The
Committee shall be composed of the Chairpersons of the Committee on Ways and Means of the Senate and House
of Representatives and four (4) additional members from each House, to be designated by the Senate President and
the Speaker of the House of Representatives, respectively. The Committee shall, among others, in aid of legislation:

(a) Monitor and ensure the proper implementation of this Act;

(b) Review the collection performance of the Bureau; and

(c) Review the implementation of the programs of the Bureau.

In furtherance of the hereinabove cited objectives, the Committee shall require the Bureau to submit all pertinent
information which includes:

(1) Industry audits;

(2) Collection performance data; and

(3) Status report on administrative, civil and criminal actions initiated against persons.

TITLE XVIII

FINAL PROVISIONS

SEC. 1800. Implementing Rules and Regulations. – The Secretary of Finance shall, upon the recommendation of the
Commissioner, promulgate the necessary rules and regulations for the effective implementation of this Act.

SEC. 1801. Transitory Provisions. – All suits, proceedings, or prosecutions whether civil or criminal, for causes
arising or acts done or committed prior to the effectivity of this Act, shall be commenced and prosecuted within the
same time in the same manner and with the same effect as if this Act had not been enacted and all rights acquired,
offenses committed, and penalties or forfeitures or liabilities waived prior to the said effectivity shall not be affected
thereby.

SEC 1802. Saving Clause. – All other laws, acts, executive orders, and Customs Administrative Orders (CAOs),
Customs Memorandum Orders (CMOs), orders, memoranda, circulars, rules and regulations issued by the Bureau,
under the provisions of Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of the
Philippines of 1978, as amended, not inconsistent with the provisions of this Act, shall remain valid unless the same
will be repealed or amended accordingly, pursuant to the provisions of this Act.

SEC. 1803. Repealing Clause. – Presidential Decree No. 1464, otherwise known as the Tariff and Customs Code of
the Philippines of 19785 as amended, and Presidential Decree No. 1853 which require any applicant for letter of
credit covering imports to deposit the full amount of duties due on the importation, are hereby expressly repealed. All
other laws, acts, presidential decrees, executive orders, rules and regulations or parts thereof inconsistent with the
provisions of this Act are hereby expressly repealed, amended or modified accordingly.

SEC. 1804. Separability Clause. – If any provision of this Act is declared invalid or unconstitutional, the remaining
provisions or parts shall remain in full force and effect.

SEC. 1805. Effectivity. – This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a
newspaper of general circulation.

Approved,

(Sgd.) FRANKLIN M. DRILON (Sgd.) FELICIANO BELMONTE JR.

President of the Senate Speaker of the House
of Representatives
This Act which is a consolidation of House Bill No. 5525 and Senate Bill No. 2968 was finally passed by the House of
Representatives and the Senate on February 2, 2016.

(Sgd.) OSCAR G. YABES (Sgd.) MARILYN B. BARUA-YAP

Secretary of the Senate Secretary General
House of Representatives
Approved: MAY 30 2016

(Sgd.) BENIGNO S. AQUINO III

President of the Philippines

A. THE BUREAU OF CUSTOMS MANAGEMENT

THE ORIGIN OF TARIFFS
The word “tariff” originated from the old Spanish coast town of Tarifa, which received its
name in the Arab who are said to named it after “Tariff Iban Malik”. This historic little
town has existed far more than 12 centuries. In the days when commerce began to
expand from the Mediterranean, a gang of racketeers made Tarifa their headquarters,
help up all merchant ships at this point and levied tribute according to a fixed rate on all
merchandise passing in and out of the Straits of Gibraltar. The mariners called this
tribute a “tariff”, and the word beacme current in England whose vessels founded
majority in the merchant trade. The word was adopted into Spanish tarifa which means
price list or rate book; in Portugese tarifa which means schedule; in French tarifa which
means rate; and in Italian tarifa which means price list. TARIFF DISTINGUISHED FROM
CUSTOMS Tariff – a term found in many languages, denotes the list of schedules of
commodities with the particular duties or charges upon each. Customs – an Englisgh
term which originally denoted “all customay tolls” or dues paid by merchants upon
commodities on their way to and from the market, not necessarily differentiated by the
class of goods for the benefit of the King, Lord, local government authority. Modern
Customs Tariff – a systematic arrangement of customs duties levied on goods when they
cross the border of a political unit. They are an official list of schedule setting forth the
several customs duties to be imposed on imports, exports on goods in transit.
 ORIGIN OF CUSTOMS
The practice of collecting revenue from customs on importation by means of tariff is
shrouded with antiquity. Customs duties are mentioned in the Old Testament, but this
method of collecting revenue may have been the fashion long before its first authentic
record. During the many disputes between the English Kings and the House of
Commons over the levying and imposition of taxes the kings claomed that proceeds
from “ancient customs” was theirs and parliaments had no jurisdiction over it. Thus, the
term “customs” came into official use at an early date in England, and has ever since
been applied to imports or taxes on imports. During the feudal ages, favored barons
were granted the privelege to levy takes by the king. Those importing foreign
mechandise or selling a certain domestic commodity were taxed for the privelede by
favored lord or baron. One baron would have the exclusive right to levey tribute on
sellers of salt while another baron would have the priveledge to some other commodity.
Thus, taxes were collected from domestic merchants and importers somewhat as they
are today. The Kings, in turn, levied upon these same feudal lords, sometimes referred to
as robber barons, through the so-called “divine rights of kingds” which included the
physical ability: 1. To raise revenue by levying on the feudal lords; 2. To enforce their
decrees on the greater number; and 3. To raise armed forces to sustain their orders, by
punishing recalictrants and to make conquest on other nobles and kings and bring them
into the orbits of influence.
PURPOSES OF TARIFF
1. Revenue Tariff Tariff whose rate of duty is relatively low so that goods may be readily
imported and duties easily collected.
 2. Protective Tariff Tariff whose rates are relatively high to keep certain imports out of
the domestic market or to raise domestic price on certain imports so that they may be
manufactured profitability at home.
3. Baragaining Tariff Tariff whose schedules include rates designed primarily for
barganing purposes or which contain some general provision for the imposition of
higher duties upon products of countries vision for the imposition of higher duties upon
products of countries vision for the imposition of higher duties.

TARIFF AS IT HAS AFFECTED THE HISTORY OF THE PHILIPPINES DURING THE PRE-
SPANISH PERIOD
Long before the history of the Philippines by Magellan, the ancient Filipinos were
already trading with China, Japan, Siam (Thailand), Cambodia, India, Burma, Sumatra,
Java and other neighboring islands. An interestingbSpanish document of 1586 narrated
that they are “keen traders and have traded with China for many years and before the
advent of the Spaniards they saild to Mulloco, Malacca, Hazian, Parani, Burnie and other
kingdoms.” The customary way of trading with other people was by barter in which the
Filipinos offered their home products in exchange for the products of other countries.
Sometimes, a price was fixed for commodities “which was paid in gold, as agreed upon
or in metal bells (gongs) brought from China.” The Chinese writers Chao Ju Kua and
Wang Tay-Uan observed that the ancient Filipinos were honest in the commercial
dealings. History records show that even before the arrival of Magellan in the
Philippines, Chinese, Japanese and other foreign traders who brought silks, woolens,
bells, porcelains, perfume, iron, tin, colored cotton cloth and other small wares to the
country paid tariff duties on them.

DURING THE SPANISH PERIOD

As soon as the islands were acquired by Sapin, the ancient almojarifazgo (a three
percent ad valorem) imposed on both imports and exzports was amplified to the
Philippine customshouse was established in Manila by Governorn Guido R. de lavizares
in 1573. However, according to the report of the Viceroy of Mexico to the Spanish King
of 1573, the governor-genral did not enforced the almojarifazgo at once. It took
Gonzalo Ronquillo de Penalosa, the fourth Spanish governor-general to impose
almojarifazgo in 1582. It was not until more than 2 and a half centuries that other ports
of the archipelago were opened for foreign commerce. Zamboanga was opened in
1833; Cebu in 1842; Iloilo and Sulu in 1855; and Legazpi and Tacloban in 1874. All
foreign commerce was required to be carried in government vessels except those with
China, Japan and other oriental countries. Not until 1834, the Philippine trade was
opened to the world and ships other than those os Spain was permitted to share in
Philippine commerce. The customshouse became a distinct department if 1779 and was
made an independent branch of the Treasury in 1805. While duties in theory and ad
valorem, they were in reality specific by the fixing of arbitrary values. Prior to 1734, these
values were assessed by a board composed of a royal officer and two merchants with a
royal fiscal as intervenor. In 1734, a permanent board of valuation called as “Junta de
Valoraciones” was established. This was abolished in 1782, followed by the tariff board
in 1828 called as “Junta de Arancelus”. Trade during the interim was in the hands of
Compania Real de Filipinas. The traiff board created in 1828 was introduced to prepare a
new tariff bases on the following purposes, Junta de Arancelus as follows:
1. To increase revenue;
2. To protect agriculture and arts of the islands; and
3. To expand foreign commerce.
 On January 1, 1832, a new tariff which was drafted by the Tariff Board created in 1828
was adopted. Like its predecessor, it provided from rge arbitrary valuation. This tariff was
in effect until April 1891. Under this tariff, there were 100 classes of articles which fixed
values with few exceptions. Fifteen export articles were enumerated, although all exports
were subject to duty, except gold, silver and tobacco, which were exported to Spain. On
importations, four rates were established according to origin namely:
1. First and lowest rate, Spanish goods in Spanish ships;
2. Spanish goods in foreign ships;
3. Foreign goods in Spanish ships;
4. Foreign goods in foreign ships.
On April 1, 1891, the new traiff which was promulgated on March 3, 1891 took effect.
This tariff as made all duties specific reduced the free list but exemoted Spanish
merchandise from duty. This law of 1981 remained in force up to the beginning of the
American occupation and was continued in force and effected by the US Military
Government until November 15, 1901.

 DURING THE AMERICAN OCCUPATION

The early Philippine tariff, although Manila was occupied by the United States forces in
August 13, 1898, one month earlier on July 12, 1898, President William Mckinley had
already issued and executive order providing for a tariff duties and taxes to be imposed
as military contributions and to take effect and be in force in the ports and places of the
Philippines so occupied by the American forces. However, when the Manila
customshouse was actually re-opened for business on August 21, 1898, it was deemed
advisable by General Wasley Merritts to continue temporarily the Spanish tariff then
found in force modifying the same by eliminating the extensive preference accorded to
Spanish goods. The action taken by General Meritts was notified by the United States
Secretary of War on October 13, 1893 providing that the effectivity until November 10,
1898 and in the interim period the Spanish tariff shall be enforced. It should be recalled
that at the time the United States gained possession of the Philippines, the Dingley
Tariff Law was in force in the former country. No tariff preference were accorded by the
United States to Philippine products nor were accorded by the American Government in
the Philippines to United States products. The full rates of the Dingley Tariff Law,
therefore, applid on Philippine products imported into the United States and the full
rates of the Spanish Tariff and subsequently the modified American tariff prepared for
the Philippines were applied on United States goods imported into the Philippines. The
Spanish tariff and the modified tariff were enforced from the occupation of the
Philippines in 1989 upto November 15, 1901 were deemed to be only temporary
meausures pending the enactment of a general revision of the Philippine tariff. On
September 17, 1901, the Philippine Commission passed Act No. 230 which initiated a
general revision of the tariff. The Act was made to take effect on November 15, 1901.
THE FOURTEEN DIAMOND RING CASES AND ITS AFTERMATH
The imposition of duties on Philippine products entering the United States and on
United States products entering the Phillippines had so far remained unquestioned.
However, in the later part of 1901 and a short time after the enactment of Act 230 of the
Philippine Commission, the Supreme Court of the United States made a far reaching
decision in the famous 14 Diamond Ring Cases. Briefly, the case was brought up when
Emil J. Pepke, United States citizen in the service of the American Armed Forces, brought
with him which he acquired in the Philippines, 14 diamond rings. They were seized by
the United States customs authorities as having been brought in illegally, into the
United States, which ruled that the Philippine is not a foreign country within the
meaning of the Dingley Tariff Law. As a consequence thereof, Philippine goods may be
imported into the United States and the United States goods into the Philippines duty
free. This ruling nullified the applicability of Act 230 of the Philippine Commission on the
Philippine imports of United States goods and of the Dingley Law on Philippine
products imported into the United States. One of the provisions of the Treaty of Paris on
April 10, 1899 betweeen the United States and Spain was the following: “The United
States will, for a term of 10 years from the date of exchange of the ratification of the
present treaty, admit Spanish ships and merchandise to the ports of the Philippine
Islands on the same term as ships and merchandise of the United States.”

PHILIPPINE OPPOSITION TO FREE TRADE

Messengers Benito Legarda and Paolo Ocampo expressed their opposition to free trade.
Commissioner Legarda stated that the proposal to establish free trade between the
Philippines and the United States will tend to divert Philippine sugar and tobacco
products from their natural markets in China and Japan to one several thousand miles
away and that the duty-free entry of the American products into the Philippines would
result in a big deficit in the revenue of the Philippine treasury. Resident Commissioner
Paolo Ocampo indicated that passage of the trade measured not only reduced
government revenue but also make it difficult for the Philippines to maintain an
independent existence later on.

ESTABLISHMENT OF FREE TRADE

The opposition of both the Philippines and the segments of the American people
against free trade was nevertheless overridden by its proponents. The “Payne-Aldrich
Tariff Act” was approved on August 5, 1909, to take effect the following day. Philippine
manufactured products were allowed duty-free entry into the United States articles
except rice. No limitation as to quantity or the foreigh material content were imposed
with respect to the United States products imported into the Philippines. Free Trade was
thus established between the Philippines and the United States. The duty-free trade was
also subject to the conditions that np draw back of customs duties has been allowed,
and the shipment of the goods must be direct.

THE UNDERWOOD TARIFF LAW

The United States Congress passed what is now known as the “Underwood Tariff Law”
which went into effect the following day. This Act of the United States Congress
constituted the final step in the establishment of free trade between the Philippines and
the United States. This Act maintained the provisions under the Tariff Act of 1909 with
respect to the Foreign material content of Philippine products exported to the United
States, the non-granting of drawback of customs duties and direct shipment as
conditions of duty-free trade. The Act further repealed Section 13 of the Philippine Tariff
Act thereby abolishing exportb duties on Philippine exports. Rice which was dutiable
under the Philippine Tariff Act of 1909 was made duty-free either way under the Tariff
Act of 1913.
THE JONES LAW
On August 29, 1916, the United States made manifest its desire to grant independence
to the Philippines as soon as a stable government could be established in the country. It
thus provided for a more autonomous government for the Philippines. The Jones Law
authorizes the Philippines to enact tariff law for the Philippines subject to the condition
that the same shall not become a law until approved by the President of the United
States. It further provided that the relations of the Philippines and the United States
shall exclusively be governed by the laws of the United States Congress. The United
States Tariff Act of 1922 known as the Fordney-McCumber Tariff Law and the United
States Tariff Act of 1930 known as the Hawley-Smooth Tariff Law re-enacted the free
trade relationship between the Philippines and the United States.
COMMONWEALTH PERIOD
The passage of the “Tydings-McDuffie Law” on March 24, 1934 made more concrete
and definite the commitment of the United States with respect to the grant of Philippine
independence. At the same time, the Act provided for the trade relations to govern the
Philippines for a term of 10-year transition period prior to independence. It specified all
acts of the Philippine legislature with respect to imports and exports shall not become a
law until approved by the President of the United States. It also specified the nature of
trade relations between the Philippines and the United States. The Tydings-McDuffie Act
destroyed the reciprocal nature of free trade relations. The saving clause in the Act
(Section 13) provided for the holding of a conference at least one year prior to the grant
of the Philippine independence to formulate recommendations regarding the future
trade relations between the two countries. The transition period was broken by the
outbreak of the World War II.
AMERICAN AID AND THE 1946 TRADE AGREEMENT WITH THE UNITED STATES
The United States Congress came to the aid of the Philippine by approving the
Philippine Rehabilitation Act of 1946, otherwise known as the War Damage Act. The Act
would bring millions of the United States dollards for the rehabilitation and construction
of the country subject, however, to the condition that no war damage payments in
excess of $500 could be made until an Executive Agreement providing for the trade
relations between the two countries. To implement the condition of the War Damage
Act, the US Congree approved the Philippine Trade Act of 1946 commonly known as the
Bell Trade Act. The Act contained specific provisions on the terms which could govern
the trade and other relationships between the Philippines and the US from July 4, 1946,
the date of the inauguration of the Philippine Republic, to July 3, 1974. In general, it
provided an eight years of duty-free trade relation between the two countries.

THE LAUREL-LANGLEY AGREEMENT

In order to correct the inequalities of the 1946 Trade Agreement and to negotiate with
the United States a trade agreement that would be more in harmony with the national
interest of the Philippines, a Philippine Economic Mission headed by Senator Jose P.
Laurel with several senators and congressmen and men in the executive branch of the
government was sent to the US in September 1954. The mission carried on negotiations
with its US counterparts and in December of the same year, they reach an agreement,
now known as the Laurel-Langley Agreement, providing for the terms for the revision of
the 1946 Trade Agreement. The Laurel-Langley Agreement contains also other
provisions which will directly help the Philippines protect its domestic industries and
develop its economy in general.

HISTORY OF THE BUREAU OF CUSTOMS

Historical records show that the Philippine Customs Service started many centuries back
long before the Philippines was discovered by the eastern and western expeditionaries.
The Philippines had already a flourishing trade with countries of Southeast Asia, but
since money at that time was not yet the medium of exchange, people then resorted to
the barter system of commodities. The rules of the barangays known as the “datus” or
“rajahs” collected tributes from the people before they were allowed to engage in their
trade.

THE SPANISH REGIME

After Spain had taken full control of almost all the trades of the country, it passed three
important statutes:

a.    Spanish Customs Law which was similar to that of the Indies enforced in the country
from 1582 to 1828. It was a concept of ad valorem levied on import and export.
b.    A Tariff Board was established which drew up a tariff of fixed values for all imported
articles on which 10% ad valorem duty was uniformly collected.

c.     Another Tariff Law was introduced in 1891, which established the specific duties on
all imports and on certain exports and this lasted till the end of the Spanish rule in the
Philippines.

THE AMERICAN REGIME

When the American came into the Philippines, the Military Government continued to
enforce the Spanish Tariff Code of 1891, which remained in effect until the Philippine
Commission enacted the Tariff Revision Law of 1901.

On October 24, 1900, the Philippine Commission passed Act No. 33 abolishing and
changing the position of Captain of the Port to Collector of Customs in all ports of entry
except the Port of Manila. The designation of the Captain of the Port in the Port of
Manila was retained.

When the Civil Government was established in the Philippines, the most important laws
passed by the Philippine Commission were the following:

a.    Tariff Revision Law of 1902 based in the theory that the laws of Spain were nit as
comprehensive as the American Customs Laws to conform with the existing conditions
of the country.

b.    Philippine Administrative Act No. 355 passed by the Philippine Commission on

February 6, 1902. The full implementation of this Act, however, was considered
inadequate and incomplete, so the Customs Service Act No. 355, called the Philippine
Customs Service Act was passed to amend the previous laws. After several modification
and amendments, the Philippine Customs Service finally became a practical counterpart
of the American Customs Service.

c.     Act No. 357 reorganized the Philippine Customs Service and officially designated
the Insular Collector of Customs as Collector of Customs for the Port of Manila.

d.    Act No. 625 abolished the Captain of the Port for the Port of Manila.
e.    Public Act No. 430 transformed the Philippine Customs Service to a Bureau of
Customs and Immigration under the supervision and control of the Department of
Finance and Justice.

When the Department of Justice became a separate office from the Department of
Finance, the Customs Service remained under the umbrella of the latter which set-up
remained up to this time.

THE COMMONWEALTH GOVERNMENT

After the Commonwealth government was established in the country, the Philippine
Legislature enacted Commonwealth Act No. 613 forming the Bureau of Immigration as a
separate office from the Bureau of Customs.

On May 1, 1947, the Bureau of Customs has its head, the Insular Collector of Customs.
He was assisted by the Deputy Insular Collector of Customs. Both officials were
concurrently Collector of Customs and Deputy Collector of Customs of Port of Manila.

THE REPUBLIC

Pursuant to EO No. 94 of RA 52, the President of the Philippines reorganized the

different departments, bureaus, offices and agencies of the government of the Republic
of the Philippines. Consequently, the Insular Collector of Customs was changed to
Collector of Customs for the Port of Manila. The reorganization took effect on July 1,
1947.

In 1957, Congress enacted the Tariff and Customs Code of the Philippines (TCCP) known
as RA 1937. This took effect on July 1, 1957. The passage of this Act by the defunct
Congress of the Philippines subject to the provision of the Laurel-Langley Agreement
became the first official expression of an autonomous Philippine Tariff Policy.

 
Before the passage of RA 1937, all importations from the US enjoyed full exemptions
pursuant to the Tariff Act No. 1902 which was adopted by RA 3 as the Tariff Laws of the
Philippines.

REORGANIZATION OF THE BUREAU OF CUSTOMS

On February 4, 1965, the Bureau of Customs was reorganized pursuant to Customs

Administrative Order No. 4-65 by authority of Sec 550 and 551 of the Revised
Administrative Code of Republic Act 4164. During the reorganization, offices under the
direct supervision and control of the Commissioner were elevated to Department Level
with ranks higher than Division Level. These Departments were the following: Public
Relations, Personnel, Legal, Administrative Service, Budget and Finance, and the
Management Improvement. Likewise, three ranking Customs positions were created,
namely: Assistant Commissioner for Revenue, Assistant Commissioner for Security and
Director for Operations.

Later, Customs Administrative Order No. 4065 was amended abolishing the position of
Assistant Commissioner for Security and creating the position of Director for
Administration.

In 1972, Congress passed the law revising the Tariff and Customs Code of the
Philippines. However, before it can be implemented, the President issued Proclamation
No. 1081 on September 21, 1972 declaring Martial Law in the country.

On October 27, 1972, President Ferdinand Marcos signed Presidential Decree No. 34
amending the Tariff and Customs Code of the Philippines. The New Code took effect on
November 26, 1972 except for Section 104 thereof which became effective only on
January 1, 1973.

Another reorganization of the Bureau of Customs took effect on September 24, 1972,
pursuant to Presidential Decree No. 1 creating  6 Customs Service under the Office of
the Commissioner and creating jurisdictional limits of 12 collection districts with the
principal ports and sub-ports of entry under the supervision and control of the Collector
of the Principal Port of Entry.

As a result of this reorganization, the designation of the heads of different services were
called Customs Service Chiefs, and heads of offices with rank of division were
designated Customs Operation Chiefs and the Head of the National Customs Police as
Director. It was in this reorganizational set-up that the Director for Administration and
Operations, and the Assistant Commissioner for Revenue were abolished.

In 1975, the Bureau undertook reorganization under PD 689 and the result is what you
see now as the Organizational Chart, except for some slight changes and modifications.

On June 11, 1978, the Tariff and Customs Code was further amended, modified and
supplemented by new positions to make it responsive code in keeping with the
development programs of the New Society. The new Code was embodied in Presidential
Decree No. 1464.

With the accession of the Philippines to the Customs Cooperation Council, the Tariff and
Customs Code has to be revised anew in order to align our tariff system with the CCC
Nomenclature, and the result was the Tariff and Customs Code of 1982, revised by virtue
of EO No. 688. This New Code also assimilated various amendments to the Customs
Code under PD 1628 and 1980 as well as reprints of the tariff concessions under the
General Agreement on Tariff Multilateral Agreement Negotiations as provided in EO
578, series of 1980 and the tariff concessions granted to ASEAN member countries as
embodied in various EOs from 1978 to 1981.

The last major reorganization of the Bureau took place in 1986 after the EDSA revolution
with the issuance of EO 127 which expanded the organizational umbrella of the Central
Office by providing offices that will monitor and coordinate assessment and operations
of the Bureau and provided for a staff of about 5,500 customs personnel.
 

The implementation of the computerization program also necessitated the creation of a

new group to ensure its continuous development and progress. The creation of the
Management Information System and Technology Group (MISTG) under a new Deputy
Commissioner with 92 positions was authorized under EO 463 dated January 91 1998.

BUREAU OF CUSTOMS VISION

A modernized and credible Customs administration that is among the world’s best

BUREAU OF CUSTOMS MISSION

To strengthen border control, enhance trade facilitation and improve collection of lawful
revenues

CORE VALUES

·         Professionalism

·         Integrity

·         Accountability

ORGANTIZATIONAL STRUCTURE OF THE BUREAU OF CUSTOMS

Please access https://customs.gov.ph/organizational-chart/

THE OFFICE OF THE COMMISSIONER

The Office has for its main function the supervision and the control of exports, imports,
foreign mails and the clearance of vessels and aircrafts in all ports of entry. It also
prevents and prosecutes smuggling and other illegal activities in all ports under its
jurisdiction; it exercises supervision and controls its constituent Units; and performs
other functions as may be provided by law.

INTERNAL ADMINISTRATION GROUP (IAG)

The Group shall be headed by the Assistant Commissioner and shall assist the
Commissioner of Customs in the formation of policies and in the setting up of
objectives relative to financial administrative, personnel, planning and management
improvement services of the Bureau.

CUSTOMS REVENUE COLLECTION MONITORING GROUP (RCMG)

Headed by the Deputy Commissioner, this group shall have the functions of maintaining
an updated accounting for all customs revenues collected; administering legal
requirements of the Bureau to include litigation and prosecution of cases; providing the
Commissioner with accurate and timely information and analysis of Collection statistics;
conducting a continuing audit of liquidated entries and outstanding bonds; and
performing other functions consistent  with the group’s assigned tasks and others which
may be given by the Commissioner.

CUSTOMS ASSESSMENT AND OPERATIONS COORDINATING GROUP

The group shall be headed by a Deputy Commissioner and shall have the functions of
gathering and upon approval of the Commissioner, publishing values of commodities
imported into the Philippines, such values being the basis for the computation of
custom duties and other revenues; monitoring for decision-making purposes the
implementation of rules and regulations governing assessment, warehousing and
support operations; monitoring for action and disposal activities together with the
port/airport operations related activities for decision making purposes; and performing
other appropriate functions consistent with the assigned tasks of the group which may
be given by the Commissioner.

 
CUSTOMS INTELLIGENCE AND INVESTIGATION SERVICE

This Office shall be headed by a Customs Service Chief and shall have direct supervision
and control over the Intelligence Division, Investigation and Prosecution Division and
the Internal Inquiry and Prosecution Division.

THE 17 COLLECTION DISTRICTS AND THEIR SUB-PORTS OF ENTRY

OFFICE PRINCIPAL PORTS SUB-PORTS

1 Port of San Fernando PEZA Baguio

Sub-port of Sual

Sub-port of Salomague
2 Port of Manila South Harbor

Sub-port of Masinloc

Customs Postal Office

PEZA Cavite

EPZA Laguna
2-B Manila International Container North Harbor
Port
3 Ninoy Aquino International Manila Domestic Airport
Airport
Airmail Distribution Center
4 Port of Batangas Sub-port of Siain

Sub-port of Puerto Princesa

5 Port of Legaspi Sub-port of Tabaco

Sb-port of Jose Panganiban

6 Port of Iloilo Sub-port of Pulupandan

Kalibo International Airport

7 Port of Cebu Sub-port of Mactan

Sub-port of Dumaguete
8 Port of Tacloban Sub-port of Isabel

Sub-port of San Jose

Sub-port of Catbalogan
9 Port of Surigao Sub-port of Bislig

Sub-port of Nasipit
10 Port of Cagayan De Oro Sub-port of Iligan

Sub-port of Ozamis

Mindanao Container Terminal

11 Port of Zamboanga Zamboanga International Airport

Sub-port of Jolo

Sub-port of Tawi-tawi

Sub-port of Basilan
12 Port of Davao Sub-port of Dadiangas

Sub-port of Mati

Sub-port of Parang
13 Port of Subic  
14 Port of Clark  
15 Port of Aparri Sub-port of Irene

Sub-port of Currimao

Laoag International Airport

Sub-port of Claveria

Cagayan North International Airport

16 Port of Limay Sub-port of Mariveles
 

CMTA PROVISIONS

Sec. 200. Chief Officials of the Bureau. – The Bureau shall be headed by a
Commissioner and shall be assisted by at least four (4) but not more than six (6) Deputy
Commissioners.
The Commissioner shall be appointed by the President of the Philippines.

The Deputy Commissioners shall also be appointed by the President and at least
majority of whom shall come from the ranks of the Bureau.

Sec. 201. Powers and Functions of the Commissioner. – The Commissioner shall have the
following powers and functions:

(a) Exclusive and original jurisdiction, to interpret the provisions of this Act, in
collaboration with other relevant government agencies, subject to review by the
Secretary of Finance;

(b) Exercise any customs power, duties and functions, directly or indirectly;

(c) Review any action or decision of any customs officer performed pursuant to the
provisions of this Act;

(d) Review and decide disputed assessments and other matters related thereto, subject
to review by the Secretary of Finance and exclusive appellate jurisdiction of the Court of
Tax Appeals (CTA);

(e) Delegate the powers vested under this Act to any customs officer with the rank
equivalent to division chief or higher, except for the following powers and functions:

(1) Promulgation of rules and regulations;

(2) Issuance, revocation or modification of rulings; and

(3) Compromise or abate of customs obligations.

(f) Assignment or reassignment of any customs officer subject to the approval of the
Secretary of Finance: Provided, That District Collectors and other customs officers that
perform assessment functions shall not remain in the same area of assignment for more
than three (3) years; and

(g) Perform all other duties and functions as may be necessary for the effective
implementation of this Act and other customs related laws.

 
Sec. 202. Functions of the Bureau. – The Bureau shall exercise the following duties and
functions:

(a) Assessment and collection of customs revenues from imported goods and other
dues, fees, charges, fines and penalties accruing under this Act;

(b) Simplification and harmonization of customs procedures to facilitate movement of

goods in international trade;

(c) Border control to prevent entry of smuggled goods;

(d) Prevention and suppression of smuggling and other customs fraud;

(e) Facilitation and security of international trade and commerce through an informed
compliance program

(f) Supervision and control over the entrance and clearance of vessels and aircraft
engaged in foreign commerce;

(g) Supervision and control over the handling of foreign mails arriving in the Philippines
for the purpose of collecting revenues and preventing the entry of contraband;

(h) Supervision and control on all import and export cargoes, landed or stored in piers,
airports, terminal facilities, including container yards and freight stations for the
protection of government revenue and prevention of entry of contraband;

(i) Conduct a compensation study with the end view of developing and recommending
to the President a competitive compensation and remuneration system to attract and
retain highly qualified personnel, while ensuring that the Bureau remains financially
sound and sustainable;

(j) Exercise of exclusive original jurisdiction over forfeiture cases under this Act; and

(k) Enforcement of this Act and all other laws, rules and regulations related to customs
administration.

Sec. 203. Annual Report of the Commissioner. – The Commissioner shall submit to
the President, the Congress of the Philippines and the NEDA an annual report on the
performance of the Bureau, on or before March 31 of the following year.
Sec. 204. Promulgation of Rules and Regulations. – The Commissioner, subject to the
approval of the Secretary of Finance, shall promulgate rules and regulations for the
enforcement of this Act. The Commissioner shall regularly prepare and publish an
updated customs manual, and the rules, regulations and decisions of the Bureau. The
Commissioner shall furnish the Congress of the Philippines, the NEDA and the Tariff
Commission with electronic copies of department orders, administrative orders,
circulars, and rules and regulations promulgated pursuant to this Act.

Sec. 205. Copies of Goods Declaration. – The Commissioner shall regularly furnish the
NEDA, the Philippine Statistics Authority (PSA), the Bureau of Internal Revenue (BIR.) and
the Tariff Commission electronic copies of all customs goods declaration processed and
cleared by the Bureau.

Upon request, the Tariff Commission shall have access to, and the right to be furnished
with copies of liquidated goods declaration and other documents supporting the goods
declaration as finally filed in the Commission on Audit (COA).

For this purpose, the Bureau shall maintain electronic records of goods declaration and
other documents supporting the declaration.

TERMINOLOGIES

Sec. 102.  Definition of Terms. - As used in this Act:

TERMINOLOGY DEFINITION
Abatement Refers to the reduction or diminution, in whole or in part, of
duties and taxes where payment has not been made.
Actual or Outright Exportation Refers to the customs procedure applicable to goods which,
being in free circulation, leave the Philippine territory and are
intended to remain permanently outside it.
Admission Refers to the act of bringing imported goods directly or
through transit into a free zone.
Airway Bill (AWB) Refers to a transport document for airfreight used by airlines
and international freight forwarders which specify the holder
or consignee of the bill who has the right to claim delivery of
the goods when they arrive at the port of destination. It is a
contract of carriage that includes carrier conditions, such as
limits of liability and claims procedures. In addition, it
contains transport instructions to airlines and carriers, a
description of the goods, and applicable transportation
charges.
Appeal Refers to the remedy by which a person who is aggrieved or
adversely affected by any action, decision, order, or omission
of the Bureau, seeks redress before the Bureau, the Secretary
of Finance, or competent court, as the case may be.
Assessment Refers to the process of determining the amount of duties and
taxes and other charges due on imported and exported goods.
Authorized Economic Operator Refers to the importer, exporter, customs broker, forwarder,
freight forwarder, transport provider, and any other entity duly
accredited by the Bureau based on the World Customs
Organization (WCO) Framework of Standards to Secure and
Facilitate Global Trade, the Revised Kyoto Convention
(RKC), the WCO Supply Chain Management Guidelines and
the various national best practices to promote trade facilitation
and to provide a seamless movement of goods across borders
through secure international trade supply chains with the use
of risk management and modern technology.
Bill of Lading (B/L) Refers to a transport document issued by shipping lines,
carriers and international freight forwarders or non-vessel
operating common carrier for water-borne freight. The holder
or consignee of the bill has the right to claim delivery of the
goods at the port of destination. It is a contract of carriage that
includes earner conditions, such as limits of liability and
claims procedures. In addition, it contains transport
instructions to shipping lines and carriers, a description of the
goods, and applicable transportation charges.
Bureau Refers to the Bureau of Customs
Carrier Refers to the person actually transporting goods or in charge
of or responsible for the operation of the means of transport
such as airlines, shipping lines, freight forwarders, cargo
consolidators, non-vessel operating common carriers and other
international transport operators.
Clearance Refers to the completion of customs and other government
formalities necessary to allow goods to enter for consumption,
warehousing, transit or transshipment, or to be exported or
placed under another customs procedure.
Commission Refers to the Tariff Commission
Conditional Importation Refers to the customs procedure known under the RKC as
temporary admission in which certain goods can be brought
into a customs territory conditionally relieved, totally or
partially, from payment of import duties and taxes; such goods
must be imported for a specific purpose and must be intended
for reexportation within a specified period and without having
undergone any substantial change except due to normal
depreciation.
Customs Broker Refers to any person who is a bona fide holder of a valid
 Certificate of Registration/Professional Identification Card
issued by the Professional Regulatory Board and Professional
Regulation Commission pursuant to Republic Act No. 9280,
as amended, otherwise known as the "Customs Brokers Act of
2004".
Customs Office Refers to any customs administrative unit that is competent
and authorized to perform all or any of the functions
enumerated under customs and tariff laws.
Customs Officer As distinguished from a clerk or employee, refers to a person
whose duty, not being clerical or manual in nature, involves
the exercise of discretion in performing the function of the
Bureau. It may also refer to an employee authorized to
perform a specific function of the Bureau as provided in this
Act.
Customs Territory Refers to areas in the Philippines where customs and tariff
laws may be enforced.
Entry Refers to the act, documentation and process of bringing
imported goods into the customs territory, including goods
coming from free zones.
Exportation Refers to the act, documentation, and process of bringing
goods out of Philippine territory.
Export Declaration Refers to a statement made in the manner prescribed by the
Bureau and other appropriate agencies, by which the persons
concerned indicate the procedure to be observed for taking out
or causing to be taken out any exported goods and the
particulars of which the customs administration shall require.
Flexible Clause Refers to the power of the President upon recommendation of
the National Economic and Development Authority (NEDA):
(1) to increase, reduce or remove existing protective tariff
rates of import duty, but in no case shall be higher than one
hundred percent (100%) ad valorem; (2) to establish import
quota or to ban importation of any commodity as may be
necessary; and (3) to impose additional duty on all import not
exceeding ten percent (10%) ad valorem, whenever necessary.
Foreign Exporter Refers to one whose name appears on documentation attesting
to the export of the product to the Philippines regardless of the
manufacturer's name in the invoice.
Free Zone Refers to special economic zones registered with the
Philippine Economic Zone Authority (PEZA) under Republic
Act No. 7916, as amended, duly chartered or legislated special
economic zones and freeports such as Clark Freeport Zone;
Poro Point Freeport Zone; John Hay Special Economic Zone
and Subic Bay Freeport Zone under Republic Act No. 7227,
as amended by Republic Act No. 9400; the Aurora Special
Economic Zone under Republic Act No. 9490, as amended;
 the Cagayan Special Economic Zone and Freeport under
Republic Act No. 7922; the Zamboanga City Special
Economic Zone under Republic Act No. 7903; the Freeport
Area of Bataan under Republic Act No. 9728; and such other
freeports as established or may be created by law.
Goods Refer to articles, wares, merchandise and any other items
which are subject of importation or exportation.
Goods Declaration Refers to a statement made in the manner prescribed by the
Bureau and other appropriate agencies, by which the persons
concerned indicate the procedure to be observed in the
application for the entry or admission of imported goods and
the particulars of which the customs administration shall
require.
Importation Refers to the act of bringing in of goods from a foreign
territory into Philippine territory, whether for consumption,
warehousing, or admission as defined in this Act.
Freight Forwarder Refers to a local entity that acts as a cargo intermediary and
facilitates transport of goods on behalf of its client without
assuming the role of a carrier, which can also perform other
forwarding services, such as booking cargo space, negotiating
freight rates, preparing documents, advancing freight
payments, providing packing/crating, trucking and
warehousing, engaging as an agent/representative of a foreign
non-vessel operating as a common carrier/cargo consolidator
named in a master bill of lading as consignee of a consolidated
shipment, and other related undertakings.
International Freight Forwarder Refers to persons responsible for the assembly and
consolidation of shipments into single lot, and assuming, in
most cases, the full responsibility for the international
transport of such shipment from point of receipt to the point of
destination.
Jurisdictional Control Refers to the power and rights of the Bureau in exercising
supervision and police authority over all seas within the
jurisdiction of the Philippine territory and over all coasts,
ports, airports, harbors, bays, rivers and inland waters whether
navigable or not from the sea.
Lodgement Refers to the registration, of a goods declaration with the
Bureau; r (ee) Non-Vessel Operating Common Carrier
(NVOCC) refers to an entity, which may or may not own or
operate a vessel that provides a point-to-point service which
may include several modes of transport and/or undertakes
group age of less container load (LCL) shipments and issues
the corresponding transport document.
Outright Smuggling Refers to an act of importing goods into the country without
complete customs prescribed importation documents, or
 without being cleared by customs or other regulatory
government agencies, for the purpose of evading payment of
prescribed taxes, duties and other government charges.
Perishable Good Refers to goods liable to perish or goods that depreciate
greatly in value while stored or which cannot be kept without
great disproportionate expense, which may be proceeded to,
advertised and sold at auction upon notice if deemed
reasonable.
Port of Entry Refers to a domestic port open to both domestic and
international trade, including principal ports of entry and
subports of entry. A principal port of entry is the chief port of
entry of the Customs District wherein it is situated and is the
permanent station of the District Collector of such port. 
Subports of entry are under the administrative jurisdiction of
the District Collector of the principal port of entry of the
Customs District. Port of entry as used in this Act shall
include airport of entry.
Port of Discharge (Port of Refers to a place where a vessel, ship, aircraft or train unloads
Unloading) its shipments, from where they will be dispatched to their
respective consignees.
Re-exportation means exportation of goods which have been imported
Release of Goods Refers to the action by the Bureau to permit goods undergoing
clearance to be placed at the disposal of the party concerned.
Refund Refers to the return, in whole or in part, of duties and taxes
paid on goods.
Security Refers to any form of guaranty, such as a surety bond, cash
bond, standby letter of credit or irrevocable letter of credit,
which ensures the satisfaction of an obligation to the Bureau.
Smuggling Refers to the fraudulent act of importing any goods into the
Philippines, or the act of assisting in receiving, concealing,
buying, selling, disposing or transporting such goods, with full
knowledge that the same has been fraudulently imported, or
the fraudulent exportation of goods. Goods referred to under
this definition shall be known as smuggled goods.
Taxes Refer to all taxes, fees and charges imposed under this Act
and the National Internal Revenue Code (NIRC) of 1997, as
amended, and collected by the Bureau.
Technical Smuggling Refers to the act of importing goods into the country by means
of fraudulent, falsified or erroneous declaration of the goods
to its nature, kind, quality, quantity or weight, for the purpose
of reducing or avoiding payment of prescribed taxes, duties
and other charges.
Tentative Release Refers to a case where the assessment is disputed and pending
review, an importer may put up a cash bond equivalent to the
duties and taxes due on goods before the importer can obtain
 the release of said goods.
Transit Refers to the customs procedure under which goods, in its
original form, are transported under customs control from one
customs office to another, or to a free zone.
Transshipment Refers to the customs procedure under which goods are
transferred under customs control from the importing means
of transport to the exporting means of transport within the area
of one customs office, which is the office of both importation
and exportation.
Traveller Refers to any person who temporarily enters the territory of a
country in which he or she does not normally resides (non-
resident), or who leaves that territory, and any person who
leaves the territory of a country in which he or she normally
resides (departing resident) or who returns to that territory
(returning resident).
Third Party Refers to any person who deals directly with the Bureau, for
and on behalf of another person, relating to the importation,
exportation, movement or storage of goods.
 

COLLECTION DISTRICTS AND PORTS OF ENTRY

Sec. 206. Customs Districts. – For administrative purposes, the Philippines shall be

divided into as many Customs Districts as necessary, the respective limits of which may
be changed from time to time by the Commissioner, with the approval of the Secretary
of Finance.

Each Customs District shall be supervised by one (1) District Collector, assisted by as
many Deputy District Collectors as may be necessary.  The choice of the location of a
District Office, its business hours and the staffing pattern thereof, shall be based on the
particular requirements of each district.

Sec. 207. Ports of Entry. – All ports of entry shall be under the supervision and control
of a Customs District.  A District Collector shall be assigned in the principal ports of
entry while a Deputy District Collector may be assigned to other types of ports of entry.

The principal ports of entry shall be located in Aparri, San Fernando, Manila, Manila
International Container Port, Ninoy Aquino International Airport, Subic, Clark, Batangas,
Legaspi, Iloilo, Cebu, Tacloban, Surigao, Cagayan de Oro, Zamboanga, Davao, Limay and
such other ports that may be created pursuant to this Act.
 

For the effective enforcement of the Bureau's functions and without hampering business
and commercial operations of the ports, sea ports and airport authorities and private
ports and airport operators shall provide suitable areas for examination and for other
customs equipment free of charge within, a definite period of time, as agreed with
private port and airport operations, if any.

Classification of Ports of Entry

a.    Principal Port

It is the chief port of entry of the Customs District wherein it is situated and is the
permanent station of the District Collector.

b.    Subports of Entry

Are under the administrative jurisdiction of the District Collector of the principal port of
entry of the District Collector of the principal port of entry of the Customs District.

Sec. 208. Power of the President to Open and Close Any Port. – Upon the
recommendation of the Secretary of Finance, the President may open or close any port
of entry. Upon closure of a port of entry, the existing personnel shall he reassigned by
the Commissioner, subject to the approval of the Secretary of Finance,

Sec. 209. Assignment of Customs Officers and Employees to Other Duties. – The
Commissioner, with the approval of the Secretary of Finance, may assign any employee
of the Bureau to any port, service, division or office of the Bureau within the Bureau's
staffing pattern or organizational structure, or may assign any employee other duties:
Provided, That such assignment shall not affect the employee's tenure of office nor
result in a change of status, demotion in rank and/or salary deduction.

 
Sec. 210. Duties of the District Collector. – The District Collector shall have the
following duties in their assigned Customs District:

 (1) Ensure entry of all imported goods at the customs office;

 (2) Prevent importation and exportation of prohibited goods;

 (3) Ensure legal compliance of regulated goods and facilitate the flow of legitimate
trade;

 (4) Examine, classify and value imported goods;

 (5) Assess and collect duties, taxes and other charges on imported goods;

 (6) Hold and dispose imported goods in accordance with this Act;

 (7) Prevent smuggling and other customs fraud; and

 (8) Perform other necessary duties that may be assigned by the Commissioner for the
effective implementation of this Act.

Subject to the supervision and control of the District Collector, the duties and functions
of the District Collector may be delegated to the Deputy District Collector. The Deputy
District Collector assigned to a sub-port shall be under the supervision and control of
the District Collector of the corresponding principal port.

Sec. 211. Temporary Succession of Deputy District Collector to Position of Acting

District Collector. – In the absence or disability of a District Collector or, in case of
vacancy, the Deputy District Collector shall temporarily discharge the duties of the
District Collector. Should there be no Deputy District Collector, the District Collector
shall designate, in writing, a senior ranking customs officer to temporarily perform the
duties of the District Collector. In case there are two (2) or more senior ranking customs
officers with equal length of service, a drawing of lots shall be undertaken. The District
Collector shall report the designation to the Commissioner within twenty-four (24) hours
after the designation.

Sec. 212. Records to be Kept by Customs Officers. – District Collectors, Deputy

District Collectors, and customs officers acting in such capacities must maintain
permanent records of official transactions and turn-over all records and official papers
to their respective successors or other authorized officials.  The records shall be made
available for inspection by other authorized officials of the Bureau.

If required, the District Collector shall affix the official dry seal of the Bureau on all
documents and records requiring authentication.

Sec. 213. Reports of the District Collector to the Commissioner. – The District
Collector shall report to the Commissioner any probable or initiated litigation within the
Customs District and shall submit regular monthly reports on all district transactions.

Preliminary Provisions CMTA

INTRODUCTION TO BORDER CONTROL

 What is Border?

 A line separating two political or geographical areas specially counties.

 What is Border Control?

Means measures adopted by a country to regulate and monitor its territory. It regulates
the entry and exit of people, animals, and goods across a country’ territory. It aims at
fighting terrorism and detecting the movement of criminals across the territory.

Security defined

Refers to all the measures that are taken to protect a place, or to ensure that only
people with permission enter it or leave it

Border Security

Protecting borders from the illegal movement of weapons, drugs, contraband, and
people, while promoting lawful trade and travel, is essential to Philippine security,
economic prosperity, and national sovereignty.
                                                                   PHILIPPINE TERRITORY

 Philippine Territory as defined under the Treaty of Paris

 The National Territory under the 1987 Philippine Constitution

 Article 1 National Territory

 The national territory comprises the Philippine archipelago, with all the islands
and  waters embraced therein, and all other territories over which the Philippines
has  sovereignty or jurisdiction, consisting of its terrestrial, fluvial, and aerial
domains,  including its territorial sea, the seabed, the subsoil, the insular shelves, and
other  submarine areas. The waters around, between, and connecting the islands of
the  archipelago, regardless of their breadth and dimensions, form part of the
internal  waters of the Philippines.

The National Territory of the Philippines comprises the Philippine Archipelago:

ARCHIPELAGO came from the Greek work PELAGOS meaning “sea”. It has been defined 
as a sea or part of a sea studded with islands, often synonymous with group of islands
or large group of islands in an extensive  body of water.

 How do we determine our territorial boundaries?

 - THE 12 MILE RULE

- THE ARCHIPELAGIC PRINCIPLE

 This concept is meant that an archipelago shall be regarded as a single unit, so that  the
waters around, between and connecting  the islands of the archipelago, irrespective of
their breath and dimensions, form part of the internal waters of the state, subject to its
exclusive sovereignty.

 Baselines

 Three domains of the territory of the state

 Terrestrial Domain
 The terrestrial domain refers to the land mass, which may be integrate or dismembered,
or partly bound by water or consist of one whole island. It may also be composed of
several islands, like the Philippines. It also includes all the resources attached to the land.

Aerial Domain

This refers to the air space above the land and waters of the State.

The rules governing the high seas also apply to outer space, which is considered res
communes. Under customary international law, States have the right to launch satellites
in orbit over the territorial space of other States.

The Outer Space Treaty, formally known as the Treaty on Principles Governing the
Activities of States in the Exploration and Use of Outer Space, including the Moon and
Other Celestial Bodies, is a treaty that forms the basis of international space law.

What is the vertical limit of the territory of state?

The Kármán line

It lies at an altitude of 100 kilometers (62 mi) above the Earth’s sea level and is
commonly used to define the boundary between the Earth’s atmosphere and outer
space.

Fluvial domain

 
Included in its fluvial domains are as follows:

l  Internal waters

l  Territorial sea

l  Exclusive Economic zone (EEZ)

l  Sea bed

l  Subsoil

l  Insular shelves

l  Other submarine areas

Internal waters

This include all bodies of water located inside the baseline of the territory including sea,
lakes, rivers, streams etc.

Territorial Sea

Out to 12 nautical miles from the baseline, the coastal state is free to set laws, regulate
use, and use any resource.

The Principle of “INNOCENT PASSAGE”

 
Vessels were given the right of "innocent passage" through any territorial waters, with
strategic straits allowing the passage of military craft as "transit passage", in that naval
vessels are allowed to maintain postures that would be illegal in territorial waters.

"Innocent passage" is defined by the convention as passing through waters in an

expeditious and continuous manner, which is not “prejudicial to the peace, good order
or the security” of the coastal state.

The exclusive economic zone (EZZ)

Extend 200 nautical miles from the baseline. Within this area, the coastal nation has sole
exploitation rights over all natural resources. The EEZs were introduced to halt the
increasingly heated clashes over fishing rights, although oil was also becoming
important.

Sea Bed

This refers to the land that holds the sea, lying beyond the sea shore, including mineral
and natural resources

Insular shelves or continental shelves

 
The submerged portions of a continent or offshore island, which slope gently seaward
from the low waterline to a point where there is a substantial break in grade occurs, at
which point the bottom slopes seaward at a considerable  increase in  slope until the
great ocean depths are reached.

Subsoil

This refers to  everything beneath the  surface soil and the seabed, including mineral
and natural resources.

Other submarine areas

They refer to all areas under the territorial sea which includes seamount, trough, trench,
basin, deep, bank shoal and reef.

Import Clearance and Formalities

Chapter 6 - IMPORT CLEARANCE AND FORMALITIES

Import Clearance and Formalities

Goods to be Imported through Customs Office

 All goods imported into the Philippines shall be entered through a customs office at a
port of entry, or may be admitted to or removed from a free zone as defined in this Act,
as the case may be.

Importation Subject to Goods Declaration

 
Unless otherwise provided for in this Act, all imported goods shall be subject to the
lodgement of a goods declaration. A goods declaration may be for consumption, for
customs bonded warehousing, for admission, for conditional importation, or for
customs transit.

Goods Declaration for Consumption

All goods declaration for consumption shall be cleared through a formal entry process
except for the following goods which shall be cleared through an informal entry process;

(a) Goods of a commercial nature with Free on Board (FOB) or Free Carrier At (FCA)
value of less than fifty thousand pesos (₱50,000.00). Every three (3) years after the
effectivity of this Act, the Secretary of Finance shall adjust this amount as provided
herein to its present value, using the Consumer Price Index (CPI) as published by the
PSA; and

(b) Personal and household effects or goods, not in commercial quantity, imported in a
passenger’s baggage or mail.

The Commissioner may adjust the value of goods of commercial nature that shall be
cleared through an informal entry process without prejudice to the periodic adjustment
period in subparagraph (a) of this section.

All importations entered through, a formal entry process shall be covered by a letter of
credit or any verifiable commercial document evidencing payment or in cases where
there is no sale for export, by any commercial document indicating the commercial
value of the goods.

Provisional Goods Declaration

Where the declarant does not have all the information or supporting documents
required to complete the goods declaration, the lodging of a provisional goods
declaration may be allowed: Provided, That it substantially contains the necessary
information required by the Bureau and the declarant undertakes to complete the
information or submit the supporting documents within forty-five (45) days from the
filing of the provisional goods declaration, which period may be extended by the Bureau
for another forty-five (45) days for valid reasons.

If the Bureau accepts a provisional goods declaration, the duty treatment of the goods
shall not be different from that of goods with complete declaration.

Goods under provisional goods declaration may be released upon posting of any
required security equivalent to the amount ascertained to be the applicable duties and
taxes.

Owner of Imported Goods

All goods imported into the Philippines shall be deemed to be the property of the
consignee or the holder of the bill of lading, airway bill or other equivalent transport
document if duly endorsed by the consignee therein, or, if consigned to order, duly
endorsed by the consignor. The underwriters of abandoned goods and the salvors of
goods saved from wreck at sea, coast, or in any area of the Philippines, may be regarded
as the consignees.

Liability of Importer for Duties and Taxes

Unless relieved by laws or regulations, the liability for duties, taxes, fees, and other
charges attached to importation constitutes a personal debt due and demandable
against the importer in favor of the government and shall be discharged only upon
payment of duties, taxes, fees and other charges. It also constitutes a lien on the
imported goods which may be enforced while such goods are under customs' custody.

Importations by the government

 
Except those provided for in Section 800 of this Act, all importations by the government
for its own use or that of its subordinate branches or instrumentalities, or corporations,
agencies or instrumentalities owned or controlled by the government, shall he subject to
the duties, taxes, fees and other charges under this Act.

Goods Declaration and Period of Filing

As far as practicable, the format of the goods declaration shall conform with
international standards. The data required in the goods declaration shall be limited to
such particulars that are deemed necessary for the assessment and collection of duties
and taxes, the compilation of statistics and compliance with this Act. The Bureau shall
require the electronic lodgement of the goods declaration.

The Bureau shall only require supporting documents necessary for customs control to
ensure that all requirements of the law have been complied with. Translation of
supporting documents shall not be required except when necessary.

Goods declaration must be lodged within fifteen (15) days from the date of discharge of
the last package from the vessel or aircraft. The period to file the goods declaration
may, upon request, be extended on valid grounds for another fifteen (15) days: Provided,
That the request is made before the expiration of the original period within which to file
the goods declaration: Provided, However, That the period of the lodgement of the
goods declaration may be adjusted by the Commissioner.

Lodgment and Amendment of Goods Declaration

The Bureau shall permit the electronic lodgement of the goods declaration at any
designated customs office. The Bureau shall, for valid reason and under terms and
conditions provided by regulation, permit the declarant to amend the goods declaration
that has already been lodged; Provided, That the request to amend the goods
declaration, together with the intended amendments, must be received prior to final
assessment or examination of the goods.
 

Advance Lodgment and Clearance

The Bureau may provide for the lodgement and clearance of goods declaration and
supporting documents prior to the arrival of the goods under such terms and conditions
as may be provided by rules and regulations to be promulgated under this Act.

Entry of Goods  in Part for Consumption and in Part for warehousing

Goods declaration covered by one bill of lading or airway bill over goods which are
meant in part for consumption and in part for warehousing may be both entered
simultaneously for release at the port of entry.

Contents of Goods Declaration

Goods declaration shall contain the names of the consignee, importing vessel or aircraft,
port of departure, port of destination and date of arrival, the number and marks of
packages, or the quantity, if in bulk, the nature and correct commodity description of
the goods contained therein, its value as set forth in a proper invoice, and such other
information as may be required by rules and regulations. Where the declarant does not
have all the information required to make the goods declaration, a provisional or
incomplete goods declaration shall, for certain cases and for reasons deemed valid by
the Bureau, be allowed to be lodged: Provided, That it contains the particulars deemed
necessary by the Bureau for the acceptance of the entry filed and that the declarant
undertakes to complete it within forty-five (45) days from the filing of the provisional
goods declaration in accordance with Section 403 of this Act

Statements to be provided in the Goods Declaration

 

No entry of imported goods shall be allowed unless the goods declaration has been
lodged with the Bureau. The goods declaration shall, under penalties of falsification or
perjury, contain the following statements:

(a) The invoice and goods declaration contain an accurate and faithful account of the
prices paid or payable for the goods, and other adjustments to the price actually paid or
payable, and that nothing has been omitted therefrom or concealed whereby the
government of the Republic of the Philippines might be defrauded of any part of the
duties and taxes lawfully due on the goods; and

(b) To the best of the declarant's information and belief, all the invoices and bills of
lading or airway bills relating to the goods are the only ones in existence relating to the
importation in question, and that these documents are in the same state as when they
were received by the declarant, and the declaration thereon are in all respects genuine
and true.

Goods declaration shall be submitted electronically pursuant to Republic Act No. 8792,
otherwise known as the “Electronic Commerce Act of 2000”. Such declarations when
printed and certified by a competent customs officer as a faithful reproduction of the
electronic submission shall be considered as actionable documents for purposes of
prosecuting a declarant if the declarations are found to be fraudulent.

Description of goods

Under such terms and conditions prescribed under the rules and regulations, the
description of the goods in the goods declaration must be sufficient and specific in
detail to enable the goods to be Identified for customs valuation, statistical purposes,
and classification to the appropriate tariff heading and subheading in the currency of
the invoice, and in such other particulars necessary for the proper assessment and
collection of duties and taxes. The quantity and value of each of the several classes of
goods shall be separately declared according to their respective headings or
subheadings and the totals of each heading or subheading shall be duly shown.

Commercial and non-commercial invoice

Commercial invoice of imported goods shall contain the following:

(a) The agreed price paid or to be paid for the goods;

(b) The adjustments to the price paid or to be paid as defined in Section 701(1) of this
Act, if not yet included in the invoice, as may be applicable;

(c) The names of the buyer, seller, and the time and place of sale;

(d) The port of entry;

(e) A sufficient description to enable the accurate identification of goods for tariff
classification, customs valuation, and statistical purposes, indicating the correct
commodity description, in customary term or commercial designation, the grade or
quality, numbers, marks or symbols under which they are sold by the seller or
manufacturer, together with the marks and number of packages in which the goods are
packed;

(f) The quantities in the weights or measures of the goods shipped; and

(g) Any other fact deemed necessary for the proper examination, customs valuation, and
tariff classification of the goods as may be prescribed by rules and regulations.

To the extent possible, the above requirements shall also apply to goods imported but
not covered by sale, such as goods on consignment or lease, samples, or donations,
covered by a consignment, pro forma invoice, or other noncommercial invoice.

Mode of Payments and Terms of Trade

Subject to existing laws and rules on foreign currency exchange, the internationally
accepted standards and practices on the mode of payment or remittance covering
import and export transactions, including standards developed by international trading
bodies such as the International Chamber of Commerce (ICC) on trading terms
(incoterms) and on international letters of credit such as the Uniform Customs and
Practice for Documentary Credits (UCPDC), shall he recognized.

Examination of Samples

Customs officers shall see to it that representative samples taken during examination
shall be properly receipted for and retained within a reasonable period of time. The
quantity and value of the samples taken shall be noted in the specified box of goods
declaration or electronic form. Such samples shall be duly labeled as will definitely
identify them with the importation for which they are taken

Forwarding of Cargo and Remains of Wrecked Vessels or Aircraft

When vessels or aircrafts are wrecked within the Philippines, the original owners or
consignees of the cargo, or by its underwriters, in ease of abandonment, may seek
approval from the Bureau to forward the goods saved from the wreck to the ports of
destination without going through the customs office in the district in which the goods
were cast ashore or unloaded. Upon approval, the goods may be forwarded with
particular manifests and duly certified by a customs officer in charge of the goods.

The owner of the vessel or aircraft may be permitted to export the remains of the wreck
upon proper examination and inspection. The remains of a wrecked vessel shall include
not only its hull and rigging, but also all sea stores, goods and equipment, such as sails,
ropes and chain anchors.

Derelicts and Goods from Abandoned Wrecks.

Derelicts and all goods recovered from sea or from abandoned wrecks shall be under
the jurisdiction of the port where the goods arrive, and shall be retained in the custody
of the Bureau. If not claimed by the owner, underwriter or salvor, the same shall be
deemed as property of the government.

When such goods are brought into port by lighters or other craft, each vessel shall
submit a manifest of their respective cargo.
The customs officer nearest the scene of the wreck shall take charge of the goods saved
and shall give immediate notice to the District Collector or the nearest customs office.

In order to prevent any attempt to commit fraud, the District Collector shall be
represented at the salvage of the cargo by customs officers who shall examine and
receive the inventory made on the cargo.

Derelicts and goods salvaged from foreign vessels or aircrafts recovered from sea or
wreck are prima facie dutiable and may be entered for consumption or warehousing. If
claimed to be of Philippine production, and consequently conditionally duty-free, proof
must be submitted as in ordinary cases of reimportation of goods. Foreign goods
landed from a vessel or aircraft in distress is dutiable if sold or disposed of in the
Philippines.

Before any goods taken from a recent wreck are admitted to the customs territory, the
same shall be appraised, and the owner or importer shall have the same right to appeal
as in ordinary importation.

No part of a Philippine vessel or aircraft or its equipment, wrecked either in Philippine or

foreign waters, shall be subject to duty.

Export Clearance and Formalities

Chapter 7 - EXPORT CLEARANCE AND FORMALITIES

Export Goods Declaration

All goods exported from the Philippines, whether subject to export duty or not, shall be
declared through a competent customs office through an export declaration, duly
signed electronically or otherwise by the party making the declaration.

The description of the goods in the export declaration must contain sufficient and
specific information for statistical purposes as well as for the proper valuation and
classification of the goods.

Export Products to Conform with Standard Grades

If applicable, products shall conform to export standard grades established by the

government. The packaging of the said goods shall likewise be labeled and marked in
accordance with related laws and regulations. Export declaration may not be granted for
goods violating the aforementioned requirements.

Lodgement and Processing of Export Declaration

promulgate rules and regulations to allow manual and electronic lodgement and
processing of the export declaration.

Rules of Origin

Pursuant to the applicable rules of origin, the Bureau or any other designated
government agency may determine the origin of goods for export and, if appropriate,
issue the corresponding certificates of origin. However, the exporter may adopt a self-
certification system: Provided, That it is duly accredited by the Bureau or any other
authorized government agencies.

Offences and Penalties

Chapter 8 - OFFENCES AND PENALTIES

Unlawful Importation or Exportation

Any person who shall fraudulently import or export or bring into or outside of the
Philippines any goods, or assist in so doing, contrary to law, or shall receive, conceal,
buy, sell, or in any manner facilitate the transportation, concealment, or sale of such
goods after importation, or shall commit technical smuggling as defined in this Act shall
be penalized by:

(a) Imprisonment of not less than thirty (30) days and one (1) day but not more than six
(6) months, or a fine of not less than twenty-five thousand pesos (₱25,000.00) but not
more than seventy-five thousand pesos (₱75,000,00), or both, if the appraised value of
the goods unlawfully imported, to be determined in the manner prescribed under this
Act, including duties and taxes, of the goods unlawfully imported does not exceed two
hundred fifty thousand pesos (₱250,000,00);

(b) Imprisonment of not less than six (6) months and one (1) day but not more than one
(1) year, or a fine of not less than seventy-five thousand pesos (₱75.000.00) but not
more than one hundred fifty thousand pesos (₱150,000.00), or both, if the appraised
value of the goods unlawfully imported, to be determined in the manner prescribed
under this Act, including duties and taxes, exceeds two hundred fifty thousand pesos
(₱250,000.00) but not more than five hundred thousand pesos (₱500,000.00);

(c) Imprisonment of not less than one (1) year and one (1) day but not more than three
(3) years, or a fine of not less than one hundred fifty thousand pesos (₱150,000.00) but
not more than three hundred thousand pesos (₱300,000.00) or both, if the appraised
value of the goods unlawfully imported, to be determined in the manner prescribed
under this Act, including duties and taxes, exceeds five hundred thousand pesos
(₱500,000.00) but not more than one million pesos (₱1,000,000.00);

(d) Imprisonment of not less than three (3) years and one (1) day but not more than six
(6) years, or a fine of not less than three hundred thousand pesos (₱300,000.00) but not
more than one million five hundred thousand pesos (₱1,500,000,00), or both, if the
appraised value of the goods unlawfully imported, to be determined in the manner
prescribed under this Act, including duties and taxes, exceeds one million pesos
(₱1,000,000.00) but not more than five million pesos (₱5,000,000.00);

(e) Imprisonment of not less than six (6) years and one (1) day but not more than twelve
(12) years, or a fine of not less than one million five hundred thousand pesos
(₱1,500,000.00) but not more than fifteen million pesos (₱15,000,000.00), or both, if the
appraised value of the goods unlawfully imported, to be determined in the manner
prescribed under this Act, including duties and taxes, exceeds five million pesos
(₱5.000,000.00) but not more than fifty million pesos (₱50,000,000.00);

(f) Imprisonment of not less than twelve (12) years and one (1) day but not more than
twenty (20) years, or a fine of not less than fifteen million pesos (₱15,000,000.00) but not
more than fifty million pesos (₱50,000,000.00), or both, if the appraised value of the
goods unlawfully imported, to be determined in the manner prescribed under this Act,
including duties and taxes, exceeds fifty million pesos (₱50,000,000.00) but not more
than two hundred million pesos (₱200,000,000.00);

(g) If the appraised value of the goods unlawfully imported to be determined in the
manner prescribed under this Act, including duties and taxes, exceeds two hundred
million pesos (₱200,000,000.00) or if the aggregate amount of the appraised value of
the goods which are the subject of unlawful importation committed in more than one
instance, including duties and taxes, exceeds two hundred million pesos
(₱200,000,000.00), the same shall be deemed as a heinous crime and shall be punishable
with a penalty of reclusion perpetua and a fine of not less than fifty million pesos
(₱50,000,000.00); and
(h) The penalty of prision mayor shall be imposed when the crime of serious physical
injuries shall have been committed, and the penalty of reclusion perpetua shall be
imposed when the crime of homicide shall have been committed by reason or on the
occasion of the unlawful importation.

In applying the above scale of penalties, an offender who is a foreigner shall be

deported without farther proceedings after serving the sentence. If the offender is a
public officer or employee, the penally which is the next higher in degree shall be
imposed in addition to the penalty of perpetual disqualification from public office, and
disqualification to vote and to participate in any public election. If the offender fails to
pay the fine, subsidiary imprisonment shall he served.

When, upon trial for violation of this section, the defendant is shown to have had
possession of the goods in question, possession shall be deemed sufficient evidence to
authorize conviction unless the defendant shall explain the possession to the
satisfaction of the court: Provided, That each act of unlawful importation or exportation
shall be deemed as a separate offense: Provided, However, That payment of the tax due
after apprehension shall not constitute a valid defense in any prosecution under this
section; Provided,  Further, That outright smuggling shall also be punishable under this
section; Provided,  Finally, That the rights and privileges provided in this Act for the
importers, consignees, exporters, service providers, third parties and other third parties
who committed this offense shall be revoked.

Vessel, Seacraft or Aircraft Departing before Undergoing Customs Formalities

Any vessel, seacraft, or aircraft arriving within the limits of a Customs District from a
foreign port which departs before undergoing customs formalities, without being
compelled to do so by stress of weather, pursuit or duress of enemies, or other
necessity, shall be liable for a fine of not less than one hundred thousand pesos
(₱100,000.00) but not more than three hundred thousand pesos (₱300,000.00).

Obstruction to Boarding Officer

If the master or pilot-in-command or any member of the complement of any vessel or

aircraft arriving at the Philippine port obstructs or hinders any officer from lawfully
going on board such vessel or aircraft for the purpose of enforcing this Act, or
intentionally causes any officer to be so obstructed or hindered, the vessel or aircraft
shall be liable to a fine of not less than one hundred thousand pesos (₱100,000.00) but
not more than three hundred thousand pesos (₱300,000.00).

Unlawful Boarding or Leaving of Vessel or Aircraft

If, upon arrival at the Philippine port, any master of a vessel or pilot-in-command of an
aircraft engaged in a foreign trade permits any person to board or leave the vessel or
aircraft without the permission of the customs officer-in-charge, the owner or operator
of such vessel or aircraft shall be liable for a fine of not less than one hundred thousand
pesos (₱100,000.00) but not more than three hundred thousand pesos (₱300,000.00).

Unloading of Cargo Before Arrival at Port of Entry

Unloading of Cargo Before Arrival at Port of Entry.— If, upon the arrival within the hunts
of any Customs District of the Philippines of any vessel or aircraft engaged in foreign
trade, the master or pilot-in-command thereof permits any part of the cargo to be
unloaded before arrival at the port of entry, and without authority from a proper
customs officer, the owner, operator, or agent of such vessel or aircraft shall be liable for
a fine of not less five hundred thousand pesos (₱500,000.00) but not more than two
million pesos (₱2,000,000.00); Provided, That no fine shall accrue upon satisfactory proof
to the proper District Collector that the unloading was rendered necessary by stress of
weather, accident or other necessity: Provided,  However, That the fine imposed herein
shall be without prejudice to the application of fines or penalties provided under Section
1401 of this Act.

Unloading of Cargo at Improper Time or Place After Arrival

The owner or operator of any vessel or aircraft from which cargo is discharged upon
arrival in the Philippines at a time or place other than that designated by the District
Collector, shall be fined not less one hundred thousand pesos (₱100,000.00) but not
more than three hundred thousand pesos (₱300,000.00); Provided, That no fine shall
accrue upon satisfactory proof to the proper District Collector that the unloading was
rendered necessary by stress of weather, accident or other necessity.

 
Failure to Exhibit or Deposit Documents

When the master of a vessel or pilot-in-command of an aircraft engaged in foreign

trade fails to submit to the District Collector at the time of entry of the vessel or aircraft
the register or other documents in lieu thereof, together with the clearance and other
documents granted by the customs officers to the vessel or aircraft at the last foreign
port of departure, or fans to exhibit any certificate or other documents required to be
then exhibited, the owner or operator of such vessel or aircraft shall be liable for a fine
of not less than one hundred thousand pesos (₱100,000.00) but not more than three
hundred thousand pesos (₱300,000.00).

Bringing of Unmanifested arms, explosives or war equipment

The owner, operator, or agent of a vessel or aircraft arriving at a port in the Philippines
bearing cargo consisting of firearms, gunpowder, cartridges, dynamite or any other
explosives, munitions or equipment of war not contained in the manifest of the vessel or
aircraft, or which are concealed on board, shall be liable for a fine of not less than five
hundred thousand pesos (₱500,000.00) but not more than one million pesos
(₱1,000,000.00).

False Statement of Vessel’s or Aircraft’s Destination

When the master or pilot-in-command of a vessel or aircraft loaded with goods shall
make a false statement as to the next destination of such vessel or aircraft when that
information is required by a customs officer, the owner or operator of such vessel or
aircraft shall be liable for a fine of not less than one hundred thousand pesos
(₱100,000.00) but not more than three hundred thousand pesos (₱300,000.00). The
arrival of a vessel or aircraft at a different port other than the one it had been originally
authorized and cleared for without having been impelled to do so by necessity, shall
be prima facie proof that the original statement of the actual destination of the vessel or
aircraft was false.

Chapter 9 - RISK MANAGEMENT OFFICE

EXECUTIVE ORDER NO. 836- Transforming the risk management group of the
bureau of customs into risk management office

Structure. 

To ensure its integrity and autonomous character, the RMO is placed directly under the
Commissioner of Customs while its day-to-day operations shall be managed by the
Deputy Commissioner for the Intelligence Group, Bureau of Customs.

Functions. 

The RMO shall undertake the following functions:

a. Review and update parameters of the Selectivity Screen of the Selectivity System of
the Bureau of Customs;

b. Establish a viable system of setting and changing the said parameters;

c. Ensure an efficient and secure information pipeline from all sources to the RMO;

d. Conduct a continuing study/profile of importers, exporters and customs brokers; and

e. Maintain a database of all smuggling cases and related data; and

f. Recommend to the Commissioner of Customs policies and programs to increase

efficiency and effectivity of the BOC’s Selectivity System.

The Commissioner of Customs may impose additional functions to the RMO to ensure
that the aims and objectives of this order are achieved.

Composition of RMO

The RMO shall be headed by a chief of office and shall be composed, aside from the
administrative staff, the following units:

Strategic Assessment Unit shall be responsible for

the development and creation of policies for risk assessment which shall be nationwide in
scope. It shall Identify or profile personalities and modus operandi of those involved n the
importation and distribution of smuggled goods.
 

Research and Analysis Unit shall be responsible for

The Gathering of all information relating to the improvement of the selectivity screen such
as records of all shipments alerted, placed on hold, seized forfeit, and/ or finally disposed
off by OBC nationwide. To collate data pertaining to smuggled goods apprehended by
other law enforcement authorities outside the customs zone

To develop a database support system and a computer based risk management system for
enforcement

Operational Risk Assessment Unit shall perform the following task

To implement the policies created and developed by the Strategic Assessment Unit in
every port under the jurisdiction of the BOC

Implementing Authority.  The Deputy Commissioner of the Intelligence Group, in his

capacity as manager of the RMO, may recommend to the Commissioner of Customs
new policies and organizational improvements to the RMO to increase its efficiency.

Appropriations.  The necessary funding for the efficient and effective operations of the
RMO shall be taken from the original appropriations of the RMG to be augmented from
the available funds of the BOC. Its subsequent appropriations shall be incorporated into
the BOC’s budget proposals.

Oversight Function of the Office of the President Over the RMO.  The Office shall submit a
quarterly report of its work program and accomplishments to the Secretary of Finance
and the Office of the President.

Customs Warehouses
Customs Warehouses

Establishment and Supervision of Warehouses

When the business of the port requires such facilities, the District Collector, subject to
the approval of the Commissioner, shall designate and establish warehouses for use as
public and private bonded warehouses, yards, or for other special purposes. All such
warehouses and premises shall be subject to the supervision of the District Collector
who shall impose such conditions as may be deemed necessary for the protection of the
revenue, and of the goods stored therein. In the exercise of the District Collector's
supervisory functions herein and in the Bureau's implementation of this chapter, existing
contracts of private operators with appropriate government agency or regulator, such
as, but not limited to, the Philippine Ports Authority (PPA), Subic Bay Metropolitan
Authority (SBMA) and Phividec Industrial Authority (PIA) and their respective authorities
and powers already granted by law pertinent to such contracts, shall not be impaired or
adversely affected.

Goods manufactured in whole or in part of imported materials, and intended for

exportation, may be made and manufactured in a bonded manufacturing warehouse
subject to the following conditions;

The manufacturer shall file sufficient security for the faithful observance of all laws, rules
and regulations applicable thereto;

(2) The application for the establishment of bonded warehouses must be made in
writing and filed with the customs officer, describing the premises, the location, and
capacity of the same, and the purpose for which the building is to be used, pursuant to
Section 804 of this Act;

(3) From the receipt of the application, the customs officer shall examine the premises,
evaluate its location, construction, and means provided for the safekeeping of the
goods;

(4) The customs officer may authorize the establishment of the customs bonded
warehouse, and accept a bond for its operation and maintenance if the applicant was
compliant with the prescribed requirements; and

(5) The operator of the bonded warehouse shall pay an annual supervision fee in an
amount to be fixed by the Commissioner.

Classification of Warehouse under CMTA

Manufacturing
·         Miscellaneous Customs Bonded Warehouse

·         Customs Common Bonded Warehouse

·         Industry-specific Bonded Warehouse

Non-manufacturing

·         Public Bonded Warehouse

·         Private Bonded Warehouse

Other Customs Facilities

Other Classification of Warehouse

1.    Private Warehouse

2.    General  Bonded Warehouse

3.    Customs Bonded Warehouse

a)    Ordinary Customs Bonded Warehouse (CBW)

b)    Airlines Customs Bonded Warehouse (ACBW)

c)    Customs Common Bonded Warehouse (CCBW)

d)    Garments/Textile Manufacturing Bonded Warehouse (GTMBW)

e)    Industry-Specific Customs Bonded Warehouse (ICBW)

f)     Miscellaneous Manufacturing Bonded Warehouse (MMBW)

g)    Multinational Regional Bonded Warehouse (MRBW)

h)    Private Bonded Warehouse (PrBW)

i)     Public Bonded Warehouse (PuBW)

j)     Warehouses operated by Duty Free Philippines Corporation (DFPC)

Definition of various concepts involving warehouses.

1.    Accessories – refers to articles which neither raw materials nor supplies which
enhances the finished product to be exported.

2.    Airline Customs Bonded Warehouse (ACBW) – Airline Customs Bonded

Warehouse (ACBW) is a special type of CBW which caters to the needs pf the
international air carriers operating in the country.

3.    Customs Bonded Warehouse (CBW) – A customs bonded warehouse is a

traditional warehouse duly licensed by the Bureau of Customs wherein a Customs
Bonded Warehouseman, Sr. Storekeeper and CBW Guards, among others may be
assigned to supervise its activities and transactions with the BOC regarding imported
goods that may be stored without prepayment of customs duties and taxes.

4.    Customs Bonded Warehouse Operator -  is a natural or juridical person who has
duly approved license to operate a CBW issued by the BOC.

5.    Customs Common Bonded Warehouse (CCBW) – is a warehouse facility licensed

by BOC alone, and jointly with GTIS for garment industry, to import, receive, and store
raw materials, accessories, spare parts, supplies accessories and packaging materials for
the account of its accredited members for manufacture into finished products for
export.

6.    Garment and Textile Import Services (GTIS) – The government agency attached
to the Department of Trade and Industry mandated to assist the BOC  in granting
license to be an operator or to be a member or subcontractor of garments or textiles for
export.

7.    Garments/Textile Manufacturing Bonded Warehouse (GTMBW) -  is a

warehouse facility jointly licensed by the BOC and the GTIS through its accreditation
committee to import, receive and store garments, textiles, accessories and packaging
materials for manufacture into finished products for export.

8.    General Bonded Warehouse – Every building, structure, or other protected

enclosure which is duly licensed in accordance with law being rented out to the public in
general for storage at an agreed upon fee.

9.    Industry-Specific Customs Bonded Warehouse (ICBW) – is a warehouse facility

duly licensed by the BOC to import under bond and under its name and account raw
materials (except for fibers, yarns, fabrics and accessories for the manufacture of
garments) for storage and subsequent sale/transfer to the following where these shall
be manufactured into export products by:
a.    Licensed client/end user

b.    Customs Bonded Manufacturing Warehouse or

c.     PEZA or Freeport locator

10.  Licensed Member-  a natural or juridical person licensed by the BOC alone, or

jointly by the GTIS for garments industry, to be a member of a CCBW.

a.    Licensed client/end-user -  is a natural or juridical person licensed by the BOC to

be a client/end-user of ICBW

11.  Licensed Sub-contractor-  is a person or company licensed by the BOC and the

GTIS in case of garments, to undertake to perform, for a definite period, certain
manufacturing operations and activities incidental to the manufacture of bonded raw
materials into finished products in behalf of a licensed CBW due to the latter’s
insufficiency of operational facilities or the lack of material to meet export
commitments.

12.  Miscellaneous Manufacturing Bonded Warehouse (MMBW)- is a warehouse

facility licensed by the BOC to import receive and store raw materials, accessories and
packaging materials, except garments and textile, for manufacture into finished
products for export.

13.  Multinational Regional Bonded Warehouse (MRBW) – is a warehouse facility

licensed by the BOI in proper cases, to serve as a supply depot for the storage, deposit,
safekeeping of spare parts components, semi-finished product and raw materials
including the packing, covering, putting up, marking, labelling, cutting or altering to
customer’s satisfaction, mounting and/or packaging into kits or marketable lots thereof
to fill up transactions and sales made by its officer or parent companies and to serving
as a storage off goods purchased locally by the home office of the multinational for
export abroad under the supervision of the BOC.

14.  Open Bonded System -   the operation of a duly licensed CBW wherein the
tracking, monitoring and accounting of imported goods entered conditionally free
under the CBW Scheme is done by means of computer linkage, without the need of
assigning any customs personnel at the warehouse.

15.  Private Bonded Warehouse (PrBW) – Every building, structure, or other protected

enclosure in which commodity owned by the owner is kept for storage. PrBW is a
warehouse facility licensed by the BOC to import, receive and store articles for its
production intended for domestic consumption, withdrawal of which shall be made only
upon payment of duties taxes and other charges due thereon.

16.  Supplies – refer to the imported consumable and disposable indirect materials that
are needed in the maintenance, operation and production of a CBMW. Such materials
are not included in the formula of manufacture of the finished products and are not
duty/tax free unless authorized by BOI or exempted by the DOF.

17.  Warehouse- Any enclosed structure used for storage is a warehouse.

18.  Warehouse operated by the Duty Free Philippines Corporation (DFPC) – Duty

free Philippines (DFP) is a government entity created under E.O. No. 46 s.1986 has been
reorganized to become Duty-Free Philippines Corporation (DFPC).

To enable it to compete in the international tax and duty free market DFPC is entitled to
exemption from duties and taxes including excise tax and VAT relative to the
importation of merchandise for sale.

In order to avail of its exemption from the payment of duties and taxes on its
importation, DFPC continues to operate under customs bonded warehousing scheme.

Tax Exemption

          Imported raw materials, accessories, spare parts, labels hangers, cartons,
packaging materials and the like used in the manufacture of articles that are transferred 
to other bonded manufacturing warehouses or licensed members of subcontractors for
processing into finished product  and thereafter exported shall be exempt from
payment of any duties and taxes.

          Imported articles may be withdrawn for the warehouse either for manufacture
into export products; for repacking for distribution to foreign markets; for sale to
manufacturing bonded warehouses for transfer to sub-contractors or members of
common bonded manufacturing warehouse, or for domestic consumption. Those
articles withdrawn for domestic consumption shall be subject to payment of duties and
taxes.

 
·         Items that are brought into warehouses that are taxable and the
exception.  The privilege of exemption from payment of duties and taxes, however,
shall not apply to implements, machineries, spare parts and apparatuses, supplies and
tools to be used to construct, repair and operate any bonded manufacturing warehouse
unless these supplies and spare parts are indispensably needed in the production of
finished product for export subject to  presentation of Certificate of Qualification from
the DOF.

Conditions for entering goods into bonded manufacturing warehouse   

            Goods manufactured in whole or in part of imported materials, and intended for

exportation, may be made and manufactured in a bonded manufacturing Warehouse
Subject to the following conditions:

1.    The manufacturer shall file sufficient security for the faithful observance of all laws,
rules and regulations applicable thereto;

2.    The application for the establishment of bonded warehouses must be made in

writing and filed with the customs officer, describing the premises, the location, and
capacity of the same, and the purpose for which the building is to be used.

3.    From the receipt of the application, the customs officer shall examine the premises,
evaluate its location, construction, and means provided for the safekeeping of the
goods;

4.    The customs officer may authorize the establishment of the customs bonded
warehouse, and accept a bond for its operation and maintenance if the applicant was
compliant with the prescribed requirements; and

5.    The operator of the bonded warehouse shall pay annual supervision fee in an
amount to be fixed by the commissioner.

Types of Customs Facilities and Warehouse

Customs facilities and warehouse include:

a.    Container yard;
b.    Container freight station;

c.     Seaport warehouses;

d.    Airports warehouses

Subject to consultation with the NEDA and the DTI, and based on prevailing economic
circumstances, the Secretary of Finance may, upon the recommendation of the
Commissioner, create or dissolve certain types of warehouse.

Application for Operation of a Customs Warehouse.

          Application for the establishment of CBW and CFW shall be filed with the District
Collector where the CBW or CFW is located, describing the premises, location, capacity
and purpose thereof.

Upon receipt of such application, the District Collector shall examine the premises of
such proposed warehouse, particularly its location, construction and storage facilities.
The District Collector, with the approval of the Commissioner, may authorize the
establishment of customs warehouses, and accept the required security for its operation
and maintenance. The operator of such CBW and CFW shall pay an annual supervision
fee, as determined by the Commissioner.

Responsibility of Operators

The operator of a CBW or CFW shall comply with the customs requirements on
establishment, security, suitability and management, including stock-keeping and
accounting of the goods, of the CBW or CFW. Upon lawful demand, the operator of a
CBW or CFW shall allow authorized representatives of the Bureau access to the premises
at a reasonable time, and to all documents, books and records of accounts pertaining to
the operations of the CBW or CFW.

In case of loss of the goods stored in a CBW or CPW due to operator's gross negligence
or willful misconduct, the operator shall be liable for the payment of duties and taxes
due thereof. The government assumes no legal responsibility over the safekeeping of
goods stored in any customs warehouse, yard or premises.

 
Customs Control Over CBWs and CFW

The Bureau shall, for customs purposes, exercise control over, direct and manage CBWs
and CFWs pursuant to Section 303 of this CMTA and likewise over the goods thereat
pursuant to Section 301 of CMTA: Provided, That the Bureau shall not be liable for any
loss or damage of the goods stored for safekeeping in any CBW, CFW, yard or premises.

Discontinuance of CBW and CFW

The use of any CBW and CFW may be discontinued by the District Collector when
conditions so warrant, or upon receipt of a written request from the operator
thereof: Provided, That all the requirements of the laws and regulations have been
complied with by said operator. Where dutiable goods are stored in such premises, the
same must be removed at the risk and expense of the operator: Provided, However, That
the premises shall not be relinquished, and its use shall discontinued until after a careful
examination of the account of the warehouse shall have been made. Discontinuance of
the use of any warehouse shall be effective upon approval thereof by the District
Collector who shall, within ten (10) days, inform the Commissioner of such action in
writing.

Notice of discontinuance made by the operator shall not result in the discharge from
any duties, taxes, fees and other charges imposed on dutiable goods in said warehouse.

Warehousing Security on Goods Stored in CBW

For goods declared in the entry for warehousing in CBWs, the District Collector shall
require the importer to post a sufficient security equivalent to the computed duties,
taxes and other charges, conditioned upon the withdrawal of the goods within the
period prescribed by Section 811 of this Act or the payment of duties, taxes and other
charges and compliance with all importation requirements.

Automated Bonds Management System (ABMS)

Is the computerized system to be adopted by the BOC as a toll in the effective

monitoring and cancellation of bonds for the liquidation of raw materials/entries.
 

Procedure for the implementation of the E2M Customs System for the Automated
Bonds Management System

Types of bonds covered under the Automated Bonds Managements System of the e2m
Customs System:

a.    General Warehousing Bond;

b.    Special Warehousing Bond;

c.     Ordinary Re-export bond;

d.    General Transport Surety Bonds.

Bonds Policy Status

a.    Stored bond policy- One that has been lodge and submitted via the VASP and has
passed all validation rules set by the BOC.

b.    Mature bond policy- One against whose face value an assessment has been
charged. A bond cargo is considered matured when the obligation it seeks to guaranty
becomes due and demandable- based on the warehouse delay indicated in the
declaration

c.     Expired bond policy- one which has reached the validity period

d.    Outstanding bond charge- one awaiting liquidation within the allowable period.

Registration required to avail of ABMS

          All surety companies are required to be registered under the CPRS of the e2m
Customs System. Only Importers, warehouse operators and BOC-accredited surety
companies registered with CPRS pursuant to CMO 39-2008 shall be allowed to avail of
the ABMS I the e2m Customs System.

Creation of a Bond Account

1.    The importer/warehouse or his authorized representative shall create his Bond
Account by submitting his bond policy electronically via the VASP to the BOC-VASP
gateway.

2.    The VASP shall validate the captured data from bonds policy in accordance via the
validation rules provided by the BOC  and converts the data to XML format that is
compatible with the requirements of the BOC-VASP gateway.

3.    The e2m Customs system sends error or status message thru the same gateway to
the VASP which in turn notifies the applicant of the message received from BOC-VASP
gateway.

4.    If the bond application satisfies all system rules and is successfully lodge and
transmitted via VASP, the application shall be stored.

5.    Applicant then submits the hard copy of the bonds policy to the Bonds Division of
the port where he transacts.

6.    The bonds examiner receive the original bonds policy retrieve the file bond record
and verifies the bond information against the details in the original bond policy and
checks for the following: authenticity, validity and completeness of the submitted bonds
and the supporting documental accreditation of the surety company with the Bureau
and value of outstanding bonds issued by the surety company does not exceed the
maximum allowable coverage amount based on his accreditation information capability.

7.    Bonds examiner tags the bond either “EXAMINED”  to submit the document for
approval of the division chief, or “EXAMINED FAILED” to reject the document and return
the original bind to the importer or his duly authorized representative.

8.    If the application passes the examination by the bonds examiner, the original bonds
the forwarded to the Chief, Bonds Division who performs the completeness and
accuracy check (Bond account and bonds details) of the bond application details against
the hard copy of the policy submitted.

9.    The Bonds Division Chief either tags “EXAMINED APPROVED” to approve the bond
application or “EXAMINED REJECTED” to reject the application. The original bond is
returned to the importer or his duly authorized representative in case of rejection. Only
APPROVED bonds can be used as payment instrument by entity declarations.
10.  Approve bonds automatically generate importers bond account containing the
Bond Account Information. Account policies (one bond account can contain more than
one bond policy) and the Bond Charging/Cancellation history in ledger form.

11.  A bond owner can add more policies to his account by following the same
procedure during the first bond application. The Automated Bonds Management
System automatically adds the approved new policies to the ABMS system checks to the
existing bond accounts and consequently increase the value and extend the expiry date
of the said accounts. Individual liability dates of bond policies will still hold, that is,
expire policies available amount will not be part of the accounts available amount”

Bonds Charging

1.    The Import Assessment System (IAS) send request to the ABMS to charge against a
particular bond policy. The Warehousing Entry System (WES) and Transit/Transshipment
System (TTS) sends request to ABMS to charge against particular bond account. The
Temporary Imports System (TIS) sends request to the ABMS to charge against a
particular policy.

2.    For Warehousing Entry System (WES) and Transit/Transshipment System (TTS), the
ABMS system checks for the Bond Availability of the bond account, debits the amount
charged to the available bond balance and sends a “Charged Bond Notification”
message. The SAD successful Assessment Notification is the notification that the bond
charge is done based on the duties and taxes filed.

3.    For Temporary Imports System (TIS) the ABMS system checks for the Bond
Availability of the bond policy, charge the status of the bond policy to CHARGED and
sends a “Charged Bond Notification” message. The SAD successful Assessment
Notification is the notification that the bond charge is done based on the duties and
taxes filed.

4.    If the Bond Posted is insufficient an “Insufficient Bond Notification” is sent to the
importer through the Single Administrative System (SAD). The SAD notification will state
whether the Bond Account has sufficient balance.” (CMO No. 14-2012, Sec.4.2)

Bonds Cancellation
1.    The Automated Export Documentation System (AEDS), Transshipment Entry System
(TES) and the Raw materials Liquidation System (RMLS) sends a request for cancellation
of bonds charged through the system.

2.    The ABMS checks the bond maturity. If the bond is not mature, ABMS cancels the
bonds charged and reverts it to the original bond balance. The Bond Cancellation is
reflected in the ledger of accounts in the case of the Warehousing Entry System or the
Transit/Transshipment System. In the case of the TIS, the bond policy status is charged
to “Liquidated” for re-export bonds.

3.    In the case of computer systems breakdown or power failure which renders the
computer system non-operational, an importer may request for the manual cancellation
of the bonds by filling a letter-request with the District Collector for manual cancellation
and stating the reasons thereof. NO manual cancellation of bonds will be made unless
with the prior approval of the District Collector or the Deputy Commissioner, MISTG as
the case may be.

4.    Bonds cancelled manually shall still be electronically lodged as soon as practicable.

5.    The Chief, “Bonds Division shall submit a report on all manually cancelled bonds to
the Deputy Commissioner, MISTG”

Bonds Inquiry

1.    An importer may inquire on-line through the VASP his bond record and request for
the following information. List of outstanding bonds, list of filed bonds, list of charged
bonds including the maturity date and list of matured bonds.

Monitoring by the Collection Service

1.    The Collection Service of the Bureau shall be given access to the ABMS to view and
monitor all bonds accounts filed with the Bureau to ensure that surety companies strictly
adhere to the 70-30 compliance rate requirement.

2.    The Collection Service shall report to the Commissioner of Customs any surety
company found to be delinquent in its obligations and recommend the imposition of
sanctions against the same including the blacklisting thereof and revocation at its
Authority to Transact Business as Surety (ATBAS) with the Bureau.
Withdrawal of Goods from CBW

 Imported goods shall be withdrawn from the CBWs when the necessary withdrawal
permit has been filed, together with any related document required by any provision of
this Act and other regulations.

Goods entered under sufficient security as provided in Section 1507 of CMTA may be
withdrawn at any time for consumption, transit, or exportation. The withdrawal must be
made by the CBW operator or its duly authorized representative.

Release of Goods from CFWs.

Imported goods shall be released when the goods declaration is electronically lodged,
together with any related document required by any provision of this Act and other
regulations. AH goods entered into the CFWs shall be subject to the filing of a goods
declaration within the period specified under Section 407 of CMTA.

Period of Storage in CBWs

Goods entered for warehousing may remain in a CBW for a maximum period of one (1)
year from the time of its arrival thereat. For perishable goods, the storage period shall
be three (3) months from the date of arrival, extendible for valid reasons, and upon
written request, to another three (3) months. Goods not withdrawn after the expiration
of the prescribed period shall be deemed as abandoned, as provided under Section
1129 of CMTA.

The Commissioner shall, in consultation with the Secretary of Trade and Industry,
establish a reasonable storage period limit beyond one (1) year for bonded goods for
manufacturing and intended for export, the processing into finished products of which
requires a longer period based on industry standard and practice, subject to the
approval of the Secretary of Finance.

Exemption from Duty of Goods in CBWs

 Goods duly entered for warehousing in CBWs shall be exempt from duty and tax within
the allowed period for storage unless withdrawn for consumption, exportation or transit
to a free zone or another CBW, in which case, such withdrawal will be subject to the
applicable rules and regulations on the liquidation of the warehousing entry.

Records to be Kept by CBW Operators.

An account shall be kept by the Bureau of all goods delivered to a CBW, and a report
shall be made by the CBW operator containing a detailed statement of all imported
goods entered and withdrawn from the CBW. The Bureau shall specify the format of the
report and may require electronic submission.

All documents, books, and records of accounts concerning the operation of any CBW
shall, upon demand, be made available to the District Collector or the representative of
the District Collector for examination or audit. For record purposes, all documents shall
be kept for three (3) years.

WAREHOUSE RECEIPT LAW

THE ISSUE OF WAREHOUSE RECEIPTS

Persons who may issue receipts.

·         Warehouse receipts may be issued by any warehouseman.

Form of receipts; essential terms.

·         Warehouse receipts need not be in any particular form but every such receipt
must embody within its written or printed terms:

-       The location of the warehouse where the goods are stored,

-       The date of the issue of the receipt,

-       The consecutive number of the receipt,

-        A statement whether the goods received will be delivered to the bearer, to a
specified person or to a specified person or his order,

-       The rate of storage charges

-       A description of the goods or of the packages containing them,

-       The signature of the warehouseman which may be made by his authorized agent,

-       If the receipt is issued for goods of which the warehouseman is owner, either solely
or jointly or in common with others, the fact of such ownership, and

-        A statement of the amount of advances made and of liabilities incurred for which
the warehouseman claims a lien.  If the precise amount of such advances made or of
such liabilities incurred is, at the time of the issue of, unknown to the warehouseman or
to his agent who issues it, a statement of the fact that advances have been made or
liabilities incurred and the purpose thereof is sufficient.

A warehouseman shall be liable to any person injured thereby for all damages caused by
the omission from a negotiable receipt of any of the terms herein required.

Form of receipts - What terms may be inserted.

·         A warehouseman may insert in a receipt issued by him any other terms and
conditions provided that such terms and conditions shall not:

-       Be contrary to the provisions of Warehouse Receipt Law

-       In any wise impair his obligation to exercise that degree of care in the safe-keeping
of the goods entrusted to him which is reasonably careful man would exercise in regard
to similar goods of his own.

Non-negotiable receipt. -A receipt in which it is stated that the goods received will be
delivered to the depositor or to any other specified person, is a non-negotiable receipt.  

Negotiable receipt. — A receipt in which it is stated that the goods received will be
delivered to the bearer or to the order of any person named in such receipt is a
negotiable receipt.

No provision shall be inserted in a negotiable receipt that it is non-negotiable.  Such

provision, if inserted shall be void.

Duplicate receipts must be so marked.

 When more than one negotiable receipt is issued for the same goods, the word
"duplicate" shall be plainly placed upon the face of every such receipt, except the first
one issued.  A warehouseman shall be liable for all damages caused by his failure so to
do to any one who purchased the subsequent receipt for value supposing it to be an
original, even though the purchase be after the delivery of the goods by the
warehouseman to the holder of the original receipt.

Failure to mark "non-negotiable."

 A non-negotiable receipt shall have plainly placed upon its face by the warehouseman
issuing it "non-negotiable," or "not negotiable."  In case of the warehouseman's failure
so to do, a holder of the receipt who purchased it for value supposing it to be
negotiable, may, at his option, treat such receipt as imposing upon the warehouseman
the same liabilities he would have incurred had the receipt been negotiable.

OBLIGATIONS AND RIGHTS OF WAREHOUSEMEN UPON  THEIR RECEIPTS

Obligation of warehousemen to deliver.

 A warehouseman, in the absence of some lawful excuse provided by this Act, is bound
to deliver the goods upon a demand made either by the holder of a receipt for the
goods or by the depositor; if such demand is accompanied with:

-       An offer to satisfy the warehouseman's lien;

-       An offer to surrender the receipt, if negotiable, with such indorsements as would
be necessary for the negotiation of the receipt; and

-       A readiness and willingness to sign, when the goods are delivered, an
acknowledgment that they have been delivered, if such signature is requested by the
warehouseman.

In case the warehouseman refuses or fails to deliver the goods in compliance with a
demand by the holder or depositor so accompanied, the burden shall be upon the
warehouseman to establish the existence of a lawful excuse for such refusal.
Justification of warehouseman in delivering.

 A warehouseman is justified in delivering the goods, subject to the provisions of the

three following sections, to one who is:

-       The person lawfully entitled to the possession of the goods, or his agent;

-       A person who is either himself entitled to delivery by the terms of a non-
negotiable receipt issued for the goods, or who has written authority from the person so
entitled either indorsed upon the receipt or written upon another paper; or

-       A person in possession of a negotiable receipt by the terms of which the goods are
deliverable to him or order, or to bearer, or which has been indorsed to him or in blank
by the person to whom delivery was promised by the terms of the receipt or by his
mediate or immediate indorser.

 Warehouseman's liability for misdelivery.

Where a warehouseman delivers the goods to one who is not in fact lawfully entitled to
the possession of them, the warehouseman shall be liable as for conversion to all having
a right of property or possession  in the goods if he delivered the goods otherwise than
as authorized by subdivisions (b) and (c) of the preceding section, and though he
delivered the goods as authorized by said subdivisions, he shall be so liable, if prior to
such delivery he had either:

-       Been requested, by or on behalf of the person lawfully entitled to a right of

property or possession in the goods, not to make such deliver; or

-        Had information that the delivery about to be made was to one not lawfully
entitled to the possession of the goods.

Negotiable receipt must be cancelled when goods delivered.

 Except as provided in section thirty-six, where a warehouseman delivers goods for
which he had issued a negotiable receipt, the negotiation of which would transfer the
right to the possession of the goods, and fails to take up and cancel the receipt, he shall
be liable to any one who purchases for value in good faith such receipt, for failure to
deliver the goods to him, whether such purchaser acquired title to the receipt before or
after the delivery of the goods by the warehouseman. 

Negotiable receipts must be cancelled or marked when part of goods delivered. 

Except as provided in section thirty-six, where a warehouseman delivers part of the

goods for which he had issued a negotiable receipt and fails either to take up and
cancel such receipt or to place plainly upon it a statement of what goods or packages
have been delivered, he shall be liable to any one who purchases for value in good faith
such receipt, for failure to deliver all the goods specified in the receipt, whether such
purchaser acquired title to the receipt before or after the delivery of any portion of the
goods by the warehouseman.

Altered receipts.

 The alteration of a receipt shall not excuse the warehouseman who issued it from any
liability if such alteration was:

- Immaterial,

- Authorized, or

- Made without fraudulent intent.

If the alteration was authorized, the warehouseman shall be liable according to the
terms of the receipt as altered.  If the alteration was unauthorized but made without
fraudulent intent, the warehouseman shall be liable according to the terms of the
receipt as they were before alteration.

Material and fraudulent alteration of a receipt shall not excuse the warehouseman who
issued it from liability to deliver according to the terms of the receipt as originally
issued, the goods for which it was issued but shall excuse him from any other liability to
the person who made the alteration and to any person who took with notice of the
alteration.  Any purchaser of the receipt for value without notice of the alteration shall
acquire the same rights against the warehouseman which such purchaser would have
acquired if the receipt had not been altered at the time of purchase.

Lost or destroyed receipts.

 Where a negotiable receipt has been lost or destroyed, a court of competent

jurisdiction may order the delivery of the goods upon satisfactory proof of such loss or
destruction and upon the giving of a bond with sufficient sureties to be approved by the
court to protect the warehouseman from any liability or expense, which he or any
person injured by such delivery may incur by reason of the original receipt remaining
outstanding.  The court may also in its discretion order the payment of the
warehouseman's reasonable costs and counsel fees.

The delivery of the goods under an order of the court as provided in this section, shall
not relieve the warehouseman from liability to a person to whom the negotiable receipt
has been or shall be negotiated for value without notice of the proceedings or of the
delivery of the goods.  

Effect of duplicate receipts.

A receipt upon the face of which the word "duplicate" is plainly placed is a
representation and warranty by the warehouseman that such receipt is an accurate copy
of an original receipt properly issued and uncanceled at the date of the issue of the
duplicate, but shall impose upon him no other liability.

Warehouseman cannot set up title in himself .

 No title or right to the possession of the goods, on the part of the warehouseman,
unless such title or right is derived directly or indirectly from a transfer made by the
depositor at the time of or subsequent to the deposit for storage, or from the
warehouseman's lien, shall excuse the warehouseman from liability for refusing to
deliver the goods according to the terms of the receipt.

Interpleader of adverse claimants.

 If more than one person claims the title or possession of the goods, the warehouseman
may, either as a defense to an action brought against him for non-delivery of the goods
or as an original suit, whichever is appropriate, require all known claimants to interplead.

Warehouseman has reasonable time to determine validity of claims.

If someone other than the depositor or person claiming under him has a claim to the
title or possession of goods, and the warehouseman has information of such claim, the
warehouseman shall be excused from liability for refusing to deliver the goods, either to
the depositor or person claiming under him or to the adverse claimant until the
warehouseman has had a reasonable time to ascertain the validity of the adverse claim
or to bring legal proceedings to compel claimants to interplead.

Adverse title is no defense except as above provided.

 Except as provided in the two preceding sections and in sections nine and thirty-six, no
right or title of a third person shall be a defense to an action brought by the depositor
or person claiming under him against the warehouseman for failure to deliver the goods
according to the terms of the receipt.

Liability for non-existence or misdescription of goods.

 A warehouseman shall be liable to the holder of a receipt for damages caused by the
non-existence of the goods or by the failure of the goods to correspond with the
description thereof in the receipt at the time of its issue.  If, however, the goods are
described  in a receipt merely by a statement of marks or labels upon them or upon
packages containing them or by a statement that the goods are said to be goods of a
certain kind or that the packages containing the goods are said to contain goods of a
certain kind or by words of like purport, such statements, if true, shall not make liable
the warehouseman issuing the receipt, although the goods are not of the kind which the
marks or labels upon them indicate or of the kind they were said to be by the depositor.

Liability for care of goods.

A warehouseman shall be liable for any loss or injury to the goods caused by his failure
to exercise such care in regard to them as reasonably careful owner of similar goods
would exercise, but he shall not be liable, in the absence of an agreement to the
contrary, for any loss or injury to the goods which could not have been avoided by the
exercise of such care.

Goods must be kept separate.

 Except as provided in the following section, a warehouseman shall keep the goods so
far separate from goods of other depositors and from other goods of the same
depositor for which a separate receipt has been issued, as to permit at all times the
identification and redelivery of the goods deposited.
Fungible goods may be commingled if warehouseman authorized.

 If authorized by agreement or by custom, a warehouseman may mingle fungible goods

with other goods of the same kind and grade.  In such case, the various depositors of
the mingled goods shall own the entire mass in common and each depositor shall be
entitled to such portion thereof as the amount deposited by him bears to the whole. 

Liability of warehouseman to depositors of commingled goods.

 The warehouseman shall be severally liable to each depositor for the care and
redelivery of his share of such mass to the same extent and under the same
circumstances as if the goods had been kept separate.

Attachment or levy upon goods for which a negotiable receipt has been issued. 

If goods are delivered to a warehouseman by the owner or by a person whose act in

conveying the title to them to a purchaser in good faith for value would bind the owner,
and a negotiable receipt is issued for them, they cannot         thereafter, while in the
possession of the warehouseman, be attached by garnishment or otherwise, or be levied
upon under an execution unless the receipt be first surrendered to the warehouseman
or its negotiation enjoined.  The warehouseman shall in no case be compelled to deliver
up the actual possession of the goods until the receipt is surrendered to him or
impounded by the court.

Creditor's remedies to reach negotiable receipts.

 A creditor whose debtor is the owner of a negotiable receipt shall be entitled to such
aid from courts of appropriate jurisdiction, by injunction and otherwise, in attaching
such receipt or in satisfying the claim by means thereof as is allowed at law or in equity
in these islands in regard to property which cannot readily be attached or levied upon
by ordinary legal process.

What claims are included in the warehouseman's lien.

Subject to the provisions of section thirty, a warehouseman shall have a lien on goods
deposited or on the proceeds thereof in his hands, for all lawful charges for storage and
preservation of the goods; also for all lawful claims for money advanced, interest,
insurance, transportation, labor, weighing, coopering and other charges and expenses in
relation to such goods, also for all reasonable charges and expenses for notice, and
advertisements of sale, and for sale of the goods where default had been made in
satisfying the warehouseman's lien.

Against what property the lien may be enforced.

Subject to the provisions of section thirty, a warehouseman's lien may be enforced:

-       Against all goods, whenever deposited, belonging to the person who is liable as
debtor for the claims in regard to which the lien is asserted, and

-       Against all goods belonging to others which have been deposited at any time by
the person who is liable as debtor for the claims in regard to which the lien is asserted if
such person had been so entrusted with the possession of goods that a pledge of the
same by him at the time of the deposit to one who took the goods in good faith for
value would have been valid.

How the lien may be lost. A warehouseman loses his lien upon goods:

-       By surrendering possession thereof, or

-       By refusing to deliver the goods when a demand is made with which he is bound
to comply under the provisions of this Act.

Negotiable receipt must state charges for which the lien is claimed.

If a negotiable receipt is issued for goods, the warehouseman shall have no lien thereon
except for charges for storage of goods subsequent to the date of the receipt unless the
receipt expressly enumerated other charges for which a lien is claimed.  In such case,
there shall be a lien for the charges enumerated so far as they are within the terms of
section twenty-seven although the amount of the charges so enumerated is not stated
in the receipt.

Warehouseman need not deliver until lien is satisfied.

 A warehouseman having a lien valid against the person demanding the goods may
refuse to deliver the goods to him until the lien is satisfied.

Warehouseman's lien does not preclude other remedies.

 Whether a warehouseman has or has not a lien upon the goods, he is entitled to all
remedies allowed by law to a creditor against a debtor for the collection from the
depositor of all charges and advances which the depositor has expressly or impliedly
contracted with the warehouseman to pay.

Satisfaction of lien by sale

 A warehouseman's lien for a claim which has become due may be satisfied as follows:

-       An itemized statement  of the warehouseman's claim, showing the sum due at the
time of the notice and the date or dates when it becomes due,

-       A brief description of the goods against which the lien exists,

-       A demand that the amount of the claim as stated in the notice of such further
claim as shall accrue, shall be paid on or before a day mentioned, not less than ten days
from the delivery of the notice if it is personally delivered, or from the time when the
notice shall reach its destination, according to the due course of post, if the notice is
sent by mail, 

-       A statement that unless the claim is paid within the time specified, the goods will
be advertised for sale and sold by auction at a specified time and place.

In accordance with the terms of a notice so given, a sale of the goods by auction may be
had to satisfy any valid claim of the warehouseman for which he has a lien on the
goods.  The sale shall be had in the place where the lien was acquired, or, if such place is
manifestly unsuitable for the purpose of the claim specified in the notice to the
depositor has elapsed, and advertisement of the sale, describing the goods to be sold,
and stating the name of the owner or person on whose account the goods are held, and
the time and place of the sale, shall be published once a week for two consecutive
weeks in a newspaper published in the place where such sale is to be held.  The sale
shall not be held less than fifteen days from the time of the first publication.  If there is
no newspaper published in such place, the advertisement shall be posted at least ten
days before such sale in not less than six conspicuous places therein. 

From the proceeds of such sale, the warehouseman shall satisfy his lien including the
reasonable charges of notice, advertisement and sale.  The balance, if any, of such
proceeds shall be held by the warehouseman and delivered on demand to the person to
whom he would have been bound to deliver or justified in delivering goods.

At any time before the goods are so sold, any person claiming a right of property or
possession therein may pay the warehouseman the amount necessary to satisfy his lien
and to pay the reasonable expenses and liabilities incurred in serving notices and
advertising and preparing for the sale up to the time of such payment.  The
warehouseman shall deliver the goods to the person making payment if he is a person
entitled, under the provision of this Act, to the possession of the goods on payment of
charges thereon.  Otherwise, the warehouseman shall retain the possession of the goods
according to the terms of the original contract of deposit. 

Perishable and hazardous goods.

If goods are of a perishable nature, or by keeping will deteriorate greatly in value, or, by
their order, leakage, inflammability, or explosive nature, will be liable to injure other
property , the warehouseman may give such notice to the owner or to the person in
whose names the goods are stored, as is reasonable and possible under the
circumstances, to satisfy the lien upon such goods and to remove them from the
warehouse and in the event of the failure of such person to satisfy the lien and to
receive the goods within the time so specified, the warehouseman may sell the goods at
public or private sale without advertising.  If the warehouseman, after a reasonable
effort, is unable to sell such goods, he may dispose of them in any lawful manner and
shall incur no liability by reason thereof.

The proceeds of any sale made under the terms of this section shall be disposed of in
the same way as the proceeds of sales made under the terms of the preceding section.

Other methods of enforcing lien

The remedy for enforcing a lien herein provided does not preclude any other remedies
allowed by law for the enforcement of a lien against personal property nor bar the right
to recover so much of the warehouseman's claim as shall not be paid by the proceeds of
the sale of the property.

Effect of sale

After goods have been lawfully sold to satisfy a warehouseman's lien, or have been
lawfully sold or disposed of because of their perishable or hazardous nature, the
warehouseman shall not thereafter be liable for failure to deliver the goods to the
depositor or owner of the goods or to a holder of the receipt given for the goods when
they were deposited, even if such receipt be negotiable.

NEGOTIATION AND TRANSFER OF RECEIPTS

Negotiation of negotiable receipt of delivery

A negotiable receipt may be negotiated by delivery:

-       Where, by terms of the receipt, the warehouseman undertakes to deliver the goods
to the bearer, or

-       Where, by the terms of the receipt, the warehouseman undertakes to deliver the
goods to the order of a specified person, and such person or a subsequent indorsee of
the receipt has indorsed it in blank or to bearer.  

Where, by the terms of a negotiable receipt, the goods are deliverable to bearer or
where a negotiable receipt has been indorsed in blank or to bearer, any holder may
indorse the same to himself or to any other specified person, and, in such case, the
receipt shall thereafter be negotiated only by the indorsement of such indorsee.

Negotiation of negotiable receipt by indorsement

A negotiable receipt may be negotiated by the indorsement of the person to whose

order the goods are, by the terms of the receipt, deliverable.  Such indorsement may be
in blank, to bearer or to a specified person.  If indorsed to a specified person, it may be
again negotiated by the indorsement of such person in blank, to bearer or to another
specified person.  Subsequent negotiation may be made in like manner.

Transfer of receipt

A receipt which is not in such form that it can be negotiated by delivery may be
transferred by the holder by delivery to a purchaser or donee.

 
A non-negotiable receipt can not be negotiated, and the indorsement of such a receipt
gives the transferee no additional right.

Who may negotiate a receipt

A negotiable receipt may be negotiated:

-       By the owner thereof, or

-       By any person to whom the possession or custody of the receipt has been
entrusted by the owner, if, by the terms of the receipt, the warehouseman undertakes to
deliver the goods to the order of the person to whom the possession or custody of the
receipt has been entrusted, or if, at the time of such entrusting, the receipt is in such
form that it may be negotiated by delivery.

Rights of person to whom a receipt has been negotiated.

A person to whom a negotiable receipt has been duly negotiated acquires thereby:

-       Such title to the goods as the person negotiating the receipt to him had or had
ability to convey to a purchaser in good faith for value, and also such title to the goods
as the depositor or person to whose order the goods were to be delivered by the terms
of the receipt had or had ability to convey to a purchaser in good faith for value, and

-       The direct obligation of the warehouseman to hold possession of the goods for
him according to the terms of the receipt as fully as if the warehouseman and
contracted directly with him.

Rights of person to whom receipt has been transferred.

A person to whom a receipt has been transferred but not negotiated acquires thereby,
as against the transferor, the title of the goods subject to the terms of any agreement
with the transferor.

If the receipt is non-negotiable, such person also acquires the right to notify the
warehouseman of the transfer to him of such receipt and thereby to acquire the direct
obligation of the warehouseman to hold possession of the goods for him according to
the terms of the receipt.

Prior to the notification of the warehouseman by the transferor or transferee of a non-

negotiable receipt, the title of the transferee to the goods and the right to acquire the
obligation of the warehouseman may be defeated by the levy of an attachment or
execution upon the goods by a creditor of the transferor or by a notification to the
warehouseman by the transferor or a subsequent purchaser from the transferor of a
subsequent sale of the goods by the transferor.

Transfer of negotiable receipt without indorsement.

Where a negotiable receipt is transferred for value by delivery and the indorsement of
the transferor is essential for negotiation, the transferee acquires a right against the
transferor to compel him to indorse the receipt unless a contrary intention appears.  The
negotiation shall take effect as of the time when the indorsement is actually made.

Warranties of a sale of receipt.

A person who, for value, negotiates or transfers a receipt by indorsement or delivery,

including one who assigns for value a claim secured by a receipt, unless a contrary
intention appears, warrants:

-       That the receipt is genuine,

-       That he has a legal right to negotiate or transfer it,

-       That he has knowledge of no fact which would impair the validity or worth of the
receipt, and

-       That he has a right to transfer the title to the goods and that the goods are
merchantable or fit for a particular purpose whenever such warranties would have been
implied, if the contract of the parties had been to transfer without a receipt of the goods
represented thereby.

Indorser not a guarantor

The indorsement of a receipt shall not make the indorser liable for any failure on the
part of the warehouseman or previous indorsers of the receipt to fulfill their respective
obligations.

No warranty implied from accepting payment of a debt.

 A mortgagee, pledgee, or holder for security of a receipt who, in good faith, demands
or receives payment of the debt for which such receipt is security, whether from a party
to a draft drawn for such debt or from any other person, shall not, by so doing, be
deemed to represent or to warrant the genuineness of such receipt or the quantity or
quality of the goods therein described.

When negotiation not impaired by fraud, mistake or duress.

 The validity of the negotiation of a receipt is not impaired by the fact that such
negotiation was a breach of duty on the part of the person making the negotiation or
by the fact that the owner of the receipt was induced by fraud, mistake or duress or to
entrust the possession or custody of the receipt to such person, if the person to whom
the receipt was negotiated or a person to whom the receipt was subsequently
negotiated paid value therefor, without notice of the breach of duty, or fraud, mistake or
duress.

Subsequent negotiation.

 Where a person having sold, mortgaged, or pledged goods which are in warehouse and
for which a negotiable receipt has been issued, or having sold, mortgaged, or pledged
the negotiable receipt representing such goods, continues in possession of the
negotiable receipt, the subsequent negotiation thereof by the person under any sale or
other disposition thereof to any person receiving the same in good faith, for value and
without notice of the previous sale, mortgage or pledge, shall have the same effect as if
the first purchaser of the goods or receipt had expressly authorized the subsequent
negotiation.

Negotiation defeats vendor's lien

Where a negotiable receipt has been issued for goods, no seller's lien or right of
stoppage in transitu shall defeat the rights of any purchaser for value in good faith to
whom such receipt has been negotiated, whether such negotiation be prior or
subsequent to the notification to the warehouseman who issued such receipt of the
seller's claim to a lien or right of stoppage in transitu.  Nor shall the warehouseman be
obliged to deliver or justified in delivering the goods to an unpaid seller unless the
receipt is first surrendered for cancellation.  

CRIMINAL OFFENSES

Issue of receipt for goods not received.

A warehouseman, or an officer, agent, or servant of a warehouseman who issues or aids

in issuing a receipt knowing that the goods for which such receipt is issued have not
been actually received by such warehouseman, or are not under his actual control at the
time of issuing such receipt, shall be guilty of a crime, and, upon conviction, shall be
punished for each offense by imprisonment not exceeding five years, or by a fine not
exceeding ten thousand pesos, or both.

Issue of receipt containing false statement.

A warehouseman, or any officer, agent or servant of a warehouseman who fraudulently

issues or aids in fraudulently issuing a receipt for goods knowing that it contains any
false statement, shall be guilty of a crime, and upon conviction, shall be punished for
each offense by imprisonment not exceeding one year, or by a fine not exceeding two
thousand pesos, or by both.

Issue of duplicate receipt not so marked

 A warehouse, or any officer, agent, or servant of a warehouseman who issues or aids in

issuing a duplicate or additional negotiable receipt for goods knowing that a former
negotiable receipt for the same goods or any part of them is outstanding and
uncanceled, without plainly placing upon the face thereof the word "duplicate" except in
the case of  a lost or destroyed receipt after proceedings are provided for in section
fourteen, shall be guilty of a crime, and, upon conviction, shall be punished for each
offense by imprisonment not exceeding five years, or by a fine not exceeding ten
thousand pesos, or by both.

Issue for warehouseman's goods or receipts which do not state that fact

Where they are deposited with or held by a warehouseman goods of which he is owner,
either solely or jointly or in common with others, such warehouseman, or any of his
officers, agents, or servants who, knowing this ownership, issues or aids in issuing a
negotiable receipt for such goods which does not state such ownership, shall be guilty
of a crime, and, upon conviction, shall be punished for each offense by imprisonment
not exceeding one year, or by a fine not exceeding two thousand pesos, or by both.

Delivery of goods without obtaining negotiable receipt

 A warehouseman, or any officer, agent, or servant of a warehouseman, who delivers

goods out of the possession of such warehouseman, knowing that a negotiable receipt
the negotiation of which would transfer the right to the possession of such goods is
outstanding and uncanceled, without obtaining the possession of such receipt at or
before the time of such delivery, shall, except in the cases provided for in sections
fourteen and thirty-six, be found guilty of a crime, and, upon conviction, shall be
punished for each offense by imprisonment not exceeding one year, or by a fine not
exceeding two thousand pesos, or by both.

Negotiation of receipt for mortgaged goods.

 Any person who deposits goods to which he has no title, or upon which there is a lien
or mortgage, and who takes for such goods a negotiable receipt which he afterwards
negotiates for value with intent to deceive and without disclosing his want of title or the
existence of the lien or mortgage, shall be guilty of a crime, and, upon conviction, shall
be punished for each offense by imprisonment not exceeding one year, or by a fine not
exceeding two thousand pesos, or by both.

REVISED RULES AND REGULATION FOR THE ESTABLISHMENT, OPERATION,

SUPERVISION AND CONTROL OF CUSTOMS BONDED WAREHOUSE.

Objectives

·         To enhance the rules and regulations for the establishment, operation, supervision
and control of Customs Bonded Warehouses (CBWs) and guard against possible
leakages arising therefrom.

·         To introduce into the CBW scheme computerized systems and more transparent
procedures which would aid the Bureau of Customs (BOC) in the monitoring, supervision
and control of CBW operations.
·         To align Customs regulations on CBWs with international standards and best
practices.

GENERAL PROVISIONS

1.    The BOC is responsible for the licensing, supervision and control of all CBW’s
including its extension warehouses, licensed members and licensed subcontractors.
Subcontractors located in PEZA or freeports shall likewise be subject to monitoring by
the Bureau of Customs upon proper coordination with the relevant agency concerned

2.    A CBW and variants thereof include the surrounding premises within its perimeter
fenced per approved applications, rooms, compartments, and other areas necessary and
exclusively used for sorting, processing, re-packing, and manufacturing imported raw
materials and the finished product, by-products, wastages and rejects incident to such
activities as applied for and approved by the BOC. No other establishment shall be
allowed thereat except upon proper approval of the BOC and under such conditions as
may be imposed by the BOC.

3.    During the transition period from the present system to the open bonded
warehouse system, the BOC shall, as far as practicable, institute new methods and
techniques in the supervision and control of CBW’s. these shall include, but not limited
to, the computerization of all CBW bonded warehouse system.

4.    Terms and Condition of Licensed to Operate a CBW:

a)    Imported raw materials, accessories, spare parts, labels, hangers, cartons, packaging
materials and the like used in the manufacture of articles that are transferred to another
bonded manufacturing warehouse or licensed members or subcontractor for processing
into finished products and thereafter exported shall be exempt from payment of any
duties and taxes.

Imported articles may be withdrawn from the warehouse either for manufacture into
export products; repacking for distribution to foreign markets; for sale to manufacturing
bonded warehouse; for transfer to subcontractor or member of common bonded
manufacturing warehouses, or for domestic consumption. Those articles withdrawn for
domestic consumption shall be subject to payment of duties and taxes.

The privilege of exemption from payment of duties and taxes, however, shall not apply
to implements, machineries, spare parts and apparatuses, supplies and tools to be used
to construct, repair or operate any bonded manufacturing warehouse unless these
supplies and spare parts are indispensably needed in the production of finished
products for exports subject to presentations of a certificate of qualification from BOI
and corresponding exemption from the DOF.

b)    The visitorial powers of BOC shall extend to all CBW’s, including their extensions,
licensed members, end-user/ clients and subcontractors. In case of end-user
clients/subcontractor located in PEZA or freeport, the exercise by the BOC of its
visitorial power shall always be with prior notice to the locator/enterprise concerned and
limited to a specific transaction through proper coordination with the government
agency concerned.

c)    Articles not used by manufacturing bonded warehouses within the prescribed

period pursuant to section 2002 paragraph b of the Tariff and Customs Code of the
Philippines, as amended (TCCP) shall be liable for payment of duties and taxes. In case
of other types of warehouses, articles are not withdrawn at the expiration of the
prescribed period shall be deemed abandoned and Ipso facto  forfeited in favor of the
government to be sold at public auction by the district collector by the district collector
pursuant o section 1908, of the TCCP.

d)    The importer shall within a non-extendible period of sixty (60) days from the date of
complete and full exportation, submit the complete documents required for the
liquidation of entry. The same period shall likewise be given to importers for the
submission of the importer for the submission of the complete documents required for
the liquidation of the warehousing entry even in cases where complete exportation is
made before the expiration of the period prescribed. Notwithstanding the foregoing,
the maximum period within which to submit complete liquidation documents is thirty
(30) days from the expiration of the of the storage period

The imposition of the period herein prescribed shall be without prejudice to existing
rules and regulations.

e)    Companies which are non-small or medium scale are encourage to establish their
own Customs Bonded Manufacturing Warehouse (CBMW). A CCBMW shall further
maintain a capitalization equivalent to a Large-Scale Industry in accordance with R.A
6977 as amended by R.A. 8289 or a minimum paid up capitalization of Php
20,000,000.00

f)     A CCBW or an ICBW operator shall likewise have an examination and storage facility
which is secured area with sufficient space for the inspection and subsequent storage
and safekeeping of imported goods prior to their delivery to licensed members or
licensed client/end-user, as the case mat be. It shall also have the necessary logistical
support needed for the proper handling of such imported articles.
g)    The license to operate a CBW is personal to the warehouse and shall not be
transferred or assigned for whatever reason.

h)    A licensed extension warehouse or a licensed sub-contractor of a manufacturing

bonded warehouse should be preferably be located within the collection district where
the main warehouse is registered except a subcontractor located in the PEZA or
Freeport zone.

i)     Any person, natural or juridical, found to be operating as abounded warehouse

without a valid customs license, shall be barred from being granted any warehousing
privileges.

j)     Any misrepresentation, false statement or non-disclosure of any material

information required in any material information required in any application shall be a
ground for its disapproval without prejudice to any administrative/ criminal charges as
may be proper.

k)    Any misrepresentation, false statement or non-disclosure of any required material

information discovered after the issuance of a license to operate a CBW shall be ground
for the revocation/cancellation of such license.

ADMINISTRATIVE PROVISIONS

·         Application for a License to Operate a CBW- The application to operate a CBW

shall be submitted to the commissioner of customs through the district collector for
evaluation y the BWC, except the application to operate a Multinational Regional
Bonded Warehouse which shall be filed with the Board of Investments (BOI). In the latter
case, the approval of the application, upon recommendation of the BOC, shall be in
accordance with the BOI’s rules and regulations.

·         Application for License to Operate as Member, Subcontractor or Client/end

user-  The application for the license to operate as member, subcontractor or client/end
user shall likewise be submitted to the Commissioner of Customs through the District
Collector for evaluation by the BWC.

·         Relevant Documentary Requirements- Together with such application, relevant

documents such as, but not limited to, BOI, DTI, Freeport Authority, PEZA and other
applicable agency indorsements shall be submitted. Also, favorable indorsements from
relevant business industry association/federation may be submitted in support of the
application

Further, in case the applicant is already a BOC accredited importer, the CAS
Accreditation Certificate together with the Information Validation Service Providers
(IVSP’s) favorable recommendation shall be submitted together with the application.

·         Evaluation of the Application  the District Collector of Customs of the port shall,

within five (5) days from receipt of the application pass upon the merits of the said
applications prior to submission to the BWC for final evaluation and recommendation.
The BWC act on the application within fifteen (15) days from receipt of the indorsement
of the District Collector.

For the licensing of members and subcontractor in case of garments, the BOC and the
GTIS shall coordinate and come up with a policy to expedite the accreditation of
members and subcontractors.

·         Approval of the Application – The Commissioner of Customs shall act on the

application as endorsed by the Chairman, BWC within fifteen (15) days from the receipt
of such endorsement. The approval shall be evidenced by a Certificate of License to
Operate. Such Certificate of License to Operate shall be conspicuously displayed at all
timed at the CBW’s offices.

Other amended Certificates shall also be issued upon the approval and/or notation of
an application in case of any subsequent change in company name, address, certificate
or renewal, etc.

·         Submission of the Audited Financial Statements  - For monitoring purposes,

the CBW operator shall submit its annual Audited Financial Statements for the
immediately  preceding calendar or fiscal year, as the case may be to be the Operating
Division copy furnished to the WCD or its equivalent unit within ten (10) days from its
filling/submission to the Bureau of Internal Revenue.

·         Assignment of Customs Personnel -  Unless the Commissioner provides

otherwise, the District Collector having jurisdiction over the CBW shall assign such
number of customs personnel necessary to supervise the operation of the CBW.

The CBW operator shall provide the customs personnel with suitable working areas
complete with office equipment and supplies.
·         Work Hours -  Customs employees assigned to the CBW’s shall strictly observe
regular office hours and record their attendance in accordance with Civil Service rules
and regulations. The CBW operator shall promptly report to the District Collector any
unauthorized absences. The services of customs personnel requested by the operator
which are performed outside the regular office hours, including Saturdays, Sundays and
holidays, shall be considered overtime.

·         Locks and Keys – the door/entrance to a CBW and the designated compartments
for raw materials, finished goods and wastages, rejects and by-products shall have two
(2) locks each. One set shall be maintained by the CBW warehouseman and the other by
CBW Operator. All duplicate keys for locks held by the customs Warehouseman shall be
kept by the Chief, Warehousing Operating Division or equivalent unit.

·         Principal Books and Records -  The commissioner of Customs shall require a

CBW operator to maintain a Principal book which shall contain information relevant to
the operation of the CBW including all documents on its operations according to the
period required by section 3514, of the TCCP. A separate principal book shall also be
maintained kept at the Bonded Warehouse Division/ unit concerned.

·         Audit – Periodic Audits shall be conducted on a CBW for the purpose of

monitoring its operations as well as to determine its compliance with governing rules
and regulations.

There shall be established a Compliance Rate System (CRS) which shall be utilized to
measure and assess the compliance and performance levels of all CBW’s especially with
regard to applicable laws, rules and regulations and other performance factors like
import-export and economic viability, among others. The CRS shall be utilized by the
BOC as a risk management mechanism in its evaluation of any application or used as
bass in any action which may be taken by the BOC for or against a CBW.

·         Renewal of License-   An application for renewal of license by a CBW or for

License as member, subcontractor or client/end user shall be filed every two (2) years
with the BWC thru the district collector of the port.

A certificate of Renewal of License shall be issued for every renewal which shall be
conspicuously displayed at all times at the CBW’s offices.

·         Raw Materials Importation – CBWs may import articles a authorized by the BOC
and/ or other government regulatory agencies.
·         Stock Inventory -  In order to effectively monitor the stock inventory of all CBWs,
ARMIMS shall be established and utilized with linkage to the BOC.

·         Transfer of CBW Articles- Unless the District Collector allows direct transfer,

articles imported by CBWs shall be examined, appraised and bonds filed before these
are transferred.

CUSTOMS BONDED WAREHOUSE

Objectives.

-       To provide the guidelines for the establishment, operation, supervision, and
control of CBWS.

-       To protect revenue through the institution of safeguard and control

-       To define the rights and corresponding obligations of operators of CBWs.

-       To improve level of compliance of CBW operators with customs warehousing laws
and regulations and provide penalties for non-compliance.

-       To establish, develop and implement a CBW management system making full use
of information and communications technology.

General Provisions

Establishment of Customs Warehouses. When the business of the port and trade

requires such facilities, the District Collector, subject to the approval of the
Commissioner, shall designate and establish customs warehouses for the storage of
imported goods or for other special purposes.

Supervision and Control over Customs Warehouses. Al warehouses and facilities,

including their expansion, extensions and additional facilities shall be subject to the
supervision and control of the District Collector for the protection of government
revenue, and of the goods stored. The supervision and control of the District Collector
over warehouses shall extend to the warehouse and facilities of duly authorized
members, client, exporters and sub-contractors of CBWS.

In cases where the client-exporter of ICBW or sub-contractor of Manufacturing Customs

Bonded Warehouse (MCEW) is also a locator in Free Zones', the exercise of supervision
and control shall be made in coordination with the government agency concerned

Types of Customs Bonded Warehouse.

-       Manufacturing Customs Bonded Warehouse (MCBW). It Is a warehouse facility

established for the manufacture of products utilizing raw materials or components that
are imported duty and tax-free conditioned on the exportation of the finished products
within the period prescribed herein or withdrawal for domestic consumption upon
payment of duties and taxes. A MCBW shall include:

-       Miscellaneous Manufacturing Bonded Warehouse (MMBW). It is a warehouse

facility established and duly authorized to import, receive, and store, duty and tax free
and under bond, raw materials, accessories, packaging and packing materials for
products and commodities not covered under any specific industry, for manufacture
into finished products for export within a specified period.

-       Garments and Textiles Manufacturing Bonded Warehouse (GTBW). It is a

warehouse facility established and jointly authorized by the Bureau and the GTIDO to
import, receive, and store duty and tax free and under bond, raw materials, accessories,
packaging and packing materials for the manufacture of garments or textiles for export
within a specified period.! c. Customs Common Bonded Warehouse (CCBW). It is a
warehouse facility established and duly authorized by the Bureau alone and jointly with
GTIDO, in case of garments industry, to import, receive, and store, duty free and under
bond, raw materials, accessories, packaging and packing materials for the account of its
accredited members for manufacture into finished products for export.

-       Industry-Specific Customs Bonded Warehouse (ICBW), It is a warehouse facility

duly licensed by the BOC to import under bond and under its name and account, raw
materials (except fibers, yarns, fabrics and accessories for the manufacture of garments)
for storage and subsequent sale and transfer to the following where these shall be
manufactured into export products:

 
i. Licensed client exporter;

ii. MCBW; or

iii. PEZA or Freeport locator.

-       Private Bonded Manufacturing Warehouse (PvtBMW). It is a warehouse facility

licensed by the Bureau to import, receive and store goods for production for export, or
for domestic consumption the withdrawal of which shall be made only upon payment of
duties and taxes and other charges due.

·         Bonded Non-Manufacturing Warehouse (BNMW). It is a facility where goods

are stored duty-and-tax-free conditioned on the eventual withdrawal of the goods for
consumption, or for export, or for transit, or for any other clearance regime, within the
period prescribed, such as:

-       Public Bonded Warehouse. It is a warehouse facility duly authorized to receive

and store general cargoes for exportation, transfer to another CBW, free zones, or for
local consumption, in the same state when the cargoes were imported. Goods for local
consumption shall only be withdrawn upon payment of the assessed duties, taxes and
other charges.

-       Private Bonded Warehouse. It is a warehouse facility duly authorized to import

receive and store goods intended for domestic consumption, withdrawal of which shall
be made only upon payment of the corresponding duties, taxes and other charges

-       Airlines Customs Bonded Warehouse and Airlines Catering Customs Bonded

Warehouse. It is a special type of CBW which stores supplies, spare parts in-flight duty-
free items and such other goods necessary for the reasonable requirements of the
aircraft, its crew and passengers.

-       Multinational Regional Bonded Warehouse. It is a warehouse facility licensed by

the BOI in proper cases, to serve as the supply depot for the storage, deposit, safe
keeping of spare parts components, semi-finished products and raw materials including
the packing. Covering, putting up, marking, labeling cutting or altering to customer's
satisfaction, mounting and/or packaging into kits or marketable lots thereof to fill up
transactions and sales made by its officers of parent companies and to serving as a
storage of goods purchase locally by the home office of the multinational for export
abroad under the supervision of the Bureau.
·         Creation or Dissolution of CBW. The Secretary of Finance may, upon the
recommendation of the Commissioner, create or dissolve certain types of warehouses
subject to consultation with the National Economic and Development Authority (NEDA)
and the Department of Trade and Industry (DTI) based on prevailing economic
circumstances

·         Issuance of Authority to Operate. The Bureau shall be responsible for the

issuance of an Authority to Operate CBWS, including the imposition of requirements for
their establishment and operation, setting forth the rights and obligations of operators,
and the penalties and sanctions for violation of these rules.

Establishment or Renewal of Authority to Operate CBW.

Application for the Establishment or Renewal of Authority to Operate.

·         Application for Authority to Operate a CBW. The application to operate a CEW,

including applications for accreditation as member subcontractor or dent-exporter of an
existing warehouse, shall be filed with the District Collector where the CBW is located,
describing the premises, location, capacity, and purpose of such establishment

·         Documentary Requirements. Any person or firm desiring to establish and

operate a CBW shall submit the following documents:

a. BOC Certificate of Accreditation as importer

b. Certified True Copy of Articles of Incorporation or Articles of Partnership, and by-laws

c. Department of Trade and Industry (DTI) Certificate of Business Registration for sole
proprietorship.

d. Certified True Copy (CTC) of Mayor's Permit:

e. Barangay Clearance:

f. Certificate of Bureau of Internal Revenue (BIR) (ITR) and Latest Audited Financial
Registration;
g. Income Tax Return Statements, if applicable;

h. Lease contract or certificate where the proposed CBW is located;

of title to the real property

i. Warehouse location or vicinity map showing the area and means of access.

j. Warehouse layout showing and describing the following:

i. Floor plan and building structure;

ii. Storage areas for raw materials, finished products

and wastages

iii. Production area;

iv. Office spaces for both CBW and customs personnel and

v. Physical security feature:

k. List of machineries and equipment:

l. Feasibility study

m. List of materials to be imported; and

n. Formula of Manufacture or Conversion, if applicable.

·         Evaluation of the Application. The District Collector of the Port shall:

a. Determine the completeness of the documents submitted

in support of the application;

b. Cause the conduct of physical inspection and taking of photographs of the premises;

c. Evaluate and review the documents including the physical inspection report; and,
d. Recommend to the Commissioner the approval of the application upon compliance
with all the requirements.

The District Collector may deny the application at any stage of the evaluation process in
cases where the application is attended with fraud or material misrepresentation, or the
applicant does not meet the regulatory requirements to operate a CBW.

·         Action by the District Collector. The District Collector shall recommend approval
of the application within five (5) working days from completion of documents and
inspection report; provided, however, that in case of failure to act within the said period,
the application for establishment or renewal is deemed favorably acted upon by the
District Collector, who shall forward the records to the Commissioner for appropriate
action.

·         Denial of the Application by the District Collector. In case of denial, the District
Collector shall send a notice to the applicant stating clearly the grounds for the denial of
the application.

·         Action by the Commissioner. The Commissioner shall act on the

recommendation of the District Collector within twenty (20) working days from receipt
of the recommendation.

If the Commissioner fails to act on the application within the prescribed period, said
application shall be deemed approved: Provided, that all required documents have been
submitted and all required fees and charges have been paid. The acknowledgement
receipt together with the official receipt for payment of all required fees issued to the
applicant and the date of receipt of the complete documents from the District Collector
shall be enough proof or has the same force and effect of an Authority to Operate
under this automatic approval mechanism.
In case the Commissioner fails to act on the application for renewal within the
prescribed period, the Authority to Operate shall be deemed automatically extended
until the regular Authority to Operate is issued. The effectivity of any Authority to
Operate shall retroact to the first day immediately after the expiration of the previous
authority.

·         Notice of Denial. In case of denial of application by the Commissioner, a notice

shall be sent to the applicant stating clearly the grounds for the denial.

·         Appeal from the Denial of the Application by the District Collector. The

applicant may appeal the denial of the application to establish or renew a CBW by filing
an appeal to the District Collector within fifteen (15) days from receipt of the notice of
denial, copy furnished the Office of the Commissioner, stating clearly the grounds why
the application should be approved.

·         Records of Appeal. The District Collector shall forward the complete records of

the application to the appeal. Commissioner within five (5) days from receipt of the
appeal.

·         Customs Bonded Warehouse Committee. The Commissioner of Customs shall

constitute a CBW Committee for purposes of evaluating, reviewing, and consolidating all
applications for the establishment and renewal of CBW and other related matters
pertaining to the operations of CBW.

·         Certificate of Authority to Operate. Upon approval of the CBW application, the

District Collector shall issue a Certificate of Authority to Operate a CBW, which shall be
conspicuously displayed at all times at the CBW and its extension offices,

 
·         Amendment of Certificate of Authority. Upon the request of the CBW operator,
the District Collector may amend the Certificate of Authority based on any of the
following grounds:

a. Change of company name:

b. Change of the name of the street or building number without actual change of the
physical location of the CBW; or Such other changes which do not substantially alter the

c. conditions specified in the existing Authority to Operate CBW.

The Commissioner shall be notified of any amendment to the Certificate of Authority to

Operate CBW as approved by the District Collector

·         Post Approval Requirements. CBWS granted Authority to Operate shall submit

annually their ITRS duly filed with the BIR, CTC of Mayors Permit, Audited Financial
Statement, Export and Import Performance, and Year-end. Stock Inventory Report Non-
submission of these requirements is a ground for the suspension or cessation of
operations of the CBW.

·         Membership in a Customs Common Bonded Warehouse (CCBW). Membership

in a CCBW shall be governed by the following rules and regulations:

a. A company which is considered as micro or small enterprise shall have the option to
establish its own CMBW or apply as a member of a CCBW and

b. Medium and Large-Scale enterprises can be accredited as members in meritorious

cases such as when the bonded manufacturing operation is only a minor component of
their business operations as may be determined during the evaluation of its application
as member

·         Application for Accreditation and Renewal as Member, Sub-Contractor, or

Client-Exporter of CBWs. The CCBW Operator and its applicant member, the CBMW
Operator and its applicant sub-contractor or the ICBW Operator and its applicant client-
exporter of CBMW's, as the case may be, shall jointly file the application for
accreditation and renewal with the District Collector who has supervision and control
over the applicant CBW. In such case, the rules provided herein on application and
renewal of CBWs shall apply.

·         Validity of Authority to Operate. The Authority to Operate a CBW, including

warehouse extensions and additional facilities issued pursuant to this CAO shall be valid
for three (3) years counted from the date of the approval of the application for
establishment, as stated in the Certificate of Authority to Operate. If the term of the
lease of contract submitted during the application is less than three (3) years, the validity
of the Authority to Operate shall be coterminous with the lease contract unless a new
contract of lease with a longer period is submitted. In such case, the Authority to
Operate shall be amended to its maximum period of three (3) years counted from its
date of original issuance.

·         Filing of Application for Renewal of Authority to Operate CBW. The

application for renewal of Authority to Operate a CBW shall be filed not later than ninety
(90) days but not earlier than one hundred twenty (120) days before its expiration. For
CCBWS or ICBWS with more than ten (10) members or client-exporter respectively,
application for renewal shall be filed not later than one hundred twenty (120) days
before its expiration

 Requirements for Renewal.

·         The application for renewal of Authority to Operate CBW shall be supported by

the following:

a. If applicable, Certified Copy of Amended Articles of Incorporation or Articles of

Partnership, and by-laws;

b. Updated General Information Sheet (GIS);

c. Certified True Copy (CTC) of Mayor's Permit:

d. Barangay Clearance;
e. Income Tax Return (ITR) and Latest Audited Financial Statement, if applicable;

f. Copy of the certificate of title to the real property or, if applicable, copy of renewal of
lease contract,

g. Warehouse location or vicinity map showing the area and means of access,

h. Updated list of machineries and equipment, if applicable;

i. Updated list of materials to be imported;

j. Formula of Manufacture, if applicable, and

k. Affidavit of change of circumstances with supporting documents

In case of CBMW with sub-contractors, CCBW, and ICBW, the joint application for
renewal shall be supported with all of the above requirements complied by all CBMW,
CCBW, ICBW and each sub-contractor, member and respectively, client-exporter

·         Post Application Requirements. Upon submission of application for renewal of

Authority to Operate, the Operator shall secure and the Bureau shall issue the required
Inspection Report, Clearances or Certificate of No Accountability of the CBW. In doing
so, the Bureau shall be subject to the provisions of Anti-Red Tape Act (ARTA).

·         Late Filing of Application for Renewal of Authority to Operate. Non-filing

within the prescribed period shall cause the imposition of penalties, which may take the
form of fines, suspension, or revocation of the Authority to Operate, as may be
warranted, in accordance with Sections 8.3 and 5.15.1.c OF CAO 13-2019

·         Validity of Renewed Authority to Operate. Period of validity of renewed

Authority to Operate shall follow Section 5.2 CAO 13-2019

·         Application for Structural Changes or Additional Facilities within the CBW.

-       The CBW Operator may introduce structural changes or additional facilities in the
CBWs provided that the ingress and egress or the physical security feature of the CBW
shall not be altered or compromised;
-       The CBW Operator shall file the application with the District Collector prior to the
introduction of any structural changes or additional facilities:

-       The application shall be supported by the following documents:

a. Building permit, if applicable;

b. Description of the proposed structural changes or additional facilities;

c. CBW layout, estimated capacity and physical security features after the Introduction
of, and

d. Such other documents that may be required by the District Collector in the exercise of
power of supervision and control,

·         Application for Extension Warehouse.

-       The CBW Operator may apply for an extension warehouse which should be located
within the territorial jurisdiction of the District Collector who has control over the main
warehouse.

-       The application shall be supported by the following documents:

a. Certified True Copy (CTC) of Mayor's Permit for the new CBW, if applicable;

b. Barangay Clearance, if applicable:

c. Lease contract or certificate of title to the real property  where the proposed
extension warehouse is located;

d. Location or vicinity map of the proposed extension warehouse showing the area and
means of access.

e. Layout of the proposed extension warehouse showing and describing the following:

i. Floor plan and building structure;

ii. Storage areas for raw materials, finished products and wastages, and production area,
as appropriate:

iii. Office spaces for both CBW and customs and

iv. Physical security features, and

f. List of machine and equipment, as appropriate.

-       In case the proposed extension warehouse or facility is located in a place outside
the territorial jurisdiction of the District Collector where the main warehouse or facility is
situated, such shall be treated as a new application and shall be filed with the District
Collector who has territorial jurisdiction over the area where the new warehouse is
located.

The supporting documents to be submitted for such application shall be the same as
those provided under Section 5.1.2. of this CAO 13-2019

-       Existing extension warehouses shall be governed by the transitory provision of this

CAO.

·         Application for Relocation. As a general rule, any application for relocation of a

CBW shall be approved by the Commissioner as recommended by the District Collector.
In cases where the CBW is relocated to another structure or warehouse within the same
compound or building, the application shall be approved by the District Collector
concerned subject to compliance with Section 5.8.3 of this CAO.

Any unauthorized relocation shall be a ground for the suspension or revocation of the
Authority to Operate issued to the CBW, its members or subcontractors, as the case may
be.

·         Physical Inspection by the Bureau. In all cases of application for structural

changes or additional facilities extension warehouse or relocation of CBW, physical
inspection of the premises must first be conducted prior to approval

·          Annual Supervision Fee and Other Charges. The Bureau shall impose an annual
supervision fee, service fee, and other charges on the operations of CBWs, including
extensions and additional facilities, if any, in accordance with the schedule provided
under the CAO on Service Fees

 
Administrative Provisions for CBWS.

General Policies.

·         Exemption from Duty and Tax of Goods in CBWS. Goods duly entered for
warehousing in CBWS shall be exempt from duty and tax within the allowed period for
storage unless withdrawn for consumption, exportation or transit to a free zone or
another CBW, in which case, such withdrawal will be subject to the applicable rules and
regulations on liquidation of the warehousing entry."

·         Raw Materials Importation. CBW may import articles based on its approved
formula of manufacture as duly authorized.

·         Compliance Rating System. The Commissioner shall establish a Compliance

Rating System (CRS) which shall be used to measure and assess the compliance and
performance levels of all CBWS especially with regard to applicable laws, rules and
regulations and other performance factors such as import-export and economic
viability, among others, in consultation with stakeholders. The system shall be utilized by
the Bureau as a risk management mechanism in its evaluation of any application or used
as basis in any action which may be taken by the Bureau for or against a CBW

·         For record purposes, all documents shall be kept for three (3) years."

Requirements Prior to Operation,

·         Customs Officers and Personnel. In pursuit of the supervisory and control

functions over CBWs by the District Collector, assigned customs officers and personnel
shall monitor and implement control measures for customs purposes, in accordance
with its existing organizational structure and staffing pattern.

·         Provision for a Suitable Working Space for Bureau Personnel. The CBW

operator shall provide customs personnel with suitable working areas complete with
office equipment and supplies necessary to perform their basic functions.

·         Work Hours. Customs personnel assigned to CBWS shall strictly observe regular
office hours and record their attendance in accordance with Civil Service Rules and
Regulations. The CBW operator shall promptly report to the District Collector any
unauthorized absences.

·         Locks and Keys. The door and entrance to a CBW and the designated
compartments for new materials, finished goods and wastages, rejects and by-products
shall have a secured locking system which complies with the standard and specification
set by the Bureau. Access to the areas shall be limited to personnel duly authorized by
both the Bureau and the CBW Operator.

Requirements During Operation.

·         Principal Books of Accounts. The Bureau and the CBW operator shall keep and
maintain Principal Books of Accounts containing the records of importation and
exportation of all goods delivered to and withdrawn from a CBW. As far as practicable,
the Bureau and CBW operator shall develop and maintain an ICT enabled inventory and
liquidation system of all goods delivered to and withdrawn from a CBW, which may
serve as the principal books of accounts

·         Submission of the Audited Financial Statements. For monitoring purposes, the

CBW operator shall submit its annual Audited Financial Statements for the immediately
preceding calendar or fiscal year, as the case may be, to the District Collector not later
than thirty (30) days from its filing with the Bureau of Internal Revenue.

·          Stock Inventory. All CBW’s shall establish a computer-based inventory system

for bonded goods which is accessible to the Bureau.

·          Inspection of CBW and Bonded Goods. The District Collector may issue a
Mission Order authorizing a representative to conduct inspection of the CBW and the
bonded goods stored in the CBW and to examine the documents, books, and records of
accounts concerning the operation of any CBW. Mission Order shall contain the names
of the representative, time and date of inspection, and the documents, books, and
records of accounts to be examined.

 
Operational Provisions.

·         Goods Declaration for Warehousing. A goods declaration for warehousing shall be

filed at the port where the goods for warehouse are discharged. In cases where the
goods to be entered for warehousing are under the jurisdiction of another port of entry,
the same goods declaration shall also act as the transit document for the transfer of the
goods from the port of discharge to the other port of entry Pending implementation of
the use of multi-purpose declaration, existing procedures on the filing of goods
declaration shall govern the clearance procedures for goods entered under
warehousing.

·         Provisional Goods Declaration. The Bureau may allow the lodgment of a

provisional goods declaration for goods entered under warehousing in accordance with
the rules and regulations on the filing of a provisional goods declaration

·          Posting of Security for Goods Stored in CBWs. For goods declared and entered
under the CBW scheme, the District Collector shall require the importer to post sufficient
security equivalent to the assessed duties, taxes and other charges, as a condition for
the storage and withdrawal of the bonded goods within the period prescribed by
Section 811, Chapter 2, Title VIII of the CMTA, or the payment of duties, taxes and other
charges upon compliance with all importation requirements.

·         Examination of Bonded Goods. Unless the goods entered for warehousing is

placed under Alert Order or selected for physical or non-intrusive examination, the
District Collector shall allow immediate transfer of bonded goods to the CBW where the
examination shall be conducted. The Bureau shall establish a mechanism to ensure the
integrity of the bonded goods during the transfer of shipment from the port of entry to
the CBW.

·         Bonded to Bonded Transfer. For CBMW operator which sources its raw materials
from enterprises in Free Zones or from existing customs manufacturing bonded
warehouse, the Bureau shall prescribe the specific form of goods declaration and
supporting documents covering the transfer

·         Withdrawal of Goods for Production. The CBMW operator shall, within the

prescribed storage period, apply for withdrawal of the bonded goods for production

·         Identification of Bonded Goods Prior to Stuffing for Export. The CBW

operator shall notify the District Collector in advance before any actual stuffing into a
container shall be made.
All goods for export by CBW shall be stuffed only upon prior examination by a customs
officer who shall issue the Certificate of Identification (CI).

·         Exportation of CBW Products. The CBW operator shall lodge an export

declaration for finished products which are manufactured in CBWS within the prescribed
period.

For CBMW or ICBW operator which supplies its raw materials or packaging materials to
enterprises in Free Zones or to existing customs manufacturing bonded warehouse, the
Bureau shall prescribe the specific form of goods declaration and supporting documents
to be submitted

·         Wastes. Wastes, rejects and by products in the manufacture of export products

shall be properly accounted for and disposed of in accordance with existing rules and
regulations."

·         Liquidation of Warehousing Entry and Cancellation of Bond. The CBW

operator shall cause the liquidation of the warehousing entry and the cancellation of the
bonds related to the finished products.

The Bureau shall establish and maintain an ICT-enabled system to account for the raw
materials used in the manufacture of goods and the resulting wastages for liquidation;
and to monitor the posting, charging, cancellation and aging of bonds for CBMW.

Period of Storage in CBWs.

·         Goods entered for warehousing may remain in a CBW for a maximum period of
one (1) year from the time of its arrival at the warehouse, without prejudice to the
provisions of Section 5.14.4. of CAO 13-2019

·         For perishable goods, the storage period shall be three (3) months from the date
of arrival at the warehouse, extendible for valid reasons, and upon written request, for
another three (3) months.         

·         Imported goods shall be withdrawn from the CBWs when the necessary
withdrawal permit has been filed, together with any related document as may be
required by the Bureau. Goods not withdrawn after the expiration of the prescribed
period shall be deemed abandoned, as provided under paragraph (e), Section 1129,
Chapter 6, Title XI of the CMTA, unless the CBW operator expressly abandons the goods
prior to the expiration of the period to withdraw the same within the prescribed storage
period.

·         Bonded raw materials withdrawn within the prescribed storage period shall be
manufactured and exported within one (1) year from the time of arrival at the CBW.
Goods withdrawn within the prescribed period of one (1) year but re-exported beyond
the said period shall be subject to the applicable penalties under this CAO.

·         The Commissioner shall, in consultation with the Secretary of Trade and Industry,
establish a reasonable storage period limit beyond one (1) year for particular bonded
goods for manufacturing and intended for export, the processing into finished products
of which requires a longer period based on industry standard and practice, subject to
the approval of the Secretary of Finance.

Suspension of the Authority to Operate and Closure of CBW.

·         The District Collector shall, without prejudice to the imposition of administrative

penalties and filing of criminal cases against the responsible person, initiate suspension
or closure proceeding against any CBW in the following instances:

a. In case of discontinuance requested by the CBW operator or when the conditions

warrant pursuant to Section 807, Chapter 2, Title VIII of the CMTA

b. Filing an application containing false information for establishment or renewal of

CBW Authority to Operate;

c. Failure to file application for renewal

d. Being inactive for a continuous period of at least one (1) year, i.e. no importation, or if
there is one, no corresponding legal withdrawal of imported goods or exportation of
finished products;

e. When the operator or any responsible official shall knowingly allow the use of the
warehouse for illegal activities;

f. Unauthorized relocation or use of extension warehouse; and

g. Violation of customs rules and regulations.

·         Upon the closure of the CBW, a careful examination of the account of the
warehouse shall be made and the remaining dutiable goods shall be disposed by the
District Collector in accordance with existing rules and regulations.
·         Closure of the CBW shall be effective upon approval by the District Collector, who
shall within ten (10) days, inform the Commissioner of such action in writing. The
decision ordering the closure of a CBW may be appealed to the Commissioner

·         Notice of discontinuance made by the operator shall not result in the discharge
from any duties, taxes, fees and other charges imposed on dutiable goods in said
warehouse.

Responsibilities of CBW Operators

·         Operators of CBWs shall comply with the requirements of the Bureau on

establishment, security, suitability and management, including stock-keeping and
accounting of the goods introduced.

·         Upon lawful demand, the operators shall allow duly authorized representatives of
the Bureau access to the premises at a reasonable time, and to inspect all documents,
books and records of accounts pertaining to the operations of the CBW.

·         In case of loss of the goods stored in CBWS due to the operators gross negligence
or willful misconduct, the operator shall be made liable for the payment of duties and
taxes due. The government assumes no legal responsibility over the safekeeping of
goods stored in CBW.

·         Operators shall ensure a secured and safe environment for both persons and
goods stored in CBWs by implementing effective security measures, such as the
employment of a 24-hour security scheme and the installation of Closed Circuit
Television Camera (CCTV) and similar devices

Customs Supervision and Control over CBWs.

 
The Bureau shall exercise supervision and control over CBWs and the same shall, for all
intents and purposes, be considered as extension of the customs premises insofar as the
dutiable goods stored and           introduced are concerned.

The Bureau however, shall not be liable for any loss or damage of the goods stored in
any CBW.

Penalties

Without prejudice to the criminal and other administrative liability provided under the
CMTA, the following administrative sanctions shall be imposed on the operator for the
following offenses:

·         Diversion or Unauthorized Withdrawal or Repacking.

a. First Offense - Duties, taxes and charges due on the goods withdrawn; and Surcharge
of fifty percent (50%) of duties, taxes, customs fees, and charges, found to be due and
unpaid;

b. Second Offense - Suspension of warehousing privileges for six (6) months;

c. Third Offense - Closure of the CBW; and d. Where the withdrawal is attended with
fraud - Closure of the CBW.

·         Unauthorized Relocation.

a. First Offense - Duties, taxes and charges due on the goods withdrawn; and Surcharge
of fifty percent (50%) of duties, taxes, customs fees, and charges, found to be due and
unpaid

b. Second Offense - Suspension of warehousing privileges for six (6) months, and

C. Third Offense - Closure.

Any person who enters any CBW with intent to unlawfully remove any merchandise, or
who shall aid or abet such removal, shall suffer the penalties provided in Section 1401 of
the CMTA.
Penalties for late filing of application for renewal of the Authority to Operate a
CBW shall be as follows:

a. For members of CCBW and ICBW

91-119 days before expiration of the validity Php 10000000

period of Authority to Operate
 
 
61-90 days before expiration of the Php 15000000

validity period of Authority to Operate

 
31-60 days before expiration of the Php 20000000

validity period of Authority to Operate

1-30 days before expiration of the  validity of Php250000005 and
Authority to Operate
validity period of suspension of privilege
operator.

b. For other CBWS

61-89 days before expiration of the validity Php 15000000

period of Authority to Operate
 
31-60 days before expiration of the validity Php 20000000
period of Authority to Operate
 
1-30 days before expiration of the validity Php 25000000  and suspension of
period of Authority to Operate privilege as CBW

operator.

Failure to submit the documents within the period prescribed under Section 5.6 of this
CAO shall result to the closure of the CBW. However, the CBW operator may still reapply
as new applicant.
 

Late Re-Exportation under Section 5.14.3 of CAO 13-2019

a. Up to six (6) months 2% per month of the collectible duties and taxes counted from
the date of expiration of the bond to date of actual exportation."

b. Beyond six (6) months - Penal amount of the bond in addition to the 2% per month
of the collectible duties and taxes from the date of expiration of the bond to date of
actual exportation.

Late submission of documents such as proof of re-exportation authority to cancel bonds

issued by the Commissioner and such other documents required for reconciliation or
liquidation of raw materials, liquidation of entries or cancellation of re-export or surety
bonds.

1-30 days from expiration of the Php1,000.00

bond
31-60 days from expiration of the bond Php2,000.00

 
61-90 days from expiration of the Php3,000.00

bond
91-120 days from expiration of the Php4,000.00

bond  
121-150 days from expiration of the Php5,000.00

bond  
151 to 180 days from expiration of the bond Php6,000.00

 
Beyond six (6) months from expiration of the Penal amount of the
bond
  bond

 
 

Without prejudice to other actions that the Bureau may file against the importer or
surety company for breach of bond or take action on the importation pursuant to the
CMTA, the provisions on existing regulations on fines, penalties, or surcharges shall be
applied on erring importers or warehouse operators.

RECONSTITUTION OF CUSTOMS BONDED WAREHOUSE COMMITTEE

To streamline and expedite the processing of applications for the establishment and
operation of Customs Bonded Warehouses, renewal of licenses to operate CBW.
applications as member of a Common Bonded Warehouse, applications as
subcontractor of a CBW and other related matters pertaining to the operations of
customs bonded warehouse, the Customs Bonded Warehouse Committee and its
Secretariat is hereby reconstituted as follows

 1.    Customs Bonded Warehouse Committee (CBWC) 

1. Chairman - Deputy Commissioner, Assessment & Operations Group

Members:

1. Chief Garment & Textile Bonded Warehouse Division, POM

2. Chief Miscellaneous Mfg. Bonded Warehouse Division, POM

3. Chief, Common Bonded Warehouse Division, POM

4. Chief, Public/Private Bonded Warehouse, POM

5. Chief, Bonded Warehouse Division, NAIA

6. Chief, Warehousing Audit & Monitoring Unit

2.    Secretariat

Head - Chief, Warehousing Documentation and Records Division

Members

1.    Chief, Warehousing Inspection Division, POM

2.    Executive Assistant, Office of the Deputy Commissioner, AOCG

3.    Chief, Bonds Division, POM, MICP and NAIA

RENEWAL OF LICENSE OF CBW

To provide sufficient time and opportunity to process applications for Renewal or

Accreditation of Licenses and to ensure uninterrupted effectivity of Licenses or
Accreditations issued to Customs Bonded Warehouses (CBWs) and/or their Members,
there is a need to define the terms of validity of licenses and/accreditation and establish
clear timelines thereof.

All applications for RENEWAL of Licenses or Accreditation Customs Bonded Warehouses

and/or their Accredited Members shall be filed at least 6 months before the expiration
of the CBWs and/or their Accredited Members who fail to file renewal of Licenses and/or
Accreditation at the required cut-off time of six (6) months before expiration date, shall
be considered as closed at the end of the term and their accounts shall be liquidated
upon.

All CBWs with lapsed or expired licenses and/or accreditation shall be considered as new
applicants and their applications for renewal treated as such.

In any case, applications or renewal of licenses of CBWs and/or their members shall be
subject to approval or clearance by the Commissioner of Customs.

For purposes of compliance and monitoring the Chairman, Bonded Warehouse

Committee is hereby directed to furnish a list of CBWs and its accredited members
whose terms are going to expire within 6 months from this Order.

ESTABLISHMENT MAINTENANCE AND OPERATION OF CUSTOMS FACILITIES AND

WAREHOUSE
 

Objectives.

·         To provide the guidelines on the establishment, operation supervision, and

control of CFWS for purposes of protecting government revenues and imported goods
stored therein, and preventing customs fraud.

·         To provide the guidelines on the operation of CFW by terminal facility operators
with Permit to Operate granted by port authorities and similar government agencies, for
customs purposes

·         To provide a system of temporary storage for exports and imports and accounting
of abandoned or overstaying and forfeited goods

·         To define the rights and corresponding obligations of operators of CFWS.

·         To develop and maintain a CFW management system making Section

 General Provisions.

 Establishment of Customs Facilities and Warehouses (CFWs). When the business of

the port and trade requires such facilities, the District Collector, subject to the approval
of the Commissioner, shall designate and establish CFWs for the storage and/or
clearance of imported goods or for other special purposes.

Existing contracts of private operators with concerned government agencies and

regulatory bodies, such as but not limited to the PPA, SBMA, PIA, CPA and their
respective affiliates and subsidiaries, including the powers and privileges already
granted by virtue of such contracts, shall not be impaired or adversely affected in the
exercise of the supervisory and regulatory functions of the Bureau in accordance with
the CMTA.

Supervision and Control over Customs Facilities and Warehouses. All CFWs,
including their expansion, extensions and additional facilities shall be considered as part
of Customs Premises subject to the supervision and control of the Bureau which shall
impose such conditions and other regulations as may be deemed necessary for the
protection of government revenue, and of the goods stored therein.

 
The Bureau, however, shall not be liable for any loss or damage of the goods stored in
any customs facility warehouse, without prejudice to applicable provisions of law on loss
of or damage to property

·         Types of Customs Facilities and Warehouses.

-       Terminal Facility. It is a facility duly authorized to operate ports and offer services
such as, but not limited to, receiving handling, and checking, as well as the custody and
delivery of conventional breakbulk or stripped or stuffed containerized cargo over piers
or wharves, in transit sheds or warehouses and open storage areas

-       Off-Dock CFW. It is a customs facility located outside the seaport established for
temporary storage of goods. It is considered part of customs premises under the
exclusive control, direction and management of the Bureau. It may be a container yard,
container freight station, seaport temporary warehouse, airport temporary warehouse or
inland container depot as defined under this Order.

-       Off-Terminal CFW. It is a customs facility located outside the airport established

for temporary storage of goods. It is considered part of customs premises under the
exclusive control, direction and management of the Bureau,

-       Container Yard. It is a facility duly authorized to accept and store container vans,
loaded or empty, intended for international shipping for storage within the period
allowed under applicable customs laws, rules and regulations. A container yard may be
established either within the seaport or off-dock, as may be allowed under customs
laws, rules and regulations.

-       Container Freight Station. It is a facility duly authorized to accept and store

containers loaded with consolidated shipments, for temporary storage, examination,
stripping, stuffing, and other related activities as may be allowed under customs laws,
rules, and regulations. A container freight station may be established either within the
seaport or of dock as may be allowed under customs laws, rules and regulations.

-       Seaport Temporary Storage Warehouse. It is a customs facility established within

the seaport premises or off-dock for purposes of storage, examination, stripping
stuffing, or safekeeping of Imported goods.
-       Airport Temporary Storage Warehouse. It is a customs facility established within
the airport premises or cff-terminal for purposes of storage, examination, stripping, or
safekeeping of imported goods

-       Inland Container Depot (ICD). It is an off dock CFW which is part of a terminal
facility equipped for handling or temporary storage of containers, both empty or laden
for transit as may be allowed by the Bureau of an inland customs office.

·         Designated Areas for Abandoned, Overstaying and Forfeited Goods within

the CFW. For proper accounting and inventory CFWs may designate special areas where
the Bureau Shall establish a temporary storage area of abandoned and overstaying and
abandoned goods.

·         Other Premises Used for Customs Purposes. For the protection of government
revenues, prevention of entry of contrabands, and other customs fraud, CFWS shall
extend to examination areas, cold storage, wharves, Infrastructure and other premises
where goods subject to customs clearance may be stored, examined, or disposed.
Customs control over these premises shall be without prejudice to the general powers
of the Local Government Units (LGUS), the Philippine Coast Guard (PCG) and law
enforcement agencies in the exercise of their respective functions

·          Issuance of Authority to Operate. The Bureau shall be responsible for the

issuance of an Authority to Operate CFWs. Including the imposition of different sets of
requirements for the establishment, maintenance and operation, setting forth the nights
and obligations of operators, and the penalties.

Operators of terminal facilities with existing contracts granted by the PPA and other Port
Authorities under Section 4.3 hereof shall be registered as a CFW, provided they submit
the Permit to Operate a equivalent document from their respective port regulators and
comply with the requirements under Section 6 for the effective exercise of customs
jurisdictional control over ports, airports and terminal facilities.

·         Non-transferability of Authority to Operate. The Authority to Operate a CFW

shall be non-transferable. In case of a merger sale, assignment, or other modes of
transfer, the surviving entity which is not the grantee of an Authority to Operate issued
by the Bureau must apply for a new Authority following the prescribed procedure under
existing rules and regulations.
·         Registration of CFWs. All CFWS granted with Authority to Operate shall be
registered with the BOC’s profile recording system as CFW operator.

·         Creation or Dissolution of CFWS. The Secretary of Finance may upon the

recommendation of the Commissioner, create or dissolve certain types of warehouses
subject to consultation with the National Economic and Development Authority (NEDA)
and the Department of Trade and Industry (DTI) based on prevailing economic
circumstances. This shall be without prejudice to existing contracts of private operators
with the appropriate government agencies,

·         Assignment of Personnel In pursuit of Its supervisory and control functions over

Customs Premises, the District Collector may assign  customs personnel  to monitor and
implement control measures for customs purposes, in accordance with existing
organizational structure and staffing pattern.

Off-Dock and Off-Terminal CFW

Off dock and off terminal CFS duly established shall be considered as extension of the
port subject to the supervision and control of the District Collector.

·         Application for Establishment of Of-dock and Off-terminal CFW.

-       Application. All applications for the establishment of an off dock and off-terminal

CFW shall be filed with the District Collector who has territorial jurisdiction over the
location of the off dock CPW, describing the proposed premises, location capacity and
purpose

-       Documentary Requirements. Any person or firm desiring to establish and operate

an off dock and off terminal OFW shall submit the following documents:

a. Securities and Exchange Commission Articles of Incorporation Department of Trade

and Industry Certificate of Business Registration, Bureau of Internal Revenue Certificate
of Registration and Mayor's Permit (if not yet filed under the Client Profile Registration
System CPRS)

b. Location and layout of facility, including machineries equipment as applicable

(including lease contract or title to the property)
C. Audited Financial Statements for the last two (2) years immediately preceding the
date of application d. Manual of web-based inventory management system,

e. Lay-out of the proposed customs facility for use of customs personnel complement
and

f. Lay out for the designated amination area and non-intrusive inspection equipment
facility as may be applicable,

-       Security Requirements. An applicant must likewise have written and verifiable

procedures on the following:

a. Security procedures for service providers and vendors,

b. Container security integrity and breach detection measures (e.g. container storage
and seals);

c. Physical access controls (e.g. security personnel, employee ID system, searches,

visitors or vendors verification); d. Personnel security (eg. pre-employment verification,
background checks);

e. Procedural security (e.g. cargo control, shipping and receiving, container opening and
release);

f. Security training and awareness of personnel of CFW operator

g. Physical Security (e.g. fences, gates, parking, building structures, locks and keys,
lighting, alarm systems and video surveillance cameras), and

h. Information Technology Security (e.g. password, accountability)

-       Evaluation of Documents and Examination of Premises. Upon receipt of the

above documents, the District Collector shall:

a. Determine the completeness of the documents submitted In support of the

application,

b. Cause the conduct of physical inspection and taking of photographs of the premises,
and

c. Evaluate and review the documents including the

physical inspection report.

-       Action by the District Collector. The District Collector shall recommend approval

of the application within five (5) working days from completion of documents and
inspection report

-       Recommendation by the District Collector. In case there is merit in the

application, the District Collector shall recommend its approval to the Commissioner,
forwarding the complete records of the application. Otherwise, the District Collector
shall send a letter to the applicant denying the application and stating clearly the
grounds for the denial.

-        Approval by the Commissioner. The Commissioner shall act on the

recommendation of the District Collector on the application within twenty (20) working
days from receipt of the complete records of the application from the District Collector.

If the Commissioner falls to act on the application within the prescribed period, salad
application shall be deemed approved: Provided, that all required documents have been
submitted and all required fees and charges have been paid. The acknowledgement
receipt together with the official receipt for payment of all required fees issued to the
applicant and the date of receipt of the complete documents from the District Collector
shall be enough proof or has the same force and effect of an Authority to Operate
under this automatic approval mechanism.

In case the Commissioner denies the application, a letter shall be sent to the applicant
stating clearly the grounds for the denial.

-       Appeal from the Denial of the Application by the District Collector. The

applicant may appeal the denial of the application to establish an off-dock or off-
terminal CFW by filing a Letter of Appeal to the District Collector who denied such
application within fifteen (15) working days from receipt of the letter of denial, copy
furnished the Office of the Commissioner, stating clearly the grounds why the
application should be approved.5.2. Appeal from the Denial of the Application by the
District Collector. The applicant may appeal20 the denial of the application to establish
an off-dock or off-terminal CFW by filing a Letter of Appeal to the District Collector who
denied such application within fifteen (15) working days from receipt of the letter of
denial, copy furnished the Office of the Commissioner, stating clearly the grounds why
the application should be approved.

-       Records of Appeal. The District Collector shall forward the complete records of

the application to the Commissioner within five (5) working days from receipt of the
Letter of Appeal.

-       Decision of the Commissioner on Appeal. The Commissioner shall render a

decision on the appeal within five (5) working days from receipt of the complete records
of the application from the District Collector. Failure of the Commissioner to render a
decision within the prescribed period shall be deemed as an affirmation of the decision
of denial by the District Collector.

·         Certificate of Authority to Operate. Any approval of the off-dock or off-terminal

CFW application shall be evidenced by a Certificate of Authority to Operate issued by
the District Collector. Such certificate shall be conspicuously displayed at all times at the
off dock or off-terminal CFW and its extension offices, if any.

·         Amendment of Certificate of Authority to Operate. The Certificate of Authority

may be amended by the District Collector upon the request of the off-dock or off-
terminal CFW operator based on the following instances:

-       Change of company name

-        Change of the name of the street or building number without actual change of the
physical location of the CFW;

-       Submission of a new lease contract covering the CFW for a period, and

-        Such other changes which do not substantially alter the conditions specified in the
existing Authority to Operate CFW.

The Commissioner shall be notified of any amendment to the Certificate of Authority to

Operate CFW as approved by the District Collector

·         Validity of the Authority to Operate. The Authority to Operate an off-dock or

off-terminal CFW, including any additional facilities, issued pursuant to this CAO shall be
valid for three (3) years counted from the date of approval of the application by the
Commissioner
·         Renewal of Authority to Operate. At least ninety (90) days before the expiration
of the Authority to Operate, the off-dock or off-terminal CFW operator shall file the
application for renewal of Authority to Operate attaching thereto the following:

-       Income Tax Return duly filed with the BIR for the past three (3) years, certified true
copy of Mayors Permit, audited financial statement, and year-end Inventory report

-       Updated documentary and security requirements as provided in subsection 5.1.2

and 5.1.3 of CAO 9-2019.

For this purpose, the District Collector shall cause the inspection of the off-dock or off-
terminal CFW and require a Certificate of No Accountability from concerned customs
offices as precondition for renewal.

Non-submission of the above documentary requirements within the prescribed period

may cause the imposition of penalties in the form of fines, suspension, or revocation of
the Authority to Operate.

The Authority to Operate shall be deemed automatically extended in case the District
Collector fails to issue the renewed Authority to

Operate prior to the exploration of the original authority unless terminated. The
automatic extension shall last until the regular Authority to Operate is issued. The
effectivity of any Authority to Operate issued pursuant to this Section shall retroactive to
the first day immediately after the expiration of the previous authority

In case of disapproval of the application for renewal, Section 5.2 of this CAO shall apply

·         Application for Establishment of Extension or Additional Facilities.

-       Application for establishment of extension or additional facilities shall be filed with

the District Collector who has jurisdiction over the main facilities,

-       Where the proposed extension or additional facility is located in a place outside

the jurisdiction of the District Collector where the main warehouse or facility is situated,
such shall be treated as a new application. Accordingly

a. Rules for the establishment of a new off dock or off terminal CFW shall apply,

b. Control and supervision over an off-dock or off-terminal CFW can only be exercised
by the District Collector who has jurisdiction over the location.
·         Annual Supervision Fee. The Bureau shall impose an annual supervision fee,
service fee, and other charges on the operations of off-dock and off-terminal CFWs in
accordance with the schedule provided under the CAO on Service Fees.

·         Rates charged by Off-dock and Off-terminal CFW. The fees and rates to be

charged by off-dock and off-terminal shall be governed by those prescribed by the
Bureau under existing rules and regulations. Within one year from the effectivity of this
CAO, the Bureau shall review said rates and recommend adjustments for the approval of
the Secretary of Finance.

·         Rationalization on the Establishment of Off-Dock CFS. For efficient control and

supervision of off-dock CFS, the Bureau shall maintain the number of off-dock CFS
operating in a port to a number consistent with the business requirements of the port.

Accordingly, the Bureau may consider the capacity utilization of the existing off-dock
CFS, the provision of modern infrastructure, and other factors in the new applications for
Authority to Operate an off dock CFS.

·         Provision for Areas for Physical Examination and Non Intrusive Inspection
(NII). Subject to the provision of Section 1111, Chapter 3, Title XI of the CMTA on the
costs of physical examination of alerted goods, operators of off-dock and off-terminal
CFWs, as may be applicable, shall provide suitable areas for physical examination ,NII or
X-ray machines, and other customs equipment free of charge in favor of the
government. Any NII equipment provided by the operator shall be under the
operational control and supervision of the Bureau.

This includes suitable areas for articles that require special handling such as Dangerous
or Hazardous Goods, high value items, frozen goods, Perishable Goods, or other similar
articles.

The areas to be designated for the conduct of physical and non-intrusive examination
shall conform to the Bureau's goods clearance procedures and requirements.
Designation of additional areas for examination shall take into consideration the
following factors:

a.    Disposition of abandoned and forfeited goods; 5.11.2. The business and commercial
operations,

b.    Terminal area;

c.     Volume of import goods being handled for examination;

d.    Safety and security, and

e.     Standards for handling radioactive cargoes.

·         System for Temporary Storage of Abandoned and Overstaying Goods Prior

to Lodgement of Goods Declaration.

-       Off-dock and off-terminal operators shall provide suitable and secured premises
for temporary storage of overstaying or abandoned goods. They shall provide
authorized customs officers with unhampered access to the storage facility for
temporary storage of goods.

-       In case of loss, damage, or deterioration of the goods stored due to the negligence
or willful misconduct of the operator, the operator shall be liable for the payment of
duties and taxes due thereon, unless the loss, injury or damage is caused by force
majeure or other causes beyond the operator's control.

·         Special Areas. For the protection of revenue and to prevent the entry of
prohibited goods, the Bureau may require off-dock or off terminal operators to provide
special areas for the following:

-       General Cargoes;

-       Transshipment cargoes;

-       Dangerous and hazardous goods;

-       Forfeited and abandoned goods for disposition;

-       Stripped or segregated cargoes found or suspected to be in violation of customs,

laws, rules, and regulations pending final disposition; and

-       Storage, stripping, and examination of consolidated shipments.

·         Suspension or Closure of CFW.

-       The District Collector shall, without prejudice to the imposition of administrative

penalties and filing of criminal cases against the responsible person, cause the
suspension or closure of any CFW under the following grounds:
a. In case of discontinuance requested by the CFW operator or when the conditions
warrant pursuant to Section 807, Chapter 2, Title VIII of the CMTA;

b. When the operator knowingly facilitates or assists in the commission of smuggling

and other illegal activities in the CFW;

c. In case of pilferage of goods stored in the facility;

d. Failure to account for goods stored;

e. Being inactive for a continuous period of at least one (1) year, i.e. no transfer of
imported goods;

f. Failure to submit the required documents for renewal under Section 5.6 of this CAO;

g, Violation of customs laws, rules and regulations, and

h. Other practice or violation of law which negates the intended purpose for which the
CFW was established

-       Except in cases of voluntary discontinuance, there shall be a closure or suspension

proceeding to be conducted by the District Collector where due process must be
observed. For this purpose, a Customs Memorandum Order (CMO) shall be issued to
outline the conduct of administrative proceedings to be instituted in such cases,

-       Upon the closure of the CFW, a careful examination of the account of the
warehouse shall be made and dutiable goods stored in such premises must be removed
at the risk and expense of the operator. Provided, however, that the premises shall not
be relinquished, and its use shall not be discontinued until after a careful examination of
the account of the warehouse shall have been made.

-       Closure of the CFW shall be effective upon approval by the District Collector, who
shall within ten (10) days, inform the Commissioner of such action in writing. The
decision ordering the closure of a CFW may be appealed to the Commissioner within
ten (10) days from receipt of the decision otherwise it shall be deemed final and
executory.

-       Notice of discontinuance made by the operator shall not result in the discharge of
liability for payment of any duties, taxes, fees and other charges imposed on dutiable
goods in said warehouse
-       The owner, operator, or officers of the CFW shall not be relieved of criminal liability
arising from any violation of the tariff and customs laws and other laws enforced by the
Bureau in connection with the operation.

-       Suspension or closure of CFWs with existing contracts with government agencies

and other regulatory bodies shall be governed by the provisions of the contract and the
rules and regulations of the concerned government agency or regulatory body.

·         Security. In cases where transfer of goods including empty containers to an off-

dock or off-terminal CFW is allowed, the operator shall post and maintain a non-
chargeable annual Security to cover for the duties and taxes due on lost or damaged
goods while in transit or stored in the facility. The Security shall be in the amount of Five
Million Pesos (Php 500,000,000) or equivalent to the average duties and taxes for goods
or empty containers transferred to the facility for the last 12 months, whichever is higher

·         Transfer Note. All transfers to off-dock or off-terminal CFWs shall be covered by

a Transfer Note or any equivalent document approved by the District Collector or his
duly authorized representative.

-       The Transfer Note shall state the following details:

a. Container Number 3;

b. Name of the Carrying Vessel, Registry Number, and Voyage Number;

c. Date of Arrival; and

d. Port of Origin

-       Pending the establishment of a system generated transfer and release instructions,

transfers to any off-dock or off terminal CFWs shall be subject to the following
conditions:

a. Accompanied by duly approved Transfer Note:

b. Supervised by assigned Bureau personnel, and

c. In cases where the filing of Goods Declaration is required, no goods shall be released
from the off-dock or off-terminal CFW unless the corresponding Goods Declaration is
electronically lodged or the goods are cleared for release by the District Collector, in
case of manual release
All transfer of goods to any off-dock or off-terminal CFS shall be under the supervision
of assigned Bureau personnel. The Bureau shall integrate all processes pertaining to
transfer and receipt of goods by off-dock or off-terminal CFWs to its current computer
system.

·         The off-dock or off-terminal operators in coordination with Management

Information System and Technology Group (MISTG) shall provide an ICT-enabled
inventory and monitoring system for cargoes from the time they are transited from the
terminal facility or unloaded from the aircraft, Inbounded, stored, or transferred and
until finally released. The system shall also have the capability to monitor and tag the
actual location and age of storage of goods Inside the facility

·          Reportorial Requirements and Annual Compliance Evaluation

-       Pending the establishment of web-based page inventory system accessible to the

Bureau, the operator shall submit a weekly report in electronic form containing a
detailed statement of the following: () all goods entered, stored, and withdrawn; (ii)
overstaying shipment; and () unclaimed shipment pursuant to Section 1129 (d) of the
CMTA. The Bureau shall specify the format of the report.

-       The Bureau shall establish a compliance rate structure to evaluate the performance
of all existing CFW operators,

·         Penalties. Without prejudice to the criminal liability provided under the CMTA,
the following administrative sanctions shall be imposed on the operator for the
following offenses:

-       Unauthorized Removal, Delivery or Repacking of Goods. a. First Offense

Suspension of Authority to Operate for one (1) year; and b. Second Offense - Closure.

Merchandise so concealed, removed, or repacked, or package upon which marks,

number or the values thereof have been so altered, detached, or obliterated shall be
forfeited in favor of the government.

The suspension or closure shall be without prejudice to the penalties under Section
1418 of the CMTA and the forfeiture of bonds posted by the off-dock or off-terminal
facility operators pursuant to Section 5.12 and Section 7.3 of CAO 9-2019
-       Penal
ties for late a. 31-60 days before expiration of the Php 100,000.00
validity period of Authority to operate
submission
b. 1-30 days before and expiration of the Php 150,000.00 and prohibition on
of validity of Authority Operate transfer of goods to Off-dock/Off
application Terminal CFW until approval of
for application
renewal
required under Section 5.6 of this CAO shall be as follows:

-       Failure to submit the documents within the period prescribed under Section 5.6 of
CAO 9-2019 shall result to the closure of the off-dock CFW/off-terminal CFW. However,
the off-dock CFW/off-terminal CFW may still reapply as new applicant.

Terminal Facility Operators

Terminal facility operators with Authority to Operate granted by other government

agencies and regulatory bodies shall comply with the following requirements:

·         Unhampered Access to Premises. Port operators shall provide authorized

customs officers with unhampered access to all premises within their administrative
jurisdiction cognizant of the internationally accepted port safety and security rules and
regulations.

·         Provision of Areas for Physical Examination and Non-Intrusive

Inspection. Subject to the provision of Section 1111, Chapter 3, Title XI of the CMTA on
the costs of physical examination of alerted goods, operators of terminal facilities shall
provide suitable areas for physical examination, NII, and other customs equipment free
of charge in favor of the government within a definite period of time, as agreed with
private port and airport operators, if any This includes suitable areas for articles that
require special handling such as Dangerous or Hazardous Goods, high value items,
frozen goods, Perishable Goods, or other similar articles
The areas to be designated for the conduct of physical and non-intrusive examination
shall conform to the Bureau's goods clearance procedures and requirements.
Designation of additional areas for examination shall take into consideration the
following factors:

a.    Disposition of abandoned and forfeited goods; The business and commercial

operations;

b.     Terminal area;

c.     Volume of import goods being handled for examination;

d.    Safety and security, and

e.    Standards for handling radioactive cargoes.

·         System for Temporary Storage of Abandoned and Overstaying Declaration.

Goods Prior to Lodgement of Goods

-       The Commissioner in coordination with the terminal facility operator shall establish
a system for temporary storage of imports prior to Lodgement of Goods declaration for
Abandoned or Overstaying Goods, and export goods before the actual loading to the
carrying vessel.

-       Terminal facility operators shall provide suitable and secured premises for
temporary storage of overstaying or abandoned goods. They shall provide authorized
customs officers with unhampered access to the storage facility for temporary storage
of goods taking into consideration the requirements under the International Maritime
Organization (IMO), International Ship and Port Facility Security (ISPS), and other
relevant international security and safety standards.

-       In case of loss, damage, or deterioration of the goods stored due to the negligence
or willful misconduct of the operator, the operator shall be liable for the payment of
duties and taxes due thereon, unless the loss, Injury or damage is caused by force
majeure or other causes beyond the operator's control.

·         Special Areas. For the protection of revenue and to prevent the entry of
prohibited goods, the Bureau may require Terminal Facility Operators to provide special
areas for the following:

-       Transshipment cargoes,
-       Dangerous and hazardous goods,

-       Forfeited and abandoned goods for disposition;

-       Stripped or segregated cargoes found or suspected to be in violation of customs,

laws, rules, and regulations pending final disposition; and

-       Storage, stripping, and examination of consolidated shipments

·         Periodic Reports. The Operator shall submit a periodic report containing the

following information:

-       Daily report on discharged and loaded containers to and from the vessels;

-       Daily report on received and delivered containers

-       Daily report on delivered containers with weight information, and

-       Weekly report on overstaying goods.

Upon written request, the port operator shall provide the Bureau with information
pertaining to imports or exports stored or handled. For information which are readily
available, the operator shall provide the Bureau within two (2) business days from
receipt. For information which are not readily available, the operator shall provide the
Bureau within five (5) business days from receipt. This period may be extended for
another two (2) business days upon the approval of the Bureau and such approval shall
not be unreasonably withheld.

The Bureau shall specify the format of the report and may require electronic submission
or other modes allowed under customs rules and regulations

For failure to provide such information within the period provided, the terminal facility
operator shall be liable for a fine in the amount of Php5,000.00 per business day of
delay.

·         Provision for a Suitable Working Space of Bureau Personnel. The CFW

operator shall provide customs personnel with suitable working areas necessary to
perform their basic functions.
·         Installation of Closed-Circuit Television Cameras (CCTVS) For effective
enforcement of customs laws, rules and regulation, port operators shall install CCTV
cameras in critical areas inside the terminal facility to be designated by the Bureau such
as ingress or egress gates, examination areas, and warehousing storage area. The
storage period of CCTV footage shall be at least thirty (30) days.

The operator shall upon written request provide a copy of CCTV footage within five (5)
days from receipt, or allow duly authorized customs officer for real-time viewing of the
video monitors of the CCTVS

·         Security. The operator shall post a Security to cover for duties and taxes due on
lost or damaged goods stored or transferred to the facilities directly and solely caused
by the operator in the amount of Php 100,000,000.

·         Consultation with Port Authorities. The Bureau shall conduct periodic

consultation with the Port Authorities for the effective implementation of the
jurisdictional control of the Bureau over goods stored and handled by operators of
CFWs with existing contracts

Responsibilities of CFW Operators.

·         CFW operators shall comply with the requirements of the Bureau on

establishment, security, suitability and management of the facility, as may be applicable,
including stock-keeping and accounting of the goods transferred to and stored threat.

·          CFW operators shall report to the Bureau all overstaying goods including empty
containers transferred to the facility for the Bureaus appropriate action pursuant to
existing rules and regulations.

·         Upon lawful demand, the operators shall allow duly authorized representatives of
the Bureau access to the premises at a reasonable time during working hours, and to
obtain data, documents, and records pertaining to the operations of the CFW. H

In case of loss of the goods stored in CFWs due to the gross negligence or willful
misconduct of the operator, the operator shall be liable for the payment of duties and
taxes due. The government assumes no legal responsibility over the safekeeping of
goods stored in any customs warehouse, yard, or premises, unless due to its personnel's
gross negligence or willful misconduct
·         Operators shall ensure a secured and safe environment for both persons and
goods stored in the facilities by implementing effective security measures, such as the
employment of a 24-hour security scheme and the installation of CCTV and similar
devices as required under Section 5.1.3 (9) and Section 6.7 of CAO 9-2019 based on
internationally accepted safety standards and best practices.

·         The CFW Operator shall be responsible for the physical transfer and security of the
goods at the designated temporary storage area,

All costs Incurred by the operators in connection with the transfer of the goods to and
from the designated temporary storage area if requested by the Bureau shall be for the
account of the government subject to government accounting rules and regulations.

RULES AND REGULATIONS FOR THE ESTABLISHMENT SUPERVISION AND

CONTROL OF WHARVES, CONTAINER YARDS, CONTAINER FREIGHT STATIONS,
EXAMINATION AREAS AND OTHER FACILITIES WITHIN THE CUSTOMS ZONE
OTHERWISE KNOWN AS AUTHORIZED CUSTOMS FACILITIES.

Objectives

To implement the Authorized Economic Operator (AEO) program established under the
World Customs Organization (WCO) Framework of Standards to Secure and Facilitate
Global Trade (SAFE Framework) and the WTO Trade Facilitation Agreement (WTO-TFA)
by ensuring the integrity and security of cargo in cross-border trade from the supply
source to customs clearance to final distribution at the point of destination

-       To provide the minimum supply chain security standards and best practices for
AEOs

-       To harmonize the electronic cargo information requirements on inbound,

outbound and transit shipments for use in a risk management approach to address
security threats and ensure customs compliance;

-       To institute guidelines governing the establishment and supervision of Wharves,

Container Yards, Container Freight Stations, Warehouses, Examination Areas and other
facilities located in customs zones and/or in airports and seaports, and used for the
temporary handling and storage of imported goods; and
-       To promote the utilization of these facilities for the promotion of security in the
supply chain, the proper collection of duties and taxes, the prevention of the entry of
drugs and other anti-social goods, and the facilitation of the clearance process for
imported goods.

Coverage

·         This Order shall cover all Wharves, Container Yards, Container Freight Stations,
Warehouse, Examination Areas and other facilities located in customs zones and/or in
airports and seaports, and used for the temporary handling and storage of imported
goods Immediately discharged from the carrying airplanes, vessels and other means of
international transport Existing facilities accredited as Customs Bonded Warehouses
(CBWS) will be subject to review and re accreditation as an Authorized Customs Facility
(ACF).

·         This Order shall not apply to warehouses and facilities with existing licenses as
Container Yard and/or Container Freight Station Outside Customs Zone (CY/CFS OCZ)
and other Off-Dock Customs Facilities (OCF) outside of the Customs Zones which are
subject of a separate set of rules and regulations

General Provisions

·         All Wharves, Container Yards Container Freight Stations, Warehouses, Examination

Areas and similar facilities as defined in Section 2 shall be considered as part of the
customs zone and shall be subject to the supervision and control of the Bureau of
Customs (BOC) as an Authorized Customs Facility (ACT)

·         In addition to those prescribed in this Order, these facilities shall be subject to
such requirements, rules and conditions which may be imposed by the Commissioner of
Customs and shall be made accessible to all authorized Customs officials or
representatives upon proper demand for ocular inspection

·         Inventory and other management records of imported cargoes handled and

stored by authorized operators shall be maintained and kept at all times in their places
of business and shall be accessible and available online to authorized BOC officers. Such
records shall also be subject to Inspection by authorized customs officials or
representatives and, upon proper demand, shall immediately be produced and
submitted to such officials or representatives
·         Only ACF operators shall be allowed to handle and store imported goods that are
immediately discharged from the arriving airplane, vessel and other means of
international transport.

Operational Provisions

·         Application to Establish and Operate an Authorized Customs Facility (ACF)

a. Documentary, Security and Other Requirements. Any person or firm desiring to

establish and operate an AFC shall apply in writing to the Collection District where the
proposed ACF facilities are to be located and shall submit the following documents:

-       Application Letter

-       SEC Articles of Incorporation, BIR Certificate of Registration and Mayor's Permit (if
not yet filed under the Client Profile Registration System (CPRS)

-       Location and layout of facility, including machinery, equipment and x-ray facility, as
applicable (including lease contract or title to the property)

-       Audited Financial Statement for the last two (2) years immediately preceding the
date of application

-       Web-based inventory management system

-       Customs facility for use of customs complement (or proposed facility)

An ACF must have written and verifiable procedures on the following:

-       Security procedures for service providers and vendors

-       Container security integrity and breach detection measures (e.g. container storage
and seals)

-       Physical access controls (e.g. security personnel, employee ID system, searches,

visitor/vendor verification)

-       Personnel security (e.g, pre-employment verification, background checks)

Procedural Security (e.g. cargo control, shipping and receiving, container opening and
release)

-       Security Training and Awareness

-       Physical Security (e.g. fences, gates, parking, building structures, locks and keys,
lighting, alarm systems and video surveillance cameras)

-       IT Security (e.g. password, accountability)

b. The ACF management shall cause the mandatory and periodic training of a sufficient
number of its personnel for the handling/storage/management of dangerous goods

C. Upon receipt of the above documents, the District Collector, through the Deputy
Collector for Operations, shall immediately direct an inspection of the proposed ACF
and an evaluation on the merit of the application. The inspection report and evaluation
together with the recommendation/s from the concerned customs officers shall be
submitted to the District Collector within fifteen (15) working days upon receipt of the
directive.

d. Upon receipt of the evaluation and inspection report, the District Collector shall
endorse the same to the Director, Port Operations Service (POS) for review. The Director
shall submit Its final evaluation report within fifteen (15) working days from receipt of
the report to the Deputy Commissioner, Assessment and Operations Coordinating
Group, (AOCG).

e. The Deputy Commissioner, AOCG shall endorse to the Commissioner the

report/recommendation for final approval of the application to operate an ACF, through
the issuance of a Certificate of Authority, which shall be valid for the period granted by
the Commissioner.

f. Upon issuance of the Certificate of Authority to Operate, the ACF shall comply with the
following:

-       E2M Connectivity. Request from Management Information System and Technology

Group (MISTG) to provide them with connectivity to e2m/OURS upon presentation by
the operator of the original authority to operate duly approved by the Commissioner of
Customs.

-       CPRS Registration. Having been provided with e2m/OLRS, the Commissioner

through the Deputy Commissioner for AOCG shall approve its CPRS registration

-       Interest Bearing Account / Treasury Bond / Insurance from any government

financial Institution to cover for duties and taxes due on lost or damaged goods
transferred to the ACF in the amount provided in the Certificate of Authority.
-       Payment of an Annual Supervision Fee in an amount as follows:

Small - Two Hundred Thousand Pesos (PHP200,000) per annum

Medium - Three Hundred Fifty Thousand Pesos (PhP 350,000) per annum

Large - Five Hundred Thousand Pesos (PhP500,000) per annum

·         Application for Renewal of Certificate of Authority

a. The license to operate an ACF shall be valid for the period granted in the Certificate of
Authority which shall not be less than 3 years.

b. The application for renewal shall be filed with District Collector concerned, through
the Deputy Collector for Operations, not later than six (6) months before the expiration
of the authority to operate an ACF. Failure to file an application for renewal six (6)
months prior to its expiration shall automatically be subject to a penalty in the amount
of One Hundred Thousand Pesos only (Php100,000)

C. The Director, Port Operations Service (POS) shall give proper and timely notice of
expiration to the ACF operator to afford the applicant sufficient time to file its
application for renewal.

d. The application shall be submitted together with the updated documentary and other
requirements. The procedures provided in paragraph 4.1 above, as applicable, shall
apply in processing of the renewal application.

·         Voluntary Closure of ACF

a. Upon written request of the ACF operator to the District Collector concerned, citing
reasons therefor, an ACF may be closed voluntarily. The District Collector shall require all
cargoes remaining with the ACF to be released to its consignee(s) upon payment of all
customs duties, taxes and other charges due thereon and after compliance with
applicable laws and regulations.

b. Any overstaying cargoes still remaining with the ACF shall be inventoried and
transferred to BOC Warehouse at the expense of ACF

·         Suspension and Revocation of ACF Certificate of Authority to Operate

a. The ACF shall be suspended or revoked on any of the following grounds:

-       When the facility is used in storing smuggled goods;

-       If involved in pilferage;

-       Cargoes cannot be accounted for;

-       Overcharging of fees;

-       Violation of customs laws, rules and regulations, and

-       Other violations of laws of the Philippines.

b. In case of a customs-initiated revocation or cancellation, the District Collector

concerned shall order its Deputy Collector for Operations to conduct an Investigation,
allowing the ACF operator to submit evidence to the contrary,

c. The administrative proceeding should be summary in nature and should be

terminated within thirty (30) working days from receipt of the order to conduct hearing

d. After termination of the investigation, the District Collector shall prepare its
recommendation and submit the same to the Deputy Commissioner, AOCG.

e. The procedures provided in paragraph 4.1 of CMO 30-2015, as applicable, shall apply
in processing of the suspension or revocation of ACF.

·         Application for Relocation / Expansion / Additional Facilities

a. In case of relocation, expansion or provision of additional facilities, the ACF operator

shall secure approval from BOC.

b. The procedures provided in paragraph 4.1 above, as applicable, shall apply in

processing of the application for relocation or expansion, or for additional facilities.

·         Application to Operate additional facilities outside of the Collection District

a. Additional facilities outside the Collection District where the ACF acquired its authority
to operate may be permitted upon application to the District Collector concerned
subject to the approval of the Commissioner, which shall be considered as a new and
original application. Hence, a separate accreditation to operate is necessary on new
applications to establish and operate an ACF as provided in this Code shall apply.
ESTABLISHMENT OF ICBW AND THE RULES AND REGULATIONS GOVERNING ITS
OPERATIONS.

 OBJECTIVES

·           To ensure efficiency in the delivery of materials and supplies to the

Semiconductor and Electronics industry.

·           To rationalize and simplify existing procedures to enhance the competitiveness

of the industry in the global market and sustain its standing as the top export earner of
the country.

·           To strengthen the role of ICBWs as a strategic support base for the industry.

·           To ensure a high level of integrity for ICBWs catering to the Semiconductor and
Electronics industry.

SCOPE

The provisions of this ORDER shall apply only to ICBWs exclusively servicing the needs
of the Semiconductor and Electronics industry group.

GENERAL PROVISIONS

·           An industry -Specific Customs Bonded Warehouse shall be licensed exclusively to

address and service the needs of the Semiconductor and Electronics industry.

·           Application to establish and operate ICBW for the industry shall be submitted
along with a written certification by a duly recognized industry group that the applicant
will exclusively service the Semiconductor and Electronics industry. Such certification
shall be signed by its duly authorized representative and officially endorsed to the
District Collector having jurisdiction over the application.

·           The application shall be accompanied by the following documents:

-             List of materials and supplies to be imported directly or indirectly as certified to

by a duly recognized industry group, if necessary.
-             Projected semi-annual volume/quantity of materials and supplies to be
imported;

-             List of customers who belong to the Semiconductor and Electronics industry

and attaching thereto, if necessary, certificates of registration or other documents to
prove that they are either PEZA/Ecozone/Freeports locators or operators of Customs
Bonded Manufacturing Warehouse;

-             Sworn Statement by the ICBW operator that the materials and supplies
imported are destined to and for the use of the Semiconductor and Electronics industry
based on the list customers required to be submitted.

-             Certification issued by a duly recognized industry group stating that the

materials and supplies will be sourced by its members from the applicant company.

·           The list of importable materials and supplies may be revised, as well as their
semi-annual volume/quantity provided such application for revision has been approved
by the Customs Bonded Warehouse Committee upon the recommendation of the
District Collector concerned and provided further, that the revision made shall not be
constructed to effect an extension of the authority to operate an ICBW.

·           An ICBW established to service the Semiconductor and Electronics industry shall
be allowed to operated for a period of three (3) years, renewable for the same period
thereafter, provided that the application for renewal shall be filed at least three (3)
months prior to the expiration of its license otherwise, the ICBW shall be deemed closed
at the expiry of the license.

·           Expansion of an ICBW may be allowed upon application in writing to, and

approved by the District Collector concerned, provided that this shall be construed to
refer to the expansion of its facility’s original structure within the same land area
covered by the original approved application. Expansion under this definition shall be
exempt from payment of the annual warehouse supervision fee.

·           Expansion of an ICBW may be permitted upon application in writing to, and

approved by the Bonded Warehouse Committee; provided that such extension/s shall
service the Semiconductor and Electronics industry and located within the same
collection district where the main ICBW is registered; and provided further that its
lifespan is conterminous with that of the latter. An approved ICBW extension shall be
subject to the payment of the corresponding annual warehouse supervision fee.
·           An application for the establishment of an extension located outside the
collection district where the main ICBW is registered shall be treated as a new and
original application and, upon approval, issued a separate license.

·           Unless otherwise provided herein, all existing regulations pertaining to the

application and other documents required for the evaluation of applicants,
responsibilities for the operator and all other provisions governing the operation of
other types of CBWs, shall remain in force, insofar as they are applicable to ICBWs
established under this Oder.

SPECIFIC PROVISIONS

·         Warehousing Importations

-             Importations of ICBWs established under Order shall be made within the limits
applied for and in accordance with ICBW license approved by the Customs Bonded
Warehouse Committee.

-             Imported warehousing articles may be stored at the ICBW for a period of nine
(9) months counted from the date of transfer to the licensed warehouse. Said articles
shall be withdrawn within this period which may be extended for another three months
by the district collector, provided that the application for extension shall be filled at least
one month before the expiration of the original period.

·         Prohibited Warehousing Shipments

-             Fibers, yarns, fabrics and accessories for the manufacture of garments

-             Finished articles, except when such articles are required by the industry for the
manufacture, assembly, testing and packaging/repacking of its export products, as
certified by a duly recognized industry group pursuant to paragraph 4.3.1.

-             Articles not included in the approved list of importable materials and supplies
or in excess of the approved volume/ quantity for importation.

-             Prohibited articles

-             Regulated articles, except when covered by a corresponding clearance and/or

import authority duly issued by a competent authority, and the same is required by the
industry for the manufacture, assembly, testing and packaging/repacking of its export
products as certified by a duly recognized industry group pursuant to paragraph 4.3.1

·         Sanctions for Importing Excluded Articles

-       Except those covered under par. 5.2.4 and 5.2.5, which shall be subject to
seizure/forfeiture proceeding and such other applicable sanctions, importations made in
violation of the section 5.2 thereof shall be penalized as follows:

a.    First Offence- full payment of correct duties and taxes due on the imported articles
that are subject of the violation with a stem warning

b.    Second offence- full payment of correct duties and taxes as describe in letter (a)
above; and one-month suspension of operations

c.     Third Offence- full payment of correct duties and taxes as described in letter (a)
above: and closure of its warehouse.

This violation shall be reckoned within the 3-year life time of the license.

-       The imposition of the above penalties shall be without prejudice to the authority of
the Warehouse Audit and Monitoring Unit (WAMU), Post Entry Audit Unit, or any other
unit authorized by the Commissioner of Customs, to conduct an audit on the
importations/operations of the erring ICBW. In case other units have derogatory
information, they shall forward the same to the Commissioner of Customs for
appropriate action.

·         Databank

The concerned Customs operating division shall maintain a databank of all articles by
the ICBW’s which databank shall at all times be made accessible to the WAMU, and such
other units as may be authorized by the Commissioner of Customs for monitoring
and/or audit purposes.

·         Transfer from Customs Zone to ICBW

·         Transfer of Warehousing articles from the customs zone to the ICBWs may be
effected upon filling of their corresponding warehousing entry, which shall be processed
in accordance with the existing selectivity scheme, and upon the proper posting of
bond. Hence, cargoes shall not be subject to examination when channeled “green”, but
shall undergo to examination if channeled “yellow” and physical inspection if channeled
“red”

·         In ports where the selectivity scheme for warehousing entries is not yet
operational, a system for random checking shall be developed and implemented, in
which case the transfer of the imported warehousing articles from the Customs zone to
the ICBWs shall be made under a Transshipment Permit, and the warehousing entry
shall be filed  within 5 days from the date of transfer, which period may be extended for
another 5 days by the district collector as provided for under CMO 39-91.

·         The transfer of imported articles from the Customs zone to an ICBW shall be
under continuous guarding by customs guards until delivery at the warehouse is
acknowledged in the covering boat note by the Customs personnel assigned thereat.

Withdrawal of Articles from the ICBW

·         Imported articles may be withdrawn from an ICBW without payment of duties and
taxes either for sale or transfer to the Semiconductor and Electronics industry that
are PEZA/Ecozone/Freeport locators, Bonded Manufacturing Warehouses.

·         Withdrawal for sale or transfer to the Semiconductor and Electronics industry shall
be approved by the Chief Operating Division on a per import entry basis. Partial
deliveries shall be allowed based on the list provided.

Penalties for Late/Unauthorized Withdrawal

·         The withdrawal of articles shall be made within the original/extension period for
re-exportation, otherwise said articles shall be subject to the following penalties.

o   First offense- a penalty equal to correct duties and taxes of the articles not
withdrawn within the period with a stem warning.

o   Second offense- a penalty equivalent to one and a half times the correct duties and
taxes due on the articles. After the proper payment of the penalty, the ICBW may choose
thereafter to re-export or sell subject articles to Semiconductor and Electronics export
producers.

o   Third offense-seizure/forfeiture of the articles not withdrawn and closure of the

warehouse without prejudice to the filling of criminal and administrative against the
operator.
The violation shall reckoned within the 3-year lifetime of the license.

·         The penalties hereinabove imposed may, highly justifiable and meritorious

reasons, be reviewed and reconsidered by the Commissioner of Customs upon the
recommendation of the Customs Bonded Warehouse Committee.

Liquidation of Entry and Cancellation of Bonds

·         The liquidation of imported articles under bond as well as their covering entries
shall done within thirty (30) days from the date the goods were delivered to the
customers; provided that the 30-day period shall fall within the original 9-month period
for re-exportation or within one (1) year, if extended for another three (3) months.

·         The ICBW operator may effect liquidation of materials and supplies and their
covering entries by submitting the following:

-       Certificate of Identification

-       Boat note

-       Packing List

-       Copy of approved PEZA Form 8105 In case of delivery to PEZA or approved

Admission Import/Permit in the case of an Ecozone/Freeport.

-       Duly authenticated proof/evidence of delivery and receipt of subject articles by

manufacturing CBW or PEZA/Ecozone locators.

PHILIPPINE ECONOMIC AUTHORITY ZONE (PEZA) RULES AND REGULATIONS.

R.A. 7916 AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND MECHANISMS
FOR THE CREATION, OPERATON, ADMINISTRATION, AND COORDINATION OF
SPECIAL ECONOMIC ZONES IN THE PHILIPPINES, CREATING FOR THIS PURPOSE,
THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA), AND FOR OTHER
PURPOSES.

PURPOSES AND OBJECTIVES: ESTABLISHMENT AND NATURE OF SPECIAL

ECONOMIC ZONES; COORDINATION WITH OTHER SIMILAR SCHEMES
Purposes, Intents and Objectives

·         To establish the legal framework and mechanisms for the integration,
coordination, planning and monitoring of special economic zones, industrial estates /
parks, export processing zones and other economic zones;

·         To transform selected areas in the country into highly developed agro industrial,
industrial, commercial, tourist, banking, investment, and financial centers, where highly
trained workers and efficient services will be available to commercial enterprises

·         To promote the flow of investors, both foreign and local, into special economic
zones which would generate employment opportunities and establish backward and
forward linkages among industries in and around the economic zones;

·         To stimulate the repatriation of Filipino capital by providing attractive climate and
incentives for business activity;

·         To promote financial and industrial cooperation between the Philippines and
industrialized countries through technology-intensive industries that will modernize the
country’s industrial sector and improve productivity levels by utilizing new technological
and managerial know-how; and

·         To vest the special economic zones on certain areas thereof with the status of a
separate customs territory within the framework of the Constitution and the national
sovereignty and territorial integrity of the Philippines.

Criteria for the Establishment of Other ECOZONES

(a) The proposed area must be identified as a regional growth center in the Medium-
Term Philippine Development Plan or by the Regional Development Council;

(b) The existence of required infrastructure in the proposed ECOZONE, such as roads,
railways, telephones, ports, airports, etc., and the suitability and capacity of the
proposed site to absorb such improvements;

(c) The availability of water source and electric power supply for use of the ECOZONE;
(d) The extent of vacant lands available for industrial and commercial development and
future expansion of the ECOZONE as well as of lands adjacent to the ECOZONE available
for development of residential areas for the ECOZONE workers;

(e) The availability of skilled, semi-skilled and non-skilled trainable labor force in and
around the ECOZONE;

(f) The area must have a significant incremental advantage over the existing economic
zones and its potential profitability can be established;

(g) The area must be strategically located; and

(h) The area must be situated where controls can easily be established to curtail
smuggling activities.

Other areas which do not meet the foregoing criteria may be established as ECOZONES:
Provided, That the said area shall be developed only through local government and/or
private sector initiative under any of the schemes allowed in Republic Act No. 6957 (the
build-operate-transfer law), and without any financial exposure on the part of the
national government: Provided, further, That the area can be easily secured to curtail
smuggling activities: Provided, finally, That after five (5) years the area must have
attained a substantial degree of development, the indicators of which shall be
formulated by the PEZA.

ECOZONE to be Operated and Managed as Separate Customs Territory

The ECOZONE shall be managed and operated by the PEZA as separate customs

territory.

The PEZA is hereby vested with the authority to issue certificate of origin for products
manufactured or processed in each ECOZONE in accordance with the prevailing rules or
origin, and the pertinent regulations of the Department of Trade and Industry and/or
the Department of Finance.

Defense and Security

The defense of the ECOZONE and the security of its perimeter fence shall be the
responsibility of the national government in coordination with the PEZA. Military forces
sent by the national government for the purpose of defense shall not interfere in the
internal affairs of any of the ECOZONE and expenditure for these military forces shall be
borne by the national government. The PEZA may provide and establish the
ECOZONES’ internal security and firefighting forces.

GOVERNING STRUCTURES

The Philippine Economic Zone Authority (PEZA) Board.

There is hereby created a body corporate to be known as the Philippine Economic Zone
Authority (PEZA) attached to the Department of Trade and Industry. The Board shall
have a director general with the rank of department undersecretary who shall be
appointed by the President. The director general shall be at least forty (40) years of age,
of proven probity and integrity, and a degree holder in any of the following fields:
economics, business, public administration, law, management or their equivalent, and
with at least ten (10) years relevant working experience preferably in the field of
management or public administration.

"The director general shall be assisted by three (3) deputy directors general each for
policy and planning, administration and operation, who shall be appointed by
the PEZA Board, upon the recommendation of the director general. The deputy
directors general shall be at least thirty-five (35) years old, with proven probity and
integrity, and a degree holder in any of the following fields: economics, business, public
administration, law, management or their equivalent."

"The Board shall be composed of thirteen (13) members as follows: the Secretary of the
Department of Trade and Industry as Chairman, the Director General of the Philippine
Economic Zone Authority as Vice-Chairman, the undersecretaries of the Department of
Finance, the Department of Labor and Employment, the Department of Interior and
Local Government, the Department of Environment and Natural Resources, the
Department of Agriculture, the Department of Public Works and Highways, the
Department of Science and Technology, the Department of Energy, the Deputy Director
General of the National Economic and Development Authority, one (1) representative
from the investors / business sector in the ECOZONE. In case of the unavailability of the
Secretary of the Department of Trade and Industry to attend a particular board meeting,
the Director General of PEZA shall act as Chairman."

The existing Export Processing Zone Authority (EPZA) created under Presidential Decree
No. 66 shall evolve into the PEZA in accordance with the guidelines and regulations set
forth in an executive order issued for this purpose.
Members of the Board shall receive a per diem of not less than the amount equivalent
to the representation and transportation allowances of the members of the Board and /
or as may be determined by the Department of Budget and Management: Provided,
however, That per diems collected per month does not exceed the equivalent of four (4)
meetings.

Functions and Powers of PEZA Board

The Philippine Economic Zone Authority (PEZA) Board shall have the following functions
and powers:

(a) Set the general policies on the establishment and operations of the ECOZONES,
industrial estates, export processing zones, free trade zones, and the like;

(b) Review proposals for the establishment of ECOZONES based on the set criteria under
Section 6 and endorse to the President the establishment of the ECOZONES, industrial
estates, export processing zones, free trade zones and the like. Thereafter, it shall
facilitate and assist in the organization of said entities;

(c) Regulate and undertake the establishment, operation and maintenance of utilities,
other services and infrastructure in the ECOZONE, such as heat, light and power, water
supply, telecommunication, transport, toll roads and bridges, port services, etc., and to
fix just, reasonable and competitive rates, charges and fees therefore;

(d) Approve the annual budget of the PEZA and the ECOZONE development plans;

(e) Issue rules and regulations to implement the provisions of this Act in so far as its
power and functions are concerned;

(f) Exercise its powers and functions as provided for in this Act; and

(g) Render annual reports to the President and the Congress.

General Powers and Functions of the Authority

The PEZA shall have the following powers and functions:

(a) To operate, administer, manage and develop the ECOZONE according to the
principles and provisions set forth in this Act;

(b) To register, regulate and supervise the enterprises in the ECOZONE in an efficient
and decentralized manner;

(c) To coordinate with local government units and exercise general supervision over the
development, plans, activities and operations of the ECOZONES, industrial estates,
export processing zones, free trade zones, and the like;

(d) In coordination with local government units concerned and appropriate agencies, to
construct, acquire, own, lease, operate and maintain on its own or through contract,
franchise, license, bulk purchase from the private sector and build-operate-transfer
scheme or joint venture, adequate facilities and infrastructure, such as light and power
systems, water supply and distribution systems, telecommunication and transportation,
buildings, structures, warehouses, roads, bridges, ports and other facilities for the
operation and development of the ECOZONE;

(e) To create, operate and/or contract to operate such agencies and functional units or
offices of the authority as it may deem necessary;

(f) To adopt, alter and use a corporate seal; make contracts, lease, own or otherwise
dispose of personal or real property; sue and be sued; and otherwise carry out its duties
and functions as provided for in this Act;

(g) To coordinate the formulation and preparation of the development plans of the
different entities mentioned above;

(h) To coordinate with the National Economic Development Authority (NEDA), the
Department of Trade and Industry (DTI), the Department of Science and Technology
(DOST), and the local government units and appropriate government agencies for policy
and program formulation and implementation; and

(i) To monitor and evaluate the development and requirements of entities in subsection
(a) and recommend to the local government units or other appropriate authorities the
location, incentives, basic services, utilities and infrastructure required or to be made
available for said entities.
Powers and Functions of the Director General

The director general shall be the overall coordinator of the policies, plans and programs
of the ECOZONES. As such, he shall provide overall supervision over and general
direction to the development and operations of these ECOZONES. He shall determine
the structure and the staffing pattern and personnel complement of the PEZA and
establish regional offices, when necessary, subject to the approval of the PEZA Board.

In addition, he shall have the following specific powers and responsibilities:

(a) To safeguard all the lands, buildings, records, monies, credits and other properties
and rights of the ECOZONES;

(b) To ensure that all revenues of the ECOZONE are collected and applied in accordance
with its budget;

(c) To ensure that the investors/firms and employees of the ECOZONES are properly
discharging their respective duties;

(d) To give such information and recommend such measures to the Board, as he shall
deem advantageous to the ECOZONE;

(e) To submit to the Board, the ongoing and proposed projects, work and financial
program, annual budget of receipts, and expenditures of the ECOZONE;

(f) To represent the ECOZONE in all its business matters and sign on its behalf after
approval of the Board, all its bonds, borrowings, contracts, agreements and obligations
made in accordance with this Act;

(g) To acquire jurisdiction, as he may deem proper, over the protests, complaints, and
claims of the residents and enterprises in the ECOZONE concerning administrative
matters;

(h) To recommend to the Board the grant, approval, refusal, amendment or termination
of the ECOZONE franchises, licenses, permits, contracts, and agreements in accordance
with the policies set by the Board;
(i) To require owners of houses, buildings or other structures constructed without the
necessary permit whether constructed on public or private lands, to remove or demolish
such houses, buildings, structures within sixty (60) days after notice and upon failure of
such owner to remove or demolish such house, building our structure within said
period, the director general or his authorized representative may summarily cause its
removal or demolition at the expense of the owner, any existing law, decree, executive
order and other issuances or part thereof to the contrary notwithstanding;

(j) To take such emergency measures as may be necessary to avoid fires, floods and
mitigate the effects of storms and other natural or public calamities;

(k) To prepare and make out plans for the physical and economic development of the
ECOZONE, including zoning and land subdivision, and issue such rules and regulations
which shall be submitted to the Board for its approval; and

(l) To perform such other duties and exercises such powers as may be prescribed by the
Board, and to implement the policies, rules and regulations set by the PEZA.

Administration of Each ECOZONE

 Except for privately-owned, managed or operated ECOZONES, each ECOZONE shall be

organized, administered, managed and operated by the ECOZONE executive committee
composed of the following:

(a) The administrator who shall be appointed by the PEZA Board upon recommendation

of the director general; and

(b) One (1) deputy administrator to be appointed by the Board upon recommendation
of the director general.

An ECOZONE advisory body shall be created with the following members:

1. The president of the association of investors in the ECOZONE;

2. The governor of the province where the ECOZONE is located;

3. The mayor/s of the municipality/ies or city/ies where the ECOZONE is located;

4. The president of an accredited labor union in the ECOZONE;

5. The representative of the business sector in the periphery of the ECOZONE; and

6. The representative of the PEZA.

The ECOZONE advisory body shall have the following functions:

i. Advise the ECOZONE management on matters pertaining to policy initiatives; and

ii. Assist the ECOZONE management in setting problems arising between labor and any
enterprise in the ECOZONE.

Privately-owned ECOZONES shall retain autonomy and independence but shall be

monitored by the PEZA for the implementation of incentives and operations for
adherence to the law.

Personnel

The PEZA Board of Directors shall provide for an organization and staff of officers and
employees of the PEZA, and upon recommendation of the director general with the
approval of the Secretary of the Department of Trade and Industry, appoint and fix the
remunerations and other emoluments: Provided, That the Board shall have exclusive and
final authority to promote, transfer, assign and reassign officers of the PEZA, any
provision of existing law to the contrary notwithstanding: Provided, further, That the
director general may carry out removal of such officers and employees.

All positions in the PEZA shall be governed by a compensation, position classification

system and qualification standards approved by the director general with the
concurrence of the Board of Directors based on a comprehensive job analysis and audit
of actual duties and responsibilities. The compensation plan shall be comparable with
the prevailing compensation plans in the Subic Bay Metropolitan Authority (SBMA),
Clark Development Corporation (BCDA) and the private sector and shall be subject to
the periodic review by the Board no more than once every two (2) years without
prejudice to yearly merit reviews or increases based on productivity and profitability.
The PEZA shall therefore be exempt from existing laws, rules and regulations on
compensation, position classification and qualification standards. It shall however
endeavor to make its systems conform as closely as possible with the principles under
Republic Act No. 6758.
The PEZA officers and employees including all Members of the Board shall not engage
directly or indirectly in partisan activities or take part in any election, except to vote.

No officer or employee of the PEZA subject to Civil Service laws and regulations shall be

removed or suspended except for cause, as provided by law.

OPERATIONS WITHIN THE ECOZONE

Fiscal Incentives

Business establishments operating within the ECOZONES shall be entitled to the fiscal
incentives as provided for under Presidential Decree No. 66, the law creating the Export
Processing Zone Authority, or those provided under Book VI of Executive Order No. 226,
otherwise known as the Omnibus Investment Code of 1987.

Furthermore, tax credits for exporters using local materials as Inputs shall enjoy the
same benefits provided for in the Export Development Act of 1994.

Exemption from National and Local Taxes

Except for real property taxes on land owned by developers, no taxes, local and national,
shall be imposed on business establishments operating within the ECOZONE. In lieu
thereof, five percent (5%) of the gross income earned by all business enterprises within
the ECOZONE shall be paid and remitted as follows:

a. Three percent (3%) to the National Government;

b. Two percent (2%) which shall be directly remitted by the business establishments to
the treasurer’s office of the municipality or city where the enterprise is located.

Domestic Sales

Goods manufactured by an ECOZONE enterprise shall be made available for Immediate

retail sales in the domestic market, subject to payment of corresponding taxes on the
raw materials and other regulations that may be adopted by the Board of the PEZA.

However, in order to protect the domestic industry, there shall be a negative list of
Industries that will be drawn up by the PEZA. Enterprises engaged in the industries
included in the negative list shall not be allowed to sell their products locally. Said
negative list shall be regularly updated by the PEZA.

The PEZA, in coordination with the Department of Trade and Industry and the Bureau of
Customs, shall jointly issue the necessary implementing rules and guidelines for the
effective Implementation of this section.

Eminent Domain

The areas comprising an ECOZONE may be expanded or reduced when necessary. For
this purpose, the government shall have the power to acquire, either by purchase,
negotiation or condemnation proceedings, any private lands within or adjacent to the
ECOZONE for:

a. Consolidation of lands for zone development purposes;

b. Acquisition of right of way to the ECOZONE; and

c. The protection of watershed areas and natural assets valuable to the prosperity of the
ECOZONE.

If in the establishment of a publicly-owned ECOZONE, any person or group of persons

who has been occupying a parcel of land within the Zone has to be evicted,
the PEZA shall provide the person or group of persons concerned with proper
disturbance compensation: Provided, however, That in the case of displaced agrarian
reform beneficiaries, they shall be entitled to the benefits under the Comprehensive
Agrarian Reform Law, including but not limited to Section 36 of Republic Act No. 3844,
in addition to a homelot in the relocation site and preferential employment in the
project being undertaken.

Shipping and Shipping Register

Private shipping and related business including private container terminals may operate
freely in the ECOZONE, subject only to such minimum reasonable regulations of local
application which the PEZA may prescribe.

The PEZA shall, in coordination with the Department of Transportation and

Communications, maintain a shipping register for each ECOZONE as a business register
of convenience for ocean-going vessels and issue related certification.

Ships of all sizes, descriptions and nationalities shall enjoy access to the ports of the
ECOZONE, subject only to such reasonable requirement as may be prescribed by
the PEZA In coordination with the appropriate agencies of the national government.

Registration of Business Enterprises

 Business enterprises within a designated ECOZONE shall register with the PEZA to avail
of all incentives and benefits provided for in this Act.

One Stop Shop Center

The PEZA shall establish a one stop shop center for the purpose of facilitating the
registration of new enterprises in the ECOZONE. Thus, all appropriate government
agencies that are Involved In registering, licensing or issuing permits to investors shall
assign their representatives to the ECOZONE to attend to Investor’s requirements.

MISCELLANEOUS PROVISIONS

Appropriation

Upon the effectivity of RA 7916 , all funds of the former Export Processing Zone
Authority (EPZA) shall be transferred to the newly-created Philippine Economic Zone
Authority, Thereafter, any sum as may be necessary to augment its capital outlay shall
be Included In the General Appropriations Act to be treated as an equity of the national
government.

Additional funding shall come from the following:

(a) The annual subsidies, appropriations and/or other assets of the exports processing
zone, and the industrial estates and other economic areas that have been
absorbed/transferred to the PEZA as mandate in this Act;

(b) The proceeds from the rent of lands, buildings, and other properties of the
ECOZONES concerned;

(c) The proceeds from fees, charges and other revenue-generating Instruments which
the PEZA is authorized to impose and collect under this Act,

(d) The proceeds from bonds which the PEZA authorized to float both domestic and
abroad; and
(e) The advance rentals, license fees, and other charges which the PEZA is authorized to
impose under this Act and which an investor is willing to advance payment for.

Applicability of National Laws

 National laws shall prevail vis-a- vis ECOZONE rules, regulations and standards, unless
there is a clear intent in this Act or other Acts of Congress to vest the ECOZONE specific
power and privileges not otherwise allowed under existing laws.

Non-Applicability on Areas Covered by Republic Act. No. 7227

RA 7916 shall not be applicable to economic zones and areas already created or to be
created under Republic Act No. 7227 or other special laws, and governed by authorities
constituted pursuant thereto.

Ipso-Facto Clause

All privileges, benefits, advantages or exemptions granted to special economic zones

under Republic Act. No. 7227, shall ipso-facto be accorded to special economic zones
already created or to be created under RA 7916. The free port status shall not be vested
upon new special economic zones.

Interpretation / Construction

 The powers, authorities and functions that are vested In the Philippine Economic Zone
Authority (PEZA) and the ECOZONES concerned are intended to establish
decentralization of governmental functions and authority as well as an efficient and
effective working relationship between the ECOZONE, the central government and the
local government units.

IMPLEMENTING RULES AND REGULATIONS.

The Department of Trade and Industry, the National Economic and Development
Authority, the Department of Finance, the Bureau of Customs, the Department of
Agrarian Reform, the Department of Interior and local Government, the Philippine
Economic Zone Authority, and the representatives from the technical staff of the
Committee on Economic Affairs of both Houses of Congress shall formulate the
implementing rules and regulations of this Act within ninety (90) days after its approval.
Such rules and regulations shall take effect fifteen (15) days after their publication in a
newspaper of general circulation in the Philippines.

REGISTRATION OF ECOZONE ENTERPRISE

Application and Registration

Qualification of Applicants

Any person, firm, association, partnership, corporation, or any other form of business
organization, regardless of nationality, control and / or ownership of the working capital
thereof may apply for registration as an Export or Free Trade Enterprise within the
ECOZONE in any sector of industry, international trade and commerce, except duty-free
retailing and wholesale trading of imported finished products for purposes of serving
the domestic market. Furthermore, if the area of investments of the said enterprises falls
within Lists A and B of the Foreign Investments Act of 1991, then the applicable
nationality, ownership or control requirements of the said law shall be observed.

Applications for ECOZONE Developer / Operator, Domestic Market, Utilities, Facilities,

Tourism or Service Enterprises shall comply with the applicable nationality, control and /
or ownership requirements of the working capital thereof in accordance with the
pertinent provisions of the Philippine Constitution, Foreign Investments Act of 1991 and
other existing laws and regulations.

However, applicants for Domestic Enterprise shall be limited to new or expanding

business entities subject to the guidelines that shall be promulgated by the Board in
addition to the nationality requirements under existing laws and regulations.

All applications shall be made upon forms prescribed by the PEZA duly accomplished in

three (3) copies.

Supporting Documents

The applicant for an ECOZONE Enterprise shall submit the following documents:

a. Project feasibility study, unless dispensed with and in lieu thereof, the applicant shall
submit basic data / information on its technical, financial, marketing and management
capability / competence to undertake the proposed project or business within the
ECOZONE; *NO LONGER REQUIRED*
b. Copies of articles of incorporation and by-laws;

c. Resolution of the applicant's board of directors authorizing the filing of the

application; list of its directors, principal officers, and major stockholders, including their
bio-data;

d. List of machinery and equipment to be used by the applicant with a statement of their
capacity, ownership and/or mode of procurement;

e. Company brochures and / or photographs of product(s); and

f. Other supporting documents / papers / clearances as may be required by

the PEZA depending upon the nature of the business and the type of business
organization of the applicant

Board Action

Approval of the application shall be by resolution of the Board unless otherwise

required by appropriate circulars and / or memoranda taking into consideration the
decentralization policy in the management, operation and maintenance of each
ECOZONE. The action taken thereon shall be communicated in writing to the applicant.

Certificate of Registration

The Certificate of Registration shall be issued only upon the execution of the
Registration Agreement by the PEZA and the applicant and whenever it can be shown
that the applicant has:

a. Complied with all the pre-registration requirements;

b. Submitted within twenty (20) calendar days from receipt of the notice of approval of
the application, a formal acceptance of the proposed terms and conditions of
registration. For good cause shown, said period may be extended if the request
therefore is filed before the expiration of the period sought to be extended; and

c. Paid the registration fee.

However, in appropriate cases as may be determined by the Board, the ECOZONE

management or the duly authorized offices of the PEZA shall be empowered to issue
business permits and / or licenses to ECOZONE Enterprises in lieu of the Certificate of
Registration after the proper evaluation of their application in accordance with the set of
criteria duly approved by the Board and upon payment of the corresponding fees.
One Stop Shop Center

There shall be established in the ECOZONE a one stop-shop center to facilitate the
registration, licensing and issuance of permits to ECOZONE Enterprises. All government
agencies involved shall assign their respective representatives in the ECOZONE for this
purpose.

TAX TREATMENT OF MERCHANDISE IN THE ECOZONES

Tax Treatment of Merchandise in the Restricted Areas of the Ecozones

Exemptions

Merchandise brought to the restricted areas in the ECOZONES by registered Export or

Free Trade Enterprises, except prohibited merchandise, shall not be subject to all
customs and internal revenue laws and regulations of the Philippines nor to local tax
ordinances: Provided, That they are to be sold, stored, broken-up, replaced, assembled,
manipulated, manufactured and/or mixed with foreign or domestic merchandise within
the restricted areas in the ECOZONES.

Domestic Merchandise

 Domestic Merchandise sent from the restricted areas of the ECOZONES by registered
Export or Free Trade Enterprises to the custom territory shall, whether or not combined
with or made part of other articles likewise the growth, product or manufacture of the
Philippines while in the ECOZONE subject to the internal revenue laws of the Philippines
as domestic goods sold, transferred or disposed of for local consumption.

Foreign Merchandise

 Merchandise of foreign origin brought to the restricted areas in the ECOZONES by

registered Export or Free Trade Enterprises which has not undergone any processing,
manufacturing or manipulation while in the said areas of the ECOZONES, shall, when
sent therefrom to the customs territory, be subject to the laws and regulations
governing imported merchandise: Provided, That where said foreign merchandise is
combined with or made part of any domestic article, the duties and taxes to be assessed
on the final product shall be based on the value of such imported merchandise (except
when the final product is exempt) and internal revenue taxes on the value added:
Provided, further, That foreign merchandise included in the negative list shall not be
sent from the restricted areas of the ECOZONE to the customs territory.

Transfer of Merchandise

Domestic merchandise on which all internal revenue taxes have been paid if subject
thereto, and foreign merchandise on which duty or tax has been paid, or which have
been admitted free of duty and tax, may be taken into restricted areas of the ECOZONES
from the customs territory of the Philippines and brought back thereto free of quota,
duty or tax: Provided, however, That said merchandise shall be preserved its identity at
the time of transfer from the ECOZONE to the customs territory. A merchandise shall be
deemed to have lost its identity when, at the time of transfer, there has been a change
in the physical or mechanical characteristics and / or electro-magnetic or chemical
properties of such merchandise.

Domestic Sale

Finished products of registered Export of Free Trade Enterprises not included in the
negative list shall be made available for domestic sale in the customs territory or retail
stores / shopping malls within the commercial / tourist or other authorized areas of the
ECOZONES, subject to all applicable rules and regulations including the payment of
customs duties and internal revenue taxes, to the applicable provisions of the Retail
Trade Nationalization Law, as amended, and to such other regulations or limitations as
may be adopted by the Board.

Identity

When the identity of an article taken to the restricted areas of the ECOZONES defined in
Section 4 above has been lost, such article shall, when taken from the ECOZONE to the
customs territory or to the non-restricted areas of the ECOZONE, be treated as foreign
merchandise entering the country for the first time.

Subsequent Importation

Goods or merchandise produced or manufactured in the restricted areas of the

ECOZONE and exported therefrom shall, on subsequent importation into the customs
territory, be subject to the import laws applicable to like articles manufactured in a
foreign country.

Rejects, Seconds and Recoverable Wastes

Subject to the provisions of Section 3 of this Rule, rejects, seconds and recoverable
wastes shall, when taken from the restricted areas of the ECOZONES to the customs
territory, or to the non-restricted areas of the ECOZONE, be taxed in accordance with
the applicable provisions of the customs and internal revenue laws and regulations of
the Philippines.

Abandonment

Any article or merchandise found in the restricted areas of the ECOZONE, the ownership
of which cannot be known despite diligent efforts, shall be declared as abandoned in
favor of the PEZA.

Treatment of Merchandise in  Non-Restricted Areas of the Ecozone

Regulations

Insofar as consistent with the Act, the PEZA hereby adopts the pertinent regulations and
procedures in the tax treatment of merchandise and / or services in the industrial estate
and / or tourism and recreational and other areas within the ECOZONE but outside a
restricted area, being implemented by appropriate agencies of the government without
prejudice to subsequent changes / supplements to be issued in appropriate circulars /
issuances by the Board with the end in view of simplifying the same.

ENTRY AND EXIT OF GOODS TO AND FROM THE RESTRICTED AREAS OF THE

ECOZONES

Prior Approval

Merchandise or articles of every description, except prohibited merchandise, may be

brought to the restricted areas of ECOZONES upon prior approval of the PEZA in a
prescribed form, which shall be obtained before placing the order for the importation or
before entry of said merchandise or articles into the territorial jurisdiction of the
Philippines. However, the PEZA shall adopt separate rules and guidelines with respect to
the entry and exist of goods or merchandise to and from the non-restricted areas of the
ECOZONES.

Importation of Samples

The importation of samples for reference and / or research purposes, of such kind and
in such quantity, dimensions or constructions as may be determined by the PEZA shall
also be allowed in the restricted areas of the ECOZONES and the same shall be
considered as imports of raw materials.

Permits

Merchandise or goods may be taken into or brought out of the restricted areas of the
ECOZONES only upon prior approval or permit by the PEZA in accordance with its
documentation and security procedures. Permits to bring out of the ECOZONES said
merchandise or goods must be secured by the Export or Free Trade Enterprise from
the PEZA prior to loading or before the release of said merchandise or goods from the
factory premises or warehouse of the enterprise. Merchandise or goods brought out of
the factory premises or warehouse of the Export or Free Trade Enterprise without the
required prior permit from the PEZA shall be considered as a violation of this Section
although the said merchandise or goods are still within or inside the restricted areas or
boundaries of the ECOZONE.

Prescribed Forms

The application for the entry or exit permit of goods shall be filed by the ECOZONE
Export or Free Trade Enterprise or entity concerned in the form prescribed by the PEZA.
The PEZA shall require the submission of shipping, commercial and other pertinent
documents relative to the importation, exportation, or entry into the customs territory of
the said goods

 Certificate of Origin

Upon due application, the PEZA shall issue the corresponding Certificate of Origin to an

ECOZONE enterprise intending to export its finished goods or merchandise to a foreign
country.

The Certificate of Origin shall contain a declaration by the exporter and certification by
the PEZA that the goods or merchandise were manufactured, assembled, processed,
stored, mixed, cleaned, graded, repacked, sorted, manipulated or transshipped wholly or
partly within a particular ECOZONE located in the Philippines and accompanied by any
of the following information:

a. The goods or merchandise covered by the certificate were grown, produced or

manufactured in the Philippines without any foreign material component; or

b. There are foreign material components which are ascertainable and are indicated
either in quantity, value or percentage in relation to the whole of a unit; or
c. There are foreign material components which are not ascertainable but their
estimated value in relation to the ex-factory price are indicated.

The PEZA, likewise, upon due application may provide additional certification of facts to
enable the ECOZONE enterprise to comply with the requirements of the importing
country in the availment of preferential tariff rates.

Marking

Imported goods destined for the ECOZONE shall be clearly marked in bold letters
indicating its destination, thus:

“DESTINES FOR (NAME OF ECOZONE 

ENTERPRISE / NAME OF ECOZONE)”

All Outward Bound Goods

Bound goods manufactured, assembled, processed packaged or manipulated within the

ECOZONE shall likewise be marked in such manner as would clearly indicate that such
goods originated from the ECOZONE,

THUS: “FROM THE PHILIPPINES” (NAME OF THE ECOZONE)

Loading and Unloading

An ECOZONE Export or Free Trade Enterprise shall, whenever practicable, unload and
load its importations into and exportations from the ECOZONE at the port of entry
nearest to such ECOZONE. In case the loading or unloading is done elsewhere, the dates
of arrival or departure shall be conveyed to the PEZA well in advanced so that
arrangements can be made with the customs authorities for the expeditious handling of
the cargo and escort service can be provided and scheduled by the PEZA.

In all cases involving the movements of foreign and domestic merchandise, raw
materials, supplies, articles, equipment, machineries, spare parts, wares and goods of
every description from the customs territory into the ECOZONE or vice-versa, the
procedures and requirements thereof shall be the subject of a Memorandum of
Agreement between PEZA and the Bureau of Customs and to subsequent
memorandum orders, circulars or memoranda of agreement, which shall be complied
with by the ECOZONE enterprise.

Written Permission
Products made in the restricted areas of the ECOZONES, samples thereof and / or
imported raw materials shall not be given nor sold by an Export or Free Trade Enterprise
to its Visitors, workers or employees without prior written permission from the PEZA.

Quality Standards

All exports from the ECOZONE shall satisfy duly established quality standards and
regulations pertinent thereto.

INVENTORY OF FINISHED PRODUCTS, RAW MATERIALS AND OTHER ASSETS

Inventory

The PEZA may, at any time, conduct an inventory of all machineries, equipment, stocks

of finished or semi-finished products, work-in-process, raw materials, supplies, goods or
merchandise and other assets of an ECOZONE enterprise.

Shortage and Overage

In case of failure to account for shortages on raw materials, machineries, equipment,

supplies or goods for personal usage, imported tax and duty free pursuant to the Act,
the same shall constitute prima facie proof that such goods or merchandise were
illegally sent out of the restricted areas of the ECOZONE and/or to the customs territory.
In such case, the enterprise concerned shall be imposed the corresponding fines, taxes
and duties in accordance with the applicable provisions of these Rules, Customs and
Internal Revenue Laws.

In case of overages, it shall be presumed that the excesses were introduced illegally into
the restricted areas of the ECOZONES and shall be subject to the imposition of fines and
/ or to confiscation or forfeiture pursuant to the provisions of these Rules and of the
Tariff and Customs Code of the Philippines.

In both cases, however, the PEZA shall take into account the reasonable percentage of
allowance based on established materials usage formula and other relevant factors
applicable to specific industry groups.

Liquidation of Imported Articles

Accountability for goods or merchandise imported tax and duty-free pursuant to the Act
shall be discharged as follows:

1. Submission of proof of payment of the corresponding taxes and duties;

2. Submission of proof of re-exportation - this shall consist of the following documents:

a. Import Entry 
b. Certificate of Identification 
c. Export Declaration 
d. Packing List 
e. Certificate of Loading / Landing

3. By condemnation / loss / destruction (including wastage and rejects) - the following

shall be submitted:

a. Covering Import Entry 

b. Description 
c. Quantity 
d. Affidavit of Loss / Destruction 
e. Permit to Bring Out of the ECOZONE

4. Exportation of finished products - the following documents shall be submitted:

a. Statement of liquidation (reconciliation of raw materials) 

b. Outward Bill of Lading / Airway Bill 
c. Certificate of Identification 
d. Certificate of Inspection and Loading / Landing 
e. Boatnote

5. Indirect Exportation - the following shall be submitted:

a. Receipt of payment covering the sale / contract of sale 

b. Certificate of Identification 
c. Boatnote Covering Transfer 
d. Certificate of Liquidation of Raw Materials / Raw Materials Consumption

6. Constructive Exportation - the following should be submitted:

a. Contract of Sale 
b. Boatnote / Delivery Receipt

The foregoing requirements for each mode of liquidation shall be without prejudice to
other requirements as the PEZA may determine.

INCENTIVES TO ECOZONE ENTERPRISES

Application and Entitlement

- All applications for availment of incentives shall be filed with PEZA.

Scope of Entitlement

New or expanding ECOZONE Developers / Operators, Export, Free Trade, Domestic

Market, Utilities, Facilities and Tourism Enterprises, except ECOZONE Service Enterprises
as defined under Section 2(p), Rule I of these Rules, registered on or after the effectivity
of these Rules, shall be entitled to the fiscal incentives provided in Sections 24 and 42 of
the Act.

Additional Incentives

In addition to the incentives in the preceding Section, new or expanding ECOZONE

Export and Free Trade Enterprises shall be entitled to the fiscal incentives under the
Decree or those provided under the Code. Said enterprises opting to avail of incentives
under the Decree shall be entitled to the incentives provided under Sections 1 to 5 and
7 of Rule XV of these Rules subject to the regulations that shall be prescribed by the
Board and the Department of Finance/Bureau of Internal Revenue. These opting to avail
of incentives under the Code shall be entitled to the incentives provided under Sections
1 to 6 of Rule XV of these Rules.

New or expanding ECOZONE Developers / Operators may be entitled to the incentives

provided under Section 1(C) and (D) of Rule XIV of these Rules as may be determined by
the Board in accordance with the pertinent provisions of the Code and the Investment
Priorities Plan prepared annually by the Board of Investments in addition to the
incentives provided in Section 2 of this Rule.

ECOZONE Domestic Market, Facilities, Utilities and Tourism Enterprises may be entitled
to additional incentives as provided under Section 1(C) and Section 2(C) and (D) of Rule
XVI as may be determined by the Board in accordance with the pertinent provisions of
the Code and the Investment Priorities Plan.

In the availment of the foregoing additional incentives, the Board may restrict the extent
the period of availment of the said incentives under the Code to ECOZONE Developers /
Operators, Domestic Market, Facilities, Utilities and Tourism Enterprises. Any such
restriction shall apply prospectively.

 Existing PEZA-Registered Enterprises
Export enterprises registered with the Export Processing Zone Authority (EPZA) under
the Decree or the Code shall continue to be entitled to the incentives under the terms
and conditions provided therein. However, EPZA export enterprises whose Income Tax
Holiday entitlement under the Code has expired shall be subject to the 5% special tax
rate under Rule XX of these Rules. EPZA Enterprises registered under the Decree which
are still availing of the Net Operating Loss Carry-Over incentive shall be subject to such
regulations as may be determined by the Board and Department of Finance / Bureau of
Internal Revenue.

Limitation of Entitlement to Incentives

Incentives granted by the PEZA shall apply only to registered operations of the

ECOZONE Enterprise and only during the period its registration with PEZA.

INCENTIVES TO ECOZONE EXPORT AND FREE TRADE ENTERPRISES

Exemption from Duties and Taxes on Merchandise

Merchandise, raw materials, supplies, articles, equipment, machineries, spare parts and
wares of every description brought into the ECOZONE Restricted Area by an ECOZONE
Export or Free Trade Enterprise to be sold, stored, broken up, repacked, assembled,
installed, sorted, cleaned, grade or otherwise processed, manipulated, manufacture,
mixed with foreign or domestic merchandise whether directly or indirectly related in
such activity, shall not be subject to customs and internal revenue laws and regulations
of the Philippines nor to local tax ordinances. Importations of certain goods or
merchandise under this paragraph shall be subject to the following conditions:

A. Importations of Capital Equipment

1. Conditions for Duty and Tax Free Importation - an ECOZONE Export or Free Trade
Enterprise may import machineries, equipment and spare parts exempt from the
payment of any and all tariff duties and internal revenue taxes due thereon subject to
the following conditions:

a. The machinery and equipment are directly and actually needed and will be used
exclusively by the ECOZONE Export or Free Trade Enterprise in its registered activity;

b. The importation of spare parts shall be restricted only to component spare parts for
the specific machinery and / or equipment authorized to be imported; and
c. Subject to reasonable allowances, the rated capacity of the capital equipment to be
imported must be within the registered capacity of the ECOZONE Export or Free Trade
Enterprise.

2. Sale or Disposition of Capital Equipment - Any sale, transfer, assignment, donation or

other form of disposition of originally imported capital equipment / machinery including
spare parts, brought into the ECOZONE duty and tax-free, within five (5) years from date
of acquisition shall require prior approval of the Board. Such approval shall be granted
only if the sale or other form of disposition is made:

a. To an ECOZONE Enterprise entitled to duty and tax free importation of machinery, to

a BOI-registered enterprise enjoying similar incentives under this Rule, to operators of
BMW's / BMCTW's and / or to an export enterprise with a certificate of export-
orientedness from the Bangko Sentral ng Pilipinas;

b. For reasons of technical obsolescence as determined by the Board;

c. For purposes of replacement to improve and / or expand the operations of the

ECOZONE Export or Free Trade Enterprise intending to sell, transfer, assign, donate or
otherwise dispose of such machinery or spare parts;

d. In cases of withdrawal or cessation from operations of the ECOZONE Export or Free

Trade Enterprise, subject to payment of applicable duties and taxes and such other
conditions as may be prescribed by the Board.

If the ECOZONE Export or Free Trade Enterprise sells, transfers or disposes of these
machinery, equipment and spare parts without prior approval of the Board within five
(5) years from date of acquisition, the ECOZONE Export or Free Trade Enterprise and the
vendee, transferee, or assignee shall be solidarily liable to pay twice the amount of the
tax exemptions granted.

Any sale, transfer, assignment, donation or other form of disposition of capital

equipment, brought into the ECOZONE duty and tax-free, after five (5) years from date
of acquisition shall require prior approval of the PEZA-Director General.

B. Importation of Construction Materials - ECOZONE Export or Free Trade Enterprises

entitled to tax and duty free importation of goods or merchandise under these Rules
may import construction materials and other articles that shall form part of its factory,
warehouse or office building, including fixtures thereof, enclosures, driveways and
auxiliary structures, subject to the following conditions:
1. The factory, warehouse or office building shall be constructed at the expense of the
ECOZONE Export or Free Trade Enterprise;

2. The construction materials to be imported are not manufactured domestically in

sufficient quantity, not of comparable quality and not sold locally at reasonable prices.
Construction materials shall not be considered available in sufficient quantity if they
cannot be made available to the ECOZONE Export or Free Trade Enterprise at the time
of need or within a reasonable period. In determining whether the quality is comparable,
the test, among others, will be whether or not it will conform to the plans and
specifications of the ECOZONE Export or Free Trade Enterprise as approved by PEZA. In
determining reasonableness of the prices quoted by the domestic manufacturers or
suppliers, PEZA may be guided by the acquisition cost of similar construction materials
imported into the Philippines, after all applicable duties and taxes were paid thereon,
plus fifteen percent (15%) mark-up;

3. The construction materials to be imported are reasonably needed and will be used
exclusively in the construction of the factory, warehouse or office building to be used by
the ECOZONE Export or Free Trade Enterprise solely for its registered operations;

4. The approval of PEZA is obtained by the ECOZONE Export or Free Trade Enterprise
before the purchase order is made or before the corresponding letters of credit are
opened; and

5. The construction materials shall be brought directly and physically inside the
ECOZONE restricted area or such area as may be designated by PEZA for this purpose
and in no instance shall these be sold, transferred, assigned, donated or be disposed of
in any manner in the customs territory.

C. Importation of Specialized Office Equipment and Furniture - Specialized office

equipment and furniture such as computers, antistatic chairs, tables and others of
similar nature may be imported by ECOZONE Export or Free Trade Enterprise exempt
from customs duties and taxes payable thereon, if the said equipment is not
manufactured domestically in sufficient quantity, not of comparable quality and not sold
at reasonable price. Otherwise, ordinary office equipment and furniture, whenever
applicable shall be procured locally.

D. Importation of Specialized Vehicles and Other Transportation Equipment -

Specialized vehicles and other specialized transportation equipment, including
necessary spare parts, directly related to the registered activity of the ECOZONE Export
or Free Trade Enterprise, may be imported exempt from customs duties and taxes only
upon prior approval of the Board and with proper clearance from the appropriate
government agency(ies). Otherwise, ordinary vehicles and other transportation
equipment, including necessary spare parts, whenever applicable shall be procured
locally.

E. Importation of Professional Instruments and Household Effects - The professional

instruments and implements, tools of trade, occupation or employment, wearing
apparel and personal household effects of foreign nationals who shall settle in the
Philippines in connection with their registered activity, may be imported exempt from
the payment of import duties and taxes: Provided, (a) That the foreign national is an
executive or is employed in an ECOZONE Export or Free Trade Enterprise; and (b) That
the above-mentioned articles shall not be in commercial quantities nor for hire (Section
105 (h) of the Tariff and Customs Code); and © That the approval of PEZA is obtained
by the ECOZONE Export or Free Trade Enterprise before the purchase order is made or
before the corresponding letters of credit are opened.

Exemption from National and Local Taxes and Licenses

The same incentives as provided for under Section 1(A) of the Rule XIV and Rule XX of
these Rules shall likewise apply to ECOZONE Export and Free Trade Enterprises.

Tax Credit for Import Substitution

A. Entitlement - ECOZONE Export or Free Trade Enterprises exporting non-traditional

products which use or substitute locally produced raw materials, capital equipment
and / or spare parts shall be granted a tax credit equivalent to twenty-five percent (25%)
of the duties that would have been paid had these inputs been imported: Provided, That
this incentive shall be available until December 31, 1997, unless extended by the
President of the Philippines.

To be eligible for tax credit, the ECOZONE Export or Free Trade Enterprise exporting a
non-traditional product must have used locally produced raw materials, capital
equipment and / or spare parts or has substituted locally produced raw materials,
capital equipment and / or spare parts for similar articles previously imported.

B. Determination of Whether Product is Traditional or Non-Traditional - The

determination of whether an export product is traditional or non-traditional shall be
governed by the criteria to be jointly issued by the Secretary of Finance, Secretary of
Trade and Industry and the Export Development Council as provided in Republic Act No.
7844, otherwise known as the Export Development Act of 194. Thereafter, on the basis
of said criteria, products identified as traditional export products shall not be qualified
for the tax credit under this Rule.
Exemption from Wharfage Dues, Export Tax, Impost or Fee

An ECOZONE Export or Free Trade Enterprise shall be exempt from payment of

wharfage dues and any export tax, impost of fee on the exportation of its registered
export products or, in the case of an ECOZONE Free Trade Enterprise, on foreign
merchandise transshipped through its ECOZONE facilities.

Other Incentives

A. Income Tax Holiday

1. Period of Availment - New ECOZONE Export or Free Trade Enterprises shall be fully
exempt from income taxes levied by the National Government for the period as follows:

a. New Registered Pioneer Firms - Six (6) years from commercial operations.

b. New Registered Non-Pioneer Firms - four (4) years from commercial operations.

c. Expanding Firms - Three (3) years from commercial operation of the expansion.

2. Entitlement for New Expansion Projects

a. New Projects - In exceptional cases, ECOZONE Export or Free Trade Enterprises

undertaking new activities distinct from their registered operations may qualify as new
projects subject to the setting up of separate books of accounts. In such cases, the
income tax holiday shall apply only to sales of the new products.

b. Expansion Projects - The income tax holiday for expansion projects, as defined in
Section 2(w), Rule I of these Rules shall apply only to the extent of the actual increase in
production.

3. Expansion - Expansion may include modernization or rehabilitation which, to be

registrable, may or may nor result in increase capacity but in any case, subject to the
following conditions:

a. Phases / stages of production sought to modernized / rehabilitated must be

identified; and

b. It must result in any of the following:

(i) substantial reduction of production cost; and 

(ii) significant increase in production effeciency including debottlenecking; 
(iii) meaningful upgrading of product quality; 
(iv) keeping abreast with the state of the art in the production of the registered product.

The rate of exemption from income tax of expansion projects shall be computed as
follows:

                          Incremental Sales of the 

                           Registered Product 
Rate of Exemption = ----------------------------- 
                            Total Sales of the 
                          Registered Product

The term “Sales” as indicated in the above formula shall be expressed in volume in case
of homogenous products and value in case of heterogeneous products.

4. In general, modernization and rehabilitation shall not be entitled to income tax

holiday.

5. Where the start of commercial operations does not coincide with the first month of
the taxable year of the ECOZONE Enterprise, the rate of exemption from income tax
shall be computed in the following manner:

a. Get the total sales for the whole taxable year. 

b. Deduct the base figure from the total sales (a) to get the incremental sale. 

c. The rate of exemption is determined by dividing the incremental sales (b) by the total
sales (a.). 

d. The rate of exemption shall apply only to the total income tax due arising from sales
of the registered product. 

e. For this purpose, the base figure shall mean the highest attained sales in volume in
case of homogenous products or value in case of heterogeneous products of the
ECOZONE Export or Free Trade Enterprise for any one (1) year within the last three (3)
years prior to the year of expansion. 

f. The rate of exemption shall be further computed in proportion to the number of

months of the expanding firms commercial operations during a given year. 

g. The rate of exemption for the last taxable year of availment shall be computed in the
same manner as above-mentioned: Provided, However, That the rate of exemption shall
be applied on the income tax due on sales during the months that the ECOZONE Export
or Free Trade Enterprise is entitled to income tax holiday.

6. Additional Period of Availment - For ECOZONE Export or Free Trade enterprises, the
income tax holiday incentive may be extended for an extra year in each of the following
cases but in no case to exceed a total period of eight (8) years for pioneer registered
enterprises:

a. If the ratio of the total imported and domestic capital equipment to the number of
workers for the project does not exceed US$28,000.00 to one worker, or as prescribed
by the Board;

b. If the average cost of indigenous raw materials used in the manufacture of the
registered product is at least fifty percent (50%) of the total cost of raw materials for the
preceding years prior to the extension unless the Board prescribes a higher percentage;

c. If the net foreign exchange savings or earnings amount to at least US$500,000.00

average annually during the first three (3) years of operations to be determined by the
Board at the end of such three-year period: Provided, That the foregoing foreign
exchange savings criterion shall apply, as a general rule, to ECOZONE Export or Free
Trade Enterprises whose products are totally imported into the country at the time of
registration and duly indicated as imports substation in firm's approved project
proposal.

For the purpose of availment of this incentive, the ECOZONE Export or Free Trade
Enterprise shall apply in writing to PEZA for the additional period and shall submit proof
of compliance with the criteria above-mentioned.

7. Determination of Pioneer / Non-Pioneer Status

a. Investment Priorities Plan - As a general policy, the basis for determining whether an
area of economic activity may be considered pioneer or non-pioneer shall be the
Investment Priorities Plan prepared yearly by the Board of Investments. In the absence
thereof, the applicable criteria shall be formulated by PEZA.

b. Non-Pioneer Status - An area of activity shall be accorded non-pioneer status if it

may be determined categorically as falling in such classification using the Investment
Priorities Plan (IPP). Accordingly, the approval of the application for registration as an
ECOZONE Export or Free Trade Enterprise shall indicate such status and the
corresponding incentives the ECOZONE Export or Free Trade Enterprise may avail of
under the Act.

c. Pioneer Status - Pioneer status may be extended to an ECOZONE Export or Free Trade
Enterprise only after the evaluation of their application for such status.

B. Tax Credit on Domestic Capital Equipment - A tax credit equivalent to one hundred
percent (100%) of the value of national internal revenue taxes and customs duties that
would have been waived on the machinery, equipment and spare parts, had these items
been imported shall be given to the new or expanding ECOZONE Export or Free Trade
Enterprise which purchases machinery, equipment and spare parts from a domestic
manufacturer: Provided, (1) That the said equipment, machinery and spare parts are
reasonably needed and will be used exclusively by the registered enterprise in its
registered activity; (2) That the equipment would have qualified for tax and duty
exemption under Section 1 of this Rule; and 93) That the approval of the Board was
obtained by the registered enterprise. In case the registered ECOZONE Export or Free
Trade Enterprise sells, transfers, or disposes of these machinery, equipment an spare
parts, the provisions of Section 1(A.2) of this Rule shall apply.

The period of availment of this incentive shall be determined in accordance with Section
3 and 5 Rule XIII of these Rules.

C. Importation of Breeding Stocks and Genetic Materials

1. Extent of Availment - The importation of breeding stocks and genetic materials by an

ECOZONE Export Enterprise shall be exempt from taxes and duties. Such importation
shall cover breeding stocks and genetic materials necessary for expansion or
improvement or for replacement of proven unproductive breeding stock and genetic
materials. The period of availment of this incentive shall be determined in accordance
with Sections 3 and 5, Rule XIII of these Rules.

2. Conditions for Availment - Tax and duty free importation of breeding stocks and
genetic materials shall be authorized under the following conditions:

a. That the strains / breeding stocks to be imported are not domestically available at
reasonable prices;

b. That they shall be used exclusively by the registered producer for the improvement of
the strains / breeding stocks of its livestocks, poultry, fish and / or plants; and
c. That prior approval of the Board must have been obtained by the registered
enterprise before the purchase order was made or before the opening of the
corresponding letters of credit.

3. Prior Approval of Sale or Disposition of Breeding Stocks and Genetic Materials - Any
sale, transfer or disposition of the breeding stocks and genetic materials purchased
under Article 39(I) of the Code shall require prior Board approval if such sale, transfer or
disposition is made within: (a) four (4) years from date of acquisition in cases of large
cattle as the term is understood in agriculture; or (b) two (2) years from date of
acquisition in cases of poultry as the term is understood in agriculture.

D. Tax Credit on Domestic Breeding Stock and Genetic Materials

1. Extent of Entitlement - An ECOZONE Export Enterprise which purchases breeding

stocks and genetic materials from a domestic producer shall be entitled to a tax credit
equivalent to one hundred percent (100%) of the value of national internal revenue
taxes and customs duties that would have been waived on the breeding stocks and
genetic materials had these items been imported.

2. Prior Approval of Sale, Transfer or Disposition - Any sale, transfer or disposition of

breeding stocks and genetic materials purchased from domestic producers shall be
subject to the same conditions provided for the sale, transfer or disposition of imported
breeding stocks and genetic materials under Section 6(C.3) of this Rule.

E. Additional Deduction for Labor Expense - For the first five (5) years from registration,
a qualified ECOZONE Export or Free Trade Enterprise shall be allowed to deduct from its
taxable income an amount equivalent to fifty percent (50%) of the wages corresponding
to the increment in the number of direct labor for skilled and unskilled workers subject
to the following conditions:

1. That the ratio of imported and domestic capital equipment to the number of workers
of the firm does not exceed US$10,000.00 to one worker;

2. The ECOZONE Export or Free Trade Enterprise does not avail of this incentive
simultaneously with the income tax holiday incentive; and 

3. That in the event the ECOZONE Export or Free Trade Enterprise, except those
engaged in mining or forestry-based activities, should be located in a less-developed
area as defined in Title IV of the Code, it shall be allowed to deduct one hundred
percent (100%) of the wages above-mentioned.
F. Unrestricted Use of Consigned Equipment - The use of consigned machinery,
equipment and spare parts which are reasonably needed in the registered operations
and for the exclusive use the ECOZONE Export or Free Trade Enterprise beyond the
period permitted under other laws, rules and regulations may be permitted by PEZA.

Incentives Under the Decree

 An ECOZONE Export or Free Trade Enterprise not availing of the incentives under
Section 6 herein may avail of the incentives under the Decree subject to the regulations
that shall be prescribed by the Board and by the Department of Finance / Bureau of
Internal Revenue.

OTHER PROVISIONS

Negative List

Subject to the guidelines to be issued by the PEZA in coordination with the Department

of Trade and Industry and the Bureau of Customs pursuant to Section 26 of the Act, the
Board shall, in the meantime, be guided by the current supply and demand gap on an
industry basis in limiting the domestic sales of ECOZONE enterprises in the customs
territory.

Shipping

The operation of shipping related business and container terminals within an ECOZONE
shall be subject to such regulations as the PEZA may prescribe. In the meantime, the
regulations being implemented by the Department of Transportation and
Communication and other agencies of the government in relation therewith shall be
adopted by the PEZA.

Police Functions

Pending the creation and establishment of the internal security force for each ECOZONE
by the PEZA, the Police Force of the Export Processing Zone Authority shall continue to
exercise its police authority and functions under the Decree, as amended, including but
not limited to conducting police investigations of violations of penal laws inside the
ECOZONES or areas owned or administered by the PEZA.

Investigations / Hearings
The PEZA shall promulgate rules and procedures governing the conduct of
investigations and hearings involving violations of the Act, applicable provisions of the
Decree, as amended, and the Code, these Rules and Regulations, the corresponding
implementing memoranda or circulars and the terms and conditions of the Registration
Agreement between the PEZA and the registered ECOZONE enterprise or of the terms
and conditions of the permit or franchise granted by PEZA. Pending the promulgation
of said rules or procedures, the PEZA may conduct said investigations and hearings
provided the requirements of due process are observed.

Examination of Records / Visitorial Powers

An ECOZONE enterprise shall allow duly authorized representative/s of the PEZA access

to its premises and records during working hours for purposes of inspection, evaluation
and/or examination or audit of books of accounts or financial records, operations,
security and safety measures and production records.

PEZA

Philippine

Economic Zones

Authority

Created under RA

7916 otherwise

known as “THE

SPECIAL

ECONOMIC ZONE

ACT OF 1995”

Economic Zones

➢ Regular Economic Zones

➢ Special Economic Zones

ECOZONE
1. Industrial Estates (IEs)

2. Export Processing Zones (EPZs)

3. Free Trade Zones

4. Tourist/Recreational Centers

Industrial Estate (IE)

Refers to a tract of land subdivided and

developed according to a comprehensive

plan under a unified continuous

management and with provisions for basic

infrastructure and utilities, with or without

pre-built standard factory buildings and

community facilities for the use of a

community of industries

Export Processing Zone (EPZ)

refers to a specialized industrial estate

located physically and/or administratively

outside the customs territory and

predominantly oriented to export

production. Enterprises located in export

processing zones are allowed to import

capital equipment and raw materials free

from duties, taxes and other import

restrictions
Free Trade Zone

refers to an isolated policed area adjacent to a

port of entry (such as a seaport) and/or airport

where imported goods may be unloaded for

immediate transshipment or store, repacked,

sorted, mixed, or otherwise manipulated.

However, movement of these imported goods

from the free-trade area to a non-free-trade

area in the country shall be subject to customs

and internal revenue rules and regulations

Tourist/recreational center

refers to an area within the ECOZONE

where tourist accommodation facilities

such as hotels, apartelles, tourist inns,

pension houses, resorts, sports and or

recreational facilities are provided render

tourism services for both local and foreign

tourist, travelers and investors in

accordance with the guidelines issued by

the PEZA

Who are required to register

with PEZA?

1. ECOZONE Export Enterprise

2. ECOZONE Domestic Market Enterprise

3. ECOZONE Pioneer Enterprise

4. ECOZONE Free Trade Enterprise

5. ECOZONE Utilities Enterprise

6. ECOZONE Facilities Enterprise

7. ECOZONE Developer/Operator

8. ECOZONE Service Enterprise

9. ECOZONE Tourism Enterprise

The applicant for an ECOZONE

Enterprise

1. Project feasibility study, unless dispensed with in

lieu thereof, the applicant shall submit basic

data/information on its technical, financial,

marketing and management capability/competence

to undertake the proposed project or business

within the ECOZONE

2. Copies or articles of incorporation and by-laws

3. Resolution of the applicant’s board of directors

authorizing the filing of the application; list of its

directors, principal officers, and major stockholders,

including their biodata

4. List of machinery and equipment to be used by the

applicant with a statement of their capacity,

ownership and/or mode of procurement

5. Company brochures and/or photographs of

product(s)
Merchandise brought to the restricted areas in

the ECOZONES by registered Export or Free

Trade Enterprises, except prohibited

merchandise, shall not be subject to all customs

and internal revenue laws and regulations of the

Philippines not to local tax ordinances: Provided,

that they are to be sold, stored, broken-up,

repacked, assembled, manipulated,

manufactured and/or

Treatment of Goods Inside PEZA

Zones

Secured Zone Customs Territory

Forms and Documentations

1. For transfer/transshipment to PEZA

zones

2. Admission to PEZA zones

3. Temporary transfer to customs territory

4. Withdrawal for local consumption

5. Exportation

6. Liquidation

Transfer/Transshipment
Customs-PEZA

Clearance

Unit

Deputy Collector

For Operations

Transfer to

PEZA

zone

Admission to PEZA zone

Temporary transfer to customs

territory

For Exportation

IMPORT AND EXPORT

PROCEDURES ENTERPRISES IN

SUBIC BAY FREE PORT ZONE

Special Economic Zones

- SBMA

- Clark

- Camp John Hay

- Zamboanga

Legal Basis of SBMA

◼ Sec. 13(a) The SBMA is hereby created as an

operating and implementing arm of the

conversion authority

Treatment of Goods Inside

Special Economic Zones

Secured Zone Customs Territory

Major Operations

Export

Direct from Subic

From Subic

through other

ports

Imports

Direct to Subic

From other Ports

Into Subic

Transfer

1. Constructive Export
2. Local Consumption

3. Temporary Transfer

Guidelines- Import Operations

➢ All importations of registered enterprises directly

involved with its operations are exempt from

payment of customs duties and taxes

➢ To avail of the exemption

➢Certificate of Registration

➢Tax Exemption

➢Permit to Operate at SBMA Investment Center

➢Import Permit (valid for ninety days)

The SBMA shall issue the Import Permit based

on the application for Import Permit by the

Registered Enterprise

All SBMA fees shall be paid prior to issuance

of Import Permit

Guidelines – Export

Operations 1. Locators/Registered Enterprises shall furnish the

following documents to Seaport Department

SBMA:

a) Export Declaration

b) Commercial Invoice
c) Packing List

d) Export Tally Sheet (Photocopy) 2. Original copy or loading copy of the export declaration

must be presented to attest the authenticity of the

document. The said document must be completely and

accurately filled up.

3. Export permit will only be issued by SBMA

representative after documents have been completely

processed.

4. The Export permit is valid within one month from the

date of issuance.

5. Photocopies of export permit must be certified, dated and

dry sealed.

6. The One Stop Export Documentation Center (OSEDC)

houses the following agencies and caters to export

processing only, whether it will be for Manila or Subic

loading.

a. Garments and Textiles Export Board (GTEB)

b. Bureau of Plant Industry (BPI)

c. Bureau of Animal Industry (BAI)

d. Subic Bay Metropolitan Authority (SBMA)

7. Post documentation service by OSEDC

a. Certificate of Origin (CO)

̅ Bill of Lading / Airway Bill (original)

̅ Processed Export Declaration (photocopy)

̅ Commercial Invoice

̅ Packing List

b. Generalized System of Preferences (GSP)

Certificate of Origin Form A

- Evaluation of the product to be expected

- Plantation Inspection

- Certificate of Evaluation

- Bill of Lading/Airway Bill (original)

- Processed Export Declaration (photocopy)

- Commercial Invoice

- Packing List

8. All fees (Processing/Storage/Wharfage)

must be paid prior to the release of

Authority to Load.

9. The procedure for export of Controlled

items like the garment export to country

required quota, agricultural and animal

products will be governed by the laws, rules

or regulations of Philippines Customs and

other government authorities concerned.

10. All packages/crates containing the export

goods manufactured, packaged, assembled

within the zones shall be marked.

“Made in the Philippines, SB Industrial Park,

Subic Bay Freeport, Philippines”

B. Procedure of Export

RESPONSIBILITY ACTVITY

Registered Enterprise or Broker

One Stop Export Documentation

Center (OSEDC)

Cargo Control Branch, Port

Management Division, Seaport

Department

OSEDC

Bureau of Customs (BOC) SBF and

Manila

1. Accomplishes the Export Declaration (With foreign

ex-change proceeds) together with:

2. The Export Authorization /Permit will be issued by

SBMA Representative in OSEDC

3. (a) The Exporter requests for SBMA Checker to

inspect cargoes to be loaded

(b) The Exporter Tally Sheet (SBMA Form No. 055-

95) is being signatured by the Checker, SBMA

4. (a) The Exporter will proceed to OSEDC for

issuance of Authority to load (SBMA Form

No. 4) by SBMA Representative.

(b) Authority to Load and Export Tally Sheet will

serve as clearance for loading and releasing of

cargoes from the zone.

5. (a) If the cargoes is exported through Customs

Territory, the BOC, SBF is requested for BOAT

NOTE and escort

(b) The BOC, Manila endorses the Shipments and

release the cargoes.

Guidelines – Import Operations

◼ Authority to Load shall be issued based on

completely processed documents

◼ OSEDC

◼ GTEB

◼ BPI

◼ BAI

◼ SBMA

◼ OSEDC caters to export whether for Manila or

Subic loading

◼ All export fees shall be paid first before the

issuance of the Authority to Load

OSEDC Post Documentation

Services

◼ Certificate of Origin (CO)

◼ Bill of Lading/Airway Bill

◼ Processed Export Declaration

◼ Commercial Invoice

◼ Packing List

OSEDC Post Documentation

Services

◼ Generalized System of

Preference

◼ Certificate of Origin Form A

◼ Evaluation of the product to be exported

◼ Plant Inspection

◼ Certificate of Evaluation

◼ Bill of lading

◼ Processed Export Declaration

◼ Commercial Invoice

◼ Packing List

Guidelines – Transfer for

Constructive Export

◼ Registered Enterprises may sell their

products or semi-products to tax and duty

exempted firms having

Certificate of Certificate of Registration

◼ Board of Investment
◼ Philippine Economic Zone

◼ Clark Special Economic Zone

◼ SEC/DTI

◼ CBW Operator

◼ BOI Registered

◼ SEC/DTI Registered Export Oriented Enterprise

◼ Constructive Exports shall be covered by an

approved Permit of SBMA within two (2)

months`validity from approval

The Following Are Constructive

Exports

◼ Sales to Export Oriented Bonded Manufacturing

Warehouse

◼ Sales to Export processing Zones and Freeport Zones

◼ Sales to export oriented Bonded Trading Warehouses

◼ Sales to foreign military bases, diplomatic missions

and entities with immunities

Guidelines – Transfer for Local

Consumption

◼ Exit of articles from SBMA to Customs

territory for local consumption shall be

covered by
◼ SBMA Letter of Authority to Bring Out

◼ Duly approved SBMA Gate Pass

◼ Items to be brought out shall be examined

like

◼ Finished products

◼ Overruns

◼ Scraps

◼ Recoverable items

•Items shall be assessed and taxes and

duties paid through the Bank

Guidelines for Temporary

Transfer

◼ Foreign articles maybe removed temporarily from

the Freeport for repair, restoration, testing and

similar operations not available within the Free Port

◼ Items to be brought out shall be covered by an SBMA

Permit and examined by Customs prior to transfer

◼ Period of transfer is four (4) months unless extended

for another four months

Players at Subic

◼ Locators
◼ Port Users

Importers

Brokers

Shipping Lines

Truckers

Dock Workers

SUBJECT: RULES AND REGULATIONS FOR

CUSTOMS OPERATIONS IN THE SUBIC SPECIAL

ECONOMICS AND FREEPORT ZONE

AUTHORITY: PURSUANT TO THE PROVISIONS OF THE REVISED

ADMINISTRATIVE CODE OF 1987 IN RELATION TO SECTIONS 12 AND 13 OF THE

REPUBLIC ACT NO. 7227 AND THE PHILIPPINES (TCCP), AS AMENDED, THE

FOLLOWING RULES AND REGULATIONS ARE HEREBY PROMULGATED.

Subic Special Economic Zone

◼ Subject to the concurrence by the resolution of the

Sangguniang Panglunsod of the City of Olongapo and the

Sanguniang bayan of the Municipalities of Subic, Morong

and Hermosa, there is hereby created a Special Economic

and Free-port Zone consisting of the City of Olongapo

and the Municipality of Subic Province of Zambales, the

land occupied by the Subic Naval Base and its contiguous

extensions are embraced, covered and defined by the

1947 Military Bases Agreement between the Philippines

and United States of America as amended, and within

the territorial jurisdiction of the municipalities of Morong

and Hermosa Province of Bataan, herein referred to as

the Subic Special Economic Zone whose metes and

bound shall be delineated in a proclamation to be issued

by the President of the Phils. Within 30 days after the

approval of this Act, each local government unit shall

submit its resolution of concurrence to join the Subic

Special Economic Zone to the office of the Pres.,

thereafter, the President shall issue a proclamation

defining the metes and bounds of the zone as provided

The abovementioned zone shall be

subjected to the following policies

(a) Within the framework and subject to the

mandate and limitations of the

Constitution and the pertinent provisions

of the Local Government Code, the Special

Economic Zone shall be developed into a

self-sustaining, industrial, commercial,

financial and investment center to

generate employment opportunities and

around the zone and to attract and

promote productive foreign investments.

The abovementioned zone shall be

subjected to the following policies

(b) The Subic Special Economic Zone shall be

operated and managed as a separate customs

territory ensuring free flow or movement of

goods and capital within, into and exported out

of the Subic Special Economic Zone, as well as

provide incentives such as tax and duty free

importations of raw materials, capital and

equipment. However exportation or removal of

goods from the territory shall be subject to

customs duties and taxes under Customs and

Tariff Code and other relevant tax laws of the

Philippines.

The abovementioned zone shall be

subjected to the following policies

(c) The provision of existing laws, rules and

regulations to the contrary, no taxes, local and

national, shall be imposed within the Subic

Special Economic Zone. In Lieu of paying taxes,

three (3%) of the gross.

In case of conflict between national and local laws

with respect to tax exemption privileges in the

Subic Special Economic Zone, the same shall be

resolve in favor of the later.

The abovementioned zone shall be

subjected to the following policies

(d) No exchange control policy shall be applied and free

markets for foreign exchange, gold, securities and

future shall be allowed and maintained in the Subic

Special Economic Zone.

(e) The Central Bank, through the Monetary Board, shall

supervise and regulate the operations of bank and

other financial institutions within the Subic Special

Economic Zone.

(f) Banking and finance shall be liberalized with the

establishment of foreign currency depository units of

local commercial banks and offshore banking units of

foreign banks with minimum Central Bank regulation.

(g) Any investor within the Subic Special Economic zone

whose continuing investment shall not be less than Two

hundred fifty thousand dollars ($250,000.00), his/her

spouse and dependent children under twenty one (21)

years of age, shall be granted permanent resident status

within the Subic Special Economic Zone.

They shall have freedom of ingress and egress to and from

Subic Special Economic Zone without any need of special

authorization from the Bureau of Immigration and

Deportation.

The Subic Bay Metropolitan Authority referred to in Section

13 of this Act may also issue working visas renewable every

two (2) years to foreign executives and other aliens

possessing highly technical skills which linked Filipino within

the Subic Special Economic Zone possesses, as certified by

DOLE. The names of aliens granted permanent residence

status and working visas by the Subic Bay Metropolitan

Authority shall be reported to the Bureau of immigration

and Deportation within thirty (30) days after issuance

thereof.

(h) The defense of the zone and the security of its

perimeters shall be the responsibility of the

National Government in coordiantion with Subic

Bay Metropolitan Authority shall provide and

establish its own internal security and firefighting

forces; and

(i) Except as herein provided, the local government

units comprising the Subic Special Economic Zone

shall retain their basic autonomy and identity. The

cities shall be governed by the respective charters

and municipalities shall be operate and function in

accordance with RA 7160, otherwise known as the

Local Government Code of 1991.

‘AN ACT ACCELARATING THE CONVERSION OF

MILITARY RESERVATIONS INTO OTHER

PRODUCTIVE USES, CREATING THE BASES

CONVERSION AND DEVELOPMENT AUTHORITY

FOR THIS PURPOSE, PROVIDING FUNDS

THEREFOR AND FOR OTHER PURPOSES.”

Be it enacted by the Senate and House of Representatives of the Philippines in

Congress assembled
CHAPTER I. DEFINITIONS

A. The following terms used in these rules and

regulations are hereby defined as follows:

1. ACT – Republic Act No. 7227 otherwise known as

the Bases Conversion and Development Act of

1992.

2. ARTICLES – For purpose of these rules and

regulations, any goods, wares, merchandise and

in general, anything that may, under the Tariff and

Customs Code of the Philippines as amended, be

made the subject of importation and/or

exportation.

3. CONTAINER – The outer container in which

merchandise is held for storage or

transportation, and not an intermodal container

covered by the Customs convention or

containers done at Geneva on December 1972,

unless otherwise indicated.

4. CUSTOMS – Means the Philippines Bureau of

Customs.

5. CUSTOMERS TERRITORY – The portion of the

Republic of the Philippines where the Customs

laws are in force and effect, which is separate

from the Zone.

6. DOMESTIC ARTICLES – Articles which are

the growth, product or manufacture of the

Philippines on which all national internal revenue

taxes have been paid, if subject thereto, and

upon which no drawback or bounty has been

allowed; and articles of foreign origin on which

all duties and taxes have been paid and upon

which no drawback or bounty has been allowed,

or which have previously been entered into

Customs territory fee of duties or taxes.

7.FOREIGN ARTICLES – articles of foreign origin

on which duties and taxes have been paid, or, if

paid, upon which drawback or a bounty has

been allowed, or which have not previously been

entered into Customs Territory; or articles which

are the growth, product, or manufacture of the

Philippines on which not all national internal

revenue taxes have been paid, if subject thereto,

or if paid, upon which drawback or a bounty has

been allowed.

8. PERSON - a natural person, and not a

juridical person, who brings merchandise

into, possesses merchandise in, or take

merchandise from, the Secured Area of

the Zone whether or not the person is a

resident of the Zone.

9. POINT OF ENTRY OR EXIT – any place designated by the

Subic Bay Metropolitan Authority (SBMA) and the Bureau

of Customs, Department of Finance, where articles may

be lawfully introduced into or removed from the Secured

Area of the Zone, or any area to which duty and tax free

benefits are limited by the SBMA pending the

establishments of a secured perimeter around the Zone.

However, the port/Airport of Entry for the importation,

and exportation of foreign articles INTO /FROM THE

ZONE IN ACCORDANCE WITH THIS ADMINISTRATIVE

ORDER shall be the premises declared by the President

of the Republic of the Philippines as International

Port/Airport of Entry and where the Customhouse shall

be located.

10. REGISTERED ENTERPRISE – any sole

proprietorship, partnership, corporation

or entity registered with the SBMA to do

business in Secured Area of the Zone,

whether or not for profit.

11. RULES AND REGULATIONS – unless

otherwise specified, the regulations

issued by the SBMA to implement

Republic Act No. 7227, otherwise known

as the Bases Conversion and

Development Act of 1992.

12. RESIDENT – any person who is registered and

authorized by the SBMA to establish and

maintain a personal residence in the Secured

Area of the Zone.

13. RETAIL SALE – the sale of articles in the

Secured Area of the Zone, in small quantities

to a person for his or her own personal use

and account and not for resale.

14. SUBIC BAY METROPOLITAN AUTHORITY

(SBMA) – us the Authority established and

authorized by Section 13 of Republic Act No.

7227, otherwise known as the Bases

Conversion and Development Act of 1992.

15. ZONE – The Subic Special Economic and

Freeport Zone, (SSEFZ) outside the Customs

Territory and the authority of the Customs laws,

consisting of the City of Olongapo and

municipality of Subic, Province of Zambales, the

lands occupied by the Subic Bay Naval Base and

its constiguous extensions, embraced, covered,

and defined by the 1947 Philippine – U.S.

Military Base Agreement, whose metes and

bounds shall be delineated in a Proclamation to

be issued by the President of the Republic of the

Philippines.

16. SECURED AREA – cognizant of the vast expanse of the

Zone and the initial absence of the secure perimeter

around it, there is designated, a secured area consisting

the presently fenced-in former Subic Naval Base which

shall be the only completely tax and duty-free area in the

Zone and within which there shall be a free and

unimpeded flow of goods and merchandise from one

registered enterprise to another or to residents and along

the boundaries of the area shall be set up as a Custom

checkpoint through which goods authorized to leave or

enter the area for some destination inside or outside the

Zone must pass; the boundaries of the secured area may

be readjusted from time to time jointly by the SBMA and

the Department of Finance as the requirements of the

business in the Zone may demand or permit.

CHAPTER II. GENERAL PROVISIONS

A. AUTHORITIES AND RESPONSIBILITIES

1. AUNTHORITY OF SBMA

◼ The SBMA is responsible for the operation and the

management of the Secured Area of the Zone, as

provided in Section 12 of the Act, the Rules and

Regulations, its Manual of Operations and the

provisions of this Administrative Order; and its

authorized to carry out the powers and function

enumerated in Section 13 of the Act, its Rules and

Regulations, its Manual of Operations and the

provisions of this Administrative Order.

2.AUTHORITY OF CUSTOMS

Customs in the Secured Area of the Zone shall, as

a unit of the Bureau of Customs, Department of

Finance, working in the coordination with the

SBMA, be responsible for:

a. supervising and administering Customs operations

involving the admission of articles to the Secured

Area of the Zone, the removal of articles from the

Secured Area of the Zone, and other CUSTOMS

operations as determined by the Commissioner of

Customs in coordination with the Administrator of

the SBMA ; and

b.establishing and maintaining offices within the

Secured Area of the Zone wherever necessary to

efficient conduct Customs operations.

To enable to perform the above functions, the

bringing out of the goods from the Secured Area

to a registered enterprise/sub-contractor located

within the Zone shall require written permission

from the Collector of Customs assigned to the

Zone which shall be monitored until the same

shall have been returned to the Secured Area. A

Customs checkpoint at the boundary or

boundaries of the Secured Area shall be set up by

Customs for the purpose.

B. AUDIT, SEARCH, SEIZURE AND ARREST IN

ZONE

1. AUDIT

Official of the SMBA and Customs are

authorized to JOINTLY conduct, at any time

during office hours, any audit, check, or

inventory count for the verifications and the

reconciliation of the account records of any

Registered Enterprises in the Zone.

2. SEARCH

Person, baggage, vehicles and cargo entering or leaving

the Secured Area of the Zone are subject to search by

Customs as conditions to enter or leave the Secured Area

Customs official may, only upon specific authority of the

Commissioner of Customs or the District Collector

DESIGNATED BY HIM and with the assistance and in the

presence of SBMA officials or representatives, examine any

article held in the Secured Area of the Zone by any

registered enterprise, or by any Zone resident when a

member of the household is at home, for possible

violation(s) of Section 101 of the Tariff and Customs Code

of the Philippines and the pertinent provisions of this

Administrative Order; provided, that the constitutional

requirements for Search are met.

3. SEIZURE

Any prohibited or excluded articles found

upon search, or through any examination,

audit or check of articles in the Zone by

the Customs may seized by Customs for

violations of Tariff and Customs cod e of

the Philippines as amended and disposed

of in accordance with law.

4. ARREST

The SBMA shall, upon request of the

Commissioner of Customs or the District Collector

DESIGNATED BY HIM, and his coordination with

Customs officials, arrest persons in the Zone for

violation of the Tariff and Customs code for which

arrest is authorized under the law; provided,

however, that Customs may arrest persons who

violate the Tariff and Customs Code of the

Philippines upon entering or leaving the Secured

Area of the zone.

C. RECORD KEEPING

◼ Registered enterprises bringing articles into the Secured Area of the

Zone are responsible for retaining and maintaining records of permits,

receipts, sales transfer, deliveries, and removal from Zone of articles

received by the Enterprise, and for maintaining the accounts and

inventory records brought into the Zone on a current basis and

according to the regulations and the generally-recognized accounting

principles and standards of the Republic of the Philippines.

◼ The records shall provide an audit trail of the articles from the time of

their reset by the Registered Enterprise to the time the Registered

Enterprise is relieved of responsibility for the articles according to the

Rules and Regulations and the provisions of this Administrative Order.

◼ Such records shall be retained for five (5) years after the removal of

the articles from the Secured Area of the Zone.

◼ If the records keeping system of the registered Enterprise has become

impaired to the point where no effective check, audit, or count of the

inventory of the Enterprise can be by the SBMA, Customs, bureau of

Internal Revenue, Economics Intelligence and Investigation Bureau

(EIIB, or other authorized office, the SBMA may order a suspension of

permit of the Enterprise shall provide access to the articles in their

premises and in their possession in the Zone, and to records pertaining

thereto, which they are responsible for maintaining under the Rules

and Regulations, SBMA’s Manual of Operations and the provisions of

this Administrative Order government agency to which access is

authorized by law and regulation.

D. VESSELS, AIRCRAFTS AND VEHICLES ARRIVING IN

ZONE

1. IN GENERAL
◼ Regulations and procedures in the arrival

formalities and clearance of vessels and aircraft in

the Zone shall be the same as those observed in

the Customs Territory. Vehicles which are brought

into the Zone free of duties and taxes upon

transfer to the Custom Territory for consumption;

provider that the SBMA and Customs, in

coordination with the Land Transportation Office

(LTO) of the Department of Transportation and

Communication (DOTC) shall formulate separate

rules and guidelines on the registration and use of

imported vehicles within and outside the Zone.

BONDING OF CARRIES

Carries who undertake to transship foreign articles

from the Secured Area of the Zone to a Customs

Bonded Warehouse within the Customs Territory

shall be bonded in an amount to be determined by

the SBMA which in no case shall be less then Fifty

Thousand Pesos (50,000.00), conditioned that the

carrier shall transport and deliver, without delay,

and in accordance with the Rules and regulations

in effect in the Customs Territory, to the Collector

of Customs at the port of destination or export.

The provisions of the Tariff and Customs Code, as

amended, and its implementing regulations shall

govern the transshipment of foreign articles to

and/or from secure area of the Zone.

E. INPORTATION OF RAW MATERIALS, CAPITAL GOODS,

EQUIPMENT AND CONSUMER ITEMS INTO THE

SECURED AREA

1. IN GENERAL

◼ Business enterprises and registered residents (Filipinos

and foreigners) in the Secured Area are free to import

raw materials, capital goods, equipment and consumer

item tax and duty-free, but consumer items must be

consumed within the Secured Area. Removal of raw

materials, capital goods, equipments and consumer

items out of the Secured Area for sale to non-Zone

registered enterprises shall be subject to the usual

taxes and duties, except as may be provided herein.

(Executive Order No. 97-A).

F. CONSUMER ITEMS IMPORTED INTO

THE SECURED AREA

1. Residence of the Zone living outside the

Sacred Area can enter the Secured Area and

consume any quantity of consumer items in

hotels and restaurants within the Secured

Area. However, these residents can purchase

and bring out the Secured Area to other

parts of the Philippines territory consumer

items worth not exceeding US $100 per

month per person, only residents age 15 and

over are entitled to this privilege.

2. Filipinos not residing within the Zone

can enter the Secured Area and consume

any quantity of consumption items in

hotels and restaurants within the Secured

Area. However, they can purchase and

bring out the Secured Area to another

parts of the Philippine territory consumer

items worth not exceeding US $200 per

year per person. Only Filipinos age 15 and

over are entitled to this privilege.

3. There shall be no pooling, tacking, or

advance use of the US $100 or US $200

entitlement which is a privilege similar to

the entitlement enjoyed by returning

residents who shop at existing

government-owned tourist duty-free

shops. (Executive Order No. 97-A)

G. SALE OF CONSUMER ITEMS IN

DULY AUTHORIZED DUTY-FREE

SHOPS

1. The sale of tax and duty-free consumer

items in the Secured Area shall only be

allowed in duly authorized duty-free

shops. Duty-free shops shall be subject to

the joint regulation of Customs and the

SBMA to insure proper accounting of

import sales.

2.Foreign tourists, balikbayans and returning

residents (from abroad) passing through the

Secured Area shall be entitled to the same

prevailing tax and duty – free privileges they

presently enjoy. However, the selling of duty and

tax-free goods persons other than tourists,

balikbayan and returning residents shall be HELD

IN ABEYANCE pursuant to Executive Order No. 97-

A unit a control system shall have been approved

by the SBMA and Customs authorities as a

condition precedent to a duty-free outlet being

allowed to operate.

◼ Duly authorized duty-free shops shall be

subject to the joint regulations of Customs

and SBMA to insure proper accounting of

imports and sales, such regulations to be

issued in a separate Customs

Administrative Order. (Executive Order No.

97-A)

H. EXPORTATION TO ZONE AND

IMPORTATION FROM ZONE

◼ Articles which are admitted to the Secured

Area of the Zone from the Customs

Territory which in turn are re-exported

under proper permit shall be considered

exported. Articles which are transferred to

Customs Territory from the Secured Area of

the Zone shall UNLESS OTHERWISE

PROVEN be considered imported and

therefore, subject to all laws, rules and

regulations regarding importations.

CHAPTER III. ADMISSION AND

RECEIPT INTO ZONE

A.PROHIBITED MERCHANDISE

1. GENERAL

Any kind or class of articles may be admitted

into the Secured Area of the Zone from a foreign

country, the Customs Territory, or a Customs

Bonded Warehouse or Export Processing Zone

within the Customs Territory, except articles

prohibited under the laws of the Republic of the

Philippines.

2. ARTICLES NOT IN ACCORDANCE

WITH PERMIT TO IMPORT

◼ Articles brought into the Secured Area of

the Zone which are not in accordance with

the permit to import the issued by the SBMA

to Registered Enterprise or Resident shall be

proceeded against pursuant to the

provisions of the Tariff and Customs Code of

the Philippines and this Administrative

Order.

B. IMPORTATION OF ARTCLES

DESTINED FOR CUSTOMS TERROTORY

Foreign articles destined for the Customs

Territory which arrives on a carrier landing in

a Secured Area of the Zone may be unladed

in the Zone and held there pending

completion of requirements for the entry and

transshipment through the Zone to Custom

Territory. Articles which have been released

for transfer to Customs Territory shall be

transshipped through the zone under

Customs supervision or control.

C. IMPORTATION AND TRANSSHIPMET

OF ZONE-DESTINED FOREIGN

MERCHANDISE
1. TAX AND DUTY EXEMPTION

◼ Importing for the Secured Area of the

Zone, either for direct unloading thereat or

through a port in the Customs Territory

shall be exempt from payment of all duties

and taxes.

2. CONTAINER MARKING REQUIREMENTS

◼ Foreign articles destined for the Secured Area of

the Zone may be imported directly into the

Secured Area of the Zone or through any point in

Customs Territory through which importation may

be lawfully made. Except for foreign articles,

arriving by mail or accompanying persons upon

arrival, the containers bearing the foreign articles

shall be marked “SHIP to Subic Bay Freeport,

REPUBLIC OF THE PHILIPPINES” or with similar

wording to show the Zone destination of the

Articles.

3. TRANSSHIPMENT PROCEDURE

If the foreign articles were imported at port

in the Customs Territory, the Registered

Enterprise or its agent will present the

admission documentation to Customs office

at the port of importation. No other

authorization or approval will be necessary

for release of the articles for transshipment

to the Secured Area of the Zone.

a. PROCESSING OF DOCUMENTATION

◼ When the registered enterprise submits the admission

documentation before arrival of the articles, officials of

Customs ill accept, review and approve the document in

advance of the arrival.

◼ The Customs Office shall review and authorize the release

of the articles within (1) work day after receipt of the

required documentation, and provide rapid release

privileges equivalent to those provided to perishable and

other articles which are normally allowed to be removed

from the port as soon as they are unloaded from the

arriving carrier.

◼ Release of the articles for transportation to the Secured

Area of the Zone shall be documented by authorized

official of Customs in writing on the admission

documentation.

b. EXAMINATION AT PORT IMPORTATION

◼ Except in unusual circumstances, Officials of

Customs will not inspect the articles at the port of

importation.

◼ The articles will remain unopened in the original

packing containers and under Customs or the

original shippers’s seal.

◼ Customs will deviate from his policy only when

there is a clear threat of loss of revenue or other

serious law violations, and will document and

explain each reason for inspection to the SBMA and

the registered enterprise.

D. ADMISSION PROCEDURE

1. RIGHT TO APPLY FOR ADMISSION

◼ The applications for admission of articles to the Secured

Area of the Zone shall be made by or on behalf of the

owner or purchasers of the articles.

◼ The consignee shown on the bill on lading or airwaybill, or

the addressee shown or mail packages, will be considered

to the owner or purchaser, unless another person or firm

person presents evidences satisfactory to Customs that it is

the true owner or purchaser and that it is requesting

admission on the behalf of and at the specific request of

the owner or purchaser.

◼ The application may be prepared by a person who has the

authority to sign the documents on behalf of the owner or

purchaser.

◼ A resident in the Secured Area or other person having

possession of articles accompanying them upon arrival in

the Secured Area of the Zone shall be considered the

considered the owner or purchaser of the articles.

2.ADMISSION FORM

The admission application of Registered

Enterprise (including small Registered Enterprise),

Residents in the Secured Area of other persons

bringing articles into the Secured Area of the Zone

shall be made on Forms provided for and required

by SBMA.

The forms shall be prepared in the number of

copies required by Customs and shall be

presented at the location designated by Customs,

normally the Customs Office nearest to the point

of arrival of the carrier of person bringing the

articles to the Secured Area of the Zone.

3. ACCOMPANYING DOCUMENTS

The admission application to be prepared by

Registered Enterprises (including small Registered

Enterprises) or Residents in the Secured Area shall

be accompanied by the permit to import, a

commercial invoice, packing list, or other itemized

statement which describe the article precisely and in

commercial terms and serve as audit trail into the

records and accounts of the applicant.

If the applicant is not the person or enterprise

shown as a consignee in the permit to import or

other shipping documents, the admission

application shall also be accompanied by evidence

satisfactory to demonstrate that the applicant is

marking the application on behalf of the eligible

owner or purchaser.

4. CUSTOMS REVIEW PROCEDURE

Customs officials shall review the

admission documentation and, if

necessary, examine the articles, to verify

the correctness of the information in the

documents.

a. Customs will review the admission

documentation for completeness and

accuracy. A copy of the admission

application shall be retained by Customs

for compilation of statistics.

b. Customs will examine the articles as a

condition of approving admission only

(1) when the Commissioner of customs has

reason to believe information in the admission

documentation is incorrect,

(2) when the Commissioner of Collector of

Customs has reason to believe that there has

been a violation of the law, regulations, or the

provisions of this Administrative Order or

(3) under the program of random checks to

test the quality of admission documentation

furnished to Customs.

c. If Customs decides to examine the

merchandise, the examination will be

conducted in the applicant’s premises,

unless:

1. the examination cannot be readily performed there;

2. the articles consist of personal or household effects

or other articles accompanying Zone residents or

other persons which can be readily examined at the

point of where this will be examined;

3. the applicant requests that the examination be

conducted at the Customs point of entry into the

Secured Area of the Zone;

4. the articles or the vehicle carrying them cannot

be readily sealed; or

5. The Commissioner or Collector of Customs has

reason to believe the carrier or the articles will

be tampered with before arrival at the applicant’s

premises. Customs will sealed the vehicle

containing the articles or cord and seal the

containers of the articles to assure the articles

are delivered to the applicants premises without

the change in condition, quantity, or nature of

the articles between the point of entry into the

Secured Area of the Zone and the location where

the examination will take place.

d. Containers of the articles will be opened

and the articles presented to Customs by

applicant or an agent of the applicant.

Customs officers will not open containers

for examination of the articles.

e. If no examination is to be conducted,

Customs will check the condition of the

vehicle delivering the articles to the

applicant’s premises and any seals

affixed thereto, and note any

irregularities on the admission

documents.

CUSTOMS RELEASE

Of no irregularities are discovered through

review of the documentation and any examination

conducted by Customs that require detention of

the articles, Customs will issue a permit to release

the articles for delivery to the applicant’s premises

in the Secured Area of the Zone. The articles may

be delivered by:

(a) the vehicle which brought the articles to the

Secured Area to the Zone.

(b) A vehicle owned or lease by the applicant, or

(c) a vehicle of a firm licensed by the SBMA for the

purpose of carriage of articles within the Secured

Area of the Zone.

E. EXEMPTION FROM ADMISSION

PROCEDURE

◼ Except upon special order of the SBMA but

without any limitation on the Customs Search

authority of vehicles, persons, baggage, or cargo

arriving in the Secured Area of the Zone, no

declaration of admission or permit by either

Customs or the SBMA is required for admission

to the Secured Area of the Zone of:

1. ANY personal effect of residents of the

Secured Area valued at less than One

Hundred U.S. Dollars (US $100);

2. ANY article of foreign origin in any

shipment valued at less than Five U.S.

Dollar (US$5);

3. Articles for delivery to a vessel or aircraft

for loading and exportation to a foreign

country from the Zone;

4. Merchandise being returned to the Secured Area

of the Zone after temporary transfer from the

Secured Area of the Zone under the procedure of

Chapter V, Section D; or

5. Domestic articles not covered by any of the

proceeding exemption when the person or

enterprise presenting the articles for admission

surrenders to Customs a commercial invoice or

similar document describing the articles in

commercial items, along with a declaration that

the articles are domestic articles as provided in

the regulation of Customs in force in the Customs

Territory.

POSTAL IMPORTATIONS

◼ Articles arriving by mail or parcel post at a

postal facility within the Secured Area of

the Zone shall be released by Customs

after completion of the required admission

procedure, for delivery by postal officials

to the addresses.

CUSTOMS BONDED WAREHOUSE OR EXPORT

PROCESSING ZONES

◼ Articles may be admitted into the Secured Area of the Zone

from a Customs Bond Warehouse or Export Processing Zone

within the Customs Territory.

◼ Containers of the said merchandise shall be clearly marked

“SHIPPED FROM (NAME OF CBW OR EPZ

ENTERPRISE/NAME OF CBW OR EPZ, DESTINED TO Subic

Bay Freeport)” or similar wordings to show both the origin

and destination of the shipment.

◼ Acceptance and acknowledgement of authorized receipt by a

Registered Enterprise in the Secured Area of the Zone shall

constitute fulfillments of the obligation for safe delivery from

the sending Customs Bonded Warehouse or Export

Processing Zone to the Secured Area of the Zone.

H. ELIGIBILITY FOR DRAWBACK,

BOUNTY OR EXEMPTION

The signed permit and release by

Customs for the admission of foreign

articles into the Secured Area of the Zone

and conclusive proof of actual

exportation there from as required under

pertinent customs laws, rules and

regulations shall be the basis of

consideration to prove exportation.

CHAPTER IV. OPERATION AND

HANDLING WITH ZONE

A. ANNUAL INVENTORY, RECONCILATION,

AND REPORT

◼ Each Registered enterprise shall conduct an

annual physical inventory of the end its business

year of all articles in its premises and its

possession in the Secured Area of the Zone, and

reconcile any discrepancies found with its

inventory, such reconciliation shall be made to the

SBMA on a form to be required by it, copy

furnished the Bureau of Customs within ninety

(90) days after the end of the business year,

along with any payments of duties and taxes

from shortages or admission documents for

overages.

B. COUNTRY OF ORIGIN OF ARTICLES

MANUFACTURED IN ZONE

Without reference to the assessment of duties and taxes under

these regulations, the country of origin of articles which are

manufactured or produced in the Zone in whole or in part

from foreign articles and transferred to the Customs

Territory for consumption, shall be determined according to

the laws and regulations in effect in the Customs Territory.

The country of origin of such article which exported shall be

determined according to the laws of the importing country.

No false country of origin marking or designation shall be

placed by any person or firm on any articles in the Zone,

whether the merchandise is destined for consumption in

the Zone, the Customs Territory, or a foreign place or

country.

◼ Domestic articles which have lost their identity

as such in the Zone shall be treated as foreign

articles if they are transferred to the Customs

Territory.

◼ They will be considered as having so lost their

identify if they cannot be identified by Customs

as domestic articles on the basis of an

examination of the articles or consideration of

any proof presented by the Registered

Enterprise, including the accounting and

inventory records of the Enterprise.

CHAPTER V. TRANSFER OF

ARTICLES FROM SECURED AREA

A. ARTICLES ELIGIBLE FOR TRANSFER

◼ Any articles which have been admitted to or

produced in the Secured Area of the Zone may

be transferred therefrom for exportation,

transshipment through Customs Territory,

transportation to the Customs Bonded

Warehouse or an Export Processing Zone within

the Customs Territory, or transfer to the

Customs Territory for consumption subject to

existing rules and regulations.

B.SBMA PERMIT FOR TRANSFER

1. Except as specified below, articles shall not be

transferred from the Secured Area of the Zone

without the permit of the SBMA.

Forms and procedures used for transfers from the

Secured Area of the Zone shall provide therein for

the permit of the SBMA.

The following articles are exempted from the

permit requirement and from Customs entry

procedures after examination and verification

conducted by Customs and if allowed under the

pertinent provisions of the Tariff and Customs Code

of the Philippines, except where such a permit is

required under special order of the SBMA.

a.Domestic articles which have not been

manufactured, blended or otherwise

combined in the Zone with foreign article,

when the person or enterprise presenting

the articles for removal from the Zone

surrenders to Custom a commercial

invoice or similar document describing the

articles in commercial terms along with a

declaration that the articles as provided in

the provisions of this Administrative Order.

b. Foreign articles, or articles which contain

foreign article components, which are

exempted from entry requirements

under the laws and regulations in effect

in the Customs Territory, and

c. Articles or substances which are not

subject to the Tariff and Customs Code

of the Philippines.

2. Carriers containing such article are

nevertheless subject to search by Customs

upon removal from the Zone, and

Registered Enterprises shall maintain and

procedure records of the transfer and

removal of exempted article.

C. TRANSFER FOR CONSUMPTION IN

CUSTOMS TERRITORY

D.

◼ Foreign articles, or article containing

foreign article components, in the Secured

Area of the Zone may be transferred to

Customs Territory under the laws,

regulations and procedures, applicable in

the customs territory, except as provided

in the SBMA’s Rules and Regulations as

well as the provisions of this

Administrative Order.

1. ASSESMENT OF DUTIES AND TAXES

Customs and import duties and taxes shall be

assessed, where authorized and required by la w,

as provided in this subsection;

a. TARIFF CLASSIFICATION
◼ The classification under the Tariff and Customs

Code of the Philippines of foreign articles, whether

or not they have been manufactured, blended or

otherwise combined with domestic articles, shall

be determined according to the conditions, nature

and character of the entire article at the time of

its transfer from the Zone to Customs Territory.

b.VALUATION

The value of foreign articles or articles

containing foreign articles components, on which

ad valorem duties and taxes are assessed shall

be the price actually paid or payable for the

entire article in the transaction that caused the

article to be transferred to the Customs Territory,

minus the cost of any domestic article

components of the entire article.

D. TEMPORARY TRANSFER TO CUSTOMS

TERRITORY

1. ELIGIBLE PURPOSES

Foreign articles which have been admitted to the

Secured Area of the Zone may be removed

temporarily from the Secured Area of the Zone

from services which are not available in the

Secured Area of the Zone, such as repair,

restoration, testing and similar operations.

Those procedures shall not used for any operations

outside the Secured Area of the Zone which adds

any article or value to the temporarily removed

merchandise; or for any operation which is part of

a production process.

2. APPLICATION

◼ A person or enterprise which has

received a permit from the SBMA for

temporary transfer shall present an

application of a form to be required by

Customs, to the latter with the articles

for review and examination.

3. TIME AND GEOGRAPHIC LIMITS

◼ Upon issuance of a Customs permit, the articles

may be transferred from the Secured Area of the

Zone for a period of not more than four (4)

months, unless the period is extended for another

four (4) months by the SBMA and for a valid

business reason.

◼ The articles may be transported to any place

within the Customs Territory to conduct the

service or operation.
◼ The article entered for consumption or exported

while it is in temporary transfer status in the

Customs Territory, unless duties and taxes are

paid where applicable.

4. RETURN TO ZONE AND ENFORCEMENT

MEASURES

◼ Upon its return to the Secured Area of the zone,

the original permit and the articles shall be

presented to Customs for examination and review.

◼ If the articles are not returned within one month

period, plus any extension granted by the SBMA, or

not handled in accordance with the provisions of

this section, the articles will be considered to have

been transferred to the Customs Territory without

proper permit, and will be subject to duties and

taxes and any enforcement action authorized under

the provisions of this Administrative Order.

E. EXPORTATION FROM THE ZONE

1. EXPORTATION FROM CUSTOMS TERRITORY THROUGH THE

SECURED AREA

◼ Foreign or domestic articles may be brought into the

Secured Area of the Zone from the Customs Territory for

the purpose of loading onto vessels or aircraft arriving in

the Secured Area of the Zone. Such articles shall be

supervised by the Customs to assure their exportation from

the Secured Area of the Zone.

◼ If they are not exported or returned to Customs Territory

within three (3) months, the articles shall be considered

abandoned and turned over to Customs for disposal in

accordance with the Tariff and Customs Code of the

Philippines, as amended, and from the proceeds shall be

deducted any all expenses incurred, by the SBMA in

connection therewith as may allowed by law.

◼ However, in all other respects the articles shall be governed

by the Customs laws and regulations as if it were being

exported from the Customs Territory.

2. DIRECT EXPORTATION FROM

SECURED AREA

◼ Foreign or domestic articles in the Zone

may be delivered to vessels or aircraft

arriving in the Zone for exportation

directly thereon under Customs

supervision.

3. TRANSSHIPMENT THROUGH CUSTOMS TERRITORY

FOR EXPORTATION

◼ Foreign articles, or articles containing foreign article

components,.

◼ In the Secured Area of the Zone may be transshipped to

other ports in the Customs Territory for delivery to vessels

aircrafts for exportation under the supervision of Customs

using the forms and procedures applicable for exportation

in the Customs Territory.

◼ However, Customs officials will not usually inspect or

examine Zone articles destined for exportation and while

awaiting loading onto the exporting vessels or vessel or

aircraft, the articles will remain unopened in the original

packing containers and under Customs or this original Zone

shipper’s seal.

◼ Customs officials will deviate from this policy only in the

most unusual circumstances which will be clearly

documented and justified to the SBMA and the Registered

Enterprise.

4. MARKING OF CONTAINERS FOR

EXPORTATION

◼ Except in the case of exportation from the

Secured Area of the Zone by mail, accompanying

persons, under the Special Retail Sale Regime,

containers of articles destined for exportation

whether directly from the Zone or transshipped

through the Customs territory, shall be clearly

marked, “SHIPPED FROM SUBIC BAY FREEPORT,

REPUBLIC OF THE PHILIPPINES” or similar

wording to show the Zone origin of the shipment.

5. EXPORTATION UNDER SPECIAL RETAIL SALES

REGIME

◼ Persons who purchase articles under the special

Retail Sales regime may export the articles

accompanying then upon departure to a foreign

country on a vessel or aircraft which they board in

the Secured Area of the Zone, or on a vessel or

aircraft which they board on Customs Territory.

The itemized listing provided by the retail seller

under the provisions of this Administrative Order

shall contain the SBNA permit to export the

articles and the export documentation for the

articles.

a. Persons who board vessels or aircraft in the

Secured Area of the Zone shall present to

Customs immediately prior to boarding:

1. the articles to be exported;

2. the itemized listing provided by the seller; and

3. a declaration of any foreign articles consumed in the

Secured Area of the Zone. If the vessel or aircraft is

to land at a port or place in Customs territory before

departure to a foreign country, Customs will place

the articles in the custody of the officers of the

vessel or airline for surrender to the purchaser only

after final departure to a foreign country.

b. persons who board vessels or aircraft in the Customs at the

point of exit from the Sacred Area of the Zone.

1. the articles to be exported;

2. the itemized listing provided by the seller; and,

3. a declaration of any foreign articles consumed in the Secured

Area of the Zone. The articles to be exported will be placed

in a special sealed container provided by the seller or the

articles for the transshipment of the articles to the vessel or

aircraft the purchaser is to be board. The seller will be

responsible for the delivery of the merchandise, under the

supervision of Customs to the purchaser in the Custom

Territory upon the departure of the vessels or the aircraft for

the exportation to a foreign country, and for the payment of

any duties, taxes or penalties due on any merchandise that is

not properly delivered and exported

6. Articles which have been exported from the

Secured Area of the Zone to foreign

country and which are subsequently re-

imported may be admitted into the Secured

Area of the Zone as foreign articles in the

manner provided in Chapter III, Section D,

of this Administrative Order.

Foreign articles or articles containing

foreign article components which are

exported and subsequently re-imported

directly into Customs territory for

consumption shall be treated in the same

manner as like articles from the country of

exportation.

F. ARTICLES FOR USE ON VESSEL OR AIRCRAFT

◼ Foreign articles or articles containing foreign article

components, may be delivered free of duties and taxes to

vessel and aircraft arriving in the Secured Area of the Zone

for use or consumption on board by the crew or passengers,

as fuel, or as equipment or for repair of the vessel or

aircraft, to the same extent as is authorized under the laws

and regulations in effect in Custom Territory.

◼ The articles will be considered transferred from the Secured

Area of the Zone upon signature for receipt of the articles by

an authorized official of the vessels or airline with the intent

to use them on board the vessels or the aircraft from the

Secured Area of the Zone.

◼ Such articles may also be transshipped to ports in the

Customs Territory for delivery free of duties and taxes to

vessels and aircraft under the laws and regulations in effect

in the Customs Territory. However, the containers of such

articles shall be marked “SHIPPED FROM SUBIC BAY

FREEPORT” or with similar wording to show the Zone origin

of the shipment.

G. TRANSFER TO CUSTOMS BONDED

WAREHOUSE OR EXPORT PROCESSING

ZONE
◼ Foreign or domestic articles may be transferred

from the Secured Area of the Zone for

transshipment to Customs Bounded Warehouse or

Export Processing Zone in the Customs Territory,

and receipt therein, under the laws, regulations

and procedures in effect in the Customs Territory.

However, containers of such articles shall be

clearly marked “SHIPPED FROM SUBIC BAY

FREEPORT, DESTINED FOR (NAME OF CBW OR

EPZ ENTERPRISE/NAME OF CBW OR EPZ)” or

with similar wording to show both the origin and

destination of the shipment.

H. DELIVERY AND REMOVAL FROM THE ZONE

Articles shall be delivered to carrier and removed

from the Secured Area of the Zone in accordance

with the provisions of this Section.

1.Customs shall require that vehicles containing

shipments of foreign articles or of article components

transshipped through Customs Territory be sealed

with Customs seal, or with a shipper’s seal approved

by Customs, and transferred under guard so as to

prevent or make evident any diversion of the articles

into the commerce of the Republic of the Philippines,

or any tampering with the articles.

2. The articles may be transferred from

the premises of the Registered Enterprise

by the carrier which is to transport the

articles to Customs Territory, a vehicle of

the Registered Enterprise, or a carrier

licensed by the SBMA for carriage within

the Secured Area of the Zone.

3. Passenger vehicles, including buses,

taxicabs or other vehicles carrying persons

for hire shall be subject to Customs

Inspections and search to allow persons to

properly declare purchase made in the Zone

for transfer to Customs Territory and to

detect undeclared merchandise. Points of

exits hall contain adequate facilities to pull

aside vehicles for Customs search, hold or

store detained to pull aside vehicles for

Customs search, hold or store detained or

seized articles, assess and collect duties

and taxes.

4.When foreign articles, or articles containing

foreign article components, are examined at the

premises of a Registered Enterprise and given a

permit to transfer the articles from the Secured

Area of the Zone, or in other situations where the

permit is given at location other than the point of

exit, Customs shall establish controls, such as

escorts, gate passes, sealing, or other devices, to

assure that the articles for which a permit to

transfer has been issued are duly and properly

removed from the Secured Area of the Zone, and

that articles without such a permit are not

removed from the Secured Area of the Zone.

5. A person of enterprise which has received a Customs

permit for transfer of articles from the Secured Area of the

Zone shall see to it that the articles are physically

removed from the Secured Area of the Zone within seven

(7) calendar days after the permit is issued; or request

the withdrawal or cancellation of the application for

transfer.

Except by special order of the SBMA, foreign articles, or

articles containing foreign components, shall be entered

for consumption in the Customs Territory but remained in

the Secured Area of the Zone.

If the request for transfer is withdrawn or

cancelled, the Registered Enterprise shall resume

responsibility for that articles and any duty or tax paid will

be refunded by the Customs.

If the request for cancel is not withdrawn or cancelled and

there has been no special permit by the SBMA for

retention of the articles in the Secured Area of the Zone,

any duty and tax paid will be treated as unclaimed and

turned over to the SBMA for disposal.

I. RETURN TO ZONE WITHOUT ENTRY INTO

COMMERCE

◼ If foreign articles or articles containing foreign article

components are transferred to Customs Territory with the

intent or returning them to the Secure Area of the Zone

without having entered the commerce of the Republic of

the Philippines and of circumventing the removal

requirements provided in the provisions of this

Administrative Order and the articles are so returned to

the Secured Area of the Zone, the original permit to

transfer and entry shall be cancelled any duties and

taxes paid shall be refunded by Customs, and the

Registered enterprises which transferred the articles from

the Secured Area of the Zone shall reassume

responsibility for the articles as foreign articles.

CHAPTER VI. ENFORCEMENT

OF REGULATIONS

A. PENALTIES

◼ Any person or enterprise found to

have violated any provision of the

Act of this Administrative Order

shall be subject to the pertinent

penal provisions of the Tariff and

Customs Code of the Philippines.

B. EFFECTIVITY

This Administrative Order shall take effect fifteen (15)

days after publications in the official Gazette or in any

newspaper or general circulation. Certified copies of

this Customs Administrative Order shall be submitted

to the U.P. Law Center pursuant to Book VII, Chapter

II, Section 3 and 4 of the Revised Administrative Code

of 1987.

SGD) GUILLERMO L. PARAYNO, JR.

Commissioner

Approved:

(SGD) ERNEST LEUNG

Acting Secretary of Finance

MALACAÑANG
Manila

PRESIDENTIAL DECREE No. 857 December 23, 1975

PROVIDING FOR THE REORGANIZATION OF PORT ADMINISTRATIVE AND OPERATION

FUNCTIONS IN THE PHILIPPINES, REVISING PRESIDENTIAL DECREE NO. 505 DATED JULY
11, 1974, CREATING THE PHILIPPINE PORT AUTHORITY, BY SUBSTITUTION, AND FOR
OTHER PURPOSES

WHEREAS, there is a recognized need to integrate and coordinate port planning, development,
control and operations at the national level, and at the same time promote the growth of regional port
bodies responsive to the needs of their individual localities;

WHEREAS, harbors and tributary areas have their own peculiar potentialities to be considered in
port planning and development;
WHEREAS, hitherto, the concept of port administration in this country has been focused on the
traditional functions of revenue collection, harbor maintenance and cargo handling, to the exclusion
of the port's fuller utilization and development as a spur for regional growth;

WHEREAS, Presidential Decree No. 505 was promulgated on July 11, 1974 to carry out these
stated objectives; and

WHEREAS, it was found necessary in the national interest to amend Presidential Decree No. 505 so
as to enable the Philippine Port Authority to Exercise all the proper powers and functions of a port
authority and in order to better carry out the desired objectives:

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution in order to effect desired changes and reforms in the social,
economic and political structure of our society, do hereby decree and order the revision of
Presidential Decree No. 505 by substitution with this Decree which is hereby adopted and made part
of the laws of the land;

Article I
Title.

Section 1. Title This Decree shall be known as the Revised Charter of the Philippine Ports Authority
created under Presidential Decree No. 505 dated July 11, 1974.

Article II
Declaration of Policies

Section 2. Declaration of Policies and Objectives It is hereby declared to be the policy of the State
to implement an integrated program for the planning, development, financing, and operation of Ports
or Port Districts for the entire country in accordance with the following objectives:

(a) To coordinate, streamline, improve, and optimize the planning, development, financing,
construction, maintenance and operation of Ports, port facilities, port physical plants, all 11
equipment used in connection with the operation of a Port.

(b) To ensure the smooth flow of waterborne commerce passing through the country's Ports
whether public or private, in the conduct of international and domestic trade.

(c) To promote regional development through the dispersal of industries and commercial
activities throughout the different regions.

(d) To foster inter-island seaborne commerce and foreign trade.

(e) To redirect and reorganize port administration beyond its specific and traditional functions
of harbor development and cargo handling operations to the broader function of total port
district development, including encouraging the full and efficient utilization of the Port's
hinterland and tributary areas.

(f) To ensure that all income and revenues accruing out of dues, rates, and charges for the
use of facilities and services provided by the Authority are properly collected and accounted
for by the Authority, that all such income and revenues will be adequate to defray the cost of
providing the facilities and services (inclusive of operating and maintenance cost,
 administration and overhead) of the Port Districts, and to ensure that a reasonable return on
the assets employed shall be realized.

Article III
Definitions

Section 3. Definitions For the purpose of this Decree and of the by-laws, regulations, or rules
promulgated thereunder, the terms or words used herein shall, unless the context indicates
otherwise, mean or be understood to mean, as follows:

(a) "Authority" means the Philippine Ports Authority created by this Decree.

(b) "Board" means the Board of Directors of the Authority appointed by the President under
Section 7 of this Decree.

(c) "Functions" includes powers and duties.

(d) "Port District" means the territorial jurisdiction under the control, supervision or ownership
of the Authority over an area (land or sea), declared as such in accordance with Section 5 of
this Decree including but not limited to any Port within said District.

(e) "Port" means a place where ships may anchor or tie up for the purpose of shelter, repair,
loading or discharge of cargo, or for other such activities connected with water-borne
commerce, and including all the land and water areas and the structures, equipment and
facilities related to these functions.

(f) "Navigable waters" means all navigable portions of the seas, estuaries, and inland
waterways.

(g) "Anchorage" means a place with sufficient depth of water where vessels anchor or may
ride at anchor or may ride at anchor within the harbor.

(h) "Terminal Facility" includes the seaport and its facilities of wharves, piers, slips, docks,
dry docks, bulkheads, basins, warehouses, cold storage, and loading or unloading
equipment.

(i) "Basin" means a naturally or artificially enclosed or nearly enclosed body of water in free
communication with the sea.

(j) "Dock" includes locks, cuts, entrances, graving docks, inclined planes, slipways, quays,
and other works and things appertaining to any dock.

(k) "Drydock" means a dock from which the water can be temporarily excluded, in order to
effect repairs to hulls and keels of ships or vessels.

(l) "Pier" means any structure built into the sea but not parallel to the coast line and includes
any stage, stair, landing place, landing stage, jetty, floating barge or pontoon, and any bridge
or other works connected therewith.

(m) "Warehouse" means a building or shed used for the storage of cargo.
 (n) "Transit Shed" means a building or shed which is situated at or near a quay, wharf or
pier, and is used for the temporary or short-term storage of goods in transit, or to be shipped
or discharge from a vessel.

(o) "Wharf" means a continuous structure built parallel to along the margin of the sea or
alongside riverbanks, canals or waterways where vessels may lie alongside to receive or
discharge cargo, embark or disembark passengers, or lie at rest.

(p) "Transportation Facility" includes rails and railcars, highways, wheeled vehicles, bridges,
tunnels, tramways, subways, passenger or cargo vessels, ferry-boats, lighters, tugs, barges,
scows, ramps, and any kind of facility in use or for use of the transportation, movement, or
carriage of goods or passengers.

(q) "Lighter" means a flat-bottomed boat or barge used in loading or unloading cargo to or
from vessels,

(r) "Vessel" includes any ship or boat, or any description of a vessel or boat.

(s) "Goods" includes animals, carcasses, baggage, and any movable property of any kind.

(t) "Dues" includes harbor fees, tonnage and wharfage dues, berthing charges, and port
dues and any other dues or fees imposed by virtue of existing law or this Decree.

(u) "Rates" means any rates or charges including any toll or rent under existing law or
imposed by the Authority by virtue of this Decree for facilities used or services rendered.

Article IV
Establishment, Constitution, Powers and Duties

Section 4. Creation of Philippine Ports Authority

(a) There is hereby established a body corporate to be known as the Philippine Ports
Authority (hereinafter called the Authority), which shall be attached to the Department of
Public Works Transportation and Communications.

(b) The principal office of the Authority shall be located in Metropolitan Manila, but it may
establish port management units and other offices elsewhere in the Philippines as may
become necessary for the proper conduct of its business.

Section 5. Port District The Authority may, from time to time, submit to the President, through the
National Economic and Development Authority, applications for the declaration of specific areas as
Port Districts. Such applications shall be accompanied by a survey plan indicating the geographical
location of the area or areas to be declared as Port Districts with their respective boundaries
properly delineated.

Section 6. Corporate Powers and Duties

(a) The corporate duties of the Authority shall be:

i. To formulate in coordination with the National Economic and Development

Authority a comprehensive and practicable Port Development plan for the State and
 to program its implementation, renew and update the same annually in coordination
with other national agencies.

ii. To supervise, control, regulate, construct, maintain, operate, and provide such
facilities or services as are necessary in the ports vested in, or belonging to the
Authority.

iii. To prescribe rules and regulations, procedures, and guidelines governing the
establishment, construction, maintenance, and operation of all other ports, including
private ports in the country.

iv. To license, control, regulate, supervise any construction or structure within any
Port District.

v. To provide services (whether on its own, by contract, or otherwise) within the Port
Districts and the approaches thereof, including but not limited to

berthing, towing, mooring, moving, slipping, or docking any vessel;

loading or discharging any vessel;

sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.

vi. To exercise control of or administer any foreshore rights or leases which may be
vested in the Authority from time to time.

vii. To coordinate with the Bureau of Lands or any other government agency or
corporation, in the development of any foreshore area.

viii. To control, regulate, and supervise pilotage and the conduct of pilots in any Port
District.

ix. To provide or assist in the provision of training programs and training facilities for
its staff or staff of port operators and users for the efficient discharge of its functions,
duties, and responsibilities.

x. To perform such acts or provide such services as may be deemed proper or

necessary to carry out and implement the provisions of this Decree.

(b) The corporate powers of the Authority shall be as follows:

i. To succeed in its corporate name.

ii. To sue and be sued in such corporate name.

iii. To adopt, alter, and use a corporate seal which shall be judicially noticed.

iv. To adopt, amend, or repeal its by-laws.

 v. To create or alter its own organization or any Port Management Unit, and staff
such an organization or Port Management Unit with appropriate and qualified
personnel in accordance with what may be deemed proper or necessary to achieve
the objectives of the Authority.

vi. To make or enter of any kind or nature to enable it to discharge its functions under
this Decree.

vii. To acquire, purchase, own, lease, mortgage, sell, or otherwise dispose of any
land, port facility, wharf, quay, or property of any kind, whether movable or
immovable.

viii. To exercise the right of eminent domain, by expropriating the land or areas
surrounding the Port of harbor, which in the opinion of the Authority, are vital or
necessary for the total development of the Port District.

ix. To levy dues, rates, or charges for the use of the premises, works, appliances,
facilities, or for services provided by or belonging to the Authority, or any other
organization concerned with port operations.

x. To reclaim, excavate, enclose, or raise any part of the lands vested in the
Authority.

xi. To dredge or provide dredging services, within a Port District of elsewhere.

xii. To acquire any undertaking affording or intending to afford facilities for the loading
and discharging or warehousing of goods in the Port Districts.

xiii. To supply water or bunkers for ships.

xiv. To obtain insurance for or require the insurance of any property, movable or
immovable, belonging to the Authority and/or goods in the custody of the Authority.

xv. To do all such other things and to transfer all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purposes of the Authority.

xvi. Generally, to exercise all the powers of a corporation under the Corporation Law
insofar as they are not inconsistent with the provisions of this Decree.

Section 7. Board of Directors

(a) The corporate powers of the Authority shall be vested in a Board of Directors, which shall
consist of the following members:

i. The Secretary of Public Works, Transportation and Communications, who shall act
as Chairman.

ii. The General Manager of the Authority, who shall act as Vice-Chairman.

iii. The Director-General of National Economic and Development Authority.

 iv. The Secretary of Finance.

v. The Secretary of Natural Resources.

vi. The Secretary of Trade.

The Directors listed under subsections (a) (i) to (vi) shall be ex-officio members of the
Board of Directors.

vii. One (1) other person who shall be appointed by the President of the Philippines,
representing the private sector, who by reason of his knowledge or experiences is, in
the opinion of the President, fit and proper person to be Director of the Board.
Provided, That, in the absence of the Director appointed in subsections (iii) to (vi),
the Director concerned shall designate the officer next in rank to him in his
department or office to act on his behalf as a Director.

(b) The Director from the private sector shall hold office for a period of three years from the
date of his appointment upon the completion of such period.

(c) The members of the Board or their respective alternates shall receive a per diem as it
may approve for each Board meeting actually attended by them: Provided, That, such per
diems shall not exceed one thousand pesos during any one month for each member:
Provided further, That no other allowances or any form of compensation shall be paid them,
except actual expenses in travelling to or from their residences to attend Board meetings.

Article V
Organization and Staff

Section 8. Management and Staff

(a) The President shall, upon the recommendation of the Board, appoint the General
Manager and the Assistant General Managers.

(b) All other officials and employees of the Authority shall be selected and appointed on the
basis of merit and fitness based on a comprehensive and progressive merit system to be
established by the Authority immediately upon its organization and consistent with Civil
Service rules and regulations. The recruitment, transfer, promotion, and dismissal of all
personnel of the Authority, including temporary workers, shall be governed by such merit
system.

(c) The General Manager shall, subject to the approval of the Board, determine the staffing
pattern and the number of personnel of the Authority, define their duties and responsibilities,
and fix their salaries and emoluments. For professional and technical positions, the General
Manager shall recommend salaries and emoluments that are comparable to those of similar
positions in other government-owned corporations, the provisions of existing rules and
regulations on wage and position classification notwithstanding.

(d) The General Manager shall, subject to the approval by the Board, appoint and remove
personnel below the rank of Assistant General Manager.
 (e) The General Manager of the Authority shall receive a salary to be determined by the
Board, and approved by the President.

(f) The number of Assistant General Managers of the Authority shall in no case exceed three
(3) who shall each receive a salary to be determined by the Board and approved by the
President.

Section 9. General Powers and Duties of the General Manager and Assistant General Managers

(a) General Powers and Duties of the General Manager

The General Manager shall be responsible to the Board, and shall have the following general
powers, functions, and duties:

i. To implement, enforce and apply the policies, programs, guidelines, procedures,

decisions, rules and regulations promulgated, prescribed, issued or adopted by the
Authority.

ii. To manage the day to day affairs of the Authority, and ensure the operational
efficiency of the Ports under the jurisdiction and ownership of the Authority.

iii. To sign contracts, to approve expenditures and payments within the budget
provisions, and generally to do any all acts or things for the proper operations of the
Authority or any of the Ports under the jurisdiction, control or ownership of the
Authority.

iv. To submit an annual budget to the Board for Recurrent Income and Expenditure
and the Estimated Capital Expenditure for its option not later than two months before
the commencement of the ensuing fiscal year.

v. To undertake research, studies, investigations, and other activities and projects,

and to submit comprehensive reports and appropriate recommendations to the Board
for its information and approval.

vi. To perform such other duties as the Board may assign from time to time.

(b) General Powers and Duties of the Assistant General Managers

The Assistant General Managers shall be responsible to the General Manager of the
Authority, and shall have the following general powers, functions and duties:

i. To assist the General Manager in implementing, enforcing, and applying the

policies, programs, guidelines, procedures, decisions, rules and regulations
promulgated, prescribed, issued, or adopted by the Authority.

ii. To assist the General Manager in the performance of his other functions and
duties.

iii. To perform such other duties as the General Manager may assign from time to
time.
 Article VI
Capital, Finance and Accounts

Section 10. Capital

(a) The authorized capital of the Authority shall be three billion pesos.

(b) The initial paid in capital shall consist of:

i. The value of assets (including port facilities, quays, wharves, and equipment) and
such other properties, movable and immovable as may be contributed by the
Government or transferred by the Government or any of its agencies as valued at the
date of such contribution or transfer and after deducting or taking into account the
loans and other liabilities of the Authority at the time of the takeover of the assets and
other properties.

ii. The initial cash appropriation of P2 million out of the funds of the National Treasury
and such further sums, including working capital, as may be contributed by the
Government.

Section 11. Creation of Reserves The balance of any revenue or income of the Authority remaining
at the end of each year shall be applied to the creation of a general reserve or such other reserves
as the Authority may deem appropriate.

Section 12. Investment of Funds The Authority may, from time to time, invest any of its funds not
immediately required to be expended in meeting its obligations or in the discharge of the functions of
the Authority in such government securities approved by the Board.

Section 13. Borrowing Powers

(a) The Authority may after consultation with the Central Bank and the Department of
Finance, and with the approval of the President of the Philippines, raise funds, either from
local or international sources, by way of loans, credits or indebtedness or issue bonds, notes,
debentures, securities, and other borrowing instruments, including the power to create
pledges, mortgages, and other voluntary liens or encumbrances on any of its assets or
properties.

(b) All loans contracted by the Authority under this Section together with all interests and
other sums payable in respect thereof, shall constitute a charge upon all the revenues and
assets of the Authority and shall rank pari passu with one another, but shall have priority
over any other claim or charge on the revenue and assets of the Authority; Provided, That
this provision shall not be construed as a prohibition or restriction on the power of the
Authority to create pledges, mortgages and other voluntary liens or encumbrances on any
property of the Authority.

(c) Except as expressly authorized by the President of the Philippines, the total outstanding
indebtedness of the Authority in the principal amount in local and foreign currency shall not
at any time exceed the networth of the Authority at the relevant time.

(d) The President of the Philippines, by himself or through his duly authorized representative,
is further hereby authorized to guarantee in the name and on behalf of the Republic of the
 Philippines, the payments of the loans or other indebtedness of the Authority up to the
amount herein authorized.

(e) All interests paid or payable by the Authority on its loans or other forms of indebtedness
shall be exempt from taxes of whatsoever nature.

Section 14. Annual Budget

(a) The Board shall every year cause to be prepared and shall adopt annual estimates of
income and expenditures and estimates of capital expenditure of the Authority for the
ensuing year.

(b) Supplementary estimates may be adopted at any of the meetings of the Board.

Section 15. Annual Accounts

(a) The Board shall cause proper accounts and other records of the Authority in relation
thereto to be kept. An annual statement of account shall be rendered in respect to each year.
The Authority shall maintain such accounts and other records under a commercial system of
accounting.

(b) The accounts of the Authority shall be kept and made up to 31 December in each year.

(c) The annual statement of accounts of the Authority shall present a true and fair value of
the financial position of the Authority and of the results of the operations of the Authority for
the year to which it relates.

Section 16. Auditor

(a) In consonance with existing laws and regulations, the Commission on Audit shall be
appointed to audit the accounts of the Authority. In the fulfillment of international contractual
commitments of the Authority, however, the Board may engage the services of any person or
firm duly authorized by law for the audit of accounts, to audit the accounts of the Authority.

(b) The Auditor shall be paid out of the revenue of the Authority such remuneration,
compensation or expenses as the Board may determine.

Section 17. Auditor's Reports The Auditor shall as soon as practicable, but not later than three
months after the accounts have been submitted for audit, send an annual report to the Board. The
Auditor may also submit such periodical or special reports to the Board as may to him appear
necessary.

Section 18. Annual Report The Board shall submit to the President of the Philippines together with
the Auditor's Report on the relevent accounts, an annual report generally dealing with the activities
and operations of the Authority during the preceding year and containing such information relating to
the proceedings and policies of the Authority.

Article VII
Dues and Rates

Section 19. Dues
The President of the Philippines may upon recommendation of the Authority increase or decrease
such dues, collectible by the Authority to protect the interest of the Government and to provide a
satisfactory return on the Authority's assets, and may adjust the schedule of such dues so as to
reflect the costs of providing the services; Provided, however, that the rates of dues on all the ports
of the Philippines upon the coming into operation of this Decree shall be those now provided under
Parts 1, 2, 3, and 6 of the Title VII of Book II of the Tariff and Customs Code, until such time that the
President upon recommendation of the Board may order that the adjusted schedule of dues are in
effect.

Section 20. Rates and Charges

(a) The Authority may impose, fix, prescribe, increase or decrease such rates, charges or
fees for the use of port premises, works, appliances or equipment belonging to the Authority
and port facilities provided, and for services rendered by the Authority or by any organization
within a Port District.

Provided, that upon the coming into operation of this Decree, the rates of storage and
arrastre charges in all ports of the Philippines shall be those now provided under Parts 4 and
5 of Title VII Book II of the Tariff and Customs Code until such time when the President of
the Philippines upon recommendation of the Board may order that the revised rates, charges
or fees are in effect.

(b) The Authority shall regulate the rates or charges for port services or port related services
so that taking one year with another, such rates or charges furnish adequate working capital
and produce an adequate return on the assets of the Authority. In regulating the rates or
charges for individual ports the Authority shall take into account the development needs of
the port's hinterland.

(c) All dues, fees, charges and other sums imposed and collected by the Authority shall
accrue to the Authority and shall be disposed of in accordance with the provisions of this
Decree.

Section 21. Remission of Dues, Rates, or Charges

No amount due in respect of dues, rates, or charges prescribed by the Authority under this Decree
shall be waived or reduced except:

(a) Where the State has arrangements with a foreign government in respect of vessels are
not normally engaged in the conveyance of cargo or passengers; and

(b) For vessels seeking shelter from inclement weather or entering the port for medical help
and other maritime necessity.

Section 22. Remedies for Nonpayment If the master, owner or agent of any vessel refuses or
neglects to pay on demand any dues, rates, or charges made under this Decree or any part thereof,
the Authority may, in addition to any other remedy provided by law, distrain or arrest on its own
authority such vessel and tackle, apparel or furniture belonging to the vessel, and detain the same
until the amount or amounts due have been paid.

Section 23. When Rates Payable and Lien

 (a) Rates or charges in respect of goods to be landed become payable immediately on
landing such goods.

(b) Rates or charges in respect of goods to be shipped are payable before the goods are
loaded.

(c) Rates or charges in respect of goods to be removed from the premises of the Authority
are payable on demand.

(d) For the amount of rates of charges leviable under this Decree in respect of goods, the
Authority shall have lien on such goods and is entitled to detain them until the amount of
rates or charges is fully paid. Such lien shall have priority over all other liens and claims,
except claims for duties and taxes due to the Government and expenses of the sale.

Section 24. Recovery of Lien Without prejudice to the authority and rights of the Bureau of Customs
in the disposition of property in Customs custody as provided for in the Tariff and Customs Code, as
amended, if any goods which have been placed in or on the premises of the Authority are not
removed therefrom within the prescribed period after the legal permit for their withdrawal and/or
release from Customs custody, or the authority to load, in case of exports, has been issued by the
Bureau of Customs, the authority, with the prior concurrence of the Bureau of Customs, may dispose
of any such goods in the manner as it deems fit in order to recover the lien; Provided, That the
proceeds of the sale shall be applied in the following manner:

(a) Firstly, in the payment of duties and taxes due to the Government;

(b) Secondly, in payment of expenses of the sale;

(c) Thirdly, in payment of the rates, charges, and fees due to the Authority in respect of the
goods;

(d) Fourthly, in payment of freight, lighterage or general average, on voyage of importation

and in case of exports, in payment of domestic freight, lighterage and cartage, of which due
notice shall have been given to the Authority;

(e) And finally in rendering on demand the surplus, if any, to the person legally entitled
thereto: Provided, That in case no such demand is made within a period of one year from the
date of sale of the goods, the surplus, if any, shall become part of the general funds of the
Authority, whereupon all rights to the same by such person shall be extinguished.

Section 25. Exemption from Realty Taxes The Authority shall be exempt from the payment of real
property taxes imposed by the Republic of the Philippines, its agencies, instrumentalities or political
subdivisions; Provided, That no tax exemptions shall be extended to any subsidiaries of the
Authority that may be organized; Provided, finally, That investments in fixed assets shall be
deductible for income tax purposes.

Article VIII
Port Regulations

Section 26. Power to Make Port Regulations

 (a) The Authority may, after consultation with relevant Government agencies, make rules or
regulations for the planning, development, construction, maintenance, control, supervision
and management of any Port or Port District and the services to the provided therein, and for
the maintenance of good order therein, and for the maintenance of good order therein, and
generally for carrying out the purposes of this Decree.

(b) The Authority may provide separate regulations for each category of ports or port
districts.

Section 27. Dangerous Cargo

(a) The Authority may make regulations for the conveyance, loading, discharging and
storage of dangerous goods within any port, port district, and the approaches to the port.

(b) The Authority may provide separate regulations for each category of ports or port
districts.

Section 28. Powers of Harbor Master Further to the provisions of any regulation under Section 26
and 27 of this Decree, the Authority thru the Harbor Master of a Port or Port District may:

(a) Direct where any vessel shall be berthed, moored, or anchored, and the method of
anchoring within the port and the approaches to the port;

(b) Direct the removal of any vessel from any berth or anchorage to another berth or
anchorage and the time within such removal is to be effected; and

(c) Regulate the mooring of vessels within the port and the approaches to the port.

Section 29. Existing Regulations Anything to the contrary notwithstanding and until new rules or
regulations are promulgated by the Authority under Sections 26 and 27 of this Decree, the rules,
regulations or orders made under the Customs Code or any other law of the Philippines relating to
the matters covered by Sections 26, 27 and 28 shall continue to apply as if they were made under
said sections and any reference to a customs official or any other officials under any law of the
Philippines shall be deemed a reference to an equivalent official of the Authority.

Article IX
Transfer of Assets and Liabilities

Section 30. Transfer of Existing and Completed Physical Facilities In accordance with the transitory
provisions of this Decree, there shall be transferred to the Authority all existing and completed public
port facilities, quays, wharves, docks, lands, buildings and other property, movable or immovable,
belonging to those ports declared as Port Districts for purposes of this Decree.

Section 31. Transfer of Intangible Assets In accordance with the transitory provisions of this Decree,
there shall be transferred to the Authority all intangible assets, powers, rights, foreshore rights,
interests and privileges belonging to the Bureau of Customs, and Bureau of Public Works and other
agencies relating to port works or port operations, subject to terms to be arranged by and between
the Authority and agencies concerned. Any disagreement relating to such transfer shall be elevated
to the President for decision.
Section 32. Projects in Progress In accordance with the transitory provisions of this Decree, all
ongoing projects relating to the construction of ports and port facilities shall be continued by the
agency or agencies involved until completion. After completion, such projects shall be transferred to
the Authority in accordance with the agreement among agencies concerned. Any disagreement
relating to such transfer shall be elevated to the President for decision.

Section 33. Transfer of Liabilities and Debts Upon the transfer and acceptance by the Authority of
the existing physical facilities, intangible assets, and completed projects referred to in the Sections
immediately preceding, all debts, liabilities, and obligations of the government agencies or entities
concerned in respect of such physical facilities, intangible assets and completed projects within the
Port Districts shall likewise be transferred to or deemed incurred by the Authority.

Section 34. The Philippine Coast Guard shall retain ownership of its properties and facilities which
are necessary for the enforcement of laws, rules and regulations pertaining to safety of life and
property at sea (SOLAS) found within ports and port districts and shall continue to administer,
operate and maintain the same as well as assume the obligations and liabilities pertaining to such
properties and facilities. All other properties and facilities of the Philippine Coast Guard found within
ports and port districts, including all obligations and liabilities related thereto shall be deemed
transferred to the Authority in accordance with Section 33 of this Decree.

Section 35. Transfer of Staff Officials and employees of existing offices or agencies, or their
subordinate units, which are abolished or reorganized under this Decree may be absorbed by the
Authority on the basis of merit and fitness: Provided, That those officials and employees who are
deemed qualified under both the Authority and the reorganized office agency or unit shall have the
option to either transfer or remain in their present office, agency or unit, or elect to be separated from
the service with all the benefits they may be entitled to under existing laws: Provided, further, That
those who do not qualify under the Authority shall be retained in the office or agency in which the
unit was abolished.

Section 36. Gratuity and Other Benefits All officials and employees whose services are terminated
as a result of this Decree shall be given gratuities equivalent to one month's salary for every year of
continuous satisfactory service rendered but not exceeding twelve months on the basis accorded to
them by existing laws.

Article X
Construction and Dredging Works

Section 37. Construction and Dredging Works

(a) The Bureau of Public Works shall be the executing agency of the Authority for the
detailed design, contract document preparation and advertisement, construction supervision
of port terminal facilities and port works, and the dredging of public ports vested in the
Authority; Provided, That when there are no qualified bidders and for projects less than two
hundred thousand pesos (P200,000.00), the Bureau of Public Works may undertake the
construction through force account; Provided, further, That the Authority shall perform
rehabilitation or maintenance works (including maintenance dredging) by its own personnel
or private contractor, whichever arrangement is more advantageous to port and shipping
operations.

(b) he Authority shall be responsible for the allocation and control of all funds for the
execution of all construction, rehabilitation and maintenance works mentioned in the
preceding paragraph.
 Article XI
Final Provisions

Section 38. Transitory Provisions

(a) Until the President declares the Authority to be fully operational, the Bureau of Customs
and the Division of Ports and Harbors of the Bureau of Public Works may continue to
perform, in coordination with the Authority, such port operations and port works as may be
deemed necessary, undertake the phased or gradual takeover of such port operations or
port works.

(b) The budget for staff operations and other expenses relating to port operations or port
works of the Bureau of Customs or the Bureau of Public Works, as the case may be, during
such transitional period, shall be submitted by them to the Authority for information and
guidance before implementation.

(c) All expenses and charges relating to port operations and port works during the
transitional period shall be paid out of the funds of the Authority or such other funds as may
be allocated to the Authority in the Annual Appropriations Act or other sources. For this
purpose, the current budget provision, funds and allocations of the Bureau of Customs, the
Bureau of Public Works and other government agencies concerned, pertaining to the
expenses, including retirement funds, for personnel involved in port planning, maintenance
and operations, the outlays for port works and port development, the existing balances as
well as subsequent collections from port operations shall be transferred to the Authority in
accordance with transfer arrangements to be negotiated by and among the agencies
concerned: Provided, however, That in case of disagreement relating to such transfer, the
same shall be elevated to the President for decision: Provided, further, That all transitional
arrangements including transfers of property, funds, rights, powers and liabilities under this
Decree shall not extend beyond Fiscal Year 1977.

Section 39. Bureau of Customs The Tariff and Customs Code is hereby modified or amended to the
extent that all the powers, duties and jurisdictions of the Bureau of Customs concerning the following
matters shall be transferred to and be vested in the Authority:

(a) All dues, fees and rates collectible under Title VII but excluding Part VII of the Code;

(b) The general supervision, control, and regulation of all matters and affairs that pertain to
the operation of and the issuance of permits or licenses to construct ports, port facilities,
warehouses, and other facilities within port districts;

(c) All such other powers, duties and jurisdictions vested in the Bureau of Customs pertaining
to every matter concerning port facilities, port operations or port works.

Section 40. Other Laws Any and all other powers and rights, duties and functions and jurisdiction
vested in and all properties and appropriations of any government agency, authority or
instrumentality pertaining to every matter concerning port facilities, ports operations, or port works
shall be transferred to and be vested in the Authority.

Section 41. Repeal All laws, decrees, Letters of Instructions, orders, rules and regulations, policies,
programs or parts thereof inconsistent with or contrary to any of the provisions of this Decree are
hereby repealed or modified, including but not limited to the following:
 (a) R.A. No. 4567 creating the San Fernando Port Authority and R.A. No. 4663 as amended
by R.A. No. 6086 creating the Cagayan de Oro Port Authority.

(b) Sections 26 and 27 of Presidential Decree No. 458.

(c) Act No. 3592 as amended, creating the Port Work Fund.

(d) Presidential Decree No. 505.

(e) Section 711 as far as Port Administration is concerned. Section 3304 and such other
inconsistent provisions of the Tariff and Customs Code without prejudice to the provisions of
Section 38 of this Decree.

(f) Section 3 (a) as far as it concerns stevedoring, arrastre and customs brokerage services
and the whole of Section 11 (c) of Presidential Decree No. 474 creating the Maritime Industry
Authority.

Section 42. Separability Clause If, for any reason, any section or provision of this Decree is
declared to be unconstitutional or invalid, the other sections or provisions of this Decree which are
not affected thereby shall continue in full force and effect.

Section 43. Penalties

(a) Any person who violates any of the provisions of this Decree or any of the rules and
regulations issued or promulgated by the Authority, shall be punished by imprisonment for
not less than one day but not more than six years, and pay a fine of not less than two
hundred pesos but not more than one hundred thousand pesos. If the offender is a
government official or employee he shall, in addition to imprisonment and fine be perpetually
disqualified to hold any public office. If the offender is a juridical person, the penalty of
imprisonment and fine shall be imposed upon its manager, director, representative or
employee thereof responsible for the violation. If the offender is an alien he shall be deported
immediately without further proceedings, after serving his sentence and paying the fine.

(b) Any license, franchise, authority or permit to exercise any right or privilege, which may
have been issued by the Authority in accordance with this Decree or the rules and
regulations issued or promulgated pursuant to this Decree, shall be deemed withdrawn and
revoked upon conviction of the holder thereof.

Section 44. Effectivity This Decree shall take immediate effect upon its promulgation.

Done in the City of Manila, this 23rd day of December in the year of Our Lord, nineteen hundred and
seventy-five.

MALACAÑANG
Manila

PRESIDENTIAL DECREE No. 857 December 23, 1975

PROVIDING FOR THE REORGANIZATION OF PORT ADMINISTRATIVE AND OPERATION

FUNCTIONS IN THE PHILIPPINES, REVISING PRESIDENTIAL DECREE NO. 505 DATED JULY
 11, 1974, CREATING THE PHILIPPINE PORT AUTHORITY, BY SUBSTITUTION, AND FOR
OTHER PURPOSES

WHEREAS, there is a recognized need to integrate and coordinate port planning, development,
control and operations at the national level, and at the same time promote the growth of regional port
bodies responsive to the needs of their individual localities;

WHEREAS, harbors and tributary areas have their own peculiar potentialities to be considered in
port planning and development;

WHEREAS, hitherto, the concept of port administration in this country has been focused on the
traditional functions of revenue collection, harbor maintenance and cargo handling, to the exclusion
of the port's fuller utilization and development as a spur for regional growth;

WHEREAS, Presidential Decree No. 505 was promulgated on July 11, 1974 to carry out these
stated objectives; and

WHEREAS, it was found necessary in the national interest to amend Presidential Decree No. 505 so
as to enable the Philippine Port Authority to Exercise all the proper powers and functions of a port
authority and in order to better carry out the desired objectives:

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution in order to effect desired changes and reforms in the social,
economic and political structure of our society, do hereby decree and order the revision of
Presidential Decree No. 505 by substitution with this Decree which is hereby adopted and made part
of the laws of the land;

Article I
Title.

Section 1. Title This Decree shall be known as the Revised Charter of the Philippine Ports Authority
created under Presidential Decree No. 505 dated July 11, 1974.

Article II
Declaration of Policies

Section 2. Declaration of Policies and Objectives It is hereby declared to be the policy of the State
to implement an integrated program for the planning, development, financing, and operation of Ports
or Port Districts for the entire country in accordance with the following objectives:

(a) To coordinate, streamline, improve, and optimize the planning, development, financing,
construction, maintenance and operation of Ports, port facilities, port physical plants, all 11
equipment used in connection with the operation of a Port.

(b) To ensure the smooth flow of waterborne commerce passing through the country's Ports
whether public or private, in the conduct of international and domestic trade.

(c) To promote regional development through the dispersal of industries and commercial
activities throughout the different regions.

(d) To foster inter-island seaborne commerce and foreign trade.

 (e) To redirect and reorganize port administration beyond its specific and traditional functions
of harbor development and cargo handling operations to the broader function of total port
district development, including encouraging the full and efficient utilization of the Port's
hinterland and tributary areas.

(f) To ensure that all income and revenues accruing out of dues, rates, and charges for the
use of facilities and services provided by the Authority are properly collected and accounted
for by the Authority, that all such income and revenues will be adequate to defray the cost of
providing the facilities and services (inclusive of operating and maintenance cost,
administration and overhead) of the Port Districts, and to ensure that a reasonable return on
the assets employed shall be realized.

Article III
Definitions

Section 3. Definitions For the purpose of this Decree and of the by-laws, regulations, or rules
promulgated thereunder, the terms or words used herein shall, unless the context indicates
otherwise, mean or be understood to mean, as follows:

(a) "Authority" means the Philippine Ports Authority created by this Decree.

(b) "Board" means the Board of Directors of the Authority appointed by the President under
Section 7 of this Decree.

(c) "Functions" includes powers and duties.

(d) "Port District" means the territorial jurisdiction under the control, supervision or ownership
of the Authority over an area (land or sea), declared as such in accordance with Section 5 of
this Decree including but not limited to any Port within said District.

(e) "Port" means a place where ships may anchor or tie up for the purpose of shelter, repair,
loading or discharge of cargo, or for other such activities connected with water-borne
commerce, and including all the land and water areas and the structures, equipment and
facilities related to these functions.

(f) "Navigable waters" means all navigable portions of the seas, estuaries, and inland
waterways.

(g) "Anchorage" means a place with sufficient depth of water where vessels anchor or may
ride at anchor or may ride at anchor within the harbor.

(h) "Terminal Facility" includes the seaport and its facilities of wharves, piers, slips, docks,
dry docks, bulkheads, basins, warehouses, cold storage, and loading or unloading
equipment.

(i) "Basin" means a naturally or artificially enclosed or nearly enclosed body of water in free
communication with the sea.

(j) "Dock" includes locks, cuts, entrances, graving docks, inclined planes, slipways, quays,
and other works and things appertaining to any dock.
 (k) "Drydock" means a dock from which the water can be temporarily excluded, in order to
effect repairs to hulls and keels of ships or vessels.

(l) "Pier" means any structure built into the sea but not parallel to the coast line and includes
any stage, stair, landing place, landing stage, jetty, floating barge or pontoon, and any bridge
or other works connected therewith.

(m) "Warehouse" means a building or shed used for the storage of cargo.

(n) "Transit Shed" means a building or shed which is situated at or near a quay, wharf or
pier, and is used for the temporary or short-term storage of goods in transit, or to be shipped
or discharge from a vessel.

(o) "Wharf" means a continuous structure built parallel to along the margin of the sea or
alongside riverbanks, canals or waterways where vessels may lie alongside to receive or
discharge cargo, embark or disembark passengers, or lie at rest.

(p) "Transportation Facility" includes rails and railcars, highways, wheeled vehicles, bridges,
tunnels, tramways, subways, passenger or cargo vessels, ferry-boats, lighters, tugs, barges,
scows, ramps, and any kind of facility in use or for use of the transportation, movement, or
carriage of goods or passengers.

(q) "Lighter" means a flat-bottomed boat or barge used in loading or unloading cargo to or
from vessels,

(r) "Vessel" includes any ship or boat, or any description of a vessel or boat.

(s) "Goods" includes animals, carcasses, baggage, and any movable property of any kind.

(t) "Dues" includes harbor fees, tonnage and wharfage dues, berthing charges, and port
dues and any other dues or fees imposed by virtue of existing law or this Decree.

(u) "Rates" means any rates or charges including any toll or rent under existing law or
imposed by the Authority by virtue of this Decree for facilities used or services rendered.

Article IV
Establishment, Constitution, Powers and Duties

Section 4. Creation of Philippine Ports Authority

(a) There is hereby established a body corporate to be known as the Philippine Ports
Authority (hereinafter called the Authority), which shall be attached to the Department of
Public Works Transportation and Communications.

(b) The principal office of the Authority shall be located in Metropolitan Manila, but it may
establish port management units and other offices elsewhere in the Philippines as may
become necessary for the proper conduct of its business.

Section 5. Port District The Authority may, from time to time, submit to the President, through the
National Economic and Development Authority, applications for the declaration of specific areas as
Port Districts. Such applications shall be accompanied by a survey plan indicating the geographical
location of the area or areas to be declared as Port Districts with their respective boundaries
properly delineated.

Section 6. Corporate Powers and Duties

(a) The corporate duties of the Authority shall be:

i. To formulate in coordination with the National Economic and Development

Authority a comprehensive and practicable Port Development plan for the State and
to program its implementation, renew and update the same annually in coordination
with other national agencies.

ii. To supervise, control, regulate, construct, maintain, operate, and provide such
facilities or services as are necessary in the ports vested in, or belonging to the
Authority.

iii. To prescribe rules and regulations, procedures, and guidelines governing the
establishment, construction, maintenance, and operation of all other ports, including
private ports in the country.

iv. To license, control, regulate, supervise any construction or structure within any
Port District.

v. To provide services (whether on its own, by contract, or otherwise) within the Port
Districts and the approaches thereof, including but not limited to

berthing, towing, mooring, moving, slipping, or docking any vessel;

loading or discharging any vessel;

sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.

vi. To exercise control of or administer any foreshore rights or leases which may be
vested in the Authority from time to time.

vii. To coordinate with the Bureau of Lands or any other government agency or
corporation, in the development of any foreshore area.

viii. To control, regulate, and supervise pilotage and the conduct of pilots in any Port
District.

ix. To provide or assist in the provision of training programs and training facilities for
its staff or staff of port operators and users for the efficient discharge of its functions,
duties, and responsibilities.

x. To perform such acts or provide such services as may be deemed proper or

necessary to carry out and implement the provisions of this Decree.

(b) The corporate powers of the Authority shall be as follows:

 i. To succeed in its corporate name.

ii. To sue and be sued in such corporate name.

iii. To adopt, alter, and use a corporate seal which shall be judicially noticed.

iv. To adopt, amend, or repeal its by-laws.

v. To create or alter its own organization or any Port Management Unit, and staff
such an organization or Port Management Unit with appropriate and qualified
personnel in accordance with what may be deemed proper or necessary to achieve
the objectives of the Authority.

vi. To make or enter of any kind or nature to enable it to discharge its functions under
this Decree.

vii. To acquire, purchase, own, lease, mortgage, sell, or otherwise dispose of any
land, port facility, wharf, quay, or property of any kind, whether movable or
immovable.

viii. To exercise the right of eminent domain, by expropriating the land or areas
surrounding the Port of harbor, which in the opinion of the Authority, are vital or
necessary for the total development of the Port District.

ix. To levy dues, rates, or charges for the use of the premises, works, appliances,
facilities, or for services provided by or belonging to the Authority, or any other
organization concerned with port operations.

x. To reclaim, excavate, enclose, or raise any part of the lands vested in the
Authority.

xi. To dredge or provide dredging services, within a Port District of elsewhere.

xii. To acquire any undertaking affording or intending to afford facilities for the loading
and discharging or warehousing of goods in the Port Districts.

xiii. To supply water or bunkers for ships.

xiv. To obtain insurance for or require the insurance of any property, movable or
immovable, belonging to the Authority and/or goods in the custody of the Authority.

xv. To do all such other things and to transfer all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purposes of the Authority.

xvi. Generally, to exercise all the powers of a corporation under the Corporation Law
insofar as they are not inconsistent with the provisions of this Decree.

Section 7. Board of Directors

 (a) The corporate powers of the Authority shall be vested in a Board of Directors, which shall
consist of the following members:

i. The Secretary of Public Works, Transportation and Communications, who shall act
as Chairman.

ii. The General Manager of the Authority, who shall act as Vice-Chairman.

iii. The Director-General of National Economic and Development Authority.

iv. The Secretary of Finance.

v. The Secretary of Natural Resources.

vi. The Secretary of Trade.

The Directors listed under subsections (a) (i) to (vi) shall be ex-officio members of the
Board of Directors.

vii. One (1) other person who shall be appointed by the President of the Philippines,
representing the private sector, who by reason of his knowledge or experiences is, in
the opinion of the President, fit and proper person to be Director of the Board.
Provided, That, in the absence of the Director appointed in subsections (iii) to (vi),
the Director concerned shall designate the officer next in rank to him in his
department or office to act on his behalf as a Director.

(b) The Director from the private sector shall hold office for a period of three years from the
date of his appointment upon the completion of such period.

(c) The members of the Board or their respective alternates shall receive a per diem as it
may approve for each Board meeting actually attended by them: Provided, That, such per
diems shall not exceed one thousand pesos during any one month for each member:
Provided further, That no other allowances or any form of compensation shall be paid them,
except actual expenses in travelling to or from their residences to attend Board meetings.

Article V
Organization and Staff

Section 8. Management and Staff

(a) The President shall, upon the recommendation of the Board, appoint the General
Manager and the Assistant General Managers.

(b) All other officials and employees of the Authority shall be selected and appointed on the
basis of merit and fitness based on a comprehensive and progressive merit system to be
established by the Authority immediately upon its organization and consistent with Civil
Service rules and regulations. The recruitment, transfer, promotion, and dismissal of all
personnel of the Authority, including temporary workers, shall be governed by such merit
system.
 (c) The General Manager shall, subject to the approval of the Board, determine the staffing
pattern and the number of personnel of the Authority, define their duties and responsibilities,
and fix their salaries and emoluments. For professional and technical positions, the General
Manager shall recommend salaries and emoluments that are comparable to those of similar
positions in other government-owned corporations, the provisions of existing rules and
regulations on wage and position classification notwithstanding.

(d) The General Manager shall, subject to the approval by the Board, appoint and remove
personnel below the rank of Assistant General Manager.

(e) The General Manager of the Authority shall receive a salary to be determined by the
Board, and approved by the President.

(f) The number of Assistant General Managers of the Authority shall in no case exceed three
(3) who shall each receive a salary to be determined by the Board and approved by the
President.

Section 9. General Powers and Duties of the General Manager and Assistant General Managers

(a) General Powers and Duties of the General Manager

The General Manager shall be responsible to the Board, and shall have the following general
powers, functions, and duties:

i. To implement, enforce and apply the policies, programs, guidelines, procedures,

decisions, rules and regulations promulgated, prescribed, issued or adopted by the
Authority.

ii. To manage the day to day affairs of the Authority, and ensure the operational
efficiency of the Ports under the jurisdiction and ownership of the Authority.

iii. To sign contracts, to approve expenditures and payments within the budget
provisions, and generally to do any all acts or things for the proper operations of the
Authority or any of the Ports under the jurisdiction, control or ownership of the
Authority.

iv. To submit an annual budget to the Board for Recurrent Income and Expenditure
and the Estimated Capital Expenditure for its option not later than two months before
the commencement of the ensuing fiscal year.

v. To undertake research, studies, investigations, and other activities and projects,

and to submit comprehensive reports and appropriate recommendations to the Board
for its information and approval.

vi. To perform such other duties as the Board may assign from time to time.

(b) General Powers and Duties of the Assistant General Managers

The Assistant General Managers shall be responsible to the General Manager of the
Authority, and shall have the following general powers, functions and duties:
 i. To assist the General Manager in implementing, enforcing, and applying the
policies, programs, guidelines, procedures, decisions, rules and regulations
promulgated, prescribed, issued, or adopted by the Authority.

ii. To assist the General Manager in the performance of his other functions and
duties.

iii. To perform such other duties as the General Manager may assign from time to
time.

Article VI
Capital, Finance and Accounts

Section 10. Capital

(a) The authorized capital of the Authority shall be three billion pesos.

(b) The initial paid in capital shall consist of:

i. The value of assets (including port facilities, quays, wharves, and equipment) and
such other properties, movable and immovable as may be contributed by the
Government or transferred by the Government or any of its agencies as valued at the
date of such contribution or transfer and after deducting or taking into account the
loans and other liabilities of the Authority at the time of the takeover of the assets and
other properties.

ii. The initial cash appropriation of P2 million out of the funds of the National Treasury
and such further sums, including working capital, as may be contributed by the
Government.

Section 11. Creation of Reserves The balance of any revenue or income of the Authority remaining
at the end of each year shall be applied to the creation of a general reserve or such other reserves
as the Authority may deem appropriate.

Section 12. Investment of Funds The Authority may, from time to time, invest any of its funds not
immediately required to be expended in meeting its obligations or in the discharge of the functions of
the Authority in such government securities approved by the Board.

Section 13. Borrowing Powers

(a) The Authority may after consultation with the Central Bank and the Department of
Finance, and with the approval of the President of the Philippines, raise funds, either from
local or international sources, by way of loans, credits or indebtedness or issue bonds, notes,
debentures, securities, and other borrowing instruments, including the power to create
pledges, mortgages, and other voluntary liens or encumbrances on any of its assets or
properties.

(b) All loans contracted by the Authority under this Section together with all interests and
other sums payable in respect thereof, shall constitute a charge upon all the revenues and
assets of the Authority and shall rank pari passu with one another, but shall have priority
over any other claim or charge on the revenue and assets of the Authority; Provided, That
 this provision shall not be construed as a prohibition or restriction on the power of the
Authority to create pledges, mortgages and other voluntary liens or encumbrances on any
property of the Authority.

(c) Except as expressly authorized by the President of the Philippines, the total outstanding
indebtedness of the Authority in the principal amount in local and foreign currency shall not
at any time exceed the networth of the Authority at the relevant time.

(d) The President of the Philippines, by himself or through his duly authorized representative,
is further hereby authorized to guarantee in the name and on behalf of the Republic of the
Philippines, the payments of the loans or other indebtedness of the Authority up to the
amount herein authorized.

(e) All interests paid or payable by the Authority on its loans or other forms of indebtedness
shall be exempt from taxes of whatsoever nature.

Section 14. Annual Budget

(a) The Board shall every year cause to be prepared and shall adopt annual estimates of
income and expenditures and estimates of capital expenditure of the Authority for the
ensuing year.

(b) Supplementary estimates may be adopted at any of the meetings of the Board.

Section 15. Annual Accounts

(a) The Board shall cause proper accounts and other records of the Authority in relation
thereto to be kept. An annual statement of account shall be rendered in respect to each year.
The Authority shall maintain such accounts and other records under a commercial system of
accounting.

(b) The accounts of the Authority shall be kept and made up to 31 December in each year.

(c) The annual statement of accounts of the Authority shall present a true and fair value of
the financial position of the Authority and of the results of the operations of the Authority for
the year to which it relates.

Section 16. Auditor

(a) In consonance with existing laws and regulations, the Commission on Audit shall be
appointed to audit the accounts of the Authority. In the fulfillment of international contractual
commitments of the Authority, however, the Board may engage the services of any person or
firm duly authorized by law for the audit of accounts, to audit the accounts of the Authority.

(b) The Auditor shall be paid out of the revenue of the Authority such remuneration,
compensation or expenses as the Board may determine.

Section 17. Auditor's Reports The Auditor shall as soon as practicable, but not later than three
months after the accounts have been submitted for audit, send an annual report to the Board. The
Auditor may also submit such periodical or special reports to the Board as may to him appear
necessary.
Section 18. Annual Report The Board shall submit to the President of the Philippines together with
the Auditor's Report on the relevent accounts, an annual report generally dealing with the activities
and operations of the Authority during the preceding year and containing such information relating to
the proceedings and policies of the Authority.

Article VII
Dues and Rates

Section 19. Dues

The President of the Philippines may upon recommendation of the Authority increase or decrease
such dues, collectible by the Authority to protect the interest of the Government and to provide a
satisfactory return on the Authority's assets, and may adjust the schedule of such dues so as to
reflect the costs of providing the services; Provided, however, that the rates of dues on all the ports
of the Philippines upon the coming into operation of this Decree shall be those now provided under
Parts 1, 2, 3, and 6 of the Title VII of Book II of the Tariff and Customs Code, until such time that the
President upon recommendation of the Board may order that the adjusted schedule of dues are in
effect.

Section 20. Rates and Charges

(a) The Authority may impose, fix, prescribe, increase or decrease such rates, charges or
fees for the use of port premises, works, appliances or equipment belonging to the Authority
and port facilities provided, and for services rendered by the Authority or by any organization
within a Port District.

Provided, that upon the coming into operation of this Decree, the rates of storage and
arrastre charges in all ports of the Philippines shall be those now provided under Parts 4 and
5 of Title VII Book II of the Tariff and Customs Code until such time when the President of
the Philippines upon recommendation of the Board may order that the revised rates, charges
or fees are in effect.

(b) The Authority shall regulate the rates or charges for port services or port related services
so that taking one year with another, such rates or charges furnish adequate working capital
and produce an adequate return on the assets of the Authority. In regulating the rates or
charges for individual ports the Authority shall take into account the development needs of
the port's hinterland.

(c) All dues, fees, charges and other sums imposed and collected by the Authority shall
accrue to the Authority and shall be disposed of in accordance with the provisions of this
Decree.

Section 21. Remission of Dues, Rates, or Charges

No amount due in respect of dues, rates, or charges prescribed by the Authority under this Decree
shall be waived or reduced except:

(a) Where the State has arrangements with a foreign government in respect of vessels are
not normally engaged in the conveyance of cargo or passengers; and
 (b) For vessels seeking shelter from inclement weather or entering the port for medical help
and other maritime necessity.

Section 22. Remedies for Nonpayment If the master, owner or agent of any vessel refuses or
neglects to pay on demand any dues, rates, or charges made under this Decree or any part thereof,
the Authority may, in addition to any other remedy provided by law, distrain or arrest on its own
authority such vessel and tackle, apparel or furniture belonging to the vessel, and detain the same
until the amount or amounts due have been paid.

Section 23. When Rates Payable and Lien

(a) Rates or charges in respect of goods to be landed become payable immediately on

landing such goods.

(b) Rates or charges in respect of goods to be shipped are payable before the goods are
loaded.

(c) Rates or charges in respect of goods to be removed from the premises of the Authority
are payable on demand.

(d) For the amount of rates of charges leviable under this Decree in respect of goods, the
Authority shall have lien on such goods and is entitled to detain them until the amount of
rates or charges is fully paid. Such lien shall have priority over all other liens and claims,
except claims for duties and taxes due to the Government and expenses of the sale.

Section 24. Recovery of Lien Without prejudice to the authority and rights of the Bureau of Customs
in the disposition of property in Customs custody as provided for in the Tariff and Customs Code, as
amended, if any goods which have been placed in or on the premises of the Authority are not
removed therefrom within the prescribed period after the legal permit for their withdrawal and/or
release from Customs custody, or the authority to load, in case of exports, has been issued by the
Bureau of Customs, the authority, with the prior concurrence of the Bureau of Customs, may dispose
of any such goods in the manner as it deems fit in order to recover the lien; Provided, That the
proceeds of the sale shall be applied in the following manner:

(a) Firstly, in the payment of duties and taxes due to the Government;

(b) Secondly, in payment of expenses of the sale;

(c) Thirdly, in payment of the rates, charges, and fees due to the Authority in respect of the
goods;

(d) Fourthly, in payment of freight, lighterage or general average, on voyage of importation

and in case of exports, in payment of domestic freight, lighterage and cartage, of which due
notice shall have been given to the Authority;

(e) And finally in rendering on demand the surplus, if any, to the person legally entitled
thereto: Provided, That in case no such demand is made within a period of one year from the
date of sale of the goods, the surplus, if any, shall become part of the general funds of the
Authority, whereupon all rights to the same by such person shall be extinguished.
Section 25. Exemption from Realty Taxes The Authority shall be exempt from the payment of real
property taxes imposed by the Republic of the Philippines, its agencies, instrumentalities or political
subdivisions; Provided, That no tax exemptions shall be extended to any subsidiaries of the
Authority that may be organized; Provided, finally, That investments in fixed assets shall be
deductible for income tax purposes.

Article VIII
Port Regulations

Section 26. Power to Make Port Regulations

(a) The Authority may, after consultation with relevant Government agencies, make rules or
regulations for the planning, development, construction, maintenance, control, supervision
and management of any Port or Port District and the services to the provided therein, and for
the maintenance of good order therein, and for the maintenance of good order therein, and
generally for carrying out the purposes of this Decree.

(b) The Authority may provide separate regulations for each category of ports or port
districts.

Section 27. Dangerous Cargo

(a) The Authority may make regulations for the conveyance, loading, discharging and
storage of dangerous goods within any port, port district, and the approaches to the port.

(b) The Authority may provide separate regulations for each category of ports or port
districts.

Section 28. Powers of Harbor Master Further to the provisions of any regulation under Section 26
and 27 of this Decree, the Authority thru the Harbor Master of a Port or Port District may:

(a) Direct where any vessel shall be berthed, moored, or anchored, and the method of
anchoring within the port and the approaches to the port;

(b) Direct the removal of any vessel from any berth or anchorage to another berth or
anchorage and the time within such removal is to be effected; and

(c) Regulate the mooring of vessels within the port and the approaches to the port.

Section 29. Existing Regulations Anything to the contrary notwithstanding and until new rules or
regulations are promulgated by the Authority under Sections 26 and 27 of this Decree, the rules,
regulations or orders made under the Customs Code or any other law of the Philippines relating to
the matters covered by Sections 26, 27 and 28 shall continue to apply as if they were made under
said sections and any reference to a customs official or any other officials under any law of the
Philippines shall be deemed a reference to an equivalent official of the Authority.

Article IX
Transfer of Assets and Liabilities

Section 30. Transfer of Existing and Completed Physical Facilities In accordance with the transitory
provisions of this Decree, there shall be transferred to the Authority all existing and completed public
port facilities, quays, wharves, docks, lands, buildings and other property, movable or immovable,
belonging to those ports declared as Port Districts for purposes of this Decree.

Section 31. Transfer of Intangible Assets In accordance with the transitory provisions of this Decree,
there shall be transferred to the Authority all intangible assets, powers, rights, foreshore rights,
interests and privileges belonging to the Bureau of Customs, and Bureau of Public Works and other
agencies relating to port works or port operations, subject to terms to be arranged by and between
the Authority and agencies concerned. Any disagreement relating to such transfer shall be elevated
to the President for decision.

Section 32. Projects in Progress In accordance with the transitory provisions of this Decree, all
ongoing projects relating to the construction of ports and port facilities shall be continued by the
agency or agencies involved until completion. After completion, such projects shall be transferred to
the Authority in accordance with the agreement among agencies concerned. Any disagreement
relating to such transfer shall be elevated to the President for decision.

Section 33. Transfer of Liabilities and Debts Upon the transfer and acceptance by the Authority of
the existing physical facilities, intangible assets, and completed projects referred to in the Sections
immediately preceding, all debts, liabilities, and obligations of the government agencies or entities
concerned in respect of such physical facilities, intangible assets and completed projects within the
Port Districts shall likewise be transferred to or deemed incurred by the Authority.

Section 34. The Philippine Coast Guard shall retain ownership of its properties and facilities which
are necessary for the enforcement of laws, rules and regulations pertaining to safety of life and
property at sea (SOLAS) found within ports and port districts and shall continue to administer,
operate and maintain the same as well as assume the obligations and liabilities pertaining to such
properties and facilities. All other properties and facilities of the Philippine Coast Guard found within
ports and port districts, including all obligations and liabilities related thereto shall be deemed
transferred to the Authority in accordance with Section 33 of this Decree.

Section 35. Transfer of Staff Officials and employees of existing offices or agencies, or their
subordinate units, which are abolished or reorganized under this Decree may be absorbed by the
Authority on the basis of merit and fitness: Provided, That those officials and employees who are
deemed qualified under both the Authority and the reorganized office agency or unit shall have the
option to either transfer or remain in their present office, agency or unit, or elect to be separated from
the service with all the benefits they may be entitled to under existing laws: Provided, further, That
those who do not qualify under the Authority shall be retained in the office or agency in which the
unit was abolished.

Section 36. Gratuity and Other Benefits All officials and employees whose services are terminated
as a result of this Decree shall be given gratuities equivalent to one month's salary for every year of
continuous satisfactory service rendered but not exceeding twelve months on the basis accorded to
them by existing laws.

Article X
Construction and Dredging Works

Section 37. Construction and Dredging Works

(a) The Bureau of Public Works shall be the executing agency of the Authority for the
detailed design, contract document preparation and advertisement, construction supervision
of port terminal facilities and port works, and the dredging of public ports vested in the
 Authority; Provided, That when there are no qualified bidders and for projects less than two
hundred thousand pesos (P200,000.00), the Bureau of Public Works may undertake the
construction through force account; Provided, further, That the Authority shall perform
rehabilitation or maintenance works (including maintenance dredging) by its own personnel
or private contractor, whichever arrangement is more advantageous to port and shipping
operations.

(b) he Authority shall be responsible for the allocation and control of all funds for the
execution of all construction, rehabilitation and maintenance works mentioned in the
preceding paragraph.

Article XI
Final Provisions

Section 38. Transitory Provisions

(a) Until the President declares the Authority to be fully operational, the Bureau of Customs
and the Division of Ports and Harbors of the Bureau of Public Works may continue to
perform, in coordination with the Authority, such port operations and port works as may be
deemed necessary, undertake the phased or gradual takeover of such port operations or
port works.

(b) The budget for staff operations and other expenses relating to port operations or port
works of the Bureau of Customs or the Bureau of Public Works, as the case may be, during
such transitional period, shall be submitted by them to the Authority for information and
guidance before implementation.

(c) All expenses and charges relating to port operations and port works during the
transitional period shall be paid out of the funds of the Authority or such other funds as may
be allocated to the Authority in the Annual Appropriations Act or other sources. For this
purpose, the current budget provision, funds and allocations of the Bureau of Customs, the
Bureau of Public Works and other government agencies concerned, pertaining to the
expenses, including retirement funds, for personnel involved in port planning, maintenance
and operations, the outlays for port works and port development, the existing balances as
well as subsequent collections from port operations shall be transferred to the Authority in
accordance with transfer arrangements to be negotiated by and among the agencies
concerned: Provided, however, That in case of disagreement relating to such transfer, the
same shall be elevated to the President for decision: Provided, further, That all transitional
arrangements including transfers of property, funds, rights, powers and liabilities under this
Decree shall not extend beyond Fiscal Year 1977.

Section 39. Bureau of Customs The Tariff and Customs Code is hereby modified or amended to the
extent that all the powers, duties and jurisdictions of the Bureau of Customs concerning the following
matters shall be transferred to and be vested in the Authority:

(a) All dues, fees and rates collectible under Title VII but excluding Part VII of the Code;

(b) The general supervision, control, and regulation of all matters and affairs that pertain to
the operation of and the issuance of permits or licenses to construct ports, port facilities,
warehouses, and other facilities within port districts;
 (c) All such other powers, duties and jurisdictions vested in the Bureau of Customs pertaining
to every matter concerning port facilities, port operations or port works.

Section 40. Other Laws Any and all other powers and rights, duties and functions and jurisdiction
vested in and all properties and appropriations of any government agency, authority or
instrumentality pertaining to every matter concerning port facilities, ports operations, or port works
shall be transferred to and be vested in the Authority.

Section 41. Repeal All laws, decrees, Letters of Instructions, orders, rules and regulations, policies,
programs or parts thereof inconsistent with or contrary to any of the provisions of this Decree are
hereby repealed or modified, including but not limited to the following:

(a) R.A. No. 4567 creating the San Fernando Port Authority and R.A. No. 4663 as amended
by R.A. No. 6086 creating the Cagayan de Oro Port Authority.

(b) Sections 26 and 27 of Presidential Decree No. 458.

(c) Act No. 3592 as amended, creating the Port Work Fund.

(d) Presidential Decree No. 505.

(e) Section 711 as far as Port Administration is concerned. Section 3304 and such other
inconsistent provisions of the Tariff and Customs Code without prejudice to the provisions of
Section 38 of this Decree.

(f) Section 3 (a) as far as it concerns stevedoring, arrastre and customs brokerage services
and the whole of Section 11 (c) of Presidential Decree No. 474 creating the Maritime Industry
Authority.

Section 42. Separability Clause If, for any reason, any section or provision of this Decree is
declared to be unconstitutional or invalid, the other sections or provisions of this Decree which are
not affected thereby shall continue in full force and effect.

Section 43. Penalties

(a) Any person who violates any of the provisions of this Decree or any of the rules and
regulations issued or promulgated by the Authority, shall be punished by imprisonment for
not less than one day but not more than six years, and pay a fine of not less than two
hundred pesos but not more than one hundred thousand pesos. If the offender is a
government official or employee he shall, in addition to imprisonment and fine be perpetually
disqualified to hold any public office. If the offender is a juridical person, the penalty of
imprisonment and fine shall be imposed upon its manager, director, representative or
employee thereof responsible for the violation. If the offender is an alien he shall be deported
immediately without further proceedings, after serving his sentence and paying the fine.

(b) Any license, franchise, authority or permit to exercise any right or privilege, which may
have been issued by the Authority in accordance with this Decree or the rules and
regulations issued or promulgated pursuant to this Decree, shall be deemed withdrawn and
revoked upon conviction of the holder thereof.

Section 44. Effectivity This Decree shall take immediate effect upon its promulgation.
Done in the City of Manila, this 23rd day of December in the year of Our Lord, nineteen hundred and
seventy-five.

MALACAÑANG
Manila

PRESIDENTIAL DECREE No. 857 December 23, 1975

PROVIDING FOR THE REORGANIZATION OF PORT ADMINISTRATIVE AND OPERATION

FUNCTIONS IN THE PHILIPPINES, REVISING PRESIDENTIAL DECREE NO. 505 DATED JULY
11, 1974, CREATING THE PHILIPPINE PORT AUTHORITY, BY SUBSTITUTION, AND FOR
OTHER PURPOSES

WHEREAS, there is a recognized need to integrate and coordinate port planning, development,
control and operations at the national level, and at the same time promote the growth of regional port
bodies responsive to the needs of their individual localities;

WHEREAS, harbors and tributary areas have their own peculiar potentialities to be considered in
port planning and development;

WHEREAS, hitherto, the concept of port administration in this country has been focused on the
traditional functions of revenue collection, harbor maintenance and cargo handling, to the exclusion
of the port's fuller utilization and development as a spur for regional growth;

WHEREAS, Presidential Decree No. 505 was promulgated on July 11, 1974 to carry out these
stated objectives; and

WHEREAS, it was found necessary in the national interest to amend Presidential Decree No. 505 so
as to enable the Philippine Port Authority to Exercise all the proper powers and functions of a port
authority and in order to better carry out the desired objectives:

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the

powers vested in me by the Constitution in order to effect desired changes and reforms in the social,
economic and political structure of our society, do hereby decree and order the revision of
Presidential Decree No. 505 by substitution with this Decree which is hereby adopted and made part
of the laws of the land;

Article I
Title.

Section 1. Title This Decree shall be known as the Revised Charter of the Philippine Ports Authority
created under Presidential Decree No. 505 dated July 11, 1974.

Article II
Declaration of Policies

Section 2. Declaration of Policies and Objectives It is hereby declared to be the policy of the State
to implement an integrated program for the planning, development, financing, and operation of Ports
or Port Districts for the entire country in accordance with the following objectives:
 (a) To coordinate, streamline, improve, and optimize the planning, development, financing,
construction, maintenance and operation of Ports, port facilities, port physical plants, all 11
equipment used in connection with the operation of a Port.

(b) To ensure the smooth flow of waterborne commerce passing through the country's Ports
whether public or private, in the conduct of international and domestic trade.

(c) To promote regional development through the dispersal of industries and commercial
activities throughout the different regions.

(d) To foster inter-island seaborne commerce and foreign trade.

(e) To redirect and reorganize port administration beyond its specific and traditional functions
of harbor development and cargo handling operations to the broader function of total port
district development, including encouraging the full and efficient utilization of the Port's
hinterland and tributary areas.

(f) To ensure that all income and revenues accruing out of dues, rates, and charges for the
use of facilities and services provided by the Authority are properly collected and accounted
for by the Authority, that all such income and revenues will be adequate to defray the cost of
providing the facilities and services (inclusive of operating and maintenance cost,
administration and overhead) of the Port Districts, and to ensure that a reasonable return on
the assets employed shall be realized.

Article III
Definitions

Section 3. Definitions For the purpose of this Decree and of the by-laws, regulations, or rules
promulgated thereunder, the terms or words used herein shall, unless the context indicates
otherwise, mean or be understood to mean, as follows:

(a) "Authority" means the Philippine Ports Authority created by this Decree.

(b) "Board" means the Board of Directors of the Authority appointed by the President under
Section 7 of this Decree.

(c) "Functions" includes powers and duties.

(d) "Port District" means the territorial jurisdiction under the control, supervision or ownership
of the Authority over an area (land or sea), declared as such in accordance with Section 5 of
this Decree including but not limited to any Port within said District.

(e) "Port" means a place where ships may anchor or tie up for the purpose of shelter, repair,
loading or discharge of cargo, or for other such activities connected with water-borne
commerce, and including all the land and water areas and the structures, equipment and
facilities related to these functions.

(f) "Navigable waters" means all navigable portions of the seas, estuaries, and inland
waterways.
(g) "Anchorage" means a place with sufficient depth of water where vessels anchor or may
ride at anchor or may ride at anchor within the harbor.

(h) "Terminal Facility" includes the seaport and its facilities of wharves, piers, slips, docks,
dry docks, bulkheads, basins, warehouses, cold storage, and loading or unloading
equipment.

(i) "Basin" means a naturally or artificially enclosed or nearly enclosed body of water in free
communication with the sea.

(j) "Dock" includes locks, cuts, entrances, graving docks, inclined planes, slipways, quays,
and other works and things appertaining to any dock.

(k) "Drydock" means a dock from which the water can be temporarily excluded, in order to
effect repairs to hulls and keels of ships or vessels.

(l) "Pier" means any structure built into the sea but not parallel to the coast line and includes
any stage, stair, landing place, landing stage, jetty, floating barge or pontoon, and any bridge
or other works connected therewith.

(m) "Warehouse" means a building or shed used for the storage of cargo.

(n) "Transit Shed" means a building or shed which is situated at or near a quay, wharf or
pier, and is used for the temporary or short-term storage of goods in transit, or to be shipped
or discharge from a vessel.

(o) "Wharf" means a continuous structure built parallel to along the margin of the sea or
alongside riverbanks, canals or waterways where vessels may lie alongside to receive or
discharge cargo, embark or disembark passengers, or lie at rest.

(p) "Transportation Facility" includes rails and railcars, highways, wheeled vehicles, bridges,
tunnels, tramways, subways, passenger or cargo vessels, ferry-boats, lighters, tugs, barges,
scows, ramps, and any kind of facility in use or for use of the transportation, movement, or
carriage of goods or passengers.

(q) "Lighter" means a flat-bottomed boat or barge used in loading or unloading cargo to or
from vessels,

(r) "Vessel" includes any ship or boat, or any description of a vessel or boat.

(s) "Goods" includes animals, carcasses, baggage, and any movable property of any kind.

(t) "Dues" includes harbor fees, tonnage and wharfage dues, berthing charges, and port
dues and any other dues or fees imposed by virtue of existing law or this Decree.

(u) "Rates" means any rates or charges including any toll or rent under existing law or
imposed by the Authority by virtue of this Decree for facilities used or services rendered.

Article IV
Establishment, Constitution, Powers and Duties
Section 4. Creation of Philippine Ports Authority

(a) There is hereby established a body corporate to be known as the Philippine Ports
Authority (hereinafter called the Authority), which shall be attached to the Department of
Public Works Transportation and Communications.

(b) The principal office of the Authority shall be located in Metropolitan Manila, but it may
establish port management units and other offices elsewhere in the Philippines as may
become necessary for the proper conduct of its business.

Section 5. Port District The Authority may, from time to time, submit to the President, through the
National Economic and Development Authority, applications for the declaration of specific areas as
Port Districts. Such applications shall be accompanied by a survey plan indicating the geographical
location of the area or areas to be declared as Port Districts with their respective boundaries
properly delineated.

Section 6. Corporate Powers and Duties

(a) The corporate duties of the Authority shall be:

i. To formulate in coordination with the National Economic and Development

Authority a comprehensive and practicable Port Development plan for the State and
to program its implementation, renew and update the same annually in coordination
with other national agencies.

ii. To supervise, control, regulate, construct, maintain, operate, and provide such
facilities or services as are necessary in the ports vested in, or belonging to the
Authority.

iii. To prescribe rules and regulations, procedures, and guidelines governing the
establishment, construction, maintenance, and operation of all other ports, including
private ports in the country.

iv. To license, control, regulate, supervise any construction or structure within any
Port District.

v. To provide services (whether on its own, by contract, or otherwise) within the Port
Districts and the approaches thereof, including but not limited to

berthing, towing, mooring, moving, slipping, or docking any vessel;

loading or discharging any vessel;

sorting, weighing, measuring, storing, warehousing, or otherwise handling goods.

vi. To exercise control of or administer any foreshore rights or leases which may be
vested in the Authority from time to time.

vii. To coordinate with the Bureau of Lands or any other government agency or
corporation, in the development of any foreshore area.
 viii. To control, regulate, and supervise pilotage and the conduct of pilots in any Port
District.

ix. To provide or assist in the provision of training programs and training facilities for
its staff or staff of port operators and users for the efficient discharge of its functions,
duties, and responsibilities.

x. To perform such acts or provide such services as may be deemed proper or

necessary to carry out and implement the provisions of this Decree.

(b) The corporate powers of the Authority shall be as follows:

i. To succeed in its corporate name.

ii. To sue and be sued in such corporate name.

iii. To adopt, alter, and use a corporate seal which shall be judicially noticed.

iv. To adopt, amend, or repeal its by-laws.

v. To create or alter its own organization or any Port Management Unit, and staff
such an organization or Port Management Unit with appropriate and qualified
personnel in accordance with what may be deemed proper or necessary to achieve
the objectives of the Authority.

vi. To make or enter of any kind or nature to enable it to discharge its functions under
this Decree.

vii. To acquire, purchase, own, lease, mortgage, sell, or otherwise dispose of any
land, port facility, wharf, quay, or property of any kind, whether movable or
immovable.

viii. To exercise the right of eminent domain, by expropriating the land or areas
surrounding the Port of harbor, which in the opinion of the Authority, are vital or
necessary for the total development of the Port District.

ix. To levy dues, rates, or charges for the use of the premises, works, appliances,
facilities, or for services provided by or belonging to the Authority, or any other
organization concerned with port operations.

x. To reclaim, excavate, enclose, or raise any part of the lands vested in the
Authority.

xi. To dredge or provide dredging services, within a Port District of elsewhere.

xii. To acquire any undertaking affording or intending to afford facilities for the loading
and discharging or warehousing of goods in the Port Districts.

xiii. To supply water or bunkers for ships.

 xiv. To obtain insurance for or require the insurance of any property, movable or
immovable, belonging to the Authority and/or goods in the custody of the Authority.

xv. To do all such other things and to transfer all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purposes of the Authority.

xvi. Generally, to exercise all the powers of a corporation under the Corporation Law
insofar as they are not inconsistent with the provisions of this Decree.

Section 7. Board of Directors

(a) The corporate powers of the Authority shall be vested in a Board of Directors, which shall
consist of the following members:

i. The Secretary of Public Works, Transportation and Communications, who shall act
as Chairman.

ii. The General Manager of the Authority, who shall act as Vice-Chairman.

iii. The Director-General of National Economic and Development Authority.

iv. The Secretary of Finance.

v. The Secretary of Natural Resources.

vi. The Secretary of Trade.

The Directors listed under subsections (a) (i) to (vi) shall be ex-officio members of the
Board of Directors.

vii. One (1) other person who shall be appointed by the President of the Philippines,
representing the private sector, who by reason of his knowledge or experiences is, in
the opinion of the President, fit and proper person to be Director of the Board.
Provided, That, in the absence of the Director appointed in subsections (iii) to (vi),
the Director concerned shall designate the officer next in rank to him in his
department or office to act on his behalf as a Director.

(b) The Director from the private sector shall hold office for a period of three years from the
date of his appointment upon the completion of such period.

(c) The members of the Board or their respective alternates shall receive a per diem as it
may approve for each Board meeting actually attended by them: Provided, That, such per
diems shall not exceed one thousand pesos during any one month for each member:
Provided further, That no other allowances or any form of compensation shall be paid them,
except actual expenses in travelling to or from their residences to attend Board meetings.

Article V
Organization and Staff

Section 8. Management and Staff

 (a) The President shall, upon the recommendation of the Board, appoint the General
Manager and the Assistant General Managers.

(b) All other officials and employees of the Authority shall be selected and appointed on the
basis of merit and fitness based on a comprehensive and progressive merit system to be
established by the Authority immediately upon its organization and consistent with Civil
Service rules and regulations. The recruitment, transfer, promotion, and dismissal of all
personnel of the Authority, including temporary workers, shall be governed by such merit
system.

(c) The General Manager shall, subject to the approval of the Board, determine the staffing
pattern and the number of personnel of the Authority, define their duties and responsibilities,
and fix their salaries and emoluments. For professional and technical positions, the General
Manager shall recommend salaries and emoluments that are comparable to those of similar
positions in other government-owned corporations, the provisions of existing rules and
regulations on wage and position classification notwithstanding.

(d) The General Manager shall, subject to the approval by the Board, appoint and remove
personnel below the rank of Assistant General Manager.

(e) The General Manager of the Authority shall receive a salary to be determined by the
Board, and approved by the President.

(f) The number of Assistant General Managers of the Authority shall in no case exceed three
(3) who shall each receive a salary to be determined by the Board and approved by the
President.

Section 9. General Powers and Duties of the General Manager and Assistant General Managers

(a) General Powers and Duties of the General Manager

The General Manager shall be responsible to the Board, and shall have the following general
powers, functions, and duties:

i. To implement, enforce and apply the policies, programs, guidelines, procedures,

decisions, rules and regulations promulgated, prescribed, issued or adopted by the
Authority.

ii. To manage the day to day affairs of the Authority, and ensure the operational
efficiency of the Ports under the jurisdiction and ownership of the Authority.

iii. To sign contracts, to approve expenditures and payments within the budget
provisions, and generally to do any all acts or things for the proper operations of the
Authority or any of the Ports under the jurisdiction, control or ownership of the
Authority.

iv. To submit an annual budget to the Board for Recurrent Income and Expenditure
and the Estimated Capital Expenditure for its option not later than two months before
the commencement of the ensuing fiscal year.
 v. To undertake research, studies, investigations, and other activities and projects,
and to submit comprehensive reports and appropriate recommendations to the Board
for its information and approval.

vi. To perform such other duties as the Board may assign from time to time.

(b) General Powers and Duties of the Assistant General Managers

The Assistant General Managers shall be responsible to the General Manager of the
Authority, and shall have the following general powers, functions and duties:

i. To assist the General Manager in implementing, enforcing, and applying the

policies, programs, guidelines, procedures, decisions, rules and regulations
promulgated, prescribed, issued, or adopted by the Authority.

ii. To assist the General Manager in the performance of his other functions and
duties.

iii. To perform such other duties as the General Manager may assign from time to
time.

Article VI
Capital, Finance and Accounts

Section 10. Capital

(a) The authorized capital of the Authority shall be three billion pesos.

(b) The initial paid in capital shall consist of:

i. The value of assets (including port facilities, quays, wharves, and equipment) and
such other properties, movable and immovable as may be contributed by the
Government or transferred by the Government or any of its agencies as valued at the
date of such contribution or transfer and after deducting or taking into account the
loans and other liabilities of the Authority at the time of the takeover of the assets and
other properties.

ii. The initial cash appropriation of P2 million out of the funds of the National Treasury
and such further sums, including working capital, as may be contributed by the
Government.

Section 11. Creation of Reserves The balance of any revenue or income of the Authority remaining
at the end of each year shall be applied to the creation of a general reserve or such other reserves
as the Authority may deem appropriate.

Section 12. Investment of Funds The Authority may, from time to time, invest any of its funds not
immediately required to be expended in meeting its obligations or in the discharge of the functions of
the Authority in such government securities approved by the Board.

Section 13. Borrowing Powers

 (a) The Authority may after consultation with the Central Bank and the Department of
Finance, and with the approval of the President of the Philippines, raise funds, either from
local or international sources, by way of loans, credits or indebtedness or issue bonds, notes,
debentures, securities, and other borrowing instruments, including the power to create
pledges, mortgages, and other voluntary liens or encumbrances on any of its assets or
properties.

(b) All loans contracted by the Authority under this Section together with all interests and
other sums payable in respect thereof, shall constitute a charge upon all the revenues and
assets of the Authority and shall rank pari passu with one another, but shall have priority
over any other claim or charge on the revenue and assets of the Authority; Provided, That
this provision shall not be construed as a prohibition or restriction on the power of the
Authority to create pledges, mortgages and other voluntary liens or encumbrances on any
property of the Authority.

(c) Except as expressly authorized by the President of the Philippines, the total outstanding
indebtedness of the Authority in the principal amount in local and foreign currency shall not
at any time exceed the networth of the Authority at the relevant time.

(d) The President of the Philippines, by himself or through his duly authorized representative,
is further hereby authorized to guarantee in the name and on behalf of the Republic of the
Philippines, the payments of the loans or other indebtedness of the Authority up to the
amount herein authorized.

(e) All interests paid or payable by the Authority on its loans or other forms of indebtedness
shall be exempt from taxes of whatsoever nature.

Section 14. Annual Budget

(a) The Board shall every year cause to be prepared and shall adopt annual estimates of
income and expenditures and estimates of capital expenditure of the Authority for the
ensuing year.

(b) Supplementary estimates may be adopted at any of the meetings of the Board.

Section 15. Annual Accounts

(a) The Board shall cause proper accounts and other records of the Authority in relation
thereto to be kept. An annual statement of account shall be rendered in respect to each year.
The Authority shall maintain such accounts and other records under a commercial system of
accounting.

(b) The accounts of the Authority shall be kept and made up to 31 December in each year.

(c) The annual statement of accounts of the Authority shall present a true and fair value of
the financial position of the Authority and of the results of the operations of the Authority for
the year to which it relates.

Section 16. Auditor
 (a) In consonance with existing laws and regulations, the Commission on Audit shall be
appointed to audit the accounts of the Authority. In the fulfillment of international contractual
commitments of the Authority, however, the Board may engage the services of any person or
firm duly authorized by law for the audit of accounts, to audit the accounts of the Authority.

(b) The Auditor shall be paid out of the revenue of the Authority such remuneration,
compensation or expenses as the Board may determine.

Section 17. Auditor's Reports The Auditor shall as soon as practicable, but not later than three
months after the accounts have been submitted for audit, send an annual report to the Board. The
Auditor may also submit such periodical or special reports to the Board as may to him appear
necessary.

Section 18. Annual Report The Board shall submit to the President of the Philippines together with
the Auditor's Report on the relevent accounts, an annual report generally dealing with the activities
and operations of the Authority during the preceding year and containing such information relating to
the proceedings and policies of the Authority.

Article VII
Dues and Rates

Section 19. Dues

The President of the Philippines may upon recommendation of the Authority increase or decrease
such dues, collectible by the Authority to protect the interest of the Government and to provide a
satisfactory return on the Authority's assets, and may adjust the schedule of such dues so as to
reflect the costs of providing the services; Provided, however, that the rates of dues on all the ports
of the Philippines upon the coming into operation of this Decree shall be those now provided under
Parts 1, 2, 3, and 6 of the Title VII of Book II of the Tariff and Customs Code, until such time that the
President upon recommendation of the Board may order that the adjusted schedule of dues are in
effect.

Section 20. Rates and Charges

(a) The Authority may impose, fix, prescribe, increase or decrease such rates, charges or
fees for the use of port premises, works, appliances or equipment belonging to the Authority
and port facilities provided, and for services rendered by the Authority or by any organization
within a Port District.

Provided, that upon the coming into operation of this Decree, the rates of storage and
arrastre charges in all ports of the Philippines shall be those now provided under Parts 4 and
5 of Title VII Book II of the Tariff and Customs Code until such time when the President of
the Philippines upon recommendation of the Board may order that the revised rates, charges
or fees are in effect.

(b) The Authority shall regulate the rates or charges for port services or port related services
so that taking one year with another, such rates or charges furnish adequate working capital
and produce an adequate return on the assets of the Authority. In regulating the rates or
charges for individual ports the Authority shall take into account the development needs of
the port's hinterland.
 (c) All dues, fees, charges and other sums imposed and collected by the Authority shall
accrue to the Authority and shall be disposed of in accordance with the provisions of this
Decree.

Section 21. Remission of Dues, Rates, or Charges

No amount due in respect of dues, rates, or charges prescribed by the Authority under this Decree
shall be waived or reduced except:

(a) Where the State has arrangements with a foreign government in respect of vessels are
not normally engaged in the conveyance of cargo or passengers; and

(b) For vessels seeking shelter from inclement weather or entering the port for medical help
and other maritime necessity.

Section 22. Remedies for Nonpayment If the master, owner or agent of any vessel refuses or
neglects to pay on demand any dues, rates, or charges made under this Decree or any part thereof,
the Authority may, in addition to any other remedy provided by law, distrain or arrest on its own
authority such vessel and tackle, apparel or furniture belonging to the vessel, and detain the same
until the amount or amounts due have been paid.

Section 23. When Rates Payable and Lien

(a) Rates or charges in respect of goods to be landed become payable immediately on

landing such goods.

(b) Rates or charges in respect of goods to be shipped are payable before the goods are
loaded.

(c) Rates or charges in respect of goods to be removed from the premises of the Authority
are payable on demand.

(d) For the amount of rates of charges leviable under this Decree in respect of goods, the
Authority shall have lien on such goods and is entitled to detain them until the amount of
rates or charges is fully paid. Such lien shall have priority over all other liens and claims,
except claims for duties and taxes due to the Government and expenses of the sale.

Section 24. Recovery of Lien Without prejudice to the authority and rights of the Bureau of Customs
in the disposition of property in Customs custody as provided for in the Tariff and Customs Code, as
amended, if any goods which have been placed in or on the premises of the Authority are not
removed therefrom within the prescribed period after the legal permit for their withdrawal and/or
release from Customs custody, or the authority to load, in case of exports, has been issued by the
Bureau of Customs, the authority, with the prior concurrence of the Bureau of Customs, may dispose
of any such goods in the manner as it deems fit in order to recover the lien; Provided, That the
proceeds of the sale shall be applied in the following manner:

(a) Firstly, in the payment of duties and taxes due to the Government;

(b) Secondly, in payment of expenses of the sale;

 (c) Thirdly, in payment of the rates, charges, and fees due to the Authority in respect of the
goods;

(d) Fourthly, in payment of freight, lighterage or general average, on voyage of importation

and in case of exports, in payment of domestic freight, lighterage and cartage, of which due
notice shall have been given to the Authority;

(e) And finally in rendering on demand the surplus, if any, to the person legally entitled
thereto: Provided, That in case no such demand is made within a period of one year from the
date of sale of the goods, the surplus, if any, shall become part of the general funds of the
Authority, whereupon all rights to the same by such person shall be extinguished.

Section 25. Exemption from Realty Taxes The Authority shall be exempt from the payment of real
property taxes imposed by the Republic of the Philippines, its agencies, instrumentalities or political
subdivisions; Provided, That no tax exemptions shall be extended to any subsidiaries of the
Authority that may be organized; Provided, finally, That investments in fixed assets shall be
deductible for income tax purposes.

Article VIII
Port Regulations

Section 26. Power to Make Port Regulations

(a) The Authority may, after consultation with relevant Government agencies, make rules or
regulations for the planning, development, construction, maintenance, control, supervision
and management of any Port or Port District and the services to the provided therein, and for
the maintenance of good order therein, and for the maintenance of good order therein, and
generally for carrying out the purposes of this Decree.

(b) The Authority may provide separate regulations for each category of ports or port
districts.

Section 27. Dangerous Cargo

(a) The Authority may make regulations for the conveyance, loading, discharging and
storage of dangerous goods within any port, port district, and the approaches to the port.

(b) The Authority may provide separate regulations for each category of ports or port
districts.

Section 28. Powers of Harbor Master Further to the provisions of any regulation under Section 26
and 27 of this Decree, the Authority thru the Harbor Master of a Port or Port District may:

(a) Direct where any vessel shall be berthed, moored, or anchored, and the method of
anchoring within the port and the approaches to the port;

(b) Direct the removal of any vessel from any berth or anchorage to another berth or
anchorage and the time within such removal is to be effected; and

(c) Regulate the mooring of vessels within the port and the approaches to the port.
Section 29. Existing Regulations Anything to the contrary notwithstanding and until new rules or
regulations are promulgated by the Authority under Sections 26 and 27 of this Decree, the rules,
regulations or orders made under the Customs Code or any other law of the Philippines relating to
the matters covered by Sections 26, 27 and 28 shall continue to apply as if they were made under
said sections and any reference to a customs official or any other officials under any law of the
Philippines shall be deemed a reference to an equivalent official of the Authority.

Article IX
Transfer of Assets and Liabilities

Section 30. Transfer of Existing and Completed Physical Facilities In accordance with the transitory
provisions of this Decree, there shall be transferred to the Authority all existing and completed public
port facilities, quays, wharves, docks, lands, buildings and other property, movable or immovable,
belonging to those ports declared as Port Districts for purposes of this Decree.

Section 31. Transfer of Intangible Assets In accordance with the transitory provisions of this Decree,
there shall be transferred to the Authority all intangible assets, powers, rights, foreshore rights,
interests and privileges belonging to the Bureau of Customs, and Bureau of Public Works and other
agencies relating to port works or port operations, subject to terms to be arranged by and between
the Authority and agencies concerned. Any disagreement relating to such transfer shall be elevated
to the President for decision.

Section 32. Projects in Progress In accordance with the transitory provisions of this Decree, all
ongoing projects relating to the construction of ports and port facilities shall be continued by the
agency or agencies involved until completion. After completion, such projects shall be transferred to
the Authority in accordance with the agreement among agencies concerned. Any disagreement
relating to such transfer shall be elevated to the President for decision.

Section 33. Transfer of Liabilities and Debts Upon the transfer and acceptance by the Authority of
the existing physical facilities, intangible assets, and completed projects referred to in the Sections
immediately preceding, all debts, liabilities, and obligations of the government agencies or entities
concerned in respect of such physical facilities, intangible assets and completed projects within the
Port Districts shall likewise be transferred to or deemed incurred by the Authority.

Section 34. The Philippine Coast Guard shall retain ownership of its properties and facilities which
are necessary for the enforcement of laws, rules and regulations pertaining to safety of life and
property at sea (SOLAS) found within ports and port districts and shall continue to administer,
operate and maintain the same as well as assume the obligations and liabilities pertaining to such
properties and facilities. All other properties and facilities of the Philippine Coast Guard found within
ports and port districts, including all obligations and liabilities related thereto shall be deemed
transferred to the Authority in accordance with Section 33 of this Decree.

Section 35. Transfer of Staff Officials and employees of existing offices or agencies, or their
subordinate units, which are abolished or reorganized under this Decree may be absorbed by the
Authority on the basis of merit and fitness: Provided, That those officials and employees who are
deemed qualified under both the Authority and the reorganized office agency or unit shall have the
option to either transfer or remain in their present office, agency or unit, or elect to be separated from
the service with all the benefits they may be entitled to under existing laws: Provided, further, That
those who do not qualify under the Authority shall be retained in the office or agency in which the
unit was abolished.
Section 36. Gratuity and Other Benefits All officials and employees whose services are terminated
as a result of this Decree shall be given gratuities equivalent to one month's salary for every year of
continuous satisfactory service rendered but not exceeding twelve months on the basis accorded to
them by existing laws.

Article X
Construction and Dredging Works

Section 37. Construction and Dredging Works

(a) The Bureau of Public Works shall be the executing agency of the Authority for the
detailed design, contract document preparation and advertisement, construction supervision
of port terminal facilities and port works, and the dredging of public ports vested in the
Authority; Provided, That when there are no qualified bidders and for projects less than two
hundred thousand pesos (P200,000.00), the Bureau of Public Works may undertake the
construction through force account; Provided, further, That the Authority shall perform
rehabilitation or maintenance works (including maintenance dredging) by its own personnel
or private contractor, whichever arrangement is more advantageous to port and shipping
operations.

(b) he Authority shall be responsible for the allocation and control of all funds for the
execution of all construction, rehabilitation and maintenance works mentioned in the
preceding paragraph.

Article XI
Final Provisions

Section 38. Transitory Provisions

(a) Until the President declares the Authority to be fully operational, the Bureau of Customs
and the Division of Ports and Harbors of the Bureau of Public Works may continue to
perform, in coordination with the Authority, such port operations and port works as may be
deemed necessary, undertake the phased or gradual takeover of such port operations or
port works.

(b) The budget for staff operations and other expenses relating to port operations or port
works of the Bureau of Customs or the Bureau of Public Works, as the case may be, during
such transitional period, shall be submitted by them to the Authority for information and
guidance before implementation.

(c) All expenses and charges relating to port operations and port works during the
transitional period shall be paid out of the funds of the Authority or such other funds as may
be allocated to the Authority in the Annual Appropriations Act or other sources. For this
purpose, the current budget provision, funds and allocations of the Bureau of Customs, the
Bureau of Public Works and other government agencies concerned, pertaining to the
expenses, including retirement funds, for personnel involved in port planning, maintenance
and operations, the outlays for port works and port development, the existing balances as
well as subsequent collections from port operations shall be transferred to the Authority in
accordance with transfer arrangements to be negotiated by and among the agencies
concerned: Provided, however, That in case of disagreement relating to such transfer, the
same shall be elevated to the President for decision: Provided, further, That all transitional
 arrangements including transfers of property, funds, rights, powers and liabilities under this
Decree shall not extend beyond Fiscal Year 1977.

Section 39. Bureau of Customs The Tariff and Customs Code is hereby modified or amended to the
extent that all the powers, duties and jurisdictions of the Bureau of Customs concerning the following
matters shall be transferred to and be vested in the Authority:

(a) All dues, fees and rates collectible under Title VII but excluding Part VII of the Code;

(b) The general supervision, control, and regulation of all matters and affairs that pertain to
the operation of and the issuance of permits or licenses to construct ports, port facilities,
warehouses, and other facilities within port districts;

(c) All such other powers, duties and jurisdictions vested in the Bureau of Customs pertaining
to every matter concerning port facilities, port operations or port works.

Section 40. Other Laws Any and all other powers and rights, duties and functions and jurisdiction
vested in and all properties and appropriations of any government agency, authority or
instrumentality pertaining to every matter concerning port facilities, ports operations, or port works
shall be transferred to and be vested in the Authority.

Section 41. Repeal All laws, decrees, Letters of Instructions, orders, rules and regulations, policies,
programs or parts thereof inconsistent with or contrary to any of the provisions of this Decree are
hereby repealed or modified, including but not limited to the following:

(a) R.A. No. 4567 creating the San Fernando Port Authority and R.A. No. 4663 as amended
by R.A. No. 6086 creating the Cagayan de Oro Port Authority.

(b) Sections 26 and 27 of Presidential Decree No. 458.

(c) Act No. 3592 as amended, creating the Port Work Fund.

(d) Presidential Decree No. 505.

(e) Section 711 as far as Port Administration is concerned. Section 3304 and such other
inconsistent provisions of the Tariff and Customs Code without prejudice to the provisions of
Section 38 of this Decree.

(f) Section 3 (a) as far as it concerns stevedoring, arrastre and customs brokerage services
and the whole of Section 11 (c) of Presidential Decree No. 474 creating the Maritime Industry
Authority.

Section 42. Separability Clause If, for any reason, any section or provision of this Decree is
declared to be unconstitutional or invalid, the other sections or provisions of this Decree which are
not affected thereby shall continue in full force and effect.

Section 43. Penalties

(a) Any person who violates any of the provisions of this Decree or any of the rules and
regulations issued or promulgated by the Authority, shall be punished by imprisonment for
not less than one day but not more than six years, and pay a fine of not less than two
 hundred pesos but not more than one hundred thousand pesos. If the offender is a
government official or employee he shall, in addition to imprisonment and fine be perpetually
disqualified to hold any public office. If the offender is a juridical person, the penalty of
imprisonment and fine shall be imposed upon its manager, director, representative or
employee thereof responsible for the violation. If the offender is an alien he shall be deported
immediately without further proceedings, after serving his sentence and paying the fine.

(b) Any license, franchise, authority or permit to exercise any right or privilege, which may
have been issued by the Authority in accordance with this Decree or the rules and
regulations issued or promulgated pursuant to this Decree, shall be deemed withdrawn and
revoked upon conviction of the holder thereof.

Section 44. Effectivity This Decree shall take immediate effect upon its promulgation.

Done in the City of Manila, this 23rd day of December in the year of Our Lord, nineteen hundred and
seventy-five.

REPUBLIC ACT NO. 9280 AN ACT REGULATING THE PRACTICE OF CUSTOMS BROKERS PROFESSION IN
THE PHILIPPINES, CREATING FOR THE PURPOSE A PROFESSIONAL REGULATORY BOARD FOR CUSTOMS
BROKERS, AND APPROPRIATING FUNDS THEREFOR Be it enacted by the Senate and House of
Representatives of the Philippines in Congress assembled: ARTICLE I TITLE, DECLARATION OF POLICY,
OBJECTIVES, AND DEFINITION OF TERMS SECTION I, Short Title. – This Act shall be known as the
"Customs Brokers Act of 2004." SEC 2. Declaration of Policy. – It is hereby declared the policy of the
State to give priority attention and support to professional zing the practice of customs brokers
profession in the Philippines which will be beneficial to the country in general and to the economy in
particular. Pursuant to the national policy, the government shall provide a program to set up a climate
conducive to the practice of the profession and maximize the capability and potential of our Filipino
customs Brokers. SEC. 3. Objectives. – This Act provides for and shall govern: a. The standardization and
regulation of customs administration education; b. The examination and registration of customs brokers;
and c. The supervision, control and regulation of the practice and customs broker profession. SEC. 4
Definition of Terms. – For purposes of this Act, the following terms are hereby defined: (a) "Customs
Broker" - is any person who is bona fide holder of a valid Certificate of Registration/Professional
Identification Card issued by the Professional Regulatory Board and Professional Regulation Commission.
(b) "Commission" – as used in this Act shall refer to the Professional Regulation Commission. © "Board"
– as used as this Act shall refer to the Professional Regulatory Board for Customs Brokers. ARTICLE II
PRFESSIONAL REGULATORY BOARD FOR CUSTOMS BROKERS SEC. 5. Creation and Composition of the
Professional Regulatory Board for Customs Brokers. – There is hereby created a Professional Regulatory
Board for Customs Brokers, hereinafter referred to as the Board, under the supervision and
administrative control of the Professional Regulation Commission, hereinafter referred to as the
Commission, to be composed of a chairman and two (2) members who shall be appointed by the
President of the Philippines from among the list of three (3) recommended for each position submitted
by the commission from a list of five (5) nominees for each position submitted by the accredited
professional organization of customs brokers. The new Board shall be constituted within three (3)
months from the effectivity of this Act. SEC. 6. Scope of the Practice of Customs Brokers. – Customs
Broker Profession involves services consisting of consultation, preparation of customs requisite
document for imports and exports, declaration of customs duties and taxes, preparation signing, filing,
lodging and processing of import and export entries; representing importers and exporters before any
government agency and private entities in cases related to valuation and classification of imported
articles and rendering of other professional services in matters relating to customs and tariff laws its
procedures and practices. A customs brokers and shall be considered in the practices of the profession if
the nature and character of his/her employment in private enterprises requires professional knowledge
in the field of customs and tariff administration. He/She is also deemed in the practice of custom Broker
profession if he/she teaches customs and tariff administration subjects in any university, college or
school duly recognized by the government . SEC. 7. Power and Functions of the Board.- The Board shall
the following powers and functions: (a) Promulgate, administer and enforce rules and regulations,
including the Code of Ethics and Code of Technical Standards of customs brokers necessary for carrying
out the provisions of this Act; (b) Supervise and regulate the licensure, registration and practice of
customs brokers profession; © Determine and evaluate the qualifications of the applicants for
registration with or without the prescribed licensure examinations and for the issuance of special or
temporary permits; (d) Prepare and modify the questions for examination and prescribe the syllabi of
the subjects for examination and their relative weight; (e) Register successful examinees in the licensure
examination and issue the corresponding Certificate of Registration and Professional Identification Card;
(f) Issue special or temporary permits to foreign customs brokers for specific projects and for specific
duration of time; (g) Look into the conditions affecting the practice of customs brokerage, adopt
measures for the enhancement of the profession and the maintenance of high professional, technical,
and ethical standards, and conduct ocular inspection of places where customs brokers practice their
profession; (h) In coordination with the Commission on Higher Education (CHED), examine the
prescribed facilities of the universities or colleges seeking permission to open the course or programs of
customs administration in order to ensure that standards and essential requirements for a qualified
dean and faculty adequate budget are properly complied with and maintained; (i) Investigate violations
of this Act, its implementing rules and regulations, and the Code of Ethics for Customs Brokers. (j) Issue
subpoena and subpoena duces tecum to secure the attendance of respondents or witnesses or the
production of documents relative to the investigations conducted by the commission; (k) Prepare
guidelines for the continuing professional Education (CPE) in coordination with the accredited
professional organization; and (l) Perform such other powers, functions and duties as may be necessary
to effectively implement this Act. The policies, resolutions, rules and regulations, order or decisions
issued or promulgated by the Board shall be subject to the review and approval of the Commission.
However, the Board’s decisions, resolutions or orders which are not interlocutory, rendered in an
administrative case, shall be subject to review only if on appeal. SEC. 8. Qualification of the Chairman
and Members of the Board. – The chairman and members of the Board must, at the time of their
appointment: a. Be a citizen and resident of the Philippines (b) Be of good moral character and must not
have been convicted of any crime involving moral turpitude; © Be a member in good standing of the
accredited professional organization of customs brokers; (d) Be a graduate of Bachelor’s Degree in
Customs Administration or a holder of a Master of Degree in Custom Administration conferred by a
college or university duly recognized by the government, or registered and licensed customs broker
before the effectivity of this Act; (e) Be registered and licensed customs broker with a valid of Certificate
of Registration and Professional Identification Card, with at leased ten (10) years of experience prior to
his appointment; (f) Not be a member of the faculty, whether full-time or part-time, of any school ,
college or university with a regular and/or review course in customs administration is taught, nor shall
have any pecuniary interest in such institution; and (g) Not be an incumbent officer of the accredited
national organization of customs brokers. SEC. 9. Term of Office. – The members of the Board shall hold
office for a term of three (3) years or until their successors shall have been appointed and qualified.
They may, however, be reappointed for a second term. Any vacancy in the Board shall be filled for the
unexpired portion of the term only. Each member shall take an oath of office prior to the assumption of
duties. The incumbent chairman and members of the Board shall continue to serve until their
replacements shall have been appointed and qualified. SEC. 10. Compensation and Allowances of the
Chairman and Member of the Board. – The chairman and the members of the Board shall receive the
compensation and allowances comparable to the compensation and allowances receive by the chairman
and members of other professional regulatory Boards. SEC. 11. Suspension and Removal of the
Chairman and Member of the Board. – The chairman or any member of the Board may be suspended or
removed by the President of the Philippines upon recommendation of the Commission for neglect of
duty, abuse of power, oppression, incompetence, unprofessional, unethical, immoral or dishonorable
conduct, commission or toleration of irregularities in the conduct of examination or tampering of the
grades therein, or for any final judgment or conviction of any criminal offense involving moral turpitude
by the court after having been given the opportunity to defend himself in a proper administrative
investigation. SEC. 12. Supervision of the Board, Custodian of its Records, Secretariat and Support
Services. – The Board shall be under the general supervision and administrative control of the
Commission. All record of the Board, including application for examination, examination papers and
results, minutes of deliberations, administrative and other investigative cases involving customs brokers,
shall be kept by the Commission. The Commission shall designate the secretary of the Board and shall
provide the secretariat and other support services to implement the provisions of this Act subject to the
usual government accounting and auditing rules and regulations. SEC. 13. Annual Report. – The Board
shall, at the close at each calendar year, submit an annual report to the Commission, giving a detailed
account of its proceedings and accomplishments during the year and recommending measures to be
adopted with the end in view of upgrading and improving the condition affecting the practice of customs
broker profession in the Philippines. ARTICLE III "LICENSURE EXAMINATION AND REGISTRATION" SEC.
14. Licensure Examination. – Every applicants seeking to be registered and licensed as professional
customs broker shall undergo an examination as to provided for in this Act. Examinations for the
practice of customs broker profession in the Philippines shall be given by the Board at least once every
year in such places and dates as the Commission may designate in accordance with the provisions of
Republic Act No. 8981. SEC. 15. Scope of Examination. – A written examination shall be given to the
licensure applicants for customs broker profession, which shall include but not limited to the following:
a. Customs Laws and Implementing Rules and Regulations; b. Tariff Laws and International Trade
Agreements; c. Practical Computation of Customs Duties, Taxes and Other Charges; d. Documentations,
Professional Ethics, Customs Procedures and Practices; and e. Warehousing and Cargo Handling
Operations. To conform with technological and modern changes, the Board may recluster, rearrange,
modify, add or exclude any of the foregoing subjects as the need arises. SEC. 16. Qualifications of
Applicants for Examinations. – In order to be admitted to the licensure examination for customs broker
profession, a candidate shall at the time of filing his/her application, establish to the satisfaction of the
Board that: (a) he/she is a citizen of the Philippines or of a foreign country qualified to take the
examination as provided in the reciprocity provision of this Act; (b) he/she is a holder of a Bachelor’s
Degree in Customs Administration: Provided, That a holder of a master’s degree in Customs
Administration shall be allowed to qualify within five (5) years from the effectivity of this Act; and ©
he/she is of good moral character and must not have been convicted of any crime involving moral
turpitude. SEC. 17. Ratings of Examination. – In order that a candidate may be deemed to have
successfully passed the examination, he/she must have obtained an average of at least seventyfive
percent (75%) in all subjects, with no rating below sixty percent (60%) in any subject. SEC. 18. Release of
the Results of Examination. – The results of the Licensure Examination shall be released by the Board
within ten (10) days from the last of the examination. SEC. 19. Issuance of the Certificate of Registration
and Professional Identification Card. – A Certification of Registration shall be issued to examinees who
pass the licensure examination for customs broker profession subject to payment of fees prescribed by
the Commission. The Certificate of Registration shall bear the signature of the Chairperson of the
Commission and the Chairman and members of the Board, stamped with the officials seal of the
Commission, indicating that the person named therein is entitled to practice the profession of customs
broker with all the benefits and privileges appurtenant thereto: Provided, That he/she shall be allowed
to practice the profession in any collection district without the need of securing another license from the
Bureau of Customs. The Certificate of Registration shall remain in full force and effect until revoked or
suspended in accordance with this Act. A professional Identification Card bearing the registration
number. Date of issuance, expiry date, duly signed by the Chairperson of the Commission , shall likewise
be issued to every registrant upon payment of the required fees, The Professional Identification Card
shall be renewed every three (3) years and upon satisfying the requirements of the Board. SEC20.
Refusal Register. – The Board shall not register and issue a Certification of Registration to any successful
examinee who has been convicted by a court of competent jurisdiction of any criminal offense involving
moral turpitude or has been found guilty of immoral of dishonorable conduct after investigation by the
Board, or has been declared to be unsound mind. The reason for the refusal shall be set forth in writing.
SEC. 21. Revocation of Suspension of the Certificate of Registration, Professional Identification Card or
Cancellation of Temporary/Special Permit. – The Board may, after giving proper notice of hearing to the
party concerned, revoke the Certificate of Registration and Professional Identification Card of a
Professional Customs Broker or suspend him/her temporary/ special permit for any of the causes of
grounds under Section 20 or upon unprofessional or unethical conduct, malpractice, or violation of any
of the provisions of this Act, its implementing rules and regulations, and a Code of Ethics for Professional
Customs Brokers. SEC. 22. Reinstatement, Reissuance or Replacement of Certificate of Registration,
Professional Identification Card and Temporary/Special Permit, - The Board, may, after two (2) years
from the date of revocation of Certificate of Registration reinstate any revoked Certificate of
Registration and reissue a suspended Professional Identification Card. A new Certificate of Registration
or Professional Identification Card or temporary/Special permit may be issued to replace lost, destroyed
or mutilated ones subjects to such rules as may be promulgated by the Board. SEC. 23. Roster of
Professional Customs Brokers. – The Board, in coordination with the accredited professional
organization, shall prepare, update and maintain a roster of professional customs brokers which shall
contain the names of registered professional customs brokers, their residence and office addresses,
dates of registration or issuance of certificates, and other data which the Board may deem pertinent.
SEC.24. Issuance of Special or Temporary Permit. – Upon application and payment of the required fees,
and subject to the approval of the Commission, the Board may issue special or temporary permits to
professional customs brokers from foreign countries whose services are urgently needed in the absence
or inadequacy of local professional customs brokers for the purpose of promoting or enhancing the
practice of the profession in the Philippines. ARTICLE IV PRACTICE OF CUSTOMS BROKER PROFESSION
Sec. 26. Oath. – All successful examinees qualified for registration shall be required to take an oath of
profession before any member of the Board or any government official authorized by the Commission or
any person authorized by law to administer oaths prior to entering into the practice of customs broker
profession. SEC. 27. Acts Constituting the Practice of Customs Brokers Profession. – Any single act or
transaction embraced within the provision of Section 6 hereof shall constitute an act of engaging the
practice of customs broker profession. Import and export entry declaration shall be signed only by
customs broker under oath based on the covering documents submitted by the importers. SEC. 28.
Prohibition Against the Unauthorized Practice of Customs Broker Profession. – No person shall practice
or offer to practice the customs broker profession in the Philippines or offer himself/herself as customs
broker, or use the title, word, letter, figure, or any sign tending to convey the impression that one is a
customs broker, or advertise or indicate in any manner whatsoever that one is qualified to practice the
profession unless he/she has satisfactory passed the licensure examination given by the Board, except
as otherwise provided in this Act, and is a holder of a valid Certification of Registration and Professional
Identification Card or a valid special/temporary permit duly issued to him/her by the Board of
Commission. SEC. 30. Prohibition Against Financing Activities By Customs Brokers. – No Customs Brokers
shall advance and finance on behalf of their client-importers the payment of duties and taxes, arrastre
charges, wharfage dues, storage fee and other port charges. SEC. 31. Accredited Professional
Organization. – All professional customs brokers shall have one national organization, which shall be
recognized by the Board of the Commission as the one and only accredited professional organization of
customs brokers. A professional customs broker duly registered with the Board shall automatically
become a member of the accredited professional organization of customs brokers and shall receive the
benefits and privileges appurtenant thereto. Membership in the accredited professional organization of
customs brokers shall not be a bar to membership in other associations of customs brokers. SEC. 32.
Code of Ethics for Customs Broker Profession. – The Board shall adopt and promulgate the Code of
Ethics and Code of Technical Standards which shall be prescribed and issued by the accredited
professional organization of customs brokers. SEC. 33. Vested Right: Automatic Registration of Customs
Brokers. – All customs brokers who are registered and licensed at the time this Act take effect shall
automatically be registered. ARTICLE V PENAL AND FINAL PROVISIONS SEC. 34. Penal Provisions. – Any
violation of this Act, including violation of implementing rules and regulations, shall be meted the
penalty of a fine of not less than Fifty Thousand pesos (50,000.00) nor more than Five hundred thousand
pesos (500,000.00), or imprisonment of not less than six (6) years, or both such fine and imprisonment
upon the discretion of the court. SEC. 35. Appropriations. – The Chairperson of the Professional
Regulation Commission shall immediate include in the Commission’s program the implementation of
this Act, the funding of which shall be included in the annual General Appropriation Act and thereafter.
SEC. 36. Transitory Provision. – The existing Board of Customs Brokers shall continue the function in the
interim until such time that the new Board shall be constituted pursuant to this Act. SEC. 37.
Implementing Rules and Regulations. – The Board, subject to the approval by the Commission, in
coordination with the accredited professional organization, shall issue and promulgate the rules and
regulations, including the Code of Ethics for customs broker profession needed to implement the
provision of this Act. SEC. 38. Separability Clause. – If any clause, sentence, paragraph or part of this Act
shall be declared unconstitutional or invalid, such judgment shall not affect, invalidate or impact any
other part of this Act. SEC. 39. Repealing Clause. – Section 3401 to Section 3409 of Republic Act No. 1937
are hereby repealed and all laws decrees, executive orders, memorandum orders, and other
administrative issuances and parts thereof which are inconsistent with the provisions of this Act are
hereby modified, superseded or repealed accordingly. SEC. 40. Effectivity. This Act shall take effect
fifteen (15) days following its publication in the Official Gazette or in a major newspaper of general
circulation in the Philippines. Approved, (Sgd.) FRANKLIN M. DRILON (Sgd.) JOSE DE VENECIA JR.
President of the Senate Speaker of the House of the Representatives This Act which is a consolation of
House Bill No. 5957 and Senate Bill No. 2684 was finally passed by the House of Representatives and the
Senate on February 2, 2004 and January 30, 2004, respectively. (Sgd.) OSCAR G. YABES (Sgd.) ROBERTO
P. NAZARENO Secretary of the Senate Secretary General House of Representatives Approved: MAR 30,
2004 (Sgd) GLORIA MACAPAGAL-ARROYO
Republic of the Philippines 
PHILIPPINE ECONOMIC ZONE AUTHORITY 
Roxas Boulevard corner San Luis Street 
Pasay City, Metro Manila

RULES AND REGULATIONS TO IMPLEMENT 

REPUBLIC ACT NO. 7916, 
OTHERWISE KNOWN AS 
“THE SPECIAL ECONOMIC ZONE ACT OF 1995”

Pursuant to Paragraph (e) of Section 12 and Section 55 of Republic Act No. 7916, the following are hereby
promulgated:

PART I - GENERAL PROVISIONS

Rule I. Definition and Basic Guidelines

SECTION 1. Title - These rules shall be referred to as the “Rules and Regulations to Implement Republic Act
No. 7916.”

SECTION 2. Definition of Terms - For purposes of these Rules and Regulations, the following definitions
shall apply:

a. “Act” shall refer to Republic Act No. 791,6, otherwise known as The Special Economic Zone Act of 1995.

b. “Decree” shall refer to Presidential Decree No. 66, as amended.

c. “Code” shall refer to Executive Order No. 226, otherwise known as the Omnibus Investments Code of
1987, as amended.

d. “PEZA” shall mean the Philippine Economic Zone Authority created under Section 11 of the Act.

e. “Board” shall refer to the PEZA Board of Directors.

f. ECOZONES or “Special Economic Zones” (SEZ) shall refer to selected areas with highly developed or which
have the potential to be developed into agri-industrial, industrial, tourist, recreational, commercial, banking,
investment and financial centers whose metes and bounds are fixed or delimited by Presidential
Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs), export
processing zones (EPZ), free trade zones and tourist / recreational centers.

f.1. “Industrial Estate (IE)” refers to a tract of land subdivided and developed according to a comprehensive
plan under a unified continuous management and with provisions for basic infrastructure and utilities, with
or without pre-built standard factory buildings and community facilities for the use of a community of
industries.
f.2. “Export Processing Zone (EPZ)” refers to a specialized industrial estate located physically and / or administratively outside the
customs territory and predominantly oriented to export production. Enterprises located in export processing zones are allowed to import
capital equipment and raw materials free from duties, taxes and other import restrictions.

f.3. “Free Trade Zone” refers to an isolated policed area adjacent to a port of entry (such as a seaport) and / or airport where imported
goods may be unloaded for immediate transhipment or stored, repacked, sorted, mixed, or otherwise manipulated. However, movement
of these imported goods from the free-trade area to a non-free trade area in the country shall be subject to customs and internal revenue
rules and regulations.

f.4. “Tourist / Recreational Center” refers to an area within the ECOZONE where tourist accommodation facilities such as hotels,
apartelles, tourist inns, pension houses, resorts, sports and / or recreational facilities are provided to render tourism services for both local
and foreign tourists, travellers and investors in accordance with the guidelines issued by the PEZA.

g. “Customs Territory” shall mean the national territory of the Philippines outside of the proclaimed
boundaries of the ECOZONES except those areas specifically declared by other laws and/or presidential
proclamations to have the status of special economic zones and / or free ports.

h. “Restricted Area” shall mean a specific area within the ECOZONE which has been classified and / or
fenced-in as export processing zone, free trade zone or such other areas as may be declared by the Board.

i. “ECOZONE Export Enterprise” refers to an individual, association, partnership, corporation or other form of
business organization which has been registered with the PEZA to engaged in manufacturing, assembling or
processing activity falling within the purview the Act and resulting in the exportation of 100% of its
production, unless a lower percentage of its production for exportation is prescribed by the Board subject to
such terms and conditions as the latter may determine.

j. “ECOZONE Domestic Market Enterprise” refers to an individual, association, partnership, corporation or

other form of business organization which has been registered with the PEZA to engaged in manufacturing,
assembling or processing activity falling within the purview of the Act resulting in the sale of its finished
products in the customs territory or in the non-restricted or authorized areas within the ECOZONE in its
entirety or if exporting a portion of its production output, it continually fails to export at least fifty percent
(50%) thereof for a period of three (3) years without any justifiable reason in case at least 60% of its
working capital is owned by Philippine nationals or in case more than 40% of its working capital is owned by
foreign nationals, it continually fails to export at least seventy percent (70%) of its production output for a
period of three (3) years without any justifiable reason.

k. “ECOZONE Pioneer Enterprise” shall mean an ECOZONE enterprise (1) engaged in the manufacture,
processing or production and not merely in the assembly of packaging of goods, products, commodities or
raw materials that have not been or are not being produced in the Philippines on a commercial scale or (2)
which uses a design, formula, scheme, method, process or system or production of transformation of any
element, substance or raw materials into another raw material or finished goods which is new and untried in
the Philippines (3) which produces non-conventional fuels or manufactures equipment which utilizes non-
conventional sources of energy or uses or converts to coal or other non-conventional fuels or sources of
energy in its production, manufacturing or processing operations: or (4) engaged in the pursuit of agri-
export processing zone development or (5) given such status under the Investment Priorities Plan: Provided,
That the final product in any of the foregoing instances involves or will involve substantial use and
processing of domestic raw materials, whenever available, taking into account the risk and magnitude of
investment.

l. “ECOZONE Free Trade Enterprise” refers to an individual, association, partnership, corporation or other
form of business organization which has been registered with the PEZA to engaged in the importation of
goods or merchandise within the restricted or free trade area in the ECOZONE tax and duty-free for
immediate transshipment or for storage, repacking, sorting, mixing or manipulation and subsequent
exportation unless the Board allows the sale thereof in the customs territory subject to the payment of
customs duties and internal revenue taxes to such other terms and conditions as it may determine.

m. “ECOZONE Utilities Enterprise” shall refers to a business entity or concern within the ECOZONE duly
registered with and / or franchised / licensed by the PEZA with or without the incentives provided under
Republic Act No. 6957, as amended, (the Build-Operate-Transfer Law) and / or with or without financial
exposure on the part of the PEZA, such as contractors/operators of light and power systems, water supply
and distribution systems, communications and transportation systems within the ECOZONE and other similar
or ancillary activities as may be determined by the Board.

n. “ECOZONE Facilities Enterprise” shall refers to a business entity or concern within the ECOZONE duly
registered with and / or franchised / licensed by the PEZA with or without incentives provided under
Republic Act No. 6957, as amended, (the Build-Operate-Transfer Law) and / or with or without financial
exposure on t he part of the PEZA such as contractors / operators of buildings, structures, warehouses, site
development and road network, ports, sewerage and drainage system and other facilities for the
development, operation and maintenance of the ECOZONE and other similar or ancillary activities as may be
determined by Board.

o. “ECOZONE Developer/Operator” refers to a business entity or concern duly registered with and / or
licensed by the PEZA to develop, operate and maintain an ECOZONE or nay or all of the component IE, EPZ,
Free Trade Zone or Tourist / Recreational Center and the required infrastructure facilities and utilities such
as light and power system, water supply and distribution system, sewerage and drainage system, pollution
control devices, communication facilities, paved road network, administration building and other facilities as
may be required by the PEZA. The term shall include the PEZA and / or the Local Government Unit when by
the themselves or in joint venture with a qualified private entity, shall act as the Developer / Operator of the
ECOZONES. As such, they shall be entitled to the same incentives under Rule XIV of these Rules in
accordance with the pertinent provisions of the Act and the Code.

p. “ECOZONE Service Enterprise” shall refers to a business entity or concern within the ECOZONE such as
but not limited to those engaged in customs brokerage, trucking / forwarding services, parcel services,
janitorial services, security services, insurance, and / or banking services, consultancy services, restaurants
or such other services within the ECOZONE as may be determined by the Board, duly registered and/or
licensed by the PEZA whose income derived within the ECOZONE shall be subject to taxes under the
National Internal Revenue Code pursuant to Section 25 of the Act.

q. “ECOZONE Tourism Enterprise” shall refer to an individual, association, partnership, corporation or other
business organization duly registered with the PEZA proposing to engaged in the establishment and
operation of tourist-oriented accommodations, restaurants operated as an integral part of a tourism facility
(e.g., hotels, resorts, recreational centers), sports and recreational facilities within the ECOZONE.

r. “Negative List” shall refer to the list of industries drawn up and regularly updated by the PEZA under
which ECOZONE Enterprises engaged in any industry listed therein shall not be allowed to sell their products
or any portion thereof in the custom territory.

s. “Certificate of Registration” shall mean the certificate issued by the PEZA to an ECOZONE Enterprise upon
its registration.

t. “Date of Registration” shall refer to the date appearing in the certificate of registration.

u. “Registration Agreement” shall refer to the final agreement executed by the PEZA and the ECOZONE
Enterprise setting forth the terms and conditions for the latter's operation of business or engaged of
economic activity within the ECOZONE.

v. “Start of Commercial Operations” for purposes of the income tax holiday shall be the date specified in the
Registration Agreement or the date when the particular ECOZONE export enterprise actually begins
production of the registered product for commercial purposes, whichever comes first, irrespective of phases
or modules or schedule of development.
w. “Expansion” shall mean installation of additional facilities and / or equipment that will result in the
increase of production capacity. It may include modernization and rehabilitation.

Modernization or rehabilitation to be registrable may or may not result in increase in capacity but the
following conditions should be met:

1. The area must be listed in the Investment Priorities Plan specifically for modernization or rehabilitation;

2. Phases / stages of production sought to be modernize / rehabilitated must be identified; and must result
in any of the following:

a. substantial reduction of production cost; or

b. significant increase in productive efficiency including debottlenecking; or

c. meaningful upgrading of product quality; or

d. keeping abreast with the state of the art in the production of registered product.

x. “Prohibited Merchandise” shall refer to goods, wares, merchandise, equipment or machineries the
importation of which are prohibited by law as enumerated in Section 102, Book 1 of the Republic Act No.
1937, otherwise known as the Tariff Customs Code of the Philippines, as amended by Presidential Decree
No. 34, and such other goods or merchandise which may be prohibited by special laws or by the PEZA.

y. “Domestic Merchandise” shall mean those articles which are the growth, origin or manufacture of the
Philippines.

z. “Foreign Merchandise” shall mean those articles imported into the Philippines, except those previously
exported therefrom and returned having been advanced in value or improved in condition by any process of
manufacture or other similarly artificial means or processes and upon which no drawback or bounty has
been allowed.

aa. “Export Product” shall mean the manufacture, processed and/or assembled products, whether physical
or non-physical, belonging to the class of products approved by the Board to be undertaken by the
enterprise, including such packaging materials and containers as may be necessary to put the product into
exportable form.

bb. “Rejects / Seconds” shall mean finished or semi-finished products or raw materials which are defective
or inferior in quality, such that any further processing or manipulation thereof is not technically or
economically feasible for the purpose for which they are originally intended.

cc. “Semi-Finished Product” shall mean an article, which is unfinished or incomplete but possesses the
essential character of a finished product in relation to another and intended to be used as a direct input to
the latter.

dd. “Raw Materials” refers to non-fabricated materials directly used in processing or manufacturing, during
the course of which its nature or form is changed.

ee. “Spare Parts” shall mean usual components of machinery and / or equipment which are subject to wear
and tear arising from normal use, utilization and operation.

ff. “Machinery and Equipment” shall refer to capital equipment, major components thereof, non-perishable
tools, machines and other mechanical, chemical and or electrical apparatus, whether fixed or movable,
needed in the registered operations of the ECOZONE Enterprise.
gg. “Packaging Materials” shall refer to wrapping materials, receptables and containers, tags, labels, and
such other materials as are necessary to put the product in exportable form.

hh. “Construction Materials” shall refer to articles or materials that shall form part of the factory buildings
whether built by the ECOZONE enterprise or leased from the PEZA, including fixtures thereof, enclosures,
driveways and other auxiliary structures.

ii. “Merchandise or Goods” shall collectively refer to raw materials, supplies, equipment, machineries, spare
parts, packaging materials, or wares of every description to be used in connection with the registered
activity of an ECOZONE enterprise.

jj. “Assembly” shall mean the process by which semi-finished parts or materials are put together or
combined to form a distinct product without substantially changing its physical or mechanical characteristics
or electro-magnetic and / or chemical properties.

kk. “Manufacturing / Processing / Manipulation” shall mean the process by which raw or semi-finished
materials are converted into a new product through a change in their physical, mechanical or electro-
magnetic characteristics and / or chemical properties.

ll. “Packaging” shall mean the process by which raw materials, semi-finished products or finished products
whether locally produced or not are placed without substantial alteration in a container or receptacle or
wrapped in preparation for the market. It may include weighing and / or reduction of products to standard
measurements and specifications and other similar packaging processes.

mm. “Export Sales” shall mean the Philippine port F.O.B. value, determined from invoices, bills or lading,
inward letters of credit, landing certificates and other commercial documents of export products exported
directly by an ECOZONE Export or Free Trade Enterprise or the net selling price of the export products sold
by an ECOZONE Export or Free Trade Enterprise to another export producer or to an export trader that
subsequently exports the same; Provided, That sales of export products to another producer or to an export
trader shall only be deemed export sales when actually exported by the latter, as evidenced by the landing
certificate or similar commercial documents; Provided, further, That without actual exportation, the following
shall be considered constructively exported:

1. sales to the bonded manufacturing warehouses of export-oriented manufacturers;

2. sales to registered ECOZONE Export or Free Trade Enterprises;

3. sales to registered export traders operating bonded trading warehouses supplying raw materials used in
the manufacture of export products; and

4. sales to diplomatic missions and other agencies and / or instrumentalities granted tax immunities of
locally manufactured, assembled or repacked products, whether paid for in foreign currency or not.

n. “Gross Income” for purposes of computing the special tax due under Section 24 of the Act refers to gross
sales or gross revenues derived from business activity within the ECOZONE, net of sales discounts, sales
return and allowances and minus costs of sales or direct costs but before any deduction is made for
administrative expenses or incidental losses during a given taxable period. The allowable deductions from
“gross income” are specifically enumerated under Section 2, Rule XX of these Rules.

o. “Value Added” is the difference between the selling price of merchandise and the value of the raw
materials and manufacturing supplies used in the manufacture, processing or manipulation thereof, which
were either imported directly by an ECOZONE Export or Free Trade Enterprise or imported through the
customs territory.

p. “Net Foreign Exchange Earnings” shall mean the total foreign exchange proceeds from the export of the
registered product minus the total foreign exchange expenses incurred in the production of the registered
product and the depreciation of imported capital equipment.
q. “Net Foreign Exchange Savings” shall man the foreign exchange that would have been expended had the
registered product been imported less the total foreign exchange expenses incurred in the production of the
registered product and the depreciation of imported capital equipment.

r. “Fixed Assets” shall mean those assets subject to depreciation under the National Internal Revenue Code.

s. “Training Program” shall refer to an organized activity primarily designed for the systematic development
of the attitude, knowledge, skill and behavior pattern of managerial or non-managerial employees required
for the adequate performance of a given job or task conducted by a juridical or natural person or persons.

t. “Training Expense” refers to the direct, ordinary and necessary expenses incurred by an ECOZONE Service
Enterprise (except by an ECOZONE Service Enterprise as defined under paragraph (p), Section 2, Rule I of
these Rules) in training program or activity designed to develop skilled or unskilled labor or for managerial
or other management development program within the purview of Section 42 of the Act. These shall include,
among others, the following expenses or any combination of them:

1. Training materials, books and supplies;

2. Cost of raw materials and non-depreciable tools actually consumed and used during the training;

3. Honoraria for resource speakers and training coordinators and other fees;

4. Travelling expenses of resource speakers and training coordinators while away from home on account of
the training program;

5. Salaries of trainees and training staff for the duration of training;

6. Travelling expenses of trainees and training staff while away from home on account of the training
program;

7. Tuition, registration or similar fees paid for sponsored trainees;

8. Cost of repairs of training equipment facilities and other fixed assets used in the training program, if
breakdown occurs as a result of training;

9. Others (not to exceed 5% of the total training cost)

a. foods 
b. rental of venue (if held outside of the ECOZONE enterprise's factory / office building) 
c. rental of equipment 
d. work clothes for trainees and instructors 
e. certificates of training 
f. group insurance of trainees

u. “Unskilled Labor” shall refer to any person, employed or unemployed by the ECOZONE enterprise lacking
the skill, training or experience required by or necessary for a particular production process in any industrial
or manufacturing activity.

v. “Direct Labor Wage” shall refer to compensation for labor directly used in the production or manufacturing
process up to and including the services of the production foreman, but shall exclude labor for maintenance
of production, machinery and equipment. Compensation shall cover salaries and wages, including other
payments such as bonuses and cost of living allowances which form part of the laborer's or employee's
taxable earnings.
w. “Basic Skills Training” shall refer to the first stage of the learning process of a vocation or occupation
aimed at developing the aptitude, technical character for a given job, task, knowledge, skill and behavior
pattern to specific standards.

x. “Skills Upgrading” shall refer to training for supplementary skills and knowledge in order to increase the
versatility and occupational mobility of a worker or to improve his standard of performance.

y. “Retraining” shall refer to the acquisition of skills and knowledge required in an occupation or other than
the skills or knowledge for which the person was originally trained.

Rule II - Basic Rights and Guarantees

SECTION 1. Protection of Investment - Consistent with Section 7 of the Act, all investors and registered
enterprises are entitled to the basic rights and guarantees provided in the Constitution. Among other rights
recognized by the Government of the Philippines are the following:

a) Repatriation of Investments - In the case of foreign investments, the right to repatriate the entire proceeds of the liquidation of the
investment in the currency in which the investment was originally made and at the exchange rate prevailing at the time of repatriation,
subject to the applicable provisions of Republic Act No. 265 and Republic Act No. 7653 and the pertinent regulations issued pursuant
thereto.

b) Remittance of Earnings - In accordance with Section 28 of the Act and Rule XIX of these Rules, after-tax profits and other earnings of
foreign investments in the ECOZONE may be remitted outward without need of prior Bangko Sentral ng Pilipinas approval. The
remittance shall be in the equivalent foreign exchange through any of the banks licensed by the Bangko Sentral ng Pilipinas in the
ECOZONE: Provided, That such foreign investments in the registered enterprise have been previously registered with the Bangko
Sentral ng Pilipinas.

c) Foreign Loans and Contracts - The right to remit at the exchange rate prevailing at the time of remittance such sums as may be
necessary to meet the payments of interest and principal on foreign loans and foreign obligations arising from technological assistance
contracts, subject to the applicable provisions of Republic Act No. 265 and Republic Act No. 7653 and the pertinent regulations issued
pursuant thereto.

d) Freedom from Expropriation - These shall be no expropriation by the government of the property represented by investments or of the
property of the enterprise except for public use or in the interest of national welfare or defense and upon payment of just compensation.
In such cases, foreign investors or enterprises shall have the right to remit sums received as compensation for the expropriated property
in the currency in which the investment was originally made at the exchange rate at the time of remittance, subject to the applicable
provisions of Republic Act No. 265 and Republic Act No. 7653 and the pertinent regulations issued pursuant thereto.

e) Requisition of Investment - There shall no requisition of the property represented by the investment or of the property of the
enterprise, except in the event of war or national emergency and only for the duration thereof. Just compensation shall be determined and
paid either at the time of requisition or immediately after cessation of the state of war or national emergency. Payments received as
compensation for the requisitioned property may be remitted in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the applicable provisions of Republic Act No. 265 and Republic Act No.
7653 and the pertinent regulations issued pursuant thereto.
SECTION 2. Protection of Labor - Consistent with Section 2 of the Act, all workers within the ECOZONES
shall be assured of their basic rights under the Constitution, including the right to security of tenure and
humane conditions of work and right to self-organization.

PART II - REGISTRATION OF ECOZONE ENTERPRISE

Rule III - Application and Registration

SECTION 1. Qualification of Applicants - any person, firm, association, partnership, corporation, or any
other form of business organization, regardless of nationality, control and / or ownership of the working
capital thereof may apply for registration as an Export or Free Trade Enterprise within the ECOZONE in any
sector of industry, international trade and commerce, except duty-free retailing and wholesale trading of
imported finished products for purposes of serving the domestic market. Furthermore, if the area of
investments of the said enterprises falls within Lists A and B of the Foreign Investments Act of 1991, then
the applicable nationality, ownership or control requirements of the said law shall be observed.

Applications for ECOZONE Developer / Operator, Domestic Market, Utilities, Facilities, Tourism or Service
Enterprises shall comply with the applicable nationality, control and / or ownership requirements of the
working capital thereof in accordance with the pertinent provisions of the Philippine Constitution, Foreign
Investments Act of 1991 and other existing laws and regulations.

However, applicants for Domestic Enterprise shall be limited to new or expanding business entities subject
to the guidelines that shall be promulgated by the Board in addition to the nationality requirements under
existing laws and regulations.

SECTION 2. Forms - All applications shall be made upon forms prescribed by the PEZA duly accomplished in
three (3) copies.

SECTION 3. Supporting Documents - The applicant for an ECOZONE Enterprise shall submit the following
documents:

a. Project feasibility study, unless dispensed with and in lieu thereof, the applicant shall submit basic data / information on its technical,
financial, marketing and management capability / competence to undertake the proposed project or business within the ECOZONE; *NO
LONGER REQUIRED*

b. Copies of articles of incorporation and by-laws;

c. Resolution of the applicant's board of directors authorizing the filing of the application; list of its directors, principal officers, and
major stockholders, including their bio-data;

d. List of machinery and equipment to be used by the applicant with a statement of their capacity, ownership and/or mode of
procurement;

e. Company brochures and / or photographs of product(s); and

f. Other supporting documents / papers / clearances as may be required by the PEZA depending upon the nature of the business and the
type of business organization of the applicant.

SECTION 4. Filing of Application - The application shall be filed with the PEZA upon payment of the
corresponding filing fee.
SECTION 5. Board Action - Approval of the application shall be by resolution of the Board unless otherwise
required by appropriate circulars and / or memoranda taking into consideration the decentralization policy in
the management, operation and maintenance of each ECOZONE. The action taken thereon shall be
communicated in writing to the applicant.

SECTION 6. Certificate of Registration - The Certificate of Registration shall be issued only upon the
execution of the Registration Agreement by the PEZA and the applicant and whenever it can be shown that
the applicant has:

a. Complied with all the pre-registration requirements;

b. Submitted within twenty (20) calendar days from receipt of the notice of approval of the application, a formal acceptance of the
proposed terms and conditions of registration. For good cause shown, said period may be extended if the request therefore is filed before
the expiration of the period sought to be extended; and

c. Paid the registration fee.

However, in appropriate cases as may be determined by the Board, the ECOZONE management or the duly authorized offices of the
PEZA shall be empowered to issue business permits and / or licenses to ECOZONE Enterprises in lieu of the Certificate of Registration
after the proper evaluation of their application in accordance with the set of criteria duly approved by the Board and upon payment of the
corresponding fees.

SECTION 7. One Stop Shop Center - There shall be established in the ECOZONE a one stop-shop center to
facilitate the registration, licensing and issuance of permits to ECOZONE Enterprises. All government
agencies involved shall assign their respective representatives in the ECOZONE for this purpose.

PART III - ESTABLISHMENT OF THE ECOZONES

Rule IV. Criteria For the Establishment of An Ecozone

SECTION 1. General Criteria - All areas initially identified under Section 5 of the Act as the sites of the
ECOZONES and other areas where ECOZONES may be established shall conform to the following general
criteria to ensure their viability and geographic dispersal.

a) Identification of the proposed area as a regional growth center in the Medium-Term Philippine Development Plan or by the Regional
Development Council;

b) The existence of required infrastructure in the proposed ECOZONE, such as roads, railways, telephones, ports, airports, etc., and the
suitability and capacity of the proposed site to absorb such improvements;

c) The availability of water source and electric power supply for use of the ECOZONE;

d) The extent of vacant lands available for industrial and commercial development and future expansion of the ECOZONE as well as of
lands adjacent to the ECOZONE available for development of residential areas for the ECOZONE workers;

e) The availability of water source and electric power supply for use of the ECOZONE;
 f) The area must have a significant incremental advantage over the existing ECOZONES and its potential profitability can be established;

g) The area must be strategically located; and

h) The area must be situated where controls can easily be established to curtail smuggling activities.

SECTION 2. Specific Criteria - The Board shall formulate specific criteria, priorities and guidelines to
implement the general criteria set forth in Section 1 hereof, including the application of the various schemes
under Republic Act No. 6957 (the Build-Operate-Transfer Law), as amended, for the guidance of the PEZA or
of the applicant for registration as an ECOZONE Developer / Operator in the establishment of the
ECOZONES.

SECTION 3. Development of the Areas / Documentary Requirements.

A. Documents Required for PEZA Board Pre-qualification Clearance for Endorsement of a Proposed Economic
Zone for Presidential Proclamation:

1. Notarized Application (PEZA EDD Form 001 A);

2. Anti-Graft Certificate (R.A. 3019);
3. SEC Registration Certificate
4. Articles of Incorporation
5. Audited Financial Statements (for the last three (3) years of operation, where
applicable);
6. Board Resolution / Special Power of Attorney designating the company's
authorized representative to PEZA;
7. Project Description / Feasibility Study, which should provide, among others,
information on the financial capability of the proponent, present and proposed land use,
master development plan and schedule for the proposed economic zone;
8. Vicinity map reflecting the various land uses and important verifiable landmarks
within one (1) kilometer radius of the project site;
9. Proof of land ownership or any perfected contract / document confirming the
applicant's authority / clearance to use the land for economic zone development and
related purposes.
10. Endorsement of the Sangguniang Bayan / Panlungsod for the devlopment of the
proposed economic zone (i.e., all local government units of all municipalities and cities
with areas included in the proposed economic zone);
11. Certification from the Department of Agriculture that the area for the proposed
economic zone is not or has ceased to be economically feasible and sound for
agricultural purposes (i.e., the area is marginal for agricultural use);
12. DAR Conversion Clearance or Exemption Certificate (or HLURB Zoning
Certification, if applicable); and
13. Other requirements as may be prescribed by the PEZA Board.
B. Documents required for PEZA's Endorsement of a Proposed Economic Zone for Presidential Proclamation.

(Note: The issuance of the Presidential Proclamation is the operative act that enables economic zone
developers and locator enterprises to qualify for incentives):

1. Proof of land ownership and / or Long-Term Lease Agreement on the whole area
of the proposed economic zone;
2. Verified survey returns and technical description of the land area for the
proposed economic zone;
3. Certification from the National Water Resources Board that the identified
source(s) of water for the economic zone shall not cause water supply and related
problems in adjacent communities;
4. Environmental Compliance Certificate issued by the Department of Environment
and Natural Resources; and
5. Other requirements as may be prescribed by the PEZA Board.
C. Documents to be submitted to PEZA prior to the Signing of a Registration Agreement of an economic zone
covered by a Presidential Proclamation:

1. Detailed engineering / development plans of the economic zone; and

2. Other requirements as may be prescribed by the PEZA Board.
SECTION 4. Evaluation and Recommendation to the President - Upon submission of all the requirements
stated in Section 3 hereof, the PEZA shall evaluate the application for ECOZONE development and if found
viable in its technical, financial, marketing and management aspects, the Board shall recommend to the
President of the Philippines the issuance of a proclamation delineating the metes and bounds of an
ECOZONE.

SECTION 5. Timetable of Development - Unless a longer period is required by the Board, the development
of the whole ECOZONE must be completed within a period of five (5) years. Unless otherwise provided by
the Board, the phasing of development shall be allowed in the following manner:

a. Phase I - 30% of the area 

b. Phase II - 30% of the area 
c. Phase III - 20% of the area 
d. Phase IV - 10% of the area 
e. Phase V - 10% of the area

At the end of each phase, the area must be provided with the basic infrastructure facilities and utilities as
required in the guidelines to be issued by the PEZA ready for immediate use and occupancy. Areas that are
not developed an completed within the five-year period unless extended by the Board shall be reverted to
agricultural or other uses in accordance with existing land use and zoning laws and regulations. If
warranted, pertinent amendments to the covering proclamations shall be effected at the expense of the
ECOZONE Developer / Operator or proponent.

SECTION 6. Inspection and Change s - To monitor and supervise the development of the ECOZONE in
accordance with the approved overall development plan and timetable, the PEZA shall have the right to
conduct periodic inspections and if necessary, to examine the books of accounts of the ECOZONE
Developer / Operator. Any material changes in the project, such as changes in timetable, management and
ownership, shall require prior approval of the Board.

SECTION 7. Other Areas - Areas which do not meet the criteria, priorities and guidelines as provided in
Sections 1 and 2 hereof may be established as ECOZONES: Provided, That the said areas shall be developed
only through local government and / or private sector initiative under any of the schemes allowed in
Republic Act No. 6957, as amended, (the Build-Operate-Transfer Law), and without any financial exposure
on the part of the national government / PEZA: Provided, further, That the area can be easily secured to
curtail smuggling activities; Provided, furthermore, That after five (5) years the area must have attained a
substantial degree of development, the indicators of which shall be formulated by the PEZA: Provided,
finally, That the operation of ECOZONES which have failed to attain the degree of development as required
herein may be assumed by the PEZA or transferred to other interested ECOZONE Developers / Operators
under such terms and conditions as the Board may prescribe.

Locators registered with PEZA within such ECOZONES shall continue their operation in the same area and
avail of all incentives originally granted.
SECTION 8. Existing Privately-Owned Industrial Estates - Any privately-owned and existing industrial estate
may voluntarily apply for conversion into an ECOZONE subject tot he applicable criteria and requirements as
provided under Section 1,2,3,4,5,6 and 7 of this Rule, unless otherwise prescribed by the Board.

PART IV - INFRASTRUCTURE FACILITIES AND UTILITIES

Rule V. Lease of Lands and Buildings in the Ecozones

SECTION 1. Qualifications - Lands and buildings within an ECOZONE can be leased only to ECOZONE
enterprises / entities authorized by or registered with the PEZA and owned or controlled either by Philippine
nationals or by aliens under such terms and conditions as the Board may formulate.

With respect, however, to lease of lands to ECOZONE enterprises wholly owned or controlled by aliens, the
following limitations and conditions shall apply:

a. The lease period shall not exceed fifty (50) years extendible once for a period not more than twenty-five (25) years.

b. The area leased shall be used exclusively for the purpose of investments as approved by the PEZA and other government agencies, if
applicable. In case the leased premises or any part thereof is used for any other purpose different from that as approved or not related
thereto or connected therewith, without the prior written approval by the PEZA, the lease may be considered terminated and / or
cancelled by the PEZA without prejudice to the penalties provided for under Section 7 of R.A. No. 7652, otherwise known as the
Investors Lease Act, and compensation for damages suffered by the lessor.

c. The lease premises shall comprise only such area as may reasonably be required for the project contemplated in the investment.
Additional areas for future or intended expansion may also be leased upon satisfactory showing of the viability of the proposed
expansion and payment of reservation fee for the land within a period as may be determined by the Board.

d. In case the ECOZONE enterprise desires to extend the lease after the initial period of fifty (50) years, it shall present proof that it has
made social and economic contributions to the country, otherwise, the application for renewal / extension shall be disapproved.

e. In case of tourism projects, lease of private lands by a registered ECOZONE Tourism Enterprise, wholly foreign-owned or more than
40% of whose outstanding capital stock is owned by aliens, shall be limited to projects with a projected investment of not less than Five
Million ($5 Million) US Dollars seventy percent (70%) of which should be infused in said project not later than three (3) years within the
execution of the lease agreement. In case of violation of this condition, the lease agreement shall be deemed cancelled and terminated
upon the expiration of the three (3) year period unless an extension is granted by the PEZA upon clearly meritorious grounds.

However, if the entire period of lease of private land is less than fifty (50) years or not exceeding fifty (50) years with no right to extend
the lease period, the foregoing requirement as to the minimum amount of projected investment in tourism projects by foreign owned or
controlled ECOZONE Tourism Enterprises shall be prescribed by the Board.

With respect to tourism projects wholly owned or controlled by Philippine nationals, the above prescribed minimum investment in
tourism projects within an ECOZONE shall not apply.

SECTION 2. Cancellation of Lease - Any long term lease contract referred to in Section 1 hereof may be
cancelled at the instance of the PEZA, if the project is not initiated within the period as stated in the contract
or three (3) years from the date of the lease contract whichever comes earlier, unless an extension is
granted by the PEZA upon valid meritorious grounds.

SECTION 3. Transfer of Leasehold Rights - All leasehold rights acquired under long term lease contracts in
accordance with this Rule and the Act may be sold, transferred, assigned or conveyed: Provided, That if the
transferee or assignee is a Filipino citizen or an enterprise wholly owned by Filipino citizens, the limitations
contained in Section 1 hereof with respect to the maximum period of lease shall not apply: Provided, finally,
That the transferee or assignee shall be a registered ECOZONE enterprise or possesses all the qualifications
and none of the disqualifications to be eligible for registration as an ECOZONE enterprise to be determined
by the PEZA.

Rule VI. Sale of Land or Building / Structure 

Within an Ecozone

SECTION 1. Land Acquisition - An ECOZONE enterprise duly registered with the PEZA may acquire lands
within the ECOZONE subject to compliance with the nationality requirements under the Philippine
Constitution and existing laws and to the terms and conditions as may be prescribed by the Board. If the
ECOZONE enterprise is a corporation desiring to acquire lands within the ECOZONE, it must be duly
organized under the laws of the Philippines and at least sixty percent (60%) of its outstanding capital stock
and entitled to vote is owned and held by citizens of the Philippines.

SECTION 2. Building Acquisition - An ECOZONE enterprise duly registered with the PEZA may construct,
buy or sell building(s)/structure(s) subject to the terms and conditions as may be prescribed by the Board.

RULE VII. Permits and Other Requirements

SECTION 1. Permits - No building, structure, facility, utility, and electro-mechanical equipment shall be
constructed and installed and no improvement thereon within an ECOZONE or any other area owned,
administered or operated by the PEZA shall be made without the prior written approval or permit issued by
the PEZA. Likewise, upon completion of the building, structure, facility, utility and installation of electro-
mechanical equipment permanently and / or temporarily attached to the building, the ECOZONE enterprise
or the owner shall secure an occupancy permit for the building and/or a permit to operate such facility,
utility and electro-mechanical equipment from the duly designated PEZA Building Official. The ECOZONE
enterprise shall pay to the PEZA all the corresponding fees and dues related to the issuance of the permit as
specified in the National Building Code and its implementing rules as well as those contained in such other
rules as the PEZA may adopt.

SECTION 2. Submission of Requirements - Any ECOZONE registered enterprise intending to construct its
own building or other structures, facilities and utilities within an ECOZONE shall, before proceeding with the
work, submit to the PEZA all the documentary requirements as herein below enumerated within forty-five
(45) days from the date of registration. Thereafter, it shall commence construction and / or installation of
equipment within thirty (30) days from approval or issuance of the necessary permits unless a different
period is granted by the PEZA.

These documentary requirements are the following:

1. Duly accomplished application form to be submitted to the Office of the PEZA / ECOZONE Building Official together with the
following documents:

a. In case the applicant is a registered owner of the lot:

1. Certified True Copy of Transfer Certificate of Title 
2. Tax Declaration 
3. Current Real Property Tax Receipt

b. In case the applicant is not a registered owner of the lot:

1. Duly notarized copy of the contract of lease or other pertinent contracts 

2. Certificate of registration with the PEZA or business permit / license issued by the PEZA

2. Three (3) sets of plans, specifications and bill of quantities prepared, signed and sealed by duly licensed architects / engineers;

3. Logbook and standard drawing sheets; and

4. Environmental Compliance Certificate.

SECTION 3. Collection of Fees / Charges - The PEZA shall collect fees and charges for services rendered in
connection with the processing and issuance of all the permits required and performance of other regulatory
functions in accordance with the rates fixed under the National Building Code of the Philippines and / or the
schedule of fees that may be adopted by the PEZA. All fees and dues collected shall accrue to the PEZA.

SECTION 4. Use of Structures / Roads - If the use of any structure or road inside the ECOZONE or the
excavation of the same is required by an ECOZONE registered enterprise to meet its building construction
requirements, an application for such purpose must first be submitted to PEZA. The public grounds or
structures or roads shall be restored to their original shape and condition immediately after completion of
the construction work at the expense of the ECOZONE registered enterprise.

SECTION 5. Plant Inspection - A completed plant building / structure / facility / utility and new installed
electro-mechanical equipment and machinery shall be inspected by the PEZA to determine whether it has
complied with the approved building specifications and plant layout.

If the inspection indicates that the building was constructed in accordance with the approved building
specifications and plant layout and satisfies safety and anti-pollution requirements then the PEZA shall issue
the occupancy permit and / or permit to operate the electro-mechanical equipment and machinery after
payment of corresponding fees by the ECOZONE enterprise prior to the start of operation.

If the inspection shows that safety and anti-pollution requirements have not been met or that there have
been deviations from the approved plans and plant layout, the PEZA may withhold the grant of the
occupancy permit or the permit to operate electro-mechanical equipment and machineries until the
necessary adjustments shall have been made within a reasonable period of time as determined by the PEZA.

SECTION 6. Temporary Permit to Operate - If the deficiencies noted during the inspection do not endanger
life and property, a temporary permit to start operation may be granted: Provided, That the PEZA shall
furnish the ECOZONE enterprise with a detailed listing of the improvements required and shall set a deadline
for the ECOZONE enterprise to carry-out such improvements: Provided further, That the ECOZONE
enterprise shall report to the PEZA within the prescribed deadline the results of adjustments made and shall
request the PEZA to re-inspect the plant for final approval.

SECTION 7. Occupational Safety - The PEZA, in accordance with the Department of Labor and Employment,
shall conduct periodic inspection of plants within the ECOZONE to check on health, medical, occupational
and safety standards of the buildings, structures and electro-mechanical equipment and machineries and the
general conditions and maintenance of the plant. The ECOZONE enterprise shall correct any deficiency or
violations of pertinent regulations noted in such inspection within a reasonable period of time to be
determined by the PEZA.
In the implementation of the periodic inspection of plants within the ECOZONES, the PEZA shall impose
inspection fees on installations of different machineries, equipment and devices and shall issue a permit to
operate and a certificate of inspection. Fees to be collected shall be based on the current rate being imposed
by the Department of Labor and Employment unless a different rate is imposed by the Board.

PART V. TAX TREATMENT OF MERCHANDISE 

IN THE ECOZONES

Rule VIII. Tax Treatment of Merchandise in the 

Restricted Areas of the Ecozones

SECTION 1. Exemptions - Merchandise brought to the restricted areas in the ECOZONES by registered
Export or Free Trade Enterprises, except prohibited merchandise, shall not be subject to all customs and
internal revenue laws and regulations of the Philippines nor to local tax ordinances: Provided, That they are
to be sold, stored, broken-up, replaced, assembled, manipulated, manufactured and/or mixed with foreign
or domestic merchandise within the restricted areas in the ECOZONES.

SECTION 2. Domestic Merchandise - Domestic Merchandise sent from the restricted areas of the
ECOZONES by registered Export or Free Trade Enterprises to the custom territory shall, whether or not
combined with or made part of other articles likewise the growth, product or manufacture of the Philippines
while in the ECOZONE subject to the internal revenue laws of the Philippines as domestic goods sold,
transferred or disposed of for local consumption.

SECTION 3. Foreign Merchandise - Merchandise of foreign origin brought to the restricted areas in the
ECOZONES by registered Export or Free Trade Enterprises which has not undergone any processing,
manufacturing or manipulation while in the said areas of the ECOZONES, shall, when sent therefrom to the
customs territory, be subject to the laws and regulations governing imported merchandise: Provided, That
where said foreign merchandise is combined with or made part of any domestic article, the duties and taxes
to be assessed on the final product shall be based on the value of such imported merchandise (except when
the final product is exempt) and internal revenue taxes on the value added: Provided, further, That foreign
merchandise included in the negative list shall not be sent from the restricted areas of the ECOZONE to the
customs territory.

SECTION 4. Transfer of Merchandise - Domestic merchandise on which all internal revenue taxes have been
paid if subject thereto, and foreign merchandise on which duty or tax has been paid, or which have been
admitted free of duty and tax, may be taken into restricted areas of the ECOZONES from the customs
territory of the Philippines and brought back thereto free of quota, duty or tax: Provided, however, That said
merchandise shall be preserved its identity at the time of transfer from the ECOZONE to the customs
territory. A merchandise shall be deemed to have lost its identity when, at the time of transfer, there has
been a change in the physical or mechanical characteristics and / or electro-magnetic or chemical properties
of such merchandise.

SECTION 5. Domestic Sale - Finished products of registered Export of Free Trade Enterprises not included
in the negative list shall be made available for domestic sale in the customs territory or retail stores /
shopping malls within the commercial / tourist or other authorized areas of the ECOZONES, subject to all
applicable rules and regulations including the payment of customs duties and internal revenue taxes, to the
applicable provisions of the Retail Trade Nationalization Law, as amended, and to such other regulations or
limitations as may be adopted by the Board.

SECTION 6. Identity - When the identity of an article taken to the restricted areas of the ECOZONES
defined in Section 4 above has been lost, such article shall, when taken from the ECOZONE to the customs
territory or to the non-restricted areas of the ECOZONE, be treated as foreign merchandise entering the
country for the first time.
SECTION 7. Subsequent Importation - Goods or merchandise produced or manufactured in the restricted
areas of the ECOZONE and exported therefrom shall, on subsequent importation into the customs territory,
be subject to the import laws applicable to like articles manufactured in a foreign country.

SECTION 8. Rejects, Seconds and Recoverable Wastes - Subject to the provisions of Section 3 of this Rule,
rejects, seconds and recoverable wastes shall, when taken from the restricted areas of the ECOZONES to
the customs territory, or to the non-restricted areas of the ECOZONE, be taxed in accordance with the
applicable provisions of the customs and internal revenue laws and regulations of the Philippines.

SECTION 9. Abandonment - any article or merchandise found in the restricted areas of the ECOZONE, the
ownership of which cannot be known despite diligent efforts, shall be declared as abandoned in favor of the
PEZA.

RULE IX. Treatment of Merchandise in 

Non-Restricted Areas of the Ecozone

SECTION 1. Regulations - Insofar as consistent with the Act, the PEZA hereby adopts the pertinent
regulations and procedures in the tax treatment of merchandise and / or services in the industrial estate and
/ or tourism and recreational and other areas within the ECOZONE but outside a restricted area, being
implemented by appropriate agencies of the government without prejudice to subsequent changes /
supplements to be issued in appropriate circulars / issuances by the Board with the end in view of
simplifying the same.

PART VI. MOVEMENT OF GOODS, PERSONS 

AND VEHICLES

Rule X. Entry and Exit of Goods to and from the 

Restricted Areas of the Ecozones

SECTION 1. Prior Approval - Merchandise or articles of every description, except prohibited merchandise,
may be brought to the restricted areas of ECOZONES upon prior approval of the PEZA in a prescribed form,
which shall be obtained before placing the order for the importation or before entry of said merchandise or
articles into the territorial jurisdiction of the Philippines. However, the PEZA shall adopt separate rules and
guidelines with respect to the entry and exist of goods or merchandise to and from the non-restricted areas
of the ECOZONES.

SECTION 2. Importation of Samples - The importation of samples for reference and / or research purposes,
of such kind and in such quantity, dimensions or constructions as may be determined by the PEZA shall also
be allowed in the restricted areas of the ECOZONES and the same shall be considered as imports of raw
materials.

SECTION 3. Permits - Merchandise or goods may be taken into or brought out of the restricted areas of the
ECOZONES only upon prior approval or permit by the PEZA in accordance with its documentation and
security procedures. Permits to bring out of the ECOZONES said merchandise or goods must be secured by
the Export or Free Trade Enterprise from the PEZA prior to loading or before the release of said merchandise
or goods from the factory premises or warehouse of the enterprise. Merchandise or goods brought out of the
factory premises or warehouse of the Export or Free Trade Enterprise without the required prior permit from
the PEZA shall be considered as a violation of this Section although the said merchandise or goods are still
within or inside the restricted areas or boundaries of the ECOZONE.

SECTION 4. Prescribed Forms - The application for the entry or exit permit of goods shall be filed by the
ECOZONE Export or Free Trade Enterprise or entity concerned in the form prescribed by the PEZA. The PEZA
shall require the submission of shipping, commercial and other pertinent documents relative to the
importation, exportation, or entry into the customs territory of the said goods.
SECTION 5. Certificate of Origin - Upon due application, the PEZA shall issue the corresponding Certificate
of Origin to an ECOZONE enterprise intending to export its finished goods or merchandise to a foreign
country.

The Certificate of Origin shall contain a declaration by the exporter and certification by the PEZA that the
goods or merchandise were manufactured, assembled, processed, stored, mixed, cleaned, graded,
repacked, sorted, manipulated or transshipped wholly or partly within a particular ECOZONE located in the
Philippines and accompanied by any of the following information:

a. The goods or merchandise covered by the certificate were grown, produced or manufactured in the Philippines without any foreign
material component; or

b. There are foreign material components which are ascertainable and are indicated either in quantity, value or percentage in relation to
the whole of a unit; or

c. There are foreign material components which are not ascertainable but their estimated value in relation to the ex-factory price are
indicated.

The PEZA, likewise, upon due application may provide additional certification of facts to enable the ECOZONE enterprise to comply
with the requirements of the importing country in the availment of preferential tariff rates.

SECTION 6. Marking - Imported goods destined for the ECOZONE shall be clearly marked in bold letters indicating its destination,
thus:

“DESTINES FOR (NAME OF ECOZONE 

ENTERPRISE / NAME OF ECOZONE”

SECTION 7. All Outward - Bound goods manufactured, assembled, processed packaged or manipulated
within the ECOZONE shall likewise be marked in such manner as would clearly indicate that such goods
originated from the ECOZONE,

THUS: “FROM THE PHILIPPINES” (NAME OF THE ECOZONE)

SECTION 8. Loading and Unloading - An ECOZONE Export or Free Trade Enterprise shall, whenever
practicable, unload and load its importations into and exportations from the ECOZONE at the port of entry
nearest to such ECOZONE. In case the loading or unloading is done elsewhere, the dates of arrival or
departure shall be conveyed to the PEZA well in advanced so that arrangements can be made with the
customs authorities for the expeditious handling of the cargo and escort service can be provided and
scheduled by the PEZA.

In all cases involving the movements of foreign and domestic merchandise, raw materials, supplies, articles,
equipment, machineries, spare parts, wares and goods of every description from the customs territory into
the ECOZONE or vice-versa, the procedures and requirements thereof shall be the subject of a Memorandum
of Agreement between PEZA and the Bureau of Customs and to subsequent memorandum orders, circulars
or memoranda of agreement, which shall be complied with by the ECOZONE enterprise.

SECTION 9. Written Permission - Products made in the restricted areas of the ECOZONES, samples thereof
and / or imported raw materials shall not be given nor sold by an Export or Free Trade Enterprise to its
Visitors, workers or employees without prior written permission from the PEZA.

SECTION 10. Quality Standards - All exports from the ECOZONE shall satisfy duly established quality
standards and regulations pertinent thereto.
 Rule XI. Inventory of Finished Products, 
Raw Materials and Other Assets

SECTION 1. Inventory - The PEZA may, at any time, conduct an inventory of all machineries, equipment,
stocks of finished or semi-finished products, work-in-process, raw materials, supplies, goods or merchandise
and other assets of an ECOZONE enterprise.

SECTION 2. Shortage and Overage - In case of failure to account for shortages on raw materials,
machineries, equipment, supplies or goods for personal usage, imported tax and duty free pursuant to the
Act, the same shall constitute prima facie proof that such goods or merchandise were illegally sent out of the
restricted areas of the ECOZONE and/or to the customs territory. In such case, the enterprise concerned
shall be imposed the corresponding fines, taxes and duties in accordance with the applicable provisions of
these Rules, Customs and Internal Revenue Laws.

In case of overages, it shall be presumed that the excesses were introduced illegally into the restricted areas
of the ECOZONES and shall be subject to the imposition of fines and / or to confiscation or forfeiture
pursuant to the provisions of these Rules and of the Tariff and Customs Code of the Philippines.

In both cases, however, the PEZA shall take into account the reasonable percentage of allowance based on
established materials usage formula and other relevant factors applicable to specific industry groups.

SECTION 3. Liquidation of Imported Articles - Accountability for goods or merchandise imported tax and
duty-free pursuant to the Act shall be discharged as follows:

1. Submission of proof of payment of the corresponding taxes and duties;

2. Submission of proof of re-exportation - this shall consist of the following documents:

a. Import Entry 
b. Certificate of Identification 
c. Export Declaration 
d. Packing List 
e. Certificate of Loading / Landing

3. By condemnation / loss / destruction (including wastage and rejects) - the following shall be submitted:

a. Covering Import Entry 

b. Description 
c. Quantity 
d. Affidavit of Loss / Destruction 
e. Permit to Bring Out of the ECOZONE

4. Exportation of finished products - the following documents shall be submitted:

a. Statement of liquidation (reconciliation of raw materials) 

b. Outward Bill of Lading / Airway Bill 
c. Certificate of Identification 
d. Certificate of Inspection and Loading / Landing 
e. Boatnote

5. Indirect Exportation - the following shall be submitted:

a. Receipt of payment covering the sale / contract of sale 

b. Certificate of Identification 
c. Boatnote Covering Transfer 
d. Certificate of Liquidation of Raw Materials / Raw Materials Consumption

6. Constructive Exportation - the following should be submitted:

a. Contract of Sale 
b. Boatnote / Delivery Receipt

The foregoing requirements for each mode of liquidation shall be without prejudice to other requirements as the PEZA may determine.

Rule XII. Defense, Security and Firefighting Forces

SECTION 1. Defense of ECOZONE Perimeters - The defense of the perimeters of the ECOZONES shall be
the responsibility of the national government. Military forces assigned by the National Government for this
purpose shall confine their presence along the periphery of the ECOZONES to prevent unauthorized intrusion
of unwanted elements. They shall not interfere in the internal affairs of the ECOZONES nor in the entry and
exist of goods or merchandise.

SECTION 2. Internal Security - The PEZA shall maintain a security force to ensure the internal security of
each ECOZONE and to enforce law and order within its boundaries.

However, the PEZA shall allow an ECOZONE Enterprise to hire security guards provided by private security
agencies duly accredited by the PEZA to oversee the safety of its office and plant. The security guards shall
be subject to the supervision and to the security regulations of the PEZA inside the ECOZONE.

The members of the internal security force may also perform the functions of escorting and guarding
shipments of goods and merchandise imported tax and duty free by ECOZONE enterprises to and from the
ECOZONES.

SECTION 3. Inspection / Registration of Entering / Existing Persons and Vehicles - The ECOZONES and
other areas owned, possessed or being administered by the PEZA are classified as security areas. As such all
persons and vehicles entering or exiting the ECOZONES shall be subject to search and inspection. They shall
be required to register and / or secure appropriate passes / clearance / permits from the PEZA. Their
movement inside the ECOZONES shall be governed by security regulations of the PEZA.

SECTION 4. Identification of Person - All ECOZONES workers, employees shall be subject to the registration
and clearance procedures of the PEZA. They shall wear the prescribed ECOZONE identification cards / passes
at all times while inside the ECOZONE except as may provided by the PEZA. The PEZA reserves the right to
deny to any person access to an ECOZONE for reasons of security, violation of these Rules and / or when
the person sought to be excluded will hinder or seriously affect the orderly, peaceful and lawful operations of
the PEZA or of the ECOZONE enterprise.

SECTION 5. Fire Protection - The PEZA shall maintain a firefighting force to ensure the enforcement of
existing laws and regulations governing fire prevention, protection and safety within the boundaries of each
ECOZONE. For this purpose, the PEZA adopts the Fire Code of the Philippines and its implementing rules and
regulations and such other regulations or issuances it may promulgate for enforcement within the
boundaries of each ECOZONE.

PART VII - INCENTIVES TO ECOZONE ENTERPRISES

Rule XIII - Application and Entitlement

SECTION 1. Application for Availment of Incentives - All applications for availment of incentives shall be
filed with PEZA.

SECTION 2. Scope of Entitlement - New or expanding ECOZONE Developers / Operators, Export, Free
Trade, Domestic Market, Utilities, Facilities and Tourism Enterprises, except ECOZONE Service Enterprises as
defined under Section 2(p), Rule I of these Rules, registered on or after the effectivity of these Rules, shall
be entitled to the fiscal incentives provided in Sections 24 and 42 of the Act.

SECTION 3. Additional Incentives - In addition to the incentives in the preceding Section, new or expanding
ECOZONE Export and Free Trade Enterprises shall be entitled to the fiscal incentives under the Decree or
those provided under the Code. Said enterprises opting to avail of incentives under the Decree shall be
entitled to the incentives provided under Sections 1 to 5 and 7 of Rule XV of these Rules subject to the
regulations that shall be prescribed by the Board and the Department of Finance/Bureau of Internal
Revenue. These opting to avail of incentives under the Code shall be entitled to the incentives provided
under Sections 1 to 6 of Rule XV of these Rules.

New or expanding ECOZONE Developers / Operators may be entitled to the incentives provided under
Section 1(C) and (D) of Rule XIV of these Rules as may be determined by the Board in accordance with the
pertinent provisions of the Code and the Investment Priorities Plan prepared annually by the Board of
Investments in addition to the incentives provided in Section 2 of this Rule.

ECOZONE Domestic Market, Facilities, Utilities and Tourism Enterprises may be entitled to additional
incentives as provided under Section 1(C) and Section 2(C) and (D) of Rule XVI as may be determined by
the Board in accordance with the pertinent provisions of the Code and the Investment Priorities Plan.

In the availment of the foregoing additional incentives, the Board may restrict the extent the period of
availment of the said incentives under the Code to ECOZONE Developers / Operators, Domestic Market,
Facilities, Utilities and Tourism Enterprises. Any such restriction shall apply prospectively.

SECTION 4. Existing PEZA-Registered Enterprises - Export enterprises registered with the Export
Processing Zone Authority (EPZA) under the Decree or the Code shall continue to be entitled to the
incentives under the terms and conditions provided therein. However, EPZA export enterprises whose
Income Tax Holiday entitlement under the Code has expired shall be subject to the 5% special tax rate
under Rule XX of these Rules. EPZA Enterprises registered under the Decree which are still availing of the
Net Operating Loss Carry-Over incentive shall be subject to such regulations as may be determined by the
Board and Department of Finance / Bureau of Internal Revenue.

SECTION 5. Limitation of Entitlement to Incentives - Incentives granted by the PEZA shall apply only to
registered operations of the ECOZONE Enterprise and only during the period its registration with PEZA.

Rule XIV - Incentives to Ecozone Developers / Operators

SECTION 1. ECOZONE Developers / Operators - ECOZONE Developers / Operators shall be entitled to the
following incentives:
A. Exemption from National and Local Taxes and Licenses - An ECOZONE Developer / Operator shall, to the
extend of its construction and operation, be exempt from payment of all national internal revenue taxes and
all local government impost, fees, licenses or taxes, including but not limited to the following:

1. Internal revenue taxes such as gross receipts tax, Value Added Tax, ad valorem and excise taxes; and

2. Franchise, common carrier or value added taxes and other percentage taxes on public and service utilities and enterprises.

In lieu thereof, the ECOZONE Developer / Operator Enterprise shall pay a five percent (5%) final tax on
gross income in accordance with the provisions of Rule XX of these Rules.

B. Additional Deduction for Training Expenses - One-half (1/2) of the value of training expenses incurred in
developing skilled or unskilled labor or for managerial or other management development programs incurred
by an ECOZONE Developer / Operator may be deducted from the 5% final tax due from the ECOZONE
Developer / Operator but not to exceed the national governments share of three percent (3%) as provided
in Section 24 of the Act, under such guidelines as may be prescribed by PEZA in coordination with the
Department of Labor and Employment and the Department of Finance.

C. Incentives under the BOT Law - Incentives provided under R.A. 6957 as amended by R.A. 7718,
otherwise known as the Build-Operate-and Transfer Law, subject to such conditions as may be prescribed by
the Board.

D. Other Incentives Under the Code - Other incentives available under the Code, as may be determined by
the Board subject to the conditions provided under Sections 3 and 5 of Rule XII of these Rules.

Rule XV - Incentives to Ecozone Export and Free 

Trade Enterprises

SECTION 1. Exemption from Duties and Taxes on Merchandise - Merchandise, raw materials, supplies,
articles, equipment, machineries, spare parts and wares of every description brought into the ECOZONE
Restricted Area by an ECOZONE Export or Free Trade Enterprise to be sold, stored, broken up, repacked,
assembled, installed, sorted, cleaned, grade or otherwise processed, manipulated, manufacture, mixed with
foreign or domestic merchandise whether directly or indirectly related in such activity, shall not be subject to
customs and internal revenue laws and regulations of the Philippines nor to local tax ordinances.
Importations of certain goods or merchandise under this paragraph shall be subject to the following
conditions:

A. Importations of Capital Equipment

1. Conditions for Duty and Tax Free Importation - an ECOZONE Export or Free Trade Enterprise may import
machineries, equipment and spare parts exempt from the payment of any and all tariff duties and internal
revenue taxes due thereon subject to the following conditions:

a. The machinery and equipment are directly and actually needed and will be used exclusively by the ECOZONE Export or Free Trade
Enterprise in its registered activity;

b. The importation of spare parts shall be restricted only to component spare parts for the specific machinery and / or equipment
authorized to be imported; and

c. Subject to reasonable allowances, the rated capacity of the capital equipment to be imported must be within the registered capacity of
the ECOZONE Export or Free Trade Enterprise.
2. Sale or Disposition of Capital Equipment - Any sale, transfer, assignment, donation or other form of
disposition of originally imported capital equipment / machinery including spare parts, brought into the
ECOZONE duty and tax-free, within five (5) years from date of acquisition shall require prior approval of the
Board. Such approval shall be granted only if the sale or other form of disposition is made:

a. To an ECOZONE Enterprise entitled to duty and tax free importation of machinery, to a BOI-registered enterprise enjoying similar
incentives under this Rule, to operators of BMW's / BMCTW's and / or to an export enterprise with a certificate of export-orientedness
from the Bangko Sentral ng Pilipinas;

b. For reasons of technical obsolescence as determined by the Board;

c. For purposes of replacement to improve and / or expand the operations of the ECOZONE Export or Free Trade Enterprise intending to
sell, transfer, assign, donate or otherwise dispose of such machinery or spare parts;

d. In cases of withdrawal or cessation from operations of the ECOZONE Export or Free Trade Enterprise, subject to payment of
applicable duties and taxes and such other conditions as may be prescribed by the Board.

If the ECOZONE Export or Free Trade Enterprise sells, transfers or disposes of these machinery, equipment and spare parts without
prior approval of the Board within five (5) years from date of acquisition, the ECOZONE Export or Free Trade Enterprise and the
vendee, transferee, or assignee shall be solidarily liable to pay twice the amount of the tax exemptions granted.

Any sale, transfer, assignment, donation or other form of disposition of capital equipment, brought into the ECOZONE duty and tax-free,
after five (5) years from date of acquisition shall require prior approval of the PEZA-Director General.

B. Importation of Construction Materials - ECOZONE Export or Free Trade Enterprises entitled to tax and
duty free importation of goods or merchandise under these Rules may import construction materials and
other articles that shall form part of its factory, warehouse or office building, including fixtures thereof,
enclosures, driveways and auxiliary structures, subject to the following conditions:

1. The factory, warehouse or office building shall be constructed at the expense of the ECOZONE Export or Free Trade Enterprise;

2. The construction materials to be imported are not manufactured domestically in sufficient quantity, not of comparable quality and not
sold locally at reasonable prices. Construction materials shall not be considered available in sufficient quantity if they cannot be made
available to the ECOZONE Export or Free Trade Enterprise at the time of need or within a reasonable period. In determining whether the
quality is comparable, the test, among others, will be whether or not it will conform to the plans and specifications of the ECOZONE
Export or Free Trade Enterprise as approved by PEZA. In determining reasonableness of the prices quoted by the domestic
manufacturers or suppliers, PEZA may be guided by the acquisition cost of similar construction materials imported into the Philippines,
after all applicable duties and taxes were paid thereon, plus fifteen percent (15%) mark-up;

3. The construction materials to be imported are reasonably needed and will be used exclusively in the construction of the factory,
warehouse or office building to be used by the ECOZONE Export or Free Trade Enterprise solely for its registered operations;

4. The approval of PEZA is obtained by the ECOZONE Export or Free Trade Enterprise before the purchase order is made or before the
corresponding letters of credit are opened; and
5. The construction materials shall be brought directly and physically inside the ECOZONE restricted area or such area as may be
designated by PEZA for this purpose and in no instance shall these be sold, transferred, assigned, donated or be disposed of in any
manner in the customs territory.

C. Importation of Specialized Office Equipment and Furniture - Specialized office equipment and furniture
such as computers, antistatic chairs, tables and others of similar nature may be imported by ECOZONE
Export or Free Trade Enterprise exempt from customs duties and taxes payable thereon, if the said
equipment is not manufactured domestically in sufficient quantity, not of comparable quality and not sold at
reasonable price. Otherwise, ordinary office equipment and furniture, whenever applicable shall be procured
locally.

D. Importation of Specialized Vehicles and Other Transportation Equipment - Specialized vehicles and other
specialized transportation equipment, including necessary spare parts, directly related to the registered
activity of the ECOZONE Export or Free Trade Enterprise, may be imported exempt from customs duties and
taxes only upon prior approval of the Board and with proper clearance from the appropriate government
agency(ies). Otherwise, ordinary vehicles and other transportation equipment, including necessary spare
parts, whenever applicable shall be procured locally.

E. Importation of Professional Instruments and Household Effects - The professional instruments and
implements, tools of trade, occupation or employment, wearing apparel and personal household effects of
foreign nationals who shall settle in the Philippines in connection with their registered activity, may be
imported exempt from the payment of import duties and taxes: Provided, (a) That the foreign national is an
executive or is employed in an ECOZONE Export or Free Trade Enterprise; and (b) That the above-
mentioned articles shall not be in commercial quantities nor for hire (Section 105 (h) of the Tariff and
Customs Code); and © That the approval of PEZA is obtained by the ECOZONE Export or Free Trade
Enterprise before the purchase order is made or before the corresponding letters of credit are opened.

SECTION 2. Exemption from National and Local Taxes and Licenses - The same incentives as provided for
under Section 1(A) of the Rule XIV and Rule XX of these Rules shall likewise apply to ECOZONE Export and
Free Trade Enterprises.

SECTION 3. Tax Credit for Import Substitution

A. Entitlement - ECOZONE Export or Free Trade Enterprises exporting non-traditional products which use or
substitute locally produced raw materials, capital equipment and / or spare parts shall be granted a tax
credit equivalent to twenty-five percent (25%) of the duties that would have been paid had these inputs
been imported: Provided, That this incentive shall be available until December 31, 1997, unless extended by
the President of the Philippines.

To be eligible for tax credit, the ECOZONE Export or Free Trade Enterprise exporting a non-traditional
product must have used locally produced raw materials, capital equipment and / or spare parts or has
substituted locally produced raw materials, capital equipment and / or spare parts for similar articles
previously imported.

B. Determination of Whether Product is Traditional or Non-Traditional - The determination of whether an

export product is traditional or non-traditional shall be governed by the criteria to be jointly issued by the
Secretary of Finance, Secretary of Trade and Industry and the Export Development Council as provided in
Republic Act No. 7844, otherwise known as the Export Development Act of 194. Thereafter, on the basis of
said criteria, products identified as traditional export products shall not be qualified for the tax credit under
this Rule.

SECTION 4. Exemption from Wharfage Dues, Export Tax, Impost or Fee - An ECOZONE Export or Free
Trade Enterprise shall be exempt from payment of wharfage dues and any export tax, impost of fee on the
exportation of its registered export products or, in the case of an ECOZONE Free Trade Enterprise, on
foreign merchandise transshipped through its ECOZONE facilities.
SECTION 5. Additional Deduction for Training Expenses - The same incentives as provided for under
Section 1(b) of Rule XIV of these Rules shall likewise apply to ECOZONE Export or Free Trade Enterprises.

SECTION 6. Other Incentives under the Code

A. Income Tax Holiday

1. Period of Availment - New ECOZONE Export or Free Trade Enterprises shall be fully exempt from income
taxes levied by the National Government for the period as follows:

a. New Registered Pioneer Firms - Six (6) years from commercial operations.

b. New Registered Non-Pioneer Firms - four (4) years from commercial operations.

c. Expanding Firms - Three (3) years from commercial operation of the expansion.

2. Entitlement for New Expansion Projects

a. New Projects - In exceptional cases, ECOZONE Export or Free Trade Enterprises undertaking new activities distinct from their
registered operations may qualify as new projects subject to the setting up of separate books of accounts. In such cases, the income tax
holiday shall apply only to sales of the new products.

b. Expansion Projects - The income tax holiday for expansion projects, as defined in Section 2(w), Rule I of these Rules shall apply only
to the extent of the actual increase in production.

3. Expansion - Expansion may include modernization or rehabilitation which, to be registrable, may or may
nor result in increase capacity but in any case, subject to the following conditions:

a. Phases / stages of production sought to modernized / rehabilitated must be identified; and

b. It must result in any of the following:

(i) substantial reduction of production cost; and 

(ii) significant increase in production effeciency including debottlenecking; 
(iii) meaningful upgrading of product quality; 
(iv) keeping abreast with the state of the art in the production of the registered product.

The rate of exemption from income tax of expansion projects shall be computed as follows:

Incremental Sales of the 

Registered Product 
Rate of Exemption = ----------------------------- 
Total Sales of the 
Registered Product

The term “Sales” as indicated in the above formula shall be expressed in volume in case of homogenous
products and value in case of heterogeneous products.

4. In general, modernization and rehabilitation shall not be entitled to income tax holiday.
5. Where the start of commercial operations does not coincide with the first month of the taxable year of the
ECOZONE Enterprise, the rate of exemption from income tax shall be computed in the following manner:

a. Get the total sales for the whole taxable year. 

b. Deduct the base figure from the total sales (a) to get the incremental sale. 

c. The rate of exemption is determined by dividing the incremental sales (b) by the total sales (a.). 

d. The rate of exemption shall apply only to the total income tax due arising from sales of the registered product. 

e. For this purpose, the base figure shall mean the highest attained sales in volume in case of homogenous products or value in case of
heterogeneous products of the ECOZONE Export or Free Trade Enterprise for any one (1) year within the last three (3) years prior to the
year of expansion. 

f. The rate of exemption shall be further computed in proportion to the number of months of the expanding firms commercial operations
during a given year. 

g. The rate of exemption for the last taxable year of availment shall be computed in the same manner as above-mentioned: Provided,
However, That the rate of exemption shall be applied on the income tax due on sales during the months that the ECOZONE Export or
Free Trade Enterprise is entitled to income tax holiday.

6. Additional Period of Availment - For ECOZONE Export or Free Trade enterprises, the income tax holiday
incentive may be extended for an extra year in each of the following cases but in no case to exceed a total
period of eight (8) years for pioneer registered enterprises:

a. If the ratio of the total imported and domestic capital equipment to the number of workers for the project does not exceed
US$28,000.00 to one worker, or as prescribed by the Board;

b. If the average cost of indigenous raw materials used in the manufacture of the registered product is at least fifty percent (50%) of the
total cost of raw materials for the preceding years prior to the extension unless the Board prescribes a higher percentage;

c. If the net foreign exchange savings or earnings amount to at least US$500,000.00 average annually during the first three (3) years of
operations to be determined by the Board at the end of such three-year period: Provided, That the foregoing foreign exchange savings
criterion shall apply, as a general rule, to ECOZONE Export or Free Trade Enterprises whose products are totally imported into the
country at the time of registration and duly indicated as imports substation in firm's approved project proposal.

For the purpose of availment of this incentive, the ECOZONE Export or Free Trade Enterprise shall apply in writing to PEZA for the
additional period and shall submit proof of compliance with the criteria above-mentioned.

7. Determination of Pioneer / Non-Pioneer Status

a. Investment Priorities Plan - As a general policy, the basis for determining whether an area of economic activity may be considered
pioneer or non-pioneer shall be the Investment Priorities Plan prepared yearly by the Board of Investments. In the absence thereof, the
applicable criteria shall be formulated by PEZA.
b. Non-Pioneer Status - An area of activity shall be accorded non-pioneer status if it may be determined categorically as falling in such
classification using the Investment Priorities Plan (IPP). Accordingly, the approval of the application for registration as an ECOZONE
Export or Free Trade Enterprise shall indicate such status and the corresponding incentives the ECOZONE Export or Free Trade
Enterprise may avail of under the Act.

c. Pioneer Status - Pioneer status may be extended to an ECOZONE Export or Free Trade Enterprise only after the evaluation of their
application for such status.

B. Tax Credit on Domestic Capital Equipment - A tax credit equivalent to one hundred percent (100%) of the
value of national internal revenue taxes and customs duties that would have been waived on the machinery,
equipment and spare parts, had these items been imported shall be given to the new or expanding
ECOZONE Export or Free Trade Enterprise which purchases machinery, equipment and spare parts from a
domestic manufacturer: Provided, (1) That the said equipment, machinery and spare parts are reasonably
needed and will be used exclusively by the registered enterprise in its registered activity; (2) That the
equipment would have qualified for tax and duty exemption under Section 1 of this Rule; and 93) That the
approval of the Board was obtained by the registered enterprise. In case the registered ECOZONE Export or
Free Trade Enterprise sells, transfers, or disposes of these machinery, equipment an spare parts, the
provisions of Section 1(A.2) of this Rule shall apply.

The period of availment of this incentive shall be determined in accordance with Section 3 and 5 Rule XIII of
these Rules.

C. Importation of Breeding Stocks and Genetic Materials

1. Extent of Availment - The importation of breeding stocks and genetic materials by an ECOZONE Export
Enterprise shall be exempt from taxes and duties. Such importation shall cover breeding stocks and genetic
materials necessary for expansion or improvement or for replacement of proven unproductive breeding
stock and genetic materials. The period of availment of this incentive shall be determined in accordance with
Sections 3 and 5, Rule XIII of these Rules.

2. Conditions for Availment - Tax and duty free importation of breeding stocks and genetic materials shall be
authorized under the following conditions:

a. That the strains / breeding stocks to be imported are not domestically available at reasonable prices;

b. That they shall be used exclusively by the registered producer for the improvement of the strains /
breeding stocks of its livestocks, poultry, fish and / or plants; and

c. That prior approval of the Board must have been obtained by the registered enterprise before the
purchase order was made or before the opening of the corresponding letters of credit.

3. Prior Approval of Sale or Disposition of Breeding Stocks and Genetic Materials - Any sale, transfer or
disposition of the breeding stocks and genetic materials purchased under Article 39(I) of the Code shall
require prior Board approval if such sale, transfer or disposition is made within: (a) four (4) years from date
of acquisition in cases of large cattle as the term is understood in agriculture; or (b) two (2) years from date
of acquisition in cases of poultry as the term is understood in agriculture.

D. Tax Credit on Domestic Breeding Stock and Genetic Materials

1. Extent of Entitlement - An ECOZONE Export Enterprise which purchases breeding stocks and genetic
materials from a domestic producer shall be entitled to a tax credit equivalent to one hundred percent
(100%) of the value of national internal revenue taxes and customs duties that would have been waived on
the breeding stocks and genetic materials had these items been imported.
2. Prior Approval of Sale, Transfer or Disposition - Any sale, transfer or disposition of breeding stocks and
genetic materials purchased from domestic producers shall be subject to the same conditions provided for
the sale, transfer or disposition of imported breeding stocks and genetic materials under Section 6(C.3) of
this Rule.

E. Additional Deduction for Labor Expense - For the first five (5) years from registration, a qualified
ECOZONE Export or Free Trade Enterprise shall be allowed to deduct from its taxable income an amount
equivalent to fifty percent (50%) of the wages corresponding to the increment in the number of direct labor
for skilled and unskilled workers subject to the following conditions:

1. That the ratio of imported and domestic capital equipment to the number of workers of the firm does not
exceed US$10,000.00 to one worker;

2. The ECOZONE Export or Free Trade Enterprise does not avail of this incentive simultaneously with the
income tax holiday incentive; and 

3. That in the event the ECOZONE Export or Free Trade Enterprise, except those engaged in mining or
forestry-based activities, should be located in a less-developed area as defined in Title IV of the Code, it
shall be allowed to deduct one hundred percent (100%) of the wages above-mentioned.

F. Unrestricted Use of Consigned Equipment - The use of consigned machinery, equipment and spare parts
which are reasonably needed in the registered operations and for the exclusive use the ECOZONE Export or
Free Trade Enterprise beyond the period permitted under other laws, rules and regulations may be
permitted by PEZA.

SECTION 7. Incentives Under the Decree - An ECOZONE Export or Free Trade Enterprise not availing of the
incentives under Section 6 herein may avail of the incentives under the Decree subject to the regulations
that shall be prescribed by the Board and by the Department of Finance / Bureau of Internal Revenue.

Rule XVI - Incentives to Ecozone Domestic Market, Facilities, 

Utilities and Tourism Enterprises

SECTION 1. Domestic Market Enterprise - ECOZONE Domestic Market Enterprise shall be entitled to the
following incentives:

a. Exemption from national and local taxes in lieu thereof, payment of a special tax rate of five percent (5%) on gross income in
accordance with Section 1(A) of Rule XIV and Rule XX of these Rules;

b. Additional Deduction for Training Expenses - The same incentive as provided for under Section 1(B) of Rule XIV of these Rules shall
also apply to ECOZONE Domestic Market Enterprises; and

c. Other incentives available under the Code, as may be determined and subject to the conditions that may be prescribed by the Board in
accordance with Sections 3 and 5 Rule XIII of these Rules.

SECTION 2. ECOZONE Facilities, Utilities and Tourism Enterprises - ECOZONE Facilities, Utilities and
Tourism Enterprises shall be entitled to the following incentives:

a. Exemption from national and local taxes and lieu thereof payment of a special tax rate of five percent (5%) on gross income in
accordance with Section 1(A) of Rule XIV and Rule XX of these Rules;

b. Additional Deduction for Training Expenses - The same incentives as provided for under Section 1(B) of Rule XIV of these Rules
shall also apply to ECOZONE Facilities, Utilities and Tourism Enterprises;
c. Incentives provided under R.A. 6957 as amended by R.A. 7718, otherwise known as the Build Operate and Transfer Law, subject to
such conditions as may be prescribed by the Board; and

d. Other incentives available under the Code, as may be determined by the Board subject to the conditions provided under Sections 3 and
5 of Rule XIII of these Rules.

Rule XVII - Permanent Resident Status for Foreign Investors

SECTION 1. Permanent Resident Status - Subject to the conditions under Rule XII of these Rules and such
guidelines as may be formulated by the PEZA Board, any investor within the ECOZONE whose initial
personal investments shall not be less than one hundred fifty thousand dollars (US$150,000.00), his / her
spouse and dependent children under twenty-one (21) years of age shall be granted permanent resident
status within the ECOZONE. They shall have freedom of ingress and egress to and from the ECOZONE
without need of special authorization from the Bureau of Immigration.

Rule XVIII - Employment of Foreign Nationals

SECTION 1. Entitlement - Pursuant to Section 10 of the Act, ECOZONE Enterprises may employ foreign
nationals in executive, supervisory, technical and advisory positions: Provided, That executive positions shall
pertain only to the president, vice-president, treasurer and general manager, or their equivalents: Provided,
further, That the total number of foreign nationals employed by an ECOZONE Enterprise in supervisory,
technical or advisory positions shall not at any time exceed five percent (5%) of its workforce unless
expressly authorized by the Secretary of Labor and Employment: Provided, That foreign nationals may be
employed in supervisory, technical or advisory positions only if it is certified by the Department of Labor and
Employment that no Filipino within the ECOZONE possesses the technical skills required therefor.

SECTION 2. Length of Employment - An ECOZONE Enterprise may employ foreign nationals for a period not
exceeding five (5) years from its registration, extending within limited periods depending upon the need of
the ECOZONE Enterprise as determined by PEZA: Provided, That the ECOZONE Enterprise seeking such
extension must have satisfactorily complied with the training program required under this section: Provided,
however, That when the majority of the capital stock of an ECOZONE Enterprise is owned by foreign
nationals, the positions of president, treasurer and general manager or their equivalents may be retained by
foreign nationals.

SECTION 3. Training Program and Annual Reports - An ECOZONE Enterprise employing foreign national
exercising supervisory, technical or advisory functions shall provide a training program for Filipinos to be
conducted by said foreign nationals each in his own specialized line: Provided, That every foreign nationals
shall have at least two (2) Filipino understudies and such training shall be done regularly during regular
office hours: Provided, further, That the ECOZONE Enterprise shall submit its program for training Filipinos
in the functions of the foreign national within thirty (0) calendar days from arrival of said foreign national or
from the day he reports for duty, or from the date of registration in case the foreign national was employed
before registration: Provided, finally, That the ECOZONE Enterprise shall submit an annual progress report
to PEZA on such training program within the month of June each year containing the following data:

a. Name of the foreign national and his field of specialization as prescribed in the program;

b. Names and address of Filipinos understudies under him;

c. Number of hours of actual training for each understudy and specific subject(s) covered; and

d. Reasons why Filipino understudies cannot yet take over the work of the foreign national, if such be the case.
SECTION 4. Spouse and Unmarried Minor Children - The spouse and unmarried children under twenty one
(21) years of age of the foreign nationals employed under the provisions of the Act shall be permitted to
enter and reside in the Philippines during the period of employment of such foreign national in the ECOZONE
Enterprise.

Rule XIX - Remittance of Earnings from Investments

SECTION 1. After Tax Profits - In accordance with Section 28 of the Act, after tax profits and other earnings
of foreign investments in ECOZONE Enterprises may be remitted outward without the need of prior approval
by the Bangko Sentral ng Pilipinas on the equivalent foreign exchange through any of the banks licensed by
the Bangko Sentral ng Pilipinas in the ECOZONE: Provided, however, That such foreign investments in said
ECOZONE Enterprise have been previously registered with the Bangko Sentral ng Pilipinas.

Rule XX - Gross Income Taxation

SECTION 1. Special Income Tax Rate - Subject to the Regulations to be issued by the Secretary of Finance,
upon the recommendation of the Commissioner of the Bureau of Internal Revenue, the 5% special income
tax on gross income earned pursuant to Section 24 of R.A. No. 7916, as amended, shall be directly paid and
remitted by registered ECOZONE enterprises as follows:

a. 3% to the national government;

b. 2% to the Treasurer's Office of the Municipality or City where the ECOZONE registered enterprise is located.

SECTION 2. Rules on Apportionment - In case an ECOZONE or an ECOZONE registered enterprise is

situated whithin the territorial jurisdiction of more than one municipality, the following payment shall be
made:

a. By ECOZONE Developer / Operator - The ECOZONE Developer / Operator shall directly pay and remit to the Treasurer's Office of
each municipality its share of the 2% tax on gross income based on the ratio of the area of the municipality included in the ECOZONE to
the total area owned and / or operated by the ECOZONE Developer / Operator.

b. By other ECOZONE Registered Enterprises - The ECOZONE business establishment shall directly pay and remit to the Treasurer's
Office of each municipality its share of the 2% tax on gross income based on the ratio of the area of the municipality included in the lot
occupied by the ECOZONE registered enterprise to the total area occupied by the establishment.

c. PEZA shall determine the exact boundaries and percentage allocation of the ECOZONE and ECOZONE registered enterprise.

SECTION 3. PEZA Endorsement - All ECOZONE registered enterprises shall secure from PEZA at least thirty
(30) days prior to the filing of their annual income tax returns an endorsement letter to BIR containing,
among others, the following information (1) that the establishment is a bonafide PEZA registered
establishment entitled to the 5% special tax on gross income and (2) whenever applicable, the percentage
allocation of the 2% share in case of overlapping municipalities / cities.

A copy of the Final Income Tax Return filed by the ECOZONE registered enterprise, supported by (1)
Schedule of Other Income (2) Schedule of Financing Charges (3) Schedule of Cost of Goods Sold /
Manufactured (4) Summary of Direct Labor and (5) Other Pertinent Supporting Documents as may be
necessary, shall be submitted to PEZA within (15) calendar days from filling thereof for review and
confirmation by PEZA and subsequent endorsement to the BIR and the local government unit concerned.
 SECTION 4. Gross Income Earned; Allowable Deductions - For purposes of these Rules, Gross Income
earned shall be defined in Section 2 (nn) of Rule I of these Rules, subject to the following allowable
deductions for specific types of enterprises:

1. For ECOZONE Export Enterprises, Free Trade Enterprises and Domestic Market Enterprises.

 Direct salaries, wages or labor expenses

 Production supervision salaries
 Raw materials used in the manufacture of products
 Goods in process (intermediate goods)
 Finished goods
 Supplies and fuels used in production
 Depreciation of machinery and equipment used in production and buildings
owned or constructed by an ECOZONE Enterprise
 Rent and utility charges associated with building, equipment and warehouses, or
handling of goods
 Financing charges associated with fixed assets
2. For ECOZONE Developer / Operator, Facilities, Utilities and Tourism Enterprises.

 Direct salaries, wages or labor expenses

 Service supervision salaries
 Direct materials, supplies used or resold to another ECOZONE Enterprise
 Depreciation of machinery, equipment and buildings owned and/or constructed
 Financing charges associated with fixed assets
 Rent and utility charges for buildings and capital equipment

Rule XXI - Conditions for Availment of Incentives and 

Other Privileges

SECTION 1. Compliance with Obligations - The ECOZONE Enterprise shall observe and abide by the
provisions of the Act, the applicable provisions of the Decree and / or Code, and these Implementing Rules
and Regulations, and take adequate measures to ensure its obligations thereunder as well as those of its
officers, employees and stockholders are faithfully discharged.

SECTION 2. Compliance with Directives - The ECOZONE Enterprise shall comply with the directives and
circulars which PEZA may issue from time to time in pursuance of its powers under the Act. 

SECTION 3. Compliance with Pre-Registration / Registration Conditions - The ECOZONE Enterprise shall
comply with all the pre-registration and registration conditions as required by the Board / PEZA and / or as
stipulated in its registration agreement with or permits/franchise issued by PEZA at specified periods therein
defined.

SECTION 4. Compliance with Reportorial Requirements - An ECOZONE Enterprise shall maintain a distinct
and separate books of accounts for its operations inside the ECOZONE and shall submit financial and other
reports / documents to PEZA on or before their respective due dates as follows:

REPORTS DUE DATE

A. Copies of Audited Financial Statements Thirty (30) calendar days from the 
date of filing with the Bureau of 
Internal Revenue

 Balance Sheet
 Income Statement
 Statement of Cost of Sales
 Statement of Operating & 
Administrative Expenses
B. Income Tax Returns Fifteen (15) calendar days from 
filing thereof

C. Amendment to the Articles of Thirty (30) calendar days from date 

Incorporation or By-Laws amendments of registration of said amendments 
with the Securities and Exchange 
Commission

D. Replacement of any director or other Thirty (30) calendar days after said 
principal officer, replacement with an change 
indication of the nationality of each 
officer and accompanied by a copy of 
his certificate of citizenship, if a 
naturalized Filipino

E. Any change in equity ownership Thirty (30) calendar days after said 
change

F. Annual Reports March 31 of each year

 Inventory Report of Finished Goods, 

Raw Materials and Work-in-Process
 Value-Added
 Net Dollar Earnings
 Dollar Cash Flow Statement
 Report on Long Term Loan
 Report on Capital Account and 
Shares of Equity
 List of Stockholders
 List of Principal Officers
 List of Foreign Nationals / Technicians
 List of Training Program
 List of Machinery and Equipment
G. Notice of Start of Commercial Seven (7) days from said date 
Operations

H. Other Reports which are submitted Fifteen (15) calendar days from 
by the enterprise to other government filing thereof 
agencies like Central Bank, GTEB, 
DOLE, BIR, SSS, etc.

I. Such other reports as may be required As may be prescribed in PEZA 

by PEZA through appropriate circulars / circulars / memoranda 
memoranda. 

SECTION 5. Delinquent Enterprises - Availment of incentives by an ECOZONE Enterprise under these Rules
shall be allowed only if said enterprise is not delinquent in the payment of its accounts with PEZA, if any, or
in its compliance with any of the obligations, terms and conditions above-defined.

SECTION 6. Duration - All incentives in favor of ECOZONE Enterprise shall continue, as long as they remain
in good standing and commit no violation of the Act, these Rules and Regulations, pertinent circulars and
directives promulgated thereunder, or the terms and conditions of their registration agreement, permit or
franchise unless otherwise provided for in the Act, these Rules and Regulations and registration agreement.

PART VIII - IMMIGRATION REGULATIONS

Rule XXII - Working and Residency Visas

SECTION 1. General Provisions - Except as provided in the Act, these Rules and other subsequent rules of
the PEZA, all laws of the Philippines concerning the entry and immigration of persons into the Philippines
and their departure and emigration therefrom shall be applicable in the ECOZONES to persons arriving
directly in the ECOZONES from a foreign country or departing directly from the ECOZONE to a foreign
country.

SECTION 2. Responsibility and Authority - All laws of the Philippines, including the Act, these Rules, and
other subsequent rules of the PEZA concerning the entry, immigration, departure, or emigration of persons,
including their arrival directly in or departure directly from the ECOZONE shall be carried out within the
ECOZONE by the personnel of the PEZA in coordination with the Bureau of Immigration.

SECTION 3. Work and Residency Visas - The PEZA shall issue temporary work and residency visas to
foreign nationals under the conditions and provisions of these Rules. Upon application by an ECOZONE
Enterprise, the PEZA may issue work visas which are valid for and renewable every two (2) years to foreign
nationals who possess executive or highly-technical skills not possessed by a Filipino citizen within an
ECOZONE as certified by the Department of Labor and Employment. The ECOZONE Enterprise shall apply to
the PEZA for renewal not less than thirty (30) days before the scheduled expiration date of the work visas,
and shall inform the PEZA whenever the employment of a foreign national is terminated by reason of
contract expiration or termination, firing, redundancy, or other removal. The temporary work visas shall be
automatically terminated upon:

a. Non-renewal of the visa, whether by reason of failure of the ECOZONE Enterprise to apply for renewal or determination made by the
PEZA;

b. Expiration of the contract under which the foreign national is working;

c. Discharge or other termination of the foreign national by the ECOZONE Enterprise;

d. Dissolution of the employing firm or revocation of its ECOZONE registration;

e. Acceptance of work for compensation outside the ECOZONE without the approval of the PEZA;

f. Death of the foreign national;

g. Conviction, by a competent court of any offense defined by the Revised Penal Code or special or other laws;

h. Commission of acts inimical to national security, public interest, health, welfare and morals; and

i. Determination by the PEZA of any other reason or circumstance by which the work of the foreign national is no longer needed in the
ECOZONE.
SECTION 4. Revocation of Temporary Work Visa - The PEZA may, after appropriate hearing, revoke a
temporary work visa for any violation by the foreign national or his or her dependent(s) of (i) any Philippine
law or regulation, including the Act (ii) these Rules and other regulations of the PEZA or (iii) the terms and
conditions for the issuance of the visa.

SECTION 5. Temporary Residency Visas - Temporary residency visas may be issued by the PEZA to any
foreign national to whom a work visa has been issued and to her or her spouse and dependent children
under 21 years of age. The temporary residency visas of the foreign national, spouse and children are valid
for residence either inside the ECOZONE or the customs territory during the period of validity of the work
visa. The temporary residency visas shall be deemed terminated upon the termination or revocation of the
work visa of the foreign national in accordance with Section 3 of this Rule.

SECTION 6. Reportorial Requirements - The names of foreign nationals who are granted temporary work or
residency visas, or whose work residency visas are terminated or revoked, shall be reported by the PEZA to
the Bureau of Immigration within thirty (30) days after issuance, termination or revocation.

SECTION 7. Permanent Residency Visas - The PEZA shall issue permanent residency visas to foreign
nationals under the conditions and provisions of these Rules.

SECTION 8. Permanent Residency Visas or Investors - The PEZA may issue a permanent residency visa
within an ECOZONE to any investor who has made and continues to maintain an investment of not less than
ONE HUNDRED AND FIFTY THOUSAND DOLLARS (US$150,000.00) within the ECOZONE. This privilege may
extend to the investors spouse and dependent children under 21 years of age. The visa shall be provided
upon application by the investor upon submission of evidence of investment, which may be in the form of:

a. Establishment of an ECOZONE Enterprise or other direct investment within the ECOZONE;

b. A cash grant or interest-free loan to the PEZA or to an ECOZONE Enterprise for the purpose of making capital investments by the
recipient in the ECOZONE;

c. A purchase of an ECOZONE; and

d. A donation in kind to the PEZA or an ECOZONE Enterprise of equipment or materials for capital improvement purposes.

SECTION 9. Revocation or Termination of Permanent Residency Visa of Investor - The permanent residency
visas of the investor, spouse and children automatically terminates when the investor, his spouse, children
or any other individual or entity acting in his behalf, takes the investment or any substantial portion thereof
out of the ECOZONE through sale or receive payment, in cash or in kind, for grants, donations, or interest-
free loans other than the return of principal. The PEZA may also revoke summarily or after hearing the
permanent residency visa of any investor, spouse or child on the same grounds enumerated in Section 3
and 4 of this Rule, as may be applicable.

SECTION 10. Reportorial Requirements - The names of foreign nationals who are granted permanent
residency visas or whose permanent residency visas are terminated or revoked by the PEZA shall be
reported by the PEZA to the Bureau of Immigration within thirty (30) days after issuance, termination or
revocation. The residency visa is valid only for the ECOZONE and not for the customs territory. However,
persons with residency visas may enter and leave the ECOZONE without any special authorization from the
Bureau of Immigration.

PART IX - INDUSTRIAL HARMONY IN THE ECOZONES

Rule XXIII - Labor and Management Relations

SECTION 1. Objective and Policy - The PEZA adopts a policy of industrial peace and productivity within the
ECOZONE thru cooperation between labor and management to eliminate unnecessary conflicts and providing
for effective mechanisms in the early settlement of disputes.

SECTION 2. Labor Code - The Labor Code of the Philippines shall govern the relationship between labor and
management of the ECOZONE registered enterprises. Salaries and benefits and working conditions for
personnel employees shall not be diminished beyond those prescribed in the Labor Code and relevant laws,
issuances and other pertinent rules and regulations of the government.

SECTION 3. Labor Center - Consistent with the one stop shop center, a Labor Center shall be established
within the ECOZONE. Under the supervision of the ECOZONE Administrator, the Center shall be handled by
the ECOZONE's Human Resources Unit in coordination with a Tripartite Oversight Committee composed of a
representative from the Department of Labor and Employment, a representative from the labor sector and
one from the management sector. It shall serve as a window for all labor related activities and shall offer
services for the following:

a. MANPOWER POOL - The Labor Center shall maintain a bulletin for job opportunities and an index of job applicants. A manpower
bank consisting of an index of available work force within the vicinity and neighboring areas of the ECOZONE shall be continually
updated and maintained.

b. TRAINING - In coordination with the Technical Education and Skills Development Authority (TESDA) created under R.A. 7796, the
PEZA shall provide facilities that will assist workers to learn skills, to retrain and enhance acquired skills as the case may be and to
provide training modules and materials and other technical assistance and facilitation services. PEZA may likewise solicit coordination
with other government agencies or non-government organization for training purposes.

SECTION 4. Priority in Hiring - On a best effort basis and in consultation with the local government units,
ECOZONE enterprise shall give priority in hiring workers from the immediate community to prevent and to
mitigate the migration of workers to other areas.

SECTION 5. Migrant Workers - The PEZA, in coordination with the local government unit and other
appropriate government and non-government organizations, shall implement an integrated program to
address the housing, health and social needs of migrant workers.

SECTION 6. Tripartite Body - A tripartite body shall be created to formulate a mechanism under a social
pact for the enhancement and preservation of industrial peace in the ECOZONE.

The body shall be composed of one (1) representative each from the Department of Labor and Employment,
labor and business sectors with the PEZA acting as the Secretariat.

The policies and declarations to be formulated by the body shall be embodied in a formal document and
disseminated to all parties concerned. It shall then act as a, guide in all actions to be taken by the PEZA as
well as the ECOZONE Advisory Council in the maintenance and promotion of sound labor-management
relations within the ECOZONE.

SECTION 7. Master Employment Contract - The PEZA in coordination with DOLE shall prescribe a master
employment contract for every ECOZONE enterprise staff members and workers. The master contract shall
indicate the terms and conditions of employment which shall include the following:

1. Salaries and wages according to trades or industry sectors, consistent within the ECOZONE and not less than the minimum wage
prescribed in the region;

2. Summary of benefits given by the enterprise;

3. Terms and employment whether probationary learner or apprentice, permanent, contractual or any other special arrangements;

4. Working hours or periods; and

5. Highlights of pertinent working conditions under the Labor Code of the Philippines.

Labor and management are, however, not precluded from entering into a Collective Bargaining Agreement
which best reflects their mutual covenants in accordance with the provisions of the Labor Code of the
Philippines and other laws and issuances.

PART X - PROTECTION OF THE ENVIRONMENT

Rule XXIV - Guiding Environmental Policies and Regulations

SECTION 1. Environmental Standards - The PEZA, in coordination with appropriate government agencies,
shall implement, established policies and guidelines to ensure environmentally and socially acceptable
development of industrial areas in the respective ECOZONES under its jurisdiction. Specific regulations to
protect and conserve environmental quality in the ECOZONES as may be promulgated by the PEZA shall be
consistent with those of the national government and shall aim to maintain the water and air quality
standards established by the Department of Environment and natural Resources (DENR) for the respective
areas.

SECTION 2. Agreements - The PEZA shall enter into a Memorandum of Agreement with the Department of
Environment and Natural Resources, National Water Resources Board and other concerned government
agencies for an integrated and simplified implementation of environmental regulations, resource
conservation, compliance monitoring and development controls.

PEZA policies and guidelines for the establishment and implementation of development controls of
ECOZONES, industrial estates and the like, shall be based on the technical details of the eco-profile of the
area as determined by the DENR.

SECTION 3. Pre-Registration Requirement - As a pre-registration requirement, an ECOZONE Developer /

Operator shall be required to subject itself to the programmatic compliance procedures of the Environmental
Impact Statement (EIS) system and to secure an Environmental Compliance (ECC).

Likewise, industries weating within the ECOZONE shall be required to submit or pre-or-post registration
requirement on environmental Impact Statement (EIS) or a Project Description (PD), whichever is
applicable, in order to be granted an ECC. The terms and conditions of an ECC. The terms and conditions of
such ECC shall be based on the discharge allocation and other limits imposed on the respective ECOZONE
where it is located.

SECTION 4. Regulatory Functions - The PEZA shall formulate and implement environmental policies and
regulations, issue permits and/or clearances and grant franchise to entities that will engage in
environmental management within the ECOZONES.

An environmental units shall be established within each ECOZONE to monitor compliance in the area based
on the limits set in the respective ECC's and conduct or cause to be conducted regular sampling and testing
of regulated emissions, dusts, particulates, effluents, sludge, noise levels and other concerns.

SECTION 5. Waste Management Program - Each ECOZONE shall be required to establish and adopt a sound
waste management program specifically but not limited to solid waste, sludge and effluents. Said program
shall be monitored and validated by the proper authorities on a periodic basis.

If necessary, PEZA shall require an industrial firm to subject itself to Pollution Management Appraisal (PMA).
SECTION 6. Environmental Management Services - The PEZA shall have the option to develop, establish,
manage and operate, or to privatize, through the grant of franchise, to, or under a build-operate-transfer
scheme under Republic Act 6957, as amended, with private companies, developers or practitioners, services
and physical infrastructure related to environmental management. This shall include among others,
wastewater and sludge sampling and testing, wastewater treatment facilities, incinerators, sanitary landfills,
environmental laboratories, and other waste treatment facilities (WTF).

In no case, however, shall any WTF operator be allowed to bring onto the ECOZONE for treatment, sorting,
recycling or any other process industrial wastes from other industries operating outside the jurisdiction of
the PEZA.

The ECOZONE Enterprise participating in a waste exchange program may be allowed to transport or cause to
be delivered to its plant such industrial wastes certified to be utilized as raw materials in its registered
activity, subject to established guidelines on waste handling and transport.

SECTION 7. Adoption of Environmental Laws and Regulations - All Philippine environmental laws
particularly Presidential Decrees 984, 1151, 1152, 1586, as well as Republic Acts Nos. 6969 and 7526 and
7526, including Memorandum Circulars and Administrative Order of the DENR an the corresponding
implementing guidelines relevant to the operation of the PEZA are hereby adopted without prejudice to
other rules and regulations that may be prescribed by the PEZA on environmental protection.

PART XI - OTHER PROVISIONS

Rule XXV - Miscellaneous and Transitory Provisions

SECTION 1. Applicability - These Rules shall apply to all special economic zones and areas covered under
the Act and the Decree, as amended, and to all enterprises registered with the Export Processing Zone
Authority prior to the effectivity of these Rules without the need of applying for registration with the PEZA.
However, with respect to other government-owned industrial estate whose Boards shall be phased-out in
accordance with Section 46 of the Act and the enterprises located therein, the applicability of these Rules
shall be subject to subsequent issuances by the Board.

SECTION 2. Negative List - Subject to the guidelines to be issued by the PEZA in coordination with the
Department of Trade and Industry and the Bureau of Customs pursuant to Section 26 of the Act, the Board
shall, in the meantime, be guided by the current supply and demand gap on an industry basis in limiting the
domestic sales of ECOZONE enterprises in the customs territory.

SECTION 3. Shipping - The operation of shipping related business and container terminals within an
ECOZONE shall be subject to such regulations as the PEZA may prescribe. In the meantime, the regulations
being implemented by the Department of Transportation and Communication and other agencies of the
government in relation therewith shall be adopted by the PEZA.

The same rule applies in the maintenance of a shipping register for each ECOZONE as a business register of
convenience and in the issuance of related certification.

SECTION 4. Termination of Business - Investors in the ECOZONE who desire to terminate business or
operations shall comply with such requirements and procedures which the PEZA shall set, particularly those
relating to the clearing of debts. The assets of the closed enterprises can be transferred and the funds can
be remitted out of the ECOZONE subject to rules, guidelines and procedures to be prescribed jointly by the
Bangko Sentral ng Pilipinas, the Department of Finance and the PEZA.

SECTION 5. Police Functions - Pending the creation and establishment of the internal security force for each
ECOZONE by the PEZA, the Police Force of the Export Processing Zone Authority shall continue to exercise
its police authority and functions under the Decree, as amended, including but not limited to conducting
police investigations of violations of penal laws inside the ECOZONES or areas owned or administered by the
PEZA.
SECTION 6. Investigations / Hearings - The PEZA shall promulgate rules and procedures governing the
conduct of investigations and hearings involving violations of the Act, applicable provisions of the Decree, as
amended, and the Code, these Rules and Regulations, the corresponding implementing memoranda or
circulars and the terms and conditions of the Registration Agreement between the PEZA and the registered
ECOZONE enterprise or of the terms and conditions of the permit or franchise granted by PEZA. Pending the
promulgation of said rules or procedures, the PEZA may conduct said investigations and hearings provided
the requirements of due process are observed.

SECTION 7. Examination of Records / Visitorial Powers - An ECOZONE enterprise shall allow duly authorized
representative/s of the PEZA access to its premises and records during working hours for purposes of
inspection, evaluation and/or examination or audit of books of accounts or financial records, operations,
security and safety measures and production records.

SECTION 8. Penalties

A. Administrative Fines - The following schedule of fines and / or administrative sanctions shall apply to all
ECOZONE Enterprises and / or to nay person or group of persons who have committed violations of these
Rules and pertinent circulars / memoranda issued thereunder:

1. For late filing of financial statements, income tax returns, performance reports, annual reports and all
other reports / documents as specifically enumerated under Section 4 Rule XXI or required under existing
circulars of the PEZA:

Basic Fine Daily Fine

1st Violation P 500.00 P 50.00 

2nd Violation 1,000.00 150.00 
3rd Violation 2,000.00 200.00

2. Failure to wear or display openly the prescribed ECOZONE identification cards / passes:

1st Violation - Reprimand

2nd Violation - Confiscation of ECOZONE identification cards / passes with denial of access to specific areas
in the ECOZONE for ten (10) days

3rd Violation - Permanent confiscation of identification cards / zone passes with perpetual denial of access to
specific areas in the ECOZONE

3. For violation of Rules X and XI of these Rules:

1st Violation - a fine ranging from 50% to 100% of the value of the goods or merchandise

2nd Violation - a fine ranging from 101% to 150% of the value of goods or merchandise

3rd Violation - a fine ranging from 151% to 200% of the value of the goods or merchandise

For purposes of this rule, the value of the goods shall mean the average valuation appearing in the invoices,
commercial documents or records on file with the PEZA for the same or similar goods or merchandise for the
last three (3) years reckoned from the date of violation or in the absence thereof, the latest CIF valuation of
the Bureau of Customs on the subject goods or merchandise.

B. Suspension of Permits - The PEZA may suspend, withhold, disapprove or revoke import or export permits,
authority to engage in local sale, authority to farm-out, to avail of any incentive or privilege being
administered by the PEZA for failure to comply with these Rules, any provision of the Registration
Agreement between the PEZA and the ECOZONE Enterprise, the terms and conditions of the permits /
franchises issued by the PEZA and / or for violation of the Act and the pertinent provisions of the Code and
the Decree within a stipulated or reasonable period of time.

C. Cancellation / Revocation - Registration, permit and / or franchise of an ECOZONE enterprise may be

cancelled for any of the following grounds:

a. Failure to maintain the qualifications of registration / permit / franchise as required.

b. Violation of any pertinent provision of the Act / Code and / or Decree; and

c. Violation of any of these Rules and Regulations, the corresponding implementing memoranda or circulars
or any of the general and specific terms and conditions of the Registration Agreement between the PEZA and
the ECOZONE enterprise or violation of the terms and conditions of the permit / franchise issued by PEZA.

However, delay by the ECOZONE enterprise in the implementation of the timetable of its project as set by
the PEZA shall result in the automatic cancellation of the certificate of registration / permit / franchise unless
extended or a different period is set by the PEZA or these Rules.

The imposition of the above penalties shall be without prejudice to the assessment and collection of customs
duties and taxes and/or forfeiture in accordance with the applicable provisions of the Tariff and Customs
Code of the Philippines.

SECTION 9. Circulars - the PEZA shall from time to time, issue memoranda and circulars to implement the
provisions of these Rules and Regulations.

SECTION 10. Amendments - The PEZA may amend, suspend or revoke these Rules as may be necessary:
Provided, however, That any amendment or any decision taken by the PEZA in connection therewith shall
take effect fifteen (15) days after the date of publication in a newspaper of general circulation in the
Philippines.

SECTION 11. Separability Clause - If any clause, sentence, provision or section of these Rules shall be held
invalid or unconstitutional, the remaining part thereof shall not be affected thereby.

SECTION 12. Effectivity - The Rules shall take effect fifteen (15) days after the date of publication in a
newspaper of general circulation in the Philippines.

Approved by the Board of Directors of the Philippine Economic Zone Authority at the City of Makati,
Philippines on the 17th day of May 1995.

TARIFF AND CUSTOMS LAWS OF THE PHILIPPINES

This page features the full text of

    Republic Act No. 1937
Tariff and Customs Code of the Philippines
AN ACT TO REVISE AND CODIFY THE TARIFF AND CUSTOMS LAWS OF THE
PHILIPPINES
 
A DECREE TO CONSOLIDATE AND CODIFY ALL

THE TARIFF AND CUSTOMS LAWS OF THE

PHILIPPINES
 Presidential Decree No. 1464

AN ACT AMENDING CERTAIN PROVISIONS OF

PRESIDENTIAL DECREE NO. 1464, OTHERWISE

KNOWN AS THE TARIFF AND CUSTOMS CODE OF

THE PHILIPPINES, AS AMENDED, AND FOR

OTHER PURPOSES.

Republic Act No. 9135

AN ACT TO REVITALIZE AND STRENGTHEN THE

BUREAU OF CUSTOMS, AMENDING FOR THE

PURPOSE CERTAIN SECTIONS OF THE TARIFF

AND CUSTOMS CODE OF THE PHILIPPINES, AS

AMENDED.

Republic Act No. 7651

AN ACT REPEALING SECTION 1404 AND

AMENDING SECTIONS 1401 AND 1403 OF THE

TARIFF AND CUSTOMS CODE OF THE

PHILIPPINES, AS AMENDED, RELATIVE TO THE

PHYSICAL EXAMINATION OF IMPORTED

ARTICLES.

Republic Act No. 7650

QUICK INDEX
OF THE
TARIFF AND CUSTOMS CODE OF THE
PHILIPPINES
BOOK I

Tariff Law

Title I - Import Tariff

Title II  - Administrative Provisions
BOOK II

Customs Law

Title I  - The Bureau of Customs

Title II - Registration of Vessels, Coastwise Trade

and Licensing of Marine Officers

Title III - Vessels and Aircraft in Foreign Trade

Title IV - Ascertainment, Collection and Recovery

of Import Duty

Title V  - Warehousing of Imported Articles

Title VI - Administrative and Judicial Proceedings

Title VII - Fees, Dues and Charges Collectible by

the Bureau of Customs

 Title VIII - General Provisions
..

 
REPUBLIC ACT NO. 1937
 
. AN ACT TO REVISE AND CODIFY THE TARIFF AND CUSTOMS LAWS
OF THE PHILIPPINES
 
BOOK II
CUSTOMS LAW 
 

TITLE VI
ADMINISTRATIVE AND JUDICIAL PROCEEDINGS 

PART 1
SEARCH, SEIZURE AND ARREST 

Section 2201. Obstruction of Customs Premises. — No person shall obstruct a

customhouse, warehouse, office, wharf, street or other premises under the control
of the Bureau of Customs, or any of the approaches to such house or premises. 
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Sec. 2202. Special Surveillance for Protection of Customs Revenue and Prevention

of Smuggling. — In order to prevent smuggling and to secure the collection of the
legal duties, taxes and other charges, the customs service shall exercise
surveillance over the coast, beginning when a vessel or aircraft enters Philippine
territory and concluding when the article imported therein has been legally passed
through the customhouse. 
chanrobles virtual law library

Sec. 2203. Persons Having Police Authority. — For the enforcement of the customs
and tariff laws, the following persons are authorized to effect searches, seizures
and arrests conformably with the provisions of said laws: 

a. Officials of the Bureau of Customs, collectors, assistant collectors, deputy

collectors, surveyors, security and secret-service agents, inspectors, port patrol
officers and guards of the Bureau of Customs. 
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b. Officers of the Philippine Navy when authorized by the Commissioner. 
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c. Any person especially authorized in writing by the Commissioner. 

d. Officers generally empowered by law to effect arrests and execute processes of

courts, when acting under direction of the Collector. 

e. Any person especially authorized by a Collector, subject to the restrictions

stated in the next succeeding section. 

Persons exercising the powers hereinabove conferred shall, in the exercise

thereof, have the same authority, be entitled to the proper protection, and shall be
governed by the same law, not inconsistent with the provisions of this section, as
other officers exercising police authority in general. 
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Sec. 2204. Place Where Authority May Be Exercised. — Persons acting under

authority conferred pursuant to subsection (e) of the preceding section may
exercise their authority within the limits of the collection district only and in or
upon the particular vessel or aircraft, or in the particular place, or in respect to the
particular article specified in the appointment. All such appointments shall be in
writing, and the original shall be filed in the customhouse of the district where
made. 

chanrobles virtual law library

All other persons exercising the powers hereinabove conferred may exercise the
same at any place within the jurisdiction of the Bureau of Customs. 

Sec. 2205. Exercise of Power of Seizure and Arrest. — It shall be within the power
of a customs official or person authorized as aforesaid, and it shall be his duty, to
make seizure of any vessel, aircraft, cargo, articles, animal or other movable
property when the same is subject to forfeiture or liable for any fine imposed
under customs and tariff laws, and also to arrest any person subject to arrest for
violation of any customs and tariff laws, such power to be exercised in conformity
with the law and the provisions of this Code. 

Sec. 2206. Duty of Officer or Official to Disclose Official Character. — It shall be

the duty of any person exercising authority as aforesaid, upon being questioned at
the time of the exercise thereof, to make known his official character as an officer
or official of the Government, and if his authority is derived from special
authorization in writing to exhibit the same for inspection, if demanded. 
Sec. 2207. Authority to Require Assistance. — Any person exercising police
authority under the customs and tariff laws may demand assistance of any police
officer when such assistance shall be necessary to effect any search, seizure or
arrest which may be lawfully made or attempted by him. It shall be the duty of
any police officer upon whom such requisition is made to give such lawful
assistance in the matter as may be required. 

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.  chanrobles virtual law library

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.  chanrobles virtual law library

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. 

chanrobles virtual law library

PART 2
ADMINISTRATIVE PROCEEDINGS 

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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. 
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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. 

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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.  chanrobles virtual law library

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.  chanrobles
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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. — The 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. 

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 PART 3
JUDICIAL PROCEEDINGS 

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Sec. 2401. Supervision and Control over Judicial Proceedings. — In the absence of

special provision, judicial action and proceedings instituted on behalf of the
Government pursuant to the provisions of this Code shall be subject to the
supervision and control of the Commissioner. 
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Sec. 2402. Review by Court of Tax Appeals. — The party aggrieved by a ruling of

the Commissioner in any matter brought before him upon protest or by his action
or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the
manner and within the period prescribed by law and regulations. 
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Unless an appeal is made to the Court of Tax Appeals in the manner and within the
period prescribed by laws and regulations, the action or ruling of the
Commissioner shall be final and conclusive. 

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PART 4
SURCHARGES, FINES AND FORFEITURES 

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Sec. 2501. Failure to Pay Liquidated Charges. — For failure to pay the amount of
liquidated duties, taxes and other charges of a liquidation within ten working days
after the notice of liquidation shall have been publicly posted in the customhouse,
a surcharge of five per centum of the total amount or balance found upon
liquidation shall be added thereto and collected therewith.
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Sec. 2502. Failure to Supply Invoice. — When an entry of articles valued at more

than five hundred pesos is permitted by the Collector to be effected upon
commercial invoice signed by the manufacturer, seller or shipper, the Collector
instead of requiring a bond for the subsequent production of the consular invoice,
may, if the importer prefers, impose a surcharge of not less than twenty-five
pesos nor more than an amount equal to fifty per centum of the duties due upon
the importation. 
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Sec. 2503. Undervaluation and Misdeclaration in Entry. — When the value of the

imported articles shall be so declared and entered that the duties, based on the
declaration of the importer on the face of the entry, would be less by twenty per
centum than should be legally collected, or when the dutiable weight
measurement or quantity of imported articles is found upon examination to exceed
by ten per centum or more, the entered weight, measurement or quantity, a
surcharge may, in the discretion of the Collector be collected from the importer in
an amount not less than the difference between the full duty and the duty based
upon the declaration of the importer, nor more than five times of such
difference: Provided, That in cases where the Collector decides to waive imposition
of any surcharge in excess of one hundred pesos in any entry, his action shall be
subject to review by the Commissioner. 

Sec. 2504. Failure or Refusal of Party to Give Evidence or Submit Documents for

Examination. — When the owner, importer or consignee of any imported articles,
or the agent of either, fails or refuses, upon lawful demand in writing by any
customs official to appear, make oath or submit himself to examination, or to
answer any material question or refuses to produce records, accounts or invoices
in his possession pertaining to the value, classification or disposition of the article
in question and deemed material in appraising the same, the Collector shall assess
a surcharge of twenty per centum ad valorem on the article which is the subject of
the importation. 

Sec. 2505. Failure to Declare Baggage. — Whenever any dutiable article is found in

the baggage of any person arriving within the Philippines which is not included in
the baggage declaration, such article shall be seized and the person in whose
baggage it is found may obtain release of such article, if not imported contrary to
any law upon payment of treble the appraised value of such article plus all duties,
taxes and other charges due thereon unless it shall be established to the
satisfaction of the Collector that the failure to mention or declare said dutiable
article was without fraud. 

Nothing in this section shall preclude the bringing of criminal action against the
offender. 

Sec. 2506. Breach of Bond. — Upon breach of a bond required to be filed under the
tariff and customs laws, the Collector subject to the approval of the Commissioner,
may accept in satisfaction thereof a smaller sum than that mentioned in the
penalty clause of the bond, but in no case less than the amount necessary to
indemnify the Government for the damage occasioned by such breach. 
Sec. 2507. Unlawful Navigation of Unregistered Vessel. — When any vessel is used
or navigated in Philippine waters without having been first duly registered in the
Bureau of Customs, or application therefor made as required by law, such vessel
shall be fined in a sum not less than fifty pesos nor more than one thousand
pesos. 

Sec. 2508. Vessel Engaging in the Coastwise Trade Without License. — Any vessel
engaging in the coastwise trade, without the requisite license, shall be fined in a
sum not exceeding one thousand pesos. 

Sec. 2509. Vessel Navigating Without Complement of Officers. — Any Philippine

vessel navigating without a full complement of duly licensed officers, not
otherwise due to an emergency beyond the control of the master, owner or agent,
shall be fined in a sum not exceeding one thousand pesos.

Sec. 2510. Vessel Engaging in Bay and River Business Without License. — Any
vessel engaging in the business of towing or of transporting passengers or freight
in any harbor, bay, river or any inland water navigable from the sea, without the
requisite license, shall be fined in a sum not exceeding five hundred pesos. 

Sec. 2511. Failure to Produce Members of Crew. — When the master of a Philippine

vessel returning from abroad fails to produce as required by law, any member of
the crew listed at the time of departure from the Philippines, in the vessel's
shipping articles, the vessel shall be fined in the sum not exceeding five hundred
pesos for each member absent and unaccounted for.  chanrobles virtual law library

Sec. 2512. Injury to Buoys and Beacons. — When any buoy or beacon maintained
in Philippine waters is damaged, misplaced or destroyed by reason of having made
fast thereto any vessel or other floating object or as a consequence of the
negligent navigation or control thereto, such vessel, or the owner or person in
control of any such other object which caused the damage shall be subject to a
fine of not more than two hundred pesos, to which shall be added the expense of
repairing or replacing the same. 

Sec. 2513. Vessel or Aircraft Departing before Entry Made. — Any vessel or aircraft
arriving within the limits of a collection district from a foreign port which departs
before entry is made, without being compelled to do so by stress of weather,
pursuit or duress of enemies, or other necessity, shall be fined in a sum not
exceeding five thousand pesos. 

Sec. 2514. Obstruction to Boarding Official. — If the master or pilot in command or

any member of the complement of any vessel or aircraft arriving at a Philippine
port obstructs on hinders any official from lawfully going on board such vessel or
aircraft for the purpose of enforcing the customs and tariff laws intentionally
causes any such official to be so obstructed or hindered, the vessel or aircraft shall
be fined in a sum not exceeding five thousand pesos. 

Sec. 2515. Unlawful Boarding or Leaving of Vessel or Aircraft. — If upon arrival at

a Philippine port, any master of a vessel or pilot in command of an aircraft
engaged in a foreign trade permits any person to board or leave the vessel or
aircraft without the permission of the customs official in charge, such vessel or
aircraft shall be fined in a sum not exceeding one thousand pesos. 

Sec. 2516. Failure to Deliver or Receive Mail. — If the master of a vessel or pilot in

command of an aircraft arriving at a Philippine port fails or refuses to deliver to
the postmaster of the nearest post office, as required by law or contract, all mail
matter on board such vessel or aircraft and destined for the particular port, the
vessel or aircraft shall be fined in a sum not exceeding one thousand pesos. 

When any vessel or aircraft which is required by law or contract to carry mail
matter departs from a port or place where mail should be received, without giving
the postmaster or other postal official a reasonable opportunity to deliver to the
vessel or aircraft of its proper officer or agent, any mail matter addressed to or
destined for the port or place to which the vessel or aircraft is bound, such vessel
or aircraft shall be fined in a sum not exceeding one thousand pesos. 

Sec. 2517. Unlading of Cargo Before Arrival At Port of Destination. — If, upon the
arrival within the limits of any collection district of the Philippines of any vessel or
aircraft engaged in foreign trade, the master or pilot in command thereof permits
any part of the cargo to be unladen before her arrival at her port of destination,
and without authority from a proper customs official, such vessel or aircraft shall
be fined in a sum not exceeding five thousand pesos, unless the unlading was
rendered necessary by stress of weather, accident or other necessity; and if due to
necessity, the subsequent approval of the proper Collector must be obtained. 

Sec. 2518. Unlading of Cargo at Improper Time or Place After Arrival. — Any vessel
or aircraft, which after arrival at her port of destination in the Philippines,
discharges cargo at any time or place other than that designated by the Collector
shall be fined in a sum not exceeding ten thousand pesos unless the unlading was
rendered necessary by stress of weather, accident or other necessity; and if due to
necessity, the subsequent approval of the proper Collector must be obtained. 

Sec. 2519. Failure to Exhibit or Deposit Documents. — When the master of a vessel

or pilot in command of an aircraft engaged in foreign trade fails to exhibit to the
Collector at the time of entry of his vessel or aircraft the register or other paper in
lieu thereof, together with the clearance and other papers granted by the customs
officials to his vessel or aircraft at the last foreign port of departure, or fails to
exhibit any certificate or other document required to be then exhibited, such
vessel or aircraft shall be fined in a sum not exceeding five thousand pesos. 

Such vessel shall be liable for the payment of the aforesaid fine if the master,
within forty-eight hours after arrival, shall fail to deliver to the proper consular
officer of his nation such documents as are required by law to be deposited with
him, or, if after having made such deposit, the master shall fail to produce to the
Collector the required evidence that the same has been effected. 

Sec. 2520. Bringing of Unmanifested Arms, Explosives or War Equipment. — Any

vessel or aircraft arriving at a port in the Philippines, having firearms, gunpowder,
cartridges, dynamite or any other explosives, munitions or equipments of war
concealed on board his vessel or not contained in the manifest of the vessel or
aircraft, shall be fined not exceeding twenty thousand pesos. 

Sec. 2521. Failure to Supply Requisite Manifests. — If any vessel or aircraft enters

or departs from a port of entry without submitting the proper manifests to the
customs authorities, or shall enter or depart conveying unmanifested cargo other
than as stated in the next preceding section hereof, such vessel or aircraft shall be
fined in a sum not exceeding ten thousand pesos. 

The same fine shall be imposed upon any arriving or departing vessel or aircraft if
the master or pilot in command shall fail to deliver or mail to the Auditor General a
true copy of the manifest of the incoming or outgoing cargo, as required by law. 

Sec. 2522. Disappearance of Manifested Article. — When any package or article

mentioned in the manifest shall not be duly forthcoming upon the arrival of the
vessel or aircraft, the vessel or aircraft shall be fined in a sum not exceeding two
thousand pesos, unless the disappearance of the package or article in question
was not due to the negligence of the master of the vessel or pilot in command of
an aircraft and explained to the satisfaction of the Collector. 

The vessel or aircraft shall be liable for the payment of the same fine when a
package or article listed in the manifest does not tally materially in character or
otherwise with the description thereof in the manifest.

Sec. 2523. Discrepancy Between Actual and Declared Weight of Manifested Article.

— If the gross weight of any article or package described in the manifest exceeds
by more that twenty per centum the gross weight as declared in the manifest or
bill of lading thereof, and the Collector shall be of opinion that such discrepancy
was due to the carelessness or incompetency of the master or pilot in command,
owner or employee of the vessel or aircraft, a fine of not more than fifteen per
centum of the value of the package or article in respect to which the deficiency
exists, may be imposed upon the importing vessel or aircraft. 

Sec. 2524. Delivery of Cargo Not Agreeing With Master's or Pilot's in Command

Report. — When a vessel or aircraft arriving from a foreign port is compelled by
necessity to put into another port than the port of her destination and permission
is granted by the Collector for the unlading of the vessel or aircraft or the delivery
of any part of her cargo and it shall be found that the delivery of the cargo does
not agree with the master's or pilot's in command report, and the discrepancy is
not satisfactorily explained, the vessel or aircraft shall be fined in a sum not
exceeding five thousand pesos.  chanrobles virtual law library

Sec. 2525. Breaking of Seal Placed by Customs Official. — If any seal placed by a

customs official upon any vessel or aircraft or compartment thereof, or upon any
box, trunk or other package of article on board any vessel or aircraft is broken or
destroyed, the vessel or aircraft shall be fined in a sum not exceeding five
thousand pesos for each seal so broken or destroyed. 

Sec. 2526. Breaking of Lock or Fastening Placed by Customs Official. — If any lock

or other fastening device placed by a customs official upon any hatch door, or
other means of communication with the hold of a vessel or aircraft, or other part
thereof, for the security of the same during the nighttime, shall be unlawfully
opened, broken or removed, or if any of the articles contained in the hold or in
other compartments so secured shall be clandestinely abstracted and landed, the
vessel or aircraft shall be fined in a sum not exceeding five thousand pesos. 

Sec. 2527. Disappearance of Trunk or Package Specially Noted by Customs Official.

— When any box, trunk or other package of article is found by a customs official on
any incoming vessel or aircraft separate from the rest of the cargo or in any
unusual or improper place on such vessel or aircraft and the same shall be noted
by him, with proper description, and the attention of the master or pilot in
command or other responsible officer of the vessel or aircraft is called thereto, the
vessel or aircraft shall be fined in a sum not exceeding one thousand pesos for
every such package which may subsequently be missing and unaccounted for upon
the arrival of the vessel or aircraft at the port of entry. 

Sec. 2528. False Statement of Vessel's or Aircraft's Destination. — When the

master or pilot in command of a vessel or aircraft laden with articles shall make a
false statement as to the next destination of such vessel or aircraft, when
information concerning the same is required of him by a customs official, such
vessel or aircraft shall be fined in a sum not exceeding five thousand pesos; and
the circumstances that a vessel or aircraft after clearing for a certain port of
destination goes to some other port, not being impelled to do so by necessity,
shall be prima facie proof that the original statement of the vessel's or aircraft's
actual destination was false. 

Sec. 2529. Miscellaneous Offenses. — The following administrative fines shall be

imposed upon any vessel that sails or operates under any of the circumstances
hereunder specified: 

a. For sailing or operating without proper certificate of inspection and special

permit, fifty pesos for each offense; 
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b. For sailing or operating with expired license or permit, one hundred pesos for
each offense; 
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c. For engaging in the business of transporting passengers in the coastwise trade
without license or permit, one hundred pesos for each offense; 

d. For navigating without sufficient life preservers, belts or rafts required by

customs regulations, one hundred pesos for each offense; 

e. For navigating without fire-fighting apparatus and/or medical supplies required

by customs regulations, fifty pesos for each offense; 

f. For sailing with excess passengers, twenty pesos for each passenger in excess
of the authorized number, but in no case less than the fare payable by each
passenger to his place of destination; 

g. For sailing with overloaded cargo, fifty pesos for each offense in case of vessels
of fifty tons gross or less; one hundred pesos in case of vessels of not less than
fifty tons nor more than one hundred tons gross; and not less than two hundred
pesos nor more than five hundred pesos in case of vessels of one hundred tons
gross or more; 

h. A vessel shall be fined in an amount hereafter fixed for: 

(1) Anchoring at any dock, pier, wharf, quay or bulkhead without rat guards, fifty
pesos for coastwise vessels, and two hundred pesos for overseas vessels; 
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(2) Dumping garbage or slops over the side in port, one hundred pesos; 
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(3) Dumping or causing to spread crude oil, kerosene or gasoline in the bay or at
the piers while in port, two hundred pesos for each offense;
(4) Loading gasoline at a place other than that designated by the regulations, four
hundred pesos for each offense. 

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. 
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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. 
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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; 
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(2) By failure to mention to a customs official, articles found in the baggage of a
person arriving from abroad. 
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(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. 
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Sec. 2532. Enforcement of Administrative Fines and Forfeitures. — Administrative

fines and forfeitures shall be enforced by the seizure of the vessel or aircraft or
other property subject to the fine or forfeiture and by subsequent proceedings in
conformity with the provisions of Parts 2 and 3, Title VI, Book II, of this Code. 

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Sec. 2533. Seizure of Vessel or Aircraft for Delinquency of Owner or Officer. —

When the owner, agent, master, pilot in command or other responsible officer of
any vessel or aircraft becomes liable to be fined under the customs and tariff laws
on account of a delinquency in the discharge of a duty imposed upon him with
reference to the said vessel or aircraft, the vessel or aircraft itself may be seized
and subjected in an administrative proceeding for the satisfaction of the fine for
which such person would have been liable. 

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PART 5
DISPOSITION OF PROPERTY IN CUSTOMS CUSTODY 

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Sec. 2601. Property Subject to Sale. — Property in customs custody shall be

subject to sale under the conditions hereinafter provided: chanroblesvirtuallawlibrary

a. Abandoned articles.
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b. Bonded articles entered under warehousing entry not withdrawn nor the duties
and taxes paid thereon within the period prescribed by law. 
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c. Articles for which import entry has been filed but have not been claimed within
fifteen days thereafter: Provided, That in justifiable cases, or when public interest
so requires, the Collector may, in his discretion, grant an extension of not more
than fifteen days. 

d. Seized property, other than contraband, after liability to sale shall have been
established by proper administrative or judicial proceedings in conformity with the
provisions of this Code. 

e. Any article subject to a valid lien for customs duties, taxes or other charges
collectible by the Bureau of Customs, after the expiration of the period allowed for
the satisfaction of the same. 

Sec. 2602. Place of Sale or Other Disposition of Property. — Property within the

purview of this Part of this Code shall be sold, or otherwise disposed of, upon the
order of the Collector of the port where the property in question is found, unless
the Commissioner shall direct its conveyance for such purpose to some other port. 
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Sec. 2603. Mode of Sale. — In the absence of any special provision, property

subject to sale by the customs authorities shall be sold at public auction after ten
days' notice conspicuously posted at the port and such other advertisement as
may appear to the Collector to be advisable in the particular case. 

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Sec. 2604. Disqualification to Participate in Auction Sale. — No customs official or

employee shall be allowed to bid directly or indirectly, in any customs auction. 

Sec. 2605. Disposition of Proceeds. — The following charges shall be paid from the
proceeds of the sale in the order named: 

a. Expenses of appraisal, advertisement and sale. 

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b. Duties except in the case of abandoned and forfeited articles. 
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c. Taxes and other charges due the Government. 

d. Government storage charges. 

e. Arrastre and private storage charges. 

f. Freight, lighterage or general average, on the voyage of importation, of which
due notice shall have been given to the Collector. 

Sec. 2606. Disposition of Surplus. — Except in the case of the sale of abandoned or

forfeited articles, any surplus remaining after the satisfaction of all lawful charges
as aforesaid shall be paid by the Collector to the owner, if known, otherwise it
shall be retained by him for ten days subject to the call of the owner. Upon the
failure of the owner to claim such surplus within this period, the Collector shall
deposit such amount with the Treasurer of the Philippines as a special deposit, to
be paid to the proper claimant demanding the same within one year thereafter,
upon such evidence and in such manner as the Auditor General shall prescribe. 

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In all such cases the Collector shall report fully his action in the matter, together
with all the particulars, to the Commissioner and to the Auditor General. After one
year all unclaimed special deposits shall be considered by the Bureau of Treasury
as customs receipts. 

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Sec. 2607. Disposition of Articles Liable to Deterioration. — Perishable articles

shall not be deposited in a bonded warehouse; and, if not immediately entered for
export or for transportation from the vessel or aircraft in which imported or
entered for consumption and the duties and taxes paid thereon, such articles may
be sold at auction, after such public notice, not exceeding three days, as the
necessities of the case permit. 

When seizure shall be made of property which, in the opinion of the Collector, is
liable to perish or be wasted or to depreciate greatly in value by keeping, or which
cannot be kept without great disproportionate expense, whether such property
consists of live animals or of any article, the appraiser shall so certify in his
appraisal, then the Collector may proceed to advertise and sell the same at
auction, upon notice as he shall deem to be reasonable. 

The same disposition may be made of any warehouse article when in the opinion
of the Collector it is likely that the cost of depreciation, damage, leakage or other
causes, may so reduce its value as to be insufficient to pay the duties, taxes and
other charges due thereon, if it should be permitted to be so kept and be subjected
to sale in the usual course.

Sec. 2608. Disposition of Articles Unfit for Use or Sale or Injurious to Public

Health. — When any article, which in the opinion of the Collector, is a menace to
public health, is seized or otherwise comes into the custody of the Bureau of
Customs, the Collector of the port shall, if the matter is not disposable under the
provisions relating to food and drugs, appoint a board of three members to
examine the article. Whenever possible, one member shall be a representative of
the Bureau of Health or the local health officer, and the two others shall be
responsible officials of the Bureau of Customs, at least one of whom shall be an
appraiser. Such board shall examine said article, and if the same is found to be
unfit or a menace to the public health, the board shall so report in writing to the
Collector, who shall forthwith order its destruction in such manner as the case
may require. 

Health authorities at port of entry shall collaborate with the collectors in such
matters with reasonable dispatch. 

Sec. 2609. Disposition of Contraband. — Articles of prohibited importation or

exportation, known as contraband, shall, in the absence of special provision, be
dealt with as follows: 

a. If the article in question is highly dangerous to be kept or handled, it shall

forthwith be destroyed. 
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b. Contraband coin or bullion shall accrue to the Stabilization Fund of the Central
Bank subject to the payment of the expenses incident to seizure, including the
reward to the informer, if any. 
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c. Other contraband of commercial value and capable of legitimate use may be
sold under such restrictions as will insure its use for legitimate purposes only; but
if the thing is unfit for use or the Collector is of the opinion that, if sold it would be
used for unlawful purposes, it may be destroyed in such manner as the Collector
shall direct. 

Sec. 2610. Disposition of Unsold Articles for Want of Bidders. — When any article
remains unsold for want of bidders or for lack of an acceptable bid, then the
Collector shall, subject to the approval of the department head, dispose of such
article to the best advantage of the government in a private sale, and in case the
same can not be sold, then such articles shall be given to government charitable
institutions through the Social Welfare Administration. 

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Sec. 2611. Disposition of Dangerous Explosives. — Gunpowder or other dangerous

or explosive substances, except firecrackers shall not be deposited in a bonded
warehouse, and when not entered for immediate use, transportation or export,
shall be subject to such disposition, in the discretion of the department head,
consistent with the public safety. 

The History of the Philippine Tariff System

THE ORIGIN OF TARIFFS

The word “tariff” originated from the old Spanish coast town of Tarifa, which received its name in the
Arab who are said to named it after “Tariff Iban Malik”. This historic little town has existed far more than
12 centuries.

In the days when commerce began to expand from the Mediterranean, a gang of racketeers made Tarifa
their headquarters, help up all merchant ships at this point and levied tribute according to a fixed rate
on all merchandise passing in and out of the Straits of Gibraltar. The mariners called this tribute a
“tariff”, and the word beacme current in England whose vessels founded majority in the merchant trade.

The word was adopted into Spanish tarifa which means price list or rate book; in Portugese tarifa which
means schedule; in French tarifa which means rate; and in Italian tarifa which means price list.

TARIFF DISTINGUISHED FROM CUSTOMS

Tariff – a term found in many languages, denotes the list of schedules of commodities with the particular
duties or charges upon each.

Customs – an Englisgh term which originally denoted “all customay tolls” or dues paid by merchants
upon commodities on their way to and from the market, not necessarily differentiated by the class of
goods for the benefit of the King, Lord, local government authority.

Modern Customs Tariff – a systematic arrangement of customs duties levied on goods when they cross
the border of a political unit. They are an official list of schedule setting forth the several customs duties
to be imposed on imports, exports on goods in transit.
ORIGIN OF CUSTOMS

The practice of collecting revenue from customs on importation by means of tariff is shrouded with
antiquity. Customs duties are mentioned in the Old Testament, but this method of collecting revenue
may have been the fashion long before its first authentic record.

During the many disputes between the English Kings and the House of Commons over the levying and
imposition of taxes the kings claomed that proceeds from “ancient customs” was theirs and parliaments
had no jurisdiction over it. Thus, the term “customs” came into official use at an early date in England,
and has ever since been applied to imports or taxes on imports.

During the feudal ages, favored barons were granted the privelege to levy takes by the king. Those
importing foreign mechandise or selling a certain domestic commodity were taxed for the privelede by
favored lord or baron. One baron would have the exclusive right to levey tribute on sellers of salt while
another baron would have the priveledge to some other commodity. Thus, taxes were collected from
domestic merchants and importers somewhat as they are today.

The Kings, in turn, levied upon these same feudal lords, sometimes referred to as robber barons,
through the so-called “divine rights of kingds” which included the physical ability:

1. To raise revenue by levying on the feudal lords;

2. To enforce their decrees on the greater number; and

3. To raise armed forces to sustain their orders, by punishing recalictrants and to make conquest on
other nobles and kings and bring them into the orbits of influence.

PURPOSES OF TARIFF
1. Revenue Tariff

Tariff whose rate of duty is relatively low so that goods may be readily imported and duties easily
collected.

2. Protective Tariff

Tariff whose rates are relatively high to keep certain imports out of the domestic market or to raise
domestic price on certain imports so that they may be manufactured profitability at home.

3. Baragaining Tariff

Tariff whose schedules include rates designed primarily for barganing purposes or which contain some
general provision for the imposition of higher duties upon products of countries vision for the imposition
of higher duties upon products of countries vision for the imposition of higher duties.

TARIFF AS IT HAS AFFECTED THE HISTORY OF THE PHILIPPINES

DURING THE PRE-SPANISH PERIOD

Long before the history of the Philippines by Magellan, the ancient Filipinos were already trading with
China, Japan, Siam (Thailand), Cambodia, India, Burma, Sumatra, Java and other neighboring islands. An
interestingbSpanish document of 1586 narrated that they are “keen traders and have traded with China
for many years and before the advent of the Spaniards they saild to Mulloco, Malacca, Hazian, Parani,
Burnie and other kingdoms.”

The customary way of trading with other people was by barter in which the Filipinos offered their home
products in exchange for the products of other countries. Sometimes, a price was fixed for commodities
“which was paid in gold, as agreed upon or in metal bells (gongs) brought from China.” The Chinese
writers Chao Ju Kua and Wang Tay-Uan observed that the ancient Filipinos were honest in the
commercial dealings.

History records show that even before the arrival of Magellan in the Philippines, Chinese, Japanese and
other foreign traders who brought silks, woolens, bells, porcelains, perfume, iron, tin, colored cotton
cloth and other small wares to the country paid tariff duties on them.

DURING THE SPANISH PERIOD

As soon as the islands were acquired by Sapin, the ancient almojarifazgo (a three percent ad valorem)
imposed on both imports and exzports was amplified to the Philippine customshouse was established in
Manila by Governorn Guido R. de lavizares in 1573. However, according to the report of the Viceroy of
Mexico to the Spanish King of 1573, the governor-genral did not enforced the almojarifazgo at once. It
took Gonzalo Ronquillo de Penalosa, the fourth Spanish governor-general to impose almojarifazgo in
1582.

It was not until more than 2 and a half centuries that other ports of the archipelago were opened for
foreign commerce. Zamboanga was opened in 1833; Cebu in 1842; Iloilo and Sulu in 1855; and Legazpi
and Tacloban in 1874.

All foreign commerce was required to be carried in government vessels except those with China, Japan
and other oriental countries. Not until 1834, the Philippine trade was opened to the world and ships
other than those os Spain was permitted to share in Philippine commerce.

The customshouse became a distinct department if 1779 and was made an independent branch of the
Treasury in 1805.

While duties in theory and ad valorem, they were in reality specific by the fixing of arbitrary values. Prior
to 1734, these values were assessed by a board composed of a royal officer and two merchants with a
royal fiscal as intervenor.
In 1734, a permanent board of valuation called as “Junta de Valoraciones” was established. This was
abolished in 1782, followed by the tariff board in 1828 called as “Junta de Arancelus”. Trade during the
interim was in the hands of Compania Real de Filipinas.

The traiff board created in 1828 was introduced to prepare a new tariff bases on the following purposes,
Junta de Arancelus as follows:

1. To increase revenue;

2. To protect agriculture and arts of the islands; and

3. To expand foreign commerce.

On January 1, 1832, a new tariff which was drafted by the Tariff Board created in 1828 was adopted. Like
its predecessor, it provided from rge arbitrary valuation. This tariff was in effect until April 1891. Under
this tariff, there were 100 classes of articles which fixed values with few exceptions. Fifteen export
articles were enumerated, although all exports were subject to duty, except gold, silver and tobacco,
which were exported to Spain.

On importations, four rates were established according to origin namely:

1. First and lowest rate, Spanish goods in Spanish ships;

2. Spanish goods in foreign ships;

3. Foreign goods in Spanish ships;

4. Foreign goods in foreign ships.

On April 1, 1891, the new traiff which was promulgated on March 3, 1891 took effect. This tariff as made
all duties specific reduced the free list but exemoted Spanish merchandise from duty. This law of 1981
remained in force up to the beginning of the American occupation and was continued in force and
effected by the US Military Government until November 15, 1901.

DURING THE AMERICAN OCCUPATION

The early Philippine tariff, although Manila was occupied by the United States forces in August 13, 1898,
one month earlier on July 12, 1898, President William Mckinley had already issued and executive order
providing for a tariff duties and taxes to be imposed as military contributions and to take effect and be in
force in the ports and places of the Philippines so occupied by the American forces. However, when the
Manila customshouse was actually re-opened for business on August 21, 1898, it was deemed advisable
by General Wasley Merritts to continue temporarily the Spanish tariff then found in force modifying the
same by eliminating the extensive preference accorded to Spanish goods. The action taken by General
Meritts was notified by the United States Secretary of War on October 13, 1893 providing that the
effectivity until November 10, 1898 and in the interim period the Spanish tariff shall be enforced.

It should be recalled that at the time the United States gained possession of the Philippines, the Dingley
Tariff Law was in force in the former country. No tariff preference were accorded by the United States to
Philippine products nor were accorded by the American Government in the Philippines to United States
products. The full rates of the Dingley Tariff Law, therefore, applid on Philippine products imported into
the United States and the full rates of the Spanish Tariff and subsequently the modified American tariff
prepared for the Philippines were applied on United States goods imported into the Philippines.

The Spanish tariff and the modified tariff were enforced from the occupation of the Philippines in 1989
upto November 15, 1901 were deemed to be only temporary meausures pending the enactment of a
general revision of the Philippine tariff. On September 17, 1901, the Philippine Commission passed Act
No. 230 which initiated a general revision of the tariff. The Act was made to take effect on November 15,
1901.

THE FOURTEEN DIAMOND RING CASES AND ITS AFTERMATH

The imposition of duties on Philippine products entering the United States and on United States
products entering the Phillippines had so far remained unquestioned. However, in the later part of 1901
and a short time after the enactment of Act 230 of the Philippine Commission, the Supreme Court of the
United States made a far reaching decision in the famous 14 Diamond Ring Cases. Briefly, the case was
brought up when Emil J. Pepke, United States citizen in the service of the American Armed Forces,
brought with him which he acquired in the Philippines, 14 diamond rings. They were seized by the
United States customs authorities as having been brought in illegally, into the United States, which ruled
that the Philippine is not a foreign country within the meaning of the Dingley Tariff Law. As a
consequence thereof, Philippine goods may be imported into the United States and the United States
goods into the Philippines duty free. This ruling nullified the applicability of Act 230 of the Philippine
Commission on the Philippine imports of United States goods and of the Dingley Law on Philippine
products imported into the United States.

One of the provisions of the Treaty of Paris on April 10, 1899 betweeen the United States and Spain was
the following:

“The United States will, for a term of 10 years from the date of exchange of the ratification of the
present treaty, admit Spanish ships and merchandise to the ports of the Philippine Islands on the same
term as ships and merchandise of the United States.”

PHILIPPINE OPPOSITION TO FREE TRADE

Messengers Benito Legarda and Paolo Ocampo expressed their opposition to free trade. Commissioner
Legarda stated that the proposal to establish free trade between the Philippines and the United States
will tend to divert Philippine sugar and tobacco products from their natural markeys in China and Japan
to one several thousands mile away, and that the duty-free entry of the American products into the
Philippines would result in a big deficit in the revenue of the Philippine treasury.

Resident Commissioner Paolo Ocampo indicated that passage of the trade measured not only reduced
government revenue but also make it difficult for the Philippines to maintain an independent existence
later on.

ESTABLISHMENT OF FREE TRADE

The opposition of both the Philippines and the segments of the American people against free trade was
nevertheless overridden by its proponents.

The “Payne-Aldrich Tariff Act” was approved on August 5, 1909, to take effect the following day.
Philippine manufactured products were allowed duty-free entry into the United States articles except
rice. No limitation as to quantity or the foreigh material content were imposed with respect to the
United States products imported into the Philippines. Free Trade was thus established between the
Philippines and the United States. The duty-free trade was also subject to the conditions that np draw
back of customs duties has been allowed, and the shipment of the goods must be direct.

THE UNDERWOOD TARIFF LAW

The United States Congress passed what is now known as the “Underwood Tariff Law” which went into
effect the following day. This Act of the United States Congress constituted the final step in the
establishment of free trade between the Philippines and the United States. This Act maintained the
provisions under the Tariff Act of 1909 with respect to the Foreign material content of Philippine
products exported to the United States, the non-granting of drawback of customs duties and direct
shipment as conditions of duty-free trade. The Act further repealed Section 13 of the Philippine Tariff
Act thereby abolishing exportb duties on Philippine exports. Rice which was dutiable under the
Philippine Tariff Act of 1909 was made duty-free either way under the Tariff Act of 1913.

THE JONES LAW

On August 29, 1916, the United States made manifest its desire to grant independence to the
Philippines as soon as a stable government could be established in the country. It thus provided for a
more autonomous government for the Philippines. The Jones Law authorizes the Philippines to enact
tariff law for the Philippines subject to the condition that the same shall not become a law until
approved by the President of the United States. It further provided that the relations of the Philippines
and the United States shall exclusively be governed by the laws of the United States Congress.

The United States Tariff Act of 1922 known as the Fordney-McCumber Tariff Law and the United States
Tariff Act of 1930 known as the Hawley-Smooth Tariff Law re-enacted the free trade relationship
between the Philippines and the United States.

COMMONWEALTH PERIOD
The passage of the “Tydings-McDuffie Law” on March 24, 1934 made more concrete and definite the
commitment of the United States with respect to the grant of Philippine independence. At the same
time, the Act provided for the trade relations to govern the Philippines for a term of 10-year transition
period prior to independence. It specified all acts of the Philippine legislature with respect to imports
and exports shall not become a law until approved by the President of the United States. It also specified
the nature of trade relations between the Philippines and the United States.

The Tydings-McDuffie Act destroyed the reciprocal nature of free trade relations. The saving clause in
the Act (Section 13) provided for the holding of a conference at least one year prior to the grant of the
Philippine independence to formulate recommendations regarding the future trade relations between
the two countries. The transition period was broken by the outbreak of the World War II.

AMERICAN AID AND THE 1946 TRADE AGREEMENT WITH THE UNITED STATES

The United States Congress came to the aid of the Philippine by approving the Philippine Rehabilitation
Act of 1946, otherwise known as the War Damage Act. The Act would bring millions of the United States
dollards for the rehabilitation and construction of the country subject, however, to the condition that no
war damage payments in excess of $500 could be made until an Executive Agreement providing for the
trade relations between the two countries.

To implement the condition of the War Damage Act, the US Congree approved the Philippine Trade Act
of 1946 commonly known as the Bell Trade Act. The Act contained specific provisions on the terms
which could govern the trade and other relationships between the Philippines and the US from July 4,
1946, the date of the inauguration of the Philippine Republic, to July 3, 1974. In general, it provided an
eight years of duty-free trade relation between the two countries.

THE LAUREL-LANGLEY AGREEMENT

In order to correct the inequalities of the 1946 Trade Agreement and to negotiate with the United States
a trade agreement which would be more in harmony with the national interest of the Philippines, a
Philippine Economic Mission headed by Senator Jose P. Laurel with several senators and congressmen
and men in the executive branch of the government, was sent to the US in September 1954. The mission
carried on negotiations with its US counterparts and in December of the same year, they reach an
agreement, now known as the Laurel-Langley Agreement, providing for the terms for the revision of the
1946 Trade Agreement.

The Laurel-Langley Agreement contains also other provisions which will directly help the Philippine
protect its domestic industries and developits economy in general.

The Tariff Commission

THE HISTORY OF THE TARIFF COMMISSION

TIME EVENTS
1953 Thru RA 911, the Tariff Commission was created on June 20, 1953 under the
Office of the President. This Act provided for a collegial body consisting of a
Chairman and two Commissioners.
1956 The Tariff Commission was transformed into a division of the then
Department of Finance.
1957 Congress enacted RA 1937 or the Tariff and Customs Code of the
Philippines restoring the Tariff Commission as an independent body under
the supervision of the Office of the President and headed by a Commissioner
and Assistant Commissioner.
1973 Tariff Commission was converted into a collegial body consisting a
Chairman and two Member Commissioners thru PD No. 1 known as the
Integrated Reorganizational Plan and placed under the administrative
supervision of NEDA.
1999 In August 1999, EO 143 was issued (Instituting Effective Operational
Mechanisms and Strategies in the Tariff Commission)
2008 Approval of the Rationalization Plan under EO No. 366 – Effecting the
Latest Pattern of the Tariff Commission.

The Tariff Commission is a government agency under the Republic of the Philippines.

TC performs both governmental and quasi-judicial functions. Under the CMTA, which
updated and expanded TC’s prescribed mandate under Presidential Decree No. 1464 (s.
1978), also known as the Tariff and Customs Code of the Philippines, TC has the
following functions:

1.    Adjudicate cases on the application of trade remedies against imports;

2.    Study  the impact of tariff policies and programs on national competitiveness and
consumer welfare in line with the economic objectives of the government;

3.    Administer the Philippine tariff schedules and tariff nomenclatures;

4.    Issue advance rulings on tariff classification of imported goods and render rulings
on disputes over tariff classification of goods;

5.    Provide the President and Congress with independent analysis, information and
technical support on matters related to tariff and non-tariff measures affecting
Philippine industries and exports for policy guidance;

6.    Analyse the nature and composition, and the classification of goods according to
tariff commodity classification and heading number for customs and other related
purposes, which information shall be furnished certain government agencies;

7.     Review the trade agreements for negotiation and trade agreements entered into by
the Philippines and make recommendations, if necessary, on the consistency of the
terms of the agreements with the national policy objectives; and

8.    Conduct public consultations and public hearings pursuant to its functions.

To date, the TC is an agency attached with the National Economic Development

Authority.

TC VISION

The Tariff Commission shall be the principal and independent authority in tariff and
trade remedy measures to enhance industry competitiveness and promote consumer
welfare.

TC MISSION

The Tariff Commission is a key adviser to the executive and legislative branches of the
government on tariff and trade matters, and adjudicatory body on trade remedy cases
and advocate a strong competition law and policy, remains committed to the pursuit of
good and effective governance.

ORGANIZATIONAL STRUCTURE OF THE TARIFF COMMISSION

PROVISIONS UNDER THE CMTA: TITLE XVI CMTA

Sec. 1600. Chief Officials of the Tariff Commission and Qualifications. – The

officials of the Tariff Commission shall consist of a Chairperson and two (2)
Commissioners to be appointed by the President of the Philippines. The Chairperson
and the Commissioners shall be natural-born citizens of the Philippines, of good moral
character and proven integrity, and who, by experience and academic training possess
the necessary qualifications requisite for developing expert knowledge of tariff and
trade related matters. During their terms of office, the Chairperson and the
Commissioners shall not engage in the practice of any profession, or intervene directly
or indirectly in the management or control of any private enterprise which may, in
anyway, be affected by the functions of their office. They shall not be, directly or
indirectly, financially interested in any contract with the government, or any subdivision
or instrumentality thereof.

Sec. 1601. Appointment and Compensation of Officials and Employees. – All

employees of the Commission shall be appointed by the Chairperson in accordance
with, the Civil Service Law except as the private secretaries to the offices of the
Chairperson, Commissioners and Executive Director.

Sec. 1602. Official Seal. – The Commission is authorized to adopt an official seal.

Sec. 1603. Functions of the Commission. – The Commission shall have the following
functions:

(a) Adjudicate cases on the application of trade remedies against imports pursuant to
Sections 711, 712 and 713 of this Act;
(b) Study the impact of tariff policies and programs on national competitiveness and
consumer welfare in line with the economic objectives of the government;

(c) Administer the Philippine tariff schedules and tariff nomenclatures;

(d) Issue advance rulings on tariff classification of imported goods and render rulings on
disputes over tariff classification of goods pursuant to Section 1100 of this Act, except in
cases involving goods on which the Commission has provided advance ruling on tariff
classification;

(e) Provide the President and Congress with independent analysis, information and
technical support on matters related to tariff and nontariff measures affecting Philippine
industries and exports for policy guidance;

(f) Analyse the nature and composition, and the classification of goods according to
tariff commodity classification and heading number for customs and other related
purposes, which information shall be furnished the NEDA, DTI, DA, DOF, DENR, and BSP;

(g) Review the trade agreements for negotiation and trade agreements entered into by
the Philippines and make recommendations, if necessary, on the consistency of the
terms of the agreements with the national policy objectives;

(h) Conduct public consultations and public hearings pursuant to its functions; and

(i) Deputize or delegate, to appropriate government agency its function of rendering

rulings on disputes over tariff classification of goods, until the plantilla positions
necessary for undertaking such function have been approved and filled-up: Provided,
That such delegation of function shall not extend beyond three (3) years from the
effectivity of this Act.

Sec. 1604. Reports of the Commission. –The Commission shall place at the disposal of
the President and any Member of the Congress of the Philippines all information at its
command. It shall conduct such investigation and submit reports as may be required by
the President and the Congress of the Philippines. It shall likewise report to the
President and Congress on the first Monday of December of each year and hereafter, a
statement of methods adopted and a summary of all reports made during the year.

Sec. 1605. Access to Documents and Assistance to the Commission. – The

Commission or its duly authorized representative shall have access to any document,
paper or record pertinent to the subject matter under investigation, in the possession of
any person, firm, co-partnership, corporation, or association engaged in the production,
importation, or distribution of goods under investigation, and shall have power to
summon witnesses, take testimony, administer oaths, and to issue subpoena duces
tecum requiring the production of books, papers, or documents relating to the matter
under investigation. The Commission may also request the views, recommendations,
and assistance of any government office, agency, or instrumentality who shall be
expected to cooperate fully with the Commission.

Sec. 1606. Sworn and Verified Statements. – The Commission may order the taking of
sworn statements at any stage of any proceeding or investigation before it. The sworn
statements must be made before a person duly authorized to administer oaths.

The Commission is authorized to require any importer, grower, producer, manufacturer

or seller to file with the Commission a statement, under oath, giving the selling prices in
the Philippines of goods imported, grown, produced, fabricated or manufacture d by
such person.

Sec. 1607. Implementing Rules and Regulations. – The Commission shall promulgate

and adopt such rules and regulations as may be necessary to carry out the provisions of
this Act.

FLEXIBLE TARIFF CLAUSE

Sec. 1608. Flexible Clause. – (a) In the interest of the general welfare and national
security, and, subject to the limitations prescribed under this Act, the President, upon
the recommendation of the NEDA, is hereby empowered to:

1.    Increase, reduce, or remove existing rates of import duty including any necessary
change in classification. The existing rates may be increased or decreased to any level, in
one or several stages, but in no case shall the increased rate of import duty be higher
than a maximum of one hundred per cent (100%) ad valorem;

2.    Establish import quotas or ban imports of any commodity, as may be necessary; and

3.    Impose an additional duty on all imports not exceeding ten percent (10%) ad
valorem whenever necessary: Provided, That upon periodic investigations by the
Commission and recommendation of the NEDA, the President may cause a gradual
reduction of rates of import duty granted in Section 1611 of this Act, including those
subsequently granted pursuant to this section.

(b) Before any recommendation is submitted to the President by the NEDA pursuant to
the provisions of this section, except in the imposition of an additional duty not
exceeding ten percent (10%) ad valorem, the Commission shall conduct an investigation
and shall hold public hearings wherein interested parties shall be afforded reasonable
opportunity to be present, to produce evidence and to be heard. The Commission shall
also hear the views and recommendations of any government office, agency, or
instrumentality. The Commission shall submit its findings and recommendations to the
NEDA within thirty (30) days after the termination of the public hearings.

(c) The power of the President to increase or decrease rates of import duty within the
limits fixed in subsection (a) hereof shall include the authority to modify the form of
duty.  In modifying the form of duty, the corresponding ad valorem or specific
equivalents of the duly with respect to imports from the principal competing foreign
country for the most recent representative period shall be used as basis.

(d) Any order issued by the President pursuant to the provisions of this section shall take
effect thirty (30) days after promulgation, except in the imposition of additional duty not
exceeding ten percent (10%) ad valorem which shall take effect at the discretion of the
President.

(e) The power delegated to the President as provided for in this section shall be
exercised only when Congress is not in session.

(f) The power herein delegated may be withdrawn or terminated by Congress through a
joint resolution.

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

Sec. 1609. Promotion of Foreign Trade. – (a) For the purpose of expanding foreign
markets for Philippine products as a means of assisting in the economic development of
the country, in overcoming domestic unemployment, in increasing the purchasing
power of the Philippine peso, and in establishing and maintaining better relations
between the Philippines and other countries, the President, shall, from time to time:

(1) Enter into trade agreements with foreign governments or instrumentalities thereof;
and

(2) Modify import duties, including any necessary change in classification and other
import restrictions as are required or appropriate to carry out and promote foreign
trade with other countries: Provided, That in modifying import duties or fixing import
quota, the requirements prescribed in subsection (a) of Section 1608 of this Act shall be
observed: Provided, however, That any modification in import duties and the fixing of
import quotas pursuant to the various trade agreements the Philippines has entered
into, shall not be subject to the limitations of aforesaid subsection (a) of Section 1608.

(b) The duties and other import restrictions as modified in subsection (a) of this section,
shall apply to goods which are the growth, produce, or manufacture of the specific
country, whether imported directly or indirectly, with which the Philippines has entered
into a trade agreement: Provided, That the President may suspend the application of
any concession to goods which are the growth, produce, or manufactured product of
the specific country because of acts or policies which tend to defeat the purposes set in
this section, including the operations of international cartels; and the duties and other
import restrictions as negotiated shall be in force and effect from and after such time as
specified in the order, without prejudice to the Philippine commitments in any ratified
international agreement or treaty.

(c) Nothing in this section shall be construed to give any authority to cancel or reduce in
any manner the indebtedness of any foreign country to the Philippines or any claim of
the Philippines against any foreign country.

(d) Before any trade agreement is concluded with any foreign government or
instrumentality thereof, reasonable public notice of the intention to negotiate an
agreement with such government or instrumentality shall be given in order that
interested persons may have an opportunity to present their views to the Commission.
The Commission shall seek information and advice from the DTI, DA, DOF, DENR, DFA
and BSP, and from such other sources as it may deem appropriate.

(e) In advising the President, on a trade agreement entered into by the Philippines, the
following shall be observed:

(1) The Commission shall determine whether or not the domestic industry has suffered
or is being threatened with injury and whether or not the wholesale prices at which the
domestic products are sold are reasonable, taking into account the cost of raw
materials, labor, overhead, a fair return on investment, and the overall efficiency of the
industry.

(2) The NEDA shall evaluate the report of the Commission and submit recommendations
to the President.

(3) Upon receipt of the report of the findings and recommendations of the NEDA, the
President may prescribe adjustments in the rates of import duties, withdraw, modify or
suspend, in whole or in part, any concession under any trade agreement, establish
import quota, or institute such other import restrictions, as the NEDA recommends to be
necessary in order to fully protect domestic industry and the consumers, subject to the
condition that the wholesale prices of the domestic products shall be reduced to, or
maintained at, the level recommended by the NEDA unless, for good cause shown, an
increase thereof, as recommended by the NEDA is authorized by the President. Should
increases be made without such authority, the NEDA shall immediately notify the
President who shall allow the importation of competing-products in such quantities as
to protect the public from the unauthorized increase in wholesale prices.

(f) This section shall not prevent the effectivity of any executive agreement or any future
preferential trade agreement with any foreign country.

(g) The NEDA and the Commission shall promulgate such reasonable procedures, rules
and regulations as they may deem necessary to execute their respective functions under
this section.

When Duty and Tax are Due on Imported Goods and

Prohibited Importation
Except as otherwise provided for in this Act or in other laws, all goods, when imported
into the Philippines, shall be subject to duty upon importation, including goods
previously exported from the Philippines.

Unpaid duties, taxes and other charges, shall incur legal interest of twenty percent (20%)
per annum computed from the date of final assessment under Section 429 of this Act,
when payment becomes due and demandable. The legal interest shall likewise accrue
on any fine or penalty imposed.

Upon payment of the duties, taxes and other charges, the Bureau shall issue the
necessary receipt or document as proof of such payment.

Prohibited Importation and Exportation.— The importation and exportation of the

following goods are prohibited:

(a) Written or printed goods in any form containing any matter advocating or inciting
treason, rebellion, insurrection, sedition against the government of the Philippines, or
forcible resistance to any law of the Philippines, or written or printed goods containing
any threat to take the life of, or inflict bodily harm upon any person in the Philippines;
(b) Goods, instruments, drugs and substances designed, intended or adapted for
producing unlawful abortion, or any printed matter which advertises, describes or gives
direct or indirect information where, how or by whom unlawful abortion is committed;

(c) Written or printed goods, negatives or cinematographic films, photographs,

engravings, lithographs, objects, paintings, drawings or other representation of an
obscene or immoral character;

(d) Any goods manufactured in whole or in part of gold, silver or other precious metals
or alloys and the stamp, brand or mark does not Indicate the actual fineness of quality
of the metals or alloys;

(e) Any adulterated or misbranded food or goods for human consumption or any
adulterated or misbranded drug in violation of relevant laws and regulations;

(f) Infringing goods as defined under the Intellectual Property Code and related laws;
and

(g) All other goods or parts thereof which importation and exportation are explicitly
prohibited by law or rules and regulations issued by the competent authority.

General Interpretative Rules

The classification of goods and its tariff nomenclature as provided pursuant to this Act
shall be governed by the following principles:

(1) The titles of sections, chapters and subchapters are provided for easy reference only.
For legal purposes, classification shall be determined according to the terms of the
headings and any relative section or chapter notes and, provided such headings or
notes do not otherwise require, according to the following provisions:

(2) (a) Any reference in a heading to the goods shall be taken to include a reference to
the same in their incomplete or unfinished form or state: Provided, That the incomplete
or unfinished goods have the essential character, as presented, of the complete or
finished goods. It shall also be taken to include a reference to the same, in their
complete or finished form or state (or falling to be classified as complete or finished by
virtue of this Rule), presented unassembled or disassembled.
(b) Any reference in a heading to a material or substance shall be taken to include a
reference to mixtures or combinations of that material or substance with other materials
or substances. Any reference to goods of a given material or substance shall be taken to
include a reference to goods consisting wholly or partly of such material or substance.
The classification of goods consisting of more than one material or substance shall be
according to the principles of Rule 3.

(3) When by application of Rule 2(b) or for any other reason, goods are, prima facie,
classifiable under two (2) or more headings, classification shall be effected as follows:

(a) The heading which provides the most specific description shall be preferred to
headings providing a more general description. However, when two (2) or more
headings each refer to part only of the materials or substances contained in mixed or
composite goods or to part only of the items in a set put up for retail sale, those
headings are to be regarded as equally specific in relation to those goods, even if one of
them gives a more complete or precise description of the goods.

(b) Mixtures, composite goods consisting of different materials or made up of different

components, and goods put up in sets for retail sale, which cannot be classified by
reference to 3(a), shall be classified as if they consisted of their essential character,
insofar as this criterion is applicable.

(c) When goods cannot be classified by reference to 3(a) or 3(b), they shall be classified
under the heading which occurs last in numerical order among those which equally
merit consideration;

(4) Goods which cannot be classified in accordance with the above Rules shall be
classified under the heading appropriate to the goods to which they are most akin.

(5) In addition to the foregoing provisions, the following Rules shall apply with respect
to the goods referred to therein:

(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases,
necklace eases and similar containers, specially shaped or fitted to contain specific
goods or set of goods, suitable for long-term use and presented with the goods for
which they are intended, shall be classified with such goods when of a kind normally
sold therewith. The Rule does not, however, apply to containers which give the whole its
essential character; and

(b) Subject to the provisions of Rule 5(a), packing materials and packing containers
presented with the goods therein shall be classified with the goods if they are of a kind
normally used for packing such goods. However, this provision does not apply when
such packing materials or packing containers are clearly suitable for repetitive use.

(6) For legal purposes, the classification of goods in the subheadings of a heading shall
be determined according to the terms of those subheadings and any related
subheading notes and, mutatis mutandis, to the above Rules, on the understanding that
only subheadings at the same level are comparable. For the purposes of the Rule, the
relative section and Chapter Notes also apply, unless the context otherwise requires.

Drawback and Refund

Basis of Duty Drawback.—

(A) On Fuel Used for Propulsion of Vessels.— On all fuel imported into the Philippines
used for propulsion of vessels engaged in trade with foreign countries, or in the
coastwise trade, a refund or tax credit shall be allowed not exceeding ninety-nine
percent (99%) of the duty imposed by law upon such fuel, which shall be paid or
credited under such rules and regulations as may be prescribed by the Commissioner
with the approval of the Secretary of Finance.

(B) On Petroleum Oils and Oils Obtained from Bituminous Minerals, Crude, Eventually
Used for Generation of Electric Power and for the Manufacture of City Gas.— On
petroleum oils and oils obtained from bituminous materials, crude oil imported by
nonelectric utilities, sold directly or indirectly, in the same form or after processing, to
electric utilities for the generation of electric power and for the manufacture of city gas,
a refund or tax credit shall be allowed not exceeding fifty percent (50%) of the duty
imposed by law upon such oils, which shall be paid or credited under such rules and
regulations as may be prescribed by the Commissioner with the approval of the
Secretary of Finance.

(C) On Goods Made from Imported Materials.— Upon exportation of goods

manufactured or produced in the Philippines, including the packing, covering, putting
up, marking or labeling hereof either in whole or in part of the imported materials for
which duties have beenpaid, a refund or tax credit shall be allowed for the duties paid
on the imported materials so used including the packing, covering, putting up, marking
or labeling thereof subject to the following conditions:

(1) The actual use of the imported materials in the production or manufacture of the
goods exported with their quantity, value, and amount of duties paid thereon, should be
established satisfactorily;
(2) The duties refunded or credited shall not exceed one hundred percent (100%) of
duties paid on the imported materials used;

(3) There is no determination by the NEDA of the requirement for certification on

nonavailability of locally-produced or manufactured competitive substitutes for the
imported materials used at the time of importation;

(4) The exportation shall be made within one (1) year after the importation of materials
used and daim of refund or tax credit shall be filed within six (6) months from the date
of exportation; and

(5) When two or more products result from the use of the same imported materials, an
apportionment shall be made on its equitable basis.

 Payment of Drawbacks.— Eligible claims for refund or tax credit shall be paid or granted
by the Bureau to claimants within sixty (60) days after receipt of properly accomplished
claims: Provided, That a registered enterprise under Republic Act No. 5186, otherwise
known as the “Investment Incentives Act”, or Republic Act No. 6135, otherwise
known as the “Export Incentives Act of 1970”, which has previously enjoyed tax
credits based on customs duties paid on imported raw materials and supplies, shall not
be entitled to a drawback under this section with respect to the same importation
subsequently processed and reexported.

The Secretary of Finance may, upon the recommendation of the Commissioner,

promulgate rules and regulations allowing partial payments of drawbacks pursuant to
this section.

Section 902. Prescription of Drawback Claim.— A claim and application for a drawback

shall prescribe if it is not filed within one (1) year from the date of importation in case of
Section 900, paragraphs (A) and (B) and within one (1) year from the date of exportation
in the case of Section 900, paragraph (C), subject to such rules and regulations as may
be issued by the Commissioner, upon approval of the Secretary of Finance.

REFUND AND ABATEMENT

 
Refund of Duties and Taxes.— Refund shall be granted where it is established that duties
and taxes have been overcharged as a result of an error in the assessment or goods
declaration.

Where permission is given by the Bureau for goods originally declared for a customs
procedure with payment of duties and taxes to be placed under another customs
procedure, a refund shall be made of any duties and taxes charged in excess of the
amount due under the new procedure, subject to such regulation issued for the
purpose.

A refund shall not be granted if the amount of duties and taxes involved is less than five
thousand pesos (₱5,000.00); Provided, That the Secretary of Finance, in consultation with
the Commissioner, may adjust the minimum amount specified in this Act, taking into
account the CPI as published by the PSA.

Abatement of Duties and Taxes.— When goods have not yet been released for
consumption or have been placed under another customs procedure, provided that no
other offense or violation has been committed, the declarant shall neither be required to
pay the duties and taxes nor be entitled to refund thereof in any of the following cases:

(a) When, at the request of the declarant, the goods are abandoned, or as determined
by the Bureau, the goods are destroyed or rendered commercially valueless while under
customs control. Any cost herein incurred shall be borne by the declarant;

(b) When goods are destroyed or irrecoverably lost by accident or force majeure, the
remaining waste or scrap after destruction, if taken into consumption, shall be subject to
the duties and taxes that would be applicable on such waste or scrap if imported in
same state; and

(c) When there are shortages due to the nature of the goods.

Section 905. Abatement for Damage Incurred During Voyage.—- Except as otherwise

provided, no abatement of duties shall be made on account of damage incurred or
deterioration suffered during the voyage of importation; and duties will be assessed on
the actual quantity imported as determined by the customs officers concerned.

Section 906. Abatement or Refund of Duty on Missing Package.— When any package

appearing on the manifest or bill of lading or airway bill is missing, an abatement or
refund of the duty shall he made if it is certified by the importer or consignee, under
pain of penalty for falsification or perjury, and upon production of proof satisfactory to
the Collector concerned, that the package in question has not been unlawfully imported
into the Philippines.

Abatement or Refund for Deficiency in Contents of Packages.— If, upon opening of any

package, a deficiency in the quantity of the goods is found to exist based upon the
invoice, such deficiency shall be certified, under pain of penalty for falsification or
perjury, by the customs officers concerned and upon the production of proof showing
that the shortage occurred before the arrival of the goods in the Philippines. Upon
sufficient proof thereof, the proper abatement or refund of the duty shall be made.

 Abatement or Refund of Duties on Goods Lost or Destroyed After Arrival.— The Bureau

may abate or refund the amount of duties accruing or paid on any goods that have
been lost due to injury, theft, destruction through fire or through any other causes,
upon satisfactory proof of the same, under any of the following circumstances:

(a) While within the territory of any port of entry, prior to unloading under the Bureau’s
supervision;

(b) While remaining in customs custody after unloading;

(c) While in transit from the port of entry to any port in the Philippines; and

(d) While released under sufficient security for export except in case of loss by theft.

Section 909. Abatement and Refund of Defective Goods.— Under conditions to be set by

the Commissioner, and with the approval of the Secretary of Finance, an abatement and
refund shall be granted on imported or exported goods which are found defective or
otherwise not in accordance with the agreed specifications at the time of importation or
exportation and are returned either to the supplier or to another person designated by
the supplier, subject to the following conditions:

(a) The goods have not been worked, repaired, or used in the country of importation,
and are reexported within a reasonable time; and

(b) The goods have not been worked, repaired, or used in the country to which they
were exported, and are reimported within a reasonable time.

Use of the goods shall, however, not hinder the refund if such use was indispensable to
discover the defects or other circumstances which caused the reexportation or
reimportation of the goods.
As an alternative to reexportation or reimportation, the goods may be expressly
abandoned or destroyed or rendered commercially valueless under customs control as
the Bureau may decide. In such case, the importer shall not be entitled to an abatement
or a refund if it does not defray the costs of such abandonment, destruction, or
rendition.

 Abatement of Duty on Dead or Injured Animals.— Where it is certified, under pain of

penalty for falsification or perjury, and upon production of proof satisfactory to the
Bureau that an animal subject of importation dies or suffers injury before arrival, or
while in customs custody, the duty due thereon shall be abated provided that its carcass
on board or in customs custody is removed in the manner required by the Bureau and
at the expense of the importer.

  Investigation Required in Case of Abatements and Refunds.—  The Customs Officer

concerned shall, in all cases of abatement or refund of duties, submit an examination
report as to any fact discovered which indicates any discrepancy and cause the
corresponding adjustment on the goods declaration.

Refund Arising from Correction of Errors.— Manifest clerical errors made on an invoice or

entry, errors in return of weight, measure and gauge, when duly certified under
penalties of falsification or perjury by the surveyor or examining officer when there are
such officers at the port, and errors in the distribution of charges on invoices not
involving any question of law and certified under penalties of falsification or perjury by
the examining customs officer, may be corrected in the computation of duties, if such
errors are discovered before the payments of duties, or if discovered within one (1) year
after release from customs custody of imported goods upon written request and notice
of error from the importer, or upon statement of error certified by the District Collector,
For the purpose of correcting errors specified in the next preceding paragraph, the
Bureau is authorized to make refunds within the statutory time limit.

 Claims for Refund.— All claims and application for refund of duties and taxes shall be
made in writing and filed with the Bureau within twelve (12) months from the date of
payment of duties and taxes.

If as a result of the refund of duties, a corresponding refund of internal revenue taxes on

the same importation becomes due, the Bureau shall cause the refund of internal
revenue taxes in favor of the importer after issuance of a certification from the
Commissioner of Internal Revenue, when applicable.

The importer may file an appeal of a denial of a claim for refund or abatement, whether
it is a full or partial denial, with the Commissioner within thirty (30) days from the date
of the receipt of the denial. The Commissioner shall render a decision within thirty (30)
days from the receipt of all the necessary documents supporting the application. Within
thirty (30) days from receipt of the decision of the Commissioner, the case may also be
appealed to the CTA.

Notwithstanding the provisions in the preceding paragraphs, the filing of claims for
refund of national internal revenue taxes shall be governed by the provisions provided
under the NTRC of 1997, as amended.

Special Duties and Trade Remedies

SPECIAL DUTIES AND TRADE REMEDY MEASURES

Government's Right of Compulsory Acquisition.— In order to protect government

revenues against undervaluation of goods, the Commissioner may, motu proprio or
upon the recommendation of the District Collector, acquire imported goods under
question for a price equal to their declared customs value plus any duties already paid
on the goods, payment for which shall be made within ten (10) working days from
issuance of a warrant signed by the Commissioner for the acquisition of such goods.

An importer who is dissatisfied with a decision of the Commissioner pertaining to this

section may, within twenty (20) working days after the date on which notice of the
decision is given, appeal to the Secretary of Finance, and thereafter if still dissatisfied, to
the CTA as provided for in Section 1136 of this Act.

Where no appeal is made by the importer, or upon reaffirmation of the Commissioner's

decision during the appeals process, the Bureau or its agents shall sell the acquired
goods pursuant to existing laws and regulations.

Nothing in this section limits or affects any other powers of the Bureau with respect to
the disposition of the goods or any liability of the importer or any other person with
respect to an offense committed in the importation of the goods.
Marking of Imported Goods and Containers.—

(A) Marking of Goods.— Except as hereinafter provided, all goods of foreign origin

imported into the Philippines or their containers, as provided in subsection (B) hereof
shall be conspicuously marked in any official language of the Philippines as legibly,
indelibly and permanently as the nature of the goods or container will permit and in
such manner as to indicate to an ultimate purchaser in the Philippines the name of the
country of origin of the goods. Pursuant thereto, the Commissioner shall, with the
approval of the Secretary of Finance:

(1) Determine the character of words and phrases or abbreviation 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 in a conspicuous place on the goods or container where the
marking shall appear;

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

(3) Authorize the exception of any goods from the requirements of marking if:

(i) Such goods are incapable of being marked;

(ii) Such goods cannot be marked prior to shipment to the Philippines without injury;

(iii) Such, goods cannot be marked prior to shipment to the Philippines, except at an
expense economically prohibitive of their importation;

(iv) The marking of a container of such goods will reasonably indicate the origin of such
goods;

(v) Such goods are crude substances;

(vi) Such goods are imported for use by the importer and not intended for sale in their
imported or any other form;

(vii) Such goods are to be processed in the Philippines by the importer or for the
importer's account other than for the purpose of concealing the origin of such goods
and in such manner that any mark contemplated by this section would necessarily be
obliterated, destroyed, or permanently concealed;

(viii) An ultimate purchaser, by reason of the character of such goods or by reason of the
circumstances of their importation, must necessarily know the country of origin of such
goods even though they are not marked to indicate their origin;

(ix) Such goods were produced more than twenty (20) years prior to their importation
into the Philippines; or

(x) Such goods cannot be marked after importation except at an expense which is
economically prohibitive, and the failure to mark the goods 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 goods are exempt under paragraph (3) of

subsection (A) of this section from the requirements of marking, the immediate
container, if any, of such goods, or such other container or containers of such goods,
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 goods in any official language of
the Philippines, subject to all provisions of this section, including the same exceptions as
are applicable to goods under paragraph (3) of subsection (A).

(C) Fine for Failure to Mark.— If, at the time of importation any good 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 good a marking duty of
five percent (5%) of dutiable value, which shall be deemed to have accrued at the time
of importation.

(D) Release Withheld Until Marked.— No imported goods held in customs custody for
inspection, examination, or assessment shall be released until such goods or their
containers 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.

(E) The failure or refusal of the owner or importer to mark the goods as herein required
within a period of thirty (30) days after due notice shall constitute as an act of
abandonment of said goods and their disposition shall be governed by the provisions of
this Act relative to abandonment of imported goods.
 Dumping Duty.— 

Safeguard Duty.— 

Countervailing Duty.— 

The provisions of Republic Act No. 8751, otherwise known as “An Act
Strengthening the Mechanisms for the Imposition of Countervailing Duties on
Imported Subsidized Products, Commodities or Articles of Commerce in Order to
Protect Domestic Industries from Unfair Trade Competition, Amending for the
Purpose Section 302, Part 2, Title II, Book I of Presidential Decree No. 1464”,
otherwise known as the “Tariff and Customs Code of the Philippines, as Amended”,
are hereby adopted.

Discrimination by Foreign Countries.— Without prejudice to the Philippine commitment

in any ratified international agreements or treaty, the following recourse shall be
applicable in case of discrimination by foreign countries:

(a) When the President finds that the public interest will be served thereby, the President
shall, by proclamation, specify and declare new or additional duties in an amount not
exceeding one hundred percent (100%) ad valorem upon goods wholly or in part the
growth or product of, or imported in a vessel of any foreign country whenever the
President shall find as a fact that such country:

(1) Imposes, directly or indirectly, up on the disposition or transportation in transit or

through reexportation from such country of any goods 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 goods 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 discrimination against the commerce of the Philippines,
the President is hereby authorized, if deemed consistent with the interests of the
Philippines and of public interest, to issue a further proclamation directing that such
product of said country or such goods imported in their vessels be excluded hom
importation into the Philippines.

(c) Any proclamation issued by the President under this section shall, if the President
deems it consistent with the interest of the Philippines, extend to the whole of any
foreign country or may be confined to any subdivision or subdivisions thereof; Provided,
That the President may, whenever the public interest requires, suspend, revoke,
supplement or amend any such proclamation.

(d) All goods 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 he established for the recovery, collection, distribution, and
remission or 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 goods
wholly or in part the growth or product of any foreign country, it shall be applicable
thereto, whether such goods are imported directly or indirectly.

(e) It shall be the duty of the Commission to ascertain and at all times 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, and to recommend measures to address
such discriminatory acts.

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

Flexible Tariff
FLEXIBLE TARIFF

 Flexible Clause.—

(a) In the interest of the general welfare and national security, and, subject to the
limitations prescribed under this Act, the President, upon the recommendation of the
NEDA, is hereby empowered to:
(1) Increase, reduce, or remove existing rates of import duty including any necessary
change in classification. The existing rates may be increased or decreased to any level, in
one or several stages, but in no case shall the increased rate of import duty be higher
than a maximum of one hundred percent (100%) ad valorem;

(2) Establish import quotas or ban imports of any commodity, as may be necessary; and

(3) Impose an additional duty on all imports not exceeding ten percent (10%) ad
valorem whenever necessary: Provided, That upon periodic investigations by the
Commission and recommendation of the NEDA, the President may cause a gradual
reduction of rates of import duty granted in Section 1611 of this Act, including those
subsequently granted pursuant to this section.

(b) Before any recommendation is submitted to the President by the NEDA pursuant to
the provisions of this section, except in the imposition of an additional duty not
exceeding ten percent (10%) ad valorem, the Commission shall conduct an investigation
and shall hold public hearings wherein interested parties shall be afforded reasonable
opportunity to be present, to produce evidence and to be heard. The Commission shall
also hear the views and recommendations of any government office, agency, or
instrumentality. The Commission shall submit its findings and recommendations to the
NEDA within thirty (30) days after the termination of the public hearings.

(c) The power of the President to increase or decrease rates of import duty within the
limits fixed in subsection (a) hereof shall include the authority to modify the form of
duty. In modifying the form of duty, the corresponding ad valorem or specific
equivalents of the duty with respect to imports from the principal competing foreign
country for the most recent representative period shall be used as basis.

(d) Any order issued by the President pursuant to the provisions of this section shall take
effect thirty (30) days after promulgation, except in the imposition of additional duty not
exceeding ten percent (10%) ad valorem  which shall take effect at the discretion of the
President.

(e) The power delegated to the President as provided for in this section shall be
exercised only when Congress is not in session.

(f) The power herein delegated may be withdrawn or terminated by Congress through a
joint resolution.

The NEDA shall promulgate rules and regulations necessary to carry out the provisions
of this section.
Promotion of Foreign Trade.—

(a) For the purpose of expanding foreign markets for Philippine products as a means of
assisting in the economic development of the country, in overcoming domestic
unemployment, in increasing the purchasing power of the Philippine peso, and in
establishing and maintaining better relations between the Philippines and other
countries, the President, shall, from time to time:

(1) Enter into trade agreements with foreign governments or instrumentalities thereof;
and

(2) Modify import duties, including any necessary change in classification and other
import restrictions as are required or appropriate to carry out and promote foreign
trade with other countries; Provided, That in modifying import duties or fixing import
quota, the requirements prescribed in subsection (a) of Section 1608 of this Act shall be
observed; Provided,  However,  That any modification in import duties and the fixing of
import quotas pursuant to the various trade agreements the Philippines has entered
into, shall not be subject to the limitations of aforesaid subsection (a) of Section 1608.

(b) The duties and other import restrictions as modified in subsection (a) of tins section,
shall apply to goods which are the growth, produce, or manufacture of the specific
country, whether imported directly or indirectly, with which the Philippines has entered
into a trade agreement; Provided, That the President may suspend the application of any
concession to goods which are the growth, produce, or manufactured product of the
specific country because of acts or policies which tend to defeat the purposes set in this
section, including the operations of international cartels; and the duties and other
import restrictions as negotiated shall be in force and effect from and after such time as
specified in the order, without prejudice to the Philippine commitments in any ratified
international agreement or treaty.

(c) Nothing in this section shall be construed to give any authority to cancel or reduce in
any manner the indebtedness of any foreign country to the. Philippines or any claim of
the Philippines against any foreign country.

(d) Before any trade agreement is concluded with any foreign government or
instrumentality thereof, reasonable public notice of the intention to negotiate an
agreement with such government or instrumentality shall be given in order that
interested persons may have an opportunity to present their views to the Commission.
The Commission shall seek information and advice from the DTI, DA, DOF, DENR, DFA
and BSP, and from such other sources as it may deem appropriate.

(e) In advising the President, on a trade agreement entered into by the Philippines, the
following shall be observed:

(1) The Commission shall determine whether or not the domestic industry has suffered
or is being threatened with injury and whether or not the wholesale prices at which the
domestic products are sold are reasonable, talcing into account the cost of raw
materials, labor, overhead, a fair return on investment, and the overall efficiency of the
industry.

(2) The NEDA shall evaluate the report of the Commission and submit recommendations
to the President.

(3) Upon receipt of the report of the findings and recommendations of the NEDA, the
President may prescribe adjustments in the rates of import duties, withdraw, modify or
suspend, in whole or in part, any concession under any trade agreement, establish
import quota, or institute such other import restrictions, as the NBDA recommends to
be necessary in order to fully protect domestic industry and the consumers, subject to
the condition that the wholesale prices of the domestic products shall be reduced to, or
maintained at, the level recommended by the NEDA unless, for good cause shown, an
increase thereof, as recommended by the NEDA, is authorized by the President. Should
increases be made without such authority, the NEDA shall immediately notify the
President who shah allow the importation of competing products in such quantities as
to protect the public from the unauthorized increase in wholesale prices.

(f) This section shah not prevent the effeotivity of any executive agreement or any future
preferential trade agreement with any foreign country.

(g) The NEDA and the Commission shah promulgate such reasonable procedures, rules
and regulations as they may deem necessary to execute their respective functions under
this section.

R.A. 8502 Jewelry Industry Development Act of 1998

Republic Act No. 8502             February 13, 1998

AN ACT TO PROMOTE THE DEVELOPMENT OF THE JEWELRY MANUFACTURING

INDUSTRY, PROVIDING INCENTIVES THEREFOR AND FOR OTHER PURPOSES
 Be it enacted by the Senate and House of Representatives of the Philippines in Congress
assembled:

Section 1.  Title. – This Act shall be known as the "Jewelry Industry Development Act
of 1998."

Section 2.  Declaration of policy.  – Recognizing that the jewelry industry has the
potential for more employment generation, enhance tax collection efficiency, increase
the industry linkages with the other sectors of the economy, and to increase our foreign
exchange earnings through exports and import substitutes, it is hereby declared to be
the policy of the State to support, promote and encourage the growth and development
of the predominantly, small and medium scale jewelry industries. Toward this end, the
State shall undertake to encourage the development of the jewelry industry:

a) by promoting and encouraging local jewelers to join the formal sector by

making the jewelry industry sector a partner in the task of building up the small
and medium enterprises through the establishment of an adequate support
structure and the creation of a business environment conducive to the viability,
legalization and development of the jewelry sector;

b) by adopting appropriate tax incentives and programs necessary for the

acceleration and growth of the industry; and

c) by promoting and institutionalizing the effective promotion and participation

of associations of the jewelry industry and cooperatives particularly in the
advancement of the skills and craftsmanship of Filipino workers therein.

Section 3. Development incentives. – The following incentives shall be available to

qualified jewelry enterprises in the jewelry industry:

a) Entitlement to zero (0) duty on imported raw materials which include precious
metals, loose gems, precious stones, jewelry parts, accessories and supplies for
use by jewelry enterprise, as specifically mentioned in Chapter 5 of Sec. I, Chapter
12 of Sec. II, Chapters 25, 26 and 27 of Sec. V, Chapters 28, 34 and 38 of Sec. VI,
Chapter 70 of Sec. XIII, Chapter 71 of Sec. XIV, Chapter 83 of Sec. XV, and Chapter
96 of Sec. XX of the Tariff and Customs Code, as amended;

b) Exemption from the imposition of excise tax on all goods commonly or

commercially known as jewelry, whether real or imitation pearls, precious and
semi-precious stones and imitations thereof; all goods made of, or ornamented,
mounted or fitted with precious metals or imitations thereof, as specifically
 mentioned in Sec. 150(a) of the National Internal Revenue Code of the
Philippines, as amended;

c) Entitlement to zero (0) duty on imported capital equipment, including spare

parts and toolings thereof falling within Chapter 69 of Sec. XIII, Chapter 82 of Sec.
XV, Chapters 84 and 85 of Sec. XVI, and Chapter 90 of Sec. XVIII of the Tariff and
Customs Code, as amended;

d) Additional deduction from taxable income of fifty percent (50%) of expenses

incurred in training schemes approved by the appropriate agency and which shall
be deductible during the financial year the expenses were incurred;

e) Gold and silver sales by the Bangko Sentral ng Pilipinas  to jewelry enterprises

wider minimal margins;

f) Authority for jewelry enterprises to buy gold and silver directly from other
sources;

g) Inclusion of locally-manufactured jewelry in the government's tourist duty free

shops including the promotion, advertisement and sale thereof; and

h) Jewelry enterprises availing of incentives provided under this Act shall still be
eligible to incentives provided by other special laws such as Republic Act No.
7844 (Export Development Act of 1994), Republic Act No. 7916 (Special Economic
Zone Act of 1995), Executive Order 226 (BOI Omnibus Investments Code), among
others: Provided,  That the activity is export-oriented and that there is no double
availment of the same incentives.

Section 4. Eligibility for government assistance. – To qualify for the assistance,

counselling and other incentives envisioned in this Act, jewelry enterprises availing of
the same must be duly registered with the appropriate government agencies as
presently provided by law.

Jewelry enterprise as used in this Act shall refer to any enterprise engaged in any aspect
in the manufacture of goods commonly or commercially known as fine and imitation
jewelry including those producing, cutting and polishing, shaping, refining, forming or
fabricating real or imitation pearls, precious and semi-precious stones and imitations
thereof, goods made of precious metal and imitations thereof, and other raw materials
and parts used in the manufacture of jewelry.
Section 5. Implementing body. – The Department of Trade and Industry shall monitor,
oversee, supervise and take responsibility for the implementation of this Act and shall
submit to Congress a yearly report thereof.

Section 6. Implementing rules and regulations. – Within thirty (30) days from
approval of this Act, the Secretary of Trade and Industry shall upon prior consultation
with the Secretary of Finance, promulgate the rules and regulations implementing the
provisions of this Act.

Section 7. Separability clause. – The provisions of this Act are hereby declared to be
separable. If any provisions thereof is declared unconstitutional, the remaining
provisions thereof not otherwise affected shall remain in full force and effect.

Section 8. Repealing clause. – The second paragraph of said subSec. "q" of Sec. 105 of
the Tariff and Customs Code of the Philippines, and laws, executive orders, rules and
regulations or parts thereof inconsistent herewith are hereby repealed or modified
accordingly.

Section 9. Effectivity. – This Act shall take effect fifteen (15) days after its publication in
two (2) newspapers of general circulation.

Approved: February 13, 1998

Republic Act No. 8550

February 25, 1998 (http://www.gov.ph/1998/02/25/republic-act-no-8550/)

REPUBLIC OF THE PHILIPPINES

CONGRESS OF THE PHILIPPINES

METRO MANILA

Tenth Congress

FIFTH SPECIAL SESSION

Begun and held in Metro Manila on Tuesday the seventeenth day of February, nineteen hundred

and ninety-eight

[REPUBLIC ACT No. 8550]

AN ACT PROVIDING FOR THE DEVELOPMENT, MANAGEMENT AND CONSERVATION OF THE

FISHERIES AND AQUATIC RESOURCES, INTEGRATING ALL LAWS PERTINENT THERETO, AND

FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress

assembled

SECTION 1. Title. — This Act shall be known as “The Philippine Fisheries Code of 1998.”

CHAPTER I

Declaration of Policy and Denitions

SECTION 2. Declaration of Policy. — It is hereby declared the policy of the State:

GOVPH (/)

a. to achieve food security as the overriding consideration in the utilization, management,

development, conservation and protection of shery resources in order to provide the food needs

of the population. A exible policy towards the attainment of food security shall be adopted in

response to changes in demographic trends for sh, emerging trends in the trade of sh and

other aquatic products in domestic and international markets, and the law of supply and

demand;

b. to limit access to the shery and aquatic resources of the Philippines for the exclusive

use and enjoyment of Filipino citizens;

c. to ensure the rational and sustainable development, management and conservation of

the shery and aquatic resources in Philippine waters including the Exclusive Economic Zone

(EEZ) and in the adjacent high seas, consistent with the primordial objective of maintaining a

sound ecological balance, protecting and enhancing the quality of the environment;

d. to protect the rights of sherfolk, especially of the local communities with priority to

municipal sherfolk, in the preferential use of the municipal waters. Such preferential use, shall

be based on, but not limited to, Maximum Sustainable Yield (MSY) or Total Allowable Catch

(TAC) on the basis of resources and ecological conditions, and shall be consistent with our

commitments under international treaties and agreements;

e. to provide support to the shery sector, primarily to the municipal sherfolk, including

women and youth sectors, through appropriate technology and research, adequate nancial,

production, construction of post-harvest facilities, marketing assistance, and other services. The

protection of municipal sherfolk against foreign intrusion shall extend to offshore shing

grounds. Fishworkers shall receive a just share for their labor in the utilization of marine and
shery resources;

f. to manage shery and aquatic resources, in a manner consistent with the concept of an

integrated coastal area management in specic natural shery management areas, appropriately

supported by research, technical services and guidance provided by the State; and

g. to grant the private sector the privilege to utilize shery resources under the basic

concept that the grantee, licensee or permittee thereof shall not only be a privileged beneciary

of the State but also active participant and partner of the Government in the sustainable

development, management, conservation and protection of the shery and aquatic resources of

the country.

The state shall ensure the attainment of the following objectives of the shery sector:

1. Conservation, protection and sustained management of the country’s shery and

aquatic resources;

2. Poverty alleviation and the provision of supplementary livelihood among municipal

sherfolk;

3. Improvement of productivity of aquaculture within ecological limits;

4. Optimal utilization of offshore and deep-sea resources; and

5. Upgrading of post-harvest technology.

SECTION 3. Application of its Provisions. — The provisions of this Code shall be enforced in:

a. all Philippine waters including other waters over which the Philippines has sovereignty

and jurisdiction, and the country’s 200-nautical mile Exclusive Economic Zone (EEZ) and

continental shelf;

b. all aquatic and shery resources whether inland, coastal or offshore shing areas,

including but not limited to shponds, shpens/cages; and

c. all lands devoted to aquaculture, or businesses and activities relating to shery, whether

private or public lands.

SECTION 4. Denition of Terms. — As used in this Code, the following terms and phrases shall

mean as follows:

1. Ancillary Industries — rms or companies related to the supply, construction and

maintenance of shing vessels, gears, nets and other shing paraphernalia; shery machine
shops; and other facilities such as hatcheries, nurseries, feed plants, cold storage and

refrigeration, processing plants and other pre-harvest and post-harvest facilities.

2. Appropriate Fishing Technology — adaptable technology, both in shing and ancillary

industries, that is ecologically sound, locally source-based and labor intensive.

3. Aquaculture — shery operations involving all forms of raising and culturing sh and

other shery species in fresh, brackish and marine water areas.

4. Aquatic Pollution — the introduction by human or machine, directly or indirectly, of

substances or energy to the aquatic environment which result or is likely to result in such

deleterious effects as to harm living and non-living aquatic resources, pose potential and/or real

hazard to human health, hindrance to aquatic activities such as shing and navigation, including

dumping/disposal of waste and other marine litters, discharge of petroleum or residual products

of petroleum or carbonaceous materials/substances, and other, radioactive, noxious or harmful

liquid, gaseous or solid substances, from any water, land or air transport or other human-made

structure. Deforestation, unsound agricultural practices such as the use of banned chemicals

and excessive use of chemicals, intensive use of articial sh feed, and wetland conversion,

which cause similar hazards and deleterious effects shall also constitute aquatic pollution.

5. Aquatic Resources — includes sh, all other aquatic ora and fauna and other living

resources of the aquatic environment, including, but not limited to, salt and corals.

6. Articial Reefs — any structure of natural or man-made materials placed on a body of

water to serve as shelter and habitat, source of food, breeding areas for shery species and

shoreline protection.

7. Catch Ceilings — refer to the annual catch limits allowed to be taken, gathered or

harvested from any shing area in consideration of the need to prevent overshing and harmful

depletion of breeding stocks of aquatic organisms.

8. Closed Season — the period during which the taking of specied shery species by a

specied shing gear is prohibited in a specied area or areas in Philippine waters.

9. Coastal Area/Zone — is a band of dry land and adjacent ocean space (water and

submerged land) in which terrestrial processes and uses directly affect oceanic processes and

uses, and vice versa; its geographic extent may include areas within a landmark limit of one (1)
kilometer from the shoreline at high tide to include mangrove swamps, brackish water ponds,

nipa swamps, estuarine rivers, sandy beaches and other areas within a seaward limit of 200

meters isobath to include coral reefs, algal ats, seagrass beds and other soft-bottom areas.

10. Commercial Fishing — the taking of shery species by passive or active gear for trade,

business & prot beyond subsistence or sports shing, to be further classied as:

1. Small scale commercial shing — shing with passive or active gear utilizing shing

vessels of 3.1 gross tons (GT) up to twenty (20) GT;

2. Medium scale commercial shing — shing utilizing active gears and vessels of 20.1

GT up to one hundred fty (150) GT; and

3. Large commercial shing — shing utilizing active gears and vessels of more than one

hundred fty (150) GT.

11. Commercial Scale — a scheme of producing a minimum harvest per hectare per year of

milksh or other species including those raised in pens, cages, and tanks to be determined by the

Department in consultation with the concerned sectors;

12. Coral — the hard calcareous substance made up of the skeleton of marine coelenterate

polyps which include reefs, shelves and atolls or any of the marine coelenterate animals living in

colonies where their skeletons form a stony mass. They include: (a) skeletons of anthozoan

coelenterates characterized as having a rigid axis of compact calcareous or horny spicules,

belonging to the genus corallium as represented by the red, pink, and white corals which are

considered precious corals; (b) skeletons of anthozoan coelenterates characterized by thorny,

horny axis such as the antipatharians represented by the black corals which are considered semiprecious
corals; and (c) ordinary corals which are any kind of corals that are not precious nor

semi-precious.

13. Coral Reef — a natural aggregation of coral skeleton, with or without living coral polyps,

occurring in intertidal and subtidal marine waters.

14. Demarcated Areas — boundaries dened by markers and assigned exclusively to

specic individuals or organizations for certain specied and limited uses such as:

a. Aquaculture, sea ranching and sea farming;

b. Fish aggregating devices;

c. Fixed and passive shing gears; and

d. Fry and ngerlings gathering.

15. Department — shall mean the Department of Agriculture.

16. Electroshing — the use of electricity generated by batteries, electric generators and

other source of electric power to kill, stupefy, disable or render unconscious shery species,

whether or not the same are subsequently recovered.

17. Endangered Rare and/or Threatened Species — aquatic plants, animals, including some

varieties of corals and sea shells in danger of extinction as provided for in existing shery laws,

rules and regulations or in the Protected Areas and Wildlife Bureau of the Department of

Environment and Natural Resources (DENR) and in the Convention on the International Trade of

Endangered Species of Flora and Fauna (CITES).

18. Exclusive Economic Zone (EEZ) — an area beyond and adjacent to the territorial sea

which shall not extend beyond 200 nautical miles from the baselines as dened under existing

laws.

19. FARMCs — the Fisheries and Aquatic Resources Management Councils.

20. Farm-to-Market Roads — shall include roads linking the sheries production sites,

coastal landing points and other post-harvest facilities to major market and arterial roads and

highways.

21. Fine Mesh Net — net with mesh size of less than three centimeters (3 cm.) measured

between two (2) opposite knots of a full mesh when stretched or as otherwise determined by the

appropriate government agency.

22. Fish and Fishery/Aquatic Products — include not only nsh but also mollusks,

crustaceans, echinoderms, marine mammals, and all other species of aquatic ora and fauna

and all other products of aquatic living resources in any form.

23. Fish Cage — refers to an enclosure which is either stationary or oating made up of nets

or screens sewn or fastened together and installed in the water with opening at the surface or

covered and held in a place by wooden/bamboo posts or various types of anchors and oats.

24. Fish Corral or “Baklad” — a stationary weir or trap devised to intercept and capture sh

consisting of rows of bamboo stakes, plastic nets and other materials fenced with split bamboo
mattings or wire mattings with one or more enclosures, usually with easy entrance but difcult

exit, and with or without leaders to direct the sh to the catching chambers, purse or bags.

25. Fish ngerlings — a stage in the life cycle of the sh measuring to about 6-13 cm.

depending on the species.

26. Fish fry — a stage at which a sh has just been hatched usually with sizes from 1-2.5

cm.

27. Fish pen — an articial enclosure constructed within a body of water for culturing sh

and shery/aquatic resources made up of poles closely arranged in an enclosure with wooden

materials, screen or nylon netting to prevent escape of sh.

28. Fisherfolk — people directly or personally and physically engaged in taking and/or

culturing and processing shery and/or aquatic resources.

29. Fisherfolk Cooperative — a duly registered association of sherfolk with a common

bond of interest, who have voluntarily joined together to achieve a lawful common social or

economic end, making equitable contribution to the capital requirement and accepting a fair

share of the risks and benets of the undertakings in accordance with universally accepted

cooperative principles.

30. Fisherfolk Organization — an organized group, association, federation, alliance or an

institution of sherfolk which has at least fteen (15) members, a set of ofcers, a constitution

and by-laws, an organizational structure and a program of action.

31. Fisheries — refers to all activities relating to the act or business of shing, culturing,

preserving, processing, marketing, developing, conserving and managing aquatic resources and

the shery areas, including the privilege to sh or take aquatic resource thereof.

32. Fish Pond — a land-based facility enclosed with earthen or stone material to impound

water for growing sh.

33. Fishing Boat/Gear License — a permit to operate specic types of shing boat/gear for

specic duration in areas beyond municipal waters for demersal or pelagic shery resources.

34. Fishery Management Areas — a bay, gulf, lake or any other shery area which may be

delineated for shery resource management purposes.

35. Fishery Operator — one who owns and provides the means including land, labor, capital,
shing gears and vessels, but does not personally engage in shery.

36. Fishery Refuge and Sanctuaries — a designated area where shing or other forms of

activities which may damage the ecosystem of the area is prohibited and human access may be

restricted.

37. Fishery Reserve — a designated area where activities are regulated and set aside for

educational and research purposes.

38. Fishery Species — all aquatic ora and fauna including, but not restricted to, sh, algae,

coelenterates, mollusks, crustaceans, echinoderms and cetaceans.

39. Fishing — the taking of shery species from their wild state of habitat, with or without

the use of shing vessels.

40. Fishing gear — any instrument or device and its accessories utilized in taking sh and

other shery species.

a. Active shing gear — is a shing device characterized by gear movements, and/or the

pursuit of the target species by towing, lifting, and pushing the gears, surrounding, covering,

dredging, pumping and scaring the target species to impoundments; such as, but not limited to,

trawl, purse seines, Danish seines, bag nets, paaling, drift gill net and tuna longline.

b. Passive shing gear — is characterized by the absence of gear movements and/or the

pursuit of the target species; such as, but not limited to, hook and line, shpots, traps and gill

nets across the path of the sh.

41. Fishing vessel — any boat, ship or other watercraft equipped to be used for taking of

shery species or aiding or assisting one (1) or more vessels in the performance of any activity

relating to shing, including, but not limited to, preservation, supply, storage, refrigeration,

transportation and/or processing.

42. Fishing with Explosives — the use of the dynamite, other explosives or other chemical

compounds that contain combustible elements or ingredients which upon ignition by friction,

concussion, percussion or detonation of all or parts of the compound, will kill, stupefy, disable or

render unconscious any shery species. It also refers to the use of any other substance and/or

device which causes an explosion that is capable of producing the said harmful effects on any

shery species and aquatic resources and capable of damaging and altering the natural habitat.
43. Fishing with Noxious or Poisonous Substances — the use of any substance, plant

extracts or juice thereof, sodium cyanide and/or cyanide compounds or other chemicals either in

a raw or processed form, harmful or harmless to human beings, which will kill, stupefy, disable or

render unconscious any shery species and aquatic resources and capable of damaging and

altering the natural habitat.

44. Fishworker — a person regularly or not regularly employed in commercial shing and

related industries, whose income is either in wage, prot-sharing or stratied sharing basis,

including those working in sh pens, sh cages, sh corrals/traps, shponds, prawn farms, sea

farms, salt beds, sh ports, shing boat or trawlers, or sh processing and/or packing plants.

Excluded from this category are administrators, security guards and overseers.

45. Food Security — refers to any plan, policy or strategy aimed at ensuring adequate

supplies of appropriate food at affordable prices. Food security may be achieved through selfsufciency
(i.e. ensuring adequate food supplies from domestic production), through selfreliance (i.e. ensuring
adequate food supplies through a combination of domestic production

and importation), or through pure importation.

46. Foreshore Land — a string of land margining a body of water; the part of a seashore

between the low-water line usually at the seaward margin of a low tide terrace and the upper

limit of wave wash at high tide usually marked by a beach scarp or berm.

47. Fully-developed Fishpond Area — a clean leveled area enclosed by dikes, at least one

foot higher than the highest oodwater level in the locality and strong enough to resist pressure

at the highest ood tide; consists of at least a nursery pond, a transition pond, a rearing pond or

a combination of any or all said classes of ponds, and a functional water control system and

producing in a commercial scale.

48. Gross Tonnage — includes the underdeck tonnage, permanently enclosed spaces above

the tonnage deck, except for certain exemptions. In broad terms, all the vessel’s ‘closed-in’

spaces expressed in volume terms on the bases of one hundred cubic feet (that equals one gross

ton).

49. Inland Fishery — the freshwater shery and brackishwater shponds.

50. Lake — an inland body of water, an expanded part of a river, a reservoir formed by a
dam, or a lake basin intermittently or formerly covered by water.

51. Limited Access — a shery policy by which a system of equitable resource and

allocation is established by law through shery rights granting and licensing procedure as

provided by this Code.

52. Mangroves — a community of intertidal plants including all species of trees, shrubs,

vines and herbs found on coasts, swamps, or border of swamps.

53. Maximum Sustainable Yield (MSY) — is the largest average quantity of sh that can be

harvested from a sh stocks/resource within a period of time (e.g. one year) on a sustainable

basis under existing environmental conditions.

54. Migratory species — refers to any shery species which in the course of their life could

travel from freshwater to marine water or vice versa, or any marine species which travel over

great distances in waters of the ocean as part of their behavioral adaptation for survival and

speciation:

(a) Anadromous species — marine shes which migrate to freshwater areas to spawn;

(b) Catadromous species — freshwater shes which migrate to marine areas to spawn.

55. Monitoring, control and surveillance —

a. Monitoring — the requirement of continuously observing: (1) shing effort which can be

expressed by the number of days or hours of shing, number of shing gears and number of

sherfolk; (2) characteristics of shery resources; and (3) resource yields (catch);

b. Control — the regulatory conditions (legal framework) under which the exploitation,

utilization and disposition of the resources may be conducted; and

c. Surveillance — the degree and types of observations required to maintain compliance

with regulations.

56. Municipal sherfolk — persons who are directly or indirectly engaged in municipal

shing and other related shing activities.

57. Municipal shing — refers to shing within municipal waters using shing vessels of

three (3) gross tons or less, or shing not requiring the use of shing vessels.

58. Municipal waters — include not only streams, lakes, inland bodies of water and tidal

waters within the municipality which are not included within the protected areas as dened under
Republic Act No. 7586 (The NIPAS Law), public forest, timber lands, forest reserves or shery

reserves, but also marine waters included between two (2) lines drawn perpendicular to the

general coastline from points where the boundary lines of the municipality touch the sea at low

tide and a third line parallel with the general coastline including offshore islands and fteen (15)

kilometers from such coastline. Where two (2) municipalities are so situated on opposite shores

that there is less than thirty (30) kilometers of marine waters between them, the third line shall be

equally distant from opposite shore of the respective municipalities.

59. Non-governmental organization (NGO) — an agency, institution, a foundation or a group

of persons whose purpose is to assist peoples organizations/associations in various ways

including, but not limited to, organizing, education, training, research and/or resource accessing.

60. Payao — a sh aggregating device consisting of a loating raft anchored by a weighted

line with suspended materials such as palm fronds to attract pelagic and schooling species

common in deep waters.

61. Pearl Farm Lease — public waters leased for the purpose of producing cultured pearls.

62. People’s Organization — a bona de association of citizens with demonstrated capacity

to promote the public interest and with identiable leadership, membership and structure. Its

members belong to a sector/s who voluntarily band themselves together to work for and by

themselves for their own upliftment, development and greater good.

63. Person — natural or juridical entities such as individuals, associations, partnership,

cooperatives or corporations.

64. Philippine waters — include all bodies of water within the Philippine territory such as

lakes, rivers, streams, creeks, brooks, ponds, swamps, lagoons, gulfs, bays and seas and other

bodies of water now existing or which may hereafter exist in the provinces, cities, municipalities,

and barangays and the waters around, between and connecting the islands of the archipelago

regardless of their breadth and dimensions, the territorial sea, the sea beds, the insular shelves,

and all other waters over which the Philippines has sovereignty and jurisdiction including the

200-nautical miles Exclusive Economic Zone and the continental shelf.

65. Post-harvest facilities — these facilities include, but are not limited to, shport,

shlanding, ice plants and cold storages, sh processing plants.

66. Purse Seine — a form of encircling net having a line at the bottom passing through rings

attached to the net, which can be drawn or pursed. In general, the net is set from a boat or pair of

boats around the school of sh. The bottom of the net is pulled closed with the purse line. The

net is then pulled aboard the shing boat or boats until the sh are concentrated in the bunt or

sh bag.

67. Resource Rent — the difference between the value of the products produced from

harvesting a publicly owned resource less the cost of producing it, where cost includes the

normal return to capital and normal return to labor.

68. Sea farming — the stocking of natural or hatchery-produced marine plants or animals,

under controlled conditions, for purposes of rearing and harvesting, but not limited to

commercially-important shes, mollusks (such as pearl and giant clam culture), including

seaweeds and seagrasses.

69. Sea ranching — the release of the young of shery species reared in hatcheries and

nurseries into natural bodies of water for subsequent harvest at maturity or the manipulation of

shery habitat, to encourage the growth of the wild stocks.

70. Secretary — the Secretary of the Department of Agriculture.

71. Superlight — also called magic light, is a type of light using halogen or metal halide

bulb which may be located above the sea surface or submerged in the water. It consists of a

ballast, regulator, electric cable and socket. The source of energy comes from a generator, battery

or dynamo coupled with the main engine.

72. Total Allowable Catch (TAC) — the maximum harvest allowed to be taken during a given

period of time from any shery area, or from any shery species or group of shery species, or a

combination of area and species and normally would not exceed the MSY.

73. Trawl — an active shing gear consisting of a bag shaped net with or without otter

boards to open its opening which is dragged or towed along the bottom or through the water

column to take shery species by straining them from the water, including all variations and

modications of trawls (bottom, mid-water, and baby trawls) and tow nets.

CHAPTER II

Utilization, Management, Development, Conservation and

Allocation System of Fisheries and Aquatic Resources

SECTION 5. Use of Philippine Waters. — The use and exploitation of the shery and aquatic

resources in Philippine waters shall be reserved exclusively to Filipinos: Provided, however, That

research and survey activities may be allowed under strict regulations, for purely research,

scientic, technological and educational purposes that would also benet Filipino citizens.

SECTION 6. Fees and Other Fishery Charges. — The rentals for shpond areas covered by the

Fishpond Lease Agreement (FLA) and license fees for Commercial Fishing Boat Licenses (CFBL)

shall be set at levels that reect resource rent accruing from the utilization of resources and shall

be determined by the Department: Provided, That the Department shall also prescribe fees and

other shery charges and issue the corresponding license or permit for shing gear, shing

accessories and other shery activities beyond the municipal waters: Provided, further, That the

license fees of shery activity in municipal waters shall be determined by the Local Government

Units (LGUs) in consultation with the FARMCs. The FARMCs may also recommend the

appropriate license fees that will be imposed.

SECTION 7. Access to Fishery Resources. — The Department shall issue such number of

licenses and permits for the conduct of shery activities subject to the limits of the MSY of the

resource as determined by scientic studies or best available evidence. Preference shall be given

to resource users in the local communities adjacent or nearest to the municipal waters.

SECTION 8. Catch Ceiling Limitations. — The Secretary may prescribe limitations or quota on the

total quantity of sh captured, for a specied period of time and specied area based on the best

available evidence. Such a catch ceiling may be imposed per species of sh whenever necessary

and practicable: Provided, however, That in municipal waters and shery management areas,

and waters under the jurisdiction of special agencies, catch ceilings may be established upon the

concurrence and approval or recommendation of such special agency and the concerned LGU in

consultation with the FARMC for conservation or ecological purposes.

SECTION 9. Establishment of Closed Season. — The Secretary may declare, through public

notice in at least two (2) newspapers of general circulation or in public service announcements,

whichever is applicable, at least ve (5) days before the declaration, a closed season in any or all

Philippine waters outside the boundary of municipal waters and in bays, for conservation and
ecological purposes. The Secretary may include waters under the jurisdiction of special

agencies, municipal waters and bays, and/or other areas reserved for the use of the municipal

sherfolk in the area to be covered by the closed season: Provided, however, That this shall be

done only upon the concurrence and approval or recommendation of such special agency and

the concerned LGU and FARMC: Provided, further, That in municipal waters, shery management

areas and other areas reserved for the use of the municipal sherfolk, closed season may be

established by the concerned LGU in consultation with the FARMC for conservation or ecological

purposes. The FARMCs may also recommend the establishment of closed seasons in municipal

waters, sheries management and other areas reserved for the use of the municipal sherfolk.

SECTION 10. Introduction of Foreign Aquatic Species. — No foreign nsh, mollusk, crustacean

or aquatic plants shall be introduced in Philippine waters without a sound ecological, biological

and environmental justication based on scientic studies subject to the bio-safety standard as

provided for by existing laws: Provided, however, That the Department may approve the

introduction of foreign aquatic species for scientic/research purposes.

SECTION 11. Protection of Rare, Threatened and Endangered Species. — The Department shall

declare closed seasons and take conservation and rehabilitation measures for rare, threatened

and endangered species, as it may determine, and shall ban the shing and/or taking of rare,

threatened and/or endangered species, including their eggs/offspring as identied by existing

laws in concurrence with concerned government agencies.

SECTION 12. Environmental Impact Statement (EIS). — All government agencies as well as

private corporations, rms and entities who intend to undertake activities or projects which will

affect the quality of the environment shall be required to prepare a detailed Environmental

Impact Statement (EIS) prior to undertaking such development activity. The preparation of the

EIS shall form an integral part of the entire planning process pursuant to the provisions of

Presidential Decree No. 1586 as well as its implementing rules and regulations.

SECTION 13. Environmental Compliance Certicate (ECC). — All Environmental Impact

Statements (EIS) shall be submitted to the Department of Environment and Natural Resources

(DENR) for review and evaluation. No person, natural or juridical, shall undertake any

development project without rst securing an Environmental Compliance Certicate (ECC) from
the Secretary of the DENR.

SECTION 14. Monitoring, Control and Surveillance of Philippine Waters. — A monitoring, control

and surveillance system shall be established by the Department in coordination with LGUs,

FARMCs, the private sector and other agencies concerned to ensure that the sheries and aquatic

resources in Philippine waters are judiciously and wisely utilized and managed on a sustainable

basis and conserved for the benet and enjoyment exclusively of Filipino citizens.

SECTION 15. Auxiliary Invoices. — All sh and shery products must have an auxiliary invoice to

be issued by the LGUs or their duly authorized representatives prior to their transport from their

point of origin to their point of destination in the Philippines and/or export purposes upon

payment of a fee to be determined by the LGUs to defray administrative costs therefor.

ARTICLE I

Municipal Fisheries

SECTION 16. Jurisdiction of Municipal/City Government. — The municipal/city government shall

have jurisdiction over municipal waters as dened in this Code. The municipal/city government,

in consultation with the FARMC shall be responsible for the management, conservation,

development, protection, utilization, and disposition of all sh and shery/aquatic resources

within their respective municipal waters.

The municipal/city government may, in consultation with the FARMC, enact appropriate

ordinances for this purpose and in accordance with the National Fisheries Policy. The ordinances

enacted by the municipality and component city shall be reviewed pursuant to Republic Act No.

7160 by the sanggunian of the province which has jurisdiction over the same.

The LGUs shall also enforce all shery laws, rules and regulations as well as valid shery

ordinances enacted by the municipal/city council.

The management of contiguous shery resources such as bays which straddle several

municipalities, cities or provinces, shall be done in an integrated manner, and shall not be based

on political subdivisions of municipal waters in order to facilitate their management as single

resource systems. The LGUs which share or border such resources may group themselves and

coordinate with each other to achieve the objectives of integrated shery resource management.

The Integrated Fisheries and Aquatic Resources Management Councils (FARMCs) established
under Section 76 of this Code shall serve as the venues for close collaboration among LGUs in

the management of contiguous resources.

SECTION 17. Grant of Fishing Privileges in Municipal Waters. — The duly registered sherfolk

organizations/cooperatives shall have preference in the grant of shery rights by the

Municipal/City Council pursuant to Section 149 of the Local Government Code: Provided, That in

areas where there are special agencies or ofces vested with jurisdiction over municipal waters

by virtue of special laws creating these agencies such as, but not limited to, the Laguna Lake

Development Authority and the Palawan Council for Sustainable Development, said ofces and

agencies shall continue to grant permits for proper management and implementation of the

aforementioned structures.

SECTION 18. Users of Municipal Waters. — All shery related activities in municipal waters, as

dened in this Code, shall be utilized by municipal sherfolk and their

cooperatives/organizations who are listed as such in the registry of municipal sherfolk.

The municipal or city government, however, may, through its local chief executive and acting

pursuant to an appropriate ordinance, authorize or permit small and medium commercial shing

vessels to operate within the ten point one (10.1) to fteen (15) kilometer area from the shoreline

in municipal waters as dened herein, provided, that all the following are met:

a. no commercial shing in municipal waters with depth less than seven (7) fathoms as

certied by the appropriate agency;

b. shing activities utilizing methods and gears that are determined to be consistent with

national policies set by the Department;

c. prior consultation, through public hearing, with the M/CFARMC has been conducted;

and

d. the applicant vessel as well as the shipowner, employer, captain and crew have been

certied by the appropriate agency as not having violated this Code, environmental laws and

related laws.

In no case shall the authorization or permit mentioned above be granted for shing in bays as

determined by the Department to be in an environmentally critical condition and during closed

season as provided for in Section 9 of this Code.

SECTION 19. Registry of Municipal Fisherfolk. — The LGU shall maintain a registry of municipal

sherfolk, who are shing or may desire to sh in municipal waters for the purpose of

determining priorities among them, of limiting entry into the municipal waters, and of monitoring

shing activities an/or other related purposes: Provided, That the FARMC shall submit to the LGU

the list of priorities for its consideration.

Such list or registry shall be updated annually or as may be necessary, and shall be posted in

barangay halls or other strategic locations where it shall be open to public inspection, for the

purpose of validating the correctness and completeness of the list. The LGU, in consultation with

the FARMCs, shall formulate the necessary mechanisms for inclusion or exclusion procedures

that shall be most benecial to the resident municipal sherfolk. The FARMCs may likewise

recommend such mechanisms.

The LGUs shall also maintain a registry of municipal shing vessels by type of gear and other

boat particulars with the assistance of the FARMC.

SECTION 20. Fisherfolk Organizations and/or Cooperatives. — Fisherfolk

organizations/cooperatives whose members are listed in the registry of municipal sherfolk,

may be granted use of demarcated shery areas to engage in sh capture, mariculture and/or

sh farming: Provided, however, That an organization/cooperative member whose household is

already in possession of a shery right other than for sh capture cannot enjoy the shing rights

granted to the organization or cooperative.

SECTION 21. Priority of Resident Municipal Fisherfolk. — Resident municipal sherfolk of the

municipality concerned and their organizations/cooperatives shall have priority to exploit

municipal and demarcated shery areas of the said municipality.

SECTION 22. Demarcated Fishery Right. — The LGU concerned shall grant demarcated shery

rights to shery organizations/cooperatives for mariculture operation in specic areas identied

by the Department.

SECTION 23. Limited Entry Into Overshed Areas. — Whenever it is determined by the LGUs and

the Department that a municipal water is overshed based on available data or information or in

danger of being overshed, and that there is a need to regenerate the shery resources in that

water, the LGU shall prohibit or limit shery activities in the said waters.
SECTION 24. Support to Municipal Fisherfolk. — The Department and the LGUs shall provide

support to municipal sherfolk through appropriate technology and research, credit, production

and marketing assistance and other services such as, but not limited to training for

additional/supplementary livelihood.

SECTION 25. Rights and Privileges of Fishworkers. — The shworkers shall be entitled to the

privileges accorded to other workers under the Labor Code, Social Security System and other

benets under other laws or social legislation for workers: Provided, That shworkers on board

any shing vessels engaged in shing operations are hereby covered by the Philippine Labor

Code, as amended.

ARTICLE II

Commercial Fisheries

SECTION 26. Commercial Fishing Vessel License and Other Licenses. — No person shall operate

a commercial shing vessel, pearl shing vessel or shing vessel for scientic, research or

educational purposes, or engage in any shery activity, or seek employment as a shworker or

pearl diver without rst securing a license from the Department, the period of which shall be

prescribed by the Department: Provided, That no such license shall be required of a shing

vessel engaged in scientic, research or educational purposes within Philippine waters pursuant

to an international agreement of which the Philippines is a signatory and which agreement

denes the status, privileges and obligations of said vessel and its crew and the non-Filipino

ofcials of the international agency under which said vessel operates: Provided, further, That

members of the crew of a shing vessel used for commercial shing except the duly licensed

and/or authorized patrons, marine engineers, radio operators and cooks shall be considered as

sherfolk: Provided, furthermore, That all skippers/master shers shall be required to undertake

an orientation training on detection of sh caught by illegal means before they can be issued

their shworker licenses: Provided, nally, That the large commercial shing vessels license

herein authorized to be granted shall allow the licensee to operate only in Philippine waters seven

(7) or more fathoms deep, the depth to be certied by the NAMRIA, and subject to the conditions

that may be stated therein and the rules and regulations that may be promulgated by the

Department.
SECTION 27. Persons Eligible for Commercial Fishing Vessel License. — No commercial shing

vessel license shall be issued except to citizens of the Philippines, partnerships or to

associations, cooperatives or corporations duly registered in the Philippines at least sixty percent

(60%) of the capital stock of which is owned by Filipino citizens. No person to whom a license

has been issued shall sell, transfer or assign, directly or indirectly, his stock or interest therein to

any person not qualied to hold a license. Any such transfer, sale or assignment shall be null and

void and shall not be registered in the books of the association, cooperative or corporation.

For purposes of commercial shing, shing vessels owned by citizens of the Philippines,

partnerships, corporations, cooperatives or associations qualied under this section shall secure

Certicates of Philippine Registry and such other documents as are necessary for shing

operations from the concerned agencies: Provided, That the commercial shing vessel license

shall be valid for a period to be determined by the Department.

SECTION 28. Commercial Fishing Vessel Registration. — The registration, documentation,

inspection and manning of the operation of all types of shing vessels plying Philippine waters

shall be in accordance with laws, rules and regulations.

SECTION 29. Registration and Licensing of Fishing Gears Used in Commercial Fishing. — Before

a commercial shing vessel holding a commercial shing vessel license may begin shing

operations in Philippine waters, the shing gear it will utilize in shing shall be registered and a

license granted therefor. The Department shall promulgate guidelines to implement this

provision within sixty (60) days from approval of this Code.

SECTION 30. Renewal of Commercial Boat License. — The commercial shing boat license shall

be renewed every three (3) years.

The owner/operator of a shing vessel has a period of sixty (60) days prior to the expiration of

the license within which to renew the same.

SECTION 31. Report of Transfer of Ownership. — The owner/operator of a registered shing

vessel shall notify the Department in writing of the transfer of the ownership of the vessel with a

copy of such document within ten (10) days after its transfer to another person.

SECTION 32. Fishing by Philippine Commercial Fishing Fleet in International Waters. — Fishing

vessels of Philippine registry may operate in international waters or waters of other countries
which allow such shing operations: Provided, That they comply with the safety, manning and

other requirements of the Philippine Coast Guard, Maritime Industry Authority and other agencies

concerned: Provided, however, That they secure an international shing permit and certicate of

clearance from the Department: Provided, further, That the sh caught by such vessels shall be

considered as caught in Philippine waters and therefore not subject to all import duties and

taxes only when the same is landed in duly designated sh landings and sh ports in the

Philippines: Provided, furthermore, That landing ports established by canneries, seafood

processors and all sh landing sites established prior to the effectivity of this Code shall be

considered authorized landing sites: Provided, nally, That shworkers on board Philippine

registered shing vessels conducting shing activities beyond the Philippine Exclusive Economic

Zone are not considered as overseas Filipino workers.

SECTION 33. Importation of Fishing Vessels or Construction of New Fishing Boats. — Prior to the

importation of shing vessels and the construction of new shing vessels, the

approval/clearance of the Department must rst be obtained.

SECTION 34. Incentives for Municipal and Small-Scale Commercial Fisherfolk. — Municipal and

small-scale commercial sherfolk shall be granted incentives which shall include, but are not

limited to, the following:

a. at least ten percent (10%) of the credit and the guarantee funds of government

nancing institutions shall be made available for post-harvest and marketing projects for the

purpose of enhancing our sherfolk competitiveness by reducing post-harvest losses. Qualied

projects shall include, but shall not be limited to, ice plants, cold storage, canning, warehouse,

transport and other related infrastructure projects and facilities; and

b. the Department shall undertake the following programs:

1. a capability-building program for targeted parties shall be developed by the Department

to promote greater bankability and credit worthiness of municipal and small-scale commercial

shers. Such program shall include organizing activities, technology transfer, and skills training

related to commercial shing as well as credit management. Groups and cooperatives organized

under the program shall have priority access over credit and guarantee funds established under

this Code; and

2. an information campaign shall be conducted to promote the capability building and

credit programs. The campaign shall ensure greater information dissemination and accessibility

to targeted sherfolk.

SECTION 35. Incentives for Commercial Fishers to Fish Farther into the Exclusive Economic

Zone (EEZ). — In order to encourage shing vessel operators to sh farther in the EEZ and

beyond, new incentives for improvement of shing vessels and acquisition of shing equipment

shall be granted in addition to incentives already available from the Board of Investments (BOI).

Such incentives shall be granted subject to exhaustive evaluation of resource and exploitation

conditions in the specied areas of shing operations. The incentive shall include, but not be

limited to:

a. long term loans supported by guarantee facilities to nance the building and acquisition

and/or improvement of shing vessels and equipment;

b. commercial shing vessel operators of Philippine registry shall enjoy a limited period of

tax and duty exemptions on the importation of shing vessels not more than ve (5) years old,

equipment and paraphernalia, the period of exemption and guidelines shall be xed by the

Department within ninety (90) days from the effectivity of this Code;

c. commercial shing operator of Philippine registry engaged in sheries in the high seas

shall be entitled to duty and tax rebates on fuel consumption for commercial sheries

operations. Guidelines shall be promulgated within ninety (90) days from the effectivity of this

Code by the Department; and

d. all applicable incentives available under the Omnibus Investment Code of 1987:

Provided, That the shing operation project is qualied for registration and is duly registered with

the BOI.

SECTION 36. Complement of Fishing Vessels. — Every commercial shing vessel of Philippine

registry when actually operated, shall be manned in accordance with the requirements of the

Philippine Merchant Marine rules and regulations.

SECTION 37. Medical Supplies and Life-Saving Devices. — All shing vessels shall be provided

with adequate medical supplies and life-saving devices to be determined by the Occupational

Safety and Health Center: Provided, That a shing vessel of twenty (20) GT or more shall have as
a member of its crew a person qualied as a rst aider duly certied by the Philippine National

Red Cross.

SECTION 38. Reportorial Requirements. — Each commercial shing vessel shall keep a daily

record of sh catch and spoilage, landing points, and quantity and value of sh caught, and offloaded for
transshipment, sale and/or other disposal. Detailed information shall be duly certied

by the vessel’s captain and transmitted monthly to the ofcer or representative of the

Department, at the nearest designated landing point.

SECTION 39. Report of Meteorological and Other Data. — All vessels and crafts passing

navigational lanes or engaged in sheries activity shall be required to contribute to

meteorological and other data, and shall assist the Department in documentation or reporting of

information vital to navigation and the shing industry.

SECTION 40. Color Code and Radio Frequency. — For administrative efciency and enforcement

of regulations, registered shing vessels shall bear a color code as may be determined by the

Department and may be assigned a radio frequency specic and distinct to its area of operation.

SECTION 41. Passage. — Commercial and other passage not in the regular conduct of sheries

activity shall be made at designated navigational lanes.

SECTION 42. Transshipment. — Foreign shing vessels wishing to avail of land, air and sea

facilities available in the Philippines to transport shery products which are caught outside

Philippine territorial waters to its nal destination shall call only at duly designated governmentowned or
-controlled regional shport complexes after securing clearance from the Department.

SECTION 43. Operation of Radio Communication Facilities on Board Fishing Vessels. — The

Department shall promulgate guidelines in the operation of radio communication facilities on

board shing vessels and the assignment of radio frequencies specic and distinct to area of

operation in coordination with the National Telecommunications Commission.

SECTION 44. Use of Superlight. — The number and wattage of superlights used in commercial

shing vessels shall be regulated by the Department: Provided, That the use of superlights is

banned within municipal waters and bays.

ARTICLE III

Aquaculture
SECTION 45. Disposition of Public Lands for Fishery Purposes. — Public lands such as tidal

swamps, mangroves, marshes, foreshore lands and ponds suitable for shery operations shall

not be disposed or alienated. Upon effectivity of this Code, FLA may be issued for public lands

that may be declared available for shpond development primarily to qualied sherfolk

cooperatives/associations: Provided, however, That upon the expiration of existing FLAs the

current lessees shall be given priority and be entitled to an extension of twenty-ve (25) years in

the utilization of their respective leased areas. Thereafter, such FLAs shall be granted to any

Filipino citizen with preference, primarily to qualied sherfolk cooperatives/associations as well

as small and medium enterprises as dened under Republic Act No. 8289: Provided, further, That

the Department shall declare as reservation, portions of available public lands certied as

suitable for shpond purposes for sh sanctuary, conservation, and ecological purposes:

Provided, nally, That two (2) years after the approval of this Act, no sh pens or sh cages or

sh traps shall be allowed in lakes.

SECTION 46. Lease of Fishponds. — Fishpond leased to qualied persons and sherfolk

organizations/cooperatives shall be subject to the following conditions:

a. Areas leased for shpond purposes shall be no more than 50 hectares for individuals

and 250 hectares for corporations or sherfolk organizations;

b. The lease shall be for a period of twenty-ve (25) years and renewable for another

twenty-ve (25) years: Provided, That in case of the death of the lessee, his spouse and/or

children, as his heirs, shall have preemptive rights to the unexpired term of his Fishpond Lease

Agreement subject to the same terms and conditions provided herein provided that the said heirs

are qualied;

c. Lease rates for shpond areas shall be determined by the Department: Provided, That

all fees collected shall be remitted to the National Fisheries Research and Development Institute

and other qualied research institutions to be used for aquaculture research development;

d. The area leased shall be developed and producing on a commercial scale within three

(3) years from the approval of the lease contract: Provided, however, That all areas not fully

producing within ve (5) years from the date of approval of the lease contract shall

automatically revert to the public domain for reforestation;

e. The shpond shall not be subleased, in whole or in part, and failure to comply with this

provision shall mean cancellation of FLA;

f. The transfer or assignment of rights to FLA shall be allowed only upon prior written

approval of the Department;

g. The lessee shall undertake reforestation for river banks, bays, streams, and seashore

fronting the dike of his shpond subject to the rules and regulations to be promulgated thereon;

and

h. The lessee shall provide facilities that will minimize environmental pollution, i.e., settling

ponds, reservoirs, etc: Provided, That failure to comply with this provision shall mean

cancellation of FLA.

SECTION 47. Code of Practice for Aquaculture. — The Department shall establish a code of

practice for aquaculture that will outline general principles and guidelines for environmentallysound
design and operation to promote the sustainable development of the industry. Such Code

shall be developed through a consultative process with the DENR, the shworkers, FLA holders,

shpond owners, sherfolk cooperatives, small-scale operators, research institutions and the

academe, and other potential stakeholders. The Department may consult with specialized

international organizations in the formulation of the code of practice.

SECTION 48. Incentives and Disincentives for Sustainable Aquaculture Practices. — The

Department shall formulate incentives and disincentives, such as, but not limited to, efuent

charges, user fees and negotiable permits, to encourage compliance with the environmental

standards and to promote sustainable management practices.

SECTION 49. Reversion of All Abandoned, Undeveloped or Underutilized Fishponds. — The DENR,

in coordination with the Department, LGUs, other concerned agencies and FARMCs shall

determine which abandoned, underdeveloped or underutilized shponds covered by FLAs can be

reverted to their original mangrove state and after having made such determination shall take all

steps necessary to restore such areas in their original mangrove state.

SECTION 50. Absentee Fishpond Lease Agreement Holders. — Holders of shpond lease

agreements who have acquired citizenship in another country during the existence of the FLA

shall have their lease automatically cancelled and the improvements thereon to be forfeited in
favor of the government and disposed of in accordance with rules and regulations promulgated

thereon.

SECTION 51. License to Operate Fish Pens, Fish Cages, Fish Traps and Other Structures for the

Culture of Fish and Other Fishery Products. — Fish pens, sh cages, sh traps and other

structures for the culture of sh and other shery products shall be constructed and shall operate

only within established zones duly designated by LGUs in consultation with the FARMCs

concerned consistent with national sheries policies after the corresponding licenses thereof

have been secured. The area to be utilized for this purpose for individual person shall be

determined by the LGUs in consultation with the concerned FARMC: Provided, however, That not

over ten percent (10%) of the suitable water surface area of all lakes and rivers shall be allotted

for aquaculture purposes like sh pens, sh cages and sh traps; and the stocking density and

feeding requirement which shall be controlled and determined by its carrying capacity: Provided,

further, That sh pens and sh cages located outside municipal waters shall be constructed and

operated only within sh pen and sh cage belts designated by the Department and after

corresponding licenses therefor have been secured and the fees thereof paid.

SECTION 52. Pearl Farm Leases. — The foregoing provisions notwithstanding, existing pearl

farm leases shall be respected and allowed to operate under the terms thereof. New leases may

be granted to qualied persons who possess the necessary capital and technology, by the LGUs

having jurisdiction over the area.

SECTION 53. Grant of Privileges for Operations of Fish Pens, Cages, Corrals/Traps and Similar

Structures. — No new concessions, licenses, permits, leases and similar privileges for the

establishment or operation of sh pens, sh cages, sh corrals/traps and other similar structures

in municipal areas shall be granted except to municipal sherfolk and their organizations.

SECTION 54. Insurance for Fishponds, Fish Cages and Fish Pens. — Inland shponds, sh cages

and sh pens shall be covered under the insurance program of the Philippine Crop Insurance

Corporation for losses caused by force majeure and fortuitous events.

SECTION 55. Non-Obstruction to Navigation. — Nothing in the foregoing sections shall be

construed as permitting the lessee, licensee, or permittee to undertake any construction which

will obstruct the free navigation in any stream, river, lakes, or bays owing through or adjoining
the sh pens, sh cages, sh traps and shponds, or impede the ow of the tide to and from the

area. Any construction made in violation hereof shall be removed upon the order of the

Department in coordination with the other government agencies concerned at the expense of the

lessee, licensee, or occupants thereof, whenever applicable. The Department shall within thirty

(30) days after the effectivity of this Code formulate and implement rules and regulations for the

immediate dismantling of existing obstruction to navigation.

SECTION 56. Non-Obstruction to Dened Migration Paths. — Nothing in the foregoing sections

shall be construed as permitting the lessee, permittee, or licensee to undertake any construction

which will obstruct any dened migration path of migratory sh species such as river mouths

and estuaries within a distance determined by the concerned LGUs in consultation with and

upon the recommendation of the FARMCs.

SECTION 57. Registration of Fish Hatcheries and Private Fishponds, etc. — All sh hatcheries,

sh breeding facilities and private shponds must be registered with the LGUs which shall

prescribe minimum standards for such facilities in consultation with the Department: Provided,

That the Department shall conduct a yearly inventory of all shponds, sh pens and sh cages

whether in public or private lands: Provided, further, That all shpond, sh pens and sh cage

operators shall annually report to the Department the type of species and volume of production

in areas devoted to aquaculture.

ARTICLE IV

Post-Harvest Facilities, Activities and Trades

SECTION 58. Comprehensive Post-harvest and Ancillary Industries Plan. — The Department shall

conduct a regular study of sheries post-harvest operations and ancillary industries, in the

formulation of a comprehensive plan for post-harvest and ancillary industries. It shall take into

account among others, the following:

a. detailed and clear guidelines on the distribution, construction, maintenance and use of

post-harvest infrastructure facilities;

b. extension of credit and incentives for post-harvest operations;

c. promotion and strengthening of semi-processing, processing and handling;

d. development of domestic shmeal industry;

e. development of sheries ship-building and repair as a viable industry;

f. development and strengthening of marketing facilities and activities, including the

pricing system, with emphasis on collective marketing and the elimination of middlemen;

g. increased participation of cooperatives and non-governmental organizations in postharvest

operations and ancillary industries; and

h. integration of sheries post-harvest operations into the national sheries plan.

SECTION 59. Establishment of Post-Harvest Facilities for Fishing Communities. — The LGUs

shall coordinate with the private sector and other concerned agencies and FARMCs in the

establishment of post-harvest facilities for shing communities such as, but not limited to,

municipal sh landing sites, sh ports, ice plants and cold storage and other sh processing

establishments to serve primarily the needs of municipal sherfolk: Provided, That such postharvest
facilities shall be consistent with the Comprehensive Post-harvest and Ancillary

Industries Plan.

SECTION 60. Registration and Licensing of all Post-Harvest Facilities. — All post-harvest

facilities such as sh processing plants, ice plants, and cold storages, sh ports/landings and

other shery business establishments must register with and be licensed by the LGUs which

shall prescribe minimum standards for such facilities in consultation with the Department.

SECTION 61. Importation and Exportation of Fishery Products. —

a. Export of shery products shall be regulated whenever such exportation affects

domestic food security and production: Provided, That exportation of live sh shall be prohibited

except those which are hatched or propagated in accredited hatcheries and ponds;

b. To protect and maintain the local biodiversity or ensure the sufciency of domestic

supply, spawners, breeders, eggs and fry of bangus, prawn and other endemic species, as may

be determined by the Department, shall not be exported or caused to be exported by any person;

c. Fishery products may be imported only when the importation has been certied as

necessary by the Department in consultation with the FARMC, and all the requirements of this

Code, as well as all existing rules and regulations have been complied with: Provided, That sh

imports for canning/processing purposes only may be allowed without the necessary

certication, but within the provisions of Section 61(d) of this Code; and
d. No person, shall import and/or export shery products of whatever size, stage or form

for any purpose without securing a permit from the Department.

The Department in consultation with the FARMC shall promulgate rules and regulations on

importation and exportation of sh and shery/aquatic resources with the Government’s

export/import simplication procedures.

SECTION 62. Instruments of Weights and Measures, and Quality Grades/Standards. —

Standards for weights, volume and other measurements for all shery transactions shall be set

by the Department.

All sh and shery products for export, import and domestic consumption shall meet the quality

grades/standards as determined by the Department.

The LGU concerned shall, by appropriate ordinance, penalize fraudulent practices and unlawful

possession or use of instruments of weights and measures.

CHAPTER III

Reconstitution of the Bureau of Fisheries and Aquatic Resources and Creation of Fisheries and

Aquatic Resources Management Councils

ARTICLE I

Reconstitution of the Bureau of Fisheries and Aquatic Resources

SECTION 63. Creation of the Position of Undersecretary for Fisheries and Aquatic Resources. —

There is hereby created in the Department of Agriculture the position of Undersecretary for

Fisheries and Aquatic Resources, solely for the purpose of attending to the needs of the shing

industry, to be appointed by the President. Such Undersecretary shall have the following

functions:

a. set policies and formulate standards for the effective, efcient and economical

operations of the shing industry in accordance with the programs of the government;

b. exercise overall supervision over all functions and activities of all ofces and

instrumentalities and other ofces related to sheries including its ofcers;

c. establish, with the assistance of the director, such regional, provincial and other shery

ofcers as may be necessary and appropriate and organize the internal structure of BFAR in

such manner as is necessary for the efcient and effective attainment of its objectives and
purposes; and

d. perform such other functions as may be necessary or proper to attain the objectives of

this Code.

SECTION 64. Reconstitution of the BFAR. — The Bureau of Fisheries and Aquatic Resources

(BFAR) is hereby reconstituted as a line bureau under the Department of Agriculture.

SECTION 65. Functions of the Bureau of Fisheries and Aquatic Resources. — As a line bureau,

the BFAR shall have the following functions:

a. prepare and implement a Comprehensive National Fisheries Industry Development Plan;

b. issue licenses for the operation of commercial shing vessels;

c. issue identication cards free of charge to shworkers engaged in commercial shing;

d. monitor and review joint shing agreements between Filipino citizens and foreigners

who conduct shing activities in international waters, and ensure that such agreements are not

contrary to Philippine commitment under international treaties and convention on shing in the

high seas;

e. formulate and implement a Comprehensive Fishery Research and Development

Program, such as, but not limited to, sea farming, sea ranching, tropical/ornamental sh and

seaweed culture, aimed at increasing resource productivity, improving resource use efciency,

and ensuring the long-term sustainability of the country’s shery and aquatic resources;

f. establish and maintain a Comprehensive Fishery Information System;

g. provide extensive development support services in all aspects of sheries production,

processing and marketing;

h. provide advisory services and technical assistance on the improvement of quality of

sh from the time it is caught (i.e. on board shing vessel, at landing areas, sh markets, to the

processing plants and to the distribution and marketing chain);

i. coordinate efforts relating to shery production undertaken by the primary shery

producers, LGUs, FARMCs, shery and organizations/cooperatives;

j. advise and coordinate with LGUs on the maintenance of proper sanitation and hygienic

practices in sh markets and sh landing areas;

k. establish a corps of specialists in collaboration with the Department of National

Defense, Department of the Interior and Local Government, Department of Foreign Affairs for the

efcient monitoring, control and surveillance of shing activities within Philippine territorial

waters and provide the necessary facilities, equipment and training therefor;

l. implement an inspection system for import and export of shery/aquatic products and

sh processing establishments, consistent with international standards to ensure product quality

and safety;

m. coordinate with LGUs and other concerned agencies for the establishment of

productivity enhancing and market development programs in shing communities to enable

women to engage in other sheries/economic activities and contribute signicantly to

development efforts;

n. enforce all laws, formulate and enforce all rules and regulations governing the

conservation and management of shery resources, except in municipal waters, and to settle

conicts of resource use and allocation in consultation with the NFARMC, LGUs and local

FARMCs;

o. develop value-added shery-products for domestic consumption and export;

p. recommend measures for the protection/enhancement of the shery industries;

q. assist the LGUs in developing their technical capability in the development,

management, regulation, conservation, and protection of the shery resources;

r. formulate rules and regulations for the conservation and management of straddling sh

stocks and highly migratory sh stocks; and

s. perform such other related functions which shall promote the development,

conservation, management, protection and utilization of sheries and aquatic resources.

SECTION 66. Composition of BFAR. — As a line bureau, the BFAR shall be headed by a Director

and assisted by two (2) Assistant Directors who shall supervise the administrative and technical

services of the bureau respectively. It shall establish regional, provincial and municipal ofces as

may be appropriate and necessary to carry out effectively and efciently the provisions of this

Code.

SECTION 67. Fisheries Inspection and Quarantine Service. — For purposes of monitoring and

regulating the importation and exportation of sh and shery/aquatic resources, the Fisheries
Inspection and Quarantine Service in the BFAR is hereby strengthened and shall have the

following functions:

a. conduct sheries quarantine and quality inspection of all sh and shery/aquatic

products coming into and going out of the country by air or water transport, to detect the

presence of sh pest and diseases and if found to harbor sh pests or diseases shall be

conscated and disposed of in accordance with environmental standards and practices;

b. implement international agreements/commitments on bio-safety and bio-diversity as

well as prevent the movement or trade of endemic shery and aquatic resources to ensure that

the same are not taken out of the country;

c. quarantine such aquatic animals and other shery products determined or suspected to

be with shery pests and diseases and prevent the movement or trade from and/or into the

country of these products so prohibited or regulated under existing laws, rules and regulations as

well as international agreements of which the Philippines is a State Party;

d. examine all sh and shery products coming into or going out of the country which may

be a source or medium of sh pests or diseases and/or regulated by existing shery regulations

and ensure that the quality of sh import and export meet international standards; and

e. document and authorize the movement or trade of sh and shery products when found

free of sh pests or diseases and collect necessary fees prescribed by law and regulations.

ARTICLE II

The Fisheries and Aquatic Resources Management Councils (FARMCs)

SECTION 68. Development of Fisheries and Aquatic Resources in Municipal Waters and Bays. —

Fisherfolk and their organizations residing within the geographical jurisdiction of the barangays,

municipalities or cities with the concerned LGUs shall develop the shery/aquatic resources in

municipal waters and bays.

SECTION 69. Creation of Fisheries and Aquatic Resources Management Councils (FARMCs). —

FARMCs shall be established in the national level and in all municipalities/cities abutting

municipal waters as dened by this Code. The FARMCs shall be formed by sherfolk

organizations/cooperatives and NGOs in the locality and be assisted by the LGUs and other

government entities. Before organizing FARMCs, the LGUs, NGOs, sherfolk, and other concerned
POs shall undergo consultation and orientation on the formation of FARMCs.

SECTION 70. Creation and Composition of the National Fisheries and Aquatic Resources

Management Council (NFARMC). — There is hereby created a National Fisheries and Aquatic

Resources Management Council hereinafter referred to as NFARMC as an

advisory/recommendatory body to the Department. The NFARMC shall be composed of fteen

(15) members consisting of:

a. the Undersecretary of Agriculture, as Chairman;

b. the Undersecretary of the Interior and Local Government;

c. ve (5) members representing the sherfolk and shworkers;

d. ve (5) members representing commercial shing and aquaculture operators and the

processing sectors;

e. two (2) members from the academe; and

f. one (1) representative of NGOs involved in sheries.

The members of the NFARMC, except for the Undersecretary of Agriculture and the

Undersecretary of the Interior and Local Government, shall be appointed by the President upon

the nomination of their respective organizations.

SECTION 71. Terms of Ofce. — The members of NFARMC, except the Undersecretary of

Agriculture and the Undersecretary of the Interior and Local Government, shall serve for a term of

three (3) years without reappointment.

SECTION 72. Functions of the NFARMC. — The NFARMC shall have the following functions:

a. assist in the formulation of national policies for the protection, sustainable development

and management of shery and aquatic resources for the approval of the Secretary;

b. assist the Department in the preparation of the National Fisheries and Industry

Development Plan; and

c. perform such other functions as may be provided by law.

SECTION 73. The Municipal/City Fisheries and Aquatic Resources Management Councils

(M/CFARMCs). — The M/CFARMCs shall be created in each of the municipalities and cities

abutting municipal waters. However, the LGU may create the Barangay Fisheries and Aquatic

Resources Management Councils (BFARMCs) and the Lakewide Fisheries and Aquatic
Resources Management Councils (LFARMCs) whenever necessary. Such BFARMCs and

LFARMCs shall serve in an advisory capacity to the LGUs.

SECTION 74. Functions of the M/CFARMCs. — The M/CFARMCs shall exercise the following

functions:

a. assist in the preparation of the Municipal Fishery Development Plan and submit such

plan to the Municipal Development Council;

b. recommend the enactment of municipal shery ordinances to the sangguniang

bayan/sangguniang panlungsod through its Committee on Fisheries;

c. assist in the enforcement of shery laws, rules and regulations in municipal waters;

d. advise the sangguniang bayan/panlungsod on shery matters through its Committee

on Fisheries, if such has been organized; and

e. perform such other functions which may be assigned by the sangguniang

bayan/panlungsod.

SECTION 75. Composition of the M/CFARMC. — The regular member of the M/CFARMCs shall

be composed of:

a. Municipal/City Planning Development Ofcer;

b. Chairperson, Agriculture/Fishery Committee of the Sangguniang Bayan/Panlungsod;

c. representative of the Municipal/City Development Council;

d. representative from the accredited non-government organization;

e. representative from the private sector;

f. representative from the Department of Agriculture; and

g. at least eleven (11) sherfolk representatives (seven (7) municipal sherfolk, one (1)

shworker and three (3) commercial shers) in each municipality/city which include

representative from youth and women sector.

The Council shall adopt rules and regulations necessary to govern its proceedings and election.

SECTION 76. The Integrated Fisheries and Aquatic Resources Management Councils (IFARMCs).

— The IFARMCs shall be created in bays, gulfs, lakes and rivers and dams bounded by two (2) or

more municipalities/cities.

SECTION 77. Functions of the IFARMCs. — The IFARMC shall have the following functions:
a. assist in the preparation of the Integrated Fishery Development Plan and submit such

plan to the concerned Municipal Development Councils;

b. recommend the enactment of integrated shery ordinances to the concerned

sangguniang bayan/panlungsod through its Committee on Fisheries, if such has been

organized;

c. assist in the enforcement of shery laws, rules and regulations in concerned municipal

waters;

d. advice the concerned sangguniang bayan/panlungsod on shery matters through its

Committee on Fisheries, if such has been organized; and

e. perform such other functions which may be assigned by the concerned sangguniang

bayan/panlungsod.

SECTION 78. Composition of the IFARMCs. — The regular members of the IFARMCs shall be

composed of the following:

a. the chairperson of the Committee on Agriculture/Fisheries of the concerned

sangguniang bayan/panlungsod;

b. the Municipal/City Fisheries Ofcers of the concerned municipalities/cities;

c. the Municipal/City Development Ofcers of the concerned municipalities/cities;

d. one (1) representative from NGO;

e. one (1) representative from private sector; and

f. at least nine (9) representatives from the sherfolk sector which include representatives

from the youth and women sector.

The Council shall adopt rules and regulations necessary to govern its proceedings and election.

SECTION 79. Source of Funds of the FARMCs. — A separate fund for the NFARMC, IFARMCs and

M/CFARMCs shall be established and administered by the Department from the regular annual

budgetary appropriations.

CHAPTER IV

Fishery Reserves, Refuge and Sanctuaries

SECTION 80. Fishing Areas Reserves for Exclusive Use of Government. — The Department may

designate area or areas in Philippine waters beyond fteen (15) kilometers from shoreline as
shery reservation for the exclusive use of the government or any of its political subdivisions,

agencies or instrumentalities, for propagation, educational, research and scientic purposes:

Provided, That in municipalities or cities, the concerned LGUs in consultation with the FARMCs

may recommend to the Department that portion of the municipal waters be declared as shery

reserves for special or limited use, for educational, research, and/or special management

purposes. The FARMCs may recommend to the Department portions of the municipal waters

which can be declared as sheries reserves for special or limited use for educational, research

and special management purposes.

SECTION 81. Fish Refuge and Sanctuaries. — The Department may establish sh refuge and

sanctuaries to be administered in the manner to be prescribed by the BFAR at least twenty-ve

percent (25%) but not more than forty percent (40%) of bays, foreshore lands, continental shelf

or any shing ground shall be set aside for the cultivation of mangroves to strengthen the

habitat and the spawning grounds of sh. Within these areas no commercial shing shall be

allowed. All marine shery reserves, sh sanctuaries and mangrove swamp reservations already

declared or proclaimed by the President or legislated by the Congress of the Philippines shall be

continuously administered and supervised by the concerned agency: Provided, however, That in

municipal waters, the concerned LGU in consultation with the FARMCs may establish shery

refuge and sanctuaries. The FARMCs may also recommend shery refuge and sanctuaries:

Provided, further, That at least fteen percent (15%) where applicable of the total coastal areas in

each municipality shall be identied, based on the best available scientic data and in

consultation with the Department, and automatically designated as sh sanctuaries by the LGUs

in consultation with the concerned FARMCs.

CHAPTER V

Fisheries Research and Development

SECTION 82. Creation of a National Fisheries Research and Development Institute (NFRDI). — In

recognition of the important role of sheries research in the development, management,

conservation and protection of the country’s sheries and aquatic resources, there is hereby

created a National Fisheries Research and Development Institute (NFRDI).

The Institute shall form part of the National Research and Development Network of the
Department of Science and Technology (DOST).

The Institute, which shall be attached to the Department shall serve as the primary research arm

of the BFAR. The overall governance of the Institute shall be vested in the Governing Board which

shall formulate policy guidelines for its operation. The plans, programs and operational budget

shall be passed by the Board. The Board may create such committees as it may deem necessary

for the proper and effective performance of its functions. The composition of the Governing

Board shall be as follows:

a. Undersecretary for Fisheries — Chairman

b. BFAR Director — Vice Chairman

c. NFRDI Executive Director — Member

d. PCAMRD Executive Director — Member

e. Representative from the academe — Member

f. four (4) representatives from the private sector who shall come from the following

subsectors: — Members

* Municipal Fisherfolk

* Commercial Fishing Operator

* Aquaculture Operator

* Post-Harvest/Processor

The NFRDI shall have a separate budget specic to its manpower requirements and operations

to ensure the independent and objective implementation of its research activities.

SECTION 83. Qualication Standard. — The Institute shall be headed by an Executive Director to

be appointed by the President of the Philippines upon the recommendation of the governing

board. The Executive Director shall hold a Doctorate degree in sheries and/or other related

disciplines. The organizational structure and stafng pattern shall be approved by the

Department: Provided, however, That the stafng pattern and remunerations for scientic and

technical staff shall be based on the qualication standards for science and technology

personnel.

SECTION 84. Research and Development Objectives. — Researches to be done by the NFRDI are

expected to result in the following:

a. To raise the income of the sherfolk and to elevate the Philippines among the top ve

(5) in the world ranking in the sh productions;

b. to make the country’s shing industry in the high seas competitive;

c. to conduct social research on sherfolk families for a better understanding of their

conditions and needs; and

d. to coordinate with the sheries schools, LGUs and private sectors regarding the

maximum utilization of available technology, including the transfer of such technology to the

industry particularly the sherfolk.

SECTION 85. Functions of the NFRDI. — As a national institute, the NFRDI shall have the

following functions:

a. establish a national infrastructure unit complete with technologically-advanced features

and modern scientic equipment, which shall facilitate, monitor, and implement various research

needs and activities of the sheries sector;

b. provide a venue for intensive training and development of human resources in the eld

of sheries, a repository of all sheries researches and scientic information;

c. provide intensive training and development of human resources in the eld of sheries

for the maximum utilization of available technology;

d. hasten the realization of the economic potential of the sheries sector by maximizing

developmental research efforts in accordance with the requirements of the national sheries

conservations and development programs, also possibly through collaborative effort with

international institutions; and

e. formally establish, strengthen and expand the network of sheries-researching

communities through effective communication linkages nationwide.

CHAPTER VI

Prohibitions and Penalties

SECTION 86. Unauthorized Fishing or Engaging in Other Unauthorized Fisheries Activities. — No

person shall exploit, occupy, produce, breed, culture, capture or gather sh, fry or ngerlings of

any shery species or shery products, or engage in any shery activity in Philippine waters

without a license, lease or permit.

Discovery of any person in an area where he has no permit or registration papers for a shing

vessel shall constitute a prima facie presumption that the person and/or vessel is engaged in

unauthorized shing: Provided, That shing for daily food sustenance or for leisure which is not

for commercial, occupation or livelihood purposes may be allowed.

It shall be unlawful for any commercial shing vessel to sh in bays and in such other shery

management areas which may hereinafter be declared as over-exploited.

Any commercial shing boat captain or the three (3) highest ofcers of the boat who commit

any of the above prohibited acts upon conviction shall be punished by a ne equivalent to the

value of catch or Ten thousand pesos (P10,000.00) whichever is higher, and imprisonment of six

(6) months, conscation of catch and shing gears, and automatic revocation of license.

It shall be unlawful for any person not listed in the registry of municipal sherfolk to engage in

any commercial shing activity in municipal waters. Any municipal sherfolk who commits such

violation shall be punished by conscation of catch and a ne of Five hundred pesos (500.00).

SECTION 87. Poaching in Philippine Waters. — It shall be unlawful for any foreign person,

corporation or entity to sh or operate any shing vessel in Philippine waters.

The entry of any foreign shing vessel in Philippine waters shall constitute a prima facie

evidence that the vessel is engaged in shing in Philippine waters.

Violation of the above shall be punished by a ne of One hundred thousand U.S. Dollars

(US$100,000.00), in addition to the conscation of its catch, shing equipment and shing

vessel: Provided, That the Department is empowered to impose an administrative ne of not less

than Fifty thousand U.S. Dollars (US$50,000.00) but not more than Two hundred thousand U.S.

Dollars (US$200,000.00) or its equivalent in the Philippine Currency.

SECTION 88. Fishing Through Explosives, Noxious or Poisonous Substance, and/or Electricity. —

(1) It shall be unlawful for any person to catch, take or gather or cause to be caught, taken

or gathered, sh or any shery species in Philippine waters with the use of electricity, explosives,

noxious or poisonous substance such as sodium cyanide in the Philippine shery areas, which

will kill, stupefy, disable or render unconscious sh or shery species: Provided, That the

Department, subject to such safeguards and conditions deemed necessary and endorsement

from the concerned LGUs, may allow, for research, educational or scientic purposes only, the
use of electricity, poisonous or noxious substances to catch, take or gather sh or shery

species: Provided, further, That the use of poisonous or noxious substances to eradicate

predators in shponds in accordance with accepted scientic practices and without causing

adverse environmental impact in neighboring waters and grounds shall not be construed as

illegal shing.

It will likewise be unlawful for any person, corporation or entity to possess, deal in, sell or in any

manner dispose of, any sh or shery species which have been illegally caught, taken or

gathered.

The discovery of dynamite, other explosives and chemical compounds which contain

combustible elements, or noxious or poisonous substances, or equipment or device for electro-

shing in any shing vessel or in the possession of any sherfolk, operator, shing boat ofcial

or shworker shall constitute prima facie evidence, that the same was used for shing in

violation of this Code. The discovery in any shing vessel of sh caught or killed with the use of

explosive, noxious or poisonous substances or by electricity shall constitute prima facie

evidence that the sherfolk, operator, boat ofcial or shworker is shing with the use thereof.

(2) Mere possession of explosive, noxious or poisonous substances or electroshing

devices for illegal shing shall be punishable by imprisonment ranging from six (6) months to

two (2) years.

(3) Actual use of explosives, noxious or poisonous substances or electroshing devices for

illegal shing shall be punishable by imprisonment ranging from ve (5) years to ten (10) years

without prejudice to the ling of separate criminal cases when the use of the same result to

physical injury or loss of human life.

(4) Dealing in, selling, or in any manner disposing of, for prot, illegally caught/gathered

sheries species shall be punished by imprisonment ranging from six (6) months to two (2)

years.

(5) In all cases enumerated above, the explosives, noxious or poisonous substances and/or

electrical devices, as well as the shing vessels, shing equipment and catch shall be forfeited.

SECTION 89. Use of Fine Mesh Net. — It shall be unlawful to engage in shing using nets with

mesh smaller than that which may be xed by the Department: Provided, That the prohibition on
the use of ne mesh net shall not apply to the gathering of fry, glass eels, elvers, tabios, and

alamang and such species which by their nature are small but already mature to be identied in

the implementing rules and regulations by the Department.

Violation of the above shall subject the offender to a ne from Two thousand pesos (P2,000.00)

to Twenty thousand pesos (P20,000.00) or imprisonment from six (6) months to two (2) years or

both such ne and imprisonment at the discretion of the court: Provided, That if the offense is

committed by a commercial shing vessel, the boat captain and the master sherman shall also

be subject to the penalties provided herein: Provided, further, That the owner/operator of the

commercial shing vessel who violates this provision shall be subjected to the same penalties

provided herein: Provided, nally, That the Department is hereby empowered to impose upon the

offender an administrative ne and/or cancel his permit or license or both.

SECTION 90. Use of Active Gear in the Municipal Waters and Bays and Other Fishery

Management Areas. — It shall be unlawful to engage in shing in municipal waters and in all

bays as well as other shery management areas using active shing gears as dened in this

Code.

Violators of the above prohibitions shall suffer the following penalties:

(1) The boat captain and master sherman of the vessels who participated in the violation

shall suffer the penalty of imprisonment from two (2) years to six (6) years;

(2) The owner/operator of the vessel shall be ned from Two thousand pesos (P2,000.00)

to Twenty thousand pesos (20,000.00) upon the discretion of the court.

If the owner/operator is a corporation, the penalty shall be imposed on the chief executive ofcer

of the Corporation.

If the owner/operator is a partnership the penalty shall be imposed on the managing partner.

(3) The catch shall be conscated and forfeited.

SECTION 91. Ban on Coral Exploitation and Exportation. — It shall be unlawful for any person or

corporation to gather, possess, sell or export ordinary precious and semi-precious corals, whether

raw or in processed form, except for scientic or research purposes.

Violations of this provision shall be punished by imprisonment from six (6) months to two (2)

years and a ne from Two thousand pesos (P2,000.00) to Twenty thousand pesos (20,000.00),
or both such ne and imprisonment, at the discretion of the court, and forfeiture of the subject

corals, including the vessel and its proper disposition.

The conscated corals shall either be returned to the sea or donated to schools and museums

for educational or scientic purposes or disposed through other means.

SECTION 92. Ban on Muro-Ami Other Methods and Gear Destructive to Coral Reefs and Other

Marine Habitat. — It shall be unlawful for any person, natural or juridical, to sh with gear

method that destroys coral reefs, seagrass beds, and other shery marine life habitat as may be

determined by the Department. “Muro-Ami” and any of its variation, and such similar gear and

methods that require diving, other physical or mechanical acts to pound the coral reefs and other

habitat to entrap, gather or catch sh and other shery species are also prohibited.

The operator, boat captain, master sherman, and recruiter or organizer of shworkers who

violate this provision shall suffer a penalty of two (2) years to ten (10) years imprisonment and a

ne of not less than One hundred thousand pesos (P100,000.00) to Five hundred thousand

pesos (P500,000.00) or both such ne and imprisonment, at the discretion of the court. The

catch and gear used shall be conscated.

It shall likewise be unlawful for any person or corporation to gather, sell or export white sand,

silica, pebbles and any other substances which make up any marine habitat.

The person or corporation who violates this provision shall suffer a penalty of two (2) years to

ten (10) years imprisonment and a ne of not less than One hundred thousand pesos

(P100,000.00) to Five hundred thousand pesos (P500,000.00) or both such ne and

imprisonment, at the discretion of the court. The substance taken from its marine habitat shall

be conscated.

SECTION 93. Illegal Use of Superlights. — It shall be unlawful to engage in shing with the use

of superlights in municipal waters or in violation of the rules and regulations which may be

promulgated by the Department on the use of superlights outside municipal waters.

Violations of this provision shall be punished by imprisonment from six (6) months to two (2)

years or a ne of Five thousand pesos (P5,000.00) per superlight, or both such ne and

imprisonment at the discretion of the courts. The superlight, shing gears and vessel shall be

conscated.
SECTION 94. Conversion of Mangroves. — It shall be unlawful for any person to convert

mangroves into shponds or for any other purposes.

Violation of the provision of this section shall be punished by imprisonment of six (6) years and

one (1) day to twelve (12) years and/or a ne of Eighty thousand pesos (P80,000.00): Provided,

That if the area requires rehabilitation or restoration as determined by the court, the offender

should also be required to restore or compensate for the restoration of the damage.

SECTION 95. Fishing in Overshed Area and During Closed Season. — It shall be unlawful to sh

in overshed area and during closed season.

Violation of the provision of this section shall be punished by imprisonment of six (6) months

and one (1) day to six (6) years and/or ne of Six thousand pesos (P6,000.00) and by forfeiture

of the catch and cancellation of shing permit or license.

SECTION 96. Fishing in Fishery Reserves, Refuge and Sanctuaries. — It shall be unlawful to sh

in shery areas declared by the Department as shery reserves, refuge and sanctuaries.

Violation of the provision of this section shall be punished by imprisonment of two (2) years to

six (6) years and/or ne of Two thousand pesos (P2,000.00) to Twenty thousand pesos

(P20,000.00) and by forfeiture of the catch and the cancellation of shing permit or license.

SECTION 97. Fishing or Taking of Rare, Threatened or Endangered Species. — It shall be

unlawful to sh or take rare, threatened or endangered species as listed in the CITES and as

determined by the Department.

Violation of the provision of this section shall be punished by imprisonment of twelve (12) years

to twenty (20) years and/or a ne of One hundred and twenty thousand pesos (P120,000.00)

and forfeiture of the catch, and the cancellation of shing permit.

SECTION 98. Capture of Sabalo and Other Breeders/Spawners. — It shall be unlawful for any

person to catch, gather, capture or possess mature milksh or “sabalo” and such other breeders

or spawners of other shery species as may be determined by the Department: Provided, That

catching of “sabalo” and other breeders/spawners for local breeding purposes or scientic or

research purposes may be allowed subject to guidelines to be promulgated by the Department.

Violation of the provision of this section shall be punished by imprisonment of six (6) months

and one (1) day to eight (8) years and/or a ne of Eighty thousand pesos (P80,000.00) and
forfeiture of the catch, and shing equipment used and revocation of license.

SECTION 99. Exportation of Breeders, Spawners, Eggs or Fry. — Exportation of breeders,

spawners, eggs or fry as prohibited in this Code shall be punished by imprisonment of eight (8)

years, conscation of the same or a ne equivalent to double the value of the same, and

revocation of the shing and/or export license/permit.

SECTION 100. Importation or Exportation of Fish or Fishery Species. — Any importation or

exportation of sh or sheries species in violation of this Code shall be punished by eight (8)

years of imprisonment, a ne of Eighty thousand pesos (P80,000.00) and destruction of live

shery species or forfeiture of non-live shery species in favor of the department for its proper

disposition: Provided, That violator of this provision shall be banned from being members or

stock holders of companies currently engaged in sheries or companies to be created in the

future, the guidelines for which shall be promulgated by the Department.

SECTION 101. Violation of Catch Ceilings. — It shall be unlawful for any person to sh in

violation of catch ceilings as determined by the Department. Violation of the provision of this

section shall be punished by imprisonment of six (6) months and one (1) day to six (6) years

and/or a ne of Fifty thousand pesos (P50,000.00) and forfeiture of the catch, and shing

equipment used and revocation of license.

SECTION 102. Aquatic Pollution. — Aquatic pollution, as dened in this Code shall be unlawful.

Violation of the provision of this section shall be punished by imprisonment of six (6) years and

one (1) day to twelve (12) years and/or a ne of Eighty thousand pesos (P80,000.00) plus an

additional ne of Eight thousand pesos (P8,000.00) per day until such violation ceases and the

nes paid.

SECTION 103. Other Violations. — The following sheries activities shall also be considered as a

violation of this Code:

a. Failure to Comply with Minimum Safety Standards. — The owner and captain of a

commercial shing vessel engaged in shing who, upon demand by proper authorities, fails to

exhibit or show proof of compliance with the safety standards provided in this Code, shall be

immediately prevented from continuing with his shing activity and escorted to the nearest port

or landing point. The license to operate the commercial shing vessel shall be suspended until
the safety standard has been complied with.

b. Failure to Conduct a Yearly Report on all Fishponds, Fish Pens and Fish Cages. — The

FLA of the holder who fails to render a yearly report shall be immediately cancelled: Provided,

That if the offender be the owner of the shpond, sh pen or sh cage, he shall be subjected to

the following penalties: (1) rst offense, a ne of Five hundred pesos (P500.00) per unreported

hectare; (2) subsequent offenses, a ne of One thousand pesos (1,000.00) per unreported

hectare.

c. Gathering and Marketing of Shell Fishes. — It shall be unlawful for any person to take,

sell, transfer, or have in possession for any purpose any shell sh which is sexually mature or

below the minimum size or above the maximum quantities prescribed for the particular species.

d. Obstruction to Navigation or Flow and Ebb of Tide in any Stream, River, Lake or Bay. — It

shall be unlawful for any person who causes obstruction to navigation or ow or ebb of tide.

e. Construction and Operation of Fish Corrals/Traps, Fish Pens and Fish Cages. — It shall

be unlawful to construct and operate sh corrals/traps, sh pens and sh cages without a

license/permit.

Subject to the provision of subparagraph (b) of this section, violation of the above-enumerated

prohibited acts shall subject the offender to a ne ranging from Two thousand pesos

(P2,000.00) to Ten thousand pesos (P10,000.00) or imprisonment from one (1) month and one

(1) day to six (6) months, or both such ne and imprisonment, upon the discretion of the court:

Provided, That the Secretary is hereby empowered to impose upon the offender an administrative

ne of not more than Ten thousand pesos (P10,000.00) or to cancel his permit or license, or to

impose such ne and to cancel his permit or license, in the discretion of the Secretary: Provided,

further, That the Secretary, or his duly authorized representative, and law enforcement agents are

hereby empowered to impound with the assistance of the Philippine Coast Guard, PNP-Maritime

Command: Provided, nally, That any person who unlawfully obstructs or delays the inspection

and/or movement of sh and shery/aquatic products when such inspection and/or movement

is authorized under this Code, shall be subject to a ne of not more than Ten thousand pesos

(P10,000.00) or imprisonment of not more than two (2) years, or both such ne and

imprisonment, upon the discretion of the court.

Every penalty imposed for the commission of an offense shall carry with it the forfeiture of the

proceeds of such offense and the instruments or tools with which it was committed.

Such proceeds and instruments or tools shall be conscated and forfeited in favor of the

Government, unless they be the property of a third person not liable for the offense, but those

articles which are not subject of lawful commerce shall be destroyed.

SECTION 104. Commercial Fishing Vessel Operators Employing Unlicensed Fisherfolk or

Fishworker or Crew. — The owner/operator of a commercial shing vessel employing unlicensed

sherfolk or shworker shall be ned Five hundred pesos (P500.00) each for every month that

the same has been employed and/or One thousand pesos (P1,000.00) for every month for each

unlicensed crew member who has been employed.

SECTION 105. Obstruction of Dened Migration Paths. — Obstruction of any dened migration

paths of anadromous, catadromous and other migratory species, in areas including, but not

limited to river mouths and estuaries within a distance determined by the concerned FARMCs

shall be punished by imprisonment of seven (7) years to twelve (12) years or a ne from Fifty

thousand pesos (P50,000.00) to One hundred thousand pesos (P100,000.00)or both

imprisonment and ne at the discretion of the court, and cancellation of permit/license, if any,

and dismantling of obstruction shall be at his own expense and conscation of same.

SECTION 106. Obstruction to Fishery Law Enforcement Ofcer. — The boat owner, master or

operator or any person acting on his behalf of any shing vessel who evades, obstructs or

hinders any shery law enforcement ofcer of the Department to perform his duty, shall be ned

Ten thousand pesos (P10,000.00). In addition, the registration, permit and/or license of the

vessel including the license of the master sherman shall be canceled.

SECTION 107. Promulgation of Administrative Orders. — For purposes of shery regulation or

other shery adjustments, the Department in consultation with the LGUs and local FARMCs, shall

issue Fishery Administrative Orders or regulations for the conservation, preservation,

management and sustainable development of shery and aquatic resources.

CHAPTER VII

General Provisions

SECTION 108. Fisherfolk Settlement Areas. — The Department shall establish and create
sherfolk settlement areas in coordination with concerned agencies of the government, where

certain areas of the public domain, specically near the shing grounds, shall be reserved for the

settlement of the municipal sherfolk. Nothing in this section shall be construed to vest

ownership of any resettlement area to a municipal sherfolk for whom said areas may have

been reserved for or had been actually granted to.

SECTION 109. Municipal Fisheries Grant Fund. — For the development, management and

conservation of the municipal resources, there is hereby created a Fishery Grant Fund to nance

shery projects of the LGUs primarily for the upliftment of the municipal sherfolk. The amount

of One hundred million pesos (P100,000,000.00) is hereby appropriated out of the Department’s

allocation in the General Appropriations Act (GAA) to support the Grant Fund.

For this purpose, the Department may seek nancial assistance from any source and may

receive any donation therefore.

SECTION 110. Fishery Loan and Guarantee Fund. — Pursuant to Section 7, Article XIII of the

Constitution, there is hereby created a Fishery Loan and Guarantee Fund with an initial of One

hundred million pesos (P100,000,000.00), which shall be administered by the Land Bank of the

Philippines. The fund shall be made available for lending to qualied borrowers to nance the

development of the shery industry under a program to be prescribed by the Department.

For the same purpose, the Department may seek nancial assistance from any source and may

receive any donation therefrom.

SECTION 111. Fishing Vessels Development Fund. — There is hereby created a Fishing Vessels

Development Fund to enhance the building and/or acquisition of shing vessels. This shall be a

long-term loan facility that shall be administered by the Development Bank of the Philippines.

The amount of Two hundred and fty million pesos (P250,000,000.00) per year for ve (5) years

is hereby appropriated out of the Department’s allocation in the GAA to support this

Development Fund.

SECTION 112. Special Fisheries Science and Approshtech Fund. — The Department shall

provide subsidy for full technical and nancial support to the development of appropriate

technology, both in shery and ancillary industries, that are ecologically sound, locally sourcebased and
labor intensive, based on the requirement and needs of the FARMCs. An initial
amount of One hundred million pesos (100,000,000.00) shall be authorized for the purpose of a

Special Fisheries Science and Approshtech Fund, and thereafter shall be included in the GAA.

SECTION 113. Aquaculture Investment Fund. — An Aquaculture Investment Fund in the

minimum amount of Fifty million pesos (P50,000,000.00) shall be established for soft loans

which shall be extended to municipal sherfolk and their organization who will engage in

aquaculture, and for the development of underdeveloped or underutilized inland shponds.

SECTION 114. Other Fisheries Financing Facilities. — In addition to sheries credit guarantee,

grant and other similar facilities granted under this Code, qualied Filipino sherfolk and

sheries enterprises shall enjoy such other facilities granted them under existing and/or new

laws, specially as to rural credit, with preference being given to sheries cooperatives.

SECTION 115. Professionalization of Fisheries Graduates. — There is hereby created a Fisheries

Board of Examiners in the Professional Regulation Commission to upgrade the Fisheries

Profession: Provided, however, That those who have passed the Civil Service Examination for

Fisheries shall automatically be granted eligibility by the Fisheries Board of Examiners: Provided,

further, That they have served the industry in either public or private capacity for not less than

ve (5) years: Provided, nally, That the rst Board Examination for B.S. Fisheries Graduates

shall be conducted within one (1) year from the approval of this Code.

SECTION 116. Upgrading of State Fisheries Schools/Colleges. — The Department, in

coordination with the Commission on Higher Education (CHED), Department of Education,

Culture and Sports (DECS), and Technical Education and Skills Development Authority (TESDA),

shall upgrade State Fisheries Schools/Colleges which provide both formal and non-formal

education: Provided, however, That the CHED shall incorporate Approshtech in the curricula of

sheries schools/colleges.

The Department and the CHED shall jointly formulate standards to upgrade all sheries

schools/colleges. Fisheries schools/colleges that do not meet minimum standards shall be

closed.

SECTION 117. Inclusion of Fisheries Conservation Subjects in School Curriculum. — Fisheries

conservation subjects shall be incorporated in the curricula of elementary and secondary

schools both private and public.

SECTION 118. Educational campaign at all levels. — The Department, the CHED, the DECS and

the Philippine Information Agency shall launch and pursue a nationwide educational campaign

to:

a. help realize the policies and implement the provisions of this Code;

b. promote the development, management, conservation and proper use of the

environment;

c. promote the principle of sustainable development; and

d. promote the development of truly Filipino-oriented shing and ancillary industries.

SECTION 119. Infrastructure Support. — The Department in cooperation with concerned

agencies shall:

a. prepare and implement a nationwide plan for the development of municipal shing

ports and markets;

b. prioritize the construction of farm-to-market roads linking the sheries production sites,

coastal landing points and other post-harvest facilities to major market and arterial

roads/highways;

c. identity community infrastructure facilities such as sh landing ports, ice plant and cold

storage facilities in consultation with shery cooperatives/associations and prepare plans and

designs for their construction that would be consistent with international environmental impact;

d. establish and maintain quality laboratories in major sh ports and prescribe the highest

standards for the operation and maintenance of such post-harvest facilities;

e. arrange and make representations with appropriate funding institutions to nance such

facilities for the use of the shery cooperatives/associations;

f. develop and strengthen marketing facilities and promote cooperative marketing

systems; and

g. promote and strengthen local sheries ship-building and repair industry.

SECTION 120. Extension Services. — The Department shall develop cost-effective, practical and

efcient extension services on a sustained basis, in addition to those provided by state

educational institutions, especially to municipal sherfolk in undeveloped areas, utilizing

practicable and indigenous resources and government agencies available, and based upon a
system of self-reliance and self-help.

SECTION 121. Protection of Sensitive Technical Information. — The Department shall take such

measures as may be necessary in order to protect trade, industrial and policy information of

Filipino sherfolk, sheries owners/operators, entrepreneurs, manufacturers and researchers,

when disclosure of such information will injure the competitiveness or viability of domestic

sheries.

SECTION 122. Assistance in Collecting Information. — The Department, in coordination with

other government entities concerned, may require Filipino representatives abroad and foreignbased
personnel to assist in the collection of sheries data and information.

SECTION 123. Charting of Navigational Lanes and Delineation of Municipal Waters. — The

Department shall authorize the National Mapping and Resource Information Authority (NAMRIA)

for the designation and charting of navigational lanes in shery areas and delineation of

municipal waters. The Philippine Coast Guard shall exercise control and supervision over such

designated navigational lanes.

SECTION 124. Persons and Deputies Authorized to Enforce this Code and Other Fishery Laws,

Rules and Regulations. — The law enforcement ofcers of the Department, the Philippine Navy,

Philippine Coast Guard, Philippine National Police (PNP), PNP-Maritime Command, law

enforcement ofcers of the LGUs and other government enforcement agencies, are hereby

authorized to enforce this Code and other shery laws, rules and regulations. Other competent

government ofcials and employees, punong barangays and ofcers and members of sherfolk

associations who have undergone training on law enforcement may be designated in writing by

the Department as deputy sh wardens in the enforcement of this Code and other shery laws,

rules and regulations.

SECTION 125. Strengthening Prosecution and Conviction of Violators of Fishery Laws. — The

Department of Justice (DOJ) shall embark on a program to strengthen the prosecution and

conviction aspects of shery law enforcement through augmentation of the current complement

of state prosecutors and through their continuous training and reorientation on shery laws,

rules and regulations.

SECTION 126. Foreign Grants and Aids. — All foreign grants, aids, exchange programs, loans,
researches and the like shall be evaluated and regulated by the Department to ensure that such

are consistent with the Filipinization, democratization and industrialization of shing industry

and the development of the entire country.

SECTION 127. Mandatory Review. — The Congress of the Philippines shall undertake a

mandatory review of this Code at least once every ve (5) years and as often as it may deem

necessary, to ensure that sheries policies and guidelines remain responsive to changing

circumstances.

CHAPTER VIII

Transitory Provisions

SECTION 128. Moratoria. — The Department shall, upon the recommendation of the Bureau,

have the power to declare a moratorium on the issuance of licenses for commercial shing

vessels to operate in specied area or areas in Philippine waters for a limited period of time if

there are indications of overshing brought about by a decrease in the volume and sizes of sh

caught therein or for conservation or ecological purposes.

No new licenses and similar privileges on exploitation of specic shery areas in Philippine

waters and aquaculture production areas shall be issued in accordance with this Code. Such

moratoria shall not exceed ve (5) years from the effectivity of this Code.

SECTION 129. Formulation of Implementing Rules and Regulations. — An Inter-agency

Committee is hereby created to formulate rules and regulations for the full implementation of

this Code within ninety (90) days of its effectivity: Provided, however, That the formulated rules

and regulations shall be submitted to both Houses of Congress for information and guidance.

Such rules and regulations shall take effect upon publication in a newspaper of general

circulation.

The Inter-agency Committee shall be composed of the following:

a. Secretary of Agriculture as Chairman;

b. Secretary of the Interior and Local Government;

c. Secretary of Environment and Natural Resources;

d. Secretary of Justice;

e. Secretary of Finance;
f. Secretary of Budget and Management;

g. Secretary of Labor and Employment;

h. Secretary of National Defense;

i. Commissioner of Civil Service Commission;

j. Director of BFAR;

k. Executive Director of PCAMRD;

l. General Manager of PFDA;

m. One (1) representative from each of the following:

a.1. The League of Provinces;

a.2. The League of Cities;

a.3. The League of Municipalities;

a.4. The Liga ng mga Barangay;

n. Representative of the municipal sherfolk;

o. Representative of the commercial shers;

p. Representative of the non-government organizations involved in shing concerns; and

q. A representative from the academe coming from the specialized sheries institution.

CHAPTER IX

Final Provisions

SECTION 130. Appropriation. — The sum necessary to effectively carry out the provisions of this

Act during the rst year of implementation shall be sourced from the budget of the DA/BFAR and

other agencies performing sheries-related functions: Provided, however, That such amount as

may be necessary to carry out the provisions of Sections 79, 109, 110, 111, 112, 113 are hereby

appropriated out of the unappropriated funds of the National Treasury. The Congress of the

Philippines shall provide for the appropriations of the Department, the NFRDI and the Fisheries

Scholarship Program for the succeeding years to be included in the annual GAA.

SECTION 131. Repealing Clause. — Presidential Decree No. 704, as amended by Presidential

Decree Nos. 1015 and 1058, Presidential Decree No. 977, as amended, Executive Order No. 967,

Series of 1984, Executive Order No. 116, Series of 1987, Executive Order No. 292, Series of 1987,

Executive Order No. 473, Series of 1991 and other existing laws except Republic Act No. 7611,
decrees, executive orders, and rules and regulations or parts thereof, which are inconsistent with

this Code, are hereby repealed or modied accordingly.

SECTION 132. Separability Clause. — If any portion or provision of this Code is declared

unconstitutional or invalid, the other portions or provisions hereof, which are not affected

thereby, shall continue in full force and effect.

SECTION 133. Effectivity. — This Code shall take effect fteen (15) days after its publication in

the Ofcial Gazette or in two (2) newspapers of general publication.

Approved on February 25, 1998

World Trade Organization

THE WORLD TRADE ORGANIZATION

·         A single, formal and permanent international trade organization dealing with the
rules of trade between nations.

·         This is the successor of the GATT – a multilateral treaty which provides a code of
agreed rules for international trade embodying rights and obligations of a legal
character which entered into force on January 1, 1948.

·         Serves as a negotiating forum and trade dispute settlement body on trade

problems between members.

·         As of July 2016, there are already 164 members representing more than 97% of
the world’s population.

·         Headed by Director-General Roberto Azevedo.

·         The Philippines is a member since January 1, 1995.

OBJECTIVES OF THE WTO

- To help trade flow as freely as possible;

-   To achieve further liberalization of trade through negotiations; and

-   To set up an impartial means of settling dispute.

 

FUNCTIONS OF THE WTO

1.    Administration of trade agreements;

2.    Forum of trade negotiations and trade disputes;

3.    Monitor the national trade policies;

4.    Technical assistance and training for developing and least developed countries; and

5.    Cooperation with other international organizations.

FUNDAMENTAL PRINCIPLES OF WTO

·         NON-DISCRIMINATION

Members shall not discriminate between their trading partners (MFN principle); or
between national and foreign like products, services or nationals (national treatment
principle).

·         MORE OPEN TRADE

Involves efforts in reducing or eliminating obstacles to trade.

·         TRANSPARENCY AND PREDICTABILITY

Traders and members need to know trade rules around the world (transparency) and
that trade measures will not be raised/introduced arbitrarily (predictability).

·         SPECIAL AND DIFFERENTIAL TREATMENT FOR LESS DEVELOPED MEMBERS

Developing and least developing members face particular challenges when dealing with
trade liberalization; therefore, they are provided greater flexibility, given more time to
adjust to the rules, and granted other special rights.

THE ORGANIZATIONAL STRUCTURE OF THE WTO

·         The Ministerial Conference

-  The highest decision-making body of the WTO;

-   Meets at least once every two years to review the ongoing work, provide political
guidance and direction to that work, and set the agenda for further works as necessary.

·         The General Council

-   Composed of the representatives from all members: usually Member’s Ambassadors

or Permanent Representatives based in Geneva.

-   The GC meets as appropriate to adopt decisions, on behalf of the MC, when the latter
is not in session.

-   The GC has authority over the Trade Negotiation Committee which is in charge of the
negotiations mandated by the Doha Development Agenda.

-   The GC also meets as:

o   Dispute Settlement Body – establishes panels of independent experts to resolve the

disputes, adopts the rulings of the panels and oversees the implementation of those
rulings;

o   Trade Policy Review Body – administers trade policy reviews as mandated by the
Trade Policy Review Mechanism of the WTO.

·         Councils and Subsidiary Bodies

o   Council for Trade in Goods

Oversees all the issues related to the WTO Agreement on Trade in Goods. It supervises
the work of various committees responsible for specific matters.

o   Council for Trade in Services

Oversees all issues related to the General Agreement of  Trade in Services (GATS).

o   Council for Trade-Related Aspects of Intellectual Property

Oversees all issues related to the Trade-Related Aspects of Intellectual Property Rights
(TRIPS) Agreement.

How are decisions made at the WTO?

The WTO continues GATT’s tradition of making decisions not by voting but
by consensus.  Where consensus is not possible, the WTO Agreement allows for voting –
a vote being won with a majority of the votes cast, unless otherwise provided in said
Agreement. At meetings of the MC and the GC, each WTO members shall have one
vote.

In What Ways does the WTO Operate?

-  As a set of multilaterally-agreed rules governing the trade behaviour of governments

providing, in essence, the rules of the road for trade;

-   As a forum for trade negotiations in which the trade environment is liberalized and
made more predictable either through the opening of national markets or the
reinforcement and extension of the rules themselves;

-   As an international court where governments can resolve disputes with other WTO
members.
 

How does the WTO promote trade liberalization?

Through the conduct of multilateral trade negotiations known as “Rounds”, to remove

or reduce barriers to world trade.

THE URUGUAY ROUND

The UR was the eighth round of multilateral trade negotiations conducted within the
framework of the GATT, spanning 1986 to 1994 and including 123 countries as
“contracting parties”. It covered areas before integrated into GATT – agriculture, textiles
and clothing, services, trade-related intellectual property rights, and trade-related
investment measures.

The UR transformed the GATT into the WTO which was established in 1995.

The Final Act embodying the 30 agreements and 22 ministerial decisions resulting from
the UR, and the Agreement to establish the World Trade Organization, was signed on
April 15, 1194 at Marrakesh, Morocco – known as the Marrakesh Agreement.

THE THREE KEY RESULT AREAS OF THE URUGUAY ROUND

a.    Market Access

Includes negotiations in industrial tariffs, agriculture, textiles and clothing and services.

b.    Rules and Disciplines

Negotiating topics ranged from trade measures against unfair trade (such as anti-
dumping and countervailing measures), trade measures to protect a country against
import surges and a deterioration of its balance-of-payments, trade restrictions,
customs valuation, subsidies, intellectual property rights and investment measures.

c.     Institutional Topics

Includes dispute settlement and ways by which to improve the conduct of the MTS, e.g.
trade policy review.

World CustomsOrganization

WHAT IS THE WORLD CUSTOMS ORGANIZATION?

Established in 1952 as the Customs Cooperation Council (CCC), the WCO maintains the Harmonized
Commodity Description and Coding System (HS), and internationally accepted goods nomenclature and
administers technical aspects of the WTO Agreement on Customs Valuation and Rules of Origin. It
adopted the informal working name “World Customs Organization” in order to indicate more clearly its
nature and world-wide status. However, the Convention establishing the CCC has not been amended,
thus Customs Cooperation Council remains its official name.

To date, the WCO has a worldwide membership of 182 Customs Administration across the globe that
collectively process approximately 98% of the world trade. It has its headquarter in Brussels, Belgium.

FUNCTIONS OF THE WCO

· To study all questions relating to cooperation in customs matters;

· To examine the technical aspects, as well as the economic factors related thereto, of customs
systems with a view to proposing to its members practical means of attaining the highest possible
degree of harmony and uniformity;
· To prepare draft conventions and amendments to Conventions and to recommend their adoption
by interested governments;

· To make recommendations to ensure the uniform interpretation and application of the

conventions concluded as a result of its work as well as those concerning the Nomenclature for the
Classification of Goods in Customs Tariffs and the Valuation of Goods for Customs Purposes and, to this
end, to perform such functions as may be expressly assigned t it those Conventions in accordance with
the provision thereof;

· To make recommendations, in a conciliatory capacity, for the settlement of disputes concerning

the interpretation or application of the Conventions referred to in the above paragraph;

· To ensure the circulation of information regarding customs regulations and procedures;

· On its own initiative or on request, to furnish interested governments information or advice on

customs matters within the general purposes of the present convention and to make recommendations
thereon; and

· To cooperate with other intergovernmental organizations as regards matters within its

competence.

HOW DOES THE WCO OPERATES?

The WCO is the only international organization dealing exclusively with customs matters. It provides for
a forum where delegates representing a large variety of members could tackle customs issues on equal
footing.

THE WORKING BODIES IN THE WCO

v Council
The highest body composed of the Directors-General of Customs from all members and is assisted by
the Finance Committee (17 members) and by the Policy Commission (24 members). The council meets
once a year with the aim of securing the highest degree of harmony and uniformity in the customs
system of Member Governments.

v Policy Commission

Established to act as a dynamic steering group to the council.

v Finance Committee

Acts under the overall direction of the WCO Council with administrative support provided by the WCO
Secretariat.

v Tariff and Trade Affairs:

o Harmonizes System Committee

Administers the International Convention on the Harmonized System to ensure that the HS keeps
abreast of technical progress and international trade developments; resolves specific classification
problems; and acts as an arbitrator in customs disputes between countries and makes decisions
regarding the tariff code applicable to goods.
o Harmonized System Review Sub-Committee

Acts under the overall direction of the HS Committee on the review and amendments of the HS having
regard to the needs of the users and to changes in technology or in patterns of international trade, and
on the preparation of consequential amendments to the Explanatory Notes and Compendium of
Classification Opinions.

o Scientific Sub-Committee

Assists the HS Committee and the Review Sub-Committee in their technical work particularly on the
draft HS legal texts and Explanatory Notes involving scientific issues, and with regard to questions
involving the classification of chemical products and those involving scientific issues.

o HS Working Party

Under the overall direction of the HS Committee, drafts the texts of possible amendments to the HS
Nomenclature, Explanatory Notes and Compendium of Classification Opinions before their final
adoption by the HS Committee.

o Technical Committee on Rules of Origin

Together with the WTO Committee on Rules of Origin, is charged with the implementation of the work
program on the harmonization of rules of origin.

o Technical Committee on Customs Valuation

Responsible for matters pertaining to customs valuation; and prepares opinions, commentaries,
explanatory notes, case studies and surveys.

Asia Pacific Economic Cooperation

What is the Asia-Pacific Economic Cooperation?

APEC refers to the association created in 1989 for economies that share the boundaries of the Pacific
Ocean. APEC Member economies work together to reduce barriers to trade, ease the exchange of
goods, services, resources and technical know-how, and strengthen economic and technical cooperation
between and among members.

THE FOUR OBJECTIVES OF APEC

· Sustain the growth and development of the region for the common good of its people thus
contributing to the growth of the world economy.

· Enhance the gains of both the regional and world economies by encouraging the flow of gods,
services, capital and technology.

· Develop and strengthen the open multilateral trading system in the interest of the Asia-Pacific
Member economies and all other economies.

· Reduce barriers to trade in goods and services, and minimize hindrance to investment among its
participants in a manner consistent with GATT/WTO principles, where applicable, and without detriment
to other economies.

THE THREE PILLARS OF APEC

v Trade and Investment Liberalization

APEC members take actions to reduce tariff and non-tariff barriers to trade and investment that boosts
job creation, incomes and growth. Collaboration is guided by APEC's Regional Economic Integration
agenda and includes the advancement of bilateral and regional trade agreements and the long-term
goal of a Free Trade Area of the Asia-Pacific (FTAAP).

v Business Facilitation

APEC members pursue measures to reduce the time, cost and uncertainty of doing business in the
region and open new economic opportunities including for small firms, women and youth. APEC's
Structural Reform agenda supports the development and harmonization of policies that improve market
access and efficiency, and uphold public interest such as the safeguarding of health and safety.

v Economic and Technical Cooperation

ECOTECH builds the technical capacity of APEC's diverse members to promote trade, investment and
robust, secure and sustainable economic growth that widely benefits the region's people. Priorities
include strengthening anti-corruption, cross-border education and skills training, emergency
preparedness, energy security, environmental protection, defense against pandemics and infrastructure
development, among others.
APEC WORKING LEVEL

APEC's working level activities and projects are guided by APEC Senior Officials from the 21 APEC
member economies. These activities and projects are carried out by four high level committees:

1. Committee on Trade and Investment;

2. Senior Official’s Meeting Committee on Economic and Technical Cooperation;

3. Economic Committee; and

4. Budget and Management Committee.

Sub-Committees, Experts' Groups, Working Groups and Task Forces all support the activities and
projects led by these four high level committees.

Senior Official’s Meeting (SOM)

Working under direction from APEC Ministers, Senior Officials guide the activities of the Committees,
Working Groups and Task Forces. Senior Officials develop recommendations for APEC Ministers and
APEC Economic Leaders. Senior Officials' Meetings are held three to four times a year with the chair
from the host economy.
What are the Committees, Working Groups and SOM Task Groups?

v Committee on Trade and Investment

The Committee on Trade and Investment coordinates APEC's work on the liberalization and facilitation
of trade and investment. The Committee on Trade and Investment also works to reduce impediments to
business activity through its Sub-Committees and Experts' Groups.

v SOM Committee on Economic and Technical Cooperation

The SOM Committee on Economic and Technical Cooperation assists APEC Senior Officials in
coordinating and managing APEC's economic and technical cooperation agenda, as well as identifying
initiatives for cooperative action by member economies.

v Economic Committee

The Economic Committee (EC) has a mandate to promote structural reform within APEC by undertaking
policy analysis and action-oriented work. The EC progresses this mandate in close coordination with
other relevant APEC groups; for instance, the Competition Policy and Law Group (CPDG) and the Finance
Ministers' Process (FMP)

v Budget and Management Committee

The Budget and Management Committee advises the SOM on budgetary, administrative and managerial
issues. It also monitors and evaluates project management aspects of the operations of Committees and
Working Groups and makes recommendations to SOM for improved efficiency and effectiveness.
ACTION PLANS

In order to meet APEC's Bogor Goals for free and open trade and investment in Asia-Pacific, APEC
member economies follow the strategic roadmap as agreed by APEC Economic Leaders in Osaka, Japan
in 1995. This roadmap is known as the Osaka Action Agenda.

APEC member economies report progress towards achieving free and open trade and investment goals
through Individual Action Plans (IAPs) and Collective Action Plans (CAPs), submitted to APEC on an
annual basis. Individual and Collective Action Plans are available through the dedicated e-IAP website.
This site provides the ability to search individual APEC member economy IAPs, compare IAPs across
years and view CAPs.

OSAKA ACTION AGENDA

The Osaka Action Agenda provides a framework for meeting the Bogor Goals through trade and
investment liberalisation, business facilitation and sectoral activities, underpinned by policy dialogues
and economic and technical cooperation. As part of this framework, General Principles have been
defined for APEC member economies as they proceed through the APEC liberalisation and facilitation
process.

The following General Principles are provided in the Osaka Action Agenda and are applied to the entire
APEC liberalisation and facilitation process:
Comprehensiveness - addressing all impediments to achieving the long-term goal of free and open
trade.

WTO-consistency - measures undertaken in the context of the APEC Action Agenda are consistent with
the principles of the World Trade Organization (WTO).

Comparability - APEC member economies endeavour to have comparable trade and investment
liberalisation and facilitation, taking into account the general levels achieved by each APEC economy.

Non-discrimination - reductions in barriers to trade achieved through APEC are available to all APEC
Member Economies and non-APEC economies.

Transparency - the laws, regulations and administrative procedures in all APEC member economies
which affect the flow of goods, services and capital among APEC member economies are transparent.

Standstill - APEC Member Economies do not take measures which have the effect of increasing levels of
protection.

Simultaneous start, continuous process and differentiated timetables - APEC member economies began
simultaneously the process of liberalisation, facilitation and cooperation and continuously contribute to
the long-term goal of free and open trade and investment.

Flexibility - APEC member economies deal with the liberalisation and facilitation process in a flexible
manner, taking into account differing levels of economic development.

Cooperation - Economic and technical cooperation contributing to liberalisation and facilitation is

actively pursued.

INDIVIDUAL ACTION PLANS

Individual Action Plans are annual reports that record the unilateral steps taken by members to meet
the Bogor Goals. These are prepared for each of the 15 policy action areas of the Osaka Action Agenda.
APEC member economies regularly submit their Individual Action Plans (IAPs). This is a record of actions
taken to meet its stated goals for free and open trade and investment. APEC member economies set
their own timelines and goals, and undertake these actions on a voluntary and non-binding basis.

As specified in the Osaka Action Agenda, reporting is based on the following areas including:

Tariffs

Non-tariff measures

Services

Investment

Standards and conformance

Customs procedures

Intellectual property rights

Competition policy

Government procurement

Deregulation/regulatory review

WTO Obligations (including rules of origin)

Dispute mediation

Mobility of business people

Information gathering and analysis

Transparency

Regional Trade Agreements / Free Trade Agreements (RTAs/FTAs)

WHY DO MEMBERS NEED TO SUBMIT INDIVIDUAL ACTION PLAN?

· To improve the transparency of trade and investment regimes, providing valuable information to
business and thereby facilitating intra-APEC trade and investment;

· To encourage members to focus on policy issues which need to be addressed to achieve the Bogor
goals through annual reporting and a peer review process;

· To maintain and demonstrate the momentum of APEC trade and investment efforts, thereby
encouraging liberalization in non-APEC economies through WTO processes; and

· To enable members to learn from the liberalization and facilitation experiences of others.

ENVIRONMENTAL GOODS AND SERVICES

The term Environmental Goods and Services (EGS) refers to the industry sector devoted to solving,
limiting or preventing environmental problems. EGS companies may be involved in manufacturing
and/or services related to water or air pollution, waste management, recycling, renewable energy,
monitoring and analysis and assessment.

WHAT ARE THE COVERAGE OF THE APEC ENVIRONMENTAL GOODS LIST?

ü Renewable and clean energy technologies such as solar panels, gas and wind turbines;

ü Wastewater treatment technologies such as filters and ultraviolet disinfection equipment;

ü Air pollution control technologies such as soot removers and catalytic converters;

ü Solid and hazardous waste treatment technologies such as waste incinerators and crushing and
sorting machinery; and
ü Environmental monitoring and assessment equipment such as air and water quality monitors, and
manometers to measure pressure and water delivery systems.

WHAT IS THE PHILIPPINES’ ENVIRONMENTAL GOODS SCHEDULE?

On June 26, 2015, EO 185 was issued, modifying the MFN rate of certain environmental goods, in
compliance with the Philippines’ commitment. Items subjected to 5% MFN rates included condensers
for stream or other vapour power units, waste incinerators and filtering machinery and apparatus for
liquids or gases.

ASEAN China Free Trade Area

ASEAN-CHINA FREE TRADE AREA

What is the ASEAN-China Free Trade Area?

The ACFTA is a trade agreement among the 10 Member States of the ASEAN and China.
The Framework Agreement on Comprehensive Economic Cooperation between ASEAN
and China covering trade in goods, trade in services, investments and other measures to
develop new areas of economic cooperation was signed on November 4, 2002.

What are the objectives of the ACFTA?

The ACFTA seeks to strengthen and enhance economic, trade and investment
cooperation between the parties; progressively liberalize and promote trade in goods
and services as well as create a transparent, liberal and facilitative investment regime.
ACFTA also seeks to explore new areas and develop appropriate measures for closer
economic cooperation between the parties; and facilitate the more effective economic
integration of the newer AMS and bridge the development gap among the parties.

 
What is the Early Harvest Program (EHP) and its product coverage?

The EHP aimed to accelerate the implementation of Article 6 of the Framework

Agreement on trade in goods.

The EHP covers all products falling under the HS Chapters 1 to 8. Parties were allowed to
have an Exclusion List.

Implementation began on January 1, 2004 for ASEAN, except for the Philippines and
China. On December 29, 2005, the Philippines issued EO 485 to implement the EHP
Commitments.

What are the time frames for the Agreement on Trade in Goods?

What is the reciprocal tariff treatment under ACFTA?

Reciprocal tariff treatment is not automatically applied. Products that have been placed
in ST may be accorded reciprocal tariff treatment as governed by paragraph 6 of Annex
2 of the TIG, after notification has been received from the party/ies that the rates of duty
on its products in St are at 10% and below.

How is reciprocal tariff treatment applied?

What are the Rules of Origin (ROO) under the ACFTA?

ASEAN Australia New Zealand Free Trade Area

What is AANZFTA?
It is a trade agreement among the 10 ASEAN member states, Australia and New
Zealand. It was signed on February 27, 2009 and entered into force on January 1, 2010
in Cha-am, Thailand.

What is the objective of AANZFTA?

Deeper economic integration between the two regions through:

·         Progressive liberalization and facilitation of trade in goods, trade in services,

investments; and

·         Trade and investment facilitation and economic cooperation measures.

What is the product coverage of the trade in Goods (TIG) Chapter of AANZFTA?

All goods from HS Chapter 1 to 97 except for:

·         Rice

·         Sugar

·         Selected articles of iron and steel.    

What are the 2 programs of tariff reduction under the TIG Chapter of AANZFTA?

    

What are the rules of origin under the AANZFTA?

·         Products which are wholly obtained or produced in the exporting party shall be
deemed originating and eligible for preferential tariff treatment.

·         The “General Rule” of RVC 40 is applicable to all other goods except where there
is a product specific rule. The PSR becomes either the exclusive rule or an alternative to
or a combination with the general rule depending on the provisions of Annex 2 of the
Agreement.

ROO Criteria – General Rule RVC 40 or Change in Tariff Heading

CO Form Form AANZ
Reciprocity Rule None
 

What are the criteria for products to be eligible for concession under AANZFTA?

a.    Product should be in the Inclusion List

b.    Product should be wholly obtained or produced in the extraordinary party or RVC

40 or Change in Tariff Heading or Product Specific Rule (PSR) to be deemed originating

c.    Certificate of Origin Form AANZ

What Executive Orders implemented the Philippine’s tariff commitments under

AANZFTA?

·         EO 851 issued on December 23, 2009 and which took effect on January 1, 2010.

·         EO 191 issued on November 5, 2015 and which took effect on November 12,
2015.

ASEAN India Free Trade Area

ASEAN-INDIA FREE TRADE AREA

What is the ASEAN-India Free Trade Area?

The ASEAN-India Free Trade Area is a trade agreement between the 10 AMS and India.
The Framework Agreement on Comprehensive Economic Cooperation between ASEAN
and India was signed on October 8, 2003, supports the establishment of an FTA by year
2013 for BIMST and India and by year 2018 for Philippines, Cambodia, Laos, Myanmar,
Viet Nam and India, with flexibility on sensitive sectors and commodities.

The Agreement on Trade in Services under the AIFTA entered into force on January 1,
2010, was ratified on April 10, 2010 and implemented on May 17, 2011.

What is the product coverage and program of tariff reduction under the TIGA of
AIFTA?

Except for about 14% of tariff lines based on ASEAN Harmonized Tariff Nomenclature
(AHTN) 2012, all products falling under Harmonized System (HS) Chapters 1 to 97 are
covered by a program of progressive reduction/elimination of tariffs.

What are considered as Special Products of India?

These refer to India’s crude and refined palm oil, coffee, black tea and pepper. Applied
MFN tariffs on these products will be reduced in accordance with mutually agreed end
rates and end dates.

Exclusion List/General Exceptions

Certain products are excluded from the tariff reduction program for reasons of national
security, public morals, human, animal and plant life, conservation of exhaustible natural
resources and protection of articles with artistic, historic, and archaeological value.
Exclusion Lists shall be subject to an annual tariff review for improvement in market
access.

What are the Rules of Origin under AIFTA?

 

What Executive Order implemented the Philippines’ tariff commitments under

AIFTA?

EO 25 issued on February 10, 2011 and which took effect on May 17, 2011.

ASEAN-Japan Comprehensive Economic Partnership

Agreement
ASEAN-Japan Comprehensive Economic Partnership Agreement

What is the ASEAN-Japan Comprehensive Economic Partnership Agreement?

The AJCEPA between the 10 member states of the ASEAN and Japan covers chapters on
Trade in Goods, Sanitary and Phytosanitary Measures, Technical Barriers to Trade, Trade
in Services, Trade in Investment and Economic Cooperation and Trade Facilitation.

The Agreement provides for the establishment of a Free Trade Area between ASEAN
and Japan over a period of 10 years taking into account the outcomes of bilateral
negotiations between each AMS and Japan and the further progress of the ASEAN
integration process.

What are the basic principles underlying AJCEPA?

What are the objectives of the agreement?

The AJCEPA seeks to strengthen economic integration between ASEAN and Japan
through the creation of a CEP; to enhance the competitiveness of ASEAN and Japan in
the world market through strengthened partnership and linkages; to progressively
liberalize and facilitate trade in goods and services as well as create a transparent and
liberal investment regime. The agreement also seeks to explore new areas and develop
appropriate measures for further cooperation and economic integration; and facilitate
the more effective economic integration of the newer AMSs and bridge the
development gap among AMS.

What is the product coverage under the TIGs Chapter of the AJCEPA?

All products under HS Chapters 1 to 97 are covered by the agreement.

What are excluded?

·         Rice

·         Salt

·         Certain chemical products

·         Articles of iron and steel

·         Motor vehicles of Heading 87.03

What are the Rules of Origin in the AJCEPA?

What are other areas of facilitation and cooperation are included in the AJCEPA?

·         Trade-Related Procedures

Facilitation of trade-related procedures will be implemented in such areas as customs

procedures by computerization, simplification and harmonization, as far as possible, to
relevant international standards.
 

·         Business Environment

Each Party will exert all efforts to improve the business environment and enhance
cooperation in related fields with the view that satisfactory business environment
attracts investors.

·         Intellectual Property Rights

Japan will support ASEAN Member States in developing, improving, enhancing an

implementing their intellectual property right capabilities and in promoting accession to
intellectual property right-related international agreements. Information exchange will
also be encouraged.

·         Energy

Cooperation in oil stockpiling, natural gas utilization and promotion of energy efficiency.

·         Information and Communications Technology

Cooperation in developing Information and Communications Technology infrastructure,

Information Technology (IT)-related legal systems, and IT-related human resource and

promoting exchanges of IT researchers and engineers.

·         Human Resource Development

Cooperation among the relevant organizations in each AMS and Japan especially in
human resource development for experienced engineers and middle management.

·         Small and Medium Enterprises

Cooperation in exchanging views on policies relating to small and medium enterprises
and expanding business opportunities of small and medium enterprises.

·         Tourism and Hospitality

Cooperation in conducting seminars or information exchange on tourism and

hospitality.

·         Transportation and Logistics

Cooperation geared towards efficient cargo transport system, safe, efficient and
sustainable shipping and air transport.

·         Standards and Conformance and mutual recognition arrangement

Exchange of information concerning the standards and conformance policies and

capacity building of standardization organizations in each ASEAN Member State.

·         Other possible technical cooperation projects including environment,

automobile, biotechnology, science and technology, sustainable forest
management, competition policy, foods security and financial services
cooperation.

What EO implements the Philippine tariff commitments under AJCEPA?

EO 852 which was issued on December 23, 2009 and which took effect on July 1, 2010

ASEAN-Korea Free Trade Area

ASEAN-KOREA FREE TRADE AREA
 

What is the ASEAN-Korea Free Trade Area?

The ASEAN-Korea Free Trade Area (AKFTA) is a trade agreement between the ten (10)
Member States of the Association of Southeast Asian Nations (ASEAN) and Korea.

The Framework Agreement on Comprehensive Economic Cooperation Between the

ASEAN and Korea was signed on December 13, 2005 in Kuala Lumpur, Malaysia. The
Agreement on Trade in Goods reflecting the Parties' commitment on goods was signed
on August 24, 2006 in Kuala Lumpur, Malaysia.

The AKFTA covers economic cooperation projects on selected areas, e.g., effective trade
and investment facilitation measures, and procedures and mechanisms for these
measures’ effective implementation. It also provides for special and differential
treatment to newer ASEAN Members to compensate for different levels of economic
development and to enable them to fully participate and take advantage of the AKFTA
benefits.

What are the objectives of the AKFTA?

The AKFTA seeks to strengthen and enhance economic, trade and investment
cooperation among ASEAN Member States and Korea by progressively liberalizing and
promoting trade in goods and services as well as create a transparent, liberal and
facilitative investment regime. The Agreement also aims to explore new areas and
develop appropriate measures for closer economic cooperation and integration;
facilitate more effective economic integration of the new ASEAN Member States and
bridge the development gaps; and, establish a cooperative framework to further
strengthen economic relations among the countries.

 
What is the product coverage of the AKFTA?

All products, except arms and ammunitions, clinical and municipal wastes and
specialized medicine for cancer, AIDS and other dreaded diseases, are covered under
the program of progressive reduction/elimination of tariffs.

What is the reciprocal tariff treatment under the AKFTA?

Reciprocal tariff treatment means determination of the preferential rate to be applied to

an article placed in the ST of an exporting Party (except those excluded from the
concession – Group E) for which the same article is placed by the importing Party in its
NT. It applies if the tariff rate (MFN) of the exporting Party is 10% or below and the
importing Party from whom reciprocity is sought has been duly notified.

The following conditions shall determine the reciprocal tariff rate to be applied under
the AKFTA:

a.    the reciprocal tariff rate shall either be the tariff rate of exporting Party, or the NT
tariff rate of the importing Party from whom reciprocity is sought, whichever is higher;

b.    notwithstanding sub-paragraph (b), the importing Party can, on its own discretion,
apply its NT tariff rate even if such rate is lower than the tariff rate of the exporting
Party; and

c.    shall in no case exceed the applied MFN rate of the same tariff line of the importing
Party.

What are the Rules of Origin under the AKFTA?

What are the EOs issued to implement the Philippines’ tariff commitment under
the AKFTA?
Philippines-Japan Economic Partnership Agreement
PHILIPPINES-JAPAN ECONOMIC PARTNERSHIP AGREEMENT

What is the Philippines-Japan Economic Partnership Agreement?

The PJEPA is the first bilateral economic agreement entered into by the Philippines. It
was signed on September 9, 2006 in Helsinki, Finland, was ratified on October 8, 2008
pursuant to Senate Resolution No. 131; and was implemented on December 11, 2008.

The PJEPA is described as a “new age of FTA” as it goes beyond tariff reduction and
elimination on traded goods. Other provisions include: (i) movement of natural persons
and services, (ii) investment and cooperation on areas such as technology transfer, (iii)
human and resource development, (iv) small and medium enterprises development, (v)
environment, and (vi) competition policy.

What are the objectives of the PJEPA?

The PJEPA seeks to liberalize and facilitate trade in goods and services between the
Parties; facilitate the mutual recognition of the results of conformity assessment
procedures for products or processes; increase investment opportunities and strengthen
protection for investments and investment activities in the parties; to enhance
protection of intellectual property and strengthen cooperation in the field thereof to
promote trade and investment between the Parties; to promote transparency in
government procurement in the parties; and to promote competition by addressing
anti-competitive activities and cooperate in the field of competition. The Agreement
also seeks to establish a framework for further bilateral cooperation and improvement
of business environment; promote transparency in the implementation of laws and
regulations respecting matters covered by the Agreement; and create effective
procedures for the implementation and operation of the Agreement and for the
resolution of dispute.

What is the product coverage of PJEPA and its implementation period?

Except for rice and salt, all products falling under Harmonized System (HS) Chapters 1 to
97, based on HS 2002 nomenclature, are covered. The implementation period of PJEPA
tariff commitments is ten (10) years from the date of entry into force of the Agreement.

What are the Rules of Origin under the PJEPA?

a.    Criteria in determining if a product is originating:

ü  Good is wholly obtained or produced entirely in the party;

ü  Goods is produced entirely in the party exclusively from originating materials of the
party; or

ü  Goods satisfies the product specific rules set out in Annex 2 of the Agreement
requiring that the materials used undergo a change in tariff classification or a specific
manufacturing or processing operation, and all other applicable requirements of
Chapter 3, when the goods is produced entirely in the Party using non-originating
materials.

b.    The Qualifying Value Content must not be less than the percentage specified by the
Product Specific Rule (PSR) for the good.

What are the EOs implementing the Philippines’ tariff commitments under PJEPA?