Advance rulings from the Bureau of Customs and the Tariff Commission

(First of two parts)

It can be a nightmare for any importer to have imported goods held at customs for questioning on its classification, valuation or origin, more so if such goods were previously imported without any issues and supported by sufficient documentation. In such a case, a legally binding ruling would be very handy and prevent similar unexpected but avoidable delays.

A published binding ruling from the Bureau of Customs (BoC) is already possible under Republic Act No. 10863, or the Customs Modernization and Tariff Act (CMTA), which was passed into law on May 30, 2016. The establishment of the Advance Ruling System is one of the important provisions of the law.

An advance ruling is an official, written and legally binding ruling issued upon the request of an importer, exporter, or authorized agent on matters of commodity classification, the proper application of a specific method on customs valuation of specific goods or as originating under the rules of origin (ROO) of the applicable preferential trade agreement.

Under the CMTA, an application for advance ruling may be lodged with the Tariff Commission (TC) if it involves tariff classification of goods. The application may also be filed with the BoC for goods valuation or origin concerns.

Historically, only published rulings on tariff classification may be accessed through the Tariff Commission website but importers and exporters may now secure their own rulings from the BoC. This new advance ruling mechanism reduces operational uncertainty, adds predictability to international trade, lessens costs and risks of lodgment disputes, speeds up obtaining of clearances, and ensures uniformity of treatment across various BoC ports and offices.

In general, under Section 1103 of the CMTA, an application for an advance ruling shall cover only one product or item and must be filed at least 90 days prior to importation or exportation of the product or item.

Pursuant to Sections 1100, 1101, 1102 of the law, as implemented, a ruling on classification, valuation and rules of origin, respectively, shall be issued within 30 working days from the receipt of the request or additional documents. The ruling only benefits the requesting party, but may be cited by another applicant in support of his own request. The BoC, however, is not bound to recognize or apply such rulings to a similar importation.

The applicant may elevate an unfavorable ruling by way of an appeal to the Court of Tax Appeals (CTA) within 30 days from receipt of an adverse ruling or decision. However, the BoC rules allow for a motion for reconsideration to the Customs Commissioner before the appeal to the CTA. Moreover, decisions of the BoC and TC that are unfavorable to government are subject to automatic review by the Secretary of Finance.

ADVANCE RULING ON TARIFF CLASSIFICATION
An application for advance ruling on tariff classification is initiated by accomplishing TC Form No. 1 (Application for Advance Ruling on Tariff Classification), which is available and downloadable at the Tariff Commission website www.tariffcommission.gov.ph. It must be submitted for pre-clearing together with the supporting documents to the Commodity Specialist of the Tariff Commission.

Supporting documents which should be signed by the applicant or its authorized representative on every page, could take the form of actual samples, technical catalogs/brochures, duly certified complete composition, plans, photographs or other documents or information that may assist the Tariff Commission in determining the correct classification of the goods that are the subject of the application.

Once pre-cleared for filing, an order of payment is issued by the Commodity Specialist. The applicant may proceed with the payment of the filing fee of P500 per article, plus P10 legal research fund fee (per article) and proceed to the cashier. The 30-day period within which the Tariff Commission should act on the application starts upon receipt by the accomplished TC form and attachments as pre-cleared with the proof of payment.

Since the new rules took effect last year, the submission of incomplete documents was noted as the usual cause of delay in the issuance of advance tariff classification rulings. In particular, applications either lack the required authorization letters, certain important details and supporting documents. In some instances, there are delays on the part of the applicant to provide additional information and/or records when requested. Moreover, the Commodity Specialists themselves may need sufficient time to evaluate applications involving entirely new products and items not commonly imported or devices/machines involving new technology. Another challenge is the limited complement of Commodity Specialists within the Commission to handle numerous applications. Currently, only eight specialists belonging to the Commodity Studies Division (CSD) are assigned to handle all applications covering all 21 sections and 97 chapters of the ASEAN Harmonized Tariff Nomenclature (AHTN).

Since it accepted requests for advance rulings under the CMTA, the Tariff Commission has received over 650 applications, of which no less than 500 have been processed and rulings issued. About 128 requests are pending resolution. Issued rulings and the status of pending applications may be easily accessed through the Tariff Commission website. Readers should note that since the 2017 version of the AHTN has already been implemented beginning July 28, 2017, advance rulings issued under Section 1100 of the CMTA that were based on AHTN 2012 are no longer considered valid. New classification rulings must be secured under the new AHTN.

Be that as it may, it is impressive that the Tariff Commission has been able to issue over 500 rulings under the provisions of the CMTA advanced ruling system. It is also noteworthy that the status of pending applications can easily be tracked through their website. These rulings have a binding effect upon the BoC unless overturned by the Secretary of Finance.

In next week’s column, we will take the discussion further to look at advance rulings for valuation and preferential rules of origin that may be applied for with the BoC.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.

Arlyn A. Sarmiento-Sy is a Senior Tax Director of SGV & Co.