(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.