SEC 1425:Failure to pay Duties, Taxes and Other

Charges

SURCHARGES For failure to pay the duties, taxes and other

charges of an assessment WITHIN FIFTEEN
UNDER CMTA; (15) DAYS from the date of final assessment, a
SURCHARGE OF TEN (10%) PERCENT of the
IMPOSITION OF FINES & total assessed amount or balance thereon shall
FORFEITURES W/ be added & collected, which surcharge SHALL
BE INCREASED TO TWENTY FIVE (25%)
REDEMPTION and OTHER PERCENT if the delinquency lasts for MORE
PENALTIES THAN ONE (1) YEAR.

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Formula : (SEC 1425)

Sec. 1005 vs Sec. 1425 a) No surcharge if payment made within 15 days
from the date of final assessment

 1005-Failure to Pay 1425- Failure to b) If payment made after 15 days but within 1 year (from
Correct Duties and pay Duties, Taxes the date of final assessment)
Taxes on Imported and Other Charges Where:
a) B F = Balance Found
Goods - After final
= D/TAF - D/TAD
assessment
-After post b) SURCHARGE = 0.10 x B F
- Erroneous c) AMT DUE = 1.10 x B F (SC + BF)
clearance audit
declaration but
-degree of not fraudulent c) If payment made more than 1 year after the date of final
assessment
culpability applied a) SURCHARGE = 0.25 x B F
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b) AMT DUE = 1.25 x B F (SC + BF) 4
 SAMPLE PROBLEM Solution :
(FAILURE TO PAY DUTIES, TAXES AND OTHER a) Within 10 days: P 50,000.00
CHARGES)
b) Within 1 year:
Surcharge (SC) = 0.10 x BF
The Bureau of Customs has send notice to the importer
of a deficiency in the payment of duties and VAT Where:
amounting to P 50,000. Calculate the surcharge for the BF - Balance as Found
following cases: Thus:
a) Paid within 15 days from the date of final Amt Due = 1.10 x BF
assessment = 1.10 x P 50,000.00
b) Paid beyond 15 days but within 1 year from the date Amt Due = P 55,000.00
of final assessment c) After 1 year:
c) Paid more than 1 year from the date of final SC = 1.25 x BF
assessment Amt Due = 1.25 x P 50,000.00
5 Amt Due = P 62,500.00 6

SEC 1422: UNAUTHORIZED WITHDRAWAL OF

IMPORTED GOODS FROM BONDED WAREHOUSE
Fraudulent act of unauthorized
Any person who causes the unauthorized withdrawal of withdrawal:
imported goods stored from a customs bonded  Fake withdrawal permit
warehouse, shall be liable for payment of a surcharge
of FIFTY (50%) PERCENT of duties, taxes, customs  Altered withdrawal permit
fees & charges found to be due & unpaid, the amount
of surcharge shall be added to the DTOC due on the
goods withdrawn. The surcharge SHALL BE Penalty to be met (warehouse operator):
INCREASED BY TWENTY-FIVE (25) PERCENT  Liable under pertinent provisions of CMTA
ANNUALLY of the unpaid duties and taxes lasts for
more than one year.  Suspension or Revocation of the privileges
Note: if fraudulent warehouse operator shall be granted by the Bureau pursuant to CMTA.
held liable
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 FORMULAS: SAMPLE PROBLEM
(UNAUTHORIZED WITHDRAWAL OF IMPORTED (UNAUTHORIZED WITHDRAWAL OF IMPORTED GOODS
FROM BONDED WAREHOUSE)
GOODS FROM BONDED WAREHOUSE)
Miss Dee withdrawn 2 containers from
1) If paid within one (1) year from the date of withdrawal:
bonded warehouse without the production of
1.1 Surcharge = 0.50 x D/T & O/C proper documents. The total duties, taxes and
1.2 Total Payable = 1.50 x D/T & O/C other charges assessed for the containers
was amounting to P 1,800,000. Calculate the
2) If paid more than one (1) year from date of withdrawal: amount payable to government for the
(increase should be 25% per year)
following cases:
2.1 Surcharge = 0.75 x D/T & O/C 1) Paid within 1 year
2) Payment is made after more than 1 year
2.2 Total Payable = 1.75 x D/T & O/C
3) If proper documents were presented prior to
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withdrawal 10

SOLUTION TO ILLUS. NO. 2:

1) SC = 0.50 x Total D/T & O/C

= 0.50 x P 1,800,000.00
SC = P 900,000.00
SEC. 1400:MISDECLARATION,
Amt Due = SC + Total D/T & O/C
MISCLASSIFICATION,
= P 900,000.00 + P 1,800,000.00
Amt Due = P 2,700,000.00
UNDERVALUATION IN GOODS
DECLARATION
b) SC = (0.50 + 0.25)(Total D/T & O/C)
= 0.75 x P 1,800,000.00
SC = P 1,350,000.00
Amt Due = SC + Total D/T & O/C
= P 1,350,000.00 + P 1,800,000.00
Amt Due = P 3,150,000.00
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Misdeclaration-
Imposition of Surcharge
As to quantity, quality, description, weight, or
POD AMOUNT OF SC
measurement of the goods.
Misclassification-
 LESS THAN 10% NO SC
Insufficient or wrong description of the goods or
use of the wrong tariff heading resulting to a 10% - 30% 250% OR 2.5 TIMES
discrepancy in the tax and duty. OVER 30% 500% OR 5 TIMES
Undervaluation-
a. When the declared value fails to disclose in POD- PERCENTAGE OF DISCREPANCY
full the PAPP (DIFFERENCE)
b. When incorrect valuation method is used or SC- SURCHARGE
not properly observe.(resulting to discrepancy)

FORMULA/EQUATION ON SURCHARGES
PAYMENT FOR SURCHARGE (PATTERENED UNDER CAO 06-2014)
BASIS OF SC – [CUD + VAT AS FOUND]
Formula:
FORMULA FOR SURCHARGE:
CUD+VATAF - CUD+VATAD
TOTAL AMOUNT PAYABLE= a) POD = x 100%
CUD+VATAF
PRINCIPAL AMOUNT + SURCHARGE
Where:
SAY THAT: PRINCIPAL AMOUNT IS
EQUIVALENT TO DIFFERENCE IN POD - percentage difference
CUSTOMS DUTY CUD+VATAF - as found or as appraised
SIMPLY: CUD+VATAD - as declared/entered
SC - Surcharge
DIFFERENCE IN CUD + 2.5 OR 5 (CUD + VAT AF)
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 (UNDERVALUATION)
SAMPLE PROBLEM
Given: a) % Df =
CUD+VATAF - CUD+VATAD
x 100%
CUD+VATAF

CUD+VAT as Declared - P 80,000.00

CUD+VAT as Found - P 120,000.00 P 120,000.00 - P 80,000.00
= x 100%
Difference in CUD - P 33,000,00 P 120,000.00
R/D : 10%
P 40,000.00
Find: = x 100%
P 120,000.00
a) % Difference
b) Amount of surcharge = 0.33 x 100%
c) Total Amount Payable
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% Diff = 33% (5 X CUD+VAT af=SC) 18

SOLUTION: (UNDERVALUATION)
SAMPLE PROBLEM
Given:
b) SC = (CUD+VATAF) X (5)
= (P 120,000.00) X (5) CUD+VAT as Declared - P 25,000.00
SC = P 600,000.00 CUD+VAT as Found - P 30,000.00
Difference in CUD - P 3,500,00
c.) SC + P. Amount R/D : 10%
P 600,000 + P 33,000
Total Amount Payable = P 633,000.00 Find:

a) % Difference
b) Amount of surcharge
c) Total Amount Payable
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 (UNDERVALUATION) SOLUTION: (UNDERVALUATION)
CUD+VATAF - CUD+VATAD
a) % Df = x 100%
CUD+VATAF
b) SC = (CUD+VATAF) X (2.5)
= (P 30,000.00) X (2.5)
P 30,000.00 - P 25,000.00 SC = P 75,000.00
= x 100%
P 30,000.00
c.) SC + P. Amount
P 5,000.00 P 75,000 + P 3,500
= x 100% Total Amount Payable = P 78,500.00
P 30,000.00

= 0.17 x 100%

% Diff = 17% (2.5 X CUD+VAT af=SC) 21 22

SEC 1402: FAILURE OR REFUSAL OF PARTY SEC 1402: FAILURE OR REFUSAL

TO GIVE EVIDENCE OR SUBMIT DOCUMENTS
FOR ASSESSMENT
When the owner, importer or consignee of any
articles, or the agent of either FAILS OR REFUSES, FORMULA:
upon lawful demand in writing by any customs
official to appear, make oath or SUBMIT HIMSELF
TO EXAMINATION, OR TO ANSWER ANY MATERIAL
SURCHARGE = 20% x Total Dutiable Value
QUESTION OR REFUSES TO PRODUCE RECORDS, = 0.20 x Total DV
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 District Collector shall
ASSESS A SURCHARGE OF TWENTY (20) PER
CENTUM of the DUTIABLE VALUE which is the
subject of the importation.
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 SAMPLE PROBLEM: SOLUTION:
(FAILURE TO SUBMIT DOCUMENTS)

Importer A failed to exhibit the DV = CUD/ ROD

necessary documents for his shipment = P 30,000 / .3
to be properly assessed, thus the = P 100,000
bureau imposed surcharge for the
shipment which has paid a duty
amounting to P 30,000, the non SC = 20% x DV
preferential C.O. was presented with an
ATIGA rate of 10% and the MFN rate = 0.20 x P 100,000.00
was 30%. Compute for the amount of
surcharge?
SC = P 20,000.00
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SEC 1404: SEC 1404:

FAILURE TO DECLARE BAGGAGE (FAILURE TO DECLARE BAGGAGE)

Whenever any dutiable goods are not declared by any FORMULAS:

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 1) SURCHARGE = .3 x LC
OF A SURCHARGE EQUIVALENT TO 30% OF THE
LANDED GOODS OF SUCH GOODS, in addition DTOC 2) Summary : (w/o ET)
Nothing in this section shall preclude the bringing of Total D/T & SC = CUD + VAT + SC
criminal action against the offender.
3) Summary : ( w/ ET)
Total D/T & SC = CUD + VAT + ET + SC

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 SAMPLE PROBLEM:
(FAILURE TO DECLARE BAGGAGE)

Mr. Revita arrived at NAIA with his gold IMPOSITION OF FINES &
bracelet undeclared and it was assessed
to have a dutiable value of P 25,000. FORFEITURES W/
Rate of duty applicable is 7%. REDEMPTION
1) Amount of surcharge (SC)
2) Total D/T inclusive of surcharge

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Sec. 1124: SETTLEMENT OF PENDING SEIZURE

CASE BY PAYMENT OF FINE OR REDEMPTION
OF FORFEITED GOODS
Provision:
Subject to approval of the Commissioner,
the district collector may allow the
settlement of payment by fine or
redemption of forfeited goods, during the
course of the forfeiture proceedings.
Fine - 30% of the landed cost
Forfeiture - 100% of the landed cost
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Definition of Terms
□Fine - An imposition as a
penalty for an act of wrong
doing or commission of an
offense
□Forfeiture - The divestiture of
the title to property from owner
to the sovereign power without
compensation as a result of
default offense.
Upon payment of the fine or redeemed value, goods
shall be released and all liabilities shall be
discharged without prejudice to the filing of
administrative or criminal case.
Cases in which settlement by payment of fine or
redemption can not be used:
1. When there is fraud
2. Prohibited goods
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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 (Audit and
Examination of Records) of this act, is
found to have incurred deficiencies in
duties and taxes paid for the imported
goods, shall be penalized according to two
(2) degrees of culpability:
1. Negligence
2. Fraud
OFFENSES SUBJECT TO
FORFEITURE
a) SEC. 1113, CMTA: Property Subject to
Seizure and Forfeiture (a) to (k)
b) Misdeclaration, Misclassification and
Undervaluation having a percentage of
difference of higher than 30%.
c) Imported goods found upon
examination by Customs authorities
to be undeclared.
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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 to ensure that a
statement made is correct, it shall be
determined to be negligent and
punishable by an administrative fine
equivalent to 125% of the revenue
loss.
(FINE = 125% x Revenue Loss)
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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, it shall be determined to be
fraudulent and be punishable by an
administrative fine equivalent to six (6) times
revenue loss and imprisonment of not less than 2
years, but not more than 8 years.

(FINE = 6 x Revenue Loss and/or imprisonment of 2 to 8 yrs.)

NOTE : The decision of the Commissioner to impose the

penalties may be appealed to the Court of Tax
Appeals in accordance with Section 1104 of this act.