CUSTOMS MEMORANDUM ORDER No.

22-2007

Subject: Guidelines for Calculating Insurance and Freight Charges in Dutiable Value

Section 1: OBJECTIVES:

1.1. Combine relevant Customs laws and regulations on Insurance and Freight charges.

1.2. Ensure accurate duties and taxes under the WTO Valuation System (CAO No. 4-2004).

1.3. Provide guidance on declaring and verifying Insurance and Freight charges.

Section 2: ADMINISTRATIVE PROVISIONS

2.1 Definitions:

 Airway Bill (AWB) - non-negotiable document by air carrier or freight forwarder for air transport.
 Bill of Lading (B/L) - negotiable document between shipper and carrier, confirming goods receipt and
ownership.
 CFR (Cost and Freight) - seller pays costs and freight to the named port of destination.
 CIF (Cost, Insurance and Freight) - seller pays costs, freight, and marine insurance to named
destination.
 CIP (Carriage and Insurance Paid To) - seller delivers goods to carrier, pays carriage cost, and
insurance premiums.
 FOB (Free On Board) - seller's obligation ends when goods pass ship's tail at the port of shipment.
 House Air Way Bill (HAWB) - document by freight forwarder to individual consignee importer.
 IATA (International Air Transport Association) - an air carrier rate bureau established to standardize
international airfares.
 IEIRD (Import Entry and Internal Revenue Declaration) - a set of official documents for customs
clearance.
 Insurance Premium - payment to insurer for cargo indemnity during transport.
 Local Insurance Premium - amount paid in local currency to a Philippine insurer for CFR, FOB, FAS,
and non-CIF shipments. A certification of the paid premium must be attached to the entry.
 Master Airway Bill (MAWB) - air carrier's document to a consolidator/freight forwarder for a
shipment, whether consolidated or not.
 SAD (Single Administrative Document) - uniform documents used for processing shipments through
Customs.

2.2. Accountability:

2.2.1 Importers, declarants, and brokers must accurately report the actual freight and insurance costs
for imports.

2.2.2 Port Formal Entry Division Chiefs and Principal Appraisers or equivalent staff must verify the
accuracy and truthfulness of freight and insurance declarations.

2.2.3 Customs Officers and staff must fulfil their duties as outlined in this order. Neglecting their
responsibilities may result in disciplinary action following Civil Service Rules and Regulations.

2.2.4 District Collectors are responsible for ensuring the proper implementation of this order within
their respective districts.

2.2.5 Any signatories to certificates or reports required by this order will be held accountable for any
misrepresentations and may face legal action under TCCP Sections 3602 and 3604, as amended.

Section 3. Operational Provisions

As per the Tariff and Customs Code of the Philippines, insurance and freight charges are part of the dutiable
value. To determine the correct insurance premium and freight charges, follow these guidelines:

3.1. Insurance
 3.1.1. If the sale terms are CIF/CIP, use the actual insurance premium amount for assessment. If it's
lower than 2% of the FOB value for general cargo or 4% of the FOB value for dangerous/inflammable
chemicals and high-risk goods, it will be verified by the BOC.

3.1.2. If the shipment has local or domestic insurance, the actual paid premium can be accepted. If it's
less than 2% of the FOB value for general cargo or 4% for dangerous goods, chemicals, or high-risk
items, provide a Certification from the insurance company with the Original Official Receipt. A
Customs Appraiser/Examiner should certify a true copy to attach to the original Working Entry.

3.1.3. For shipments without local insurance, the declared insurance amount in the Entry can be
accepted. If it's lower than 2% of the FOB value for general cargo or 4% for dangerous goods,
chemicals, or high-risk items, it will be verified by the BOC.

3.1.4. For direct government imports, present the original Marine Open Policy issued by the
Government Service Insurance System (GSIS) along with a certified true copy. The actual insurance
premium rate will be applied. If insured by a different Surety company, follow 3.1.2. If not covered by
local insurance, follow 3.1.3.

3.1.5. Declare the insurance amount in IEIRD box no. 90 and the appropriate box for electronic
lodgement in the SAD.

3.2. Freight Charges

3.2.1. Use the freight charge amount from the Air Waybill or Bill of Lading.

3.2.2. If there's no freight charge on these documents or the invoice, then use the declared freight
charge in the Import Entry Internal Revenue Declaration (IEIRD) or Single Administrative Document
(SAD). If it's less than 70% of the IATA rate for airfreight or the Conference rate for sea freight, it will
be verified by the BOC.

3.2.3. If the declared freight charge is less than 70% of the IATA or Conference rate, provide a
Certification from the Carrier/Forwarder and/or Official Receipt for actual freight charges paid.

3.2.4. For bulk shipments, include a certified copy of the Charter Party document or Freight Contract
and Stowage Plan with the working copy of the Entry. For bulk/general cargo shipments by the
National Food Authority (NFA), the freight charge should not be less than 10% of the CFR value of the
commodity.

3.2.5. For refrigerated shipments, present a certification from the shipping lines for Customs
verification. If not available, use the following reference freight charges:

Shipments from China (Guangshou, Xiamen, Shanghai, Dalian):

$1,700.00/40 ft Reefer Container (Guangshou, China)

$1,300.00/20 ft Reefer Container (Guangshou, China)

$1,500.00/20 ft Reefer Container (Xiamen, China)

$1,800.00/40 ft Reefer Container (Xiamen, China)

$1,800.00/20 Reefer Container (Shanghai, China)

$3,200.00/40 ft Reefer Container (Shanghai, China)

$3,200.00/40 A Reefer Container (Shanghai, China)

$1,350.00/20 Reefer Container (Dalian, China)

$1,680.00/40 ft Reefer Container (Dalian, China)

Shipments from Hong Kong:

$1,600.00/40 ft reefer container van

Shipments from Singapore:

$900.00/20 ft reefer container

$1,850.00/40 ft reefer container

Plus: BAF ($70/20 & $140/40")

Shipments from Los Angeles, USA:

$3,050.00/20 ft Reefer Container

$6,100.00/40 ft Reefer Container

If it's a 20 ft. container reefer van, the freight should be 50% of the 40 ft. charge. Otherwise, it will be verified
by the BOC if lower.