Introduction to Importing What is Importation Academy of

Introduction to Importing What is Importation? Academy of Developmental Logistics

Importation Defined Introduction to Importing Ø It is the commercial activity of buying and bringing in goods from a foreign country. Ø Commodities (goods or services) bought from a foreign country. Academy of Developmental Logistics

Introduction to Importing Why import? Academy of Developmental Logistics

Reasons for Importing Introduction to Importing Ø Companies import goods and services to supply to the domestic market at a cheaper price and (or) better quality that competing goods manufactured in the domestic market Ø Companies import products that are not available in the local market Academy of Developmental Logistics

Types of Importers Introduction to Importing 1. Looking for any product around the world to import and use; or import and sell. 2. Looking foreign sourcing to get their products at the cheapest price. Academy of Developmental Logistics

Types of Importers Introduction to Importing 3. Using foreign sourcing as part of their global supply chain. 4. Importers by circumstances: - Recipient of gifts, promo items, etc. (OFW relatives) - Excess baggage, items left abroad, etc. Academy of Developmental Logistics

Introduction to Importing Global Trade Statistics (Import & Export) Academy of Developmental Logistics

Introduction to Importing List of Countries By Imports Source: World Trade Organization Academy of Developmental Logistics

Introduction to Importing List of Countries By Imports Source: World Trade Organization Academy of Developmental Logistics

Introduction to Importing List of Countries By Exports Source: World Trade Organization Academy of Developmental Logistics

Introduction to Importing List of Countries By Exports Source: World Trade Organization Academy of Developmental Logistics

Introduction to Importing List of Countries By Exports Source: World Trade Organization Academy of Developmental Logistics

Import Classification (Degree of Restriction) Introduction to Importing § FREELY-IMPORTABLE COMMODITIES Importation of these commodities may be effected without the prior approval or clearance from any government agency. Academy of Developmental Logistics

Import Classification (Degree of Restriction) Introduction to Importing § REGULATED COMMODITIES Importation of these commodities requires import clearance or permit from regulatory or appropriate government agencies. Academy of Developmental Logistics

Import Classification (Degree of Restriction) Introduction to Importing § PROHIBITED COMMODITIES Importation of these commodities is not allowed or banned under Philippine laws. Academy of Developmental Logistics

Imports Classification (Degree of Restriction) Introduction to Importing § PROHIBITED COMMODITIES Sec. 101 of the Tariff and Customs Code: 1) Absolutely Prohibited Importations 2) Conditionally Prohibited Importations Academy of Developmental Logistics

Philippine Law on Importation Introduction to Importing § When importation begin? – the carrying vessel or aircraft enters Philippine jurisdiction with intention to unlade therein. § Philippine jurisdiction is defined in Article 1 of the 1987 Philippine Constitution § Intention to unlade – as evidenced by the inward cargo manifest Academy of Developmental Logistics

The National Territory Introduction to Importing 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. Academy of Developmental Logistics

Philippine Law on Importation Introduction to Importing Duty of vessel or aircraft to make entry Except those specifically allowed by law, vessel or aircraft engaged in foreign trade shall touch at port of entry only. . . when arriving within a customs collection district…from a foreign port shall make entry at the port of entry of such district…shall be subject to the jurisdiction of the Collector…while within his jurisdiction. Academy of Developmental Logistics

Principal Port of Entry Introduction to Importing • • • • Port of San Fernando Port of Clark Port of Subic Port Manila Port of MICP Port of NAIA Port of Batangas Port of Legaspi Port of Tacloban Port of Iloilo Port of Cebu Port of Surigao Port of Cagayan de Oro Port of Zamboanga Port of Davao Academy of Developmental Logistics

Philippine Law on Importation Introduction to Importing Importation through customhouse only All importation, whether subject to duty or not shall be entered through a customhouse at port of entry. Academy of Developmental Logistics

Philippine Law on Importation Introduction to Importing § When importation end? – duties and taxes paid, or secured to be paid, legal permit for withdrawal have been granted, and the goods legally left customs jurisdiction. Academy of Developmental Logistics

Philippine Law on Importation Introduction to Importing WHEN TO FILE AN ENTRY? Entry must be filed in the Customhouse within 30 days from the date of discharge of the last package from the vessel, which shall not be extendible. Failure to file the entry constitutes implied abandonment and will result in the ‘ipso facto’ forfeiture of the goods/shipment. Academy of Developmental Logistics

Philippine Law on Importation Introduction to Importing Kinds of Abandonment of Imported Articles 1. Express Abandonment – the owner, importer or consignee signifies to the Collector his intention to abandon his importation in favor of the government, in writing and under oath. Academy of Developmental Logistics

Philippine Law on Importation Introduction to Importing Kinds of Abandonment of Imported Articles 2. Implied Abandonment – a. Failure to file an entry for his importation within the non-extendible period of thirty (30) days from the date of discharge of the last package from vessel or aircraft. b. Having filed an entry, failed to claim his importation within 15 days non-extendible from the date of posting of the notice to claim such importation Academy of Developmental Logistics

Import Taxation Introduction to Importing GENERAL RULE OF IMPORTATION ALL IMPORTATIONS are subject to payment of § DUTY and § TAX (VAT & Excise Taxes, if any) . . . upon each importation . . . even though previously exported from the Philippines. Academy of Developmental Logistics

Import Taxation Introduction to Importing EXCEPTION TO THE RULE If provided by law or international agreements: § Conditionally-free importation (Sec. 105, TCCP) § Importation of CBWs (Sec. 2001 -2002, TCCP) § Freeport importations (Subic, Clark, Bataan, etc. ) Academy of Developmental Logistics

Import Taxation Introduction to Importing EXCEPTION TO THE RULE If provided by law or international agreements: § Ecozone importations (PEZA, SEZ) § De minimis importations (Sec. 709, TCCP) § VAT Exempt under NIRC § As specifically exempted under new regulations (R. A. , international agreements) Academy of Developmental Logistics

Import Taxation Introduction to Importing IMPORTER’S LIABILITY Unless relieved by laws and regulations, the liability for duties, taxes, fees and other charges attaching on importation constitute a personal debt from the importer which shall be discharged only upon full payment of all duties, taxes, fees and other charges legally accruing. Academy of Developmental Logistics

Import Taxation Introduction to Importing Government’s Lien on Imported Goods It also constitute a lien upon the articles imported which may be enforced while such articles are in custody or subject to the control of the government. Academy of Developmental Logistics

Import Taxation Introduction to Importing Who is the IMPORTER? All articles imported into the Philippines shall be held to be the property of the person to whom the same are consigned and the holder of the bill of lading duly indorsed by the consignee therein named or, if consigned to order, by the consignor, shall be deemed the consignee thereof. Academy of Developmental Logistics

PH Customs Clearance Process Introduction to Importing Dutiable Shipments Formal Entry Informal Entry Non-Dutiable PEZA Enterprise Freeport Enterprise -Shipment value over USD 500 -DG Chemicals -Shipment weight beyond threshold Shipment value USD - Commodity listed 500 below in pre-approved Personal Effects importable - Electronic IP - Commodity listed in pre-approved importable - Electronic IP E 2 M process (electronic) Manual process, to migrate to E 2 M EACTS (electronic) EACTS (electronic Online payment Online & OTC payment Online payment / prepayment Academy of Developmental Logistics

PH Customs Clearance Process Introduction to Importing Tax and duty-free importation The Department of Finance is the sole approving agency for all Tax Exemption Certificate (TEC); endorsement from originating/recommending agency triggers the process. e. g. – importation of foreign embassies, endorsement first by the Department of Foreign Affairs Academy of Developmental Logistics

PH Customs Clearance Process Introduction to Importing The National Single Window The Department of Finance is the sole approving agency for all Tax Exemption Certificate (TEC); endorsement from originating/recommending agency triggers the process. e. g. – importation of foreign embassies, endorsement first by the Department of Foreign Affairs Academy of Developmental Logistics

Clearance Documentation Requirements Introduction to Importing • • • Importer’s Registration with BOC-ICARE Customer Profile Registration (thru VASP) Bank Reference Number / DT Account Bank Reference Number / PEZA Import Permit for Regulated Items Academy of Developmental Logistics

A Long List of ICARE Requirements Introduction to Importing For Corporation, SEC Certificate of Registration, Articles of Incorporation and By-Laws and General Information Sheet as may be applicable For Partnerships, SEC Certificate of Registration, Articles of Partnership and By-Laws For Cooperatives, Certificate of Cooperation issued by the Cooperative Development Authority Audited Financial Statements for the past year, if applicable Bureau of Investments (BOI) Certificate of Registration, if applicable Income Tax Return of the Company/Partners for the past three (3) years, if applicable • Etc……………… • Special Power of Attorney/Board Resolution • of Authorized Representative • BCOR evidencing payment of registration fee • • Printed CPRS Application profile • Mayor’s permit (CTC by Issuing Agency) • Barangay Clearance (CTC by Issuing Agency) • • BIR TIN Card and/or VAT (or Non-Vat) Certificate of Application • Valid Government Issued ID with photo (e. g. • Passport, Driver’s License, etc. ) and Community Tax Certificate of the • Application • Proof of Registration with the Department • of Trade and Industry (DTI) (Sole Proprietor) Academy of Developmental Logistics

Introduction to Importing The Philippine National Single Window (NSW) is a computerized internet-based system that allows parties involved in trade to lodge information and documents with a single entry point to fulfill all import, export, and transit-related regulatory requirements. There about 40 government agencies involved in the issuance of import and export licenses, permits and clearances for trade facilitation over Philippine borders. Academy of Developmental Logistics

Introduction to Importing POST ENTRY AUDIT Are you ready for it? Academy of Developmental Logistics

Customs Post Entry Audit Introduction to Importing Section 3515, TCCP, as amended by Republic Act 9135 - requires importers and customs brokers to allow entry of authorized customs officers to their premises or the place where the records are kept anytime during office hours and conduct audit examination or inspection of records or documents that are relevant in the determination of the transaction value of imported goods and on the propriety of the dutiable amount declared by the importer/broker on the import-entry declaration. Academy of Developmental Logistics

Customs Post Entry Audit Introduction to Importing Executive Order 160 – creation of the Post Entry Audit Group (PEAG) To give teeth to this supervisory and investigative power of the BOC This office directly reports to the commissioner of customs. Under Customs Administrative Order 42004, no audit shall start without the issuance of an Audit Notification Letter (ANL) by the Customs Commissioner. Academy of Developmental Logistics

Customs Post Entry Audit Introduction to Importing ANL is somewhat similar to the letter of authority (LOA) issued by the Bureau of Internal Revenue in the sense that it authorizes customs officials to conduct an audit—a post-entry audit—on importations to determine the correctness of the taxes and duties paid on such importations. Importers/brokers are required to maintain and keep all records of their importations and/or books of accounts for a period of three years from the date of importation. Academy of Developmental Logistics

Post Audit Penalties Introduction to Importing Negligence - a fine equivalent to not less than onehalf but not more than twice the revenue loss; Gross Negligence - a fine of not less than two-and-ahalf times but not more than four times the revenue loss; Acts constituting Fraud - fine of not less than five times but not more than eight times the revenue loss. Academy of Developmental Logistics

Post Audit Penalties Introduction to Importing Failure to keep records - a fine equivalent to 20 -percent ad valorem on the imported article/s for which no records were kept and maintained - Withhold delivery of future importation to cover the fine and other assessment - Criminal prosecution punishable with a fine of not less than Ph. P 100 K but not more than Ph. P 500 k; and/or imprisonment of 2 years to 6 years Academy of Developmental Logistics

Introduction to Importing Why use a courier or forwarding service? Academy of Developmental Logistics

Why use a courier service? Introduction to Importing Courier services, more often than not, are: • Faster • More secure • Allow tracking, are customized for specific requirements Academy of Developmental Logistics

When to use a customs broker? Introduction to Importing • Customs compliance advantages • Keeping legal customs records • Saving money on tariff duties • Saving customs broker fees Academy of Developmental Logistics

Basic Computation of Duties and Taxes Introduction to Importing TOTAL DUTIES, TAXES AND CHARGES DUE GOVERNMENT CUSTOMS DUTY Dutiable Value (Customs Value) x Foreign Exchange Rate x Rate of Duty + Cost of Goods + Freight + Insurance + Other Charges and Costs Exchange Rate (published weekly) Rate of Duty (per AHTN, Sec. 104 of TCCP) + VALUE ADDED TAX Total Landed Cost x 12 % VAT Rate + Dutiable Value + Bank Charge (. 125% of DV) + Customs Duty + Brokerage Fee + Arrastre + Wharfage + Customs Doc. Stamp* + Import Processing Fee** *Fixed at Ph. P 265. 00 ** Per CAO 2 -2001 Academy of Developmental Logistics + IMPORT PROCESSING FEE IPF Table (CAO 2 -2001) DV Amount IPF/Entry Up to Ph. P 250 K Ph. P 250. 00 >250 k but <500 k Ph. P 500. 00 >500 k but <750 k Ph. P 750. 00 >750 k Ph. P 1000. 00

Cost to Import Introduction to Importing • • • Cost of Goods Freight Insurance Premium Bank charges Duties, taxes and other government charges Port or airport charges Customs clearance expense Brokerage Fee Others Academy of Developmental Logistics