The Bureau of Customs (BOC) of the Philippines has enhanced its collection efforts in recent years. In the first quarter of 2022 alone, about PHP534.2 million (USD10 million) was collected through its post-clearance audit (PCA) and prior disclosure programme (PDP). This means the BOC has met 35% and 44.5% of its entire 2021 and 2020 collections, respectively, in a mere quarter – and importers can expect its steadfast collection efforts to continue this year.
Mandated to prevent and curtail fraud and illegality in importations, the BOC, together with the National Bureau of Investigation and Philippine Coast Guard, seized fake covid-19 test kits and counterfeit face masks, among others, at a warehouse in San Miguel, Manila last January. In the same month, it seized various smuggled goods at a warehouse in Pandi, Bulacan province. With the enhanced collection efforts of the BOC, corresponding rules have been issued to protect the rights of each importer and stakeholder in being aware of the nature, basis and extent of each investigation.
Customs Administrative Order (CAO) No. 01-2019 authorises the post-clearance audit group-compliance assessment office (PCAG-CAO) to conduct audit examination, verification and investigation of records on any goods declaration for the purpose of ascertaining its correctness and determining the importer’s liability for duties, taxes and other charges, including any fine or penalty, within three years from the date of final payment of duties and taxes or customs clearance.
Similar to a letter of authority issued by the Commissioner of Internal Revenue, the PCAG-CAO’s PCA may only be performed if the Commissioner of Customs issues an audit notification letter (ANL). When served with an ANL, an importer may safeguard its rights by observing the possible issues that could arise during its implementation, including:
• Issuance of ANLs past the prescribed period to audit, which should only be within the three-year period;
• Conduct of audit by personnel not explicitly listed in the ANL; and
•Performance of audit procedures not expressly approved by the commissioner of the BOC.
Exercising police authority
Unlike the revenue generating purpose of a PCA, the BOC is dutybound to prevent and suppress smuggling and other customs fraud. CAO No. 03-2019 was enacted to implement fortification of the BOC’s police authority and the commissioner’s visitorial power, emphasised by the Customs Modernisation and Tariff Act. In fact, this CAO was supplemented by the Office of the Commissioner Memo No. 162-2021, issued in late November last year.
These two issuances taken in tandem highlight that although section 214 of the Customs Modernisation and Tariff Act explicitly authorises certain persons to conduct searches, seizures and arrests, such actions must be performed pursuant to various documentary requirements, in particular, a valid disposition form, letter of authority, mission order and deputisation order, all signed by the commissioner.
These documents are different from an ANL. A customs letter of authority is issued based on derogatory information that imported goods – which are probably smuggled, regulated, prohibited or restricted – are being openly offered for sale or kept in a particular store, stall, exhibition place, warehouse and/or enclosure.
The BOC’s exercise of police authority must also be implemented with due regard to the following due process considerations:
• Search and seizures cannot be conducted in the absence of a valid BOC letter of authority;
• Entering premises without presence of the lawful occupant, or other persons listed under section 2.9 of the Office of the Commissioner memo;
• Irregularities in the contents of the BOC letter of authority, location of place to be searched, and implementing team’s lack of proper authorisation;
• Confiscation of prohibited goods in violation of the Plain View Doctrine.
Despite the seemingly convoluted guidelines surrounding PCAs and the exercise of police authority, it all boils down to acknowledging that these rules are in place to protect the BOC, importers and all stakeholders.
On one hand, the government seeks lawful collection of revenue under the lifeblood doctrine. On the other hand, importers and/or stakeholders expect the corresponding fruits of their due contributions, while upholding their rights to substantive and procedural due process.
Therefore, balancing their particular interests through their respective compliance with the prescribed rules is fundamental to this symbiotic relationship.
REX WILBERT RIVERA is an associate at the tax department of ACCRALAW
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