Philippines

The customs and trade environment of the Philippines has become more open in the last few years to incentivise foreign investment. Partly because of this relaxed approach, the Philippines has experienced consistent GDP growth. Customs processes are relatively simple, but some of the procedures, such as duty refunds or rulings, can take a long time to finalise.

The Philippines has also experienced a shift in its manufacturing activities, moving to more complex value-added products. Historically, exports have been mostly agricultural. Current exports include products such as semi-conductor processors, chips and hard drives, as well as transport equipment, garments, copper products and petroleum products. The main export markets are Japan, United States , China and Hong Kong.

Average customs duty rates on import are relatively low due to the negotiation of various Free Trade Agreements with several countries such as all ASEAN member countries, China, Japan, Korea, Australia, New Zealand and India, granting preferential import duty rates, often at 0%, to imports originating in such territories. Moreover, companies enrolled with the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA), Customs Bonded Warehouse, Drawback program etc., can claim additional duty concession privileges subject to certain conditions. However, there are still a significant number of items with positive, sometimes high, rates of duty.

Philippine Customs has increased audits, mainly regarding compliance levels with customs valuation and classification. This means that many importers need to start taking correct classification and valuation of imports more seriously, and knowledge regarding current agreements with other territories as well as the general compliance level that they may have. Additional scrutiny is often complimented by a Voluntary Disclosure Program which may allow an importer to avoid the high penalties normally associated with duty underpayments.
 

Our services

We focus on providing the best solutions to your company to achieve customs efficiency and strategic customs planning opportunities. We specialise in the following areas:

  • Strategic regional customs panning
  • Free Trade Agreements (FTAs), compliance and planning
  • Tariff Classification, Centre of Excellence for mass classification
  • Customs valuation
  • Customs compliance and process reviews
  • Customs investigation and audit management

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Case studies

Voluntary Disclosure Programme

WMS was approached by a US parent company that did not have sufficient local knowledge or resource to assess and carry out the actions required to deal with a major incidence of customs non-compliance that was uncovered during a routine internal audit of the Philippines subsidiary. WMS worked directly with the company’s legal team in the US but also was aware that the local subsidiary had to be pro-actively involved to ensure an acceptable result and to avoid future incidents of non-compliance.

How we helped

WMS assisted an entity in the Philippines that would like to voluntarily disclose erroneous declarations before the Bureau of Customs(BoC), and pay the applicable taxes and duties in order to possibly (depending on the lobbying strategy with the authority) avoid some penalties, surcharges, etc.

Benefit for the client

The benefit for this project was the reduction in the penalties and fines to be paid by the entity to the corresponding Customs authority.

Classification, Free Trade Agreement (FTA) application feasibility and Origin determination

WMS was engaged by a multinational manufacturer of electronic equipment to assess its supply chain covering the import of components into the Philippines, the assembly operations in the Philippines and subsequent export of finished goods. The manufacturer had concerns regarding non-compliance since it had very little control or oversight of its 3PLs handling import / export.

How we helped

WMS conducted a location feasibility study to determine if the goods being imported into the Philippines were classified correctly and if an FTA application (inbound and outbound) could be possible supported by the origin determination of the goods.

The study included:

  • Saving opportunities through the usage of Free Trade Agreements – for both procurement and finished goods sales
  • Incorrect HS Classification – finished products and parts: incorrect codes with tariff impact used in 7 major product classes leading to both overpayment of duties and compliance risk
  • Effect on FTA usage

Benefit for the client

The benefits for this project were:

  • correct use of Harmonized Tariff Codes ensuring compliance with the current legislation, and
  • the correct and full application of available FTAs,reducing considerably the duties to be paid by the entity.

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Paul Sumner

Partner

Tel: +662 844 1305

Email

Luningning Pizarra

Manager

Tel: +63 (2) 459 2005

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