TRAINING COURSES

In general, the ASEAN Free Trade Agreement (AFTA) involves the removal of obstacles to free trade among the 10-member states of ASEAN. The main instrument for making ASEAN a free trade area is the Common Effective Preferential Tariff Scheme (AFTA-CEPT), which hopes to reduce intra-regional tariffs and remove non-tariff barriers. Specifically, the goal is to reduce tariffs on all manufactured goods to 0-5% by the year 2003.

Under AFTA-CEPT, there is a set of criteria to determine the country of origin of a product for purposes of availing of the special rates. The rule on country of origin is based on the concept of “substantial transformation”, which assigns origin to the country where the last substantial transformation occurred. Under AFTA, the basis of substantial transformation is based on a 40% threshold level of the value of the product. In other words, at least 40% of the value of the imported product must be considered as originating from ASEAN to avail of the preferential tariff rates under AFTA-CEPT.

This course offering will involve topics such as AFTA-CEPT, AICO and Rules of Origin. The course should also provide the participants a general understanding of the trading rules under AFTA to ensure compliance and assist the trading community in planning for the future. The courses should also assist companies gain preferential market access and avail of existing commercial opportunities through strategic manufacturing and sourcing. Specifically, an understanding of the myriad rules governing trading within ASEAN should allow companies to identify business opportunities within the ASEAN Region.

The Bureau of Customs (BoC) recently issued new rules to govern the importation of goods or products that infringe on IPRs such as trademarks, copyrights and patents. In recognition of the need to enhance procedures at the border to conform to international standards, the new rules gives strength to the efforts of the BoC in enforcing IPRs at the customs border.

Customs Administrative Order (CAO) No. 6-2002, amending CAO 7-93 basically provides the rules and regulations implementing Republic Act (RA) No. 8293, otherwise known as the Intellectual Property Code of the Philippines (IP Code), and Sections 51-60 of the Trade Related Aspects of Intellectual Property Rights Agreement (TRIPS Agreement).

This course should provide the private sector an update on the basic concept and types of IPRs, current rules and procedures to protect IPRs and to minimize, if not totally prevent, the entry across the customs border of products using unlicensed trademarks and copyrights and other intellectual property rights as well as in the area of parallel and/or gray importation.

This seminar involves the handling of insurance claims arising from cargo loss or damage during the course of the transport of the goods from the port of origin to the port of arrival/destination or depending on the terms of freight or transport.

Many trading companies pay a lot more taxes and duties (indirect taxes) to customs than to internal revenue authorities. The amount of taxes and duties paid to customs has direct impact not only on the cost of the goods upon importation but also on the selling price when offered for sale in the domestic market. Consequently, this will directly influence the bottom line or operating profit of the company.

As has been the practice for many decades, importers normally outsource the management of its customs operations to its customs brokers. Most companies therefore have inadequate knowledge of customs rules and procedures particularly in regards to valuation and classification. In addition, these companies do not have the facility for verifying whether taxes and duties were properly paid to customs.

Given the impact of indirect taxes on the business of importing companies, a basic understanding of how taxes and duties are computed should assist the company staff not only in verifying the payments made to customs but also in identifying possible duty opportunities. In addition to the various techniques and formulas for computing the customs taxes and duties, this seminar shall include topics such as customs valuation and classification, customs documentation and processing, and AFTA-CEPT.

For companies engaged in international trade, logistics normally refer to the proper management of the supply of materials. In general terms, this involves securing the exact quantity of materials for delivery at the right time and location at a minimum cost. In international sale transactions, logistics may include inbound logistics (from supplier factory or farm to the buyer in another country) and outbound logistics (warehousing and distribution of the goods to the production lines or retail shops).

Logistics managers normally look at the costs and risks involved when moving goods across international borders. In a typical manufacturing entity, it is estimated that incoming logistics costs accounts for about 20 – 30% of the total purchase cost of an article. Obviously, logistics has direct and indirect impact on the operating profit of a company and on the price of the goods offered in the market place. To promote efficiency and create savings opportunities, many companies have adopted an integrated approach to logistics and distribution management.

Administrative and Judicial Procedures refers to laws, rules and procedures applicable to customs case or issues pending with the Bureau of Customs or to customs cases pending or elevated to the regular courts, i.e., Trial Courts or Court of Tax Appeals.

The topics in this area of study will emphasize on the various customs issues and cases as:

    • Aba ndonment
    • Refunds and Abatements
    • Payment under Protest
    • Tentative Release
    • Seizures and Forfeitures
    • Valuation and Classification Review Committee
      (VCRC) Procedures
    • Appeal in case of Compliance Audit
    • Compulsory Acquisition

For importers and customs brokers, a basic understanding of customs administrative and judicial procedures should help them understand the various customs issues that normally affect the importation of goods and how it impacts on its business operations. Hopefully, this understanding should help participants in arriving at the proper resolution of these issues at minimum costs and risks.

This course should provide information on the various types of duty exemptions (partial or total) and duty deferments programs including the rules on temporary or “conditionally free” imports. In relation to customs bonded warehouse (CBW) operations, the course should provide a general overview of CBW rules and regulations including the requirements for eligibility and securing a license as well as the rules on liquidation and audit of the warehousing entries.

In the Philippines , the practice for most local companies is to secure the services of customs brokers just for clearing the goods from customs custody. Thus, most customs brokerage companies provide limited services such as customs documentation and clearance, and customs and tariff advice. Even as most customs brokers continue to provide traditional customs brokerage services, recent developments however demand that customs brokers provide more added services to address the new requirements of local companies engaged in international trade.

The present customs and trade rules in the Philippines not only provide certain compliance requirements for importers (e.g. record keeping and customs audit) but also provide legitimate opportunities for duty and tax savings on imported goods. The challenge therefore for importers is how to select a customs broker that can provide a comprehensive customs management service and at the same, time ensure customs compliance.

Part of the seminar will include how to conduct a risk assessment of customs broker operations. For customs brokers, the seminar shall also provide how to conduct a self-audit to ensure compliance with custom requirements (e.g. Post Entry Audit and Record Keeping) and corporate compliance policies.

The Bureau of Customs (BOC) implemented two years ago the new valuation system as prescribed under the WTO Agreement on Customs Valuation. This system, known as the Transaction Value Method, effectively transformed the customs valuation system from the customs-imposed assessment to the self-assessment system. Under the self-assessment set up, the obligation to declare the correct and accurate value of imported goods has become a corporate responsibility and rests solely on the importers. Any error, whether proceeding from honest mistake or negligence, or from fraudulent intent, will result in very stiff administrative fines and/or criminal penalties.

The adoption of the TV system has provided the trading community with a fair, uniform and neutral rule on customs valuation. In addition, the TV system allows the unbundling of hidden costs (e.g. finance charges and warranty costs, which may be non-dutiable) from the customs value, thereby resulting in legitimate reduction in the duties and taxes (VAT and Excise) payable to the BOC.

The topics in this field of study includes among others the following:

    • “Reasonable Care” standard
    • Methods of valuation
    • Supporting the invoice price to customs
    • Resolving valuations issues

The participants to the various courses should also be able to understand current customs enforcement policies, compliance issues and corporate compliance policies.

Duty drawback and refund is allowed under Section 106 of the Tariff and Customs Code in case taxes and duties were paid on imported raw materials, which were subsequently manufactured and exported as finished articles. The present rules allow drawback or refund of up to 100% of the taxes and duties paid.

This course should provide a background on the eligibility requirements, documentation and procedures for securing a duty drawback and on ensuring compliance with the rules and practices required by the Bureau of Customs and the Department of Finance particularly on unused or rejected raw materials and merchandise.

This field of study involves the fundamentals of the import and export process, which include basic rules and procedures, documentation, transport, delivery and payments. Participants should likewise gain a working knowledge of the roles and responsibilities of the various entities in the import and export of goods – regulatory agencies, freight forwarders, shipping lines, airlines and customs brokers.

Particular emphasis shall be made on the proper declarations to customs (types of customs entries) and customs procedures and practices for the processing of import/export entries. Additionally, a basic background on international trading and customs rules shall be provided such as prohibited and regulated importations, import and export processing and restrictions, temporary exportation and customs bonded warehouse, special permits and licenses, security and compliance, valuation and classification of products, origin and marking requirements, protests and tentative release, and record keeping and compliance audit.

In relation to specific trading terms used in contracts, there are presently two standardized practices developed by the ICC and extensively used by the international business community. The first is the International Commercial Terms, commonly known as Incoterms. Developed in 1936 by the ICC, the current version issued in year 2000 contains thirteen terms. These terms guide the buyer and the seller by defining their respective obligations and by reducing possible legal complications. Specifically, Incoterms also provides the rules for interpreting the trade terms by allocating transport costs and risks as well as determining the responsibility for insurance and customs. For the banking sector, the ICC has likewise standardized the rules on international Letters of Credits (L/Cs) through the Uniform Customs and Practice for Documentary Credits (UCP 500).

For companies engaged in domestic or international trade, a major concern is how to protect the company’s business interests in case of failure by the buyer or seller to perform the obligations in a sale and purchasing contract. In cross border transactions, a contract involving the sale and purchase of a merchandise will involve at least two parties – the buyer (importer) and the supplier (exporter). When an importer buys goods overseas or when an exporter sells his merchandise to a buyer abroad, the first task is how to document the transaction to ensure that the risks and benefits are allocated and defined among the parties. This is not an easy task given the variety of international rules and business laws applicable in international trade.

Obviously, various risks exist when companies engaged in international trade. The focus now is preventing disputes and court trials by having draft contracts designed to amplify the specific terms and conditions of a particular international transaction and consequently, prevent such disputes. This seminar should therefore help importers in the proper documentation of the terms and conditions of a sale and purchasing transaction and in limiting the risks involved in international trade transactions.

With the explosion in international trade and the proliferation of bilateral trading agreements among trading countries (in addition to WTO, AFTA, etc.), international trade and customs law has become a highly specialized and complicated field particularly for the trading community or for those engaged in the cross-border exchange of goods and services. Similarly, as these developments greatly impact on the way things are being done at the border, the demand for trade facilitation – the speedy and cost-effective delivery of goods and services – has increased manifold, prompting both government and private service providers involved in the supply chain to continuously shape up and adapt to these changes.

To keep up with the changing trade environment as well as to ensure compliance with the law, an adequate knowledge and understanding of these new systems and the rationale behind their creation is a must for all the stakeholders of customs and trade. This seminar should therefore help all those involved in the import/export and related business in understanding this environment factors affecting trade. Participants to the seminar should learn the basic concepts of the following:

    • WTO and AFTA
    • International Trading Terms
    • Basis Import and Export Procedures
    • Customs Issue Resolution
    • Customs Valuation and Classification of Imported Goods
    • Post Entry Audit and Record Keeping
  • Marking of Products and Country of Origin Determination

Section 303 (Marking of Imported Articles and Containers) of the Tariff and Customs Code provide the general basis on the rules on Marking and Country of Origin. Additionally, several other laws and regulations on specific products require additional marking rules. To illustrate, additional marking rules apply in case of the importation of food, drugs and cigarette products. Similarly, special rules of origin apply for products originating from ASEAN countries and availing of preferential tariffs under AFTA-CEPT.

This course should provide importers and customs brokers alike on the rules and regulations governing the proper marking of imported articles and containers. Special topics would be the following:

    • Marking Exemptions
    • AFTA Rules of Origin
    • Substantial Transformation Test and Test Factors
    • Generalized System of Preference (GSP) Rules of Origin

In April 2001, Republic Act No. 9135 was passed providing, among others, the Record Keeping and Post Entry Audit (PEA) Systems. The law took effect on June 2, 2001 . Thereafter, the Department of Finance (DoF) issued the rules and regulations (Customs Administrative Order No. 5-2001) to effectively implement RA 9135. CAO 5-2001 took effect on December 14, 2001 .

The Record Keeping System requires that certain information and business process documents relating to the importing activities be kept at the companies premises within a period of 3 years from the date of the filing of the import entry. Failure to keep the records required or to give access to said records would result in administrative fines and/or criminal prosecution. On the other hand, the PEA System (also known as the Customs Compliance Audit) provides for a control mechanism for the Bureau of Customs (BoC) to verify the correct payment of taxes and duties after the goods have been released from custom custody. Within a period of 3 years from date of final payment of taxes and duties, the BoC may visit the company and conduct an audit of the records kept. A finding of underpayment of taxes and duties arising from negligence or fraud will likely result in very stiff administrative fines and/or criminal prosecution.

This area of study should provide a brief background on the legislation and how it impacts on the companies operations. Additionally, a special course can be provided on the following:

    • Preparing Importers and Customs Brokers for Audit
    • High-Level Assessment of Customs Broker Operation
    • Compliance Self-Assessment and Review
    • Voluntary Audit and Prior Disclosure

The above special courses should provide an outline of the common issues encountered during a customs audit and the strategy to prepare or defend in case of an audit investigation.

The Philippine will be implementing a new tariff classification and product description system. Known as the ASEAN Harmonized Tariff Nomenclature (AHTN, the new system is a revised version of the present tariff description system for classifying goods and for assigning the rate of import duty. Specifically, it an 8-digit commodity nomenclature adopted in principle by the 10 member countries of ASEAN based on the 6-digit Harmonized System (HS). Likewise, it involves the alignment of the national tariff nomenclature of each member country with the AHTN.

This seminar should assist importers and exporters ensure proper product description and classification when declaring goods to customs. Similarly, since tariff classification directly impacts on the assessment of customs duties, a thorough understanding of the new system should assist companies in complying with the requirements under the Post Entry Audit system. Additionally, this seminar should help exporters in availing of the tariff privileges provided under AFTA-CEPT.

In the Philippines and in most other countries, many companies offer integrated logistics services. Also known as third party logistics providers, these companies offer, among others, services such as: air and sea freight, multi-modal transport, customs brokerage, and warehousing and distribution.

From an operational perspective, logistics services typically involve the following:

adoption of international trading terms (INCOTERMS and documentary credits);

    • use of transport providers, freight forwarders and shipping agents;
    • availment of warehousing and distribution centers; and
    • customs clearance, inspection, security and compliance.

For many multinational companies, integrated logistics solutions have become part of its business planning and strategy. With the advent of internet technology, the world of logistics operations now provide faster and more efficient transportation of products and more added services.

Part of the agreements under the WTO is that binding tariffs must be applied equitably to all trading partners who retain Most Favored Nation (MFN) status. In other words, tariff rates must uniformly apply to all importations regardless of origin. However, there are exceptions as follows: (a) actions against dumping; (b) special “countervailing duties” to offset subsidies; and (c) emergency measures to temporarily limit imports to “safeguard” domestic industries.

As a requirement for membership to the WTO, the Philippines has acceded to various trade agreements, among them, the WTO agreements governing the use of trade remedy measures such as dumping, safeguards and countervailing measures. The Philippines has since implemented said agreements through legislations. This seminar should help importers and the domestic industries understand the trading rules against “unfair” trade practices. For importers in particular, these trading rules should be a recognized business consideration when planning and trading internationally.