CHAPTER 7 CHAPTER 8

OTHER ADMINISTRATIVE PROCEEDINGS CIVIL REMEDIES FOR THE COLLECTION OF DUTIES AND
TAXES

SEC. 1131. Authority of the Commissioner to Make

Compromise. – Subject to the approval of the Secretary SEC. 1132. Remedies for the Collection of Duties,
of Finance, the Commissioner may compromise any Taxes, Fines, Surcharges, Interests, and Other
administrative case arising under this Act involving the Charges. – The civil remedies for the collection of import
imposition of fines and surcharges, including those duties, taxes, fees, or charges resulting from the conduct
arising from the conduct of a post clearance audit, of a post clearance audit shall be obtained by:
unless otherwise specified by law.
(a) Distraint of goods, chattels, or effects, and other
Cases involving forfeiture proceedings shall however not personal property of whatever character, including
be subject to any compromise. stocks and other securities, debts, credits, bank
accounts, and interest in and rights to personal property,
Section 1131 gives the head of the customs office,
and by levy upon real property and interest in rights to
called the Commissioner, the power to settle certain
real property; and (b) Civil or criminal action.
disputes. Basically, if someone gets fined or charged
extra for breaking customs rules, the Commissioner can
Either or both of these remedies may be pursued at the
agree to a lower amount or a different penalty. This is like
discretion of the Bureau: Provided, That the remedies of
making a deal to avoid a long legal fight. However, the
distraint and levy shall not be allowed when the amount
Secretary of Finance, a higher-up, has to agree to this
of duties and taxes involved is not more than ten
deal.
thousand pesos (10,000.00).
Here's an example: (1) A company imports goods and
accidentally fills out the paperwork wrong, leading to a The Bureau shall advance the amounts needed to defray
fine. The Commissioner could, with the Secretary's costs of collection by means of civil or criminal action,
approval, reduce the fine if they believe the mistake was including the preservation or transportation of personal
unintentional. (2) However, if the customs office seizes property distrained and the advertisement and sale
goods because they were smuggled, those goods cannot thereof, as well as of real property and improvements
be returned through a compromise; that's considered a thereon.
forfeiture, and it's specifically excluded.
Section 1132 of the law outlines how the
government collects unpaid import duties, taxes, fines,
surcharges, interests, and other charges that are found
after a post-clearance audit. Essentially, if a business
owes money to the government after an audit, the
Bureau of Customs has two main ways to get that
money back:

(a) Taking and Selling Property: This is like seizing the

business's belongings. It includes taking their goods,
furniture, stocks, money in bank accounts, and even
their real estate like land or buildings. Imagine a
company imported goods and, after an audit, owes the control of the property sought to be placed under
government money. The Bureau of Customs could take constructive distraint refuses or fails to sign the receipt
the company's delivery trucks, the products they herein referred to, the customs officer effecting the
imported, or even money from their bank accounts to constructive distraint shall proceed to prepare a list of
cover the debt. such property and, in the presence of two (2) witnesses,
leave a copy thereof in the premises where the property
(b) Going to Court: The Bureau can also file a lawsuit,
distrained is located, after which the said property shall
either a civil case to get the money owed or a criminal
be deemed to have been placed under constructive
case if they suspect the business broke the law. Both (a)
distraint.
and (b) can be used together or separately, depending
on what the Bureau thinks is best. However, if the Section 1133 of the law allows the Commissioner of
amount owed is 10,000 pesos or less, the Bureau Customs to protect the government's right to collect
cannot use the "taking and selling property" method. unpaid duties and taxes by using a process called
"constructive distraint." Essentially, this means they can
Finally, the law states that the Bureau of Customs will
take control of a delinquent importer's property without
pay for all the costs associated with collecting this
physically moving it.
money, whether it's through taking property or going to
court. This includes things like moving and storing the Here's how it works:
seized items or advertising a property for sale.
 The Commissioner's Action: If the
Commissioner believes an importer is trying to
avoid paying duties and taxes by (a) closing
SEC. 1133. Constructive Distraint of the Property. – their business, (b) leaving the country, (c)
To safeguard the interest of the government, the moving their property out of the country, (d)
Commissioner may place under constructive distraint the hiding their property, or (e) doing anything else
property of a delinquent importer who, in the opinion of to prevent the collection of what they owe, they
the Commissioner, is retiring from any business subject can put the importer's property under
to duty and tax, or is intending to leave the Philippines, constructive distraint.
or to remove the property therefrom, or to hide or
 The Receipt: To do this, customs officers will
conceal the property, or to perform any act tending to
ask the importer, or whoever has the property, to
obstruct the proceedings for collecting the duty and tax
sign a receipt. This receipt confirms they are
due, or which may be due.
now responsible for keeping the property safe
and in the same condition as when it was
The constructive distraint of personal property shall be
seized, and that they can't sell or move it without
effected by requiring the importer or any person in
permission.
possession or control of such property to sign a receipt
covering the property, to obligate to preserve the  If the Importer Refuses: If the importer refuses
distrained property on the state and condition at the time to sign the receipt, the customs officer will make
of the government's seizure of the same, and not to a list of the property and leave a copy at the
dispose of the same in any manner whatsoever, without location where the property is kept, in the
the express authority of the Commissioner. presence of two witnesses. At this point, the
property is considered to be under constructive
In case the importer or the person in possession and distraint, even without the importer's signature.
Example Scenario:  If the Importer Refuses: If the importer refuses
to sign the receipt, the customs officer will make
Imagine an importer, "ABC Imports," owes a large sum
a list of the property and leave a copy at the
of unpaid duties and taxes. Customs officers receive
location where the property is kept, in the
information that ABC Imports is planning to close its
presence of two witnesses. At this point, the
warehouse and move all its imported goods to another
property is considered to be under constructive
country to avoid paying. The Commissioner can then
distraint, even without the importer's signature.
issue an order for constructive distraint. Customs officers
go to ABC Imports' warehouse, make a list of all the Example Scenario:
goods, and ask the warehouse manager to sign a
Imagine an importer, "ABC Imports," owes a large sum
receipt. If the warehouse manager refuses, the officers
of unpaid duties and taxes. Customs officers receive
leave a copy of the list at the warehouse, with two
information that ABC Imports is planning to close its
witnesses present. This action legally places all the
warehouse and move all its imported goods to another
goods under the government's control, preventing ABC
country to avoid paying. The Commissioner can then
Imports from moving or selling them until the tax issue is
issue an order for constructive distraint. Customs officers
resolved.
go to ABC Imports' warehouse, make a list of all the
Section 1133 of the law allows the Commissioner of goods, and ask the warehouse manager to sign a
Customs to protect the government's right to collect receipt. If the warehouse manager refuses, the officers
unpaid duties and taxes by using a process called leave a copy of the list at the warehouse, with two
"constructive distraint." Essentially, this means they can witnesses present. This action legally places all the
take control of a delinquent importer's property without goods under the government's control, preventing ABC
physically moving it. Imports from moving or selling them until the tax issue is
resolved.
Here's how it works:

 The Commissioner's Action: If the

Commissioner believes an importer is trying to
SEC. 1134. Summary Remedies. – (A) Distraint of
avoid paying duties and taxes by (a) closing
Personal Property. – Upon failure of the person owing
their business, (b) leaving the country, (c)
any delinquent duty, tax and other charges to pay at the
moving their property out of the country, (d)
time required, the Commissioner shall seize and distraint
hiding their property, or (e) doing anything else
the goods, chattels or effects, and the personal property,
to prevent the collection of what they owe, they
including stocks and other securities, debts, credits,
can put the importer's property under
bank accounts, and interests in and rights to personal
constructive distraint.
property of such persons, in sufficient quantity to satisfy
 The Receipt: To do this, customs officers will the duty, tax or other charge and the expenses of the
ask the importer, or whoever has the property, to distraint and the cost of the subsequent sale.
sign a receipt. This receipt confirms they are
now responsible for keeping the property safe The officer serving the warrant of distraint shall make or
and in the same condition as when it was cause to be made an account of the goods, chattels,
seized, and that they can't sell or move it without effects, or other personal property distrained, a copy of
permission. which, signed by the said officer, shall be left either with
the owner or person from whose possession such
goods, chattels, or effects or other personal property representative shall prepare a duly authenticated
were taken, or at the dwelling or other place of business certificate showing the name of the importer and the
of such person and with someone of suitable age and amounts of the duty and tax and penalty due. The
discretion, to which list shall be added a statement of the certificate shall operate with the force of a legal
sum demanded and note of the time and place of sale. execution throughout the Philippines.

Stocks and other securities shall be distrained by serving The levy shall be effected by writing upon the certificate
a copy of the warrant of distraint upon the importer and a description of the property on which levy is made. At
upon the president, manager, treasurer, or other the same time, written notice of the levy shall be mailed
responsible officer of the corporation, company or to or served upon the register of deeds of the province or
association, which issued the said stocks or securities. city where the property is located and upon the importer,
or if the latter is not in the Philippines, upon the agent or
Debts and credits shall be distrained by leaving with the the manager of the business from which the liability
person owing the debts or having in his/her possession arose, or if there be none, to the occupant of the
or under his/her control such credits, or with his/her property in question.
agent, a copy of the warrant of distraint. The warrant of
distraint shall be sufficient authority to the person owing In case the warrant of levy on real property is not issued
the debts or having in his possession or under his before or simultaneously with the warrant of distraint on
control any credits belonging to the importer to pay to personal property, and the personal property of the
the Commissioner the amount of such debts of credits. importer is not sufficient to satisfy the duty and tax due,
the Commissioner or a duly authorized representative
Bank accounts shall be garnished by serving a warrant shall, within thirty (30) days after execution of the
of garnishment upon the importer and upon the distraint, proceed with the levy on the real property of the
president, manager, treasurer, or other responsible importer.
officer of the bank Upon the receipt of the warrant of
garnishment, the bank shall turn over to the Within ten (10) days after receipt of the warrant, a report
Commissioner so much of the bank accounts as may be on any levy shall be submitted by the levying officer to
sufficient to satisfy the claim of the government. the Commissioner: Provided, That the Commissioner
may lift such warrants of levy issued, subject to the rules
A report on the distraint shall, within ten (10) days from and regulations promulgated pursuant to this Act.
receipt of the warrant, be submitted by the This section, SEC. 1134, outlines the government's
Commissioner to the Secretary of power to collect unpaid duties, taxes, and other charges
Finance: Provided, That the Commissioner shall have through what are called "summary remedies."
the power to lift such order of distraint subject to the Essentially, if someone owes money to the government
rules and regulations promulgated pursuant to this Act. and doesn't pay up, the government can take their
property to cover the debt.
(B) Levy on Real Property. – After the expiration of the
(A) Distraint of Personal Property: This means the
period within which to pay the duty, tax and other
government can seize a person's belongings like goods,
charges as prescribed in this section, real property may
furniture, stocks, bank accounts, or even money owed to
be levied upon, before, simultaneously, or after the
them by others.
distraint of personal property belonging to the importer.
To this end, the Commissioner or the duly authorized
For example, if a business owes unpaid taxes, the CHAPTER 9
government can (1) take their office equipment,
JUDICIAL PROCEEDINGS
(2) freeze their bank accounts, or

(3) claim money their customers owe them.

SEC. 1135. Supervision and Control over Criminal
The officer taking the property must provide a detailed and Civil Proceedings. – Civil and criminal actions and
list of what was taken and inform the owner about the proceedings instituted on behalf of the Government
amount owed and the upcoming sale. under the authority of this Act or other laws enforced by
the Bureau shall be brought in the name of the
For stocks, the company that issued them is notified,
government of the Philippines and shall be prosecuted
and for debts, the person who owes the money is told to
and handled by the Bureau with the assistance of the
pay the government instead.
Department of Justice (DOJ): Provided, That the
Banks must also give the government the needed determination of the existence of probable cause and the
amount from the accounts when a garnishment order is subsequent filing of any criminal or civil case with the
received. proper court against violators of this Act shall exclusively
belong to the DOJ: Provided, however, That no civil or
A report of the distraint is then submitted to the
criminal action for the recovery of duties or the
Secretary of Finance, and the Commissioner can lift the
enforcement of any fine, penalty or forfeiture under this
order based on rules.
Act shall be filed in court without the approval of the
(B) Levy on Real Property: If personal property isn't Commissioner.
enough to cover the debt, the government can take real
Section 1135 of a law, likely related to customs or
estate like land or buildings.
revenue, explains how legal cases involving the
For example, if the business's assets are insufficient, government are handled. (1) Basically, if someone
the government can seize their warehouse or office breaks this law and the government needs to sue them
building. in a civil court (like for money owed) or file criminal

The Commissioner prepares a document showing the charges (like for smuggling), the Bureau (which enforces

debt, which acts like a court order. the law) will take the lead in these cases, acting on
behalf of the Philippine government. (2) They'll also get
To take the property, they write a description of it on the
help from the Department of Justice (DOJ). (3) However,
document and notify the local land registry and the deciding if there's enough evidence to actually file a
property owner. criminal or civil case is solely the DOJ's job. (4) And

If the levy wasn't done at the same time as taking importantly, the Bureau can't just file any lawsuit to
personal property, it must be done within 30 days after collect unpaid duties or fines without the Commissioner's

the personal property is seized, if needed. okay.

A report of the levy is submitted to the Commissioner, Here's an example: Imagine a company imports goods
and the Commissioner can lift the warrants based on and underreports the value to avoid paying the full

rules. customs duties. The Bureau finds out and wants to sue
the company to recover the lost revenue and impose a
fine. The Bureau will prepare the case and prosecute it,
with assistance from the DOJ. However, the DOJ will
determine if there is enough evidence to proceed with (2) However, she must file her appeal within the
the filing of the case. Furthermore, the Bureau cannot specific timeframe allowed by law, and she needs to
file the case without the Commissioner's approval. follow the correct procedure for filing the
documents. If she misses the deadline or files
incorrectly, she will be forced to pay the assessed
amount, even if it's wrong.
SEC. 1136. Review by the CTA. – Unless otherwise
provided in this Act or by any other law, the party
aggrieved by the ruling or decisions of the Commissioner SEC. 1137. Exclusive Jurisdiction of the Bureau. –
may appeal to the CTA, in the manner and within the Jurisdiction over imported goods and goods for
period prescribed by law and regulations. Decisions of exportation shall be exclusive to the Bureau, or the
the Secretary of Finance when required by this Act, may Secretary of Finance, when under review by the latter,
likewise be appealed to the CTA. subject to the proceedings described in this title.

Unless an appeal is made to the CTA in the manner and Except for the CIA, no court may issue any order or
within the period prescribed by law and regulations, the decision until all the remedies for administrative appeal
ruling or decision of the Commissioner or the Secretary have been exhausted.
of Finance shall be final and executory.
Section 1137 of customs law essentially gives the
Section 1136 of the law basically explains how you
Bureau of Customs (or the Secretary of Finance in
can challenge tax decisions made by the government.
certain cases) the sole power to handle matters related
(1) If you disagree with a tax ruling or decision made
to imported and exported goods. Think of it as them
by the Commissioner of Internal Revenue (the head
being the only "judge" when it comes to these goods,
of the tax collection agency), or in some cases, the
following specific procedures. This means that if you
Secretary of Finance (the head of the Department of
have a problem with your imported or exported items,
Finance), you can take your case to the Court of Tax
you must first go through the Bureau's processes.
Appeals (CTA). This is like a special court that handles
tax disputes. For example, imagine a company imports a shipment of
electronics, and the Bureau of Customs claims they are
(2) However, there are specific rules and deadlines
undervalued, leading to higher taxes. The company
for filing this appeal, and you must follow them. If
cannot immediately go to a regular court to fight this.
you don't file your appeal correctly and on time, the
They must first use the Bureau's internal appeal system
original decision becomes final and you have to accept
to try and resolve the issue. Only after they've exhausted
it.
all these administrative appeals can they consider going
Example Scenario: Let's say a small business owner, to court (except for the Court of Tax Appeals, or CIA,
"Maria," receives a tax assessment from the which has its own specific rules). This ensures that
Commissioner of Internal Revenue stating she owes a customs-related disputes are initially handled by the
large amount of back taxes. Maria believes this experts within the Bureau.
assessment is incorrect because she has proper records
showing she paid the correct amount. (1) According to
Section 1136, Maria has the right to appeal this
decision to the CTA.
 investigation if they suspect a large
shipment of goods is being smuggled
through a port.
SEC. 1138. Fraud Investigation and Prosecution. –
3. Inquest by Apprehending Officer:
No criminal case for violation of this title shall be
instituted without the approval of the Commissioner o However, there's an exception. If
pursuant to the provisions of this Act. someone is caught red-handed (during
an "inquest"), the customs officer who
The Bureau shall have the power to investigate and made the arrest can directly initiate the
institute smuggling cases committed within its legal process. This speeds up the
jurisdiction: Provided, That in case of inquest, the same process when the evidence is clear.
may be instituted by the apprehending customs officer.
o Example Scenario: if a customs officer
Here's a breakdown of Section 1138, explained at the airport inspects a bag and finds
simply: illegal drugs, that officer can start the
legal proceeding right away.
1. Commissioner's Approval Required:

o Basically, if someone is suspected of

breaking the customs laws (like SEC. 114. Right of Appeal, Forms and Ground. – Any
smuggling), you can't just file a criminal party adversely affected by a decision or omission of the
case against them right away. The head Bureau pertaining to an importation, exportation, or any
of the Bureau of Customs, called the other legal claim shall have the right to appeal within
Commissioner, has to give their okay fifteen (15) days from receipt of the questioned decision
first. This is to make sure cases are or order.
properly reviewed before going to court.
An appeal in writing shall be filed within the period
o Example Scenario: Imagine a customs
prescribed in this Act or by regulation and shall specify
officer catches someone trying to bring
the grounds thereof.
in undeclared electronics. Before a
formal criminal charge can be filed, the
The Bureau may allow a reasonable time for the
customs officer must get the
submission of supporting evidence to the appeal.
Commissioner's approval.

2. Bureau's Power to Investigate and

Prosecute:

o The Bureau of Customs itself has the

authority to look into smuggling and start
legal cases within its area of
responsibility.

o Example Scenario: The Bureau of

Customs can conduct its own
CAO 16-2019: GOVERNMENT’S RIGHT OF other countries or report based on valid industry

COMPULSORY ACQUISITION – The power of complaint or recommendation of reputable and

the government to acquire imported goods recognized organizations that such importation is

when importers declared customs value is unconscionably low

unconscionably low.

Acquisition price: Price equal to declared c. A commodity is valued unconscionably low when

customs value plus any duties already paid on BOC, after applying all valuation methods, still

the goods finds discrepancy of at least 30% in the value

CAO 16-2019 is a rule that allows the government declared as against other reference.
to take imported goods if they think the price the importer
-Here's an explanation of the general
declared is way too low. Imagine you're trying to buy
provisions, broken down into simple terms:
something, and someone offers it to you for a price that's
unbelievably cheap. The government can step in and say, 1. Commissioner's Power of Compulsory
"That price doesn't make sense, we'll take it." When they Acquisition: This means the top person at the
take the goods, they'll pay the importer the price that was Bureau of Customs (BOC), called the
originally declared, plus any taxes that were already paid Commissioner, has the exclusive right to take
on those goods. So, it's a way for the government to goods from someone if needed. They can do this
prevent importers from lying about the value of their on their own (motu proprio) or if the Deputy
goods to pay less in taxes. Commissioner (DC) suggests it. Imagine a
scenario where a large shipment of medicine is
needed urgently for a public health crisis. The
GENERAL PROVISIONS Commissioner can step in and take that
shipment, even if it's privately owned, to ensure it
1. Commissioner has the sole authority to exercise,
reaches people in need.
motu proprio, or upon the recommendation of the DC,
2. Badges of Undervaluation: This refers to signs
to exercise the power of Compulsory Acquisition that someone is trying to pay less customs tax
than they should by falsely declaring a lower
value for their goods. Here are the specific signs:
2. Badges of undervaluation
o a. Duty Benchmarking: This is when
a. Duty benchmarking – the practice of paying importers pay the same fixed amount of
tax for similar goods, no matter if they are
uniform duty on certain categories of goods
high-quality or low-quality. For example,
disregarding the quality, quantity and the actual if all importers pay $100 tax for every

value of the goods television, regardless of whether it's a

basic model or a high-end 8K TV, that's
duty benchmarking. It ignores the real

b. Information coming from customs administration of value.

 o b. External Information: If other when no NCA is issued within the period.

countries' customs offices or well-known

organizations report that the declared
3. Upon the issuance of NCA, the goods shall
value of imported goods is suspiciously
low, it's a red flag. For example, if a immediately be transferred to a secured area or
foreign customs agency reports that the
facility under BOC jurisdiction.
declared price of a car is much lower than
the typical export price, it raises
suspicion. 4. BOC shall conduct the Compulsory Acquisition

o c. Significant Value Discrepancy: If the proceedings within 3 working days after NCA
BOC uses all their standard methods to
issuance and render a decision within 5 working
determine the value of goods and still
days from hearing termination
finds that the declared value is at least
30% lower than what they think it should
be, it's considered "unconscionably low."
5. Upon determination by the Commissioner that the
For example, if an importer declares a
machine's value as $10,000, but the value of goods are unconscionably low, a WCA

BOC's calculations show it should be shall be issued. A notice of the decision shall be
$13,000 or more, that's a 30% or greater
provided to the importer.
difference, indicating undervaluation.

a. WCA – refers to the decision of the Commissioner to

PROCEDURES IN COMPULSORY ACQUISITION
acquire the goods subject for compulsory acquisition
1. Commissioner may, motu proprio, issue the Notice

of Compulsory Acquisition (NCA) upon

6. The importer shall be paid within 10 working days
determination that the goods are valued
from WCA issuance for a value equal to the
unconscionably low. In case of forged or spurious
declared customs value plus any duties already
documents the goods shall be seized.
paid.

a. NCA - is the preliminary order identifying the

7. Importer may appeal the decision of Commissioner
goods subject for Compulsory Acquisition.
to Secretary of Finance within 20 working days from

receipt of WCA
2. If NCA issuance is upon DC recommendation, the

Commissioner shall act on the matter within 48

8. When Commissioner’s decision is affirmed by the
hours and in case of perishable goods, within 24
Secretary of Finance, importer may appeal to CTA
hours. The DC recommendation is deemed denied
within 30 days from receipt of decision.
 within 48 hours, or 24 hours for perishable goods. If they

9. If the decision of Commissioner is reversed by the

don't, the recommendation is considered rejected.

Secretary of Finance said decision shall be final and (3) Once the NCA is issued, the goods are moved to a
secure BOC facility.
executory
(4) Then, the BOC holds a hearing within three working
days and makes a decision within five working days after
10.When no appeal is taken within the prescribed the hearing.

period, or upon the finality of the decision of the

(5) If the Commissioner decides the value is indeed too
court affirming the compulsory acquisition, the low, they issue a "Warrant of Compulsory Acquisition"
(WCA), which is the final decision to take the goods.
WCA shall be final and executory.
(a) The importer is notified of this decision.

11.Payment of importer shall be in cash based on the

price equal to the declared customs value plus any (6) The government pays the importer for the goods within
10 working days, based on the declared value plus any
duties already paid on the goods.
duties already paid.

(7) If the importer disagrees with the WCA, they can

12.Goods acquired by compulsory acquisition shall be appeal to the Secretary of Finance within 20 working
disposed through public auction, negotiated sale or days.

other mode of disposition . The floor price shall (8) If the Secretary agrees with the Commissioner, the
importer can further appeal to the Court of Tax Appeals
consider the cost of storage and all other expenses
(CTA) within 30 days.
related to the safekeeping of the goods pending
(9) If the Secretary disagrees and reverses the
appeal.
Commissioner's decision, that's the final decision.
Imagine the government, through the Bureau of
(10) If there's no appeal within the time limit, or if the court
Customs (BOC), needs to take goods because they think
confirms the acquisition, the WCA becomes final.
the declared value is too low or the documents are fake.
This process is called "compulsory acquisition." (11) The payment to the importer is in cash, based on the
declared value plus paid duties.
(1) First, the BOC Commissioner can issue a "Notice of
Compulsory Acquisition" (NCA), which is like a warning (12) Finally, the acquired goods are sold through public

that the goods might be taken. auction or other methods. The starting price for the sale
includes storage and other related costs.
(a) This NCA is just a preliminary order listing the goods.
For example, if someone imports a luxury car and
declares its value as $1,000, the Commissioner might
issue an NCA because that value is clearly too low.

(2) Sometimes, a District Collector (DC) recommends this

action. If so, the Commissioner must decide quickly,