Alert order power to probe
MARK ANTHONY TAMAYO
One of the main tasks of the Commissioner of the Bureau of Customs (BOC) is to exercise, directly or indirectly, any customs power, duties and functions for the effective implementation of the Customs Modernization and Tariff Act (CMTA) and other customs related laws.
The power includes the issuance of alert orders as a tool to deter smuggling.
An Alert order is an order issued by authorized BOC officers to examine, on the basis of derogatory information, identified shipments regarding their possible non-compliance with customs rules.
It must be issued only after lodgment of the goods declaration and prior to their release from customs custody.
Due notice (through e-mail, personal service or other means such as mail, facsimile, etc.) is required to be given to the importer/exporter or its broker.
The Port District Collector having jurisdiction of the goods is also required to cause the posting of the alert order at a conspicuous place within the port and the area of the arrastre/warehouse operator.
Under the recently issued Customs Memorandum Order (CMO) No. 07-2018 dated May 31, 2018, only the commissioner, district collectors and other customs officers authorized in writing by the commissioner, can issue an alert order.
Said CMO also provides that alert orders can be issued based on derogatory information which should be restricted on specific allegations (as opposed to general allegations) of undervaluation, misclassification, misdeclaration, over-quantity and unlawful importations of goods.
General allegations that would tantamount to fishing expedition are prohibited to shield legitimate importers against unnecessary delay in the release of their shipments.
For undervaluation, the specific allegation must be by reason of submission of forged or spurious invoice or other commercial documents. Thus, if, for instance, an importer, through simple negligence or inadvertence, a) fails to disclose in full the price actually paid or payable or any dutiable adjustment to the price, b) used a valuation method incorrectly, or c) fails to observe the valuation rules, it appears that the issuance of an alert order may be validly challenged.
The resolution of these issues (which may entail longer time to resolve) could be properly threshed out through the clearance (verification) procedures and/or the post clearance audit system.
Misclassification exists when insufficient or wrong description of the goods or use of wrong tariff heading was declared resulting in a discrepancy. The allegations must provide the appropriate tariff heading/classification and duty rate of the imported goods which differ from that declared by the importer.
On the other hand, there is misdeclaration when the discrepancy pertains to quantity, quality, description, weight, or measurement of the imported goods. The alert order must at least provide the suspected actual contents of the shipment.
For allegations of over quantity, the same must indicate the source of information supporting the allegation.
For importations alleged to be contrary to law, the allegation must specifically indicate the law or rule violated.
Effects of Alert Order issuance
An alert order shall result in the suspension of the processing of the goods declaration and the release of the goods from the BOC. It shall also entail the conduct of physical or non-intrusive examination of the goods for the purpose of confirming the derogatory information against the shipment.
For shipments involving 25 containers or more, the number of containers to be examined may initially be limited to 30 percent of the total containers. If a violation is determined, a full examination of the entire shipment will be conducted by the appropriate group or division within the BOC.
The examination of alerted shipments must be conducted within a period of 48 hours from the issuance of the alert order. Otherwise, any undue delay may subject the concerned customs officer to administrative and/or criminal action.
Within five days (two days for perishable goods) from the termination of the examination, the district collector concerned shall either a) issue a warrant of seizure and detention or, b) in case of negative findings, recommend to the commissioner the continuation of the processing of goods declaration and release of goods.
If the district collector recommends the release of shipment, the commissioner shall automatically review the recommendation within 48 hours (24 hours for perishable goods).
If no decision is made within the prescribed period, the imported goods shall be deemed released.
The costs of physical examination will be borne by the BOC unless the examination results in the assessment of additional duties and taxes or the issuance of a warrant of seizure. In the latter case, the owner shall ultimately bear the costs.
Penalties
Under the CMTA, any misdeclaration, misclassification or undervaluation of imported goods resulting in a discrepancy (in duty and tax to be paid) between what is legally determined upon assessment and what is declared, will be subject to a fixed surcharge rate of 250 percent on the discrepancy.
If the misdeclaration, misclassification or undervaluation is intentional or fraudulent, (such as when a false or altered document is submitted or when false statements or information are knowingly made), a 500 percent surcharge (of the duty and tax due) will be imposed on the importer and to those who willfully participated in the fraudulent act.
Furthermore, the imported goods will be subject to seizure regardless of the amount of the discrepancy.
If the discrepancy amounts to more than 30 percent, a prima facie evidence of fraud exists.
Concluding thoughts
An alert order is all about probing beyond what was declared by importers. It is basically a non-compliance enforcement action which can be exercised by the BOC at the border.
The outcome may either result favorably or adversely to the importer. In the latter case, it could result to having to pay more (as a result of the imposition of stiff penalties) than what should have been necessary.
To avoid such a scenario, it is best practice for legitimate importers to carefully plan the duty and compliance aspects of their importations. Careful planning, if done correctly, could minimize, if not totally avoid, any unnecessary adverse consequences.
(Mark Anthony P. Tamayo is a CPA-Lawyer and a Partner of Mata-Perez, Tamayo & Francisco (MTF) Counsel. His areas of expertise include, among others, tax, customs and trade advisory, planning, controversy and litigation, contracts, corporate organization, reorganization and restructuring) This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com.
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