Importation Rules on Abandonment and Duty Assessment in Customs Law

The Supreme Court's 2008 decision in Chevron Philippines, Inc. v. Commissioner of the Bureau of Customs (G.R. No. 178759) settled important questions about importation rules, specifically when goods are considered entered for customs purposes and when they may be deemed abandoned in favor of the government. The ruling provides crucial guidance for importers on their obligations and the consequences of failing to comply with filing deadlines.

Background of the Case

Chevron Philippines imported several shipments of crude oil and petroleum products in 1996. The company filed its import entry declarations (IEDs) and paid 90% of the customs duties, but filed the import entry and internal revenue declarations (IEIRDs) much later—in some cases, more than two months after the shipments arrived.

The shipments were appraised at a 3% duty rate under RA 8180, which took effect on April 16, 1996. Prior to that law, the duty rate on imported crude oil was 10%. Three years later, the Bureau of Customs investigated and discovered that Chevron had filed its IEIRDs only after the lower 3% rate took effect, allegedly to evade the higher 10% duty. The BOC assessed deficiency duties and later declared the importations abandoned for failure to file the required entries within the 30-day period.

The Issue: What Constitutes Entry

The central question was whether entry under Sections 1301 and 1801 of the Tariff and Customs Code (TCC) refers only to the IED or also to the IEIRD.

Chevron argued that filing the IED within 30 days was sufficient. The Supreme Court disagreed. The Court explained that under Section 205 of the TCC, imported articles are deemed entered only when the specified entry form is properly filed and accepted, and all duties and taxes are paid or secured. The specified entry form refers to the IEIRD, which evidences final payment of duties and taxes.

The Court held that both the IED and IEIRD must be filed within 30 days from the date of discharge of the last package from the vessel. Allowing importers to file only the IED within the period would leave no deadline for the IEIRD, undermining the government's ability to collect customs duties promptly.

Abandonment Under the Amended TCC

Under Section 1801 of the TCC, as amended by RA 7651, an imported article is deemed abandoned when the importer fails to file an entry within the non-extendible 30-day period. The Court emphasized that the amended law no longer requires proof of intent to abandon—the mere failure to file within the prescribed period is enough.

Significantly, the Court ruled that abandonment takes effect automatically. Section 1802 provides that an abandoned article shall ipso facto be deemed the property of the Government. The amendment removed the prior requirement of a formal declaration by the Collector of Customs and notice to the importer before abandonment became effective.

Notice Requirement Not Absolute

While Section 1801 mentions "after due notice," the Court found that notice was not necessary under the circumstances of this case. Chevron was a knowledgeable, large-scale importer that had actual physical possession of the oil shipments, which were discharged at its private pier into its shore tanks. The purpose of posting an urgent notice to file entry is to inform the importer of the arrival of its shipment—but Chevron already knew its shipments had arrived.

The Court also noted that the case involved fraud. Chevron had colluded with the former District Collector to conceal the late filing and obtain the benefit of the lower duty rate. Requiring the government to post notice after the scheme was uncovered would have been illogical and oppressive.

Prescription and Fraud

Chevron raised the defense of prescription under Section 1603 of the TCC, which makes a liquidation final after one year from final payment of duties. However, the Court ruled that prescription does not apply in cases of fraud. The evidence showed Chevron deliberately delayed filing its IEIRDs to avail of the lower 3% rate, and it failed to disclose discrepancies between the 10% rate declared in the IEDs and the 3% rate in the IEIRDs.

Practical Takeaways

• Importers must file both the IED and IEIRD within 30 days from discharge of the last package from the vessel. The period is non-extendible.
• Failure to file within the 30-day period may result in the importation being deemed abandoned in favor of the government, without need for a formal declaration or abandonment proceedings.
• The "after due notice" requirement may be dispensed with when the importer has actual knowledge of the arrival of its shipments, particularly for large-scale importers with established operations.
• Fraudulent schemes to evade customs duties, such as delaying filings to take advantage of lower rates, will not benefit from the prescriptive period under Section 1603.
• Importers cannot collaterally attack the constitutionality of the abandonment provisions; such challenges must be raised in a direct proceeding.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.