Corporate Officers Criminally Liable for Customs Fraud: Fernandez v. People

The Supreme Court, in Fernandez v. People (G.R. No. 249606, July 6, 2022), affirmed the conviction of four corporate officers for violating the Tariff and Customs Code of the Philippines (TCCP) through fraudulent importation of steel products. The ruling underscores a critical principle: the corporate veil does not shield officers who knowingly participate in or negligently permit corporate crimes.

The Case: Misdeclared Steel Shipment

Kingson Trading International Corporation imported 2,406 bundles of steel products from China in May 2006. The company declared the shipment as "SCM 440 round bar" under tariff heading 7228.60 at a 1% duty rate, with a declared value of US$692,254.00.

Upon investigation, the Bureau of Customs discovered significant discrepancies. The counterpart export documents from China showed the consignee as "Solid Sea Products H.K." rather than Kingson, the shipment was actually reinforced steel bars falling under tariff heading 7214.2000 at a 7% duty rate, and the actual value was US$1,281,271.86—almost double the declared amount.

The four petitioners—Kingson's President, Vice-President, Treasurer, and Corporate Secretary—were charged with violating Section 3602, in relation to Section 2503, of the TCCP.

The Elements of Customs Fraud

The Court outlined the three elements of the offense: (1) there must be an entry of imported or exported goods; (2) the entry was made through false or fraudulent documents or practices; and (3) there was intent to avoid payment of taxes.

The prosecution established all three elements. The misdeclaration in value exceeded 30% of the actual value, which under Section 2503 of the TCCP constitutes prima facie evidence of fraud. The burden of evidence then shifted to the petitioners to explain the discrepancies, which they failed to do.

The Corporate Veil Does Not Protect Erring Officers

The Court rejected the petitioners' argument that they should not be personally liable because the corporation, not they, committed the crime. While a corporation has a separate personality from its officers, this protection does not extend to officers who actively participate in or have the power to prevent the wrongful act.

The Court found that the petitioners, by virtue of their positions, had knowledge of the importation transaction. Their failure to ensure that importation documents were accurate—despite the substantial value of the shipment—constituted assent to the unlawful acts or gross negligence in directing corporate affairs.

Significantly, the Corporate Secretary signed the Import Entry and Internal Revenue Declaration as attorney-in-fact, certifying under oath that the information contained therein was true and correct. Under Section 1301 of the TCCP, such statements constitute prima facie evidence of knowledge and consent.

Practical Takeaways

• Officers cannot feign ignorance. Corporate officers who hold positions of responsibility are expected to ensure that high-value transactions are in order. Claiming "professional apathy" will not excuse criminal liability.
• The 30% rule matters. An undervaluation or misdeclaration exceeding 30% between declared and actual value creates a legal presumption of fraud that the importer must rebut.
• Signing documents carries consequences. Officers who sign import declarations under oath can be held personally liable for false statements, regardless of whether they personally prepared the documents.
• The corporate veil has limits. While corporations are separate legal entities, this protection does not shield officers who assent to corporate crimes or are grossly negligent in preventing them.
• Document discrepancies are red flags. When import documents do not match counterpart export documents from the foreign shipper, officers must investigate and secure explanations—silence or inaction can be treated as consent.

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