Post Clearance Audits, visitorial, and police authority of the Customs Bureau

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The Bureau of Customs (BoC) has enhanced its collection efforts in recent years. In the first quarter of 2022, the BoC collected approximately P534.29 million through its Post Clearance Audit (PCA) and Prior Disclosure Program (PDP). The BoC has met 35% and 44.5% of its 2021 and 2020 collections, respectively, in a mere quarter. Importers can expect its steadfast collection efforts to continue this year.

The BoC is mandated to prevent and curtail fraud and illegality in importations. Last January, the BoC, together with the National Bureau of Investigation (NBI) and the Philippine Coast Guard, seized fake COVID-19 test kits and counterfeit face masks, among others, in a warehouse in San Miguel, Manila. In the same month, it seized various smuggled goods in a warehouse in Pandi, Bulacan.

With the BoC’s enhanced collection efforts, corresponding rules have been issued to protect the rights of each importer and stakeholder, so that each is protected and aware of the nature, basis, and extent of each investigation.

POST CLEARANCE AUDITCustoms Administrative Order (CAO) 01-2019 authorizes the Post Clearance Audit Group-Compliance Assessment Office (PCAG-CAO), to conduct an audit examination, verification, and investigation of records pertaining to any goods declaration for the purpose of ascertaining its correctness and determining the liability of the importer for duties, taxes, and other charges, including any fine or penalty within three years from the date of final payment of duties and taxes or customs clearance.

Similar to a Letter of Authority issued by the Commissioner of Internal Revenue, the PCAG-CAO PCA may only be performed if the Commissioner of Customs issues an Audit Notification Letter (ANL). When served with an ANL, an importer may safeguard its rights by observing the possible issues that could arise during its implementation:

a. Issuance of ANLs past the prescribed period to audit, which should only be within the three-year period;

b. Conduct of audit by personnel not explicitly listed in the ANL;

c. Performance of audit procedures not expressly approved by the Commissioner of the BoC.

EXERCISE OF POLICE AUTHORITYAs mentioned earlier, unlike the revenue generating purpose of a PCA, the BoC is duty-bound to prevent and suppress smuggling and other customs fraud. Thus, CAO 03-2019 was enacted to implement the fortification of the BoC’s police authority and the Commissioner’s visitorial power emphasized by the CMTA. In fact, this CAO was supplemented by OCOM Memorandum No. 162-2021 (OCOM Memo) which was issued in late November last year.

These two issuances taken in tandem highlight that although the CMTA explicitly authorizes [Section 214, CMTA] certain persons to conduct searches, seizures, and arrests, such actions must be performed pursuant to various documentary requirements, particularly a valid Disposition Form (DF), Letter of Authority (BoC LOA), Mission Order (MO), and Deputization Order, all signed by the Commissioner.

The above documents are different from an ANL discussed in the previous section. The BoC LOA is issued based on derogatory information that imported goods, which are probably smuggled, regulated, prohibited, or restricted, are being openly offered for sale or kept in a particular store, stalls, exhibition places, warehouses, and/or enclosures. [Section 2.2, OCOM Memo. No. 162-202]

Notwithstanding the dissimilarities in basis, BoC’s exercise of police authority must also be implemented with due regard to the following due process considerations:

a. The search and seizures cannot be conducted in the absence of a valid BoC LOA;

b. Entering the premises without the presence of the lawful occupant or the other persons listed under Section 2.9 of the OCOM Memo;

c. Irregularities in the contents of the BoC LOA: i. Location of place to be searched; ii. Implementing team’s lack of proper authorization; and,

d. Confiscation of prohibited goods in violation of the Plain View Doctrine.

Despite the seemingly convoluted guidelines surrounding PCAs and the exercise of police authority, it all boils down to acknowledging that these rules are in place to protect both the BoC, importers, and all stakeholders. On one hand, the government seeks lawful collection of revenue under the lifeblood doctrine. On the other, importers and/or stakeholders expect the corresponding fruits of its due contributions while upholding their rights to substantive and procedural due process.

Thus, balancing of their particular interests through their respective compliance with the prescribed rules is fundamental to this symbiotic relationship.

The views and opinions expressed in this article are those of the author. This article is for general information and educational purposes, and is not offered as, and does not constitute, legal advice or legal opinion.

Rex Wilbert L. Rivera is an Associate of the Tax Department of the Angara Abello Concepcion Regala Cruz Law Offices.

rlrivera@accralaw.com

02-8830-8000

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