Customs Law Definitions

Definition of Terms

• "As Is Where Is" refers to a sales condition with no warranty on the goods' quality, state, or condition.
• Bureau refers to the Bureau of Customs.
• Customs Officer is a person performing discretionary functions for the Bureau, as authorized by the CMTA, not a mere clerk or employee.
• Electronic Publication refers to posting public auction notices on the Bureau's official website.
• Forfeiture Fund is where proceeds from public auctions are deposited after deducting charges under Section 1143 of the CMTA.
• Garage Sale refers to selling goods not sold through public auction, with a value not exceeding Php50,000.
• Goods include articles, wares, merchandise, and any items subject to import or export, including seized or forfeited items.
• Landed Cost is the total cost of a product delivered at a port, including production, transportation, insurance, and other fees.
• Notice refers to posting in a conspicuous place in the customshouse and electronic or newspaper publication.
• Offeror refers to persons or entities tendering bids for the purchase of goods through Negotiated Sale.
• Outsourcing is a contractual arrangement between the Bureau and a private entity for designated non-sovereign functions.
• Perishable Goods are goods liable to perish or significantly depreciate in value while stored.
• Private Service Providers are entities contracted/authorized by the Bureau to provide services or facilities.
• Small Value Items are goods subject to a floor price, the value of which does not exceed Php50,000.00

General Provisions for Goods Subject to Disposition

• Goods in customs custody may be subject to disposition if are in specific conditions.
• Disposition applies to abandoned goods with final decree of abandonment.
• Disposition applies to goods deemed abandoned under Section 811 of the CMTA.
• Disposition applies to forfeited goods, other than prohibited, restricted or regulated goods.
• Disposition applies to goods subject to a valid lien for customs duties, taxes etc.
• Disposition applies to perishable goods, certified by the Customs Officer as such.

Modes of Disposition

• Public Auction is a mode of disposition.
• Public Auction must occur within thirty (30) calendar days after a ten (10)-day notice.
• The Public Auction of perishable goods is conducted within five (5) calendar days, after a three (3)-day notice.
• Donation to another government agency is a mode of disposition after the Secretary of Finance's approval.
• Goods suitable for shelter, foodstuffs, clothing, or medicine may be donated to the DSWD.
• Official Use of the Bureau is a mode of disposition, after the Secretary of Finance's approval.
• Goods remaining unsold after at least two public biddings may be declared for official use by the Bureau.
• Negotiated sale is a mode of disposition.
• Goods unsuitable for official use or donation may be sold through a negotiated sale.
• All modes of disposition require the Bureau to invite government agencies and the public to witness the process.
• Ports must submit a monthly report to the Office of the Commissioner on the status of cargoes unclaimed for over 90 days.

Public Auction Details

• Goods are sold or disposed of at the port where they are located.
• Jurisdiction over disposition remains with the District that seized and forfeited the goods despite any transfer of location.
• The floor price of goods for public auction must not be less than the Landed Cost, considering normal depreciation.
• Floor price can be computed based on domestic wholesale price.
• An alternative computation of floor price can be based on the average values of three similar articles at the time of import.
• The District Collector refers to the Imports and Assessment Service (IAS) for proper determination of floor price, to achieve uniformity in setting floor prices.
• The District Collector must approve the Notice of Public Auction.
• The Notice of Public Auction must contain specific information, including the time, date, and place.
• The Notice of Public Auction must contain the lot number, including seizure details and consignee information.
• The Notice of Public Auction must describe the Goods, including quality, condition, volume, and date of arrival.
• The Notice of Public Auction must state the date of manufacture and expiry date for Perishable Goods.
• The Notice of Public Auction must provide the date, time, and place for viewing the goods, at least one working day before the auction.
• The Notice of Public Auction must include the terms and conditions of the public auction.
• A Notice of Public Auction must be posted in a conspicuous place at the customshouse.
• These Notices must be published electronically or in a newspaper.
• Electronic copies of the notices for regulated goods must be sent to the concerned regulatory agency.

Eligibility for Public Auction Participation

• Employees or officials of the Bureau cannot participate in public auction.
• Importers or consignees of the Goods being auctioned cannot participate in public auction.
• Bidders who have failed to pay the winning bid price twice, or who are disqualified by Ports, cannot participate in public auction.
• Offerors or his or her authorized representatives not present during the opening cannot participate in public auction.

Registration for Public Bidding

• Registration to participate in public auction is required with the port concerned.
• Submission of valid government-issued identification is required for registration.
• A non-refundable registration fee of Php5,000.00 and legal research fee of Php50.00 is required.
• Clearance or registration from concerned government agencies is required, in the case of regulated goods.
• The registrants' names, addresses, TIN, and contact numbers must be recorded in a logbook.
• All goods for disposition are offered for sale on an "As is Where Is" basis.
• Quantities listed are subject to the determination of the Auction and Cargo Disposal Division (ACDD).
• Excess quantities discovered require the winning bidder to pay the difference, or the excess is returned.
• Sealed bids are opened publicly by the Auction Committee.
• The highest bid is declared the winner, except when Clustering occurs.
• Tied bids are subjected to another auction or decided by a coin toss.
• Multiple sale lots require the opening of sealed bids and payment of 50% upon announcement of the winner.
• Subsequent sale lots are not opened unless 50% is paid or a failed bidding is declared

Clustering System

• Clustering occurs when the difference between the highest and second highest bid is within ten percent (10%) of the highest bid.
• In the event of Clustering, an open-bidding is conducted with all bidders, using the highest bid as the new floor price.
• Bids must be 3% higher than the new floor price to be considered.
• The highest bid in the open bidding will be the winner; otherwise, the highest sealed bid prevails.
• The highest bidder must surrender an acknowledgement receipt at the end of each bidding.
• Upon announcement, the winning bidder must pay the bid price less any bond posted.
• Failure to pay leads to forfeiture of the deposit and potential sanctions.
• Goods are re-offered within three (3) working days of non-payment for non-perishable goods.
• Perishable Goods are re-offered the next working day.
• Re-offering is subject to compliance with publication requirements.
• Cancellation requests for public bidding must be written and addressed to the District Collector or the Office of the Commissioner.

Cancellation of Public Bidding

• Cancellation can only occur upon the order of the District Collector or Office of the Commissioner.
• Cancellation is permitted when no viewing has been conducted.
• Cancellation is permitted by request of the concerned regulating agency.
• Cancellation is permitted given other circumstances that would warrant the cancellation.
• Cancellation orders must be posted by the ACDD in conspicuous places.
• Cancellation requests from bidders are not allowed unless for valid reasons determined by the District Collector.
• A Certificate of Award is given to the winning bidder upon full payment.
• Failure to claim goods within thirty (30) calendar days results in abandonment, with forfeiture of payments made.
• The District Collector can allow claim for justifiable reasons upon recommendation of the Auction Committee.
• Once declared abandoned, the Order of Abandonment cannot be appealed.
• Third party auctioneer may be hired for heavy equipment, motor vehicles, and other goods that require appraisal by experts.
• The scope of goods sold through third party auctioneers may be limited or expanded.

Failed Bidding

• An auction is declared a failed bidding when there is no bid.
• An auction is declared a failed bidding when the highest bidder fails to comply with payments.
• A disqualified bidder cannot participate further in the public auction.
• After a failed bidding, the item or lot is re-offered after five (5) calendar days upon publication and posting.
• A second auction for Perishable Goods must be conducted 3 days after posting.

Disposition of Proceeds

• Proceeds are applied to customs duties, except in the case of forfeited goods.
• Proceeds are applied to taxes and other government charges.
• Proceeds are applied to government storage charges.
• Proceeds are applied to expenses for appraisal, advertisement, and sale of auctioned goods.
• Proceeds are applied to arrastre and private storage and demurrage charges; and
• Proceeds are applied to freight, lighterage or general average, on the voyage of importation
• The Commissioner determines the maximum charges recoverable by private entities.
• All proceeds from sales through public auction are deposited in a Forfeiture Fund.
• All proceeds from sales are subject to the claim of the owner or importer of impliedly abandoned goods.
• The Forfeiture Fund is managed by the Bureau.

Uses of Forfeiture Fund

• The Forfeiture fund can be used to outsource management, safekeeping, and the sale of goods to Private Service Providers.
• The Forfeiture fund can be used to facilitate customs seizure, abandonment and forfeiture proceedings, as well as disposition of goods
• The Forfeiture fund can be used to enhance customs intelligence and enforcement capability to prevent smuggling
• The Forfeiture fund can be used to support modernization and trade facilitation.
• The Department of Finance (DOF) and the Department of Budget and Management (DBM) shall issue a joint regulation for implementation.

Donation Provisions

• Goods may be donated which remain unsold after at least two public auctions.
• For regulated goods, donation requires concurrence of the concerned regulatory agency.
• Goods suitable for shelter or consisting of foodstuffs, clothing, or medicines may be donated to the DSWD.
• Donation requests are coursed through the Commissioner and endorsed to the District Collector/s.
• Donations are subject to the approval of the Secretary of Finance.

For Official Use of the Bureau

• Goods subject to disposition that remain unsold after at least two public auctions that are suitable for official use.
• The use must be promote intensive tax collection and/or help prevent or suppress smuggling.
• The above may be declared by the Commissioner of Customs, subject to the approval of the Secretary of Finance.

Negotiated Sale

• A Committee on Negotiated Sale shall be constituted by the Commissioner.
• The Committee on Negotiated Sale shall be composed of a Chairman from the Assistant or Deputy Commissioners.
• The Committee on Negotiated Sale shall be composed of a Vice-Chairman, from the Office of the Deputy Commissioner for Assessment and Operations Coordinating Group (AOCG).
• The Committee on Negotiated Sale shall be composed of three (3) Members, to be chosen by the Chairman.
• The Committee shall be assisted by a Secretariat.

Duties and Functions of the Committee on Negotiated Sale

• The Committee must implement the provisions of this CAO relating to the conduct of negotiated sale.
• The Committee must conduct an ocular inspection of the sale lots or items.
• The Committee may reject any or all offers or any part thereof and consider offers most advantageous to the interest of the government.
• The Committee must recommend the acceptance of the offer/s most advantageous to the government.
• The Committee must issue orders necessary to implement the CAO.

Eligibility for Participation in Negotiated Sale

• Employees or officials of the Bureau cannot participate in negotiated sale.
• Importers or consignees of the Goods being auctioned cannot participate in negotiated sale.
• Defaulting Offerors, and those disqualified by the ports for other infractions, cannot participate in negotiated sale.
• Offerors or his or her authorized representatives who are not present during the opening cannot participate in negotiated sale.
• Offerors who failed to comply with any of the documentary requirements of the Committee cannot participate in negotiated sale.

Procedures in Negotiated Sale

• The Offeror must submit a sealed offer in a designated format within the prescribed time.
• The Offeror must indicate their name and contact number on the sealed offer.
• Sealed offers are opened at the date, time, and place indicated in the Notice of Negotiated Sale.
• The presence of the Offeror or their representative is required during the opening of sealed offers.
• The most advantageous Offeror must pay a guarantee cash deposit of twenty percent (20%) of the offer within twenty-four (24) hours.
• The deposit is placed in a special trust account pending referral to the Secretary of Finance.
• The remaining eighty percent (80%) balance must be paid within forty-eight (48) hours of the Committee's notice of approval.

Failed Negotiated Sale

• In case of a failed negotiated sale, the item may be disposed of through another mode of disposition.
• Failure to comply with payment requirements results in disqualification from future negotiated sales and public auctions.
• Rejected offers result in a refund of the guarantee cash deposit.
• A Negotiated Sale is declared a failed bidding when there is no offer.
• A Negotiated Sale is declared a failed bidding when the highest Offeror fails to comply with payments.
• A Negotiated Sale is declared a failed bidding when the Department of Finance disapproves or rejects the offer.
• Upon full payment, the Secretariat issues a Notice of Award and forwards records to the District Collector.
• A Negotiated Sale is subject to approval or disapproval by the Department of Finance.
• Payments are refunded within fifteen (15) calendar days from the Notice of Disapproval.
• Goods with a value of Php50,000.00 or below may be disposed of through Garage Sale.
• Garage Sale items include those in the nature of personal effects.
• Subject to approval of the Secretary of Finance, The Commissioner may adjust the threshold value for Small Value Items

The Commissioner to Issue Customs Memorandum Order

• Restricted goods which are highly dangerous to be kept or handled, must be condemned.
• Goods that are absolutely prohibited, unless the mode of disposition is specifically provided by the CMTA, must be condemned.
• Goods that are prohibited by law to be released must be condemned.
• Goods that are have no commercial value must be condemned.
• Goods that are injurious to public health must be condemned.
• Modes of Condemnation include: Rendering, crushing, burning, breaking and shredding.
• A detailed condemnation plan must be prepared by the ACDD, and the plan must contain the mode of condemnation.
• A detailed condemnation plan must be prepared by the ACDD, and the plan must contain the nature of the items to be destroyed.
• A detailed condemnation plan must be prepared by the ACDD, and the plan must contain the Final Order of Forfeiture or Abandonment.
• A detailed condemnation plan must be prepared by the ACDD, and the plan must contain the legal basis or justification for the condemnation of the Goods.
• A detailed condemnation plan must be prepared by the ACDD, and the plan must contain any special or technical requirements.

Reporting Requirements and the Condemnation Committee

• A detailed condemnation plan must be prepared by the ACDD, and the plan must contain reports to be submitted after destruction.
• The Chairman of the Condemnation Committee is the Vice Chairman.
• The Members of the Condemnation Committee include the Chief of the ACDD or equivalent
• The Members of the Condemnation Committee include the equivalent of the Law Division
• The Members of the Condemnation Committee include a Representative from the District Collector CIIS and ESS.
• The Condemnation Committee provides formalities and procedures for condemnation.
• The Condemnation Committee evaluates the detailed condemnation plan and accreditation of contractors.
• The Condemnation Committee will choose an accredited contractor for the destruction or condemnation of goods.
• The Condemnation Committee will prepare an Order of Condemnation for the approval of the District Collector and recommend sanctions.
• The Condemnation Committee shall cause the preparation of the Order of Condemnation for the approval of the District Collector.
• When selecting a contractor, only accredited contractors may be authorized to perform condemnation.
• When selecting a contractor, suspended contractors may not be appointed for condemnation.
• When selecting a contractor, use contractors with sufficient equipment for the necessary condemnation.
• When selecting a contractor, track the record or reputation of the contractor.
• When selecting a contractor, for containerized cargoes, favor the accredited contractor.
• Interested contractors must be accredited by the District Collector, valid for three (3) years.
• Requirements for accreditation include a Letter of Intent and a Company Profile.
• Requirements for accreditation include a List of Services offered and a Diagram of Operation.
• Requirements for accreditation include the plant or facility layout.
• Requirements for accreditation include articles of incorporation.
• Suspension for one year is the sanction for the 1st and 2nd Offense.
• Suspension for five (5) years is the sanction for the 3rd Offense
• The erring contractor will be subject to perpetual disqualification.
• The District Collector shall immediately issue a suspension or disqualification order against the erring contractor.
• A corresponding gatepass and Notice of Condemnation will be issued by the Chief of ACDD or its equivalent office to the chosen accredited contractor.
• The Chief of Piers Inspection Division (PID) or its equivalent unit shall issue transfer note and assign a customs guard who'll secure the goods.
• After finality, firearms and explosives shall be turned over to Armed Forces of the Philippines.
• Turn-Over to PAGCOR: Roulette wheels, gambling outfits must be turned over to PAGCOR.
• Turn-Over to Philippine Charity Sweepstakes Office (PCSO): Lottery must be turned over to Philippine Charity Sweepstakes Office (PCSO).
• Turn-Over to Philippine Drug Enforcement Agency (PDEA): Marijuana must be turned over to Philippine Drug Enforcement Agency (PDEA).

More Provisions

• Goods with precious metals that do not meet indication standards will be turned over to Bangko Sentral ng Pilipinas.
• The Commissioner of Customs may turn over Other Prohibited and Regulated Goods.
• The turn-over shall be made with a corresponding Gate Pass.
• Violations of this CAO are penalized under Title XIV of the CMTA.
• The MISTG shall devise an ICT system for monitoring and disposition of seized, abandoned, and forfeited goods.
• The Processing of personal information collected must comply with RA No. 10173 or Data Privacy Act of 2012.
• All inconsistent rules and regulations are repealed or modified accordingly.
• If any part of this CAO is declared unconstitutional, the other parts remain in effect.
• This Order takes effect after thirty (30) days from publication.
• The Office of the National Administrative Register (ONAR) of the UP Law Center must be provided three (3) certified copies of this CAO.