Tariff and Customs Code violations: misdeclared, misclassified and undervalued goods
January 27, 2023
By: Catherina M. Fernandez
In Fernandez, et al v People of the Philippines,(1) the Supreme Court held that that the president, vice-president, treasurer, and corporate secretary of Kingson Trading International Corporation (Kingson), who violated section 3602 in relation to section 2503 of the Tariff and Customs Code of the Philippines (TCCP), could not hide behind the cloak of the corporation to escape criminal liability. Citing jurisprudence, the Supreme Court said that to be held criminally liable for the acts of a corporation, it must be evident that the officers, directors, and shareholders actively participated in or had the power to prevent the wrongful act. The Court ruled that, as responsible corporate officers of Kingston, the petitioners were criminally liable by assenting to the commission of the violations by Kingson or by being grossly negligent in directing Kingson's affairs.
Kingson imported steel products from China and paid around 5 million Philippine pesos (approximately Â£74,500) in total duties and taxes. The Bureau of Customs found that Kingson had underdeclared the value of the imported goods by almost 50%. The Commissioner of Customs seized and forfeited the imported goods.
Kingson filed a petition for review with the Court of Tax Appeals (CTA), assailing the forfeiture while the government filed a criminal complaint against the corporate officers of Kingson for violation of section 3602 in relation to section 2503 of the TCCP.
The CTA first division, the CTA en banc and the Supreme Court all found that the entry of the imported goods had been made by means of false or fraudulent shipping documents and that there had been intent to evade the payment of taxes and duties in violation of section 3602 in relation to section 2503 of the TCCP. A review of the certified true copies of the export documents from China in relation to the import entry and internal revenue declaration (IEIRD) and other supporting documents filed by Kingson showed glaring discrepancies as to the consignee's name, the description of the imported shipment and the value of the shipment, specifically:
- the consignee in the export documents was not Kingson, but Solid Sea Products HK;
- the description of the shipment in Kingson's documents stated "2,406 bundles of steel products (SCM 440 round bar)", whereas the counterpart export documents indicated "1,436 bundles of 10mm by 6m and 970 bundles of 12mm by 6m or a total of 2,406 bundles";
- the value of shipment as declared by Kingson was $692,254.00, while the counterpart export documents indicated a value of $1,281,271.86; and
- Kingson had declared the shipment under Tariff Classification heading No.7228.60 at a 1% rate of duty, while the actual classification of the same shipment based on the chemical analysis of the same steel product showed that it fell under heading No.7214.2000 at a 7% rate of duty.
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