Daily Harvest Manufacturing and Marketing Corporation vs. The Commissioner of Customs

DECISION

- 2 - and found to be as declared and was forwarded for appraisal.

The Appraiser, however, discredited the value declared by petitioner for the article, $2.40/roll or 710.80/MT, and adopted the recommendation of the Technical Expert contained in the Philippine Chamber of Commerce and Industry Customs Consultative Group (PCCI-CCG) Report which valued the article at $1,800.00/MT. The records show that the recommendation of the Technical Expert was based on an earlier PCCI - CCG Consolidated Report of Entries Subject to Alert dated August 9, 1988 involving another article described as "PVC Rigid Film Optic White 98 cartons Not Transparent 4MT" with Entry No. 66536-88 consigned to Plastic and Packages Inc.

(p. 23, Customs Records).

It appears that the "PVC Rigid Film Optic White" article wa$ examined upon its arrival on August 24, 1988 as can be seen from the Discrepancy Report dated September 8, 1988 and was recommended a value of $1,800.00/MT, higher than the declared value of $1,200.00/MT.

Thus, the • Report of Seizure as to the subject article explained the cause of seizure as under-valuation and referred to a "Recent PVC resin importation from Taiwan (which) has a cost of $1270/MT add to this are the cost of other che~lcals or additives and overheads, making a total of about $1800/MT for finished 594 DECISION C.T . A. CASE NO . 4523 - 3 - produr::t .

Thi s is th e PCCI TE r ecomme n dation" (p. 18, Cust oms Record s ).

On November 7, 1988 a Warrant of S0i7ure and Det entio n for the subje c t article was issued by th e Bureau o f Customs.

Eventually, the District Co ll ector of Cu sto ms , Port o f tfani la, held t h at the "true and correct value of the shipme nt in ques t: io n is the va lu e re co mmended by the PCCI Tec hni c a l Expert, e.i.

(sic), $1.80/kg.

based on a pre vious importation declared in Ent r y No. 66536 - 88 cove rin g a shipment of '98 carto n s PVC Rigid Film Opti~ White' which was followed by the Apprai s er co n cern ed xxx, ·there being no establis hed nor p11hli s hed valu e thereon" (D ec ision of th e Collector 0f Customs, p. 11 C . T.A. Records). Duri ng the proceedings here only the petitioner was able to formally o ffer its eviden ce , as the Court jn jt~ reso luti o n o f J a nu ary 13, 199 2 , in view o f th e non - a ppea rance o f respon d ent's coun se l at a hearing ,' f oe presentation of their evidence and several postp o ne ments previously, considered the • c:J.se s ubmit ted for decision.

Th e Customs Records, though, h ave been previ ously transmitted and received by the Co u rt o n October 23, 1991. The decision · of the Distri c t Collector of Cust o ms , Port of Manila, leans much on the PCCI-CCG Rep or t made by the Cust oms Technic a l Expert.

The 595

DECIS ION

C.T.A. CASE NO . 45 2 3 - 4 - b~ s i s o f th e sa id report is a prior imrort~ ti o n by Pl astic and Packages , In c . o f "PVC Film Optic Hhite , 98 ,-·a rtons not tran s p are nt 4HT ", there being no est a b lished o r published va l ue o f th e article.

It va~ a dmitted n o n et h e l ess by the T ~c hni ca l Expert that t h e ar ticles in this cas e a n d that imported by Plastic and Packages, Inc. "are not exac tly the same the f ir s t being made of a soft kind of materia l wh ile th e o ther is ma de of rigid film" .

Th e Cust oms Records would also show that in th e administrative p r t) c (· e dings be 1 o \·1 h e a c k n o H 1 e dge c1 that t h e p 1 a _s tic mad~ o f rigid ma terials would have a higher cost due t-. o , <:~mo ng oth e rs, high er add itives cos t for plastic o r r ig id materials, t h us : "HEARING OFFICER TO THE \HTNESS : For c larifi ca t ory ques tion, the samp l e a ttached in y o ur report the same as the sample a tta c hed in the en t ry as to t heir raH ma t erial?

"HR.

A:

Bas i cal ly the raw material are th e same but t.h e cost o f pr o duct - rigid ~li 11 be hig h er. Q:

Th e y are both finish.ed p ro duct ? A:

Yes.

( p. 52 , Custo ms Records ) X X X SIA TO l'HE vliTNESS: Q:

So th e additives o f soft and r ig id film are differ e nt? 596 ·'

- 5 - A:

Yes.

(p. 50, Customs Re c ords)

X X X

Q:

You also said that additives of these shipments are different, and that additives for rigid film is higher than soft?

A:

Yes.

(p. 49, Customs Re c ords) It a ppears that the valuation is insisted upon by the Tec hni c al Expert for the reason that they belong to t h e same family, plastic (p. 55, Customs Records). A physical examination of the two materials of plastics submitted in evidence by petitioner (E xh i b i ts "8" and "C", p.

56, C.T.A. Records) gives u s t h e impression that the two articles are physi c a lly different.

The article imported by pe ti tioner (Exhibit "8") is transparent and is a plastic film.

The other article (Exhibit "C") which was re l i ed upon by the Technical Expert for his valuati on is not transparent nor a plastic film like th a t of the first as it is white in. color' and definitely much thicker.

We are inclined to give c r e de n c e to the allegation of petitioner that the c h a r ac ter of the latter article would make it more u s eful for cartons and packages or other sturdy and strong containers rather than as a wrapper.

This infere nce is bolstered by the finding of the 597

- 6 - Unct ~rs ecretary of Finance o n the request for Tariff c las s ificat ion by petitioner of the "Nan Ya Wrap", the n a me given to the articl e. It was that the "Nan Ya Wrap" Has class ified by th e Ta rif f Commis s ion under HS He a ding 3920-4290 referr ing in particular to film, among others, at 30% ad va lorem duty Hhil e th e Bureau of Customs c l ass ified the article under HS Head ing 3926.90 referr ing to other articles of plast i c at 50% ad v a lore m.

The Tar iff Commissio n ruled essenti ally "B ased on the foregoing, NAN

YA WRAP

is esentially a pl as tic film u se d to wrap or c over fo odstuffs.

It s physical c haracter s h ows that subject film is not f urther worked nor a c onta iner for the <~o n v eyan ce or pa c king o f goods." Th e Unders ecretary of Finance c oncluded that: "It appearing that HS 39 20.4 290 in re lation to HS 3920 provides a more s pec ific d escr iption with respect to t h e phys i ca l c haracter o f NAN YA WRAP, this De p a rtment find s the c l ass ifica t ion thereof und er HS 3920.4290 at 30% ad v a lorem to be t h e correct t a riff c l assif ication . " For that ma tter, the perti n ent part of Section 201 o f the Tar iff a nd Customs Code, as a mended by Execut ive Order No.

156 mandates the folloHing in ascerta ining t h e bas is of duti a ble value: "SEC.

20-1.

Basis of Duti able Value. - "The dutiable value of a n imported article subject to an ad valorem rate o f duty shall he based o n t he cost ( fair market value) o f sa.m.e .. I .. ........ !J)<~ ()~ ~~ ~~~?-!:' .

<:l.l:':t::~<:::J . ~ .!3, as bought 598 - DECISION C. T .A. CASE NO . 4 52 3 - 7 - , nd sold o r offered for sa l e fr e e ly in the u s ual wholesale quantiti es in the or din ar y r•o 11rse of trade, in th e principa l marke t s of the exporting country on t h e date of the e xportation t o the Philip~ines (e xc luding internal excise taxe s to be remitted or re b a ted) or where there is non e on such date , then on the cost , (fair marlcet va l ue ) neares t to the date of e xportation , i nc luding the value of all co ntainers , co veri n gs and/or pa c king s of any kind and al l other expenses, cos ts and charges J n c id e nt t o placing the article in a co ndition ready for shipme n t to t h e Ph ilippine s , a nd freight as well as i nsuran ce premium co vering the t rans portatio n of suc h a rticle s to th e port o f e ntry in t h e Ph i l ippines . o f Wh e re the the fair ma rlcet v a lu e or price article cannot be asc ertained thereat or where there exist s a reasonable rln ubt as to the f a irnes s of such value or pr i ce , then the fair marke t value or price in the prin c ipal market in t h e co untry of ma nuf ac tu re or ori g in , if it i s not th e co untry · of exportation, or in a third c01mtry uith the same state of eco nomic ct ~ ve l o pment as the country of exportation sha ll be used.

Hhen th e duti a ble valu e of the nr ti c l es c an n ot b e ascertained in ac cor dan ce with the prece ding p ara graphs or ''here there exists a re aso nable doubt as to the cost (fair market value) of the imported arti c l e declared in the entry, the du tiable value o f the arti c le s hall be a~cer tained by the Commi ssio ne r o f Custo ms from the reports of the Revenue or Commercial Atta c h e (F ore ign Trade Pr o motio n Attache ), pursuant to Republ i c Act Nu mbered Fifty-four Hundred an d Sixty - Si x or other Philippine diplomatic of f icers or Custo ms Attac hes an d fr om s u c h ot h er inf or mat ion that may be a vai l a ble t o the Bu reau of Custo ms.

Su c h values s hal l be pu b li s h e d by t he Co mmissi oner o f Custo ms fr om ti me to ti me.

Wh en the duti a ble ~sce rtained as provided 599 va l ue in the cann o t be preceding ,'

.

paragraphs, oar where there eryists a reasonable doubt as to the dutiable value of the imported article declared in the entry, it shall he the domestic wholesale eelling price of such or similar article in Wanila or other principal markets in the Philippines on the date of the duty become payable on the article under appraisement, on the usual wholesale quantities and in the ordinary course of trade, minus

(a) not more than twenty-five (25) percent thereof for expenses and profits; and

(b) duties and taxes paid thereon.” (Emphasis supplied) (a0x XXX xXx."

We think that the differences between the article "PVC Wrap Film for Food Industrial Use" and the article “PVC Rigid Film Optic White not transparent” are significant not only physically but so much as ta affect their value. In fact, there is testimony by the Technical Expert to the effect that at the time of importation the cost of the same article in Taiwan under SGS valuation was $912.00/MT. In this light, the Court could not hold that "PVC Rigid Film Optic White not transparent" is a- "same, like or similar" article as "PVC Wrap ' Film for Food Industrial Use".

Further, the propriety of an "Alert notice” or an “Alert Report” .(the PCCI CCG Consolidated Report sa! ‘ on Articles Subject to Alert), as against the value declared in the invoice consistent with Section 201 600 of the Tariff and Customs Code has been ruled upon hy the Supreme Court in Commissioner of Customs v. Court of Tax Appeals (161 SCRA 376 [1988]) citing a case of the same title with G.R. No. 70648, July 31, 1987) in favor of the mandate of Section 201. We quote:

"The issue for determination is the propriety of the appraisal of the importations made by private respondent based on alert notices rather than on the values declared in consular invoices.

"The applicable legal provision is Section 201 xxx.

"The law is clear and mandatory. xxx."

We do not think that we can deviate from the substance of the said decision in the face of expositions made on the weakness of the recommendation of the Technical Expert, notwithstanding that the “Alert Report" was discussed in the proceedings in the Bureau of Customs, and the thorough examination of the records of this case, The deviation, if any, could only be that we are adopting the SGS valuation of $912.00/metric ton adverted to previously here as tis basis of the dutiahle value of the subject article in view of its recognized reliability. Consequently, the subject article cannot’be held liable for forfeiture as the undervaluation is:mot more than 50% between the value declared in the entry and the correct value.

601

- 10 -

WHEREFORE, the reliefs prayed for in the Petition for Review is GRANTED and the decision of th e Commissioner of Customs is REVERSED. The Warrant of Seizure and Detention against the article "334 Cartons PVC Wrap Film for Food Indu s trial Use" is LIFTED subject to the payment b1 petitioner of the correct taxes and duties and other charges due ba s ed on t h e value of the said article determined at $91 2. 00/metric ton.

I CONCUR:

ST~DADIVAS -FARRALE~'l Ac ting Associate Judge ~(4~ ERNESTO D. ACOSTA Presiding Judge CERTIFICATION I hereby certify that this decision was reached after due consultation between the members of the Court of Tax Appeals in accordance with Section 13, Arti cle VIII of · the Constitution. :J.

602 ~Q .. ~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals -·