BORDER CONTROL AND CUSTOMS REGULATIONS
In addition to the 12% VAT and any applicable excise tax, importations are generally subject to customs duties. The Customs Modernization Act provides for the imposition of anti-dumping duty, countervailing duty, marking duty, safeguard duty and discriminating duty under special circumstances.
The rules of the Bureau of Customs (BOC) on border control measures prevent the entry into the Philippines of infringing merchandise and ensure expedited procedures for the handling and disposition of goods suspected to be imported in violation of the Intellectual Property Code of the Philippines (the IP Code).
The Strategic Trade and Management Act likewise provides a mechanism for trade control in the importation, exportation, re-exportation, reassignment, transit and transshipment of strategic goods and the provision of related services.
Strategic goods are goods enumerated in the National Strategic Goods List, which has yet to be issued by the National Security Council - Strategic Trade Management Committee. These are products that, for security reasons or due to international agreements, are considered to be of such military importance that their export is either prohibited altogether or subject to specific conditions. Such goods are generally suitable to be used for military purposes or for the production of weapons of mass destruction.
Related services refer to brokering, financing, and transporting in relation to the movement of strategic goods between two foreign countries and providing technical assistance.
CUSTOMS AND TRADE AGREEMENTS
The Philippines is a member of the Association of Southeast Nations (ASEAN) and is a signatory to the ASEAN Trade in Goods Agreement (previously referred to as the ASEAN Free Trade Area Common Effective Preferential Tariff Scheme) along with the other ASEAN member states. The ASEAN aims to eliminate all import duties amount the member states.
In addition, as part of the ASEAN, the Philippines has existing FTAs with China (ASEAN-China), South Korea (ASEAN-Korea), Japan (ASEAN-Japan Comprehensive Economic Partnership), Australia and New Zealand (ASEAN-Australia and New Zealand), and India (ASEAN-India).
SPECIAL DISCUSSION REGARDING EU
The EU-Philippines Free Trade Agreement negotiations was launched in December 2015. A series of negotiation rounds are being undertaken with the aim to conclude an agreement that covers relevant trade issues such as tariffs, non-barriers to trade, trade in services and investment as well as trade aspects of public procurement, intellectual property, competition and sustainable development. The Philippine Senate recently ratified the Framework Agreement on Partnership and Cooperation Between the Philippines and the European Union (PCA). The PCA should bolster the Philippines’ status as a beneficiary country under the EU’s Generalised Scheme of Preferences Plus (GSP+) and provide basis for concluding a Free Trade Agreement (FTA) with the EU.
The EU has also granted the Philippines zero tariff for over 6000 products to be exported to any of the 28 member states under the Generalized System of Preferences Plus (GSP+). Products that may avail of the duty free access include coconut and marine products, processed fruit, prepared food, animal and vegetable fats and oils, textiles, garments, headwear, footwear, furniture, umbrellas, and chemicals.
The Philippines, meanwhile, has signed a free trade agreement with the European Free Trade Association (EFTA) Member States - Iceland, Liechtenstein, Norway and Switzerland, on 28 April 2016. The Parties are currently undertaking their respective domestic processes for the ratification and entry into force of the Agreement.
The Philippines’ engagement with EFTA is part of a parallel three-pronged approach to increase the country’s presence in the European region through the FTA engagements with EFTA and the European Union (EU) and the EU Generalized System of Preferences.
New enterprises operating in the special zones may enjoy income tax holidays for up to eight years from the start of commercial operations. The enterprises are also entitled to a preferential tax treatment of 5% tax on gross income in lieu of all other Philippine income taxes.
Goods that are imported into special economic zone are generally not subject to duty or tax while they remain inside the zones. However, they will become subject to duties and taxes if they are removed from the ecozone.