The Supreme Court ruled that failure to file both the Import Entry Declaration (IED) and Import Entry and Internal Revenue Declaration (IEIRD) within 30 days of cargo discharge results in the imported goods being considered abandoned. This abandonment transfers ownership of the goods to the government and makes the importer liable for the goods’ dutiable value at the time of withdrawal, especially if fraud is involved, ensuring the proper collection of customs duties.

Chevron’s Crude Awakening: Did Delayed Filings Lead to Abandoned Imports?

This case, Chevron Philippines, Inc. v. Commissioner of the Bureau of Customs, revolves around the interpretation of the Tariff and Customs Code (TCC) regarding the period for filing import entries and the consequences of failing to comply. Chevron Philippines, Inc. imported various petroleum products in 1996. The Bureau of Customs (BOC) later assessed deficiency customs duties, arguing that Chevron failed to file the necessary import entries within the prescribed period. The core legal question is whether Chevron’s actions constituted abandonment of the imported goods, thereby triggering liability for the higher duty rate and the dutiable value of the goods.

Under Section 1301 of the TCC, imported articles must be entered within 30 days from the date of discharge. Failure to comply leads to the BOC deeming the goods abandoned under Section 1801. The pivotal issue is determining what constitutes an “entry” under these sections: is it the Import Entry Declaration (IED) or the Import Entry and Internal Revenue Declaration (IEIRD)? Chevron argued that filing the IED within 30 days suffices as an entry, fulfilling the requirements of the law. The Supreme Court disagreed, asserting that the term “entry” in customs law has a triple meaning, referring to the documents filed, their submission and acceptance, and the procedure of passing goods through customs.

Building on this principle, the Supreme Court referenced Section 205 of the TCC, which defines when imported articles are “entered” for consumption:

Section 205. Entry, or Withdrawal from Warehouse, for Consumption. – Imported articles shall be deemed “entered” in the Philippines for consumption when the specified entry form is properly filed and accepted, together with any related documents regained by the provisions of this Code and/or regulations to be filed with such form at the time of entry, at the port or station by the customs official designated to receive such entry papers and any duties, taxes, fees and/or other lawful charges required to be paid at the time of making such entry have been paid or secured to be paid with the customs official designated to receive such monies, provided that the article has previously arrived within the limits of the port of entry.

This provision clarifies that the operative act constituting “entry” is the filing and acceptance of the IEIRD along with the required documents. The Supreme Court emphasized the IEIRD’s importance in evidencing the final payment of duties and taxes. Moreover, the court cited the old case of Go Ho Lim v. The Insular Collector of Customs, to further support their argument, stating that the word “entry” refers to the regular consumption entry, that is, the IEIRD, and not the provisional entry, otherwise known as the IED.

Furthermore, the court noted that the filing of IEIRDs serves several crucial purposes, including ascertaining the value of imported articles, collecting the correct customs duties, and preventing smuggling. Delaying the filing of IEIRDs would undermine the government’s ability to collect revenue promptly. Given the importance of tariff and customs duties to public revenue, the court held that both the IED and IEIRD must be filed within 30 days from the date of discharge.

The court also addressed the issue of fraud, which Chevron denied committing. The BOC argued that Chevron deliberately delayed filing the IEIRDs to take advantage of a lower duty rate, which was reduced from 10% to 3% during that period. The Supreme Court concurred with the CTA’s finding of fraud, citing Chevron’s calculated course of action to evade the correct customs duties. This included non-disclosure of discrepancies between the IEDs and IEIRDs and collusion with the former District Collector. Due to the presence of fraud, the prescriptive period for the finality of liquidation under Section 1603 of the TCC did not apply.

Regarding abandonment, the court stated that failure to file the required entries within the 30-day period leads to the importer renouncing all interests and property rights to the importations. Chevron argued that its actions, such as filing IEDs and paying advance duties, indicated no intention to abandon the goods. However, the court clarified that under the amended Section 1801 of the TCC, intent is no longer a factor. Failure to file the required import entries within the prescribed period is sufficient for the importation to be considered abandoned. Citing the legislative intent behind Republic Act No. 7651, the court emphasized that the amendment was designed to expedite the process of declaring importations as abandoned.

Chevron also contended that the BOC did not provide the required notice before declaring the importations abandoned, as stipulated in Section 1801 of the TCC and Customs Memorandum Order No. 15-94 (CMO 15-94). The Supreme Court disagreed, stating that under the circumstances of the case, notice was not necessary. The court highlighted that Chevron was fully aware that its shipments had arrived in the Port of Batangas. Chevron, a regular and large-scale importer, had actual physical possession of its oil importations. Additionally, the purpose of posting an “urgent notice to file entry” is to notify the importer of the arrival of its shipment, which Chevron was already aware of.

Furthermore, Section 1802 of the TCC provides that an abandoned article shall ipso facto be deemed the property of the Government. The court emphasized that the legislature, by using the term “ipso facto” in Section 1802, removed the need for abandonment proceedings before ownership of the imported articles could be transferred to the government. Finally, the court rejected Chevron’s claim that depriving importers of their property rights for failing to timely file the IEIRD is arbitrary, harsh, and confiscatory. The court emphasized that it cannot permit a collateral attack on a presumably valid law.

FAQs

What was the key issue in this case?	The key issue was whether Chevron’s failure to file the IEIRD within the prescribed period constituted abandonment of the imported goods, triggering liability for deficiency customs duties. The court also determined what constitutes “entry” under Sections 1301 and 1801 of the TCC.
What is the significance of Section 205 of the TCC?	Section 205 defines when imported articles are “entered” for consumption, specifying that the operative act is the filing and acceptance of the IEIRD along with other required documents. This determines when imported articles are officially entered into the country for customs purposes.
What does “ipso facto” mean in relation to abandoned articles?	“Ipso facto” means that an abandoned article is automatically deemed the property of the government by the very act of abandonment, without the need for any further declaration or proceedings. This transfers ownership to the government by operation of law.
Was Chevron required to be notified of the abandonment?	The court held that notice was not necessary in this case because Chevron was already fully aware that its shipments had arrived and were in its possession. Notice serves to inform importers of the arrival of their shipments, which was already known to Chevron.
What is the difference between the IED and the IEIRD?	The IED (Import Entry Declaration) serves as the basis for the payment of advance duties on importations, while the IEIRD (Import Entry and Internal Revenue Declaration) evidences the final payment of duties and taxes. The IEIRD is the specified entry form which constitutes “entry” of the imported articles at the port of entry.
What was the basis for finding Chevron guilty of fraud?	Fraud was established due to Chevron’s calculated course of action to evade the correct customs duties, including non-disclosure of discrepancies between the IEDs and IEIRDs and collusion with the former District Collector. This indicates a deliberate intention to defraud the government.
What is the legal basis for the 30-day filing requirement?	The 30-day filing requirement is based on Section 1301 of the TCC, which states that imported articles must be entered within 30 days from the date of discharge. This period is non-extendible, and failure to comply results in the goods being deemed abandoned under Section 1801.
How did Republic Act No. 7651 change the rules on abandonment?	Republic Act No. 7651 amended the TCC to expedite the process of declaring importations as abandoned, removing the requirement for a declaration by the Collector of Customs and notice to the importer before abandonment takes effect. It also specified that failure to file the required entries within 30 days is sufficient for abandonment.

The Supreme Court’s decision underscores the importance of strict compliance with customs regulations and the timely filing of import entries. The ruling reinforces the government’s authority to collect customs duties efficiently and prevent fraudulent practices, safeguarding public revenue. The transfer of ownership to the government through ipso facto underscores the serious ramifications of abandonment.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Chevron Philippines, Inc. vs. Commissioner of the Bureau of Customs, G.R. No. 178759, August 11, 2008