Importation on Consignment Basis under the No-Dollar Importations Scheme of Raw Materials Consisting of Fine Iron Ore and Carbon Materials i.e, Coke Breeze and Anthracite, Processed into Sintered Ore and Subsequently Re-Exported Exempt from Value Added Tax

January 24, 1997 BIR RULING NO. 009-97 105 (d) 000-00 009-97 Philippine Sinter Corporation 11th Floor, Allied Bank Center 6754 Ayala Avenue Makati City Attention: Mr . ShuSuke Omi Executive Vice President and Treasurer Gentlemen : This refers to your letter dated April 29, 1996 to the Honorable Secretary of Finance, requesting for a confirmation of your opinion that your importation on consignment basis under the no-dollar importations scheme of raw materials consisting of fine iron ore and carbon materials i.e, coke breeze and anthracite, which are processed into sintered ore and subsequently re-exported are exempt from value added tax (VAT). cdti It appears from the findings of the Department of Finance that the operations of the Philippine Sinter Corporation involves merely processing of imported ore into sinter which are entirely exported; and that imported ore processed into sinter have not been previously subjected to internal revenue taxes for the following reasons: 1. The entire operation does not constitute importation as defined in the Tariff and Customs Code of the Philippines (TCCP) because there is no completed importation (2nd Indorsement dated June 1, 1978 of Secretary Cesar Virata). 2. Then Ministry of Finance ruled that the area comprising the export processing zone is not considered part of the Customs Territory and therefore there is technically no importation to these areas. In reply, please be informed that pursuant to the provisions of Section 105 (d) of the Tariff and Customs Code of the Philippines (TCCP) stating: "Section 105. Conditionally Free Importations . The following shall be exempt from the payment of import duties upon compliance with the formalities prescribed in, or with, the regulations which shall be promulgated by the Commissioner of Customs with the approval of the Minister of Finance; Provided, That any article sold, bartered, hired or used for purposes other than that they were intended for without prior payment of the duty, tax or other charges which would have been due and payable at the time of entry if the article had been entered without the benefit of this section, shall be subject to forfeiture and the importation shall constitute a fraudulent practice against customs revenue punishable under Section Thirty-six hundred and two, as amended of this Code: Provided, further, That a sale pursuant to a judicial order on in liquidation of the estate of a deceased person shall not be subject to the preceding proviso, without prejudice to the payment of duties, taxes and other charges: Provided, finally, That the President may upon recommendation of the Minister of Finance, suspend, disallow or completely withdraw, in whole or in part, any of the conditionally free importation under this section: "(a) . . . "(b) . . . "(c) . . . "(d) Articles brought into the Philippines for repair, processing or reconditioning to be re-exported upon completion of the repair, processing or reconditioning: Provided, That the Collector of Customs shall require the giving of a bond in an amount equal to one and one-half times the ascertained duties, taxes and other charges thereon, conditioned for the exportation thereof or payment of the corresponding duties, taxes and other charges within six (6) months from the date of acceptance of the import entry" since your operation involves merely processing of ore into sinter which are entirely exported, and considering further that there is no completed importation as understood under said provision of the TCCP because all of your raw material importations are re-exported after processing, it is our opinion that the said raw material importations are exempt from value-added tax, in accordance with Section 105 (d) of the Tax Code, as amended. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue