Request for Exemption from Compensating Tax on Shipment of Container Consisting of 272 Cartons of Noodles

June 19, 1986 BIR RULING NO. 078-86 169 000-00 078-86 Gentlemen : This refers to your letter dated May 22, 1986 requesting exemption from compensating tax on your shipment of 1 x 20 container S.T.C. (consisting of 272 cartons of noodles) which arrived on April 25, 1986 on board the vessel "Clipper Ace" covered by Bill of Lading No. FKMA-001. It is represented that you are buying noodles from local manufacturers for export; that on September 22, 1985, you exported 280 cartons assorted foodstuffs covered by Export Declaration No. 14846 consigned to Larcon International, Inc., Artesia, California, U.S.A.; that upon examination made on samples of said goods by the District Director of Customs, U.S. Customs Service, it was found out that the same appears to be adulterated and hence, its admission was refused; that the said shipment was subsequently returned to the Philippines as rejected items but the Ministry of Finance is subjecting the same to compensating tax prescribed in Section 169 (formerly Section 204) of the Tax Code, as amended. In requesting exemption from payment of the compensating tax, you contended that IPT is a BOI registered company; that the exported products were traded in character and quality; that you never benefited from said exportation but on the contrary suffered additional expenses in bringing back those goods to Manila; and that the said goods will not be re-exported but will be sold as animal feeds. Based on the foregoing, this Office believes and so holds that your aforesaid shipment is not subject to the compensating tax imposed by Section 169 of the Tax Code, as amended. It should be noted that the compensating tax is imposed on the importation of goods, commodities, wares and merchandise which are neither for sale nor for use as inputs of manufactured products. In your case, however, the shipment in question is not an importation since the same was only shipped back to this country on account of its rejection by the authorities in the port of destination. However, you will be subject to the 1.5% sales tax prescribed in Section 165(B) of the Tax Code, as amended by P.D. No. 2006, in case you will sell the aforementioned goods as animal feeds. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner