"Raw Sugar" Shipments Released by the Bureau of Customs Exempt from the Payment of Duties and Taxes in Line with the Instructions of the Department of Finance; Authority to Release Imported Goods Issued by BIR Deputy Commissioner to the Bureau of Customs for the Release of the Shipments Exempt from Payment of 10% Value-Added Tax

1997 BIR RULING NO. 092-97 103 000-00 092-97 Commissioner Guillermo L. Parayno, Jr. Bureau of Customs Manila S i r : This refers to your letter dated July 30, 1997 stating that the following listed shipments were earlier released by the Bureau of Customs exempt from the payment of duties and taxes in line with the instructions of the Department of Finance: "a) "15,000 MT Brazil Raw Sugar", with SGS Clean Report of Findings (CRF) as "Brazil Cane Raw Sugar", and SGS Certificate of Weight and Quality (CWQ) at 99 . 81 polarization, consigned to the Philippine International Trading Center (PITC) for the account of (FAO) of New Frontier Sugar Inc . (NFSI), on board the vessel M/V Polymia, which arrived at the Port of Iloilo on 21 August 1996 ; "b) "15,000 MT Brazil Raw Sugar" with SGS CRF as "Brazil Cane Raw Sugar" and SGS CWQ at 99 . 68 polarization, consigned to the PITC FAO NFSI, on board the vessel M/V Capta Spyros, which arrived at Port Iloilo on 30 September 1996 ; "C) "3,576 MT Brazil Raw Sugar" with SGS CRF as "Brazil Cane Raw Sugar" and SGS CWQ at 99 . 67 polarization, consigned to the PITC FAO NFSI, on board the vessel M/V Capta Spyros, which arrived at the Port of Iloilo on 30 September 1996 ." that the subject shipments were released duty and tax free pursuant to Presidential Memorandum Order No. 358 (Annex A) on the Counter-Trade Sugar Swap Program and upon presentation of the corresponding Sugar Regulatory Administration (SRA) Clearances (Annexes B-B2) and the Bureau of Internal Revenue (BIR) Authority to Release Imported Goods (ATRIG) (Annexes C-C2); that the Port of Iloilo also bases its decision to grant duty/tax free release in line with the following: 1. SGS-CRF categorizing shipments as "raw" (Annexes D-D2); 2. Victorias Milling Laboratory Findings s howing shipment at 99.10 polarity Annex E); 3. SRA Findings showing shipments as "raw sugar" because of color and delivery in bulk (Annex F-F2) that the COA Resident Auditor of the Iloilo Customhouse, takes the position that since the SGS Certificate of Weight and Quality (Annexes G-G2) on the shipments show that their polarization are in excess of 99.5 degrees polarization and since under Chapter 17, Subheading Note of the TCCP, "raw sugar means sugar whose content of sucrose by weight, in the dry state, corresponds to a polarimeter reading of less than 99.5 degrees", the questioned sugar cannot be considered as raw, and therefore cannot be released pursuant to Presidential Memorandum Order No. 358; that you have earlier asked the SGS to explain the seeming incompetency between their measure of polarity and their findings of "raw sugar"; that SGS explained that it used the Brazilian standards (Annex H), which must comply with the analysis parameter of Polarization; Color; Moisture and Ash contents, and that consequently, Very High Polarization (VHP) sugar may still be considered raw, if it does not quality in the other attributes as mentioned; that the explanation further states that sugar delivered in bulk, which therefore needs further processing, should be considered as raw; that refined sugar is never delivered in bulk but in multi-lining packaging (except for special bulk carriers with silos) to maintain quality as to moisture and for sanitary purposes. In connection therewith, you are requesting a ruling as to whether or not from the BIR standpoint the aforementioned shipments are "raw sugar"; and whether or not the Authority to Release Imported Goods (ATRIG) issued by BIR Deputy Commissioner Beethoven L. Rualo to the Bureau of Customs for the release of the aforementioned shipments exempt from the payment of the 10% value-added tax is correct. In reply thereto, please be informed that based on findings of the SGS in its "Clean Report of Findings" issued at the port of loading that said shipments are "Brazil Cane Raw Sugar in Bulk" and the Sugar Regulatory Administration Clearances that said shipments are imported raw sugar, this Office is of the opinion as it hereby holds that the aforementioned shipments are indeed raw cane sugar. The findings of these technically competent and expert bodies which are based on the generally accepted standards for classification and inspection of sugar should be upheld. Pursuant to Section 103(q) of the Tax Code, as amended, transactions which are exempt under international agreements to which the Philippines is a signatory shall be exempt from VAT. Since the basis of the ATRIG issued by the BIR is paragraph 2, Article III of the General Agreement on Tariff and Trade (GATT), the aforementioned shipments pursuant to Memorandum Order No. 358 are exempt from the 10% VAT. Moreover, pursuant to Section 4, 103-1 (B) (c) of Revenue Regulations No. 7-95 as amended by Revenue Regulations No. 5-96, imported raw cane sugar, if originating from the territory of a WTO member, shall be considered as agricultural food product in their original state which are exempt from VAT under Section 101 (c) of the Tax Code, as amended. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue