Request for Exemption from Compensating Tax on Shipment of 68 Cartons of Defective Straw Fiber Handbags

September 17, 1986 BIR RULING NO. 178-86 169 078-86 178-86 Gentlemen : This refers to your letter dated June 4, 1986 requesting exemption from compensating tax on your shipment of 68 cartons of defective straw fiber handbags which arrived on December 28, 1985 on board the vessel "American Washington" by Bill of Lading No. 119234-3 and authorized to be released as per indorsement of the Ministry of Finance dated March 19, 1986. It is represented that you are an exporter of straw fiber handbags; that on March 20, 1985, you exported 68 cartons of straw handbags covered by export Declaration No. 15540 consigned to Irving Trust Company, New York; that the said goods were exported to the United States in three separate shipments as evidenced by a Bill of Lading No. 601-0216 and 0217; Bill of Lading No. 601-0297; and Bill of Lading No. 601-0267; that upon examination of the goods by the United States Customs, it was found out that the same had defects and did not have the proper documents and information to meet the requirements of the U.S. Fish and Wildlife Service thus the admission was refused; that the said shipment was subsequently returned to the Philippines as rejected items out of which 10 cartons were returned from the Bill of Lading No. 601-0216 and 0217, 17 cartons were returned from the Bill of Lading No. 601-0297 and 41 cartons were returned from the Bill of Lading No. 601-0267; that the Ministry of Finance is subjecting the same to the compensating tax prescribed in Section 169 (formerly Section 204) of the Tax Code as amended. In reply, please be informed that the aforesaid shipment is not subject to the compensating tax imposed by Section 169 of the Tax Code as amended. The compensating tax is imposed on the importation of goods, commodities, wares and merchandise which are neither for sale not for use as inputs of manufactured products. In the instant case, the above shipment received by you 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. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner