Whether Importation of Raw Materials Stored in Customs Bonded Manufacturing Warehouse Is Subject to Advance Sales Tax

November 20, 1985 BIR RULING NO. 207-85 199 (a) 277-81 207-85 Gentlemen : This refers to your letter dated September 13, 1985 requesting a ruling on whether or not you are subject to the advance sales tax on all your importation of raw materials stored in your Customs Bonded Manufacturing Warehouse. It appears that you are registered with the Board of Investments under List B, RA 6135 as export producer of footwear with Registration Certificate No. 78-714 dated January 20, 1978; that 100% of your manufactured footwear products are exported as you are not engaged in local sales; that you are operating a Customs Bonded Manufacturing Warehouse No. 730 where you placed your imported raw materials and manufactured therein your footwear products; that all your importation of raw materials were tax-and-duty free but properly covered by warehousing bonds which are subsequently cancelled by the Bureau of Customs upon export of the finished products; and that under Sec. 2002 of the Customs and Tariff Code, firms operating a Customs Bonded Manufacturing Warehouse are exempted from the payment of taxes and duties for any imported materials used in the manufacture of finished products for export per certification of the Board of Investments dated March 7, 1983. In reply, please be informed that the importation of supplies, spare parts, raw materials and component parts of registered products which are reasonably needed by a registered pioneer enterprise in its registered operation shall be exempt to the extent of the percentage set in Article 46(a) from the payment of either compensating or advance sales tax, . . . . (Sec. 46(a), P.D. 1789; Sec. 3, Rule XV of Rules and Regulations to implement said P.D.) Accordingly, your imported raw materials placed in your customs bonded manufacturing warehouse are not subject to the advance sales tax under Section 193(b) in relation to Section 199(a), both of the Tax Code, as amended by Executive Order No. 883. (B.I.R. Ruling No. 277-81 dated December 24, 1981) Besides, imported raw materials manufactured into finished products inside a bonded manufacturing warehouse and exported directly therefrom are not considered released from customs custody, hence, not subject to the customs duties, taxes and other charges. (See Secs. 2001 and 2002, Tariff and Customs Code, as amended) cdti Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner