VAT Exemption on the Importation of Ulexite

September 2, 1988 BIR RULING NO. 432-88 103 (u) 000-00 432-88 Gentlemen : This refers to your letter dated August 9, 1988 requesting for a ruling that your incoming importation of 2,000 MT of ulexite to be used as raw material in the manufacture of boric acid for export is exempt from value-added tax. cdtech It is orally and formally disclosed that you operate a private customs bonded warehouse within the compound of your fertilizer plant in Toledo, Cebu; that one of your main by-product in the manufacture of fertilizer is sulphuric acid, which together with ulexite imported from Chile, will be the raw material in the manufacture of boric acid; that the manufacture thereof will be done completely in one of your private customs bonded warehouses within the perimeter of your fertilizer plant compound; and that all your boric acid production will be exported to Chile where the ulexite originated. It is represented that this is your first importation of ulexite; that your processing thereof into basic acid with the uses of sulphuric acid which are readily available in your fertilizer plant is also the first time and on a test basis; and that you have a pending application with the Bureau of Customs to convert your entire fertilizer plant compound into a bonded manufacturing warehouse. In reply, please be informed that although your license to operate a private bonded warehouse pursuant to Section 1903 and 1907 of the Tariff and Customs Code carriers with it the privilege of entering imported articles for warehousing and withdrawing the same for export without the payment of taxes, it does not vest you with the privilege of conducting manufacturing activity therein. However, considering that the responsibility of allowing the carrying out of your boric acid processing in your private bonded warehouse rests with the Bureau of Customs and the fact that you have a pending application to convert the entire fertilizer plant compound into a manufacturer's bonded warehouse; that all of your boric acid production are intended for export; that imported articles whether brought into a withdrawn from private bonded manufacturing warehouse for export are exempt from taxes; in like manner, imported ulexite entered into and processed into boric acid in your private bonded warehouse on a test basis shall likewise be exempt from value-added tax pursuant to Section 103(u) of the Tax Code, as amended by Executive Order No. 273, in relation to Section 1907 of the Tariff and Customs Code of the Philippines subject to the following conditions: 1. That you have an irrevocable letter of credit; 2. That you set up a bank guarantee or bond to answer for taxes due in the event of withdrawal therefrom, or sale of any of your boric acid production in the domestic market. 3. That your imported ulexite shall be used in the manufacture of articles for export within 9 months from the date of entry into your private bonded warehouse. cdt Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner