Clarificatory Guidelines on Duty-Free Importation of Books

March 10, 2009 DOF MEMORANDUM FOR : The Revenue Office This Department The Bureau of Customs Port Area, Manila RE : Clarificatory Guidelines on Duty-Free Importation of Books These guidelines are being issued to clarify the treatment of duty-free importation of books allowed under existing laws and international agreements. They do not cover the treatment of imported books for Value-Added Tax (VAT) purposes because Section 109 (r) of the 1997 Tax Code, as amended, provides that the importation of books is VAT-exempt. 1 ISHaCD BACKGROUND: UNESCO Florence Agreement: 1. On 17 June 1950, the United Nations Educational, Scientific and Cultural Organization (UNESCO) adopted the Florence Agreement on the Importation of Educational, Scientific and Cultural Materials (Florence Agreement). Article I thereof provides that: "Article 1 1. The contracting State undertakes not to apply customs duties or other charges on or in connection with, the importation of: (a) Books, publications and documents, listed in Annex A to this Agreement; (b) Educational, scientific and cultural materials listed in Annexes B, C, D and E to this Agreement; which are the product of another contracting State, subject to the conditions laid down in those annexes." Tariff and Customs Code of the Philippines: 2. On 11 June 1978, then President Ferdinand E. Marcos, in the exercise of his legislative powers under the Martial Law regime, issued Presidential Decree (PD) No. 1464 (Tariff and Customs Code of 1978). PD 1464 amended Republic Act (R.A.) 1937 (dated 22 June 1957), otherwise known as "An Act to Revise and Codify the Tariff and Customs Code of the Philippines". Section 105 (s) of PD 1464 provides that: "SEC. 105. Conditionally-Free Importations. The following articles shall be exempt from the payment of import duties upon compliance with the formalities prescribed in, or with, the regulations which shall be promulgated by the Commissioner of Customs with the approval of the Secretary of Finance; Provided, That any article sold, bartered, hired or used for purposes other than that they were intended for without prior payment of the duty, tax or other charges which would have been due and payable at the time of entry if the article had been entered without the benefit of this section, shall be subject to forfeiture and the importation shall constitute a fraudulent practice against customs revenue . . .: HScCEa "s. Economic, technical, vocational, scientific, philosophical, historical and cultural books and/or publications: Provided, That those which may have already been imported but pending release by the Bureau of Customs at the effectivity of this Decree may still enjoy the privilege herein provided upon certification by the Department of Education, Culture and Sports that such imported books and/or publications are for economic, technical, vocational, scientific, philosophical, historical or cultural purposes or that the same are educational, scientific or cultural materials covered by the International Agreement on Importation of Educational, Scientific and Cultural Materials signed by the President of the Philippines on August 2, 1952, or other agreements binding upon the Philippines. Educational, scientific and cultural materials covered by international agreements or commitments binding upon the Philippine Government so certified by the Department of Education, Culture and Sports. Bibles, missals, prayer books, Koran, Ahadith and other religious books of similar nature and extracts therefrom, hymnal and hymns for religious use." (emphasis supplied) 3. Since the issuance of PD 1464 in June 1978 to date, there has been no changes or amendments made on Section 105 (s) thereof. R.A. 8047 (Book Publishing Industry Development Act): 4. On 7 June 1995, Congress enacted RA 8047, or the "Book Publishing Industry Development Act". Section 12 thereof states that: "SEC. 12. Incentives for Book Development . Persons and enterprises engaged in book publishing and its related activities duly registered with the National Book Development Board (NBDB) shall be entitled to the applicable fiscal and non-fiscal incentives as provided for under Executive Order No. 226, otherwise known as the Omnibus Investment Code, as amended, subject to the qualifications and requirements set by the Board of Investments (BOI); Provided, that book development activities shall always be included in the Investment Priority Plan (IPP). In the case of tax and duty-free importation of books or raw materials to be used in book publishing, the Board and its duly authorized representatives shall strictly monitor the quality and volume of imported books and materials as well as their distribution and the utilization of the said imported materials. DaAISH The Board shall also recommend to the proper prosecuting agencies any violations of the conditions of the duty-free importation. Books, magazines, periodicals, newspapers, including book publishing and printing, as well as its distribution and circulation, shall be exempt from the coverage of the expanded value added tax law." (emphasis supplied) DISCUSSION 5. It is a fundamental rule that if two or more laws govern the same subject, effort to reconcile and harmonize them must be taken. Statutes must be so construed and harmonized with other statutes as to form a uniform system of jurisprudence. 2 Section 105 (s) of the TCCP, as amended, vis--vis UNESCO Florence Agreement: 6. There is no inconsistency between Section 105 (s) of the TCCP, as amended, and the UNESCO Florence Agreement. Both have the objective of exempting imported books enumerated or listed therein from customs duties. In fact, as presently worded, Section 105 (s) already took into account the Florence Agreement. AIHTEa 7. As to its nature and purpose, Section 105 (s) basically mentions four (4) kinds of importations, as follows: (a) importation of books and/or publications for economic, technical, vocational, scientific, philosophical, historical purposes; (b) importation of educational, scientific or cultural materials covered by the International Agreement on Importation of Educational Scientific and Cultural Materials (the Florence Agreement); (c) importation of educational, scientific and cultural materials covered by international agreements or commitments; and, (d) importation of religious books for religious uses or purposes. 8. Noticeably, Section 105 (s) provides for a common condition on the requirement of DECS certification, which applies to importations under (a) to (c), and the common limitation (found in the opening paragraph of Section 105) prohibiting the sale, barter or hire of the imported articles to prevent "fraudulent practice against customs revenues", which applies to all importations under (a) to (d). 9. The right of the contracting State to impose certain conditions or limitations, thru legislation, to warrant duty-free importation of books is recognized and respected under the Florence Agreement. Article V thereof clearly provides that: "Article V Nothing in this Agreement shall affect the right of the contracting States to take measures, in conformity with their legislation, to prohibit or limit the importation, or the circulation after importation, of articles on grounds relating directly to national security, public order or public morals." 10. Besides, it is a settled rule that a State which has contracted valid international obligations is bound to make in its legislation such modifications as may be necessary to ensure the fulfillment of the obligations undertaken. 3 Florence Agreement vis--vis RA 8047: 11. There is likewise no inconsistency between the Florence Agreement and RA 8047. Just like Section 105 (s), both have the objective of exempting imported books listed therein from payment of customs duties. In fact, the Implementing Rules and Regulations (IRR) of RA 8047 adopted the UNESCO definition of "book", which is "a printed non-periodical publication of at least forty-eight (48) pages, exclusive of cover pages, published in the country and made available to the public". They differ, however, insofar as the nature or the purpose of importation of books is concerned. DTEIaC 12. As clearly worded in Section 12 of RA 8047, the books or raw materials to be imported should be used in book publishing. It partly reads: "In the case of tax and duty-free importation of books or raw materials to be used in book publishing, the Board and its duly authorized representatives shall strictly monitor the quality and volume of imported books and materials as well as their distribution and the utilization of the said imported materials.' (emphasis supplied) 13. "Book publishing" is defined in Section 3 (g) of RA 8047 as the "process of choosing and making books dealing with everything known to the human spirit, philosophy, religious beliefs, intellectual ideas, and physical word, all the arts and sciences". "Related activities", upon the other hand, is defined in Section 3 (i) of RA 8047 as "the domestic manufacturing industries, which have direct bearing on the long term viability of the book publishing". 14. Under the Florence Agreement, there is no need to show that the books to be imported are to be used in book publishing. It is enough that the books to be imported are among those listed therein, as certified to by DECS. Section 105 (s) vis--vis RA 8047: 15. RA 8047 did not expressly or impliedly repeal Section 105 of the TCCP, as amended. They are consistent with each other. In fact, the IRR of RA 8047 made reference to Section 105 (s) of the TCCP, as amended, as the added legal basis for exempting imported book from customs duties. Section 1 of the RR of RA 8047 reads: "SEC. 1. Legal Bases. Imported books shall be released duty-free pursuant to the provisions of Section 105(s) of the Tariff and Customs Code, as amended, and under the provisions of Section 12 of RA 8047." 16. Section 105 (s) and RA 8047, however, differ insofar as the nature or purpose of importation of books is concerned. Section 105 (s) generally requires that the books and/or publications are for economic, technical, vocational, scientific, philosophical, historical or cultural purposes, as certified to by DECS; while under RA 8047, the books or raw materials to be imported should be used in book publishing. In short, Section 105 (s) and RA 8047 can co-exist with each other. STIcEA IRR of RA 8047: 17. That the tax incentives under RA 8047 cover only importation of books or raw materials to be used in book publishing is further confirmed in its IRR, providing in Section 1, Rule III thereof that: "RULE III Tax Incentives SEC. 1. Goods Covered. All imported books shall be duty free as defined in Section 1 of Rule II except those specifically excluded by other existing laws like pornographic books which have been processed for release from the Bureau of Customs (BOC) in accordance with the rules and regulations promulgated by the NBDB and the BOC shall be covered by the exemption from taxes and duties as stated in Section 1, Rule 1 hereof." 18. It is worthy to note that Section 1, Rule 1 of the IRR made reference to Section 12 of RA 8047, which, as quoted above, provides the tax and duty-free importation of books or raw materials to be used in public publishing. 19. While one of the powers of the NBDB under RA 8047 is to "import books or raw materials used in book publishing which are exempt from all taxes, customs duties and other charges in behalf of persons and enterprise engaged in book publishing", we see no reason, however, why the NBDB may not allow or authorize persons and enterprise engaged in book publishing to make the importation themselves. In fact, the IRR provides that "all importers whether for commercial or non-commercial purposes, and including those who receive books through donations, are entitled to the tax incentives" provided that the " commercial book importers shall register with the NBDB". Authority of the DOF to grant tax and duty-free importation: 20. As earlier stated, RA 8047, much less its IRR, did not expressly or impliedly repeal Section 105 of the TCCP, as amended. Indeed, administrative issuances, such as the IRR of RA 8047, must not override, supplant or modify the law, but must remain consistent with the law they intend to carry out. Thus, the statement in the IRR that "the importer shall not be required to secure any tax exemption certificate from the Department of Finance . . . and shall instead deal directly with the Bureau of Customs" is of no moment." CDESIA 21. Not having been expressly or impliedly repealed by RA 8047, the authority of the DOF to grant tax and duty-free importation under Section 105 of the TCCP, as amended, and other existing laws, stands and must be upheld and respected. 22. Section 105 of the TCCP, as amended, states that the articles enumerated therein shall be exempt from the payment of import duties upon compliance with the regulations promulgated by the BOC with the approval of the Secretary of Finance. Such authority of the DOF to grant tax and duty-free importation is also inherent in the power vested upon it by Section 3 (3), Book IV of the Administrative Code of 1987 to "supervise, direct and control the collection of government revenues" as well as in its power of control over the BOC and the BIR. CONCLUSION: 23. It is clear from the foregoing that there are basically three (3) instances wherein duty-free importation of books may be legally allowed, viz. : under (1) Section 105 (s) of the TCCP; (2) Florence Agreement; and, (3) RA 8047. Duty-free importation of books of non-stock, non-profit educational institutions, however, is separately governed by Section 4 (3), Article XIV of the New Constitution, as implemented by Department Order No. 137-87. 24. In all instances, tax and duty-free importation of books requires prior DOF approval pursuant to Section 105 of the TCCP, as amended; Section 3 (3), Book IV of the Administrative Code of 1987; and, its power of control over the BOC and the BIR. 25. For efficiency and consistency, applicant/importer, at the outset, must state the basis under which he is claiming duty-free importation of books, and clearly indicate the purpose thereof. Thus: I. For importation under Section 105 (s) of the TCCP, as amended, applicant/importer must show that: (a) the imported books and/or publications are for economic, technical, vocational, scientific, philosophical, historical or cultural purposes, as certified to by DECS (now, DepEd) or the Commission on Higher Education (CHED), as the case may be, except religious books for religious uses; and, (b) the imported books and/or publications are not for sale, barter or hire. EacHCD II. For importation under the Florence Agreement (or other international agreements, if any), applicant/importer must show that: (a) that the imported books and/or publications are educational, scientific or cultural materials covered by or listed in the Florence Agreement (or other international agreements, if any), as certified to by DECS/CHED or UNESCO Philippines; and, (b) the imported books and/or publications are not for sale, barter or hire. III. For importation under RA 8047, applicant/importer must show that: (a) the books to be imported fall under the definition of "book" under Section 1, IRR of RA 8047; (b) the books or raw materials to be imported shall be used for book publishing and its related activities as defined in Section 3 (g) (i) of RA 8047; (c) the importer is duly registered with the NBDB; (d) the importer is duly authorized by the NBDB to make the importation; and, (e) the NBDB shall certify as to the quality and volume of the imported books and raw materials. 24. It is understood that the failure of the applicant/importer to satisfy the foregoing requirements shall subject the importations to the payment of duties and other charges or forfeiture as the circumstances may warrant. For the guidance and strict observance of all concerned. (SGD.) ESTELA V. SALES Undersecretary for Legal/ Revenue Operations Group Footnotes 1. "Sale, importation, printing or publication of books and any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of paid advertisements." DHCcST 2. Chavez v. Public Estates Authority, G.R. No. 133250, May 6, 2003. 3. Taada v. Angara, G.R. No. 118295, May 2, 1997.