DOJ Opinion No. 055, s. 2001

DOJ OPINION NO. 055, s. 2001 October 10, 2001 Commissioner Titus B. Villanueva Bureau of Customs Manila Sir : Reference is made to your request for legal opinion on the issue as to "whether DOJ Opinion No. 101 dated November 10, 1999 extend or can be made to apply to Used Tires brought into the country by a Customs Bonded Manufacturing Warehouse (CBMW) to be manufactured into recapped/retreaded tires and subsequently to be re-exported." It appears that NSK International Tire Recapping Corporation ("NSK"), a Cebu based firm is applying for authority to establish and operate a Customs Bonded Manufacturing Warehouse (CBMW). Should the authority be granted, NSK intends to bring into the Philippines "used tires" from Japan to be manufactured inside the CBMW and re-exported as retreaded and recapped tires. You inform us that on January 18, 2001, then Customs Commissioner Renato Ampil ruled that used tires, "the basic raw material of the goods to be exported by NSK is a prohibited importation"; that earlier, on March 28, 2000, Director Florina A. Vistal of the Board of Investments (BOI) had informed the Bureau of Customs that NSK's importation of used tires may be allowed based on the aforesaid opinion of this Department; and that, subsequently, on March 22, 2001, the Customs Bonded Warehouse Committee (CBWC), the body tasked by the Bureau of Customs to handle all matters relative to warehousing, including the subject request of NSK, noted that DOJ Opinion No. 101 dated November 10, 1999 referred only to a shipment to be brought to an Export Processing Zone Authority [EPZA], now Philippine Economic Zone Authority [PEZA] registered firm. Hence, the query. Considering the antecedent facts herein, we shall treat this query as request for clarification of DOJ Opinion No. 101, dated November 10, 1999. DCAHcT At the outset, we confirm the observation of the CBWC that our aforesaid legal opinion (No. 101, s. 1999) refers to a shipment of goods to an industry or enterprise within the economic zone. The rationale for the ruling in said opinion that goods brought into the export processing zone are not deemed imported goods is that the area covered by the economic zone is outside customs territory as specifically provided in the laws creating the EPZA, the Subic Special Economic Zone and the PEZA. Accordingly, the bringing in of such goods to said area does not constitute importation for purposes of the Tariff and Customs Code. Section 17 of P.D. No. 66 (which created EPZA) provides as follows: "SEC. 17. Tax Treatment of Merchandise in the Zone . (1) Except as otherwise provided in this Decree, foreign and domestic merchandise, raw materials, supplies, articles, equipment, machineries, spare parts and wares of every description, except those prohibited by law, brought into the zone to be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed, manipulated, manufactured, mixed with foreign or domestic merchandise or used whether directly or indirectly in such activity, shall not be subject to customs and internal revenue laws and regulations nor to local tax ordinances, the provisions of law to the contrary notwithstanding." (Emphasis supplied) Section 12(b) of Republic Act No. 7227 states that: "Section 12. Subic Special Economic Zone . . . . (b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty free importations of raw materials, capital and equipment." . . . (Emphasis supplied.) Section 4 (c) of Republic Act No. 7916 (the Special Economic Zone Act of 1995) defines an export processing zone as "a specialized industrial estate located physically and/or administratively outside customs territory, predominantly oriented to export production. Enterprises located in export processing zones are allowed to import capital equipment and raw materials free from duties, taxes and other import restrictions ." (Emphasis supplied). HDTCSI It is worthy to note that both Opinion No. 101, s. 1999 and the opinion cited therein (No. 95, s. 1994), resolved issues involving the bringing into the export processing zone by a registered firm/locator of goods to be used by such registered firm/locator in his business enterprise within the zone. Otherwise stated, the ruling in Opinion No. 101, s. 1999 applies if articles are brought into the economic zone since there is technically no importation to speak of in that case considering that an economic zone is "outside customs territory" or "operated and managed as a separate customs territory". However, if the goods are brought into the Philippines and outside an economic zone, there is deemed to be importation within the coverage of the Tariff and Customs Code. Please be advised accordingly. Very truly yours, (SGD.) HERNANDO B. PEREZ Secretary