Wednesday, August 31, 2005

Duty-free goods illegal

By Elaine Ruzul S. Ramos

The Supreme Court has ruled that imported consumer goods bought from Subic Special Economic and Free Port Zone (SSEFPZ) and Clark Special Economic Zone (CSEZ) are no longer duty-free once brought to other parts of the country.

This means imported goods must be consumed or used up within the ecozones and slapped with pertinent duties once brought outside the ecozones.

In a 32-page decision dated July 29, 2005, the Supreme Court en banc voided the second sentences in paragraphs 1.2 and 1.3 of Executive Order 97-A, which allows tax and duty-free removal of goods to certain individuals, even in a limited amount ($100 per month for resident and $200 per year for nonresident). It said the provisions violated Section 12 of Republic Act 7227, or the Bases Conversion and Development Act of 1992.

The high tribunal said RA 7227 expressly provided that “exportation or removal of goods from the territory of the Subic Special Economic Zone to other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines.”

The high court in the same case declared null and void Section 5 of Executive Order 80 and Section 4 of the Bases Conversion Development Authority (BCDA) Board Resolution 93-05-034 for being “an invalid exercise of executive legislation.”

EO 80, issued by then President Fidel Ramos, virtually gave Clark SEZ the same incentives granted by RA 7227 to Subic. The BCDA, taking its cue on EO 80, passed Board Resolution 93-05-034, allowing the tax and duty-free sale at retail of consumer goods imported via Clark for consumption outside the ecozone.

Citing the earlier case of John Hay Peoples Alternative Coalition versus Victor Lim, the high court resolved that RA 7227, which granted the incentives to Subic special ecozone, could not be applied to Clark since the law failed to make any similar grant in favor of other ecozones.

As such, there is no legal basis to uphold the granting of the same incentive, since tax and duty-free incentives should be categorically and unmistakably expressed from the language of the statute.

In view of the SC decision, no imported goods regardless of quantity can be brought out of Subic and Clark without paying the proper taxes and duties. The court virtually declared illegal the practice of allowing 15 years old and above to buy $100 and $200 worth of goods and bring them outside the economic zone tax- and duty-free.

Federation of Philippine Industries (FPI) president Jesus Arranza said the ruling favors local manufacturers.

“This landmark decision will level the playing field between local manufacturers and importers located in the Subic and Clark special economic zones,” said Arranza.

The court issued the ruling in response to a petition filed jointly by the Coconut Oil Refiners Association Inc., Philippine Association of Meat Processors Inc., Federation of Free Farmers and Bukluran ng Manggagawang Pilipino questioning the operation of tax and duty-free shops located at the Subic and Clark ecozones.

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