TARIFF 1- FUNDAMENTALS OF TARIFF SYSTEM

AND PRINCIPLES OF CUSTOMS ADMINISTRATION

COURSE DESCRIPTION
This course deals with the concept and principles of Tariff with emphasis on the Philippine Tariff
system and Tariff policy. This includes the profile of the Tariff Commission , its
organization, functions and jurisdiction as the main government agency tasked to formulate and
disseminate tariff laws, rules and regulations and its relationship with the private sector and other
government agencies
The study of origin of Tariff from Spanish regime to present stage and its principles.

ORIGIN OF TARIFFS
 Old Spanish coast of Tarifa
Tarifa- 21 miles from Gibraltar
Tariff Iban Malik- The town of Tarifa was named after him

TARIFF DISTINGUISHED FROM CUSTOMS

TARIFF- a term found in many languages, denotes the list of schedules of commodities with particular
duties o charges upon each.
- a tax or duty to be paid on a particular class of imports or exports.
- a tax imposed by a government of a country on imports or exports of goods
- a direct tax applied by the government on goods and services imported from or exported to a
different country.
Types of tariff applied by government:
1. Specific Tariff- fixed tariff that is applied to every unit of goods imported. The value for each
unit varies according to the type of goods being imported.
2. Ad Valorem Tariff- this is variable and is calculated by working out certain percentage of the
total value of the imported shipment.

CUSTOMS- is the English term which originally denoted all “customary” tolls or dues paid by
merchants upon commodities on their way to and from the market, not necessarily differentiated by
the class of goods.
- an indirect tax on a consumer who imports (and exports) goods, who then pass it on to
consumers. In the Philippines, it is levied by BOC.
MODERN CUSTOMS TARIFF AS DEFINED:
 Are a systematic arrangement of customs duties levied on goods when they cross the border of a
political unit.
 They are an official list of schedule setting forth the several customs duties to be imposed on imports,
exports on goods in transit.
Philippine Tariff Act of 1903- import tariff
ORIGIN OF CUSTOMS
Customs duties are mentioned in the Old Testament, but this method of collecting revenue may have been
the fashion long before its first authentic record.
The New Testament recites that Jesus called Matthew “from the receipt of the customs” which shows
That Matthew was probably at that time, a collector of tolls and customs duties of the the Sea of Galilee.
The term CUSTOMS came into official use at an early date in England, and has ever since been applied to
imports or taxes on imports.
IT WAS CUSTOMS:
 During the feudal ages, favored barons were granted the privilege to levy takes by the king.
 Customs became synonymous with tax levied, and the name has been continued under our tariff laws.
 Divine rights of kings
1. To raise a revenue by levying on the feudal lords
2. To enforce their decrees on the greater number and
3. To raise armed forces to sustain their orders, by punishing recalcitrant and to make conquest on other nobles
and kings to bring them into their orbits of influence.
PURPOSES OF TARIFFS:
4. REVENUE TARIFF- whose rate of duty are relatively low so that goods may be readily imported and duties
5. PROTECTIVE TARIFF- whose rates are relatively high to keep certain imports out of the domestic market or
to raise domestic price on certain imports so that they may be manufactured profitability at home
6. BARGAINING TARIFF- whose schedules include rates designed primarily for bargaining purposes or which
contain some general provision for the imposition of higher duties upon products of countries vision for the
imposition of higher duties upon products of countries whose tariff policies are considered unsatisfactory or
unfair
These three objectives may be combined in single tariff
 TARIFF AS IT HAS AFFECTED IN THE HISTORY OF THE PHILIPPINES
I- Philippine Foreign Trade during the Pre- Spanish Period
Long before the history of the Philippines by Magellan, the ancient Filipinos were already trading with China,
Japan, Thailand, Cambodia and other neighboring islands
An interesting Spanish document of 1586 narrated that they “are keen traders and have traded with China for many
years
The customary way of trading with other people was by barter
CHAO JU- KUA and WANG TAY- UAN- The Chinese writers who observed that the ancient Filipinos were honest
in the commercial dealings
II- During the Spanish Period
ALMOJARIFAZGO- 3% ad valorem duty
1573- Philippine customs house was established in Manila by Governor Guido R. Lavizares
Gonzalo Ronquillo de Penalosa- the fourth Spanish governor- general to impose almojarifazgo in 1582
Duty in Chinese goods was increased to 6% in 1606
It was not until more than two and half centuries later that other ports of the archipelafo were opened for foreign
commerce.
Zamboanga was opened in 1833, Cebu 1842, Iloilo and Sulu 1855, and Legazpi and Tacloban in 1874
1834- Philippine trade was opened for the world and ships other than those of Spain permitted to share in
Philippine commerce
1779- the customs house became distinct department
1805- the customs house was made an independent branch of treasury
Prior to 1734, values were assessed by a board composed of a royal officer and two merchants with royal
fiscal as intervenor
Junta de Valoraciones- permanent board of valuation in 1734, abolished in 1782
Junta de Aranceles- tariff board in 1828
 To increase revenue
 To protect the agriculture and arts of the islands, and
 To expand foreign commerce
Trade during the interim was in the hands of Compania Real de Filipinas
On January 1, 1832 a new tariff which was drafted by the tariff board created in 1828 was adopted. Like
its predecessor it provided from the arbitrary valuation. This tariff was in effect until April 1891
III- During the American Occupation
August 21, 1898- Manila customs house was actually re opened for business
William McKinley- issued an executive order providing for a tariff duties and taxes to be imposed as
military contribution and to take effect and be in force in the ports and places of the Philippiness
occupied by the American forces
September 17, 1901- The Philippine Commission passed Act No. 230 which was initiated a general
revision of the tariff
The Fourteen Diamond Ring and Its Aftermath
Emil J. Pepke- United States citizen in the service of the American Armed Forces, brought with him
which he acquired in the Philippines and fourteen diamond rings
Treaty of Paris- Agreement signed between the United States and Spain on April 10, 1898
Establishment of Free Trade
August 5, 1909- date of approval of Payne- Aldrich Tariff Act and take effect the following day
Philippine manufactured products were allowed duty free entry into the US except rice.
The American Opposition To Free- Trade:
- Free trade would not be in the interest in the Philippines
Senator Elihu Root- declared that secure their or for the US undue advantage over the weak people of
Philippine Islands
Senator Tom F. Core- believe that the real beneficiary will be the American rather than the Filipinos
October 3, 1913- passage of Underwood Tariff Law which take effect the following day
Underwood Tariff Law- this act of the US Congress constituted the final step in the establishment of free
trade between Philippines and the US
Under the Jones Law
On August 29, 1916, the US made a manifest its desire to grant independence to the Philippines as soon as
stable government could be established in the country. It does provided for more autonomous government for
the Philippines
Fordney- McCumber Tariff Law- Known as the United States Tariff Act of 1922
Hawley- Smooth Tariff Law- known as the United States Tariff Act of 1930
- re enacted the free trade relationship between the Philippines and the United States
During the Commonwealth Period:
March 24, 1934- passage of the Tydings- Mcduffie Law
- made more concrete and definite the commitment of the US with respect to the grant of
Philippine Independence
- destroyed the reciprocal nature of free trade relations
The Aftermath of Free Trade
Free trade with the US brought about beneficial and detrimental consequence to the Philippine economy
Passage of the Tariff legislation for the Philippines by the United States Congress was motivated by three
important reasons namely:
1. To provide revenue with which to support Philippine government budgetary requirements
2. To promote the economic development of the Philippines
3. To promote American interest by increasing the margin of preference for the American products
After Independence:
July 4, 1946- Philippine Republic Day, also known as Philippine- American Friendship Day
 The Philippines formally achieved its independence from the US
American Aid and the 1946 Trade Agreement with the United States:
War Damage Act- Philippine Rehabilitation Act of 1946
- this act would bring millions of the US dollars for the rehabilitation and construction of the
country
Bell Trade Act- Philippine Trade Act of 1946
- this act contains specific provisions on the terms which could govern the trade and other
relationships between the Philippines and US from July 4, 1946 to July 3, 1974
- it provides for 8 years of duty- free trade between the two countries commencing from July 4,
1946 and twenty years of preferential trade relationship starting from July 1954
Tariff Provisions of the Laurel- Langley Agreements
 This agreement tried to correct the inequality under the Bell Trade Act by providing for the
accelerated imposition of Philippine duties on United States articles
 Contains also other provisions which will directly help the Philippines protect its domestic
industries and develop its economy in general. There I a provision in the agreement regarding the
imposition of Special Import Tax. The special import tax is intended to supersede the excise tax of
17% on sales of foreign exchange. The import tax is levied only on visible items of trade.
- The provision of the 1946 Trade agreement relating to limitation of the Philippine Government with
respect to the administration and control of the nation’s currency as well as the provision on
immigration have been eliminated.
CONSTITUTIONAL PROVISIONS AFFECTING TARIFF
There are three provisions in the Constitution of the Philippines specifically mentioning tariff as follows:
1. All tariff bills shall originate exclusively in the House of Representatives, but the senate may propose or
concur with amendments.
2. The President shall have the power to veto any separate item or items in the tariff bill, and the item or
items vetoed shall not take effect except in manner provided as to bills effect except in manner provided as to
bills vetoed by the President.
3. The Congress by law authorize the President, subject to such limitations and restrictions as it may impose
to fix, within specified limits, tariff rates.
TO IMPORT IS NOT A RIGHT BUT A PRIVELEGE
To import merchandise is a right reserved under the Constitution to any individual or group, but a privilege
which may be granted exclusively by the Congress. Accordingly, the right of individual to import
merchandise does not flow from citizenship, residence of Constitutional authority. Importing may be allowed
only by the Congress through legislative process, subject to such limitation as are placed thereon by congress
in enacting the legislation. Only Congress may grant the privilege to import merchandise.