By Ravelo Logistics · Licensed Customs Broker
The New Importer's Complete Guide to Philippine Customs
Everything a first-time corporate importer needs to know — Incoterms explained, why shipments get flagged red, duties decoded, and the mistakes that cost companies millions.
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Chapter 1
Incoterms — Who Pays What, and When
Incoterms (International Commercial Terms) define who — buyer or seller — is responsible for costs, risk, and logistics at each stage of a shipment. Getting this wrong means paying for things you shouldn't, or leaving yourself exposed.
E Group — Departure
Seller's minimum obligation. Buyer takes almost all responsibility.
EXW
Ex Works
Seller
Buyer handles everything else
Seller makes goods available at their premises. The buyer handles ALL logistics — pickup, export clearance, freight, insurance, import customs, and delivery. Maximum risk for the buyer.
Buyer pays freight
Buyer clears customs
Seller just packs
Buyer Risk
Very High
Common in: Local sourcing, small suppliers who don't handle exports. Avoid this if you're new — too much falls on you.
F Group — Main Carriage Unpaid
Seller delivers to carrier. Buyer pays main international freight.
FOB
Free On Board
Seller → Port
Buyer → Ocean → PH
Seller delivers goods on board the vessel at the origin port. Risk transfers the moment goods cross the ship's rail. The buyer pays for ocean freight, insurance, and Philippine import costs.
Seller: packing + export + load
Buyer: freight + insurance + PH customs
Buyer Risk
Medium
Most common for PH importers. You control the freight cost and can choose your own forwarder and insurance. Widely used for sea shipments.
FCA
Free Carrier
Seller → Carrier
Buyer → Destination
Seller delivers goods to a named carrier or another nominated party at a named place. Used for any mode of transport including air freight and container shipments. Risk transfers at delivery to carrier.
Seller: export clearance + deliver to carrier
Buyer: main freight + import clearance
Buyer Risk
Medium
Preferred for air freight. More flexible than FOB — risk transfers at a specific named point, not just "on board."
FAS
Free Alongside Ship
Seller → Alongside
Buyer → Load + Freight + PH
Seller delivers goods alongside the vessel at the named port. The buyer takes over from that point — loading, freight, insurance, and import. Used mainly for bulk cargo like raw materials.
Seller: deliver to quayside
Buyer: loading + everything after
Buyer Risk
Medium-High
Rarely used unless you're importing bulk commodities like grain, coal, or steel. Not practical for manufactured goods.
C Group — Main Carriage Paid
Seller pays freight but risk transfers before destination.
CFR
Cost and Freight
Seller pays freight to PH Port
Buyer: import
Seller pays for freight to the destination port BUT risk transfers to the buyer once goods are loaded on the vessel at origin. No insurance included — buyer is at risk during transit without coverage.
Seller: export + freight to Manila/Cebu
Buyer: insurance + import clearance
Buyer Risk
Medium
Watch out: Seller controls freight booking — they may choose cheaper, slower options. You bear the risk during transit with no insurance.
CIF
Cost, Insurance & Freight
Seller: freight + insurance to PH port
Buyer: import
Same as CFR but the seller also provides minimum marine insurance. Widely used but important to note: the insurance minimum (Institute Cargo Clause C) may not fully cover your cargo value. Always check the coverage.
Seller: freight + minimum insurance
Buyer: import duties + delivery
Buyer Risk
Low-Medium
Most common for PH importers buying from China. However — CIF value is what BOC uses to compute your customs duties. Higher CIF = higher taxes.
CPT / CIP
Carriage Paid To / Insured
Seller: to named destination
Buyer: import
CPT — Seller pays freight to named destination. CIP — Same plus insurance. Both are used for multimodal transport (air + truck combinations). Risk transfers to buyer at origin carrier, not destination.
Seller: freight (and insurance for CIP)
Buyer: import duties + final delivery
Buyer Risk
Low-Medium
Used for air freight and multimodal. CIP has broader insurance coverage than CIF — better for high-value goods.
D Group — Destination / Seller Delivers
Seller bears maximum responsibility all the way to buyer's country.
DAP
Delivered at Place
Seller handles almost everything
Buyer: import only
Seller delivers goods to a named place in the buyer's country — ready for unloading. Seller pays all costs and risks up to that point. Buyer only handles import customs clearance and duties.
Seller: all freight + delivery to named place
Buyer: import clearance + duties
Buyer Risk
Low
Good for beginners — less you need to manage. But seller controls freight costs, so the price quoted may be inflated to cover their logistics margin.
DDP
Delivered Duty Paid
Seller does EVERYTHING
Rcv
Maximum seller obligation. The seller handles everything — export, freight, insurance, Philippine import customs clearance, duties, taxes, and final delivery to the buyer's door. Buyer just receives.
Seller: 100% of all costs and risks
Buyer: just receives the goods
Buyer Risk
Minimal
Sounds ideal but beware: Seller controls your customs broker. BOC may flag issues that hurt you but you have no control. Some sellers also overbill duties. Use only with very trusted suppliers.
DPU
Delivered at Place Unloaded
Seller: delivers + unloads
Buyer: import
Previously called DAT (Delivered at Terminal). Seller delivers AND unloads goods at the named place. Unique — seller bears the risk and cost of unloading. Buyer handles import clearance from that point.
Seller: all freight + unloading
Buyer: import clearance + duties
Buyer Risk
Low
New in Incoterms 2020. Rarely used in PH context but growing for port-to-port terminal deliveries. Useful for bulk shipments arriving at container yards.
Chapter 2
Why Shipments Get Flagged Red
Philippine customs (BOC) assigns every shipment a lane color. Green means go. Yellow means document check. Red means physical examination — and days or weeks of delay. Here's what triggers it.
Green Lane
Auto-released. Documents are clean, importer has good compliance history, HS codes are correct. No examination needed.
Released: Same day
Yellow Lane
Documentary check required. BOC reviews all submitted documents — invoice, packing list, Bill of Lading, permits. No physical exam.
Released: 1–3 days
Orange Lane
Medium- to high-risk cargoes subjected to mandatory X-ray scanning under the URMS. If the scan image is found suspicious, the shipment escalates to full physical examination. Activated via BOC memo, September 15, 2020.
Released: 2–7 days
Red Lane
Full physical examination. BOC opens and inspects the actual cargo. Everything stops. Storages fees begin accumulating immediately after consuming the free time.
Released: 5–30+ days
The 12 Triggers That Get You Red Laned
Wrong HS Code
The Harmonized System code on your import declaration doesn't match the actual goods. Even 1 digit wrong can trigger examination and penalty surcharges.
Use a licensed broker to verify HS classification before filing.
Undervaluation of Goods
The declared invoice value is significantly lower than the BOC's reference price or transaction value benchmarks. Common with goods from China where fake invoices are sometimes used.
Always declare the true transaction value. BOC cross-checks against global price databases.
Mismatch: Documents vs Cargo
The description, quantity, or weight on your packing list and invoice doesn't match what's physically in the container. Even minor discrepancies flag the system.
Verify packing list against actual shipment before the vessel departs.
Missing or Invalid Permits
Regulated goods (food, chemicals, machinery, electronics) require permits from FDA, DENR, BOI, or other agencies BEFORE arrival. Arriving without these = automatic red lane.
Secure all required permits before the shipment departs origin country.
Prior Non-Compliance History
If your company or accredited importer account has previous violations — past red lanes, penalties, or warnings — BOC flags future shipments automatically. Your risk profile follows you.
Maintain a clean compliance record. Every violation raises your risk score.
Incomplete Import Entry
Missing fields, incorrect tariff headings, or incomplete declarations on the Single Administrative Document (SAD) trigger automatic review and physical exam.
Have your broker double-check every field before submission — errors cannot be uncorrected once filed.
First-Time Importer / New Accreditation
New importers with no track record are automatically flagged for physical examination on their first several shipments. BOC needs to verify your business and goods are legitimate.
Expect red lane for your first 3–5 shipments. Build compliance history consistently.
Suspicious Commodity / Intelligence Alert
BOC intelligence units flag specific commodities, shipping routes, or suppliers based on national security, anti-smuggling, or tax evasion alerts. You may be caught in a net that isn't about you.
Work with a broker who monitors BOC commodity watchlists and advisories.
High-Risk Origin Country
Shipments from countries flagged by BOC for high smuggling or misrepresentation risk undergo stricter scrutiny. Certain origin + commodity combinations are near-automatic red lanes.
Know your supplier's country risk profile. Extra documentation helps pre-empt flags.
Statistical Selectivity System
BOC's e2m (Electronic- to- Mobile) System uses random and risk-based selection algorithms. Even clean shipments can get red-laned as part of random compliance checks — especially for rarely imported commodities.
You can't avoid this entirely, but clean documentation means faster release even in red lane.
Overpackaging / Concealment Indicators
If your container has unusual weight-to-volume ratios, excessive inner packaging, or manifest anomalies, the system flags potential concealment of undeclared goods.
Ensure accurate gross and net weight declarations. Never consolidate undeclared items.
Importer Not Accredited / Lapsed Accreditation
Importing under a lapsed BOC importer accreditation, or through a company not properly registered with BOC, results in immediate hold and potential forfeiture proceedings.
Renew your BOC accreditation before expiry. Keep all registrations current.
Chapter 3
The Key Terms Every Importer Must Know
Your broker speaks this language daily. You should too.
HS Code
Harmonized System Code
An internationally standardized 6–10 digit code that classifies every product traded globally. It determines your duty rate. Wrong code = wrong duty rate.
8482.10 = Ball bearings. 8443.31 = Printing machines.
Landed Cost
Total Cost of Imported Goods
The complete cost of getting goods to your warehouse — product cost + freight + insurance + customs duties + taxes + brokerage fees + trucking. What you actually pay, not just the invoice.
₱100,000 product + ₱15,000 freight + ₱20,000 duties = ₱135,000 landed cost.
BOC
Bureau of Customs
The Philippine government agency responsible for regulating all imports and exports. They assess duties, enforce trade laws, and release cargo. All clearance goes through BOC.
BOC Port of Manila, Port of Cebu, NAIA — each handles their zone's cargo.
Bill of Lading
B/L
The most important shipping document. It's a receipt from the shipping line that goods were loaded, a contract of carriage, and the title document to your goods. You need the original to claim cargo.
Original B/L is surrendered to release the container. Telex B/L allows electronic release.
Airway Bill
AWB
Equivalent of a Bill of Lading but for air freight. Unlike B/L, it is a non-negotiable document — you don't need the original to claim goods, just your company ID and authorization.
DHL AWB 1234567890 — used to track and claim air shipments.
Demurrage
Container Detention Fee
Daily fee charged by the shipping line when you exceed the free period to pick up and return the container. Starts automatically after free days (usually 5–7) expire. Can accumulate very quickly.
₱3,000/day × 14 days of red lane = ₱42,000 surprise cost on top of duties.
SAD
Single Administrative Document
The official customs declaration form filed through the e2m (Electronic- to- Mobile) System. Contains all details of the shipment — importer, consignee, goods description, HS code, values, duties computation.
Filed by your broker before cargo arrives. Errors here trigger yellow or red lane.
SDV
Supplemental Declaration on Valuation
In Philippine customs, the SDV is a mandatory document submitted to the BOC to verify the actual transaction value and origin of imported goods. It binds the importer under oath to prevent undervaluation, fraud, or tax evasion.
The valuation declared on the SDV determines the exact customs value used to calculate Customs Duties, Excise Taxes, and VAT.
Tariff Ruling
BOC Official HS Classification Decision and Circulation filed and issued by the Tariff Commission
An official BOC ruling that confirms the correct HS code and duty rate for a specific product. Once issued, it is binding and protects you from future reclassification. Can reduce duty rates significantly.
A raw materials importer got a tariff ruling reducing duty from 15% to 0%.
CIF Value
Cost, Insurance & Freight Value
The basis BOC uses to compute customs duties. Even if you shipped under FOB terms, BOC converts it to CIF for duty calculation. Higher CIF = higher duty base.
FOB value ₱500,000 + freight ₱50,000 + insurance ₱5,000 = CIF ₱555,000 for duty computation.
VAT on Importation
12% on Dutiable Value + Customs Duty
On top of customs duties, the Philippines charges 12% VAT on the dutiable value (CIF + customs duty). This is separate from your business VAT — it's paid at the port before release.
CIF ₱555,000 × 10% duty = ₱55,500 duty. Then 12% VAT on ₱610,500 = ₱73,260 VAT.
Packing List
Detailed Cargo Contents Document
Document issued by the exporter listing every item in every box/pallet — quantities, weights, dimensions, marks. BOC compares this against what they physically find during inspection.
Must match the commercial invoice exactly. Discrepancies = red lane.
Chapter 4
The Step-by-Step Import Process
From purchase order to warehouse — what happens at each stage and what documents you need.
1
Pre-Shipment
Purchase Order & Pro-Forma Invoice
Agree on terms with supplier. Confirm Incoterms, price, quantity, and HS code. Verify you have all required import permits BEFORE placing the order.
Purchase Order
Pro-Forma Invoice
Required Permits
2
Shipment Booking
Freight & Insurance Arrangement
Book your freight forwarder (or let seller book if CIF/CFR). Arrange marine cargo insurance. Get vessel/flight booking confirmation and estimated arrival date.
Booking Confirmation
Insurance Certificate
3
Departure
Supplier Ships — Documents Issued
Supplier loads cargo. Shipping line issues Bill of Lading. Supplier sends you the full document set within 3–5 days of departure.
Bill of Lading / AWB
Commercial Invoice
Packing List
Certificate of Origin
Verify ALL documents immediately — errors are easier to fix before the vessel arrives.
4
Pre-Arrival
Broker Files Import Entry with BOC
Your customs broker lodges the import entry (SAD) in e2m (Electronic- to- Mobile) System before the vessel arrives. BOC's risk management system assigns a lane — green, yellow, or red.
SAD / SDV
CETA / Permits
5
Arrival & Clearance
Vessel Arrives — Duties Assessed
BOC assesses duties and taxes. Your broker pays on your behalf. If yellow lane: document review. If red lane: physical inspection. Storage fees start from date of discharge.
Duty Payment
VAT Payment
Every day in port costs you money — storage, demurrage, and handling fees accumulate daily.
6
Release
Gate Pass Issued — Cargo Released
BOC issues the Gate Pass. Your broker coordinates with the arrastre and trucking company. Container is hauled to your warehouse or unstuffed at the container yard.
Gate Pass
Delivery Receipt
7
Post-Clearance
Records & Compliance Filing
Keep all import documents for at least 3 years — BOC can conduct post-clearance audits (PCA) within that window. File IEIRD copies, update inventory records.
IEIRD Copy
All Original Docs
📋 Document Checklist
Always Required
✓ Commercial Invoice
✓ Packing List
✓ Bill of Lading / Airway Bill
✓ Insurance Certificate
Sometimes Required
◦ Certificate of Origin
◦ Bureau of Product Standards (BPS) Cert
◦ FDA / BFAD Import Permit
◦ DENR / EMB Clearance
◦ CITES Permit (wildlife / plant products)
◦ BOI / PEZA clearance (duty-free zones)
◦ MSDS/Cert. of Analysis (for chemicals)
⏰ Free Days — Know Your Deadlines
Container Line Free Days
Usually 5–7 days after discharge. After this: demurrage charges begin.
Port Storage Free Period
Arrastre gives ~5 days free. After this: storage fees accumulate per day per ton.
Abandonment Period
Goods unclaimed for 15 days are declared abandoned. BOC can auction them.
Chapter 5
Understanding Duties & Taxes
Customs duties are not the only thing you pay at the port. Here's every charge and how it's computed.
Customs Duty
AD VALOREM / SPECIFIC
The primary tax on imports. Computed as a percentage of the CIF value (dutiable value). Rates range from 0% to 30% depending on the HS code and AHTN tariff schedule.
📊 Formula: CIF Value × Duty Rate %
Pro tip: Correct HS classification is everything. A 2-digit difference can mean 0% vs 15% duty. Always get a Tariff Ruling for high-value goods.
Value Added Tax
VAT ON IMPORTATION
12% VAT applied to the dutiable value — that's CIF value PLUS customs duty. This is collected at the port, separate from your business VAT returns. Most importers can claim it as input VAT.
📊 Formula: (CIF + Duty) × 12%
Pro tip: VAT-registered companies can claim import VAT as input tax. But you must keep original import entries to support the claim.
Excise Tax
SPECIFIC GOODS ONLY
Applied only to specific goods — alcohol, tobacco, petroleum products, vehicles, and some non-essential goods. Rates are either specific (per unit) or ad valorem (% of value). On top of customs duty and VAT.
📊 Varies: ₱X per liter / unit or % of value
Examples: Cigarettes — ₱55/pack. Imported cars — 5%–50% depending on engine size. Always check if your goods are excisable.
Arrastre & Wharfage
PORT HANDLING CHARGES
Arrastre: fees for handling and moving cargo within the port terminal. Wharfage: fee for the use of the wharf/pier. Both are charged by the port authority and paid through your broker.
📊 Computed per ton / per container
Often overlooked in landed cost estimates. These add ₱5,000–₱20,000 per container depending on port and cargo type.
Brokerage Fees
CUSTOMS BROKER SERVICE FEE
Professional fee charged by your licensed customs broker for filing the import entry, coordinating with BOC, and managing the entire clearance process. Varies by broker and shipment complexity.
📊 Typically ₱5,300–₱15,000 per entry
Don't choose cheapest — a broker who files correctly saves you far more than their fee. Errors from cheap brokers can cost hundreds of thousands.
Trucking & Delivery
INLAND TRANSPORT
Cost to haul the container from port to your warehouse. Depends on distance, truck type (10-wheeler, trailer), and whether it's a full container (FCL) or loose cargo (LCL). Return of empty container included.
📊 ₱5,000–₱25,000 depending on route
Match truck to cargo. Using wrong truck size wastes money or damages goods. Ravelo coordinates the right vehicle for each shipment type.
📊 Sample Landed Cost Computation
Industrial machinery, CIF ₱500,000, 5% duty rate
*Excludes any storage/demurrage (if red laned) and excise taxes (if applicable). Correct HS classification on this item could reduce duty to 0% — saving ₱25,000.
Chapter 6
The 10 Mistakes New Importers Always Make
These are the real-world errors that cost companies millions — most of them entirely preventable.
01
Not Verifying HS Code Before Ordering
Most first-time importers just copy the HS code from the supplier's invoice — which is their country's classification, not the Philippine AHTN code. These can be completely different, leading to wrong duty rates and red lane.
Wrong HS code = wrong duty rate, potential penalties, and BOC seizure in extreme cases.
Consult a licensed customs broker to verify the correct Philippine AHTN HS code before placing your purchase order.
02
Ignoring Required Import Permits
Regulated goods need permits from FDA, DENR, BOI, DA-BAFE, or other agencies secured BEFORE shipment departure. Importers discover this only when cargo arrives — then it sits in port accumulating fees while they scramble for papers.
Cargo stuck at port: ₱3,000–₱10,000/day in demurrage + storage. Permit processing: 2–8 weeks.
Ask your broker: "Does this commodity require any import permit?" before booking the shipment.
03
Using the Cheapest Customs Broker
Choosing a broker solely on lowest fee is one of the costliest mistakes. Inexperienced brokers file incorrect entries, miss permit requirements, use wrong duty rates, and create compliance records that follow you for years.
A single filing error can trigger audits on ALL your previous importations — post-clearance audit window is 3 years.
Choose a broker on track record, HS expertise, and compliance history — not price.
04
Not Tracking Free Days for Containers
Most importers don't know they have only 5–7 free days to pick up the container before demurrage starts. If the shipment is red-laned, those days are eaten up before you can even touch the cargo.
₱3,000–₱8,000 per day per container. A 14-day delay = ₱42,000–₱112,000 in fees alone.
Get the vessel ETA from your broker immediately upon booking. Calendar your free day deadline.
05
Undervaluing Goods on the Invoice
Some importers ask suppliers to declare lower values on the invoice to reduce duties. This is smuggling by undervaluation — a criminal offense. BOC has global price databases and will catch significant undervaluation.
Penalties: 2x–4x the unpaid duties + imprisonment for the importer and broker of record.
Always declare the true transaction value. If you want lower duties, do it legally — via HS code optimization or Tariff Ruling.
06
No Marine Cargo Insurance
Importers under CIF terms assume the seller's included insurance is sufficient. Most CIF insurance is "minimum coverage" — it won't cover theft, water damage, or rough handling. A container lost at sea without proper insurance means total loss.
If a ₱2M shipment sinks or is damaged, minimum insurance may only cover ₱300,000.
Always get All Risk marine cargo insurance covering the full CIF value +10%.
07
Letting Suppliers Choose Everything Under DDP
DDP sounds convenient — seller handles everything. But you lose control of your customs broker, your freight rate, and your import entry. Some DDP sellers overbill duties, choose slow forwarders, or use brokers who file incorrectly.
You're liable for compliance issues in your name even though the seller's broker filed your entry.
Prefer FOB or FCA so you control your own logistics chain and compliance record.
08
Importing Without BOC Accreditation
First-time importers sometimes start importing before completing BOC importer accreditation, thinking it can be done after. Cargo arrives, no accreditation exists, and shipment is held indefinitely.
Cargo on hold. Legal complications. Possible forfeiture if resolution takes too long.
Complete BOC accreditation 30–60 days before your first shipment is scheduled to arrive.
09
Not Getting a Tariff Ruling for Recurring Imports
Companies that import the same commodity every month never get a Tariff Ruling. They're potentially overpaying duties on every single shipment — sometimes for years. A ruling takes weeks to obtain but saves money on every future shipment forever.
One importer paid 15% duty for 3 years. Ruling confirmed 0% was correct. Could have saved millions.
If you import the same goods regularly, apply for a Tariff Ruling immediately. The savings compound every shipment.
10
Poor Document Filing & Record-Keeping
BOC can conduct Post-Clearance Audits (PCA) on any importation within 3 years. Importers who lose or discard original documents cannot defend against reassessment — and may be forced to pay additional duties with penalties and interest.
Unsubstantiated PCA findings: payment of reassessed duties + 20% per year interest + surcharges.
Keep all import documents (IEIRD, invoices, B/L, packing lists, permits) for minimum 5 years in organized files.