REPUBLIC OF THE PHILIPPINES DEPARTMEN;T OF FINANCE BUREAU OF CUSTOMS MANILA 1099

August 10, 1993

CUSTOMS ADMINISTRATIVE ORDER NO. 04-93

SUBJECT: Rules and Regulations Ior Customs Operations in the Subic Special Economic and Freeport Zone

TO:All collectors oI customs, service chieIs Division chieIs and others concerned

AUTHORITY: Pursuant to the provisions oI the Revised Administrative Code oI 1987 in relation to Sections 12 & 13 oI the Republic Act No.7227 and the TariII and Customs Code oI the Philippines (TCCP), as amended, the Iollowing Rules and Regulations are hereby promulgated.

CHAPTER I: DEFINITIONS

A. The Iollowing terms used in these Rules and Regulations are hereby deIined asIollows:

1. ACT - Republic Act No.7227 otherwise known as the Bases Conversion and Development Act oI 1992.

2. ARTICLES - Ior purposes oI these Rules and Regulations, any goods, wares, merchandise and in general, anything that may, under the TariII and Customs Code oI the Philippines, as amended, be made the subject oI importation or exportation.

3. CONTAINER - the outer container in which merchandise is held Ior storage or transportation, and not an intermodal container covered by the Customs Convention on Containers done at Geneva on December 02, 1972, unless otherwise indicated.

4. CUSTOMS - means the Philippine Bureau oI Customs.

5. CUSTOMS TERRITORY - the portion oI the Republic oI the, Philip pines where the customs laws are in Iorce andeIIect, WHICH IS separate Irom the Zone.

6. DOMESTIC ARTICLES - articles which are the growth, product, or manuIacture oI the Philippines on which all national internal revenue taxes have been paid, iI subject thereto, and upon which no drawback or bounty has been allowed; and articles oI Ioreign origin on which all duties and taxes have been paid and upon which no drawback or bounty has been allowed, or which have previously been entered into Customs Territory Iree oI duties or taxes.

7. FOREIGN ARTICLES - articles oI Ioreign origin on which duties and taxes have not been paid, or, iI paid, upon which drawback or a bounty has been allowed, or which have not previously been entered into Customs Territory; or articles which are the growth, product, or manuIacture oI the Philippines on which not all national internal revenue taxes have been paid, iI subject thereto, or iI paid, upon which drawback or a bounty has been allowed.

8. PERSON - a natural person, and not a juridical person, who brings merchandise into, possesses merchandise in, or takes merchandise Irom, the Secured Area oI the Zone, whether or not the person is a resident oI the Zone.

9. POINT OF ENTRY OR EXIT - any place designated by the Subic Bay Metropolitan Authority (SBMA) and the Bureau oI Customs, Department oI Finance, where articles may be lawIully introduced into or removed Irom theSecured Area oI the Zone, or any area to which duty and tax Iree beneIits are limited by the SBMA pending the establishment oI a secure perimeter around the Zone. However, the Port/Airport oI Entry Ior the importation and exportation oI Ioreign articles INTO/FROM THE ZONE IN ACCORDANCE WITH THIS ADMINISTRATIVE ORDER shall be the premises declared by the President oI the Republic oI the Philippines as International Port/Airport oI Entry and where the Customs house shall be located.

10. REGISTERED ENTERPRISE - any sole proprietorship, partnership, corporation or entity registered with the SBMA to do business in the Secured Area oI the one, whether or not Ior proIit.

11. RULES AND REGULATIONS - unless otherwise speciIied, the regulations issued by the SBMA to implement Republic Act No.7227, other wise known as the Bases Conversion and Development Act oI 1992

12. RESIDENT - any person who is registered and authorized by the SBMA to establish and maintain a personal residence in the Secured Area oI the Zone.

13. RETAIL SALE - the sale oI articles in the Secured Area oI the Zone, in small quantities to a person Ior his or her own personal use and account and not Ior resale.

14. SUBIC BAY METROPOLITAN AUTHORITY (SBMA) - is the Authority established and authorized by Section 13 oI Republic Act No.7227, otherwise known as the Bases Conversion and Development Act oI 1992.

15. ZONE - the Subic Special Economic and Freeport Zone, (SSEFZ) outside the Customs Territory and the authority oI the customs laws, consisting oI the City oI Olongapo and the municipality oI Subic, Province oI Zambales, the landsoccupied by the Subic Bay Naval Base and its contiguous extensions, embraced, covered, and deIined by the 1947 Philippine - U.S. Military Base Agreement, whose metes and bounds shall be delineated in a Proclamation to be issued by the President oI the Republic oI the Philippines.

16. SECURED AREA - cognizant oI the vast expanse oI the Zone and the initial absence oI a secure perimeter around it, there is designated, a secured area consisting oI the, presently Ienced-in Iormer Subic Naval Base which shall be the only completely tax and duty-Iree area in the Zone and within which there shall be a Iree and unimpeded Ilow oI goods and merchandise Irom one registered enterprise to another or to residents and along the boundaries oI the area shall be set up a Customs checkpoint through which goods authorized to leave or enter the area Ior some destination inside or outside the Zone must pass; the boundaries oI the secured area may be readjusted Irom time to time jointly by the SBMA and the Department oI Finance as the requirements oI the business in the Zone may demand or permit.

GENERAL PROVISIONS

A. AUTHORITIES AND RESPONSIBILITIES

1 AUTHORITY OF SBMA

The SBMA is responsible Ior the operation and management oI the Secured Area oI the Zone, as provided in Section 12 oI the Act, the Rules and Regulations, its Manual oI Operations and the provisions oI this Administrative Order; and is authorized to carry out the powers and Iunction enumerated in Section 13 oI the Act, its Rules and Regulations, its Manual oI Operations and the provisions oI this Administrative Order.

2.AUTHORITY OF CUSTOMS

Customs in the Secured Area oI the Zone shall, as a unit oI the Bureau oI Customs, Department oI Finance working in coordination with the SBMA, be responsible Ior a. supervising and administering Customs operations involving the admission oI articles to the Secured Area oI the Zone, the removal oI articles Irom the Secured Area oI the Zone, and other CUSTOMS operations as determined by the Commissioner oI Customs in coordination with the Administrator oI the SBMA; and

b.establishing and maintaining oIIices within the Secured Area oI the Zone wherever necessary to eIIiciently conduct customs operations. To enable Customs to perIorm the above Iunctions, the bringing out oI the goods Irom the Secured Area to a Registered Enterprise/sub-contractor located within the Zone shallrequire written permission Irom the Collector oI customs assigned to the Zonewhich shall be monitored until the same shall have been returned to the Secured Area. A Customs checkpoint at the boundary or boundaries oI the Secured Areahall be set up by Customs Ior the purpose.

B. AUDIT, SEARCH, SEIZURE AND ARREST IN ZONE

1. AUDIT

OIIicials oI the SBMA and Customs are authorized to JOINTLY con duct, at any time during oIIice hours, any audit, check, or inventory count Ior the veriIication and reconciliation oI the accounts or records oI any Registered Enterprise in the Zone.

2. SEARCH

Person, baggage, vehicles and cargo entering or leaving the Secured Area oI the Zone are subject to search by Customs as a condition to enter or leave the Secured Area. Customs oIIicials may, only upon speciIic authority oI the Commissioner oI Customs or the District Collector DESIGNATED BY HIM and with the assistance and in the presence oI SBMA oIIicials or representatives, examine any article held in the Secured Area oI the Zone by any Registered Enterprise, or by any Zone resident when a member oI the household is at home, Ior possible violation(s) oI Section 101 oI the TariII and Customs Code oI the Philippines and the pertinent provisions oI this Administrative Order; provided, that the constitutional requirements Ior Search are met.

3. SEIZURE

Any prohibited or excluded articles Iound upon search, or through any examination, audit or check oI articles in the Zone by Customs may be seized by customs Ior violations oI TariII and Customs Code oI the Philippines as amended and disposed oI in accordance with law.

4. ARREST

The SBMA shall, upon request oI the Commissioner oI Customs or the District Collector DESIGNATED BY HIM, and in coordination with Customs oIIicials, arrest persons in the Zone Ior violation oI the TariII and Customs Code Ior which arrest is authorized under the law; provided, however, that Customs may arrest persons who violate the TariII and Customs Code oI the Philippines upon entering or leaving the Secured Area oI the Zone.

C.RECORD KEEPING

Registered Enterprises bringing articles into the Secured Area oI the Zone are responsible Ior retaining and maintaining records oI permits, receipts, sales transIer, deliveries, and removals Irom Zone oI articles received by the Enterprise, and Ior maintaining accounts and inventory records oI articles brought into the Zone on a current basis and according to the regulations and the generally-recognized accounting principles and standards oI the Republic oI the Philippines. The records shall provide an audit trail oI the articles Irom the time oI their receipt by the Registered Enterprise to the time the Registered Enterprise is relieved oI responsibility Ior the articles according to the Rules and Regulations and the provisions oI this Administrative Order such records shall be retained Ior Iive (5) years aIter the removal oI the articles Irom the Secured Area oI the Zone. II the record keeping system oI the Registered Enterprise has become impaired to the point where no eIIective check, audit, or count oI the inventory oI the Enterprise can be made by the SBMA, Customs, Bureau oI Internal Revenue, Economic Intelligence and Investigation Bureau (EIIB), or other authorized oIIice, the SBMA may order a suspension oI permit oI the Enterprise shall provide access to articles in their premises and in their possession in the Zone, and to records pertaining thereto, which they are responsible Ior maintaining under the Rules and Regulations, SBMA's Manual oI Operations and the provisions oI this Administrative Order by authorized oIIicials oI the SBMA, Bureau oI Internal Revenue, or any other government agency to which access is authorized by law and regulation.

D.VESSELS, AIRCRAFTS AND VEHICLES ARRIVING IN ZONE

1 IN GENERAL

Regulations and procedures Ior the arrival Iormalities and clearance oI vessels and aircraIt in the Zone shall be the same as those observed in the Customs Territory Vehicles which are brought into the Zone Iree oI duties and taxes Ior use in the Zone shall become subject to duties and taxes upon transIer to Customs Territory Ior consumption; provided, that the SBMA and Customs, in coordination with the Land Transportation OIIice (LTO) oI the Department oI Transportation and Communications (DOTC) shall Iormulate separate rules and guidelines on the registration and use oI imported vehicles within and outside the Zone.

2. BONDING OF CARRIERS

Carriers who undertake to transship Ioreign articles Irom the Secured area oI the Zone to a Customs Bonded Warehouse within the Customs Territory shall be bonded in an amount to be determined by the SBMA which in no case shall be less than FiIty Thousand Pesos (P50,OOO.OO), conditioned that the carrier shall transport and deliver, without delay, and in accordance with the rules and regulations in eIIect in the Customs Territory, to the Collector oI Customs at the port oI destination orexport. The provisions oI the TariII and Customs Code, as amended, and itsimplementing regulations shall govern the transshipment oI Ioreign articles to and/orIrom Secured Area oI the Zone.

E. IMPORTATIONS OF RAW MATERIALS, CAPITAL GOODS, EQUIPMENT AND CONSUMER ITEMS INTO THE SECURED AREA

1. IN GENERAL

Business enterprises and registered residents (Filipinos and Ioreigners) in the Secured Area are Iree to import raw materials, capital goods, equipment and consumer items tax and duty-Iree, but consumer items must be consumed within the Secured Area. Removal oI raw materials, capital goods, equipment and consumer items out oI the Secured Area Ior sale to non-Zone registered enterprises shall be subject to the usual taxes and duties, except as may be provided herein. (Executive Order No. 97-A).

F. CONSUMER ITEMS IMPORTED INTO THE SECURED AREA

1. Residents oI the Zone lying outside the Secured Area can enter the Secured Area and consume any quantity oI consumer items in hotels and restaurants within the Secured Area. However, these residents can purchase and bring out oI the Secured Area to other parts oI the Philippine territory consumer items worth not exceeding US$100 per month per person. Only residents age 15 and over are entitled to this privilege.

2. Filipinos not residing within the Zone can enter the Secured Area and consume any quantity oI consumption items in hotels and restaurants within the Secured Area.However, they can purchase and bring out oI the SecuredArea to other parts oI the Philippine territory consumer item worth not exceeding US$200 per year per person. Only Filipinos age 15 and over are entitled to this privilege.

3. There shall be no pooling, tacking, or advance use oI the US$100 or US$200 entitlement which is a privilege similar to the entitlement enjoyed by returning residents who shop at existing government-owned tourists duty-Iree shops. (Executive Order No.97-A)

G.SALE OF CONSUMER ITEMS IN DULY AUTHORIZED DUTY-FREE SHOPS

1. The sale oI tax and duty-Iree consumer items in the Secured Area shall only be allowed in duly authorized duty-Iree shops.Duty-Iree shops shall be subject to the joint regulation oI Customs and the SBMA to insure proper accounting oI import and sales.

2. Foreign tourists, balikbayans and returning residents (Irom abroad) passing through the Secured Area shall be entitled to the same prevailing tax and duty Iree privileges they presently enjoy.However, the selling oI duty and tax-Iree goods to persons other than tourists, balikbayans and returning residents shall be HELD IN ABEYANCE pursuant to Executive Order No. 97-A until a control systems shall have been approved by the SBMA and Customs authorities as a condition precedent to a duty- Iree outlet being allowed to operate.

Duly authorized duty-Iree shops shall be subject to the joint regulation oI Customs and SBMA to insure proper accounting oI imports and sales, such regulations to be issued in a separate Customs Administrative Order. (Executive Order No. 97-A)

H.EXPORTATION TO ZONE AND IMPORTATION FROM ZONE

Articles which are admitted to the Secured Area oI the Zone Irom the Customs Territory which in turn are re-exported under proper permit shall be considered exported. Articles which are transIerred to Customs Territory Irom the Secured Area oI the Zone shall UNLESS OTHERWISE PROVEN be considered imported and thereIore, subject to all laws, rules and regulation regarding importations.

ADMISSION AND RECEIPT INTO ZONE

A. PROHIBITED MERCHANDISE

1. GENERAL

Any kind or class oI articles may be admitted into the Secured Area oI the Zone Irom a Ioreign country, the Customs Territory, or a Customs Bonded Warehouse or Export Processing Zone within the Customs Territory, except articles prohibited under the laws oI the Republic oI the Philippines.

2. ARTICLES NOT IN ACCORDANCE WITH PERMIT TO IMPORT

Articles brought into the Secured Area oI the Zone which are not in accordance with the permit to import issued by the SBMA to a Registered Enterprise or Resident shall be deemed importations contrary to law and shall be proceeded against pursuant to the provisions oI the TariII and Customs Code oI the Philippines and this Administrative Order.

B. IMPORTATION OF ARTICLES DESTINED FOR CUSTOMS TERRITORY

Foreign articles destined Ior the Customs Territory which arrive on a carrier landing in the Secured Area oI the Zone may be unladen in the Zone and held there pending completion oI requirements Ior entry and transshipment through the Zone to Customs Territory.Articles which have been released Ior transIer to Customs Territory shall be transshipped through the Zone under Customs supervision or control.

C.IMPORTATION AND TRANSSHIPMENT OF ZONE-DESTINED FOREIGN MERCHANDISE

1.TAX AND DUTY EXEMPTION

Importations destined Ior the Secured Area oI the Zone, either Ior direct unloading threat or through a port in the Customs Territory shall be exempt Irom payment oI all duties and taxes.

2.CONTAINER MARKING REQUIREMENT

Foreign articles destined Ior the Secured Area oI the Zone may be imported directly into the Secured Area oI the Zone or through any port in Customs Territory through which importations may be lawIully made. Except Ior Ioreign articles arriving by mail or accompanying persons upon their arrival, the containers bearing the Ioreign articles shall be marked SHIP to Subic Bay Freeport, "REPUBLIC OF THE PHILIPPINES" or with similar wording to show the Zone destination oI the articles.

3.TRANSSHIPMENT PROCEDURE

II the Ioreign articles were imported at port in the Customs Territory, the Registered Enterprise or its agent will present the admission documentation to Customs oIIice at the port oI importation. No other authorization or approval will be necessary Ior release oI the articles Ior transshipment to the Secured Area oI the Zone.

a.PROCESSING OF DOCUMENTATION

When the registered enterprise submits the admission documentation beIore arrival oI the articles, oIIicials oI Customs will accept, review and approve the documentation in advance oI the arrival.

The Customs OIIice shall review and authorize the release oI the articles within one (1) work day aIter receipt oI the required documentation, and provide rapid release privileges equivalent to those provided to perishable and other articles which are normally allowed to be removed Irom the port as soon as they are unloaded Irom the arriving carrier. Release oI the articles Ior transportation to the Secured Area oI the Zone shall be documented by authorized oIIicial oI Customs in writing on the admission documentation.

b.EXAMINATION AT PORT OF IMPORTATION

Except in unusual circumstances, OIIicials oI Customs will not inspect the articles at the port oI importation. The articles will remain unopened in the original packing containers and under Customs or the original shipper's seal. Customs will deviate Irom this policy only when there is a clear threat oI loss oI revenue or other serious law violations, and will document and explain its reasons Ior inspection to the SBMA and the Registered Enterprise.

D. ADMISSION PROCEDURE

1.RIGHT TO APPLY FOR ADMISSION

The application Ior admission oI articles to the Secured Area oI the Zone shall be made by or on behalI oI the owner or purchaser oI the articles. The consignee shown on the bill oI lading or air waybill, or the addressee shown on mail packages, will be considered to be the owner or purchaser, unless another person or Iirm presents evidence satisIactory to Customs that it is the true owner or purchaser, or that it is requesting admission on behalI oI and at the speciIic request oI the owner or purchaser. The application may be prepared by a person who has the authority tosign the documents on behalI oI the owner or purchaser. A resident in the Secured Area or other person having possession oI articles accompanying them upon arrival in the Secured Area oI the Zone shall be considered the owner or purchaser oI the articles.

2.ADMISSION FORM

The admission application oI Registered Enterprise (including small registered Enterprise), Residents in the Secured Area or other persons bringing articles into the Secured Area oI the Zone shall be made on Forms provided Ior and required by SBMA.The Iorms shall be prepared in the number oI copies required by Customs, and shall be presented at the location designated by Customs, normally the Customs oIIice nearest to the point oI arrival oI the carrier or person bringing the articles to the Secured Area oI the Zone.

3.ACCOMPANYING DOCUMENTS

The admission application to be prepared by Registered Enterprises (including small registered Enterprises) or Residents in the Secured Area shall be accompanied by the permit to import, a commercial invoice, packing list, or other itemized statement which describes the articles precisely and in commercial terms and serves as an audit trail into the records and accounts oI the applicant. II the applicant is not the person or enterprise shown as the consignee in the permit to import or other shipping documents, the admission application shall also be accompanied by evidence satisIactory to demonstrate that the applicant is making the application on behalI oI the eligible owner or purchaser.

4.CUSTOMS REVIEW PROCEDURE

Customs oIIicials shall review the admission documentation and, iI necessary, examine the articles, to veriIy the correctness oI the inIormation in the documentation.

a.Customs will review the admission documentation Ior complete ness and accuracy. A copy oI the admission application shall be retained by Customs Ior compilation oI statistics.

b.Customs will examine the articles as a condition oI approving admission only (1) when the Commissioner or Collector oI Customs has reason to believe inIormation in the admission documentation is incorrect, (2) when the Commissioner or Collector oI Customs has reason to believe that there has been a violation oI the law, regulations, or the provisions oI this Administrative Order or (3) under a program oI random checks to test the quality oI admission documentation Iurnished to Customs.

c.II customs decides to examine the merchandise, the examination will be conducted in the applicant's premises, unless;

(1)the examination cannot be readily perIormed there,

(2) the articles consist oI personal or household eIIects or other articles accompanying Zone residents or other persons which can be readily examined at the point oI entry where these will be examined,

(3) the applicant requests that the examination be conducted at the Customs point oI entry into the Secured Area oI the Zone,

(4)the articles or the vehicle carrying them cannot be readily sealed, or

(5) the Commissioner or Collector oI Customs has reason to believe the carrier or the articles will be tampered with beIore arrival at the applicant's premises. Customs will seal the vehicle containing the articles or cord and seal the containers oI the articles, to assure that the articles are delivered to the applicant's premises withouta change in the condition, quantity, or nature oI the articles between the point oI entry into the Secured Area oI the Zone and the location where the examination will take place.

d. Containers oI the articles will be opened and articles presented to Customs by the applicant or agent oI the applicant. Customs oIIicers will open containers Ior examination oI the articles.

e. II no examination is to be conducted, Customs will check the condition oI the vehicle delivering the articles to the applicant's premises and any seals aIIixed thereto, and note any irregularities on the admission documents.

5. CUSTOMS RELEASE

II no irregularities are discovered through review oI the documentation and any examination conducted by Customs that require detention oI the articles, Customs will issue a permit to release the articles Ior delivery to the applicant's premises in the Secured Area oI the Zone. The articles may be delivered by,

(a)the vehicle which brought the articles to the Secured Area oI the Zone.

(b) a vehicle owned or lease by the applicant or

(c) a vehicle oI a Iirm licensed by the SBMA Ior the purpose oI carriage oI articles within the Secured Area oI the Zone.

E.EXEMPTION FROM ADMISSION PROCEDURE

Except upon special order oI the SBMA but without any limitation on Customs search authority oI vehicles, persons, baggage, or cargo arriving in the Secured Area oI the Zone, no declaration oI admission or permit by either Customs or the SBMA is required Ior admission to the Secured Area oI the Zone oI:

1. ANY personal eIIect oI residents oI the Secured Area valued at less than One Hundred U.S. Dollars (US$100);

2. ANY article oI Ioreign origin in any shipment valued at less than Five U.S. Dollar (US$5);

3. Articles Ior delivery to a vessel or aircraIt Ior loading and exportation to a Ioreign country Irom the Zone;

4. merchandise being returned to the Secured Area oI the Zone aIter temporary transIer Irom the Secured Area oI the Zone under the procedure oI Chapter V, Section D; or

5. Domestic articles not covered by any oI the preceding exemptions when the person or enterprise presenting the articles Ior admission surrenders to Customs a commercial invoice or similar document describing the articles in commercial items, along with a declaration that the articles are domestic articles as provided in the regulation oI Customs in Iorce in the Customs Territory.

F.POSTAL IMPORTATIONS

Articles arriving by mail or parcel post at a postal Iacility with in the Secured Area oI the one shall be released by Customs aIter completion oI the required admission procedure, Ior delivery by postal oIIicials to the addressee.

G. CUSTOMS BONDED WAREHOUSES OR EXPORT PROCESSING ZONES

Articles may be admitted into the Secured Area oI the Zone Irom a Customs Bonded Warehouse or Export Processing Zone within the Customs Territory Containers oI the said merchandise shall be clearly marked "SHIPPED FROM (NAME OF CBW OR EPZ ENTERPRISE/NAME OF CBW OR EPZ, DESTINED TO Subic Bay Freeport", or similar wordings to show both the origin and destination oI the shipment. Acceptance and acknowledgment oI authorized receipt by a Registered Enterprise in the Secured Area oI the Zone shall constitute IulIillment oI the obligation Ior saIe delivery Irom the sending Customs BondedWare house or Export Processing Zone to the Secured Area oI the Zone.

H. ELIGIBILITY FOR DRAWBACK, BOUNTY OR EXEMPTION

The signed permit and release by Customs Ior the admission oI Ioreign articles into the Secured Area oI the Zone and conclusive prooI oI actual exportation there Irom as required under pertinent customs laws, rules and regulations shall be the basis Ior consideration to prove exportation.

CHAPTER IV: OPERATION AND HANDLING WITHIN ZONE

A. ANNUAL INVENTORY, RECONCILIATION, AND REPORT

Each Registered Enterprise shall conduct an annual physical inventory at the end oI its business year oI all articles in its premises and in its possession in the Secured Area oI the Zone, and reconcile any discrepancies Iound with its inventory, such reconciliation shall be made to the SBMA on a Iorm to be required by it, copy Iurnished the Bureau oI Customs, within ninety (90) days aIter the end oI the business year, along with any payment oI duties and taxes Ior shortages or admission documents Ior overages.

B.COUNTRY OF ORIGIN OF ARTICLES MANUFACTURED IN ZONE

Without reIerence to the assessment oI duties and taxes under these regulations, the country oI origin oI articles which are manuIactured or produced in the Zone in whole or in part Irom Ioreign articles and transIerred to the Customs Territory Ior consumption, shall be determined according to the laws and regulations in eIIect in the Customs Territory. The country oI origin oI such article which are exported shall be determined according to the laws oI the importing country. No Ialse country oI origin marking or designation shall be placed by any person or Iirm on any articles in the Zone, whether the merchandise is destined Ior consumption in the Zone, the Customs Territory, or a Ioreign place or country.

C LOSS OF IDENTITY OF DOMESTIC ARTICLES

Domestic articles which have lost their identity as such in the Zone shall be treated as Ioreign articles iI they are transIerred to the Customs Territory. They will be considered as having so lost their identity iI they cannot be identiIied by Customs as domestic articles on the basis oI an examination oI the articles or consideration oI any prooI presented by the Registered Enterprise, including the accounting and inventory records oI the Enterprise.

CHAPTER V: TRANSFER OF ARTICLES FROM SECURED AREA

A. ARTICLES ELIGIBLE FOR TRANSFER FROM ZONE

Any article which have been admitted to or produced in the Secured Area oI the Zone may be transIerred thereIrom Ior exportation, transshipment through Customs Territory, transportation to a Customs Bonded Warehouse or an Export Processing Zone within the Customs Territory, or transIer to the Customs Territory Ior consumption subject to existing rules and regulations.

B.SBMA PERMIT FOR TRANSFER

1. Except as speciIied below, articles shall not be transIerred Irom the Secured Area oI the Zone without the permit oI the SBMA. Forms and procedures used Ior transIers Irom the Secured Area oI the Zone shall provide therein Ior the permit oI the SBMA. The Iollowing articles are exempted Irom the permit requirement and Irom Customs entry procedures aIter examination and veriIication conducted by Customs and iI allowed under the pertinent provisions oI the TariII and Customs Code oI the Philippines, except where such a permit is required under special order oI the SBMA:

a. Domestic articles which have not been manuIactured, blended or otherwisecombined in the Zone with Ioreign articles, when the person or enterprise presenting the articles Ior removal Irom the Zone surrenders to Customs a commercial invoice or similar document describing the articles in commercial terms along with a declaration that the articles are domestic articles as provided in the provisions oI this Administrative Order.

b. Foreign articles, or articles which contain Ioreign article components, which are exempted Irom entry requirements under the laws and regulations in eIIect in the Customs Territory; and

c. Articles or substances which are not subject to the TariII and Customs Code oI the Philippines.

2. Carriers containing such articles are nevertheless subject to search by Customs upon removal Irom the Zone, and Registered Enterprises shall maintain and produce records oI the transIer and removal oI exempted article.

C. TRANSFER FOR CONSUMPTION IN CUSTOMS TERRITORY

Foreign articles, or article containing Ioreign article components, in the Secured Area oI the Zone may be transIerred to Customs Territory under the laws, regulation and procedures applicable in the customs territory, except as provided in the SBMA's Rules and Regulations as well as the provisions oI this Administrative Order.

1.ASSESSMENT OF DUTIES AND TAXES

Customs and import duties and taxes shall be assessed, where authorized and required by law, as provided in this subsection;

a.TARIFF CLASSIFICATION

The classiIication under the TariII and Customs Code oI the Philippines oI Ioreign articles, whether or not they have been manuIactured, blended or otherwise combined with domestic articles, shall be determined according to the conditions, nature and character oI the entire article at the time oI its transIer Irom the Zone to Customs Territory.

b.VALUATION

The value oI Ioreign articles, or articles containing Ioreign article components, on which ad valorem duties and taxes are assessed shall be the price actually paid or payable Ior the entire article in the transaction that caused the article to be transIerred to Customs Territory, minus the cost oI any domestic article components oI the entire article.

D. TEMPORARY TRANSFER TO CUSTOMS TERRITORY

1.ELIGIBLE PURPOSES

Foreign articles which have been admitted to the Secure Area oI the Zone may be removed temporarily Irom the Secured Area oI the Zone Ior services which are not available in the Secured Area oI the Zone, such as repair, restoration, testing and similar operations. Those procedure shall not be used Ior any operation outside the Secured Area oI the Zone which adds any article or value to the temporarily removed merchandise; or Ior any operation which is part oI a production process.

2. APPLICATION

A person or enterprise which has received a permit Irom the SBMA Ior temporary transIer shall present an application on a Iorm to be required by Customs, to the latter with the articles Ior review and examination.

3.TIME AND GEOGRAPHIC LIMITS

Upon issuance oI a customs permit, the articles may be transIerred Irom the Secured Area oI the Zone Ior a period oI not more than Iour (4) months, unless the period is extended Ior another Iour (4) months by the SBMA and Ior a valid business reason. The articles may be transported to any place within the Customs Territory to conduct the service or operation. The article may not be entered Ior consumption or exported while it is in temporary transIer status in the Customs Territory, unless duties and taxes are paid where applicable.

4.RETURN TO ZONE AND ENFORCEMENT MEASURES

Upon its return to the Secured Area oI the Zone, the original permit and the articles shall be presented to Customs Ior examination and review. II the articles are not returned within the 4-month period, plus any extension granted by the SBMA, or not handled in accordance with the provisions oI this section, the articles will be considered to have been transIerred to the Customs Territory without proper permit, and will be subject to duties and taxes and any enIorcement action authorized under the provisions oI this Administrative Order.

E EXPORTATION FROM THE ZONE

1.EXPORTATION FROM CUSTOMS TERRITORY THROUGH THE SECURED AREA

Foreign or domestic articles may be brought into the Secured Area oI the Zone Irom the Customs Territory Ior the purpose oI loading onto vessels or aircraIt arriving in the Secured Area oI the Zone. Such articles shall be supervised by Customs to assure their exportation Irom the Secured Area oI the Zone. II they are not exported or returned to Customs Territory within three (3) months, the articles shall be considered abandoned and turned over to Customs Ior disposal in accordance with the TariII and Customs Code oI the Philippines, as amended, and Irom the proceeds shall be deducted any and all expenses incurred, by the SBMA in connection therewith as may be allowed by law. However, in all other respects the articles shall be governed by the Customs laws and regulations as iI it were being exported Irom the Customs Territory.

2. DIRECT EXPORTATION FROM SECURED AREA

Foreign or domestic articles in the Zone may be delivered to vessels or aircraIt arriving in the Zone Ior exportation directly thereon under Customs supervision.

3.TRANSSHIPMENT THROUGH CUSTOMS TERRITORY FOR EXPORTATION

Foreign articles, or articles containing Ioreign article components, in the Secured Area oI the Zone may be transshipped to other ports in the Customs Territory Ior delivery to vessels and air craIts Ior exportation under the supervision oI Customsusing the Iorms and procedures applicable Ior exportation in the Customs Territory.However, customs oIIicials will not usually inspect or examine Zone articles destined Ior exportation. Upon arrival at the port oI exportation and while awaiting loading onto the exporting vessel or aircraIt, the articles will remain unopened in the original packing shipper's seal. Customs oIIicials will deviate Irom this policy only in the most unusual circumstances, which will be clearly documented and justiIied to the SBMA and the Registered Enterprise.

4.MARKING OF CONTAINERS FOR EXPORTATION

Except in the case oI exportations Irom the Secured Area oI the Zone by mail, accompanying persons, or under the Special Retail Sales Regime, containers oI articles destined Ior exportation, whether directly Irom the Zone or transshipped through the customs territory, shall be clearly marked, "SHIPPED FROM SUBIC BAY FREEPORT, REPUBLIC OF THE PHILIPPINES" or similar wording to show the Zone origin oI the shipment.

5.EXPORTATION UNDER SPECIAL RETAIL SALES REGIME

Persons who purchase articles under the special, Retail Sales Regime may export the articles accompanying them upon departure to a Ioreign country on a vessel or aircraIt which they board in the Secured Area oI the Zone, or on a vessel or aircraIt which they board in the Customs Territory. The itemized listing provided by the retail seller under the provisions oI this Administrative Order shall contain the SBMA permit to export the articles and the export documentation Ior the articles.

a.Persons who board vessels or aircraIt in the Secured Area oI the Zone shall present to Customs immediately prior to boarding;

(1) the articles to be exported,

(2) the itemized listing provided by the seller, and,

(3) a declaration oI any Ioreign articles consumed in the Secured Area oI the Zone. IIthe vessel or aircraIt is to land at a port or place in Customs Territory beIore departure to a Ioreign country, Customs will place the articles in the custody oI the oIIicers oI the vessel or airline Ior surrender to the purchaser only aIter Iinal departure to a Ioreign country.

b. Persons who board vessels or aircraIt in the Customs Territory shall present to Customs at the point oI exit Irom the Secured Area oI the Zone;

(1) the articles to be exported,

(2) the itemized listing provided by seller, and,

(3) a declaration oI any Ioreign articles consumed in the Secured Area oI the Zone. The articles to be exported will be placed in a special sealed container provided by the seller oI the articles Ior transshipment oI the articles to the vessel or aircraIt the purchaser is to board. The seller will be responsible Ior the delivery oI themerchandise, under the supervision oI Customs to the purchaser in the Customs Territory upon departure oI the vessel or aircraIt Ior exportation to a Ioreign country, and Ior the payment oI any duties, taxes or penalties due on any merchandise that is not properly delivered and exported.

6.Articles which have been exported Irom the Secured Area oI the Zone to Ioreign country and which are subsequently re-imported may be admitted into the SecuredArea oI the Zone as Ioreign articles in the manner provided in Chapter III, Section D, oI this Administrative Order. Foreign articles, or articles containing Ioreign article components which are exported and subsequently re-imported directly into Customs Territory Ior consumption shall be treated in the same manner as like articles Irom the country oI exportation.

F.ARTICLES FOR USE ON VESSEL OR AIRCRAFT

Foreign articles, or articles containing Ioreign article components, may be delivered Iree oI duties and taxes to vessel and air craIt arriving in the Secured Area oI the Zone Ior use or consumption on board by the crew or passengers, as Iuel, or as equipment or Ior repair oI the vessel or aircraIt, to the same extent as is authorized under the laws and regulations in eIIect in the Customs Territory. The articles will be considered transIerred Irom the Secured Area oI the Zone upon signature Ior receipt oI the articles by an authorized oIIicial oI the vessel or airline with the intent to use them on board the vessel or aircraIt Irom the Secured Area oI the Zone.Such articles may also be transshipped to ports in the Customs Territory Ior delivery Iree oI duties and taxes to vessels and aircraIt under the laws and regulations in eIIect in the Customs Territory. However, the containers oI such articles shall be marked "SHIPPED FROM SUBIC BAY FREEPORT" or with similar wording to show the Zone origin oI the shipment.

G. TRANSFER TO CUSTOMS BONDED WAREHOUSE OR EXPORTPROCESSING ZONE

Foreign or domestic articles may be transIerred Irom the Secured Area oI the Zone Ior transshipment to a Customs Bonded Warehouse or Export Processing Zone in the Customs Territory, and receipt therein, under the laws, regulations and procedures in eIIect in the Customs Territory. However, containers oI such articles shall be clearly marked "SHIPPED FROM SUBIC BAY FREEPORT, DESTINED FOR (NAME OF CBW OR EPZ ENTERPRISE/NAME OF CBW OR EPZ)" or with similar wording to show both the origin and destination oI the shipment.

H. DELIVERY AND REMOVAL FROM THE ZONE

Articles shall be delivered to carriers and removed Irom the Secured Area oI the Zone in accordance with the provisions oI this section.

1.Customs shall require that vehicles containing shipments oI Ioreign articles or oI articles containing Ioreign article components, transshipped through Customs Territory be sealed with Customs seal, or with a shipper's seal approved by Customs, and transIerred under guard so as to prevent or make evident any diversion oI the articles into the commerce oI the Republic oI the Philippines, or any tampering with the articles.

2.The articles may be transIerred Irom the premises oI the Registered Enterprise by the carrier which is to transport the articles to Customs Territory, a vehicle oI the Registered Enterprise, or a carrier licensed by the SBMA Ior carriage within the Secured Area oI the Zone.

3.Passenger vehicles, including buses, taxicabs or other vehicles carrying persons Ior hire shall be subject to Customs Inspection and search to allow persons to properly declare purchases made in the Zone Ior transIer to Customs Territory and to detect undeclared merchandise. Points oI exit shall contain adequate Iacilities to pull asidevehicles Ior Customs search, hold or store detained or seized articles, assess andcollect duties and taxes.

4.When Ioreign articles, or articles containing Ioreign article components, are examined at the premises oI a Registered Enterprise and given a permit to transIer the articles Irom the Secured Area oI the Zone, or in other situations where the permit is given at a location other than the point oI exit, Customs shall establish controls, such as escorts, gate passes, sealing, or other devices, to assure that the articles Ior which a permit to transIer has been issued are duly and properly removed Irom the Secured Area oI the Zone, and that articles without such a permit are not removed Irom the Secured Area oI the Zone.

5.A person or Enterprise which has received a Customs permit Ior transIer oI articles Irom the Secured Area oI the Zone shall see to it that the articles are physically removed Irom the Secured Area oI the Zone within seven (7) calendar days aIter the permit is issued, or request the withdrawal or cancellation oI the application Ior transIer. Except by special order oI the SBMA, Ioreign articles, or articles containing Ioreign components, shall not be entered Ior consumption in the Customs Territory but retained in the Secured Area oI the Zone. II the request IortransIer is with drawn or consoled, the Registered Enterprise shall reassume responsibility Ior the articles and any duty or tax paid will be reIunded by Customs.II the request Ior transIer is not withdrawn or canceled and there has been no special permit by the SBMA Ior retention oI the articles in the Secured Area oI the Zone, any duty and tax paid will be treated as unclaimed and turned over to the SBMA Ior disposal.

I. RETURN TO ZONE WITHOUT ENTRY INTO COMMERCE

II Ioreign articles or articles containing Ioreign article components are transIerred to Customs Territory with the intent oI returning them to the Secured Area oI the Zone without having entered the commerce oI the Republic oI the Philippines and oI circumventing the removal requirements provided in the provisions oI this Administrative Order and the articles are so returned to the Secured Area oI the Zone, the original permit to transIer and entry shall be canceled, any duties and taxes paid shall be reIunded by Customs, and the Registered Enterprise which transIerred the articles Irom the Secured Area oI the Zone shall reassume responsibility Ior the articles as Ioreign articles.

CHAPTER VI: ENFORCEMENT OF REGULATIONS

A. PENALTIES

Any person or enterprise Iound to have violated any provision oI the Act or this Administrative Order shall be subject to the pertinent penal provisions oI the TariII and Customs Code oI the Philippines.

B. EFFECTIVITY

This Administrative Order shall take eIIect IiIteen (15) days aIter publication in the oIIicial Gazette or in any newspaper oI general circulation. CertiIied copies oI this Customs Administrative Order shall be submitted to the U.P. Law Center pursuant to Book VII, Chapter II, Sections 3 and 4 oI the Revised Administrative Code oI 1987.

(Signed.) GUILLERMO L. PARAYNO, JR. Commissioner

APPROVED:

(Signed) ERNEST LEUNG Acting Secretary oI Finance