Recitation Notes:

A tariff is a form of tax imposed on imported goods or services. Tariffs are a common element in
international trade. In the simplest terms, an international tariff is a sovereign government tax on
imported goods or services from another country. Often used as a political tool, tariffs are
installed to discourage companies or consumers from buying imported goods or services from
certain countries or trade blocs. Instead, these are sourced from within the nation instead.
Tariffs can also discourage the import of certain items in order to encourage domestic
production. By imposing additional fees on imports, governments can force the hands of
producers to hire workers and ramp up internal production.
Primary reasons for imposing tariffs include:
1. The reduction in the importation of goods and services by increasing their prices
2. The protection of domestic producers.

Example:

The world price on imported computers in a country is $1,000. It is less than the equilibrium
price of $1,500 (the price of domestic production) because if the price on the imported computers
is higher than the price of locally manufactured computers, there is no incentive to buy
computers from other countries. In the graph above, you can see that at the world price of $1,000
per computer, domestic manufacturers produce 10 million computers while consumers purchase
30 million computers. The shortage of 20 million computers is imported from foreign
manufacturers.
However, the government decides to support the domestic computer manufacturers and imposes
a tariff of $200 per unit of imported computers. Due to the new tariff, the price per computer
increases to $1,200. Due to the price increase, consumers will purchase fewer computers (25
million) while the domestic producers will increase their output to 15 million. Subsequently, the
quantity of imported computers will decline to 10 million (25 million – 15 million).
Types/ Forms of Tariffs:
Although they can be created for any reason, there are four primary motivations for adding
international tariffs in trade. They can range from protecting a country’s labor markets to
discouraging trade with certain countries.

1. Specific Tariffs
When tariffs are levied as a fixed charge to certain products entering a country, it is called a
“specific tariff.” Each of these tariffs are levied against individual product categories, and cost a
flat fee per import. For example, according to the World Bank, the United States charged a
specific tariff of $0.68 per live goat imported into the country in 2010.
*A specific tariff is one imposed on one unit of a good (e.g., $1,000 tariff on each imported car).

2. Protective Tariff
Protective tariffs are imposed on items seen as a potential threat to items produced within a
nation. One protective tariff example is the China Section 301 tariffs imposed in 2018. In order
to encourage more steel production in the United States, a protective tariff was applied to steel
imports.

3. Ad Valorem Tariffs
The Latin term “ad valorem” roughly translates to “according to value.” Accordingly, an ad
valorem tariff is an import tax directly tied to the value of the items. If a government sets this
type of international tariff to an item, customs officials will collect a tax directly tied to the
product’s value.
*An ad valorem tariff is a tariff levied as a certain percentage of a good’s value (e.g., 10% of the
value of an imported car).

4. Compound Tariffs
Compound tariffs are a mix of both specific tariffs and ad valorem tariffs. When a government
sets an international compound tariff on a product, the taxes are a combination of a fixed price
per item, as well as a percentage of the individual or total import’s value.

Why are tariffs imposed?

There are several reasons why governments impose tariffs on imported goods:

#1 To protect domestic producers

Sometimes, governments want to protect domestic producers and industries that may experience
problems from cheap imported goods. In addition, supporting the domestic producers prevents a
potential increase in unemployment.

#2 To protect domestic consumers

Some cheap imported goods may be dangerous to consumers. For example, the goods may
contain elements that may harm consumers. By making the goods more expensive, the
government discourages their excessive consumption.

#3 To preserve national security

The government may want to protect industries with a strategic significance to national security
from overdependence on imports.

#4 To protect infant industries

Tariffs may protect emerging and growing industries. They will attract more consumers to
domestic products, and the growth of companies in the emerging industries will be stimulated.

#5 Source of Additional Fund

It gives the government money to help facilitate customs inspections, pay port employees, and
assist with international transactions.

Are Duties and Tariffs the Same?

No. Tariffs are direct taxes collected from imported goods. Duties are collected as an indirect tax
on people or companies bringing the items. Individuals may have duty allowance based on their
citizenship and the items they are bringing back.

Example of a Tariff:
As an example of a tariff: A company importing 10,000 printed circuit assemblies from China
would declare their items under HTS 8529.90.09. CBP officers would charge the importer a
tariff per item imported.

Example of a Duty:
An American brings back $200 of goods from a weekend in Canada, including two liters of
liquor. Under their personal allowance, their first liter would be duty-free while the second one
would be charged a flat duty rate of 3%, plus internal revenue tax due (where applicable).

Are Tariffs and Quotas the Same?

No. Tariffs are taxes while quotas are limits. Tariffed items can be imported as long as the taxes
are paid, while quotas block imports once the limit is met.
Are Tariffs the same from Free Trade?
Tariffs are a limitation on free trade. While free trade zones abolish tariffs on items between
countries, tariffs add additional taxes to imports under certain categories.
For example, the North American Free Trade Agreement (NAFTA) set a “free trade” zone
between the United States, Canada, and Mexico. Companies could import and export certain
items between the three nations without paying taxes. Compared to free trade, tariffs add a tax to
importing certain items from one country to another.
Philippine Setting: Import Tariffs
Last Published: 7/18/2019
The Philippines has implemented the 2017 version of the ASEAN Harmonized Tariff
Nomenclature (AHTN). The Philippines’ simple average most favored nation (MFN) tariff was
eight percent in 2017, while nine percent of MFN tariff lines have rates between 20 and 60
percent. All agricultural tariffs and about 61.9 percent of non-agricultural tariff lines are bound
under the Philippines’ WTO commitments. The simple average bound tariff in the Philippines is
23.5 percent.
As a general rule, imported manufactured goods competing with locally produced goods face
higher tariffs than those without local competition. The Philippines cites domestic and global
economic developments to justify the modification of applied rates of duty for certain products to
protect local producers.
The Philippines eliminated tariffs on approximately 99 percent of all goods from ASEAN trading
partners under the ASEAN Free Trade Area (AFTA) agreement. For more information about the
country’s free trade agreements, see section on "Trade Agreements." Philippine tariff schedules
are available at http://tariffcommission.gov.ph/finder/.
Philippine Setting: Restrictions and Prohibited Imports
Philippine law restricts the importation of certain goods for reasons of national security,
environmental and public health protection, and order and morality, in addition to complying
with international treaties and obligations. Prohibited goods include:
1. Used clothing and rags;
2. Toy guns;
3. Right-hand drive vehicles;
4. Hazardous waste, even in transit into Philippine territory;
5. Laundry and industrial detergents containing hard surfactants;
6. Polychlorinated biphenyls (PCBs);
7. Used motorcycle parts, except engine; and
8. Live piranha, shrimp, and prawns.
9. The Philippine Tariff and Customs Code also prohibit the importation of the following
goods:
10. Dynamite, gunpowder, ammunition, and other explosives, firearms, weapons of war, and
parts thereof, except when authorized by law;
11. Written or printed articles containing information that advocates or incites: treason,
rebellion, insurrection, sedition, subversion against the government, forcible resistance to
laws, threats to life, or inflicting bodily harm upon any person in the Philippines;
12. Written or printed articles, negatives or cinematographic film, photographs, engravings,
lithographs, objects, paintings, drawings, or other representation of an obscene or
immoral character;
 13. Articles, instruments, drugs, and substances designed, intended or adapted for producing
unlawful abortion;
14. Roulette wheels, gambling outfits, loaded dice, marked cards, machines, apparatus or
mechanical devices used in gambling or the distribution of money, cigars, cigarettes, or
other when such distribution is dependent on chance, including jackpot and pinball
machines or similar contrivances, or parts thereof;
15. Lottery and sweepstakes tickets except those authorized by Philippine government,
advertisements thereof, and list of drawings therein;
16. Any article manufactured in whole or in part of gold, silver or other precious metals or
alloys thereof, the stamps, brands or marks of which do not indicate the actual fineness of
quality of metals or alloys;
17. Weapons of mass destruction and goods included in the National Strategic Goods List
(NSGL) as provided under the Strategic Trade Management Act;
18. Any adulterated or misbranded articles of food or any adulterated or misbranded drug in
violation of the provisions of the Food and Drugs Act;
19. Marijuana, opium, poppies, coca leaves, heroin or any other narcotics or synthetic drugs,
which are or may hereafter be declared habit forming by the President of the Philippines,
or any compound, manufactured salt, derivative, or preparation thereof, except when
imported by the government or any person duly authorized by the Dangerous Drugs
Board, for medical purposes only;
20. Opium pipes and parts thereof, or whatever material; and,
21. All other articles and parts thereof, the importation of which is prohibited by law or rules
and regulations issued by competent Philippine authority.
https://legacy.export.gov/article?id=Philippines-Prohibited-Restricted-Imports
Philippine Setting: Trade Barriers
Last published date: 2022-07-25
Overview
The simple average bound tariffs on agricultural products stand at 35% in 2020. The Philippines
maintains a two-tiered tariff policy for sensitive agricultural products, including rice, corn, pork,
chicken meat, sugar, and coffee. These products are subject to a tariff-rate quota (TRQ), and all
imports outside the minimum access volume are taxed at a higher out-of-quota rate. In-quota
and out-of-quota tariff rates averaged 36.5% and 41.2%, respectively, and have not changed
since 2005.
On February 14, 2019, former President Rodrigo Duterte signed into law the Republic Act (RA)
No. 11203 or “An Act liberalizing the importation, exportation, and trading of rice, lifting for the
purpose the quantitative import restriction on rice, and for other purposes.” The law amends RA
No. 8178 or the Agricultural Tariffication Act of 1996, replacing quantitative restrictions (QR)
on rice imports with tariffs.
On January 18, 2021, former President Duterte signed Executive Order No. 123, maintaining the
5% tariff on mechanically deboned or mechanically separated poultry meat (MDM/MSP).
Scheduled to increase to 40% on January 1, 2021, local stakeholders successfully petitioned to
preserve the lower duty through December 31, 2022. EO 123 separates the matter of lower tariff
rates from the previous tariff concessions given to trading partners in connection with the
Philippines’ quantitative restrictions on rice imports. Other tariff concessions given to trading
partners have expired with the passage of RA 11203, with the rates of several major U.S.
agricultural products (including frozen potatoes and some dairy products) returning to their
higher previous levels.
Aiming to diversify market sources and maintain affordable rice prices, on May 15, 2021, former
President Duterte signed Executive Order 135, levying a unified rate of 35% duty for both in-
and out-of-quota Most Favored Nation (MFN) tariff rates. The order places the MFN duty in
line with the ASEAN rate of 35% and will expire in one year.
Responding to surging pork prices due to African swine fever’s devastating impact on the hog
sector, the Philippines has temporarily lowered pork tariff rates and increased the quota volume.
On May 15, 2021, Executive Order 134 was issued, setting pork tariffs lower than the original
30% in-quota and 40% out-quota rates. The President also issued Executive Order 133 on May
11, 2021, raising the Minimum Access Volume or tariff-rate quota of pork imports from 54,210
MT to 254,210 MT.
At present, a few TRQ products have achieved unified in-quota and out-of-quota tariff rates,
including chicken, frozen or chilled (40%); turkey livers, frozen or chilled (40%); potatoes, fresh
and chilled (40%); and roasted coffee beans (40%). Currently, an additional special safeguard
duty is in place for chicken meat, which effectively doubles the rate of out-of-quota tariff
protection. Administrative Order (A.O.) 9 of 1996, as amended by A.O. 8 of 1997 and A.O. 1 of
1998, established rules for implementing TRQs and allocating import licenses.
Excise Taxes on Alcohol Products
Republic Act (RA) No. 11467 provides a structure for increasing excise taxes each year and the
law does not include a sunset provision. Below are the details:
Distilled Spirits
The ad valorem tax on distilled spirits is 22 percent of the net retail price (excluding excise tax
and value added tax). For 2022, the specific tax is $0.96 (₱52.00) per proof liter and will
increase to $1.09 (₱59.00) in 2023, $1.22 (₱66.00) in 2024, and by 6 percent every year
thereafter, effective on January 1, 2025. The ad valorem tax puts imported alcohol products at a
price disadvantage compared to alcohol products made from locally sourced ingredients.
Wines
A specific tax of $1 (₱54.06) per liter is levied on all types of wines. The rate will increase 6
percent effective on January 1, 2023, and every year thereafter. This is a departure from the
previous tax structure which varied according to the wine type, price, and alcohol content. More
sparkling wines are expected to enter the market boosted by the lower excise tax.
Other Fermented Liquor
For 2022, the specific tax on other fermented liquor including beer is $0.72 (₱39.00) per liter. It
will increase $0.04 (₱2.00) each year until it reaches $0.80 (₱43.00) in 2024, and increase 6
percent effective on January 1, 2025, and every year thereafter.
For more information, please see Philippines: New Excise Tax Structure for Alcohol Products.
Import Requirements for Agricultural Products
The Philippines is a signatory to the World Trade Organization (WTO) and has recently lifted
quantitative restrictions on imports of all food products, including rice. Tariff-Rate Quotas
(TRQs) remain on a number of sensitive products such as corn, poultry meat, pork, sugar,
potatoes, and coffee. Minimum Access Volumes (MAV) have been established for these
commodities.
Sanitary and phytosanitary import clearances that serve as import licenses are required before the
importation of all agricultural commodities, including feeds, live animals, meat and poultry
products, plant and plant products, seafood, and fishery items. In addition, a minimum access
volume import certificate is required for products entering at the lower in-quota duty, such as
pork, poultry, corn, coffee, and coffee extract. In all cases, all agricultural and food products
require a registered importer to receive the shipment.
In 2010, the Philippines issued Administrative Order 9, requiring that a SPSIC be issued to an
accredited importer before shipment of imported food and agricultural products to the country
(e.g., plant and plant products, fishery products, live animals, meat and poultry products,
fertilizers, animal feed, and pet food) and functions as an import permit.
Import Regulations for Processed Food Products
Philippine food regulations generally follow the U.S. Food and Drug policies and CODEX
Alimentarius guidelines for food additives, good manufacturing practices, and suitability of
packaging materials for food use. Hence, compliance with U.S. regulations for packaged foods
will almost always assure compliance with Philippine regulations. All food products offered for
sale in the Philippines must be registered with the Philippine Food and Drug Administration
(FDA). Registration of imported products may only be undertaken by a Philippine entity,
although some documentation and, for certain types of products, samples need to be provided by
the exporter.
Each class per product brand must be registered with the FDA by the importer before the product
can be imported. Only products with a valid Certificate of Product Registration from the FDA
will be allowed for sale in the Philippines.
The following is the list of requirements for the initial registration of food products:
 Completed Integrated Application Form as prescribed by current FDA regulations,
 Proof of Payment of Fees as prescribed by current FDA regulations,
 Clear and complete loose labels or artwork, as applicable, of all packaging sizes, or
equivalent as defined by FDA regulations except for bulk raw materials, ingredients and
food additives intended for further processing or for distribution to
establishments/manufacturers for further processing,
 Pictures of the product from all angles and in different packaging sizes, and from at least
two different perspectives allowing visual recognition of a product as the same with the
others being registered, as applicable,
 For food supplements, a sample in actual commercial presentation must be submitted,
 As applicable, documents to substantiate claims, such as technical, nutritional or health
studies or reports, market-research studies, Certificate of Analysis, quantitative studies
and computations, scientific reports or studies published in peer-reviewed scientific
journals, certificates, or certification to support use of logo/seal on Halal, Organic, or
Kosher foods and in compliance with current labeling regulations. FDA will only allow
stickers to be used to correct deficiencies for up to six months, then US manufacturers are
required to design special packaging for the Philippines market to meet Philippine
labeling requirements available at
https://www.fda.gov.ph/wp-content/uploads/2021/03/Administrative-Order-No.-2014-
0030.pdf.
 A Certificate of Product Registration (CPR) shall be issued by the FDA and shall be valid
for two years. Subsequent renewal of CPR shall be valid for a period of five years.
Exporters must know that the Philippine importer must secure a license to operate (LTO)
from the FDA to import these products. This is a prerequisite for the registration of all
food products. The license lists names of foreign suppliers or sources of the products
being registered. The cost of an initial two-year licensing fee is $80 (PhP4,000).
Renewal of License to Operate, valid for five years, is $160 (PhP8,000).
Import Regulations for Plant Products
The Bureau of Plant Industry (BPI) regulates imports of all plant products, including live plants,
fruits and vegetables, and some processed plant products (i.e., raisins, frozen potatoes) that may
already be covered by the Philippine Food and Drug Administration. In addition to the Sanitary
and Phytosanitary Import Clearance (SPSIC), shipments of fruits and vegetables must be
accompanied by a USDA Phytosanitary Certificate, or a Processed Plant Product Certificate
issued by APHIS at the port of origin. The United States has market access to the Philippines:
blueberries, broccoli, cauliflower, lettuce, carrots, cabbage, celery, and potatoes. Wheat, corn,
soybeans, and other plant products that have been traditionally imported are allowed under
International Standard Phytosanitary Measures.
DA Department Circular No. 04 Series of 2016 specifies the requirements and procedures for
importing plants, planting materials, and plant products for commercial purposes. Commodities
of plant origin that are processed to the point that they are incapable of being infested with
quarantine pests are deemed Category 1 and do not require a SPSIC or a Phytosanitary
Certificate (PC). Instead of a SPSIC, an importer should obtain a Plant Quarantine Service
Certificate from BPI; likewise, the Processed Plant Product certificate from APHIS (PPQ Form
578) takes the place of a PC. Categories 2, 3, and 4 require a SPSIC and PC before shipment to
the Philippines. More information on the four categories and the details on licensing and
registration for Philippine importers are available in the Department Circular mentioned above.
Import Regulations for Meat and Poultry Products
In 2005, the Department of issued Administrative Order No. 26 (AO 26), which updated its
Administrative Order No. 39 (2000) or the “Revised Rules, Regulations and Standards
Governing the Importation of Meat and Meat Products into the Philippines.”
In 2010, Administrative Order 9 (AO 9) was issued, requiring that a Sanitary and Phytosanitary
Import Clearance (SPSIC) be issued to an accredited importer prior to shipment of imported food
and agricultural products to the country and functions as an import permit. The SPSIC replaced
the Veterinary Quarantine Clearance for meat and poultry products. A SPSIC is valid for 60
days from the date of issuance, within which the product is to be shipped from the country of
origin. The SPSIC is non-transferable and can only be used by the consignee to whom it was
issued. The Philippines follows a one shipment/bill-of-lading per Import Clearance policy.
However, due to the continuing global logistics and supply chain problems, Administrative
Order No. 15 (2022) was issued on June 8, 2022, extending the validity of SPSICs for meat and
poultry from 60 to 90 days indefinitely or until AO 15 is revoked.
All U.S. meat establishments regulated and inspected by the USDA Food Safety and Inspection
Service (FSIS) are eligible to export meat and poultry to the Philippines. A summary of
Philippine export requirements for meat and poultry products from the United States may be
obtained from FISS:
Sensitive Agricultural Products
Tariff rates for sensitive agricultural products were established in Executive Order 313 of March
1996, which set varying in-quota and out-quota rates for products considered important to
domestic agriculture: pork, poultry, coffee, sugar, rice, and corn. In-quota rates apply to
products imported within established minimum access volumes (MAV). Any imports in excess
of the MAV are assessed at the out-of-quota rate. MAV products are those for which the
Philippine Government is committed to providing minimum market access in exchange for
lifting quantitative import restrictions in the WTO.
The MAV Administration, including its allocation, is handled by a special MAV Management
Committee. Please contact the USDA Foreign Agricultural Service in Manila
(AgManila@usda.gov) for further information on minimum access volumes and current MAV
license holders.
Import Regulations for Biotechnology-Derived Products
On April 3, 2002, the Department of Agriculture issued Administrative Order No. 8 (AO 8),
which regulates the importation and release of genetically modified plants and plant products
into the environment. The Bureau of Plant Industry (BPI) issues permits for importing regulated
articles and/or combined trait products for contained use, trials, and direct use as food, feed, or
direct processing of genetically modified (GM) plants and plant products. Under AO 8, no
regulated article shall be imported or released into the environment without conducting a
satisfactory risk assessment.
A Joint Department Circular (JDC) was approved in March 2016 that replaced existing
Philippine genetically engineered regulations embodied in the Philippine Department of
Agriculture’s Administrative Order No. 8 (AO 8). AO 8 was replaced after the Philippine
Supreme Court, in a December 8, 2015 decision, ruled that AO 8 did not sufficiently cover the
minimum requirements of the principles of risk assessment as embodied in the National
Biosafety Framework. The JDC requires more public consultation and considers socio-economic
issues and environmental impacts in risk assessment procedures compared to AO 8. The JDC
was implemented on April 14, 2016. The JDC was revised in 2021 and was approved on
February 15, 2022. The revised JDC1 shortens the timeline for approvals significantly and
greatly reduces compliance costs for commercializing genetically engineered crops.
The Department of Agriculture issued Memorandum Circular No. 8, Series of 2002 or the rules
and procedure for the evaluation of products of plant breeding innovations (PBI). The
regulations provide a science-based and efficient process for assessing and determining whether
gene-edited plants are genetically engineered (GE) or not. The circular provided the general
classification of products of PBIs and established that only PBI-derived GE plants and plant
products would be regulated under the JDC1.
BPI has updated its documentary requirements for obtaining an SPSIC, namely the “Declaration
of GMO Content.” View the BPI Memorandum and list of commodities . Previously required
for only bulk commodities and not regularly enforced, BPI has expanded the list to 35
commodities. SPSIC applications may be rejected without the declaration. BPI has confirmed
that the importer can sign the declaration. The declaration can include GM events/traits that may
be included in the shipment.
A detailed report that specifically addresses import regulations and standards entitled “The
Philippines: Food and Agricultural Import Regulations & Standards Country Report (FAIRS),”
can be obtained from the Global Agricultural Information Network (GAIN). From
https://gain.fas.usda.gov/, click “Search” and select “Philippines” as the country and “Food and
Agricultural Import Regulations and Standards” as the category. The latest report is published
by June of each year.