World’s 34th largest economy, the Philippines has seen a major boost in overseas trade in recent years. The Southeast Asian country has slowly but steadily moved from an agriculture-based economy towards a manufacturing and service – dependent nation, exporting electronic items, garments, various industrial equipment, etc. Countries like the US, Japan, China, Germany, and Singapore are the major importers of the Philippines. On the other hand, the Philippines imports plenty of goods from China, Japan, Korea, the United States, and Thailand. As per 2017 data, the country’s export and import volume stood at $99 billion and $105 billion respectively.
The Trade Boosters – The Ports of the Philippines
The surge in exports in the Philippines has much to do with its geographical layout. The country is a combination of around 7641 islands of various sizes forming an archipelago. With the world’s fifth longest coastline of about 36,289 kilometers, the country shares maritime borders with China, Indonesia, Japan, Malaysia, Taiwan, Vietnam, and the island nation of Palau; thus aiding in overseas trading. The Port of Manila is one of the world’s busiest container ports, whereas the Port of Batangas is the country’s largest oil port and a major ro-ro terminal. Other major shipping ports in the Philippines are the Port of Subic, Port of Davao, Lucap Port, Lamao Port, Piso Point Global Port, Verano & Lipata Ports, Balabac, Calapan, etc.
The USA and the Philippines as Trading Partners
The Philippines was the United States’ 32nd largest goods export market and 29th largest supplier of cargo imports in 2018. In 2018, the U.S. exported goods worth $8.7 billion and imported $12.6 billion; up by 3.0% ($256 million) and 8.4% ($972 million) from 2017 respectively. The top export products of the US were electrical machinery, machinery, cereals, miscellaneous grains, seeds, fruit (flour) and food waste, animal feed, etc. The country imported electrical equipment, machinery, animal or vegetable fats and oils, knit apparel, and optical and medical instruments. Additionally, the U.S.’ exports and imports of services to and from the Philippines in 2017 were an estimated $3.0 billion and $6.5 billion respectively. Leading services exports from the U.S. to the Philippines were in the travel, intellectual property (trademarks), audiovisual and related products, and financial services sectors; while those imports from the Philippines to the U.S. were in the travel, transport, and telecommunications, computer, and information services sectors.
Philippines Export-Import Customs Requirements:
Let’s now see what the businesses in the US need to do to start trading with the Philippines:
Registration for Importers:
The first-time importers need an Import Clearance Certificate, valid for three years, from the Bureau of Internal Revenue. This is followed by registering with the Bureau of Customs (BOC) and setting up an account with the Client Profile Registration System (CPRS) which must be updated annually. The cost of CPRS accreditation is P1000 (US$20) and typically takes 15 business days to process.
Registration for Exporters:
The businesses need to register for the first time with the CPRS through the Philippine Exporters Confederation, which must be renewed annually. Like importers, this also costs P1000 (US$20) and typically takes 15 business days to process. On registration, the exporters will get a Unique Registration Number, necessary for all export activity.
For specific businesses, the country requires additional registration. As for example, coffee exporters need to register with the Export Marketing Bureau; while companies operating out of a special economic zone (SEZ) must register with the Philippine Economic Zone Authority (PEZA) and those using free port zones must register with the specific free port and so on.
Documents needed for Importers:
- Packing list
- Bill of lading
- Import Permit
- Customs Import Declaration
- Certificate of Origin
- Certificate of Product Registration from the Philippines’ Food and Drug Administration in case the imports contains animals, plants, foodstuff, medicine or chemicals.
Documents needed for Exporters:
- Packing List
- Bill of Lading
- Export License
- Customs Export Declaration
- Certificate of Origin
- Additional permission from the government authorities for specific items like endangered species, animals and animal products, plants, rice, radioactive items, sugar, and molasses.
Tariffs and Taxes for Importers:
The Philippines follows the United Nation’s Standard International Trade Classification (SITC) with import tariffs ranging in between 0 and 65%. The Philippines Customs department applies a 12% VAT (value added tax) on imported goods worth more than P10000 (US$200), which is absent on goods costing less than this.
Imported goods in sectors which have high domestic production typically incur higher tariffs. For non-agricultural goods, tariffs average at 6.7%.
Tariffs and Taxes for Exporters:
The Philippines imposes a tariff of 20% only on the logs that are to be exported.
Tariffs and Taxes for Special Economic Zones:
There is no tax or tariff imposed on the import of raw material and manufacturing equipment for companies running from the Special Economic Zones (SEZs) or free port zones. However, these companies must register with either PEZA or the specific free port regulator to be able to operate and avail benefits from these zones.
For further information, one can check https://finder.tariffcommission.gov.ph/