BOC AEO Program and Tax Exemption Rules

Legal basis and related legal framework

CAO No. 5-2017 implements Sections 1227 and 1228, Chapter 4, Title XII of Republic Act No. 10863 (the Customs Modernization and Tariff Act (CMTA)).
The AEO criteria and program concepts align with international trade facilitation and customs security standards including the World Customs Organization (WCO) Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework), the WCO Integrated Supply Chain Management Guidelines (ISCM Guidelines), the Revised Kyoto Convention, and the WTO Agreement on Trade Facilitation (WTO ATF).
CMO No. 15-2017 implements Section 800 (f) of the CMTA on tax and duty-free importations of personal and household effects of Returning Residents and Returning Overseas Filipino Workers (OFWs).
The CMO also covers an additional tax/duty exemption for Returning OFWs for home appliances and other durables in an amount not exceeding Php 150,000.00.
CAO No. 5-2017 recognizes and operates within the CMTA bonded warehouse and customs facility warehouse framework under Title VIII, Chapter 2 of the CMTA.
CMO No. 15-2017 operates within existing customs manifest submission and informal entry processes pending full automation, including rules on Electronic-Inward Foreign Manifest (E-IFM) and clearance through the Informal Entry Division (IED).

Policy, objectives, and program purpose

The AEO Program is established to support international trade commitments under SAFE Framework, ISCM Guidelines, Revised Kyoto Convention, and WTO ATF.
The AEO Program is designed to enable mutual recognition status for Philippine accredited AEOs through an MRA (Mutual Recognition Arrangement).
The AEO Program grants incentives to customs stakeholders with high level of compliance and cargo security.
The AEO Program establishes a special customs cargo clearance lane to facilitate and secure international trade while increasing customs compliance through information and communication technology and risk assessment.
CMO No. 15-2017 prescribes simplified customs clearance procedures for tax and/or duty-free importations of personal and household effects of Returning Residents and Returning OFWs.
CMO No. 15-2017 delineates duties of Bureau offices involved in customs clearance.
CMO No. 15-2017 sets guidelines for the additional exemption for Returning OFWs for home appliances and other durables up to Php 150,000.00.
CMO No. 15-2017 guides customs personnel and stakeholders on required customs formalities.

Definitions and core terms

“Airlines” refers to a corporation engaged in both domestic and international air transportation of goods, passengers, or both.
“Authorized Agent Banks (AABs)” refers to commercial banks authorized by the Bureau to collect payment of duties and taxes.
“Authorized Economic Operator (AEO)” refers to an importer, exporter, customs broker, forwarder, freight forwarder, transport provider, and other entity duly accredited by the Bureau based on the WCO SAFE Framework, RKC, WCO ISCM Guidelines, and national best practices to promote trade facilitation and secure seamless movement of goods across borders using risk management and modern technology.
“Customs Administration” refers to the government service responsible for administering customs law and collecting duties and taxes and applying other laws relating to importation, exportation, movement, or storage of goods.
“Customs Bonded Warehouse (CBW)” refers to a facility authorized by the Bureau of Customs pursuant to Title VIII, Chapter 2 of the CMTA, including specified types of bonded warehouses as defined by regulation.
“Customs Facility Warehouse (CFW)” refers to a facility authorized by the Bureau under Title VIII, Chapter 2 of the CMTA, including specified types of facilities as defined by regulation.
“Customs Brokers” refers to any person who is a bona fide holder of a valid Certificate of Registration or Professional Identification Card issued under Republic Act No. 9280 (Customs Brokers Act of 2004, as amended).
“Freight Forwarder” refers to a local entity acting as a cargo intermediary that facilitates transport for its client without assuming the role of a carrier and may perform related services including booking cargo space, documentation preparation, advancing freight payments, trucking and warehousing, and other forwarding undertakings.
“Exporter” refers to a natural or juridical person engaged in exporting goods or commodities to a foreign country from the Philippines.
“Foreign Supplier or Manufacturer” refers to a natural or juridical person, including a manufacturer, seller, or other person whose name appears on the commercial invoice as such.
“Importer” refers to a natural or juridical person engaged in importing goods into the Philippines.
“International Freight Forwarder” refers to persons responsible for assembly and consolidation of shipments into a single lot and, in most cases, assuming responsibility for international transport from point of receipt to destination.
“International Supply Chain” refers to the end-to-end process for shipping goods to or from the Philippines from the point of origin through distribution to destination.
“Local Transport Operators” refers to individuals, corporations, firms, or associations carrying or transporting goods by land, water, or air from unloading to the importer’s warehouse or local distribution point.
“Material Change” refers to changes in an AEO member’s status as recipient of privileges, general information sheet details, names of contact persons and their contact details, importation process flow, product sourcing, lists of imported items, pricing structure, terms of trade, product description, tariff classification, and security policy or profile, and other material information for monitoring continuing eligibility.
“Non-Vessel Operating Common Carrier (NVOCC)” refers to an entity that may or may not own or operate a vessel providing point-to-point service and may include groupage of LCL shipments and issues corresponding transport documents.
“Shipping Lines” refers to a shipping corporation engaged in domestic and international sea transportation of goods, passengers, or both.
“Trade Documents” refers to timely, accurate, complete, and verifiable documents relating to importation and exportation, including records that facilitate a full audit trail of customs activities or tax-relevant movement of goods or accounting entries.
“Validation” refers to a procedure whereby an AEO supply chain and relevant processes employed by it to reach AEO status are subject to full and transparent review by a Customs Administration.

Who may apply; program structure; accreditation levels

The AEO Program is established with three components: (a) Cargo Security System, (b) Trade Clearance System, and (c) Mutual Recognition Arrangement (MRA).
The cargo security component ensures integrity and security of imported goods in accordance with the SAFE Framework principles.
The trade clearance component enables highly compliant stakeholders to clear goods with minimum or zero customs border intervention.
The MRA is a formal document between two or more Customs Administrations defining circumstances and conditions under which AEO programs are recognized and accepted, including processes to implement, evaluate, monitor, and maintain mutual recognition and practical arrangements for mutually provided benefits.
The AEO Program may be implemented fully or by phases depending on Bureau resources and capacity.
Stakeholders that may apply for accreditation include: Importers; Exporters; CBW and CFW; Customs Brokers; NVOCC, Freight Forwarders, and International Freight Forwarders with offices in the Philippines; Shipping Lines or Airlines and their agents; AABs; Local Transport Operators and their facilities and equipment; Foreign suppliers, manufacturers, and other entities in the logistics and international supply chain accredited as AEO by another country with which the Philippines has an MRA.
An applicant with multiple services may submit one (1) application form for several categories, but AEO certificate of accreditation is per category.
Accreditation is granted only if the applicant meets reliability and trustworthiness measured by risk, nature of business, and conduct of importation regarding customs revenue, compliance, and cargo security.
The Bureau assesses risk through general criteria, security infrastructure, operational duration, regulatory permits/licenses/concessions, criminal liability disqualifications of relevant officers/directors/shareholders engaged in customs procedures, and the existence of a dedicated office/unit and responsible officer for compliance.

AEO application processing, benefits, and administration

The Bureau establishes a simplified system for processing, evaluating, and acting on AEO applications.
AEO processing proceeds in Levels 1, 2, and 3.
Level 1 certification is completed within ninety (90) calendar days from receipt of an AEO application.
A Level 1 member receives benefits including: exemption from renewal of accreditation under any customs accreditation system; permission to use trade documents to self-assess duty and tax liability where the member has a satisfactory trade document management system and to ensure compliance with other customs requirements; permission for lodgement of goods declarations using entries in the BOC database system by the authorized person supported subsequently by a supplementary goods declaration; a dedicated help desk for AEO applicants; and other consistent benefits under RKC and SAFE Framework.
Expenses connected to Level 1 benefits (including but not limited to port charges) are for the account of the AEO members benefiting therefrom.
Level 2 validation includes validation of security measures and supply chain security practices of a Level 1 member and includes on-site assessments at appropriate foreign locations used in the supply chain; the Bureau targets completion no later than one (1) year after Level 1 certification to the extent practicable.
A Level 2 validated member receives benefits including dedicated processing and selectivity lanes with no documentary, physical and non-intrusive inspection, except where the Commissioner directs examination due to derogatory information (physical examination at the operator’s premises); priority for non-intrusive examinations when required; advance clearance processing for import documents prior to arrival if the e-manifest has been uploaded; periodic lodgement allowing a single goods declaration for a given period for certain freely-importable and regulated goods in coordination with and subject to concerned regulatory agencies’ conformity; and a one-time duty and/or tax exemption certificate for goods imported over a period and subject to duty/tax exemption privilege upon approval by the Department of Finance, with proper identification and listing in the certificate.
Level 2 also provides expedited customs clearance for exports to countries under an MRA and other consistent benefits under RKC and SAFE Framework.
Expenses connected to Level 2 benefits (including but not limited to port charges) are for the account of the AEO members benefiting therefrom.
Level 3 is established for members demonstrating sustained commitment exceeding Level 2 validation guidelines.
Level 3 criteria are designated by the Commissioner, subject to approval of the Secretary of Finance, and may include additional cargo access controls beyond Level 2 requirements; submission of additional cargo information prior to loading; use of container security devices/technologies/policies/practices meeting Bureau standards; and compliance with other Bureau cargo requirements.
Level 3 benefits are extended by the Commissioner in consultation with the AEO Office.
The Commissioner must designate appropriate Level 3 criteria and provide Level 3 benefits not later than two (2) years after the date of effectivity of this CAO, subject to the Secretary of Finance’s approval.

Denial, suspension/expulsion triggers, and reconsideration timelines

The Commissioner may deny AEO benefits (in whole or in part) if an AEO member’s security measures and supply chain security practices fail to meet requirements under the AEO accreditation standard.
The Commissioner must develop procedures providing appropriate protections to AEO members before benefits are revoked and must not limit the Commissioner’s ability to protect national security of the Philippines.
If an AEO member knowingly provides false or misleading information during the validation process, the Commissioner must suspend or expel the member from the AEO Program for an appropriate period of time.
After the validation process concludes, the Bureau must publish a list of suspended or expelled members and make the list available to AEO members.
AEO members may file a request for reconsideration of adverse decisions by the Head of AEO Office under the denial/benefits-limitation provision.
The reconsideration must be filed with the Commissioner not later than ninety (90) calendar days from the adverse decision, and the Commissioner resolves it not later than one hundred eighty (180) calendar days after filing.
AEO members may file a request for reconsideration of adverse decisions involving false or misleading information/penalty decisions under the separate reconsideration timeline.
That reconsideration must be filed not later than thirty (30) calendar days from the adverse decision, and the Commissioner resolves it not later than one hundred eighty (180) calendar days after filing.
If the Commissioner fails to act on an appeal within thirty (30) working days from receipt of complete records, the Head of AEO Office’s denial decision is deemed affirmed.

AEO responsibilities, records, and accreditation continuity

AEO membership requires full disclosure at all times of information requested by Customs under the AEO Program.
Trade or business secrets and advantage information provided during application or AEO import clearance operations are treated as confidential and are not disclosed without the applicant’s written consent, except in the context of judicial proceedings.
Each AEO member must designate an office/unit and personnel responsible for full and prompt compliance with AEO regulations and serve as a liaison with the AEO Office for prompt information exchange and cooperation for smooth AEO operation.
Each AEO member must update the Bureau on any Material Change, including changes to status as recipient of privileges, general information, contact persons and contact numbers/email addresses, importation process flow, product sourcing, lists of imported items, pricing structure, terms of trade, product description, tariff classification, and security policy/profile, and other material information enabling monitoring of continuing eligibility.
AEO members must submit a yearly Statement of “No Material Change” if applicable to the information being monitored.
An AEO member may voluntarily disclose inadvertent errors or innocent deviation from AEO procedures with an undertaking and concrete proposal to rectify the lapse.
Voluntary disclosure is without prejudice to application of any sanction or action under existing rules and regulations applicable to the circumstance.
Each AEO member must maintain a complete, up-to-date, and accessible record keeping system for all documents (electronic or hard copies) pertaining to business and import operations.

Suspension, revocation, and AEO governance structure

Once granted, AEO accreditation lasts until suspended or revoked.
Accreditation may be suspended or revoked, depending on degree of culpability and resulting injury to the government, after due notice and hearing, for: intentional violations of CMTA or related laws/rules/regulations resulting in significant loss of customs revenues or serious injury to public welfare; repeated and unjustified failure or refusal to comply with official directives or mandates from the Bureau; habitual delinquency in complying with AEO regulations or abiding by AEO membership terms and conditions; and recommendations based on routine evaluation by the Post Validation Group showing significant risk to customs revenue or to cargo supply chain security.
The Bureau must establish a formal procedure for suspension or revocation of AEO accreditation.
AEO accreditation may be withdrawn at the initiative of the accredited member without prejudice to any liability incurred while still an AEO Program member.
The Head of the AEO Office is designated by the Commissioner subject to the approval of the Secretary of Finance.
Upon recommendation of the Head of AEO Office, the Commissioner determines the specific functions, structure, and composition of the AEO Office and sub-groups.
The AEO Office must manage overall AEO Program implementation, strengthen the Bureau of Customs core competency to operationalize the AEO Program, and optimize use of information and communications technology in coordination with the Management and Information System Technology Group (MISTG), including creating and managing an AEO database as determined by regulation.
The AEO Office must perform other functions necessary for effective and efficient AEO Program implementation.

Commissioner authority, review, separability, and repeals

The Commissioner may issue supplementary rules and regulations to effectively implement the AEO Program provisions.
The CAO is reviewed every three (3) years, unless otherwise provided, and is amended or revised if necessary.
If any part is declared unconstitutional or contrary to existing laws by the courts, other parts remain in full force and effect.
Customs Administrative Order No. 01-2012 is deemed revoked, amended, and/or modified accordingly.

Returning Resident and Returning OFW TEI rules

Returning Residents and Returning OFWs must apply with the Revenue Office of the Department of Finance (DOF) for issuance of a Tax Exemption Indorsement (TEI) to avail of the privilege under the guidelines.
The TEI application may be submitted personally or through a representative with a duly notarized authorization, together with required documents including a letter-request addressed to the Secretary of Finance (Attention: Director IV, Revenue Office), an Affidavit of End-Use or Ownership, an Import Bill of Lading/Airway Bill (BL/AWB) indicating Port of Discharge properly endorsed by the shipping agent/air carrier, an Import Invoice and/or Packing List, proof of residency/employment abroad, the original passport (for verification) with photocopy of biographical page and immigration-stamped pages, and a Tax Identification Number (TIN).
The privilege’s TEI is necessary for exemption entitlement.

PHED, supporting documents, and non-intrusive inspection

Returning Residents, Returning OFWs, or their authorized representatives must accomplish, sign, and submit a fully accomplished Personal and Household Effects Declaration (PHED) Form to the Bureau to expedite customs formalities.
PHED Form submission contains required basic information including shipper name, date of birth, citizenship, passport number, addresses abroad and in the Philippines, contact number/email, names and passport numbers of accompanying family members, last departure date, arrival date, length of stay abroad, itemized packing list details, unit value and total value, and shipment details (Letter B, page 2 of the PHED form).
If shipments arrive before the actual date of return under a conditional release option, the PHED must be submitted in advance to the Informal Entry Division (EID) or equivalent port unit for cargo clearance formalities.
For shipments arriving as accompanied baggage, the Returning Resident or Returning OFW submits the accomplished PHED Form to the Customs Officer upon arrival.
In addition to the Informal Import Declaration and Entry (IIDE), the Bureau requires submission of PHED Form, TEI, endorsed BL/AWB, Certificate of Identification (CI) when any, permits/licenses when necessary, an accomplished Permit To Deliver Imported Goods (PDIG) for sea freight, and other documents required by the Bureau.
All shipments under the order are subject to mandatory non-intrusive inspection.
Alert Orders, when warranted, may be made only after mandatory non-intrusive inspection for personal effects and household goods to prevent delays.

Conditional release for advance arrivals

Shipments arriving in advance and without the TEI may be allowed conditional release upon posting a cash bond equivalent to one hundred percent (100%) of assessed duties and taxes due.

Personally-owned vehicle treatment

Personal effects and household goods shipped together with personally-owned motor vehicles must be covered by separate BLs/AWBs—one for personal effects/household goods and another for the motor vehicle cleared under formal entry.
If a single BL/AWB is issued, the consignee or authorized representative must request the Collector of Customs for manifest amendment and splitting of the BL/AWB.
Importation of personally-owned motor vehicles is not entitled to the exemption privilege granted under Section 800 (f) of the CMTA.

Informal entry operational steps

Pending full automation, the procedures on advance submission of E-IFM and clearance of cargo under the informal entry process are observed.
E-IFM submission follows Bureau manifest submission rules, and shipping agents must indicate the words “PERSONAL AND HOUSEHOLD EFFECTS” in the BL/AWB Description of Goods field to distinguish single consignee shipments.
The declarant or authorized representative must file the goods declaration at the IED or equivalent unit using the prescribed IIDE, together with PHED and other required documents.
The Chief of the IED or equivalent unit assigns Customs Examiner/s to process the goods declaration.
After filing, the declarant/presenting representative must present a copy of the goods declaration to the x-ray field inspection office for mandatory non-intrusive inspection.
The XIP field office forwards the printed x-ray image and copy to the IED or equivalent unit through the assigned Customs Examiner, and if x-ray inspection ends beyond regular hours, submission is made on the first hour of the next working day.
If x-ray is tagged “suspect” and stamped “IMAGE APPEARS TO BE REGULAR,” the COO III returns findings, assesses duties/taxes (if any) and other charges due, signs, and forwards to the COO V.
COO V reviews IIDE, tariff classification, appraisal, computation of duties/taxes/other charges for final assessment, signs the IIDE, prepares the Order of Payment, and forwards to the Chief of the IED for approval.
For air shipments, payment is processed by the BOC Cashier, who issues a BOC Official Receipt (BCOR), issues a gatepass (BOC Form No. 201), and forwards documents for signature of COO III and COO V, and transmits copies for Warehouseman signature to effect physical release.
For sea shipments, payment is processed through the BOC Cashier or the In-House Bank using the e2m Cash-Miscellaneous Module, after which COO III verifies electronic payment and performs manual write-off of the BL under the e-manifest menu operation “Manual Discharge.”
If x-ray is tagged “suspect” and stamped “FOR VERIFICATION,” the COO III conducts physical examination in the presence of representatives from Enforcement and Intelligence Groups, XIP, and brokers or consignee representatives.
If no discrepancy is found, COO III prepares and signs a report with witnesses, returns findings, assesses duties/taxes/charges (if any), forwards to COO V, and applies the same payment and release procedures.
If a discrepancy is found, COO III prepares a discrepancy report and recommends payment of additional duties and taxes or seizure of the shipment, as applicable.

Accompanied baggage procedures and timelines

Accompanied baggage of Returning Residents and Returning OFWs is subject to non-intrusive inspection except when subject to derogatory information or selection based on profiling or risk management parameters, in which case physical examination is conducted.
If a Returning Resident or Returning OFW with accompanied baggage opts to avail fully of the privilege under Section 800, subparagraph (t) of the CMTA but without the required TEI, the following are required:
- Submission to the Customs Officer upon arrival of a PHED Form, Customs Baggage Declaration Form (CBDF), passport biographical-page photocopy including immigration stamp pages, invoice/receipt/equivalent document if any, CI or Authenticated Owner’s Declaration if any, and other Bureau-required documents.
- Posting a cash bond with the BOC Cashier equivalent to 100% of assessed duties and taxes.
- Approval by the Chief, Arrival Operations Division or Duty Collector for release.
- Submission of TEI within forty-five (45) days from arrival but not to exceed sixty (60) days from release.
If no cash bond is posted, goods are temporarily stored at the Customs In-Bond Baggage Room or equivalent facility pending submission of TEI.
When no bond is posted, TEI must be submitted not later than thirty (30) calendar days from arrival, or the person must pay full duties and taxes within the same period.
After lapse of the applicable period, the goods are deemed abandoned.

Forfeiture of cash bond; refund governance

Failure to submit TEI to support the privilege within the forty-five (45) days from arrival but not later than sixty (60) days from release causes forfeiture of the posted cash bond to answer for payment of duties and taxes due.
Claims for refund of the posted cash bond are governed by existing Customs rules and procedures.

Alert Orders and exclusions from privilege

Shipments subject to Alert Orders issued by the Bureau are processed under the regulations on Alert.
Exemptions under Section 800, subparagraph (f) of the CMTA do not apply to the following:
- Luxury items unless covered by a pre-departure Certificate of Identification.
- Vehicles.
- Watercrafts.
- Aircrafts.
- Animals.
- Donations.
- Goods intended for barter, sale, or for hire.
- Goods in commercial quantity.
- Regulated goods in excess of the limits allowed by regulations.

Repealing clause for CMO No. 15-2017

CMO No. 15-2017 specifically amends or repeals previously issued CMO provisions that are inconsistent with its rules.