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WorksheetsTM428C PRELIM EXAM
Total questions: 60
Worksheet time: 1hrs 4mins
The following are no sale transactions, except:
Free consignments, like, gifts, samples and promotional items
Goods imported on consignments
Goods imported by intermediaries, who do not purchase the goods and who sell them after importation
Goods imported by offices that are separate entities
All of the following are conditions under which the buyer and the seller are considered related for customs purposes, except:
They are officers or directors of one another’s business.
They are legally recognized partners in business.
Any person directly or indirectly owns, controls, or holds five percent (5%) or more of the outstanding voting stocks or shares of both seller and buyer.
They are shareholders in the same company controlling less than five percent of voting stocks.
Which of the following is not an acceptable basis under Method Six?
The selling price in the Philippines of locally produced goods
The transaction value of the imported goods
The computed value determined under Method Five
The transaction value of identical goods
When multiple sales and agreements to sell occur before goods are exported to the Philippines, the sale for exportation is considered the __________ to the Philippines.
Original Sale
Second Sale
Last Sale
Sale
A buyer purchases goods from a supplier. The supplier’s owner is a member of the buyer’s family, specifically the buyer’s brother-in-law. According to the criteria for being considered related, what should be concluded regarding the acceptability of the transaction value?
The transaction value is acceptable because the relationship is by affinity and does not influence the sale.
The transaction value may be rejected since the buyer and supplier are related by affinity.
The transaction value is acceptable as long as the buyer can prove that the price was not influenced by their relationship.
The transaction value may be rejected if the relationship affects the negotiation of the price.
An importer purchases semi-finished goods from a supplier, and the price is established on the condition that the supplier will receive a specified quantity of the finished goods produced from those semi-finished goods. How should this arrangement be treated under the general principle?
The arrangement is acceptable because the semi-finished goods will ultimately be converted into finished goods.
The arrangement is unacceptable for customs purposes because the price is contingent upon the production and transfer of unrelated finished goods.
The arrangement is acceptable if the value of the finished goods can be reasonably estimated at the time of the transaction.
The arrangement is unacceptable because it introduces extraneous payment conditions that cannot be valued in relation to the imported goods.
A manufacturer sells a batch of imported electronic components to a retailer, stating that the price of the components will vary based on how much the retailer sells them for. What is the implication of this pricing structure in terms of customs valuation?
The pricing structure is permissible because it reflects the market dynamics of supply and demand.
The pricing structure is unacceptable for customs purposes as it is based on a condition that cannot be determined until after the sale.
The pricing structure is acceptable if both parties agree to the terms in writing.
The pricing structure is unacceptable because it ties the price of the imported goods to the resale price of other goods.
A seller quotes a price for an imported set of imported furniture but states that the price is contingent on the buyer also purchasing a set quantity of home decor items. According to the general principle, how should this pricing arrangement be evaluated for customs purposes?
The pricing arrangement is acceptable because the buyer can choose whether to purchase the additional items.
The pricing arrangement is acceptable as long as the additional items are of comparable value to the furniture.
The pricing arrangement is unacceptable for customs purposes because it is conditional on the purchase of unrelated goods.
The pricing arrangement is acceptable as long as the buyer is informed of the conditions prior to the sale.
A manufacturer sells agricultural equipment to a farmer, stipulating that the equipment can only be used in certain provinces as per local regulations. This condition is designed to comply with environmental laws. How does this restriction align with the general principle regarding permissible restrictions?
The restriction is not permissible because it limits the geographic area where the farmer can use the equipment.
The restriction is permissible as it is imposed by law, which is an acceptable limitation under the general principle.
The restriction is not permissible because it could potentially diminish the equipment’s value.
The restriction is permissible since it is required by Philippine authorities to comply with local regulations.
A supplier sells a batch of electronic devices to a retailer in the Philippines but includes a clause in the contract prohibiting the retailer from selling the devices until a specified promotional event takes place. This restriction is intended to align with a marketing strategy. Based on the general principle regarding permissible restrictions, how should this situation be evaluated?
The restriction is not permissible as it prevents the retailer from disposing of the goods freely, thus violating the general principle.
The restriction is permissible since it does not affect the value of the goods and is based on a marketing strategy.
The restriction is permissible because it is a temporary limitation that does not substantially affect the goods’ overall value or use.
The restriction is not permissible as it limits the retailer’s ability to sell the goods in the marketplace.
An exporter sells a goods to a buyer in the Philippines. The sale agreement stipulates that the buyer can return any unsold goods within 30 days after delivery. In this case, can it be determined that there is a sale for export?
No, because the buyer has the option to return goods, which means ownership is not fully transferred.
Yes, because the agreement to exchange ownership exists despite the return policy.
No, as the return policy undermines the essence of a commercial operation.
Yes, there is a sale for export because the buyer has committed to purchasing the goods, regardless of the return policy.
Customs proposes a system that always accepts the higher of two values (invoice or reference value). Is this valid under Method Six?
Yes, because it protects revenue
Yes, if approved by the Commissioner
No, it is expressly prohibited
No, unless exporter agrees
A shipment of machinery arrives in the Philippines, but the importer cannot provide documentation supporting the dutiable value under Methods One to Five. The machinery was produced in a country other than the exporter’s country. The Collector of Customs decides to apply Method Six. What is the most appropriate approach for determining the value?
Use the price of similar machinery sold in the domestic market of the exporting country, adjusting for any discrepancies in cost and transportation.
Use the dutiable value of identical machinery imported from another country at or around the same time, applying flexibility under Method Six.
Apply the price of identical machinery sold in the Philippines if produced locally, with reasonable adjustments for production costs.
Use an arbitrary value based on the average selling price of machinery of the same type, considering domestic sales data.
An importer claims that the engineering work performed in the Philippines should not be added to the computed value. However, the work was billed directly to the producer. How should this be handled in the valuation process?
Engineering work performed in the Philippines is always excluded from computed value calculations.
Engineering work undertaken in the Philippines should be included in the computed value if charged to the producer.
Engineering work performed in the Philippines should only be included if they are a significant part of the production process.
Engineering work performed in the Philippines must be excluded regardless of whether it was charged to the producer.
A company sells specialized equipment to a related party, and the price is deemed adequate to cover costs and
provide reasonable profit margins. What conclusion can be drawn about the transaction value?
The transaction value is automatically acceptable due to profitability.
The relationship must be investigated to ascertain any price influence.
The transaction value can be accepted if no influence is demonstrated, regardless of profitability.
The transaction value must be rejected due to the related-party status.
CarlElectroMart is importing electrical components from USA. The customs authority finds identical goods sold at the same commercial level but shipped by a different producer in the same country of production. All other aspects of the goods are identical. Can the transaction value of these identical goods be used?
Yes, because identical goods produced by a different person in the same country can be considered.
No, because only goods produced by the same producer can be considered.
Yes, but only if the goods are sold at the same quantity as the goods being valued.
No, because identical goods must be produced by the same person.
Which of the following customs valuation methods allows the addition of assists undertaken in the Philippines?
Method 1 – Transaction Value
Method 3 – Transaction Value of Similar Goods
Method 5 – Computed Value
Method 6 – Fallback Method
Under Method 6, the customs value is determined by:
The price paid or payable for the goods, adjusted by specific conditions.
The computed value, based on the production costs.
A flexible approach based on reasonable means and available information when the above methods cannot be applied
The transaction value of identical goods or similar goods.
Which of the following statements is true about the use of Method 6?
Method 6 is used for measuring particulate emissions from stationary sources.
Method 6 is primarily used for water quality testing.
Method 6 is designed for soil analysis in agriculture.
Method 6 is a method for testing noise pollution levels.
Which of the following is true about the use of Method 6?
It is used as a last resort when no other methods can be applied.
It always requires the use of identical goods for valuation.
It is the preferred method for valuing all goods.
It requires a breakdown of production costs.
Which of the following is a primary component of the computed value under Method 5?
The price paid for the goods plus transportation costs.
The cost of manufacturing or production, including materials, labor, and overhead.
The sale price of identical goods in the importing country.
The transaction value of similar goods in the exporting country.
The customs authority should assess the royalties and fees to determine the dutiable value of the imported fabrics by:
Including royalties and fees paid as a condition of sale in the dutiable value.
Excluding all royalties and fees from the dutiable value.
Assessing only the cost of transportation for dutiable value.
Using the lowest market price of fabrics for dutiable value.
Customs tries to use the export price of the goods to Malaysia as the basis for goods bound for the Philippines. Is this correct?
Yes, export prices to any country can be used
Yes, if they are similar markets
No, export prices to other countries are not allowed
No, unless approved by the Tariff Commission
A beverage company, JoyRefreshCorp, imports ingredients to manufacture its new line of organic juices. As part of its production process, JoyRefreshCorp incurs several costs:
o Ingredient formulation plans, valued at $25,000, developed by an overseas consulting firm and necessary for the production of the juices.
o Specialized machinery, valued at $60,000, used solely for the production of the imported juices.
o Advertising materials amounting to $10,000 created to promote the new juice line, although they are not part of the production process.
The BOC believes all these costs should be added to the dutiable value of the imported ingredients. How should the customs authority evaluate the proposed adjustments to the dutiable value concerning the assists provided to JoyRefreshCorp?
All costs, including the ingredient formulation plans, specialized machinery, and advertising materials, should be included in the dutiable value since they contribute to the production process.
The ingredient formulation plans and specialized machinery should be included, while the advertising materials should be excluded as they are not directly related to the production of the imported goods.
The advertising materials should be included, while the other assists should be excluded since they do not pertain to the actual production of the juices.
The specialized machinery should be excluded from the dutiable value as it was provided free of charge, while the other costs should be included in their entirety.
Under Method Four, what is the primary basis for determining the customs value of imported goods?
The invoice price of the imported goods
The computed value based on production cost
The unit price at which the imported goods or identical/similar goods are sold in the Philippines
The price agreed upon between buyer and seller abroad
An importer buys goods for USD 75,000. The sale includes a condition that the buyer must also purchase advertising services from the seller worth USD 10,000. Additionally, the seller retains control over how the goods will be resold in the Philippines. There is no relationship between the buyer and seller. Can the transaction value method be used to determine the dutiable value?
Yes, because the buyer and seller are not related.
No, because the resale condition affects the price of the goods.
Yes, because advertising is not relevant to the goods.
No, because advertising services must be included in the dutiable value.
Which section of the CMTA governs the sequential valuation of imported goods?
Section 700
Section 701
Section 703
Section 704
The following are the principles of the Customs Valuation Agreement (CVA) under the WTO, except?
There is a need for a fair, uniform, and neutral system for the evaluation of goods for customs purposes that precludes the use of arbitrary or fictitious dutiable values.
The basis for valuation of goods for customs purposes should, to the greatest extent possible, be the transaction value of the goods being valued.
The dutiable value should be based on simple and equitable criteria consistent with commercial practices, and valuation procedures should be of general application without distinction between sources of supply.
Valuation procedures should be used to combat dumping.
Which of the following agencies provides the rules and regulations on the application of the Transaction Value System for customs valuation in the Philippines?
CAO 10–2016
CMO 16–2010
CMO 10–2016
CAO 16–2010
A clothing manufacturer in Vietnam ships garments to a Philippine retailer to be sold, but ownership remains with the exporter until the goods are sold. This is classified as:
Goods imported on consignment
Goods imported under a hire or leasing contract
Goods supplied on loan
Goods imported by intermediaries
A local airline leases aircraft parts from a U.S. supplier for a fixed monthly rental. The goods are returned after the lease period. This situation is an example of:
Goods imported on consignment
Goods supplied on loan
Goods imported by intermediaries
Goods imported under a hire or leasing contract
A seller requires a buyer of automobiles not to sell or exhibit them before a fixed date, which marks the beginning of a new model year. This restriction is:
Not acceptable since it limits ownership rights
Acceptable since it does not substantially affect the value of the goods
Not acceptable since it affects the transaction value
Acceptable only if agreed in writing
The Bureau of Customs prohibits the importation of medicines without FDA approval. This restriction is:
Acceptable since it is imposed by law
Not acceptable because it limits sales
Acceptable only if temporary
Unacceptable unless waived by the seller
A seller requires the importer to pay additional charges every time the goods are resold locally, regardless of the resale price. This restriction is:
Acceptable as a standard commercial practice
Not acceptable since it affects the transaction value of the goods
Acceptable only if temporary
Acceptable only if agreed in writing
A seller requires the buyer to resell the imported goods at a fixed price set by the seller. For customs valuation, this restriction is:
Acceptable since it is part of commercial practice
Not acceptable because it directly affects the value of the goods
Acceptable only if the buyer agrees in writing
Acceptable if approved by the Bureau of Customs
A Philippine importer and a foreign supplier are discovered to be officers in each other’s companies. For customs valuation purposes, this situation shows that:
There is no relationship between buyer and seller
They are legally recognized partners
They are considered related parties
They are employer and employee
A foreign supplier is the direct employer of the Philippine buyer who imports goods from him. This makes the buyer and seller:
Related parties under customs valuation
Independent business entities
Partners in business
Owners of voting shares in each other’s companies
A person owns 7% of the voting shares in both the exporting and importing companies. According to customs rules, this indicates:
A related-party relationship, since ownership exceeds 5%
No relationship, since it is below majority ownership
An employer–employee relationship
A partnership under business law
A foreign supplier owns the Philippine importer and makes all the major decisions in its operations. This means:
One directly or indirectly controls the other, making them related parties
They are independent companies without relationship
They are only contractual business partners
Their control relationship is irrelevant to customs valuation
A Philippine importer and a Japanese exporter are both owned by the same parent corporation. This situation shows:
They are unrelated since they operate in different countries
They are related parties because both are controlled by a third person
They are independent companies since they pay taxes separately
They are only trading partners, not related parties
A customs audit shows that the importer and the foreign seller are first cousins. For customs valuation, this is:
Not a relationship since it is personal, not business
A related-party relationship since they are related by consanguinity within the fourth civil degree
Acceptable only if they declare it to Customs
A partnership under family business law
A foreign exporter is the great-grandfather of the Philippine importer. Are they related?
Yes, related within the 4th civil degree of consanguinity
No, not related because of the generation gap
Related only if both share business ownership
Not related unless proven by documents
A local importer buys goods from his stepdaughter’s husband abroad. Are they related?
Yes, related by affinity
No, not related because it is not by blood
Related only if recognized in family law
Not related since in-laws are excluded
A foreign supplier is the nephew of the Philippine importer. Are they related?
Yes, related
No, not related
Related only if the nephew depends financially on the importer
Related only through a formal partnership
The importer in Manila buys goods from his best friend abroad, but they are not blood relatives. Are they related parties?
Yes, related because of close ties
No, not related since friendship is not recognized under customs rules
Related only if the friendship is documented
Related if they own shares in each other's companies
A foreign supplier is the sister-in-law of the local importer. Are they related?
Yes, related by affinity
No, not related
Related only if they have joint investments
Related if the importer's spouse agrees
Transaction value is often expressed using INCOTERMS 2020, but not under which group of terms?
"E" terms
"F" terms
"C" terms
"D" terms
It refers to the total payment made or to be made by the buyer to or for the benefit of the seller for the imported goods.
Customs duty
Transaction value
Freight charges
Insurance premium
Under the customs valuation system, the importer may request the reversal of the order of application of which methods?
Methods Two and Three
Methods Four and Five
Methods Five and Six
Methods One and Four
If the Commissioner of Customs determines that reversing Methods Four and Five will create difficulties in determining the dutiable value under Method Five, then:
The request shall still be granted
The importer must choose another method
The request shall be denied and Method Four shall be applied
The importer must appeal to the Tariff Commission
If the importer does not request for the reversal of Methods Four and Five, what sequence shall be followed?
Method Five before Method Four
The normal order of application
Commissioner's discretion order
Transaction value system only
An importer in Manila requests that Method Five be applied before Method Four. The Commissioner agrees, and the valuation proceeds without difficulty. Which principle is being applied?
Flexibility in applying Methods Two and Three
Permissible reversal of Methods Four and Five
Automatic use of Method Six
Substitution of Method One
A shipment of 10 x 40’ reefer vans STC: frozen fish from Singapore arrived at MICP with total FOB value of $15,000.00. The bill of lading indicated freight charges of $18,000.00 without certification from shipping lines. The importer provided domestic insurance of P59,225.00 with no certification and official receipt presented to BOC. The rate of exchange at the time of filing was P51.50/$1.00, while the rate of duty was 5%.
How much is the dutiable value?
P1,758,725.00
P1,730,400.00
P1,828,250.00
P1,856,575.00
A shipment of 10 x 40’ reefer vans STC: frozen fish from Singapore arrived at MICP with total FOB value of $15,000.00. The bill of lading indicated freight charges of $18,000.00 without certification from shipping lines. The importer provided domestic insurance of P59,225.00 with no certification and official receipt presented to BOC. The rate of exchange at the time of filing was P51.50/$1.00, while the rate of duty was 5%.
How much is the customs duty?
P87,936.25
P86,529.00
P91,412.50
P92,828.75
ABC Trading Inc., a wholesaler of construction supplies, imported 100 boxes STC: iron nails from Shenzhen, China at FOB value of $275.00/box. The transaction value under Method 1 cannot be established but BOC had a record on file covering previous importation identical to the shipment being valued. It showed 10 boxes sold by a different seller in China at gross retail price of $350.00/box, less 5% trade discount as a retailer. The seller likewise grants 20% trade discount for
wholesalers with a minimum purchase of 50 boxes. Upon arrival of the shipment, the importer paid $1,500.00 for ocean freight charges. How much is the total dutiable value under Method 2? Use rate of exchange P42.75/$1.00.
P1,159,300.00
P1,309,005.00
P1,285,065.00
P1,023,435.00
Delaware Enterprise, a wholesaler of fruits, imported from Green Corp. in Australia 30 cartons STC: raspberry with FCA value of $875.00/carton. The air waybill shows freight collect of $1,250.00, and the invoice shows $1,230.00. Method 1 cannot be established by BOC prompting the retrieval of import records for price comparison. There were 4 previous importation of similar fruits made under Method 1 and were compared to the air waybill dates of the similar fruits being valued, namely: 20 days ago - $880.00/carton, 35 days ago - $750.00/carton, 40 days ago - $800.00/carton and 60 days ago - $700.00/carton. The similar fruits were purchased by different wholesalers and sold by same seller in Australia as the fruits being valued. How much is the total dutiable value under Method 3? Use rate of exchange P44.70/$1.00.
P1,283,185.20
P1,276,185.00
P1,259,656.60
P1,275,291.00
A Philippine importer brings in kitchenware from China. During valuation, the Customs officer considers using the average retail price of similar kitchenware already being sold in Philippine malls as the basis of the dutiable value. The importer objects, citing the rules under Method Six. Which is correct?
The officer is correct since Philippine market prices reflect actual commercial value.
The officer is wrong because the selling price of goods produced or sold in the Philippines cannot be used.
The officer is correct if the price is supported by receipts from local retailers.
The officer is wrong only if the importer proves the local goods are of different quality.
Two companies, Company A and Company B, enter into a contract for the sale of goods. The president of Company A is also a director at Company B. Based on the law, how does this relationship affect the transaction value?
The transaction value is acceptable because the president’s dual role does not influence the price.
The transaction value may be rejected because the overlapping officers create a related-party scenario.
The transaction value is acceptable if both companies can demonstrate that their relationship did not affect pricing.
The transaction value may be rejected only if the president directly negotiates the price.
A retailer purchases electronics from a distributor. The distributor is partially owned (30%) by the retailer’s parent company. How should this ownership stake affect the evaluation of the transaction value?
The transaction value may be rejected because the parent company’s ownership constitutes a related-party relationship.
The transaction value is acceptable since the ownership does not exceed 50%.
The transaction value may be rejected if it can be shown that the ownership influences the pricing.
The transaction value is acceptable if the distributor provides an independent market analysis of the goods.
A foreign supplier sells machinery to a related buyer in the Philippines. The transaction value closely approximates the computed value of similar machinery sold to unrelated buyers. What does this imply about the acceptability of the transaction value?
The transaction value is automatically acceptable due to the approximation.
The transaction value can be accepted if it can be shown that no influence exists from their relationship.
The transaction value is acceptable under the test value provision.
The transaction value must be rejected since the buyer and seller are related.
