Commissioner of Customs vs. Eastern Sea Trading

The Central Bank has authority to regulate "no-dollar" imports pursuant to its broad charter powers to maintain monetary stability and preserve the international value of the peso, and executive agreements may be validly entered into without the concurrence of two-thirds of the Senate, unlike treaties.

Eastern Sea Trading was the consignee of several shipments of onion and garlic that arrived at the Port of Manila from Japan and Hong Kong between August 25 and September 7, 1954. The importation and release of goods at the time were governed by Central Bank Circulars Nos. 44 and 45, which required certificates from the Central Bank, and by Executive Order No. 328, dated June 22, 1950, which regulated exports to and imports from Occupied Japan pursuant to Trade and Financial Agreements between the Philippines and Japan. The Trade Agreement, dated May 18, 1950, provided for an annual trade plan and compliance with exchange, import, and export control restrictions, while the Financial Agreement of the same date governed the settlement of transactions in U.S. dollars through designated financial agent banks.

Eastern Sea Trading was the consignee of several shipments of onion and garlic that arrived at the Port of Manila from August 25 to September 7, 1954. Some shipments originated from Japan and others from Hong Kong. None of the shipments carried the certificate required by Central Bank Circulars Nos. 44 and 45 for the release of imported goods. Accordingly, the goods were seized and subjected to forfeiture proceedings for alleged violations of Section 1363(f) of the Revised Administrative Code, in relation to the aforementioned Central Bank circulars.

In the meantime, the goods had been released to the consignees upon the posting of surety bonds, with Eastern Sea Trading as principal and the Alto Surety & Insurance Co., Inc. as surety, in compliance with orders of the Court of First Instance of Manila in Civil Cases Nos. 23942 and 23852. On September 4, 1956, the Collector of Customs of Manila rendered a decision declaring the goods forfeited to the Government and directing that the bond amounts be paid jointly and severally by the principal and surety to the Bureau of Customs within thirty days from notice.

The consignee appealed to the Commissioner of Customs, who affirmed the Collector's decision on December 27, 1956. The consignee then sought review by the Court of Tax Appeals, which reversed the Commissioner's decision and ordered the cancellation and withdrawal of the bonds. The Court of Tax Appeals rested its reversal on several premises: that the Central Bank had no authority to regulate transactions not involving foreign exchange; that the shipments were "no-dollar" imports not involving foreign exchange; that Central Bank Circulars Nos. 44 and 45 were null and void insofar as they required a Central Bank license and certificate; that the seizure and forfeiture of goods imported from Japan could not be justified under Executive Order No. 328 because it implemented an executive agreement of dubious validity that had not received Senate concurrence; and that no governmental agency remained authorized to issue the import license required by the executive order, the Import Control Commission having been abolished.

• Central Bank Authority: Respondent maintained that the Central Bank had no authority to regulate transactions not involving foreign exchange, and that the shipments in question were "no-dollar" imports that did not involve foreign exchange.
• Validity of Circulars Nos. 44 and 45: Respondent argued that, insofar as Central Bank Circulars Nos. 44 and 45 required a Central Bank license and certificate authorizing the importation or release of the goods, said circulars were null and void.
• Validity of Executive Order No. 328: Respondent contended that the seizure and forfeiture of goods imported from Japan could not be justified under Executive Order No. 328 because it implemented an executive agreement of dubious validity, the Senate not having concurred therein, and because no governmental agency was authorized to issue the import license required by the executive order.

• Central Bank Authority over No-Dollar Imports: Whether the Central Bank has authority to regulate "no-dollar" imports and whether Central Bank Circulars Nos. 44 and 45 are valid.
• Validity of Executive Agreement: Whether the executive agreement with Japan, as implemented by Executive Order No. 328, is valid despite the absence of Senate concurrence.
• Agency Authority to Issue Import Licenses: Whether the abolition of the Import Control Commission rendered the import license requirement under Executive Order No. 328 unenforceable for lack of an authorized issuing agency.

• Central Bank Authority over No-Dollar Imports: Yes. The Central Bank has authority to regulate no-dollar imports, and Central Bank Circulars Nos. 44 and 45 are valid, the broad powers of the Central Bank under its charter encompassing regulation of imports that may affect monetary stability and the international value of the peso.
• Validity of Executive Agreement: Yes. The executive agreement is valid without Senate concurrence, executive agreements being distinct from treaties and not requiring ratification with the approval of two-thirds of the Senate.
• Agency Authority to Issue Import Licenses: No, the abolition of the Import Control Commission did not nullify the licensing requirement. Executive Order No. 328 authorized issuance of licenses by the Central Bank or the Import Control Administration, and upon abolition of the latter, the authority reverted to the Central Bank and Monetary Board.

• Central Bank Authority over No-Dollar Imports: The authority of the Central Bank to regulate no-dollar imports and the validity of Central Bank Circulars Nos. 44 and 45 had been repeatedly upheld by the Supreme Court in prior cases (Pascual vs. Commissioner of Customs; Acting Commissioner of Customs vs. Leuterio; Commissioner of Customs vs. Pascual; Commissioner of Customs vs. Serree Investment Co.). The broad powers of the Central Bank under its charter — Section 2 of Republic Act No. 265, to maintain monetary stability and preserve the international value of the currency, in relation to Section 14 of the same Act authorizing the Bank to issue necessary rules and regulations — connote authority to regulate no-dollar imports, owing to the influence and effect that such imports may and do have upon the stability of the peso and its international value. The shipments in question, though characterized as "no-dollar" imports, fell within the regulatory scope of the Central Bank.

• Validity of Executive Agreement: The Court of Tax Appeals entertained doubts about the legality of the executive agreement because the Senate had not concurred in its making. However, the Constitution requires Senate concurrence only for "treaties" (Article VII, Section 10[7]), which are distinct from "executive agreements." Treaties are formal documents requiring ratification with the approval of two-thirds of the Senate, whereas executive agreements become binding through executive action without the need of a vote by the Senate or Congress. The right of the Executive to enter into binding agreements without subsequent Congressional approval has been confirmed by long usage, covering subjects such as commercial and consular relations, most-favored-nation rights, patent and trademark protection, postal and navigation arrangements, and the settlement of claims. International agreements embodying adjustments of detail carrying out well-established national policies and those of a temporary nature usually take the form of executive agreements. The United States Supreme Court had expressly recognized the validity and constitutionality of executive agreements entered into without Senate approval. The so-called Parity Rights in the Ordinance Appended to the Philippine Constitution were themselves preceded by an executive agreement made without the concurrence of two-thirds of the U.S. Senate.

• Agency Authority to Issue Import Licenses: The lower court held it unreasonable to require an import license when the Import Control Commission no longer existed. This conclusion was untenable because Executive Order No. 328 provided for export or import licenses from the Central Bank of the Philippines or the Import Control Administration, meaning authority was not vested exclusively in the latter. The Import Control Commission was created merely to perform tasks implementing certain objectives of the Monetary Board and the Central Bank, which otherwise had to be undertaken by those two agencies. Upon abolition of the Commission, the duty to provide means and ways for accomplishing said objectives reverted directly to the Monetary Board and the Central Bank, even if the executive order had been silent on the matter.

• Distinction Between Treaties and Executive Agreements — Treaties are formal documents requiring ratification with the approval of two-thirds of the Senate, while executive agreements become binding through executive action without the need of a vote by the Senate or Congress. International agreements involving political issues or changes of national policy and those of a permanent character usually take the form of treaties, whereas international agreements embodying adjustments of detail carrying out well-established national policies and traditions and those of a more or less temporary nature usually take the form of executive agreements. The Court applied this doctrine to uphold the validity of the executive agreement with Japan implemented by Executive Order No. 328, notwithstanding the absence of Senate concurrence.

• Central Bank's Broad Regulatory Authority — The broad powers of the Central Bank under Section 2 of Republic Act No. 265 to maintain monetary stability and preserve the international value of the peso, in relation to Section 14 authorizing it to issue necessary rules and regulations, connote authority to regulate no-dollar imports because of their potential influence on the stability of the currency. The Court relied on this principle to sustain the validity of Central Bank Circulars Nos. 44 and 45 and the forfeiture of goods imported without the required certificates.

• Reversion of Administrative Authority Upon Abolition of Delegated Agency — When a commission is created merely to implement objectives of a principal agency, and that commission is thereafter abolished, the duty to accomplish those objectives reverts to the principal agency. The Court applied this principle to hold that the abolition of the Import Control Commission did not eliminate the import license requirement under Executive Order No. 328, as authority to issue licenses reverted to the Central Bank and Monetary Board.

• "Treaties are formal documents which require ratification with the approval of two thirds of the Senate. Executive agreements become binding through executive action without the need of a vote by the Senate or by Congress." — This passage articulates the fundamental distinction between treaties and executive agreements, the ratio decidendi for upholding the validity of the executive agreement with Japan without Senate concurrence.

• "International agreements involving political issues or changes of national policy and those involving international arrangements of a permanent character usually take the form of treaties. But international agreements embodying adjustments of detail carrying out well-established national policies and traditions and those involving arrangements of a more or less temporary nature usually take the form of executive agreements." — This passage provides the canonical formulation distinguishing the subject matter appropriate to treaties versus executive agreements, frequently cited in Philippine jurisprudence on the treaty-executive agreement distinction.

• "[T]he broad powers of the Central Bank, under its charter, to maintain our monetary stability and to preserve the international value of our currency, under section 2 of Republic Act No. 265, in relation to section 14 of said Act — authorizing the bank to issue such rules and regulations as it may consider necessary for the effective discharge of the responsibilities and the exercise of the powers assigned to the Monetary Board and to the Central Bank — connote the authority to regulate no-dollar imports, owing to the influence and effect that the same may and do have upon the stability of our peso and its international value." — This passage states the ratio decidendi for sustaining the Central Bank's authority over no-dollar imports and the validity of Circulars Nos. 44 and 45.

• Pascual vs. Commissioner of Customs, L-10979 (June 30, 1959) — Controlling precedent upholding the Central Bank's authority to regulate no-dollar imports and the validity of Central Bank Circulars Nos. 44 and 45; followed and applied in this case.
• Acting Commissioner of Customs vs. Leuterio, L-9142 (October 17, 1959) — Followed precedent on the same point regarding Central Bank authority over no-dollar imports.
• Commissioner of Customs vs. Pascual, L-9836 (November 18, 1959) — Followed precedent on the same point.
• Commissioner of Customs vs. Serree Investment Co., L-12007 (May 16, 1960) and L-14274 (November 29, 1960) — Followed precedent on the same point.
• U.S. vs. Curtis-Wright Export Corporation, 299 U.S. 304 — Cited as United States Supreme Court authority recognizing the validity of executive agreements entered into without Senate approval.
• U.S. vs. Belmont, 301 U.S. 324 — Cited as further U.S. authority on executive agreements.
• U.S. vs. Pink, 315 U.S. 203 — Cited as further U.S. authority on executive agreements.

• Section 1363(f), Revised Administrative Code — Provided the statutory basis for forfeiture of imported goods seized for violation of customs laws, applied in relation to Central Bank Circulars Nos. 44 and 45.
• Section 2, Republic Act No. 265 (Central Bank Charter) — Defined the broad powers of the Central Bank to maintain monetary stability and preserve the international value of the peso, construed as connote authority to regulate no-dollar imports.
• Section 14, Republic Act No. 265 — Authorized the Central Bank to issue rules and regulations necessary for the effective discharge of its responsibilities and the exercise of its powers, read in conjunction with Section 2 to sustain the validity of Central Bank Circulars Nos. 44 and 45.
• Article VII, Section 10(7), Constitution of the Philippines — Required Senate concurrence for the making of treaties, distinguished from executive agreements which do not require such concurrence.
• Executive Order No. 328 (June 22, 1950) — Regulated exports to and imports from Occupied Japan, requiring export or import licenses from the Central Bank or the Import Control Administration; upheld as valid and enforceable even after abolition of the Import Control Commission.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Paredes, Dizon, and De Leon, JJ., concurred. Barrera, J., took no part.