Article 2, Section 3.1 of Executive Order No. 156, prohibiting the importation of used motor vehicles, is valid and constitutional in its application to the Philippine territory outside the secured area of the Subic Bay Freeport, but it is ultra vires and void in its application to the presently secured fenced-in former Subic Naval Base area (the "Secured Area" of the Subic Bay Freeport as defined in EO 97-A), because such application exceeds the President's delegated authority and unreasonably modifies the freeport status established by RA 7227.

On December 12, 2002, President Gloria Macapagal-Arroyo issued Executive Order No. 156, "Providing for a Comprehensive Industrial Policy and Directions for the Motor Vehicle Development Program and its Implementing Guidelines." Article 2, Section 3.1 of EO 156 prohibited the importation into the country, inclusive of the Subic Bay Freeport, of all types of used motor vehicles, subject to limited exceptions. This was intended to rationalize the importation of used motor vehicles and enhance the competitiveness of the domestic motor vehicle manufacturing industry. Respondents, entities operating within the Subic Bay Freeport and engaged in the business of importing and trading used motor vehicles, challenged this provision.

• On December 12, 2002, President Gloria Macapagal-Arroyo, through Executive Secretary Alberto G. Romulo, issued Executive Order No. 156 (EO 156), titled “Providing for a Comprehensive Industrial Policy and Directions for the Motor Vehicle Development Program and its Implementing Guidelines.”
• Article 2, Section 3.1 of EO 156 states: "The importation into the country, inclusive of the Freeport, of all types of used motor vehicles is prohibited, except for the following: [list of exceptions, e.g., personal use by returning residents, diplomatic use, certain trucks, buses, special purpose vehicles]."
• Respondents (Southwing Heavy Industries, Inc., United Auctioneers, Inc., Microvan, Inc., Subic Integrated Macro Ventures Corp., and Motor Vehicle Importers Association of Subic Bay Freeport, Inc.) are Subic Bay Freeport Enterprises engaged in importing and/or trading used motor vehicles.
• Respondents filed three separate actions for declaratory relief before the Regional Trial Court (RTC) of Olongapo City, Branch 72, seeking the declaration of unconstitutionality of Article 2, Section 3.1 of EO 156.
• The RTC, in separate decisions for the three cases, declared Article 2, Section 3.1 of EO 156 unconstitutional, primarily finding it an unlawful usurpation of legislative power and contrary to RA 7227.

• Article 2, Section 3.1 of EO 156 is valid and applicable to the entire country, including the Subic Bay Freeport.
• Respondents lack locus standi to question EO 156 because their certificates of registration and tax exemption do not authorize them to import or trade "used cars," although they may import other types of used motor vehicles.
• Declaratory relief is an improper remedy as there was already a breach of respondents' alleged rights, evidenced by warrants of seizure and detention issued against imported used motor vehicles.
• EO 156 was issued pursuant to the President's authority under EO 226 (Omnibus Investment Code of the Philippines).
• The guarantee of free flow of goods into the Freeport under RA 7227 merely signifies an exemption from customs duties and taxes, not an unrestricted right to import all kinds of goods.

• Article 2, Section 3.1 of EO 156 is unconstitutional and illegal.
• The provision constitutes an unlawful usurpation of legislative power, which is vested by the Constitution in Congress.
• The prohibition on importing used motor vehicles into the Freeport is contrary to the mandate of Republic Act No. 7227 (Bases Conversion and Development Act of 1992), which allows the free flow of goods and capital within the Freeport.
• The importation ban under EO 156 is illogical, unfair, and unreasonably drives them out of business, to the prejudice of the national economy.

• Whether respondents have locus standi to challenge the validity of EO 156.
• Whether challenging EO 156 through a declaratory relief proceeding is proper.
• Whether summary judgment was properly rendered by the trial court.
• Whether there is a statutory basis for the President's issuance of EO 156, particularly Article 2, Section 3.1 thereof.
• Assuming a statutory basis exists, whether the application of Article 2, Section 3.1 of EO 156 to the Subic Bay Freeport is reasonable and within the scope provided by law.

• Respondents possess locus standi as they would suffer direct injury from EO 156's implementation, given that the ban covers "all types of used motor vehicles," affecting their authorized business of importing new and used motor vehicles and spare parts, beyond just "used cars."
• Declaratory relief is an appropriate vehicle for assailing the executive issuance, and any prior breach of rights does not bar the action, especially given the case's significance to the national economy.
• Summary judgments were properly rendered by the trial court as the issues involved were pure questions of law.
• EO 156 has constitutional (Article VI, Section 28(2) of the Constitution) and statutory bases (Section 401 of the Tariff and Customs Code; Article 7(12) of EO 226; Republic Act No. 8800 or the Safeguard Measures Act) authorizing the President to ban or regulate the importation of articles.
• While EO 156 is a valid exercise of delegated police power to protect the domestic industry, its application to the Subic Bay Freeport (SBF) through Article 2, Section 3.1 is ultra vires and unreasonable.
• RA 7227 established the SBF as a separate customs territory designed for free flow of goods and capital with minimal government intervention to attract investments; this includes the right to import goods, subject to legal prohibitions.
• EO 156, by extending the import ban to the SBF, exceeded its scope because the "domestic industry" it seeks to protect is within the "customs territory," which, by definition under RA 7227's implementing rules, is the portion of the Philippines outside the SBF.
• Applying the import ban to the SBF modifies RA 7227 by restricting the free flow of goods into what is considered, to some extent, foreign territory for customs purposes, thus constituting an ultra vires act.
• The application of the ban to the SBF is unreasonable because it does not serve the EO's purpose (protecting the domestic industry within the customs territory) and subverts RA 7227's goal of boosting the national economy through investments in the SBF.
• Consistent with Tiu v. Court of Appeals and EO 97-A, the free flow and importation of used motor vehicles shall be operative only within the "secured area" of the SBF (the presently fenced-in former Subic Naval Base).
• Therefore, Article 2, Section 3.1 of EO 156 is declared VALID insofar as it applies to the Philippine territory outside the secured fenced-in former Subic Naval Base area, and VOID with respect to its application to this secured area.

• Locus Standi — A personal and substantial interest in the case such that the party has sustained or is in immediate danger of sustaining some direct injury as a result of the governmental act being challenged. Applied here, respondents, whose business involves importing various used motor vehicles (not just "used cars"), would definitely suffer direct injury from EO 156's broad prohibition, thus having legal standing.
• Declaratory Relief (Rule 63, Rules of Court) — An action by any person interested under a deed, will, contract or other written instrument, or whose rights are affected by a statute, executive order or regulation, ordinance, or any other governmental regulation before breach or violation thereof, to determine any question of construction or validity arising, and for a declaration of his rights or duties thereunder. The Court entertained the suit despite an alleged prior breach due to the case's significance to the national economy, citing Commission on Audit of the Province of Cebu v. Province of Cebu.
• Police Power — The inherent power of the state to enact laws, within constitutional limits, to promote the order, safety, health, morals, and general welfare of society. The Court recognized that EO 156, aimed at protecting the domestic motor vehicle industry, is an exercise of police power delegated to the President.
• Quasi-Legislative Power (Delegated Legislative Power) — The authority delegated by the law-making body to an administrative body to adopt rules and regulations intended to carry out the provisions of a law and implement legislative policy. For an administrative issuance like an EO to be valid, it must be (1) authorized by the legislature; (2) promulgated according to prescribed procedure; (3) within the scope of authority given by the legislature; and (4) reasonable. EO 156 was found to have constitutional and statutory authorization (requisite 1) and presumed to follow procedure (requisite 2), but failed on requisites 3 and 4 regarding its application to the Freeport.
• Legislative Rules vs. Interpretative Rules — Legislative rules are in the nature of subordinate legislation, implementing a primary legislation, and generally require notice and hearing if they substantially increase the burden of those governed. Interpretative rules merely provide guidelines to the law. EO 156 was classified as a legislative rule imposing a ban not previously existing.
• Ultra Vires Doctrine — An act is ultra vires if it is beyond the scope of authority conferred by law. An administrative issuance must not supplant or modify the Constitution, its enabling statute, or other existing laws. The Court held that extending the import ban of EO 156 to the Subic Bay Freeport, which RA 7227 establishes as a separate customs territory with free flow of goods, was ultra vires as it modified RA 7227.
• Reasonableness of Administrative Issuances — Administrative rules and regulations must be reasonable and fairly adapted to secure the end in view; if they bear no reasonable relation to the purposes for which they were authorized, they are invalid. The Court found the application of the import ban to the Freeport unreasonable because it would not serve the EO's purpose of protecting the domestic industry (located within the customs territory, outside the Freeport) and would subvert RA 7227's economic goals for the Freeport.
• Ratione cessat lex, et cessat lex — When the reason for the law ceases, the law ceases. The Court applied this maxim to argue that since the harm EO 156 sought to prevent (to the domestic industry in the customs territory) would not arise as long as used motor vehicles do not enter the customs territory from the Freeport, the ban should not apply within the Freeport.
• Separability Clause — A provision in a statute or executive order stating that if any part of it is declared unconstitutional or invalid, the other provisions not affected shall remain in force. Applied here, Article 2, Section 3.1 of EO 156 was declared void only as to its application within the secured area of the Subic Bay Freeport, but valid as to its application outside this area, pursuant to EO 156's own separability clause.

• "The rule-making power of a public administrative body is a delegated legislative power, which it may not use either to abridge the authority given it by Congress or the Constitution or to enlarge its power beyond the scope intended. Constitutional and statutory provisions control what rules and regulations may be promulgated by such a body, as well as with respect to what fields are subject to regulation by it. It may not make rules and regulations which are inconsistent with the provisions of the Constitution or a statute, particularly the statute it is administering or which created it, or which are in derogation of, or defeat, the purpose of a statute."
• "Ratione cessat lex, et cessat lex. When the reason for the law ceases, the law ceases. It is not the letter alone but the spirit of the law also that gives it life."

• Commission on Audit of the Province of Cebu v. Province of Cebu — Cited to support entertaining the suit for declaratory relief despite an alleged prior violation, due to the importance of settling the interpretation of conflicting laws.
• Commissioner of Internal Revenue v. Court of Appeals and Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc. — Referenced for the doctrine that when an administrative rule substantially increases the burden of those governed (i.e., a legislative rule), the agency must accord affected parties a chance to be heard.
• United BF Homeowner's Association v. BF Homes, Inc. — Cited for the principle that an administrative body's rule-making power cannot be used to abridge or enlarge its statutory authority, or to issue rules inconsistent with the Constitution or statutes.
• Taxicab Operators of Metro Manila, Inc. v. Board of Transportation — Illustrative case where a regulation phasing out old taxi cabs was upheld as a valid exercise of police power for public safety and convenience.
• De la Cruz v. Paras; Lupangco v. Court of Appeals; Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc. — Cited as examples where administrative issuances or ordinances were declared void for being unreasonable or characterized by overbreadth.
• Tiu v. Court of Appeals and Coconut Oil Refiners Association, Inc. v. Torres — Referenced for upholding the validity of EO 97-A, which limited tax and duty-free importation privileges to the "secured area" (presently fenced-in former Subic Naval Base) of the Subic Bay Freeport, and this "secured area" concept was used by the Court to define the geographical scope of EO 156's invalidity.

• Constitution, Article VI, Section 28(2) — Authorizes Congress to delegate to the President the power to fix tariff rates, import/export quotas, etc., within specified limits. This was cited as a constitutional basis for the President's power to issue EO 156.
• Tariff and Customs Code, Section 401 (Flexible Clause) — Empowers the President, upon NEDA recommendation, to ban imports of any commodity in the interest of national economy, general welfare, or national security. Cited as a statutory basis for EO 156.
• Executive Order No. 226 (Omnibus Investment Code of the Philippines), Article 7(12) — Empowers the Board of Investments, upon President's approval, to restrict importation for industry rationalization programs. Cited as another statutory basis for EO 156.
• Republic Act No. 8800 (Safeguard Measures Act), Section 2 — Declares state policy to provide safeguard measures to protect domestic industries from increased imports. Cited as a statutory basis supporting the President's power to regulate imports.
• Republic Act No. 7227 (Bases Conversion and Development Act of 1992), Section 12 — Establishes the Subic Special Economic Zone (Subic Bay Freeport) and mandates its operation as a separate customs territory ensuring free flow of goods and capital. Central to the respondents' arguments and the Court's finding that EO 156's application to the Freeport was ultra vires.
• Rules and Regulations Implementing RA 7227, Section 3(n) — Defines "Customs Territory" as the portion of the Philippines outside the Subic Bay Freeport. This definition was key to the Court's reasoning that EO 156 aimed to protect industry within this territory, not within the Freeport itself.
• Rules and Regulations Implementing RA 7227, Section 39(a) — Grants SBF Enterprises the right to freely engage in business and import/export all types of goods into and out of the SBF, subject to the Act and SBMA regulations.
• Executive Order No. 156, Article 2, Section 3.1 — The specific provision challenged, prohibiting the importation of used motor vehicles into the country, including the Freeport.
• Executive Order No. 156, Article 7, Section 3 (Separability Clause) — Allowed the Court to declare Section 3.1 partially void (as to its application to the SBF secured area) while upholding its validity elsewhere.
• Executive Order No. 97-A (1993), Section 1.1 — Defines the "Secured Area" of the Subic Special Economic and Free Port Zone as the only completely tax and duty-free area, consisting of the presently fenced-in former Subic Naval Base. The Court used this definition to delineate where EO 156's ban on used vehicle imports is void.