Macondray and Company Inc. vs. Acting Commissioner of Customs

A bill of lading does not satisfy the statutory requirement of a complete cargo manifest under Section 1005 of the Tariff and Customs Code, because while a manifest is a declaration of the entire cargo, a bill of lading is but a declaration of a specific part of the cargo and is a matter of business convenience based exclusively on a contract. The law imposes an absolute obligation upon every vessel from a foreign port to have on board complete manifests of all her cargo, and where the law requires a manifest to be kept or delivered, it is not complied with unless the manifest is true and accurate.

Petitioner Macondray and Company Inc. was the local ship agent of the S/S "TAI PING," a vessel engaged in foreign trade arriving at the port of Manila from San Francisco, California. The statutory framework governing the dispute is found in Sections 1004, 1005, and 2521 of the Tariff and Customs Code of the Philippines, which collectively require vessels from foreign ports to present complete and accurate cargo manifests to customs authorities and impose fines for conveying unmanifested cargo. The manifest requirement serves the governmental purpose of furnishing customs officers with a list to check against, informing revenue officers of goods being brought into the country, and providing a safeguard against goods being smuggled ashore.

On November 2, 1962, the vessel S/S "TAI PING," of which petitioner Macondray and Company Inc. was the local agent, arrived at the port of Manila from San Francisco, California, U.S.A., conveying various shipments of merchandise. Among the shipments was one (1) coil carbon steel, one (1) bundle carbon steel flat, and one (1) carton containing carbon tool holders carbide cutters, ground, all of which appeared in Bill of Lading No. 22, consigned to Bogo Medellin Millings Co., Inc. However, the shipment, except for the one (1) coil carbon steel, was not reflected in the Inward Cargo Manifest as required by Section 1005 in relation to Section 2521 of the Tariff and Customs Code of the Philippines.

Allied Brokerage Corporation, acting for and in behalf of Bogo Medellin Milling Co., requested petitioner to correct the manifest of the steamer so that it could take delivery of the goods at the Customs House. Meanwhile, the Collector of Customs required petitioner to explain and show cause why no administrative fine should be imposed upon the vessel. On August 15, 1963, counsel for petitioner wrote a letter to the Collector of Customs explaining that the disputed shipment was described in the ship's manifest as "1 coil carbon steel" only, but the bill of lading issued and surrendered to the client, duly endorsed by the consignee, called for the delivery of all three items. Upon investigation, it was verified that the vessel actually carried on board and discharged at Manila all three items as called for in the bill of lading. By letter dated November 15, 1962, petitioner applied with the Bureau for the appropriate amendment on an approved customs form to reflect the true and correct description of the shipment.

The Collector of Customs replied on September 26, 1963, informing petitioner that under Section 2308, in relation to Section 2312, of the Tariff and Customs Code, it was free to contest by appropriate protest the action of the Office in imposing the fine, but it had to pay the fine first. The Collector noted that the vessels under petitioner's agency had oftentimes failed to declare correctly the cargoes they conveyed as covered by the pertinent bill of lading, stating that such incorrect preparation of cargo manifests could not be tolerated for it enhanced the commission of fraud and made smuggling suspicious. The fine of P1,000.00 was paid by petitioner under protest on December 4, 1963.

At the hearing on the protest, petitioner presented Irineo Lumabi, manifest clerk of the Marine Division, who testified that he prepared the amending entries himself, but without prior approval from either the Collector of Customs, his Deputy, or the chief of the Marine Division, in contravention of the usual and accepted office procedure. No amended manifest was ever presented during the hearing despite ample time requested by and granted to petitioner. Petitioner also presented Dominador Bergano, its chief of claims, who testified only that Macondray and Company approved the amendment to the manifest and filed the same with the Bureau of Customs, without knowing whether or not it was approved by the Collector of Customs.

• Bill of Lading as Substantial Compliance: Petitioner contended that from the fact the whole shipment was indicated in the bill of lading, it was clear that the deficiency of the original vessel's manifest was adequately supplied by the entries of said bill of lading, and therefore no violation of the provision of the Tariff and Customs Code was committed.
• Amendment of the Manifest: Petitioner argued that an amendment was made on the manifest to reflect the true and accurate description of the shipment, relying on the testimony of manifest clerk Irineo Lumabi that he prepared the amending entries himself.

• Purpose of the Manifest Requirement: Respondent argued that the inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the requirement of the Tariff and Customs Code, since nowhere in the said sections is the presentation of a Bill of Lading required, but only the presentation of a Manifest containing a true and accurate description of the cargoes.
• Amendment Does Not Relieve Liability: Respondent argued that even granting arguendo that the amendment was approved and therefore valid, it does not in any way relieve the vessel from the liability which she had already incurred prior to the amendment, as the philosophy and purpose behind the law authorizing amendment is to protect innocent importers or consignees from the mistake or unlawful acts of the master.

• Bill of Lading as Compliance: Whether the Court of Tax Appeals erred in holding that the bill of lading whereon the shipment was correctly manifested was not a substantial compliance with the provision of Section 1005 of the Tariff and Customs Code.
• Amendment of the Manifest: Whether the Court of Tax Appeals erred in holding that the original manifest was not amended to reflect the true and accurate description of the shipment.

• Bill of Lading as Compliance: No. The inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the requirement of Sections 1004 and 1005 in relation to Section 2521 of the Tariff and Customs Code, because the law requires the presentation of a Manifest containing a true and accurate description of the cargoes, not a Bill of Lading.
• Amendment of the Manifest: No. No valid amendment to the ship's manifest was made conformably with Section 1005 of the Tariff and Customs Code, and even assuming the amendment was approved and valid, it would not relieve the vessel from liability already incurred prior to the amendment.

• Bill of Lading as Compliance: The Court reasoned that while a manifest is a declaration of the entire cargo, a bill of lading is but a declaration of a specific part of the cargo and is a matter of business convenience based exclusively on a contract. The object of a manifest is to furnish the customs officers with a list to check against, to inform revenue officers what goods are being brought into the country, and to provide a safeguard against goods being brought into the country on a vessel and then smuggled ashore. A bill of lading is ordinarily merely a convenient commercial instrument designed to protect the importer or consignee, whereas a manifest of the cargo is absolutely essential to the exportation or importation of property in all vessels, the evident intent and object of which is to impose upon the owners and officers of such vessel an imperative obligation to submit lists of the entire loading of the ship in the prescribed form. Since the purpose served by the manifest is far different from that of the bill of lading, the Court could not accept the contention that the entries in the bill of lading adequately supplied the deficiency of the manifest and cured it of its infirmity. The law imposes the absolute obligation, under penalty for failure, upon every vessel from a foreign port to have on board complete written or typewritten manifests of all her cargo, signed by the master. Where the law requires a manifest to be kept or delivered, it is not complied with unless the manifest is true and accurate, citing U.S. vs. The S.S. Islas Filipinos, 28 Phil. 291, 297.

• Amendment of the Manifest: The Court reviewed the record carefully and found no evidence to substantiate the allegation that an amendment was made to the manifest. The testimony of Irineo Lumabi that he prepared the amending entries himself was of no moment, first, because Lumabi made the entries without prior approval from either the Collector of Customs, his Deputy, or the chief of the Marine Division, in contravention of the usual and accepted office procedure; and second, because no amended manifest was ever presented during the hearing despite ample time requested by and granted to petitioner. The supposed amendments were never attached to the manifest itself as required by Section 1005. The testimony of Dominador Bergano did not bolster petitioner's stand, as he only testified that Macondray and Company approved the amendment and filed it with the Bureau of Customs without knowing whether the same was approved by the Collector of Customs. Since there was no valid amendment, liability attached as to the unmanifested cargoes under Section 2521. The Court further held, citing Dobbins Distillery vs. US, 96 US 295-400, that by the General Maritime Law, vessels are made responsible for the unlawful acts of their masters and crews, and citing Gillam vs. US, 27 F(2d) 296, that statutory penalties are incurred where a vessel bound for the US failed to produce a manifest, or has on board unmanifested merchandise.

• Distinction between Manifest and Bill of Lading — A cargo manifest is a declaration of the entire cargo of a vessel, while a bill of lading is a declaration of a specific part of the cargo and is a matter of business convenience based exclusively on a contract. The manifest serves to furnish customs officers with a list to check against, to inform revenue officers what goods are being brought into the country, and to provide a safeguard against goods being smuggled ashore. The Court applied this distinction to hold that entries in a bill of lading cannot supply the deficiency in a cargo manifest for purposes of Section 1005 of the Tariff and Customs Code.

• Absolute Obligation to Maintain True and Accurate Manifest — The law imposes an absolute obligation, under penalty for failure, upon every vessel from a foreign port to have on board complete written or typewritten manifests of all her cargo, signed by the master. Where the law requires a manifest to be kept or delivered, it is not complied with unless the manifest is true and accurate. The Court applied this doctrine to reject petitioner's argument that the bill of lading cured the manifest's deficiency.

• Vessel's Liability for Acts of Master and Crew — By the General Maritime Law, vessels are made responsible for the unlawful acts of their masters and crews. Statutory penalties are incurred where a vessel bound for a port fails to produce a manifest, or has on board unmanifested merchandise. The Court applied this doctrine to hold that even a valid amendment to the manifest would not relieve the vessel from liability already incurred prior to the amendment.

• "The inclusion of the unmanifested cargoes in the Bill of Lading does not satisfy the requirement of the aforequoted sections of the Tariff and Customs Code. It is to be noted that nowhere in the said section is the presentation of a Bill of Lading required, but only the presentation of a Manifest containing a true and accurate description of the cargoes." — This passage states the core ratio decidendi: the statutory requirement is for a manifest, not a bill of lading, and the latter cannot substitute for the former.

• "This is for the simple reason that while a manifest is a declaration of the entire cargo, a bill of lading is but a declaration of a specific part of the cargo and is a matter of business convenience based exclusively on a contract." — This passage articulates the doctrinal distinction between the two documents that underlies the Court's reasoning.

• "The object of a manifest is to furnish the customs officers with a list to check against, to inform our revenue officers what goods are being brought into the country, and to provide a safeguard against goods being brought into this country on a vessel and then smuggled ashore." — This passage defines the purpose of the manifest requirement, which is essential to understanding why the law imposes an absolute obligation on vessels.

• "Where the law requires a manifest to be kept or delivered, it is not complied with unless the manifest is true and accurate." — This passage states the controlling rule on compliance with the manifest requirement, citing U.S. vs. The S.S. Islas Filipinos.

• U.S. vs. The S.S. Islas Filipinos, 28 Phil. 291, 297 — Cited as controlling authority for the proposition that where the law requires a manifest to be kept or delivered, it is not complied with unless the manifest is true and accurate.
• New York and Cuba Mail SS Co. vs. U.S., 125 F. 320 — Cited in the footnotes for the distinction between a manifest and a bill of lading.
• The Sylvia II, U.S. vs. Cargo of Liquors and Sea Stores, 28 F(2d) 215, 216 — Cited in the footnotes for the object and purpose of a manifest.
• U.S. vs. Steamship "Rubi," 32 Phil. 228, 233 — Cited in the footnotes for the imperative obligation imposed on vessel owners and officers to submit lists of the entire loading of the ship.
• Dobbins Distillery vs. US, 96 US 295-400 — Cited for the rule that by the General Maritime Law, vessels are made responsible for the unlawful acts of their masters and crews.
• Gillam vs. US, 27 F(2d) 296 — Cited for the rule that statutory penalties are incurred where a vessel bound for the US failed to produce a manifest, or has on board unmanifested merchandise.

• Section 1004, Tariff and Customs Code — Requires the master of a vessel engaged in foreign trade to present the original manifest of all cargo destined for the port, duly certified by him, to the customs boarding official, along with three copies of the same manifest. The Court applied this provision to determine the documents required upon entry of a vessel.
• Section 1005, Tariff and Customs Code — Requires every vessel from a foreign port to have on board a complete manifest of all her cargo, with all cargo intended to be landed at a port in the Philippines described in separate manifests for each port of call, including the port of departure and port of delivery with marks, numbers, quantity, and description of packages and names of consignees. The provision also states that a cargo manifest shall in no case be changed or altered after entry of the vessel, except by means of an amendment by the master, consignee, or agent thereof, under oath and attached to the original manifest. The Court applied this provision to hold that the bill of lading did not satisfy the manifest requirement and that no valid amendment was made.
• Section 2521, Tariff and Customs Code — Imposes a fine not exceeding ten thousand pesos upon any vessel or aircraft that enters or departs from a port of entry without submitting the proper manifests to the customs authorities, or that enters or departs conveying unmanifested cargo. The Court applied this provision to affirm the P1,000.00 fine imposed on the vessel.
• Section 2308, Tariff and Customs Code — Cited in the Collector of Customs' reply letter as the provision allowing a party to contest by appropriate protest the action of the Office in imposing a fine, provided the fine is paid first.
• Section 2312, Tariff and Customs Code — Cited in the Collector of Customs' reply letter in relation to Section 2308 regarding the procedure for protesting the imposition of a fine.

Makalintal, C.J. (Chairman), Castro, Teehankee, and Makasiar, JJ., concurred.