CONGRESSMAN ENRIQUE T. GARCIA (SECOND DISTRICT OF BATAAN), PETITIONER, VS. THE EXECUTIVE SECRETARY, THE COMMISSIONER OF CUSTOMS, THE NATIONAL ECONOMIC AND DEVE­LOPMENT AUTHORITY…

On 27 November 1990, the President issued Executive Order No. 438
which imposed, in addition to any other duties, taxes and charges imposed by
law on all articles imported into the Philippines, an additional duty of five percent (5%) ad valorem. This additional duty was imposed across the
board on all imported articles, including crude oil and other oil products
imported into the Philippines. This
additional duty was subsequently increased from five percent (5%) ad valorem
to nine percent (9%) ad valorem by the promulgation of Executive
Order No. 443, dated 3 January 1991.

On 24 July 1991, the Department of Finance requested the Tariff
Commission to initiate the process required by the Tariff and Customs Code for
the imposition of a specific levy on crude oil and other petroleum products,
covered by HS Heading Nos. 27.09, 27.10 and 27.11 of Section 104 of the Tariff
and Customs Code as amended. Accordingly, the Tariff Commission, following the procedure set forth in
Section 401 of the Tariff and Customs Code, scheduled a public hearing to give
interested parties an opportunity to be heard and to present evidence in
support of their respective positions.

Meantime, Executive Order No. 475 was issued by the President, on
15 August 1991 reducing the rate of additional duty on all imported articles
from nine percent (9%) to five percent (5%) ad valorem, except in
the cases of crude oil and other oil products which continued to be subject to
the additional duty of nine percent (9%) ad valorem.

Upon completion of the public hearings, the Tariff Commission
submitted to the President a “Report on Special Duty on Crude Oil and Oil
Products” dated 16 August 1991, for consideration and appropriate
action. Seven (7) days later, the
President issued Executive Order No. 478, dated 23 August 1991, which levied
(in addition to the aforementioned additional duty of nine percent (9%) ad
valorem and all other existing ad valorem duties) a special
duty of P0.95 per liter or P151.05 per barrel of imported crude oil and
P1.00 per liter of imported oil products.

In the present Petition for Certiorari, Prohibition and Mandamus,
petitioner assails the validity of Executive Orders Nos. 475 and 478. He argues that Executive Orders Nos. 475 and
478 are violative of Section 24, Article VI of the 1987 Constitution which
provides as follows:

“Section 24. All
appropriation, revenue or tariff bills, bills authorizing increase of the
public debt, bills of local application, and private bills shall originate
exclusively in the House of Representatives, but the Senate may propose or
concur with amendments.”

He contends that since the Constitution
vests the authority to enact revenue bills in Congress, the President may not
assume such power by issuing Executive Orders Nos. 475 and 478 which are in the
nature of revenue-generating measures.

Petitioner further argues that Executive Orders No. 475 and 478
contravene Section 401 of the Tariff and Customs Code, which Section authorizes
the President, according to petitioner, to increase, reduce or remove tariff
duties or to impose additional duties only when necessary to protect
local industries or products but not for the purpose of raising
additional revenue for the government.

Thus, petitioner questions first the constitutionality and second
the legality of Executive Orders Nos. 475 and 478, and asks us to restrain the
implementation of those Executive Orders. We will examine these questions in that order.

Before doing so, however, the Court notes that the recent
promulgation of Executive Order No. 517 did not render the instant Petition
moot and academic. Executive Order No.
517 which is dated 30 April 1992 provides as follows:

“Section 1. Lifting
of the Additional Duty. — The additional duty in the nature of ad valorem
imposed on all imported articles prescribed by the provisions of Executive
Order No. 443, as amended, is hereby lifted; Provided, however,
that the selected articles covered by HS Heading Nos. 27.09 and 27.10 of
Section 104 of the Tariff and Customs Code, as amended, subject of Annex ‘A’
hereof, shall continue to be subject to the additional duty of nine (9%)
percent ad valorem.”

Under the above quoted provision, crude
oil and other oil products continue to be subject to the additional duty of
nine percent (9%) ad valorem under Executive Order No. 475 and to
the special duty of P0.95 per liter of
imported crude oil and P1.00 per liter of imported oil products under Executive
Order No. 478.

Turning first to the question of constitutionality, under Section
24, Article VI of the Constitution, the enactment of appropriation, revenue and
tariff bills, like all other bills is, of course, within the province of the Legislative
rather than the Executive Department. It does not follow, however, that therefore Executive Orders Nos. 475
and 478, assuming they may be characterized as revenue measures, are prohibited
to the President, that they must be enacted instead by the Congress of the
Philippines. Section 28(2) of Article
VI of the Constitution provides as follows:

“(2) The Congress may, by law,
authorize the President to fix within
specified limits, and subject to
such limitations and
restrictions as it may impose, tariff rates, import and export quotas, tonage and wharfage
dues, and other duties or imposts within the framework of the national development program of the
Government.” (Underscoring supplied)

There is thus explicit constitutional
permission^[1]
to Congress to authorize the President “subject to such limitations and
restrictions as [Congress] may impose” to fix “within specific
limits” “tariff rates x x x and other duties or imposts x x x.”

The relevant congressional statute is the Tariff and Customs Code of the Philippines, and Sections
104 and 401, the pertinent provisions thereof. These are the provisions which the President explicitly invoked in promulgating Executive Orders Nos. 475 and
478. Section 104 of the Tariff and
Customs Code provides in relevant part:

“Sec. 104. All tariff
sections, chapters, headings and subheadings and the rates of import duty under
Section 104 of Presidential Decree No. 34 and all subsequent amendments issued
under Executive Orders and Presidential Decrees are hereby adopted and form
part of this Code.

There shall be levied, collected, and paid upon all imported
articles the rates of duty indicated in the Section under this section except
as otherwise specifically provided for in this Code: Provided, that, the maximum rate shall not exceed one
hundred per cent ad valorem.

The rates of duty herein provided or subsequently fixed
pursuant to Section Four Hundred One of this Code shall be subject to periodic
investigation by the Tariff Commission and may be revised by the President
upon recommendation of the National Economic and Development Authority.

xxx                xxx                   xxx”

(Underscoring supplied)

Section 401 of the same Code needs to be
quoted in full:

“Sec. 401. Flexible
Clause. —

a.  In the interest of national economy, general
welfare and/or national security, and subject to the limitations herein
prescribed, the President, upon recommendation of the National Economic
and Development Authority (hereinafter referred to as NEDA), is hereby
empowered: (1) to increase,
reduce or remove existing protective rates of import duty (including any
necessary change in classification). The existing rates may be increased or decreased but in no case shall the reduced
rate of import duty be lower
than the basic rate of ten (10) per cent ad valorem,
nor shall the increased rate of import duty be higher than a maximum of one
hundred (100) per cent ad valorem; (2) to establish
import quota or to ban imports of any commodity, as may be necessary; and (3) to
impose an additional duty on all imports not exceeding ten (10) per cent ad
valorem whenever necessary; Provided, That upon periodic
investigations by the Tariff Commission and recommendation of the NEDA, the
President may cause a gradual reduction of protection levels granted in Section
One hundred and four of this Code, including those subsequently granted
pursuant to this section.

b.  Before any recommendation is submitted to the
President by the NEDA pursuant to the provisions of this section, except in
the imposition of an additional duty not exceeding ten (10) per cent ad valorem,
the Commission shall conduct an investigation in the course of which they shall
hold public hearings wherein
interested parties shall be afforded reasonable opportunity to be present,
produce evidence and to be heard. The
Commission shall also hear the views and recommendations of any government
office, agency or instrumentality concerned. The Commission shall submit their findings and recommendations to the
NEDA within thirty (30) days after the termination of the public hearings.

c. The power of the
President to increase or decrease rates of import duty within the limits fixed
in subsection ‘a’ shall include the authority to modify the form of duty. In modifying the form of duty, the corresponding
ad valorem or specific equivalents of the duty with respect to
imports from the principal competing foreign country for the most recent
representative period shall be used as bases.

d. The Commissioner of Customs shall regularly
furnish the Commission a copy of all customs import entries as filed in the
Bureau of Customs. The Commission or
its duly authorized representatives shall have access to, and the right to copy
all liquidated customs import entries and other documents appended thereto as
finally filed in the Commission on Audit.

e. The NEDA shall promulgate rules and
regulations necessary to carry out the provisions of this section.

f.   Any Order issued by the President pursuant to
the provisions of this section shall take effect thirty (30) days after
promulgation, except in the imposition of additional duty not exceeding ten
(10) per cent ad valorem which shall take effect at
the discretion of the President.” (Underscoring supplied)

Petitioner, however, seeks to avoid the thrust of the delegated
authorizations found in Sections 104 and 401 of the Tariff and Customs Code, by
contending that the President is authorized to act under the Tariff and Customs Code only “to
protect local industries and products for the sake of the national economy,
general welfare and/or national security.”^[2] He
goes on to claim that:

“E.O. Nos. 478 and 475 having nothing
to do whatsoever with the protection of local industries and products for the
sake of national economy, general welfare and/or national security. On the contrary, they work in reverse,
especially as to crude oil, an essential product which we do not have to
protect, since we produce only minimal quantities and have to import the rest
of what we need.

These Executive Orders are avowedly solely to enable the government
to raise government finances, contrary to Sections 24 and 28 (2) of
Article VI of the Constitution, as well as to Section 401 of the Tariff and Customs Code.”^[3]
(Underscoring in the original)

The Court is not persuaded. In the first place, there is nothing in the language of either Section
104 or of 401 of the Tariff and Customs Code that suggest such a sharp and
absolute limitation of authority. The
entire contention of petitioner is anchored on just two (2) words, one found in
Section 401 (a)(1): “existing protective
rates of import duty,” and the second in the proviso found at the end of
Section 401 (a): “protection
levels granted in Section 104 of this Code x x x.” We believe that the
words “protective” and “protection” are simply not enough
to support the very broad and encompassing limitation which petitioner seeks to
rest on those two (2) words.

In the second place, petitioner’s singular theory collides with a
very practical fact of which this Court may take judicial notice — that the
Bureau of Customs which administers the Tariff and Customs Code, is one of the
two (2) principal traditional generators or producers of governmental revenue,
the other being the Bureau of Internal Revenue. (There is a third agency, non-traditional in character, that
generates lower but still comparable levels of revenue for the government —
The Philippine Amusement and Games Corporation [PAGCOR].)

In the third place, customs duties which are assessed at the
prescribed tariff rates are very much like taxes which are frequently imposed
for both revenue-raising and for regulatory purposes.^[4] Thus,
it has been held that “customs duties” is “the name given to taxes on the importation and exportation of commodities,
the tariff or tax assessed upon
merchandise imported from, or exported to, a foreign country.”^[5]
The levying of customs duties on imported goods may have in some measure the
effect of protecting local industries — where such local industries actually
exist and are producing comparable goods. Simultaneously, however, the very same customs duties inevitably have
the effect of producing governmental revenues. Customs duties like internal revenue taxes are rarely, if ever, designed
to achieve one policy objective only. Most commonly, customs duties, which constitute taxes in the sense of
exactions the proceeds of which become public funds^[6] —
have either or both the generation of revenue and the regulation of economic or
social activity as their moving purposes and frequently, it is very difficult
to say which, in a particular instance, is the dominant or principal
objective. In the instant case, since
the Philippines in fact produces ten (10) to fifteen percent (15%) of the crude
oil consumed here, the imposition of increased tariff rates and a special duty on
imported crude oil and imported oil products may be seen to have some
“protective” impact upon indigenous oil production. For the effective price of imported crude
oil and oil products is increased. At
the same time, it cannot be gainsaid that substantial revenues for the
government are raised by the imposition of such increased tariff rates or
special duty.

In the fourth place, petitioner’s concept which he urges us to
build into our constitutional and customs law, is a stiflingly narrow one. Section 401 of the Tariff and Customs Code
establishes general standards with which the exercise of the authority
delegated by that provision to the President must be consistent: that authority must be exercised in “the
interest of national economy, general welfare and/or national security.”
Petitioner, however, insists that the “protection of local
industries” is the only permissible objective that can be secured
by the exercise of that delegated authority, and that therefore
“protection of local industries” is the sum total or the alpha and the omega of “the
national economy, general welfare and/or national security.” We find it
extremely difficult to take seriously such a confined and closed view of the
legislative standards and policies summed up in Section 401. We believe, for instance, that the
protection of consumers, who after all constitute the very great bulk of our
population, is at the very least as important a dimension of “the national
economy, general welfare and national security” as the protection of local
industries. And so customs duties may
be reduced or even removed precisely for the purpose of protecting consumers
from the high prices and shoddy quality and inefficient service that
tariff-protected and subsidized local manufacturers may otherwise impose upon
the community.

It seems also important to note that tariff rates are commonly
established and the corresponding customs duties levied and collected upon
articles and goods which are not found at all and not produced in the
Philippines. The Tariff and Customs
Code is replete with such articles and commodities: among the more interesting examples are ivory (Chapter 5,
5.10); castoreum or musk taken from the beaver (Chapter 5, 5.14); olives
(Chapter 7, Notes); truffles or European fungi growing under the soil on
tree roots (Chapter 7, Notes); dates (Chapter 8, 8.01); figs
(Chapter 8, 8.03); caviar (Chapter 16, 16.01); aircraft (Chapter
88, 88.01); special diagnostic instruments and apparatus for human medicine and surgery (Chapter 90,
Notes); X-ray generators; X-ray tubes; X-ray screens, etc (Chapter 90, 90.20); etc. In such cases, customs duties may be seen to
be imposed either for revenue purposes purely or perhaps, in certain cases, to
discourage any importation of the items involved. In either case, it is clear that customs duties are levied and
imposed entirely apart from whether or not there are any competing local
industries to protect.

Accordingly, we believe and so hold that Executive Orders Nos.
475 and 478 which may be conceded to be substantially moved by the desire to
generate additional public revenues, are not, for that reason alone, either
constitutionally flawed, or legally infirm under Section 401 of the Tariff and Customs Code. Petitioner has not successfully overcome the
presumptions of constitutionality and legality to which those Executive Orders
are entitled.^[7]

The conclusion we have reached above renders it unnecessary to
deal with petitioner’s additional contention that, should Executive Orders Nos.
475 and 478 be declared unconstitutional and illegal, there should be a roll
back of prices of petroleum products equivalent to the “resulting excess money not be needed to adequately
maintain the Oil Price
Stabilization Fund (OPSF).”^[8]

WHEREFORE, premises considered, the Petition for Certiorari,
Prohibition and Mandamus is hereby DISMISSED for lack of
merit. Costs against petitioner.

SO ORDERED.

Narvasa, C.J., Gutierrez, Jr., Cruz, Paras, Padilla, Bidin,
Griño-Aquino, Medialdea, Regalado, Davide, Jr., Romero, Nocon, and Bellosillo, JJ., concur.

^[1]
This provision also existed in substantially identical terms in the 1973
Constitution (Article VIII, Section 17[2]), and the 1935 Constitution (Article
VI, Section 22[2]).

^[2]
Petition, p. 11; Rollo, p. 12; underlining in the original.

^[3]
Rollo, pp. 13-14.

^[4]
Lutz v. Araneta, 98 Phil. 148 (1955); Republic v. Bacolod-Murcia
Milling Co., Inc., et al., 17 SCRA 632 (1966); Progressive Development Corp. v.
Quezon City, 172 SCRA 629 (1989).

^[5]
U.S. v. Sischo, 262 Fed. 1001 (1919); Flint v. Stone Tracey
Company, 220 US 107 (1910); Keller-Dorian Corp. v. Commissioner of
Internal Revenue, 153 F 2d 1006 (1946). The close affinity of “customs duties” and “taxes”
was stressed almost a century ago in the following excerpt from Pollock v.
Farmers’ Loan and Trust Company
(158 US 601; 39 Law Ed. 1108
[1895]):

“Cooley, on Taxation, p. 3,
says that the word ‘duty’ ordinarily ‘means an indirect tax, imposed on the importation, exportation, or consumption of goods;’
having ‘a broader meaning
than custom, which is a duty imposed on imports or exports;’ that ‘the
term impost also signifies any tax, tribute or duty, but
it is seldom applied to any but the indirect taxes. An excise duty is an inland impost, levied upon articles
of manufacture or sale, and also upon licenses to pursue certain trades or to deal in certain
commodities.” (Underscoring partly in the original and partly supplied)

^[6]
Campania General de Tabacos de Filipinas v. City of Manila, et al., 118
Phil. 380 (1963).

^[7]
National Waterworks and Sewerage Authority v. Reyes, 22 SCRA 905 (1968);
See also: Victoriano v. Elizalde
Rope Workers’ Union, 59 SCRA 54 (1974); Ermita-Malate Hotel and
Motel Operators Association Inc. v. City Mayor of Manila, 20 SCRA 849 (1967).

^[8]
Rollo, pp. 14-16.