PROCTER & GAMBLE PHILIPPINE MANUFACTURING CORPORATION, PETITIONER, VS. COMMISSIONER OF CUSTOMS, RESPONDENT.

Procter and Gamble Philippine Manufacturing versus Commissioner of Customs

The Case

This is a petition for review brought by Procter and Gamble Philippine Manufacturing Corporation against the Commissioner of Customs, asking the Supreme Court to reverse the ruling of the Court of Tax Appeals that upheld the collection of wharfage dues on two import shipments of caustic soda. The case matters because it settles a question of statutory interpretation: whether wharfage dues under the Tariff and Customs Code are payable even when the imported cargo is not unloaded on a government wharf. The answer turns on the deliberate removal, by the codifying law, of an exemption clause that had appeared in the earlier statute.

Procedural History

The Collector of Customs of Manila levied and collected the wharfage dues, and Procter and Gamble formally protested on the ground that it did not use a government wharf or facility. The Collector denied the protests. Procter and Gamble appealed to the Commissioner of Customs, who sustained the Collector. It then appealed to the Court of Tax Appeals, which likewise upheld the Commissioner. After its motion for reconsideration was denied, Procter and Gamble petitioned the Supreme Court to review the Tax Court's decision. The Supreme Court affirmed.

Facts

In 1958, two shipments of caustic soda were consigned to Procter and Gamble Philippine Manufacturing Corporation from San Francisco, California, on board the vessels Bronxville and Banggai. The vessels were then anchored outside the breakwater in Manila Bay. From there, the caustic soda was unloaded onto lighters of the Atlantic Gulf and Pacific Company, and the lighters were towed by tugboats of the same company to Procter and Gamble's private wharf at Estero Vitas, Tondo, Manila. From that private wharf, the caustic soda was finally transferred to warehouses belonging to Procter and Gamble.

On those two shipments, the Collector of Customs of Manila levied and collected a total of 720 pesos as wharfage dues under Section 2802 of the Tariff and Customs Code. Procter and Gamble protested, insisting that it never used a government wharf or facility to unload the merchandise.

The Collector denied the protests, the Commissioner of Customs sustained the Collector, and the Court of Tax Appeals upheld the Commissioner. Procter and Gamble then brought the matter to the Supreme Court.

Issues

• Whether or not Procter and Gamble is liable for wharfage dues under Section 2802 of the Tariff and Customs Code on shipments of caustic soda that were not unloaded on a government wharf.
• Whether or not the interpretation of wharfage dues in the earlier case of Commissioner of Customs versus Superior Gas and Equipment Company, that no wharfage dues are collected where no government wharf is used, still applies to Section 2802.

Applicable Provisions

Section 3 of Republic Act 1371, the earlier wharfage law, provided:

There shall be levied, collected and paid on all articles imported or brought into the Philippines, and on products of the Philippines, except coal, lumber, creosoted and other pressure treated materials as well as other minor forest products, cement, guano, natural rock asphalt, the minerals and ores of base metals, and sugar molasses, exported from the Philippines a charge of two pesos per gross metric ton as a fee for wharfage: Provided, That in the case of logs, or flitches twelve inches square or equivalent cross-sectional area, or over, a charge of sixty centavos per cubic meter shall be collected: Provided, further, That such wharfage fee shall not be levied on articles imported or brought into the Philippines which are unloaded on private wharves.

This is the statute whose proviso exempted imported goods unloaded on private wharves, and whose interpretation is the heart of the dispute.

Section 2802 of the Tariff and Customs Code, the law applied to Procter and Gamble, provides:

There shall be levied, collected and paid on all articles imported or brought into the Philippines, and on products of the Philippines except coal, lumber, creosoted and other pressure treated materials as well as other minor forest products, cement, guano, natural rock asphalt, the minerals and ores of base metals, and sugar molasses, exported from the Philippines, a charge of two pesos per gross metric ton as a fee for wharfage: Provided, That in the case of logs, or flitches twelve inches square or equivalent cross-sectional area, or over, a charge of sixty centavos per cubic meter shall be collected.

This is an almost verbatim copy of Section 3 of Republic Act 1371, minus the proviso exempting goods unloaded on private wharves, and that omission is decisive.

Ruling

On the first issue, the Court held that Procter and Gamble is liable. The Court reasoned that the Tariff and Customs Code levies distinct charges on the different activities of a vessel engaged in foreign trade: tonnage dues for coming from or going to a foreign port, harbor fees for entrance into or departure from a port of entry, wharfage dues assessed against the cargo discharged by a vessel engaged in foreign trade, and berthing charges for mooring within specified waters of a port. A vessel enters a harbor to load, to unload, or both, and in doing so derives benefit from port facilities provided and maintained by the Government. In fairness, it contributes through berthing charges and harbor fees. Similarly, cargoes discharged to a Philippine port derive benefit from those port facilities and should share the cost of providing and keeping a safe port, in the form of wharfage dues. The Court illustrated the principle: a vessel that anchors at Manila Bay merely to seek protection from a storm is not charged wharfage dues, although it may pay harbor fees and berthing charges; but when a vessel anchors at the Bay and discharges or unloads its cargo, wharfage dues are forthwith collected, because the dues are assessed against the cargo discharged, based on its quantity, weight, or measure. Since the vessels here called on port to unload, and did unload, the cargo was unloaded amid the safety afforded by the port and is chargeable with wharfage dues. The Court added that wharfage dues partake of the nature of a tax collected by the Government to support its operations in relation to customs affairs.

On the second issue, the Court refused to apply the Superior Gas interpretation. Section 2802 is an almost verbatim copy of Section 3 of Republic Act 1371 minus the proviso that such wharfage fee shall not be levied on articles imported or brought into the Philippines which are unloaded on private wharves. The Commissioner and the Tax Court read Section 2802 differently from Section 3 precisely because Section 2802 does not provide that exemption. Procter and Gamble argued that the exemption clause was mere surplusage and that a codification is presumed to incorporate prior laws without change. The Court did not accept that argument, and instead treated the deliberate omission of the proviso as changing the meaning of the provision. Having reached this conclusion, the Court found it unnecessary to discuss the other points raised.

Doctrine

Wharfage dues under Section 2802 of the Tariff and Customs Code are assessed against the cargo discharged by a vessel engaged in foreign trade, and are payable even if the cargo is unloaded on a private wharf. They rest on the benefit that the discharged cargo derives from the safety afforded by government port facilities, and they partake of the nature of a tax supporting customs operations. The exemption for goods unloaded on private wharves that appeared in Section 3 of Republic Act 1371 was deliberately omitted from Section 2802, and that omission must be given effect; a proviso present in the source law but absent from the codified provision is not surplusage. Wharfage dues on cargo are distinct from harbor fees and berthing charges on the vessel, and each is governed by a different section of the law.

Disposition

The Supreme Court affirmed the decision of the Court of Tax Appeals, with costs against Procter and Gamble.

Remember This

The one line to memorize: wharfage dues are assessed against the cargo discharged, and the omission of the private wharf exemption from Section 2802 of the Tariff and Customs Code means the exemption no longer exists. Examiners use this case to test statutory construction, particularly the effect of a codification that drops a proviso from the source law, and the distinction between wharfage dues on cargo and harbor fees or berthing charges on the vessel.