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VOL. 3, OCTOBER 31, 1961 351

Commissioner of Customs vs. Eastern Sea Trading

No. L-14279. October 31, 1961.

THE COMMISSIONER OF CUSTOMS and THE

COLLECTOR OF CUSTOMS, petitioners, vs. EASTERN
SEA TRADING,respondent.

Import and export; Central Bank; Authority to regulate

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352 SUPREME COURT REPORTS ANNOTATED

Commissioner of Customs vs. Eastern Sea Trading

no-dollar imports.—The Central Bank has authority to regulate

no-dollar imports, because its broad powers, under the charter, to
maintain monetary stability and to preserve the international
value of the 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 the peso and its international value.
Same; Issuance of import licenses not vested exclusively upon
Import Control Commission.—The authority to issue import
licenses was not vested exclusively upon the Import Control
Commission, because Executive Order No. 328 provided for export
or import licenses “from the Central Bank of the Philippines or
the Import Control Administration” or Commission. The latter
was created only to perform the task of implementing certain
objectives of the Monetary Board and the Central Bank, which
otherwise had to be undertaken by these two (2) agencies. Upon
the abolition of said Commission, the duty to provide means and
ways for the accomplishment of said objectives had merely to be
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discharged directly by the Monetary Board and the Central Bank,

even if the aforementioned Executive Order had been silent
thereon.
Constitutional law; Executive agreement; Concurrence of
Senate not required.—While the concurrence of the Senate is
required by the Constitution in the making of “treaties”
(Constitution of the Phil., Article VII, Section 10 [7], “executive
agreements” may be validly entered into without such
concurrence.

PETITION for review of a judgment of the Court of Tax

Appeals.

The facts are stated in the opinion of the Court.

     Solicitor General for petitioners.
     Valentin Gutierrez for respondent.

CONCEPCION, J.:

Petition for review of a judgment of the Court of Tax

Appeals reversing a decision of the Commissioner of
Customs.
Respondent Eastern Sea Trading was the consignee of
several shipments of onion and garlic which arrived at the
Port of Manila from August 25 to September 7, 1954. Some
shipments came from Japan and others from Hong

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Commissioner of Customs vs. Eastern Sea Trading

Kong. Inasmuch as none of the shipments had the

certificate required by Central Bank Circulars Nos. 44 and
45 for the release thereof, the goods thus imported were
seized and subjected to forfeiture proceedings for alleged
violations of section 1363 (f) of the Revised Administrative
Code, in relation to the aforementioned circulars of the
Central Bank. In due course, the Collector of Customs of
Manila rendered a decision on September 4, 1956,
declaring said goods forfeited to the Government and—the
goods having been, in the meantime, released to the
consignees on surety bonds, filed by the same, 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 thereof—
directing that the amounts of said bonds be paid, by said

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principal and surety, jointly and severally, to the Bureau of

Customs, within thirty (30) days from notice.
On appeal taken by the consignee, said decision was
affirmed by the Commissioner of Customs on December 27,
1956. Subsequently, the consignee sought a review of the
decision of said two (2) officers by the Court of Tax Appeals,
which reversed the decision of the Commissioner of
Customs and ordered that the aforementioned bonds be
cancelled and withdrawn. Hence, the present petition of
the Commissioner of Customs for review of the decision of
the Court of Tax Appeals.
The latter is based upon the following premises, namely:
that the Central Bank has no authority to regulate
transactions not involving foreign exchange; that the
shipments in question are in the nature of “no-dollar”
imports; that, as such, the aforementioned shipments do
not involve foreign exchange; that, insofar as a Central
Bank license and a certificate authorizing the importation
or release of the goods under consideration are required by
Central Bank Circulars Nos. 44 and 45, the latter are null
and void; and that the seizure and forfeiture of the goods
imported from Japan
1
cannot be justified under Executive
Order No. 328, not only because the same seeks to
implement an executive

_______________

1 Dated June 22, 1950. It provides, inter alia, that from and after said
date, no commodity may be exported to or im-

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354 SUPREME COURT REPORTS ANNOTATED

Commissioner of Customs vs. Eastern Sea Trading

2 3
agreement —extending4
the effectivity of our Trade and
Financial Agreements with Japan—which (executive

______________

ported from Occupied Japan without an export or import license from

the Central Bank of the Philippines or the Import Control Administration,
and that the annual exports and imports to the Philippines and from
Occupied Japan, as contained in the Trade Plan shall be allocated and the
licenses therefor shall be issued only to bona fide Philippine exporters and
importers, subject to the provisions of section 9 of said Executive Order
and to such rules and regulations as may be prescribed by the Import
Control Administration and the Central Bank of the Philippines.

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2 According to a communication dated April 24, 1957 of the then Acting

Secretary of Foreign Affairs (Exhibit F), Japan was subrogated into the
rights, obligations and interests of the SCAP and Japan on March 19,
1952, and since then the agreements have been extended mutatis
mutandis 18 times, the current one to expire at the end of April, 1957.
3 The Trade Agreement, dated May 18, 1950, provides, inter alia, for
the adoption of a trade plan, on an annual basis, between the Philippines
and Occupied Japan; that, subject to exceptions, all trade shall be
conducted in accordance with the Financial Agreement between the two
countries, and through specified channels; that subject to exchange,
import and export control restrictions, both countries would permit the
importation from and exportation to each other of the commodities
specified in the trade plan, within specified limits; that consultations
would be held for necessary modifications of the trade plan; that a
machinery would be established to ensure accurate and up-to-date
information regarding the operation of the agreement and to insure the
implementation of the trade plan; and that the parties would do
everything feasible to ensure compliance with the export-import control,
exchange control and such other controls pertaining to international trade
as may be in force in their respective territories from time to time. The
agreement, likewise, specifies the method of revision or cancellation
thereof, the procedure for the review of the trading position between the
parties and the time of its effectivity (upon “exchange of formal
ratification”, pending which, “it shall take effect upon signature by
authorized representatives as modus vivendi between the parties”).
4 The Financial Agreement, dated May 18, 1950, provides, inter alia,
that all transactions covered by the Trade Agreement shall be invoiced in
U.S.A. dollars and shall be entered into the account of each party to be
maintained in the books of the principal financial agent banks designated
by each party; that debits and credits shall be offset against each other in
said accounts and payments shall be made on the net balance only;

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Commissioner of Customs vs. Eastern Sea Trading

agreement), it believed, is of dubious validity, but, also,

because there is no governmental agency authorized to
issue the import license required by the aforementioned
executive order.
The authority of the Central Bank to regulate no-dollar
imports and the validity of the aforementioned Circulars
Nos. 44, and 45 have already been passed upon and
repeatedly upheld by this Court (Pascual vs. Commissioner
of Customs, L-10979 [June 30, 1959]; Acting Commissioner
of Customs vs. Leuterio, L-9142 [October 17, 1959]
Commissioner of Customs vs. Pascual, L-9836 [November
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18, 1959]; Commissioner of Customs vs. Serree Investment

Co., L-12007 [May 16, 1960]; Commissioner of Customs vs.
Serree Investment Co., L-14274 [November 29, 1960]), for
the reason that the 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.
The Court of Tax Appeals entertained doubts on the
legality of the executive agreement sought to be
implemented by Executive Order No. 328, owing to the fact
that our Senate had not concurred in the making of said
executive agreement. The concurrence of said House of
Congress is required by our fundamental law in the
making of “treaties” (Constitution of the Philippines,
Article VII, Section 10 [7]), which are, however, distinct
and different from “executive agreements,” which may be
validly en-

_______________

that the Agreement may be revised in the manner therein stated; that
the representatives of both parties may negotiate and conclude of the
agreement; and that the same shall be effective upon exchange of formal
ratification, pending which it shall take effect upon signature of the
agreement as a modus vivendi between the parties.

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356 SUPREME COURT REPORTS ANNOTATED

Commissioner of Customs vs. Eastern Sea Trading

tered into without such concurrence.

“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.

x      x      x      x

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“x x x the right of the Executive to enter into binding

agreements without the necessity of subsequent Congressional
approval has been confirmed by long usage. From the earliest
days of our history we have entered into executive agreements
covering such subjects as commercial and consular relations,
most-favored-nation rights, patent rights, trademark and
copyright protection, postal and navigation arrangements and the
settlement of claims. The validity of these has never been seriously
questioned by our courts.

x      x      x      x

“Agreements with respect to the registration of trade-marks

have been concluded by the Executive with various countries
under the Act of Congress of March 3, 1881 (21 Stat. 502). Postal
conventions regulating the reciprocal treatment of mail matters,
money orders, parcel post, etc., have been concluded by the
Postmaster General with various countries under authorization
by Congress beginning with the Act of February 20, 1792 (1 Stat.
232, 239). Ten executive agreements were concluded by the
President pursuant to the McKinley Tariff Act of 1890 (26 Stat.
567, 612), and nine such agreements were entered into under the
Dingley Tariff Act 1897 (30 Stat. 151, 203, 214). A very much
larger number of agreements, along the lines of the one with
Rumania previously referred to, providing for most-favored-nation
treatment in customs and related matters have been entered into
since the passage of the Tariff Act of 1922, not by direction of the
Act but in harmony with it.

x      x      x      x

“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.

x      x      x      x

“Furthermore, the United States Supreme Court has expressly

recognized the validity and constitutionality of executive
agreements entered into without Senate approval.” (39 Columbia
Law Review, pp. 753-754) (See, also, U.S. vs. CurtisWright Export
Corporation, 299 U.S. 304, 81 L. ed. 255; U.S. vs. Belmont, 301
U.S. 324, 81 L. ed. 1134; U.S. vs. Pink, 315 U.S. 203, 86 L. ed.
796; Ozanic vs. U.S., 188 F. 2d. 288; Yale Law Journal, Vol. 15,
pp. 1905-1906; California Law Review, Vol.

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Commissioner of Customs vs. Eastern Sea Trading

25, pp. 670-675; Hyde on International Law [Revised Edition],

Vol. 2, pp. 1405, 1416-1418; Willoughby on the U.S.
Constitutional Law, Vol. I [2d ed.], pp. 537-540; Moore,
International Law Digest, Vol. V, pp. 210-218; Hackworth,
International Law Digest, Vol. V, pp. 390-407). (Italics supplied.)

In this connection, Francis B. Sayre, former U.S. High

Commissioner to the Philippines, said in his work on “The
Constitutionality of Trade Agreement Acts”:

“Agreements concluded by the President which fall short of

treaties are commonly referred to as executive agreements and
are no less common in our scheme of government than are the
more formal instruments—treaties and conventions. They
sometimes take the form of exchanges of notes and at other times
that of more formal documents denominated ‘agreements’ or
‘protocols’. The point where ordinary correspondence between this
and other governments ends and agreements—whether
denominated executive agreements or exchanges of notes or
otherwise—begin, may sometimes be difficult of ready
ascertainment. It would be useless to undertake to discuss here
the large variety of executive agreements as such, concluded from
time to time. Hundreds of executive agreements, other than those
entered into under the trade-agreements act, have been
negotiated with foreign governments. x x x It would seem to be
sufficient, in order to show that the trade agreements under the
act of 1934 are not anomalous in character, that they are not
treaties, and that they have abundant precedent in our history, to
refer to certain classes of agreements heretofore entered into by
the Executive without the approval of the Senate. They cover such
subjects as the inspection of vessels, navigation dues, income tax
on shipping profits, the admission of civil aircraft, customs
matters, and commercial relations generally, international claims,
postal matters, the registration of trademarks and copyrights,
etcetera. Some of them were concluded not by specific
congressional authorization but in conformity with policies
declared in acts of Congress with respect to the general subject
matter, such as tariff acts; while still others, particularly those
with respect of the settlement of claims against foreign
governments, were concluded independently of any legislation.”
(39 Columbia Law Review, pp. 651, 755.)

The validity of the executive agreement in question is thus

patent. In fact, the so-called Parity Rights provided for in
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the Ordinance Appended to our Constitution were, prior

thereto, the subject of an executive agreement, made
without the concurrence of two-thirds (2/3) of the Senate of
the United States.
Lastly, the lower court held that it would be unreason

358

358 SUPREME COURT REPORTS ANNOTATED

Commissioner of Customs vs. Eastern Sea Trading

able to require from respondent-appellee an import license

when the Import Control Commission was no longer in
existence and, hence, there was, said court believed, no
agency authorized to issue the aforementioned license. This
conclusion is untenable, for the authority to issue the
aforementioned licenses was not vested exclusively upon
the Import Control Commission or Administration.
Executive Order No. 328 provided for export or import
licenses “from the Central Bank of the Philippines or the
Import Control Administration” or Commission. Indeed,
the latter was created only to perform the task of
implementing certain objectives of the Monetary Board and
the Central Bank, which otherwise had to be undertaken by
these two (2) agencies. Upon the abolition of said
Commission, the duty to provide means and ways for the
accomplishment of said objectives had merely to be
discharged directly by the Monetary Board and the Central
Bank, even if the aforementioned Executive Order had
been silent thereon.
WHEREFORE, the decision appealed from is hereby
reversed and another one shall be entered affirming that of
the Commissioner of Customs, with costs against
respondent-appellee, Eastern Sea Trading. It is so ordered.

     Bengzon, C.J., Padilla, Bautista Angelo, Labrador,

Reyes, J.B.L., Paredes, Dizon and De Leon, JJ., concur.
     Barrera, J., took no part

Decision reversed.

ANNOTATION

AUTHORITY OF THE CENTRAL BANK TO REGULATE

“NO-DOLLAR IMPORTS”

Objectives and powers of the Central Bank—Under its

Charter, Republic Act No. 265, the Central Bank of the
Philippines is charged with the duty to use the powers
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granted to it to maintain the country’s monetary stability

and to preserve the international value of our currency, two
of the three objectives enumerated in Section 2 thereof.
Among the powers granted to the Central Bank in
pursuance of these objectives is the authority conferred
upon its Monetary Board under Section 74, Republic Act
No. 265, with the approval of the President, to temporarily

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Commissioner of Customs vs. Eastern Sea Trading

suspend or restrict sales of exchange and to subject all

transactions in gold and foreign exchange to license during
an exchange crisis in order to protect the international
reserve of the Central Bank and to give the Monetary
Board and the Government time in which to take
constructive measures to combat such a crisis. It is this
authority under Section 74 which is the basis of exchange
restrictions by the Central Bank.
Circulars on Foreign Exchange Control—The original
circular subjecting to licensing by the Central Bank “all
transactions in gold and foreign exchange”, is Circular No.
20, dated December 9, 1949. (People vs. Jolliffee, G.R. No.
L-9553, May 13, 1959). Other circulars implementing
exchange control were subsequently issued by the Central
Bank among which are Circulars Nos. 44 and 45. In
particular, Circular No. 44 dated June 12, 1953 prohibits
the release by the Commissioner of Customs of any item of
import without the presentation of a release certificate
issued by the Central Bank or any authorized agent bank
in a form prescribed by the Monetary Board. Circular No.
45 dated June 25, 1953, on the other hand, requires “any
person or entity who intends to import or receive goods
from any foreign country for which no foreign exchange is
required or will be required of the banks to apply for a
license from the Monetary Board to authorize such import.”
One reason for this requirement, according to the Central
Bank, is that practically all imports represent an
immediate demand for foreign exchange or a potential
demand for foreign exchange. These two circulars, because
they regulate imports which do not involve the remittance
of dollars or foreign exchange, are no-dollar imports
regulations of the Central Bank.
Validity of CB Circulars Nos. 44, 45.—The validity of
Circulars Nos. 44 and 45 was first upheld in the case of
Pascual vs. Commissioner of Customs, No. L-10979, June
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30, 1959 and subsequently reiterated in the cases of Acting

Commissioner of Customs vs. Leuterio, No. L-9142, October
17, 1959; Commissioner of Customs vs. Pascual, No. L-
9836, November 18, 1959; Commissioner of Customs vs.
Serree Investment Co., No. L-12007, May 16, 1960;
Commissioner of Customs vs. Serree Investment Co., No. L-
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360 SUPREME COURT REPORTS ANNOTATED

Commissioner of Customs vs. Eastern Sea Trading

14274, November 29, 1960. In all these cases, the Supreme

Court invariably held that the Central Bank, through the
Monetary Board, had the authority under the provisions of
Republic Act No. 265, particularly Section 74 thereof, to
issue these two circulars.
In Pascual vs. Commissioner of Customs, L-10979, the
Court, in ruling that Circulars No. 44 and 45 are within the
powers of the Monetary Board, held that these are actually
measures taken to check the unregulated flow of foreign
exchange from the country. According to the Court,
although no-dollar imports do not require an immediate
sale of foreign exchange, they ultimately require the sale of
such exchange. This is so because, as the Court itself
observed, in view of the differences in the currency of each
country, traders have to avail themselves of foreign
exchange in paying for their imports. Consequently, every
import of goods or merchandise requires either an
immediate or a future demand for foreign exchange.
In the case of Acting Commissioner of Customs vs.
Leuterio, wherein it was contended that the Central Bank
has no authority to regulate no-dollar imports as shown by
the fact that subsequent to the issuance of Circulars Nos.
44 and 45, several members of the House of
Representatives filed House Bill No. 2889 purposely to give
the Central Bank the authority to issue regulations
governing no-dollar imports and that, in fact, Republic Act
No. 1410 entitled “An act to prohibit the so-called ‘no-
dollar‘ imports except under certain conditions”, was
enacted on September 10, 1955, the Supreme Court
observed that some, at least, of those who sponsored this
legislation urged its approval on the assumption that
Circulars Nos. 44 and 45 were ultra vires acts of the
Central Bank and, accordingly, illegal. However, according
to the Court, the power of the Monetary Board to issue the
aforementioned circulars and the validity thereof have

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already been upheld. The decision in the Pascual case was

then quoted at length.
The decisions in the other cases are almost verbatim
reiterations of the holding in the Pascual case above-
discussed.—Atty. WILFREDO M. CHATO.

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Fuellas vs. Cadano

Notes.—Cases reiterating the authority of the Central

Bank to regulate no-dollar imports and upholding the
validity of CB circulars Nos. 44 and 45 decided by the
Supreme Court after the case of Commissioner of Customs
vs. Eastern Sea Trading are Commissioner of Customs vs.
Ne-pomuceno, L-17126, March 31, 1962; Farm Implement
Machinery Company vs. Commissioner of Customs, L-
12613, May 30, 1962; Commissioner of Customs vs. Santos,
L-11911, March 30, 1962; Pascual vs. Collector of Customs,
L-12219, April 25, 1962; Serree Investment Co. vs.
Commissioner of Customs, L-19564, November 28, 1964:
Serree Investment Co. vs. Commissioner of Customs, Nos. L-
20847-49, June 22, 1965; Commissioner of Customs vs.
Icamen, L-12351, June 29, 1965; Serree Investment Co. vs.
Commissioner of Customs, L-21217, November 29, 1965;
Chan Kian vs. Collector of Customs, L-20803, January 31,
1966; Philippine International Surety Co. vs. Commissioner
of Customs, L-22209, December 17, 1966. Circulars Nos. 44
and 45 have not been repealed by
Circular No. 133. See Bombay Department Store vs.
Commissioner of Customs, L-20460, September 30, 1965
and L-20489, June 22, 1965; Lazaro vs. Commissioner of
Customs, Nos. L-21790 and L-21794, December 24, 1965;
Fe-lipe Yupangco & Sons, Inc. vs. Commissioner of
Customs, L-22259, January 19, 1966.

______________

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