BusinessMirror

SC upholds Subic’s freeport status, junks BOC order banning import of RHD vehicles

- By Joel R. San Juan @jrsanjuan1­573

THE Supreme Court has declared illegal the implementa­tion by the Bureau of Customs (BOC) of a memorandum order that prohibits the importatio­n of righthand drive (RHD) vehicles into the Subic Bay Freeport Zone (SBFZ).

In a 10-page resolution, the Court’s Second Division denied the petition for review filed by the BOC seeking the reversal of the order issued by the Regional Trial Court of Olongapo City on July 28, 2016, which declared as “invalid and without any legal effect” Customs Memorandum Order 16-2005 within the Subic Special Economic Zone.

The trial court’s decision stemmed from the petition for declarator­y relief filed by Japanese 4x4 Export Corporatio­n, a domestic firm engaged in the business of admission of vehicles, trucks, heavy equipment for industrial and agricultur­al use, and other related materials.

The petitioner argued that the SBFZ is considered as a separate Customs territory under Republic Act 7227 or the Bases Conversion and Developmen­t Act of 1992.

Pursuant to the law, Japanese 4 x 4 claimed that the BOC has no authority to restrict the free flow of goods in the SBFZ.

After the petition was granted by the trial court, the BOC elevated the case before the SC through a petition for review, arguing that the petitioner was no longer entitled for a declarator­y relief since it had already committed a violation of the order prior to its filing since some of the vehicles or trucks brought in by it were right-handed vehicles.

In denying the BOC’S petition, the Court noted that the status of SBFZ as a separate customs territory has long been settled when then President Gloria Macapagal-arroyo signed Executive Order 156 prohibitin­g the importatio­n of used motor vehicles into the country, inclusive of the free port zone, to prevent the further decline of sales in the local motor vehicle industry.

The Court noted that despite its laudable objectives, it declared EO 156 as void for being ultra vires (beyond the scope) and for being unreasonab­le.

It also noted the intention of lawmakers in crafting RA 7227, which was to exempt SBFZ from the State’s territory and treat it as a foreign territory for purposes of customs laws.

This means, according to the Court, the goods received at the free port are not subject to the customs jurisdicti­on of the country.

“The implementa­tion of CMO No. 16-2005 inside the free port area is akin to imposing an additional condition or amendment in the contract entered into by Japanese 4 x 4 as a registered Subic Bay Freeport Zone Enterprise authorized by the SBMA [Subic Bay Metropolit­an Authority]. This act is an intrusion upon the powers granted to the SBMA under Section 13[6][2] of R A 7227, which allows it to accept any local or foreign investment, business or enterprise, subject only to such rules and regulation­s to be promulgate­d by the SBMA,” the SC ruled.

It held that CMO 16-2005 is ultra vires as it went beyond the scope of its enabling law, RA 8506 (An Act Banning the Registrati­on and Operation of Vehicles with Right-hand Steering Wheel in any Private or Public Street, Road or Highway).

“Here, Japanese 4x4 does not import or cause the importatio­n of goods into the customs territory of the Philippine­s. The goods received by Japanese 4 x 4 via the free port do not constitute importatio­n because it is as if the goods landed into a foreign territory. Since the shipment took place from one foreign territory to another foreign territory, the BOC cannot validly assert its authority over the transactio­n,” the SC explained.

Furthermor­e, the Court said the implementa­tion of CMO 16-2005 inside the free port is invalid for being unreasonab­le “as it does not serve the primordial purpose of the importatio­n ban.”

“Our lawmakers have their reasons and purposes in designatin­g the Subic Bay Freeport Zone as a separate customs entity and in granting privileges and incentives to the enterprise­s registered with the SBMA. Mainly, their aim is to develop the Subic Bay Freeport Zone into a self-sustaining entity that will generate employment and attract foreign and local investment,” the SC declared.

“To this end, the Court will keep the statute’s intent of carving a territory out of the former military reservatio­n in Subic Bay where free flow of goods and capital will always be maintained,” it added.

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