12. Commissioner of Customs vs. Eastern Sea Trading Kong.
Kong. Inasmuch as none of the shipments had the certificate required by Central
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
352
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 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
353
VOL. 3, OCTOBER 31, 1961 353
Commissioner of Customs vs. Eastern Sea Trading
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 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 cannot be justified under Executive Order No. 328,1 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-
354
354 SUPREME COURT REPORTS ANNOTATED
Commissioner of Customs vs. Eastern Sea Trading
agreement2—extending the effectivity of our Trade 3 and Financial Agreements4 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.
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
Page 1 of 4
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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VOL. 3, OCTOBER 31, 1961 355
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
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.
356
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
“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
Page 2 of 4
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.
357
VOL. 3, OCTOBER 31, 1961 357
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 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 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
359
VOL. 3, OCTOBER 31, 1961 359
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
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No. 44 dated June 12, 1953 prohibits the release by the Commissioner of Customs of VOL. 3, OCTOBER 31, 1961 361
any item of import without the presentation of a release certificate issued by the Fuellas vs. Cadano
Central Bank or any authorized agent bank in a form prescribed by the Monetary Notes.—Cases reiterating the authority of the Central Bank to regulate no-dollar
Board. Circular No. 45 dated June 25, 1953, on the other hand, requires “any person imports and upholding the validity of CB circulars Nos. 44 and 45 decided by the
or entity who intends to import or receive goods from any foreign country for which no Supreme Court after the case of Commissioner of Customs vs. Eastern Sea
foreign exchange is required or will be required of the banks to apply for a license Trading are Commissioner of Customs vs. Ne-pomuceno, L-17126, March 31,
from the Monetary Board to authorize such import.” One reason for this requirement, 1962; Farm Implement Machinery Company vs. Commissioner of Customs, L-12613,
according to the Central Bank, is that practically all imports represent an immediate May 30, 1962; Commissioner of Customs vs. Santos, L-11911, March 30,
demand for foreign exchange or a potential demand for foreign exchange. These two 1962; Pascual vs. Collector of Customs, L-12219, April 25, 1962; Serree Investment
circulars, because they regulate imports which do not involve the remittance of dollars Co. vs. Commissioner of Customs, L-19564, November 28, 1964: Serree Investment
or foreign exchange, are no-dollar imports regulations of the Central Bank. Co. vs. Commissioner of Customs, Nos. L-20847-49, June 22, 1965; Commissioner
Validity of CB Circulars Nos. 44, 45.—The validity of Circulars Nos. 44 and 45 of Customs vs. Icamen, L-12351, June 29, 1965; Serree Investment Co. vs.
was first upheld in the case of Pascual vs. Commissioner of Customs, No. L-10979, Commissioner of Customs, L-21217, November 29, 1965; Chan Kian vs. Collector of
June 30, 1959 and subsequently reiterated in the cases of Acting Commissioner of Customs, L-20803, January 31, 1966; Philippine International Surety Co. vs.
Customs vs. Leuterio, No. L-9142, October 17, 1959; Commissioner of Customs vs. Commissioner of Customs, L-22209, December 17, 1966. Circulars Nos. 44 and 45
Pascual, No. L-9836, November 18, 1959; Commissioner of Customs vs. Serree have not been repealed by
Investment Co., No. L-12007, May 16, 1960; Commissioner of Customs vs. Serree Circular No. 133. See Bombay Department Store vs. Commissioner of
Investment Co., No. L- Customs, L-20460, September 30, 1965 and L-20489, June 22, 1965; Lazaro vs.
360 Commissioner of Customs, Nos. L-21790 and L-21794, December 24, 1965; Fe-lipe
360 SUPREME COURT REPORTS ANNOTATED Yupangco & Sons, Inc. vs. Commissioner of Customs, L-22259, January 19, 1966.
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 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.
361

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