DOJ Opinion No. 005, s. 1995

DOJ OPINION NO. 005 , s. 1995 January 16, 1995 Secretary Roberto S. Sebastian Chairman, FPA Board Department of Agriculture Elliptical Road, Diliman Quezon City Sir : This has reference to your request for opinion concerning a proposed Resolution of the Board of Directors of the Fertilizer Pesticide Authority (FPA) which reads: "Approving the recommendation of FPA Management that the domestic gap of September 28, 1994 i now 240,000 MT (an increase from the previous gap of 200,000 MT) based on a projected demand of 525,000 MT. Further, that PHILPHOS may sell over the 240,000 MT gap into the domestic market provided that such sales be considered as "import" and all duties and taxes paid thereon and no subsidy for its raw material component be enjoyed, and provided further that EPZA shall have approved such domestic sales in accordance with the EPZA law, This is in consonance with the Government policy on import liberalization." prcd You state that the legality of the aforequoted Resolution has been questioned by the Atlas Fertilizer Corporation (ATLAS) insofar as it allows the Philippine Phosphate Fertilizer Corporation (PHILPHOS) to sell its fertilizer products in the domestic market as "imports" over the recommended supply demand gap in consonance with the government policy on import liberalization. Hence, the instant request for opinion on whether the phosphatic fertilizers of PHILPHOS, if sold as "imports", under the country's import liberalization policy, would be a violation of the EPZA law (P.D. 66). We surmise that the query has arisen since the proposed Resolution likewise states as a further condition to the proposed domestic sale by PHILPHOS that "EPZA shall have approved such domestic [sale] in accordance with the EPZA law." A preliminary issue to be threshed out is whether the fertilizer products of PHILPHOS may be deemed "imports" vis-a-vis the import liberalization policy. In Opinion No. 95, s. 1994, this Department had the occasion to hold that: "In law and general usage, 'importation' has been defined as the act of bringing goods and merchandise into a country from a foreign country with intent to land or unlade the goods there (see Lachauco & Co. vs. Apostol and Corpus, 44 Phil. 138, 157; Words and Phrases, Vol. 20, pp. 427-429, citing cases; Cunard Steamship Co. vs. Mellon, 67 L. Ed. 894). An import means a product manufactured in a foreign country and then shipped to and sold in this country (Black's Law Dictionary 6th ed., p. 756). An importer in turn is defined as one who purchases items and resells them to the public (Sibal, Philippine Legal Encyclopedia p. 410)." (emphasis supplied) In view of the aforesaid definitions which require the bringing of goods and merchandise into a country from a foreign country, the fertilizer products of PHILPHOS which are manufactured and produced in the country may not deemed an "import". We are not unmindful that the proposed PHILPHOS transaction will involve the sending of merchandise from the EPZA Zone to the customs territory and you point out that Section 17 (4) of P.D. No. 66, as amended, and Section 3 of Rule IV of the "Amended Rules and Regulations to Implement Presidential Decree No. 66 . . . ." provided that: "Sec. 17. Tax Treatment of Merchandise in the Zone . xxx xxx xxx (4) Merchandise sent from the zone to the customs territory shall, whether or not combined with or made part of other articles while in the zone, be subject to laws and regulations governing imported merchandise. The duties and taxes shall be assessed on the value of imported materials (except when the final product is exempt) and the internal revenue taxes on the value added." (P.D. No. 66, as amended; emphasis supplied) Rule IV Tax Treatment of Merchandise in the Zone "Section 3. Foreign Merchandise . Merchandise of foreign origin brought to the zone which has not undergone any processing, manufacturing or manipulation while in the zone, shall when sent therefrom to the customs territory, be subject to the laws and regulations governing imported merchandise: Provided, That where said foreign merchandise is combined with or made part of any domestic article, the duties and taxes to be assessed on the final product shall be based on the value of such imported merchandise (except when the final product is exempt) and internal revenue taxes on the value-added." (Amended Rules and Regulations to Implement Presidential Decree No. 66, as amended; emphasis supplied). However, the aforequoted law and regulation are both entitled "Tax Treatment of Merchandise in the Zone" which clearly indicates that the provisions thereof are merely intended for taxation purposes. This conclusion finds corroboration in the rule in statutory construction that the title of a statute may properly serve as guide to ascertaining the legislative intent and it is entitled to great weight in view of our constitutional requirement that "every bill passed by Congress shall embrace only one subject which shall be expressed in the title thereof " (section 26[1], Article VI, 1987 Constitution; Emphasis supplied). It is also very clear that the provisions under consideration merely declare that merchandise sent from the zone to the customs territory shall be "subject to laws and regulations governing imported merchandise", which simply means that such merchandise shall be subject to the same duties and taxes as imported merchandise. It cannot, therefore, be argued that by virtue of said provisions, the products of PHILPHOS should be deemed "imports" under the import liberalization policy. Well settled is that the rule that where a provision of law limits its application to certain transactions, it cannot be extended by interpretation to include other transactions (Hongkong and Shanghai Bank vs. Peters, 16 Phil. 284; Palanca vs. City of Manila, 41 Phil. 125). We shall now direct our attention to the core issue presented which is whether the proposed domestic sale by PHILPHOS would constitute a violation of the EPZA law. The pertinent legal provisions are found in Section 1 of P.D. No. 66, as amended, as implemented in Section 8, Rule XVII of the Amended Rules and Regulations to Implement Presidential Decree No. 66. . . , which respectively read as follows: P.D. No. 66, as amended "Section 1. Declaration of Policy . It is hereby declared to be the policy of the Government to encourage and promote foreign commerce as a means of making the Philippines a center of international trade, of strengthening our export trade and foreign exchange position, of hastening industrialization, of reducing domestic unemployment, and of accelerating the development of the country, by establishing export processing zones in strategic locations in the Philippines. Amended Rules and Regulations to Implement P.D. No. 66, as amended "Section 8. Local Sale . Consistent with the objectives of the Decree and the Code, a zone export enterprise engage in the production, processing, packaging, or manipulation of export products shall export its entire output or production. However, the Authority may allow a portion of the yearly production or output of a zone export enterprise to enter the customs territory and be sold locally in any of the following instances: (a) where the finished product is not produced in the Philippines and the only source is through importation; (b) where there is cessation and closure of operations of zone export enterprise; and (c) where the study of the domestic industry situation in meritorious cases, rules out adverse effects as determined by the EPZA Board. Provided , That the applicant zone export enterprise must have attained a reasonable percentage of its projected export sales for the year of period immediately preceding the date the application is filed: Provided further , That the corresponding taxes and duties shall be paid therefor: Provided , finally , That all other conditions as may be imposed by the Board are complied with. It is explicit in the foregoing implementing rule that local sale by an EPZA-registered enterprise, such as PHILPHOS, may be allowed in the exceptional cases enumerated therein, to wit: (a) where the finished product is not produced in the Philippines and the only source is through importation; (b) where there is cessation and closure of operations of zone export enterprise; and (c) where the study of the domestic industry situation in meritorious cases, rules out adverse effects as determined by the EPZA Board. You categorically state that the first two exceptions do not apply to PHILPHOS because the products concerned are also produced by local manufacturers and that PHILPHOS is open for business. With respect to the third exception, you believe that the domestic fertilizer industry situation warrants the protection of local manufacturers. Under the given circumstances and assuming that the EPZA Board makes a determination that the proposed sale by PHILPHOS over the recommended supply demand gap will, indeed, have adverse effects on the local fertilizer industry situation, then the proposed transaction would, if allowed, constitute a violation of the EPZA law. Please be guided accordingly. Very truly yours, (SGD.) DEMETRIO G. DEMETRIA Acting Secretary