DOJ Opinion No. 042, s. 1988

DOJ OPINION NO. 042 , s. 1988 March 8, 1988 Mr. Luis C. Liwanag II Acting General Manager Philippine Ports Authority Marsman Bldg., South Harbor Port Area, Manila Dear Sir : This has reference to the letter dated October 8, 1987 of 7-R Services, Inc., addressed to the Philippine Ports Authority (PPA) requesting said Office to seek the legal opinion of this Department as to whether relief goods consigned, to the Department of Social Welfare Development, the Department of Education, Culture and Sports and the Department of Health are exempt from storage charges which are being collected by said private firm, pursuant to its lease agreement with the PPA covering the storage facilities at the South Harbor and the Manila International Container Terminal in the Port of Manila. By settled policy and established precedents, the Secretary of Justice does not give opinion on questions posed by private parties, even if coursed through or endorsed by a government official (Sec. of Justice, Op. No. 96, s. 1973), especially when the question might become the subject of a judicial controversy (Sec. of Justice, Op. No. 112, s. 1971). However, we are rendering opinion on the herein case considering that the said query has arisen in the course of the performance of the functions of your office (Sec. 3701, Tariff and Customs Code) and that the above-mentioned private firm has expressed willingness to abide by the opinion of the Secretary of Justice. You state that 7-R Port Services, Inc. assesses and collects storage charges for the use of the above-mentioned storage facilities pursuant to Section 1.03 of its lease agreement with the PPA. Pertinently, said section provides as follows: prcd ". . . The LESSEE shall charge storage fees fixed by the LESSOR on cargoes and containers which have stayed in the port beyond the existing Free Storage Period as set by the LESSOR, except only over-staying cargoes and containers which by virtue of existing statutes, are exempt from the payment of storage fees ." (Emphasis supplied). A conflict of opinion has arisen in the implementation of the above-quoted stipulation of the lease contract between the Department of Health, Department of Education, Culture and Sports and the Department of Social Welfare and Development on one hand, and the 7-R Port Services, Inc. on the other. The aforesaid departments claim exemption from the payment of storage charges for donated goods consigned to them pursuant to Diplomatic Notes No. 1071 dated April 29, 1954 and No. 3001 dated October 18, 1976 of the U.S. Embassy and our Department of Foreign Affairs, respectively, which they deemed to partake of the nature of a statute. They also invoke the opinion dated February 22, 1985 of the then Ministry of Finance, stating that: ". . . the importance of relief goods by MSSD, covered by Diplomatic Notes Nos. 1071 and 3001 partakes of and are exempt from port charges under the provision of the last paragraph of Sec. 105 of the Tariff and Customs Code, as amended." 7-R Port Services, Inc. however maintains the opposite view, particularly, that Diplomatic Note No. 3001 is not a statute; that Sec. 105 of the Tariff and Customs Code provides for exemption from port charges, not from storage fees; and that Section 3005 of the Tariff and Customs Code explicitly requires government offices to pay storage charges. You are now raising the herein query to resolve the aforesaid conflicting views. The payment of storage charges, which are the amount assessed on articles for their storage in customs premises, cargo sheds and warehouses of the government, is governed by Sections 3001 to 3005 of the Tariff and Customs Code. Pursuant to Section 3701, the Transitory Provisions of said Code, the aforesaid sections have been deleted from the said Code and incorporated in P.D. No. 857, the Revised Charter of the PPA, fore enforcement by the PPA. The opinion of the then Ministry of Finance adverted to above concern the exemption from the payment of "import duties" under Section 105 of the Tariff and Customs Code, not storage charges which, we reiterate, are covered by the aforementioned Sections 3001 to 3005 of the same Code, now forming part of P.D. No. 857. Section 105 exempts the following articles from import duties: "1. Imported articles donated to, or for the account of, any duly registered relief organization, not operated for profit, for free distribution among the needy, upon certification by the Department of Social Services and Development or the Department of Education and Culture, as the case may be . . . "s. Economic, technical, vocational, scientific, philosophical, historical, and cultural books and/or publications . . . "Educational, scientific and cultural materials covered by international agreements or commitments binding upon the Philippine Government so certified by the Department of Education and Culture." No similar exemptions from storage charges are found in the above-mentioned Sections 3001 to 3005. On the contrary Section 3005 clearly provides as follows: "a. Articles, supplies or materials imported by any branch of the Philippine government shall be subject to storage charges." The difference in treatment of import duties and storage charges lies in the character of the said dues, the former being in the nature of taxes whereas the latter constitutes compensation for the use of storage facilities, the construction maintenance and operation of which entail some expense. The payment of storage charges for overstaying cargoes or those remaining in the storage facilities after the free storage period is a measure intended to encourage the swift release of cargoes as dictated by the needs of good housekeeping in the port, particularly, the need to avoid congestion in the storage areas. Accordingly, the exemption from payment of customs duties under Section 105 of the Tariff Law invoked by the aforementioned government agencies cannot embrace the storage charges being charged and collected by PPA thru its lessee, the 7-R Port Services, Inc. prcd In any case, the use of storage facilities is presently subject to the stipulations of the lease agreement entered into between 7-R Port Services, Inc. and PPA. The said agreement recognizes exemptions from storage charges, such as, those cargoes and containers which are released with dispatch, i.e., within the free storage period as set by the Lessor, PPA; and even beyond said period, those exempted from payment of storage fees by virtue of existing statutes. We take it that Diplomatic Note 3001 is being invoke as a statute falling within the contemplation of the lease contract in the light of the following constitutional provision: "Sec. 2. The Philippine renounces war as an instrument of national policy, adopts the generally accepted principles of international law as part of the law of the land and adheres to the policy of peace, equality, justice, freedom, cooperation, and amity with all nations." (Art. II, Constitution) [Emphasis supplied] Diplomatic Notes Nos. 1071 and 3001 constitute the agreement between the Philippine Government and the Government of the United States of America on the duty-free entry and exemption from internal taxation of goods or supplies approved by the US government which are donated to or purchased by U.S. voluntary, non-profit relief and rehabilitation agencies qualified under U.S. Government Regulation, and consigned to such organization, including branches of these agencies in the Philippines which have been approved by the Philippine Government. Aside from exemption from duties and taxes, Diplomatic Note No. 3001 provides as follows: prcd "4. The cost of transporting such supplies and equipment (including port, handling, storage , and similar charges as well as transportation) within the Philippines to the ultimate beneficiary will be born ( sic ) by the Government of the Philippines." (Emphasis supplied) Considering the foregoing provision of Diplomatic Note No. 3001 we do not find it necessary to determine whether said Note partakes of the nature of a statute. The quoted provision of Diplomatic Note No. 3001 contains no exemption from payment of storage fees. It merely stipulates for the assumption by the Government of said charges. There appearing to be no other law exempting the subject donated goods from the payment of storage charges, such goods which stay in the warehouse our storage facilities beyond the free storage period are subject to the payment of storage charges. LLphil Very truly yours, (SGD.) SEDFREY A. ORDOEZ Secretary of Justice