DOJ Opinion No. 076, s. 1996

DOJ OPINION NO. 076 , s. 1996 July 26, 1996 Secretary Rizalino S. Navarro Department of Trade & Industry Board of Investments Industry and Investments Building 385 Sen. Gil J. Puyat Avenue Makati City Sir : This refers to your request for confirmation of your opinion that the Basic Agreement on the ASEAN Industrial Cooperation (AICO) Scheme which will be signed at the forthcoming Informal ASEAN Economic Ministers Retreat in Singapore is in the nature of an executive agreement which will not require Senate ratification. LLphil You state that the AICO is an industrial cooperation scheme designed to increase intra-ASEAN investments and investments from non-ASEAN sources as well as to promote the sharing of resources to enhance the technology base, economies of scale and scope, and competitiveness of ASEAN industries; and that the subject Agreement shall replace the Basic Agreement on ASEAN Industrial Joint Ventures (AIJV's) dated December 15, 1987 and the Memorandum of Understanding on the Brand-to-Brand Complementation (BBC) Scheme dated October 18, 1988 in view of the developments in the region, such as the full implementation of the ASEAN Free Trade Area (AFTA)/(CEPTA) Common Effective Preferential Tariff and other trade and investment liberalization measures. You further state that the subject Basic Agreement definitely centers on the commercial relations between the different ASEAN member-countries and merely implements in concrete detail the concepts and policy formulated in the Agreement on the ASEAN which was earlier ratified and therefore it is your position that the Basic Agreement on the AICO Scheme falls within the class of executive agreements which do not require Senate ratification. We concur with your position. The pertinent provision of the Constitution on the validity and effectivity of the treaty or international agreement reads: "Sec. 21. No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the Members of the Senate" (Art. VII, 1987 Constitution) As mentioned in your letter, this Department, in its Opinion No. 125, s. 1995, had the occasion to construe the aforequoted provision of the Constitution. In that opinion, we affirmed the authority of the President to enter into binding international agreements without need of Senate ratification and cited the following ruling of the Supreme Court, to wit: ". . . the right of the Executive to enter 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". (Emphasis supplied) xxx xxx xxx "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, . . . They cover such subjects as . . . commercial relations generally, . . ." (Commissioner of Customs v. Eastern Sea Trading, 3 SCRA 351, quoting 39 Columbia Law Review, pp. 753-754). In another opinion (DOJ Opinion No. 71, s. 1988), we further ruled that: ". . . the bilateral investments agreements may be deemed valid and binding upon the government upon signing thereof by the President or the proper official duly authorized by him to sign on his behalf without need of Senate concurrence if that is also the ascertainable intention of the parties thereto, provided (1) that the agreement is purely executive in nature, meaning, it concerns a matter falling within exclusive presidential prerogative such as (a) adjustments of details carrying out with established national policies or (b) arrangements more or less temporary in nature, of (c) matters involving the exercise of an exclusive Presidential power under the Constitution., and thereby not transgressing any law; or (2) that the agreement is entered into in pursuance of an act of Congress." The subject Basic Agreements grants certain privileges to participating companies, which are companies incorporated and operating in ASEAN Member Countries meeting the criteria prescribed in the draft agreement. These privileges are provide in Article 5 quoted hereunder: ARTICLE 5 PRIVILEGES 1. A Participating Company shall be entitled to the following privileges under the AICO Scheme: a. approved AICO Products traded between Participating Companies shall enjoy preferential tariff rates of 0%-5%, the actual rate of which shall be determined by each Participating Country. The preferential tariff shall cease when the tariff rate of the product reaches the final CEPT rate; b. local content accreditation shall be accorded, where applicable, to products manufactured by Participating Companies; and c. non-tariff incentives offered by the respective National Authorities. The granting of these incentives shall be based on the fulfillment of the requirements of the respective Participating Country. 2. ASEAN Member Countries may subsequently introduce additional tariff and non-tariff incentives under this Agreement. In so doing, the said subject Basis Agreement in the ASEAN Industrial Cooperation Scheme expressly declares that it adheres to the principles, concepts and ideals of the Framework on Enhancing ASEAN Economic Cooperation and the Agreement on the Common Effective Preferential Tariff (CEPT) Schemes for the ASEAN Free Area (9th preambulatory clause). The aforementioned Agreement on the CEPT Scheme for the ASEAN Free Trade Area in turn cites the Agreement on ASEAN Preferential Trading Arrangements (PTA) that was earlier ratified and given effect by an Act of Congress, particularly Section 402 of the Tariff and Customs Code which reads: "a. For the purpose of expanding foreign markets for Philippine products as a means of assistance in the economic development of the country, in overcoming domestic unemployment, increasing the purchasing power of the Philippine peso, and in establishing and maintaining better relations between the Philippines, and other countries, the President, is authorized from time to time: (1) To enter into trade agreements with foreign governments or instrumentalities thereof; and (2) to modify import duties (including any necessary change in classification) and other import restrictions as are required or appropriate to carry out and promote foreign trade with other countries: Provided, however, That in modifying import duties or fixing import quota the requirements prescribed in subsection 'a' of Section 401 shall be observed: Provided further, That any modification of import duties and any fixing of import quotas made pursuant to the Agreement on ASEAN Preferential Trading Arrangements ratified on August 1, 1977 shall not be subject to the limitations of aforesaid Section 'a' of Section 401." Thus, the subject Basic Agreement on the AICO Scheme falls within the class of executive agreements which are entered into pursuant to an act of Congress and which merely implement in detail established national policies. Accordingly, we reiterate our opinion that the subject Basic Agreement does not require Senate concurrence. dctai Very truly yours, (SGD.) TEOFISTO T. GUINGONA, JR. Secretary