G.R. No. 164171, 164172 & 168741 ; February 20, 2006
HON. EXECUTIVE SECRETARY, et al., Petitioners, vs. SOUTHWING HEAVY INDUSTRIES, INC., et al., Respondents.

FACTS

President Gloria Macapagal-Arroyo issued Executive Order No. 156, which, under its Article 2, Section 3.1, prohibited the importation of all types of used motor vehicles into the country, inclusive of the Subic Bay Freeport (SBF). The order provided only limited exceptions, such as for diplomatic vehicles and certain special-purpose trucks. Several enterprises registered within the SBF and engaged in importing used vehicles filed separate actions for declaratory relief before the Regional Trial Court of Olongapo City. They argued that the prohibition was unconstitutional and violated the special legal regime of the SBF as established by Republic Act No. 7227 (the Bases Conversion and Development Act).
The trial court granted summary judgment in favor of the importers, declaring Section 3.1 of EO 156 unconstitutional for constituting an unlawful usurpation of legislative power and for being contrary to RA 7227’s mandate of free flow of goods within the Freeport. The Court of Appeals affirmed this decision. The government, through various executive officials, elevated the case to the Supreme Court via consolidated petitions, arguing that the prohibition was a valid exercise of the President’s delegated legislative power under the Tariff and Customs Code to protect domestic industry.

ISSUE

Whether Article 2, Section 3.1 of Executive Order No. 156, which prohibits the importation of used motor vehicles into the country inclusive of the Subic Bay Freeport, is constitutional.

RULING

The Supreme Court ruled that Section 3.1 of EO 156 is UNCONSTITUTIONAL insofar as it applies to the Subic Bay Freeport. The legal logic rests on the conflict between the executive order and a specific legislative act, RA 7227. While the President has delegated authority under the Tariff and Customs Code to impose import restrictions for national economic protection, this power cannot contravene an express statutory grant. RA 7227 created the SBF as a separate customs territory, mandating the free flow of goods and capital within its secured area. The law and its implementing rules explicitly allow SBF enterprises to import articles freely, subject only to prohibitions by the Subic Bay Metropolitan Authority (SBMA) or those “absolutely prohibited by law.”
The Court held that EO 156’s blanket ban is a general prohibition that does not qualify as an “absolute prohibition by law” intended by RA 7227. The latter refers to prohibitions with universal territorial application, such as those against illegal drugs. By imposing a new, sweeping restriction specific to used vehicles that encroaches upon the SBF’s special economic zone privileges, EO 156 effectively amended RA 7227. This constitutes an invalid exercise of legislative power by the Executive. The President cannot, through an executive order, override a clear legislative policy granting tax- and duty-free importation within the Freeport. Therefore, the prohibition is void as applied to the SBF.