G.R. No. 27491, December 31, 1927
TEODORO R. YANGCO, petitioner-appellee, vs. VICENTE ALDANESE, Insular Collector of Customs, respondent-appellant.

FACTS

Teodoro R. Yangco operated motor vessels plying between Manila and various ports in the provinces of Laguna, Pampanga, Bataan, and Cavite. He purchased imported fuel from the Asiatic Petroleum Co., on which import duties had been paid. Yangco filed drawback entries under Section 21 of the Philippine Tariff Act of 1909, seeking a refund of the import duties paid on the fuel used for vessel propulsion, less 1%. Initially, the customs authorities processed these claims. However, the Insular Collector of Customs later disapproved them, citing paragraph 3 of Customs Administrative Order No. 178, which excluded vessels engaged in “bay and river business” from receiving such drawbacks. Yangco filed a petition challenging the order.

ISSUE

Whether paragraph 3 of Customs Administrative Order No. 178, which denies drawbacks on imported fuel used by vessels engaged in “bay and river business,” is valid under Section 21 of the Philippine Tariff Act of 1909.

RULING

No. The Supreme Court declared paragraph 3 of Customs Administrative Order No. 178 null and void insofar as it excluded bay and river vessels from the drawback benefit.

The Court held that the term “coastwise trade” in Section 21 of the Tariff Act of 1909 must be interpreted according to its established meaning in U.S. federal legislation and jurisprudence. As construed by U.S. courts, “coastwise trade” is a broad term encompassing all domestic trade between ports of the United States, which includes trade conducted on bays and rivers. Therefore, the phrase “vessels engaged in … the Philippine coastwise trade” in the Act includes all vessels engaged in domestic trade within the Philippines, irrespective of the local classification into “coastwise,” “bay,” or “river” trade for licensing or other purposes. The administrative order’s restrictive interpretation contradicted the clear and general intent of the law and was thus invalid.

The Court affirmed the lower court’s judgment ordering the respondent to allow, liquidate, and certify Yangco’s drawback claims for the fuel used by his vessels. The exact refundable amount was to be determined in the subsequent liquidation proceedings.