G.R. No. L-10214; November 4, 1915

FACTS:
The Manila Railroad Company imported ten locomotive engines and related parts for use on its railroad. Some parts, specifically vacuum brake equipment, were manufactured in England. The brake equipment for four locomotives was shipped directly from England to the Philippines and was initially granted free entry under Section 10 of Act No. 1510 (the Company’s charter, which allowed duty-free importation of materials for railroad construction and equipment). The brake equipment for the remaining six locomotives was first shipped from England to the United States, where duty was paid, and then reshipped to the Philippines along with the locomotives. This equipment was also initially granted free entry under Section 10 of Act No. 1510. Subsequently, the Insular Collector of Customs canceled the free entry for the brake equipment manufactured in England and instead liquidated the entries under Section 12 of the Philippine Tariff Law of 1909 (which granted free entry to articles, except rice, that were the growth, product, or manufacture of the United States or its possessions, provided no drawback was claimed). The Railroad Company protested this cancellation, but the Collector overruled the protest. The Company then appealed to the Court of First Instance, which ruled in its favor, reversing the Collector’s decision and ordering that the entries be allowed under Section 10 of Act No. 1510. The Insular Collector of Customs appealed this judgment to the Supreme Court.

ISSUE:
Whether the Insular Collector of Customs acted correctly in canceling the free entry of the brake equipment (manufactured in England) under Section 10 of Act No. 1510 and reliquidating it under Section 12 of the Tariff Law of 1909.

RULING:
No. The Supreme Court affirmed the judgment of the Court of First Instance. The Court held that the Manila Railroad Company had a vested right under its charter (Act No. 1510, Section 10) to import materials necessary for the construction and equipment of its railroad free of duty. This right was contractual in nature and was not impaired by the subsequent Tariff Law of 1909. The Collector of Customs erred in canceling the proper free entry under Act No. 1510. Furthermore, Section 12 of the Tariff Law of 1909 was inapplicable to the brake equipment in question because it expressly applied only to articles that were the growth, product, or manufacture of the United States or its possessions. Since the brake equipment was admittedly manufactured in England, it could not qualify for free entry under that tariff provision. Therefore, the only proper basis for its duty-free admission was Section 10 of Act No. 1510. The Supreme Court directed that the liquidation of the entries be made pursuant to the Company’s charter. Costs were awarded against the appellant.