G.R. No. L-14279; October 31, 1961
THE COMMISSIONER OF CUSTOMS and THE COLLECTOR OF CUSTOMS, petitioners, vs. EASTERN SEA TRADING, respondent.

FACTS

Respondent Eastern Sea Trading was the consignee of several shipments of onion and garlic arriving at Manila from Japan and Hong Kong between August 25 and September 7, 1954. The shipments lacked the certificate of release required by Central Bank Circulars Nos. 44 and 45. Consequently, the Collector of Customs seized the goods and initiated forfeiture proceedings under Section 1363(f) of the Revised Administrative Code. The Collector declared the goods forfeited, and since they had been released under surety bonds, ordered payment of the bond amounts.
On appeal, the Commissioner of Customs affirmed the Collector’s decision. Eastern Sea Trading then sought review from the Court of Tax Appeals (CTA), which reversed the Commissioner’s decision. The CTA ordered the bonds cancelled, premised on its view that the Central Bank lacked authority to regulate “no-dollar” imports (transactions not involving foreign exchange) and that Circulars Nos. 44 and 45 were thus void insofar as they required a license for such imports. The CTA also expressed doubt about the validity of Executive Order No. 328, which implemented an executive trade agreement with Japan, due to the absence of Senate concurrence.

ISSUE

The primary issue is whether the Central Bank has the legal authority to regulate “no-dollar” imports through Circulars Nos. 44 and 45, requiring import licenses even for shipments not involving direct foreign exchange disbursements.

RULING

The Supreme Court reversed the CTA and upheld the authority of the Central Bank. The Court’s legal logic rests on the broad statutory mandate of the Central Bank under its charter, Republic Act No. 265 . Section 2 of RA 265 charges the Bank with maintaining monetary stability and preserving the international value of the peso. Section 14 authorizes it to issue necessary rules and regulations to discharge these responsibilities effectively.
The Court ruled that this mandate necessarily “connote[s] the authority to regulate no-dollar imports.” The reasoning is that all imports, regardless of their immediate foreign exchange mechanism, ultimately impact the country’s overall balance of payments and the stability of the national currency. Therefore, regulating such imports is a legitimate and necessary exercise of the Central Bank’s powers to safeguard the monetary system. The Court cited a line of prior decisions (Pascual v. Commissioner of Customs, et al.) that had already affirmed this specific authority and the validity of the contested circulars.
Regarding the CTA’s doubts on Executive Order No. 328, the Court clarified the distinction between treaties and executive agreements. Under the Constitution, treaties require Senate concurrence. Executive agreements, which address more temporary or administrative arrangements to implement established policy, become binding through executive action alone and do not require Senate approval. The Court noted that such agreements, covering matters like trade and postal relations, have a long history of validity. Thus, the executive agreement with Japan, implemented by EO 328, was validly entered into. The petition was granted, and the decision of the Commissioner of Customs was reinstated.