The Supreme Court (SC) has nullified a customs administrative order directing customs brokers to be accredited first by the Bureau of Customs (BOC) before being able to practice their profession.
The Supreme Court Second Division, in a decision penned by Associate Justice Arturo Brion and promulgated July 28, 2014, reversed a Court of Appeals (CA) decision in 2008 that declared Customs Administrative Order (CAO) No. 3-2006 as valid, as well as ordered the reinstatement of a Regional Trial Court (RTC) ruling that had earlier nullified the same CAO.
CAO 3-2006, issued by former Customs Commissioner Napoleon Morales with the approval of then Finance Secretary Margarito Teves on March 2, 2006, operationalizes Republic Act 9280 (Customs Brokers Act of 2004) and covers the rules and regulations governing accreditation of customs brokers transacting with the BOC. The CAO essentially required brokers who wish to practice their profession at the BOC to apply for accreditation and to obtain a Certificate of Accreditation before engaging in customs brokerage practice.
The SC decision stemmed from a petition for certiorari filed by Airlift Asia Customs Brokerage, Inc. and Alan Benedicto where they assailed the CA ruling upholding the validity of the CAO.
The petitioners originally filed a case before the Regional Trial Court (RTC) in May 2006 questioning the validity of the CAO which, they said, was issued without authority, contravenes Republic Act 9280 (Customs Brokers Act of 2004), and violates custom brokers’ right to practice their profession.
The RTC upheld the petitioners’ contentions and nullified CAO 3-2006, citing that the Customs commissioner had no authority to issue rules governing the practice of the customs brokerage profession since such authority, initially lodged with the Civil Service Commission (CSC) under Section 3409 of the Tariff and Customs Code of the Philippines (TCCP), had been transferred to the Professional Regulatory Board for Customs Brokers (PRBCB) under the supervision of the Professional Regulation Commission with the passage of RA 9280.
The trial court also held that the required accreditation was tantamount to a licensing requirement, prohibited under Section 19 of RA 9280. That provision allows customs brokers that have been issued certificates of registration by the PRBCB to practice the profession in any collection district without the need to secure another license from the BOC.
On appeal, the CA reversed in 2008 the RTC ruling and declared the CAO valid. According to the SC, the appeals court found the RTC ruling’s “construction of CAO 3-2006 rigid and crippling on the BOC’s efforts to ensure efficient customs administration and collection of taxes and duties”.
The CA, the high court noted, ruled that “even if the accreditation requirement was an added burden to brokers, it nevertheless bore a reasonable connection to the BOC’s aim to ensure accountability and integrity in the transactions involving customs duties and tariff laws.”
The CA also denied the petitioners’ motion for reconsideration.
The case was then elevated to the SC which ruled that “Section 39 of RA 9280 expressly repealed the TCCP provisions (Sections 3401 to 3409) on the customs brokers profession.”
Before RA 9280 became law, the SC pointed out that the TCCP governed the entry of and regulation over brokers. Under TCCP’s Sections 3401 and 3402, applicants of brokers’ certificates were required to pass a written exam administered by the Board of Examiners for Customs Brokers under CSC supervision. That board comprised the BOC Commissioner as ex-officio chairman, the Tariff Commissioner and three other members appointed by the President.
The high court noted the TCCP has given the BOC Commissioner, as ex-officio chairman of the Board of Examiners, the right to exercise control over the customs broker profession but that this situation has changed with the passage of RA 9280.
It noted that “Section 39 of RA 9280 further declared that “all laws… and parts thereof which are inconsistent with [RA 9280] are [deemed] modified, suspended, or repealed accordingly.”
Under the RA, the PRBCB was created in lieu of the Board of Examiners, the high court pointed out. “Significantly, RA 9280 excluded the BOC Commissioner as member of the PRBCB. The exclusion of the BOC Commissioner as a member of the PRBCB evinces the legislative intent to remove any power he previously exercised over customs brokers, and to transfer the supervision, control and regulation of this profession to the PRBCB.
“This intent is likewise apparent from a reading of the powers granted to the PRBCB”, the SC said, including its (PRBCB’s) powers to supervise and regulate the licensure, registration and practice of customs brokers profession; register successful examinees in the licensure exam and issue a Certificate of Registration and Professional Identification Card; and adopt measures for the enhancement of the profession.
“By conferring these powers on the PRBCB, the declared policy of RA 9280 to professionalize the practice of the customs broker profession is executed and fulfilled,” the high court said.
It took exception to the CA decision which declared that “the passage of RA 9280 did not divest the BOC Commissioner of his authority over customs brokers”, and that the BOC Commissioner retains the general power “to regulate the activities of licensed customs brokers insofar as the enforcement of tariff laws and prevention f smuggling and other illegal activities to defraud the government of lawful revenues.”
The high court also took note of the CA ruling which said that to “strip the BOC (Commissioner) of any disciplinary and supervisory authority over licensed customs brokers… would not only cripple the [BOC’s] intensified drive to combat smuggling and derail the all-out program… to increase collection targets.”
The SC said it “cannot deny that the BOC Commissioner has the mandate to enforce tariff laws and prevent smuggling” but that “these powers do not necessarily include the power to regulate and supervise the customs broker profession through the issuance of CAO 3-2006.”
With the repeal of Section 3409 of the TCCP following the passage of RA 9280, it noted that the power to promulgate rules on the practice of the customs broker profession has been transferred to the PRBCB.
Meanwhile, the SC said the “similarity in the functions and concerns of the BOC and the BIR (Bureau of Internal Revenue), however, does not support a grant of power to accredit customs brokers to the BOC Commissioner. Unlike the BOC Commissioner whose power over customs brokers was – at the very least – implied and indirect, the BIR Commissioner was given express and specific powers to accredit and register tax agents under Section 6(G) of the National Internal Revenue Code.”
Misplaced
The high court also found “misplaced” such attempts to uphold CAO 3-2006’s validity by arguing it “intends to regulate only the practice before the BOC, which is claimed to be one aspect of the multi-faceted brokerage profession. The accreditation requirement being limited only to a particular facet of the practice of the profession. CAO purportedly does not preclude licensed brokers from pursuing other areas of practice even without having been accredited by the BOC.”
The practice of the profession, the SC said, “involves a variety of activities as enumerated in Section 6 of RA 9280”.
Section 6 describes the profession as involving “services consisting of consultation, preparation of customs requisite document for imports and exports, declaration of customs duties and taxes, preparation, signing, filing, lodging and processing of import and export entries; representing importers and exporters before any government agency and private entities in cases related to valuation and classification of imported articles and rendering of other professional services in matters relating to customs and tariff laws, its procedures and practices.”
It also may involve teaching customs and tariff administration in a government-recognized school under the same section.
“Notably, with the exception of consulting with clients, and teaching tariff and customs administration, most of the above-enumerated activities involve dealing with the BOC. In other words, a large part of a customs brokers’ work involves practice before the BOC, and CAO 3-2006 practically compels all customs brokers – already certified by the PRC – to comply with the accreditation requirement for them to practice their profession.”
This, it said, is “contrary to the terms of Section 19 of RA 9280, which provides that a customs broker “shall be allowed to practice the profession in any collection district without the need of securing another license from the [BOC]”, the high court said.
It was also “unconvinced by the BOC Commissioner’s claim that CAO 3-2006’s accreditation requirement is not a form of license”. The court described a license as a “permission to do a particular thing, to exercise a certain privilege o to carry on a particular business or to pursue a certain occupation.”
“Since it is only by complying with CAO 3-2006 that a customs broker can practice his profession before the BOC, the accreditation takes the form of a licensing requirement prescribed by the law. It amounts to an additional burden on PRC-certified customs brokers and curtails their right to practice their profession. Under 9280, a successful examinee of the customs broker examinations requires a Certificate of Registration, which entitles him to practice the profession as a customs broker with all the benefits and privileges…”, it explained.
Finally the court said a “reading of CAO 3-2006 does not appear to be restricted only to “practice before the BOC” since it includes maintaining complete records covering professional practice and advising clients.
“Although it may be argued that these duties/activities have reasonable connection with practice before the BOC as to be within the scope of CAO 3-2006, this reasoning only reinforces the position that the practice of the customs broker of his profession is mainly tied with practice before the BOC.”
The SC decision is being taken by many brokers interviewed by PortCalls to mean that the broker clearance certificate they have to secure from the BOC under a recently promulgated Department of Finance (DOF) order is also invalid. DOF Department Order No. 12-2014 sets new accreditation guidelines for importers and customs brokers at the Bureau of Internal Revenue and the BOC.
As of press time, Charo Logarta-Lagamon, chief of the BOC Public Information and Assistance Division, told PortCalls the BOC is still studying the ruling. – Roumina Pablo
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