As a result of our recent article on RA 9280 entitled “New Law Prohibits Companies from Custom Brokerage” (PortCalls, May 10, 2004 issue), we have been receiving many queries in regards to the application of the law on existing customs brokerage firms.
In all those inquiries, the main issue has been – can an existing customs brokerage company continue to engage in the business of customs brokerage? Stated otherwise, does the law prohibit existing firms from the customs brokerage business?
There are two main contending positions to the question. One position is that the prohibition is prospective and as such, existing customs brokerage firms have the vested right to continue its business.
The opposite position is that RA 9280 now expressly prohibits the corporate practice of customs brokerage.
Vested Right of an Existing Customs Brokerage. The first position to the controversial law is that the RA 9280 itself allows existing customs brokerage companies to continue their business.
The basis for this position is Section 33 of RA 9280 as follows: “Sec. 33. Vested Right: Automatic Registration of Customs Brokers. – All customs brokers who are registered and licensed at the time of this Act takes effect shall automatically be registered.”
Accordingly, the present law clearly recognizes the vested rights of customs brokerage corporations, associations and partnerships established under the old provisions of Tariff and Customs Code of the Philippines (TCCP). This “vested right” concept is based mainly on the constitution right to property, which provides that no person shall be deprived of property without due process of law.
In a number of Supreme Court decisions, it has been decided that “protected property” includes the right to one’s employment, profession, trade, or calling, and the right to earn a living.
Thus, this right is considered to be property within the protection of a constitutional guaranty of due process of law.
Against Existing Corporate Practice. The other position is that RA 9280 only allows individuals to engage in the customs broker profession, to the exclusion of corporations.
The main argument in support of this position is section 29 of RA 9280, which specifically provides that the practice of customs broker is a professional service and as such, “no firm, company, or association may be registered or licensed as such for the practice of customs broker profession”.
In addition, Section 28 also provides that no person shall practice or offer to practice the profession, or use the title unless one is a registered licensed customs broker.
Under the old provisions of the TCCP, customs brokerage companies, associations or partnerships are allowed only by virtue of having at least two officers or partners who are licensed customs brokers. Accordingly, the present law merely prevents licensed customs brokers from extending their licenses to non-licensed individuals (in case of partnership) or to legal entities.
In other words, these licensed customs brokers can still continue to practice their profession in their individual capacity. In fact, the law clearly recognizes their vested right to the profession by providing that they be automatically registered.
Accordingly, it is the intention of the law to expressly prohibit the corporate practice of customs brokerage, which is not exactly a vested right but merely a privilege.
The vested right refers only to the individual.
Corporate Practice as a Property Right. Under the old provisions of TCCP, the right or privilege of corporations and associations to engage in customs brokerage was expressly provided.
Thus, corporations have property rights or privilege to engage in the customs brokerage business or profession. However, property rights are not absolute and these rights can in fact be interfered with so long as there is due process of law.
In many instances and with justifiable reasons, laws have previously been passed effectively curtailing such property rights. To properly address the issue of whether corporations are still allowed under RA 9280, two questions must be separately addressed:
- Does the vested right mentioned in Section 33 of RA 9280 include corporations? Is the right to be automatically registered available to corporations?
- Is it the express intention of Congress to prohibit corporate practice of customs brokerage given the fact that customs brokerage has been defined as a profession and not a business?
A Painful Transition. The title of customs broker refers to a licensed individual. Under the present law, we would expect that the registration requirement be limited to licensed individuals, which would of course include the principal and alternate brokers of corporations.
However, even if the principal and alternate brokers are registered, the question persists as to whether corporations can still engage in a “business”. Under the old provisions of the TCCP, it was not very clear whether customs brokerage was a business or a profession.
While the old rules required certification for individuals, corporations and associations were, however, allowed to engage in the “customs brokerage business”. Obviously, the source of the present controversy lies in the redefinition of customs brokerage as a practice of profession under RA 9280.
Ordinarily, a transitory provision would have been provided in the law to ease the transition from the old system to a new system. Considering that there is no such provision under RA 9280, we would hope that the implementing rules and regulations to be issued will “fill in the blanks” left out by the legislation.
The author is an international trade, indirect tax (customs) and supply chain expert. He is the Editorial Board Chairman of Asia Customs & Trade, an online portal on customs and trade developments affecting global trade and customs compliance in Asia. He was also Bureau of Customs Deputy Commissioner for Assessment and Operations Coordinating Group (2013-2016). For questions, please email at email@example.com and firstname.lastname@example.org