CAN THE PRESIDENT VALIDLY BAN THE IMPORTATION OF USED MOTOR VEHICLES?

Executive Order No. 156 (EO 156), issued by President Gloria Macapagal-Arroyo (President Arroyo) on 12 December 2002, imposes a ban on the importation of used motor vehicles, with a few exceptions. The ban is part of several measures EO 156 adopts to “accelerate the sound development of the motor vehicle industry in the Philippines.” In issuing EO 156, particularly the prohibition on importation under Article 2, Section 3.1, the President envisioned to rationalize the importation of used motor vehicles and to enhance the capabilities of the Philippine motor manufacturing firms to be globally competitive producers of completely build-up units and their parts and components for the local and export markets.

EO 156 is assailed on the ground that it has no constitutional and statutory bases.

Q1: Is such ban on importation of used motor vehicles as embodied in Article 2, Sec. 3.1 of EO 156 constitutional?

A1: Yes, it is constitutional because it is a valid exercise of a delegated police power. Said EO 156 finds basis on Section 28(2) of Article VI of the Constitution which provides that “the Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government.”

This constitutional provision is implemented by certain legislations, namely: the Tariff and Customs Code and Executive Order No. 226, the Omnibus Investment Code of the Philippines which was issued on July 16, 1987, by then President Corazon C. Aquino. Under Section 401 of the Tariff and Customs Code, the President, in the interest of national economy, general welfare and/or national security, to, inter alia, is expressly authorized to prohibit the importation of any commodity as provided for under Section 401 thereof. And under Article 7, paragraph 12 of the Omnibus Investment Code of the Philippines, the President is empowered to approve or reject the prohibition on the importation of any equipment or raw materials or finished products. 

There is no doubt that the issuance of the ban to protect the domestic industry is a reasonable exercise of police power. The deterioration of the local motor manufacturing firms due to the influx of imported used motor vehicles is an urgent national concern that needs to be swiftly addressed by the President. In the exercise of delegated police power, the executive can therefore validly proscribe the importation of these vehicles. 

Q2: Can the ban be applied against importations of used motor vehicles in the Freeport (Subic Bay Freeport)?

A2: No. The subject matter of the laws (Tariff and Customs Code, Omnibus Investment Code) authorizing the President to regulate or forbid importation of used motor vehicles, is the domestic industry.  EO 156 cannot be applied against the importation of used cars to the Freeport, which RA 7227, considers to some extent, a foreign territory. The domestic industry which the EO seeks to protect is actually the “customs territory” which is defined under the Rules and Regulations Implementing RA 7227, as follows: “the portion of the Philippines outside the Subic Bay Freeport where the Tariff and Customs Code of the Philippines and other national tariff and customs laws are in force and effect.”

The proscription in the importation of used motor vehicles should be operative only outside the Freeport and the inclusion of said zone within the ambit of the prohibition is an invalid modification of RA 7227.  Indeed, when the application of an administrative issuance modifies existing laws or exceeds the intended scope, as in the instant case, the issuance becomes void, not only for being ultra vires, but also for being unreasonable.

As long as the used motor vehicles do not enter the customs territory, the injury or harm sought to be prevented or remedied will not arise.  The application of the law should be consistent with the purpose of and reason for the law.  Ratione cessat lex, et cessat lex.  When the reason for the law ceases, the law ceases.  It is not the letter alone but the spirit of the law also that gives it life. To apply the proscription to the Freeport would not serve the purpose of the EO.  Instead of improving the general economy of the country, the application of the importation ban in the Freeport would subvert the avowed purpose of RA 7227 which is to create a market that would draw investors and ultimately boost the national economy. (HON. EXECUTIVE SECRETARY vs. SOUTHWING HEAVY INDUSTRIES, INC., G.R. No. 164171, February 20, 2006)