BOC Hold-Order Does Not Excuse Consignee From Paying Arrastre Storage Fees

When the Bureau of Customs (BOC) issues a Hold-Order over imported goods, who should pay the arrastre operator for storage fees — the consignee who contracted for the services, or the BOC? In Asian Terminals, Inc. v. Padoson Stainless Steel Corporation (G.R. No. 211876, June 25, 2018), the Supreme Court settled this question: a Hold-Order does not relieve the consignee of its contractual obligation to pay storage fees.

The Facts of the Case

Padoson Stainless Steel Corporation hired Asian Terminals, Inc. (ATI) to provide arrastre, wharfage, and storage services for its shipments at the South Harbor, Port of Manila. The shipments — nine stainless steel coils and 72 hot-rolled steel coils — arrived in October 2001 and were stored in ATI's premises.

On September 7, 2001, the BOC issued a Hold-Order over the shipments because of Padoson's tax liability. A customs case was filed against Padoson. The shipments remained in ATI's custody until they were discharged on July 29, 2006.

ATI demanded payment of storage fees totaling P8,914,535.28. When Padoson refused to pay, ATI filed a collection suit. Padoson countered that ATI should be liable for the deterioration and loss of the shipments while in its custody.

The Lower Courts' Ruling

The Regional Trial Court dismissed ATI's complaint. Relying on Subic Bay Metropolitan Authority v. Rodriguez (633 Phil. 196 [2010]), the RTC held that because of the BOC's Hold-Order, the BOC acquired constructive possession over the shipments. The BOC, not Padoson, should therefore pay the storage fees. The Court of Appeals affirmed.

The Supreme Court's Ruling

The Supreme Court reversed. It found that the lower courts misapplied the SBMA case.

First, in SBMA, the BOC had actual possession of the shipment because it was transferred to a security warehouse. In this case, ATI retained actual possession — the shipments stayed in ATI's premises. A Hold-Order alone does not create constructive possession in the BOC.

Second, the BOC's jurisdiction over a shipment under a Hold-Order exists only for enforcing customs laws and collecting duties. It has nothing to do with a private company's right to collect storage fees under a contract of service.

Third, the principle of relativity of contracts dictates that contracts bind only the parties who entered into them. Padoson, not the BOC, contracted with ATI and benefited from its services. The BOC was never privy to that contract. Padoson cannot shift its obligation to the BOC by invoking the Hold-Order.

The Court also noted that the BOC was not an indispensable party to the collection suit. ATI could obtain complete relief from Padoson alone.

On the Claim of Damages

The Court likewise rejected Padoson's claim that ATI negligently handled the shipments. The photographs Padoson presented were disallowed for failure to pre-mark them during pre-trial. The sheriff's reports were from the customs case, in which ATI was not a party — binding ATI to those findings would violate due process. The sheriff was not presented for cross-examination, and the photographs were not properly authenticated.

The Interest Award

The Court ordered Padoson to pay P8,914,535.28 plus interest: 12% per annum from August 4, 2006 (when ATI filed its complaint) to June 30, 2013, and 6% per annum from July 1, 2013 until full satisfaction, following Nacar v. Gallery Frames (716 Phil. 267 [2013]) and BSP Circular No. 799.

Practical Takeaways

• A BOC Hold-Order does not transfer contractual liability for storage fees from the consignee to the BOC.
• The consignee who enters into a contract of service with an arrastre operator remains liable for fees even if the BOC issues a Hold-Order over the goods.
• The BOC's interest in a shipment under a Hold-Order is limited to enforcing customs laws and collecting duties.
• Evidence not admitted during trial — such as unmarked photographs or documents from a case where a party was not impleaded — cannot be used to prove claims.
• In collection suits for unpaid fees, interest runs at 12% per annum from judicial demand until June 30, 2013, then at 6% per annum thereafter.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.