CTA Case No. 842 (Decision)

REPUBLIC. OF THH: PHIL' IPPINES COURT Of TAX PBALS MANILA FARM I MPLEMENT & lvfACHi l'fERY CO., C. T.A. CASE NO. 8lt2 / Petiti oner, - versus COMMISSIONER OF CUSTOMS, Respondent . X- - - - - - - - - - - ~ - - - X DECI SI 0 N This is an appeal by petitioner disputing the decision of respondent Commissioner of Customs order- i ng it to pay , jointly and severally , with Plaridel Surety Insurance Co., Inc . the amount of P3, 815. 00 I under the terms of P . S. I.C . Bond No. 81736 in Seizure Identification No . 1325. It appears from the recor ds that pet itioner ordered from P. J . Rhodes & Co ., of San Francisco , California , U. S. A. , 118 bags of zinc oxide dry pig- ment which arrived in Manila on December 27, 1953 on board the s. s. 11Pioneer Hail . 11 The shipment was manufactured by New Jersey Zinc Sales Co . in its factory in Palmerton, Penn. It was declared under Customs Entry No. 88388 ( Exhibit nA" p . 90 Customs rec . ) and entered free of duty under Section 311 of the Philippine Trade Act of 1946 . A bank release cer t i fica te and a consular invoice with a sworn cer- t i f i cate of origin i ssued at San Francisco , Cali f or - ni a were filed with the entry (See pp . 42 & 45, Customs rec . ). The certificate of origin, signed by a certain R. H. t-1y.nderse of P. J . Rhodes & Co ., and (

DECISION - CTA CASE NO . 842 - 2- sv10rn to before a Philippine Consular Officer, states: ttx x x I hereby declare under oath (acting in the capacity ~ndicated below) that the articles covered by t his cer- tificate of United States origin are wholly of the growth, product or manufac- ture of the United States. No foreign materials other than those of the Philippines were used at any s tage in the manufacture or production of such articles." On each bag thereof was posted a red u. s. Customs label or sticker with this -inscription: "Transportation Entry No. 01987 FROM PAll1ERTON TO NEW YORK. llThis package is Under Bond and must be Delivered Intact to the Chief Officer of the Customs AT NE"vl YORK. - tv.A...~NING - "TWO YEARS IMPRiuOJ\1J:-1ENT OR *fo 5000 . 00 FINE OR BOTH_,_ IS THE PENALTY FOR UNLAWFUL REMOVAL OF THIS PACKAGE OR ANY OF ITS CO N- TENTS . 11 After examination , the Bureau of 6ustoms concluded that the shipment v1as one which came from a foreign country other than the United States and returned the - - same as dutiable under Paragraph 59-C at 20~ ad valo- rem of the Philippine Tariff Act of 1909 . Inasmuch as the goods were entered free o� duty, the Collector of Customs ordered their seizure for violation of Section 1363(m)-3, (m)-4 , (m) -5 of the Revised Administrative Code (See Exhibit 11 E, 11 p . 89 , Customs rec .). Pending the final outcome of the seizure proceed-

DECISION - CTA CASE NO . 842 - 3- ings, the articles were released under PSIC Bond No . 81736 (Plaridel Surety and Insurance Co., Inc.) in the amount of P3,815.00 (Seep. 35, Customs rec.)o During the hearing in the seizure proceedings , petitioner presented a sworn statement of the Vice- President of the New Jersey Zinc Sales Co. who certi- fied that the zinc oxide in question was produced in the United States (See Exhibit 111, 11 p . 29 , Customs rec.). Also presented is a letter from the Assistant Collector of Philadelphia which reads: "April 2, 1954 The New Jersey Zipc Company 160 Front Street New York 38, New York AttentiQn: Mr. s. Jacobsen S i r s: Reference is made to your letter of March 31, 1954 (SJacobsen:LVM), in respect to 118 bags zinc oxide produced in your class 7 Smelt- ing and Refining Warehouse established under the CUstoms Regulations and Section 312 of the Tariff Act of 1930. This shipment was covered by Warehouse Withdrawal for Trans- portation and Exportation No . 01987 , dated November 10, 1953, consigned to the Collector of Customs, New York , the port of exit for final destination, Manila, P. I . You request an explanation from this office why red stickers were attached to the bags of zinc oxide . In reply you are informed that the cus- toms regulations provide that red stickers or labels should be used as a precautionary measure to insure that the merchandise is de- livered to the Collector of Customs at a port of exit for exportation to a foreign country.

DECISION - CTA CASE NO . 842 ,- 4 - . These labels or stickers only appear on pack- ages laden in vehicles or cars less than the capacity of the conveyance , as it was in this case . Labels or stickers would not be used if the same merchandise was forwarded in a full car or truck, in which case the car or truck would be sealed with Tyden seals . Very truly yours, (SGD.) G. S. PEFFALL Assistant Collector" (Exhibit u211 p . 30, Customs rec . ). 1'1eanwhile the Philippine Consulate at San Fran- cisco, California, upon request of the then Acting Commissioner of CUstoms, inquired from the shipper the correct percentage of the value of the foreign materials used in the manufacture of the articles in ' relation to the val ue of the finished product (See p . ~7 Customs rec . ). In repl-y to the inquiry , the shipper informed the consulate that all the documents supporting the claim that the merchandise in question were of United States origin were forwarded to their agents in Manila, and that they had received advice from Manila that the case had been brought to a settle- ment (See p . 28 , Customs rec.) . In the light of the above facts and evidence , the Collector of Customs of l4anila declared the merchandise in question forfeited in favor of the Government. Since they have been released under bond, the claimant and the Plaridel Insurance and Surety Co . , Inc . were ordered to pay in cash the sum of

� DECISION - CTA CASE NO . 842 r- 5 - P3 , 815. 00 (See pp . 22- 24 , Customs rec. ) . Fr om this deci sion, petitioner appealed to the Commissioner of Customs , who affirmed the same 1n toto on Harch 21 , 1960 (See pp . 10- 15, Customs rec . ) . On June 3 , 1960 , the instant petition for re- view was filed with this Court . ISSUES The issues raised are : 1 . Whether or not t he 118 bags of zinc oxide are wholly of the growth, product or manufacture of the United States. 2. Whether or not the said articles are subject to forfeiture for violation of Section 1363(m) -3, (m) - 4 , (m) - 5 of the Revised Administrative Cofie . Petitioner claims that the 118 bags of zinc oxide are wholly of the growth, product or manufacture of the Uni ted States . Re spondent holds the contrary view, co~tending that the 118 bags of zinc oxide , or the entire raw materials thereof were of foreign (to the U. S. ) origin for the reason that they had t o be deposited and later transported to New York under bond f or ulti- mate exportation to the Philippines in order to avoid payment of duties in the United States . The shipment at bar was entered in the Philip- pines under the provisions of Section 311 of the Philippine Trade Act of 1946 which reads:

DECISION - CTA CASE NO . 842 "Sec . 311 . Free Entry of U. S. Articles . During the period from the day after the date of the enactment of this Act to July 3, 1954, both dates inclusive , United States articles entered or withdrawn from ware- house in the Philippines for consumption shall be admitted into the Philippines free of ordinary customs duty." A United States article , as used in the said Trade Act, is defined thus: " The term ' United States article' means an article which is the product of the Uni ted States unless , j_n the case of an article produced with the use of material imported into the United States from any foreign country (except the Philippines) the aggregate value of such imported ma- terials at the time of importation into the United States was more than twenty per cen- tum of the value of the arti~le imported into the Philippines , the value of such artj_cle to be determined in accordance with, and as of the time provided by, the customs laws of the Philippines in effect at the time of importation of such article x x x. " It is unquestioned that the article in question, consisting of 118 bags of zinc oxide , was smelted , refined or manufactured in a bonded smelting warehouse of Ne\>l Jersey Zinc Sales Co . Since the zinc oxj_de is "Under Bond and must be Delivered Intact to the Chief Officer of the Customs at New York , " its raw material must have been imported into the United States from any foreign country (except the Philip- pines) and smelted or r efined ~dthout the payment of duties thereon in pursuance of Section 312 of the U. S. Tariff Act of 1930 which provides:

� DECISION - CTA CA E NO . 8~2 - 7- 11 Sec . 312 Bonded Smelting Warehouses . The works of manufacturers engaged in smelting or refining or both, of ores and crude metals , may upon the giving of satis- factory bonds, be designated as bonded msmcu.e. lbtiengremwoavreedhofu;rsoems . Ores or crud e metsls the vessel or ot.h.Ell: vehicle in which imported , or from a bonded warehouse , into a bonded smelting ware- house without the _payment pf duties there- on, and there smelted or refined , or both, together with ores or crude metals of home or ' foreign production: PROVIDED, That the bonds shall be charged with a sum equal in amount to the regular duties which would have been payable on such ores and crude metals if entered for consumption at the time of their importation; and the several charges against such bonds shall be can- celled upon the exportation or delivery to a bonded manufacturing warehouse established under the preceding section x x x x: And PROVIDED FURTHER , 'l'hat the several charges against t he bonds of any smelting warehouse established under the provisions of this Section may be cancelled upon the exporta- tion or transfer to a bonded manufacturing warehouse x x x of a quantity of the same kind of metal , in excess of that covered by open bonds, equal to the amount of metal producible from the smelting or refining, or both, of the dutiable me tal contained in the imported ores and crude metal , x x x x. " (Underscoring supplied) In this circumstance , if petitioner comp any seeks , as it had-done , to enter the zinc oxide duty f ree under the provisions of Section 311 of the Philippine Trade Act of 1946, it is incumbent upon it to show by satis- factory evidence that the value of such imported raw material is not more than twenty percentum of the value of the zinc oxide i mpo rted into the Philipp ines . Peti- �tioner failed to make such showing . The certificate of origin signed by R�.H . Mynderse of P. J . Rhodes & Co . , the exporter of the shipment in I

� .�' . ' ... DECISION CTA CA E NO . 84-2 - 8- �' question, is not a satisfactory showing that said arti- cle is wholly of the growth , product or manufacture of the United States , and that no f oreign materials other than those of the Philippines were used at any stage in t he manufacture or production of the same because , in the absence of a contrary proof, a shipper which did not manufacture or produce the article can- not be presumed to have knowledge of the source of the raw materials used in the manufacture of said . article . The S\vorn statell1ent of Robert G. Kenly, Vice President of the manufacturing company , to the effect "that the 118 bags of XX- 4- zinc oxide exported to the Philippine I slands in November, 1953 under bond A x x were pro- duced in the United States " does not certify as to the sourc e of the raw materials . The fact that the zinc oxide in question vTas produced in the United States does not give rise to the presumption that the raw materials used therein were obtained from sources within the United States. In the light of the fo�regoing , \-Te find no just- ification to reverse the findings and conclusion of r~spondent that the 118 bags of zinc oxide imported by peti. tioner into the Philippines v1ere not wholly of the growth , product or ntanufacture of the United States . Considering the above finding , t he goods in question are subject to forfeiture under Section 1363 (m)-3, (m) - 4 and (m) - 5 of the Revised Administrative

DECISION CTA CASE NO . 842 - 9- Code . WHEREFORE , the decision of the Commissioner of Customs da t ed Harch 21 , 1960 is hereby affirmed , with costs against petitioner. SO ORm~.;RED . Manila, October 31 , 1963 . I CONCUR: RO!..fAN M. UMALI Associate Judge