CTA Case No. 2684 (Decision)

REf UHt.iC f.>F THE PHILIPll~Ee < <1l l,'l OF T �� ' APP 'A L8 .LL ON CITY MACONDRAY AND CO ., INC ., (As agents of the M/ S "Fernstate" ) , Petitioner, ... versus - CoT. A. CASE NO . 2684 THE COVil4ISSIONER OF CUSTOMS , Respondent o X~ - - - - ~ - - - - - - ~X DECI S I 0 N This is an appeal from the decision of the Com- missioner of Customs affirming the decision of the Collector of Customs in Administrative Cas es Nos . V- 526/70 and V- 526/ 70- A, imposing administrative fines of P22 , 856 . 00 and P38 , 396 . oo , respectively , upon the vessel M/S 11Fernstate" and/or petitioner herein as ship agent, for violation of Section 2523 of the Tariff and Customs Code . The antecedent facts , as $ own by the records, are as follows: The M/S "Fernstate, '! with Registry No . 1312, arrived at the Port of Manila on July 10 , 1969 , and discharged thereat , among other cargoes, two ship- ments of assorted textile remnants consigned to Jucicor Corunercial , namely: (1) 38 bales of assorted textile remnants covered by Bill of Lading Noo 2 , with a declared weight of 26 , 638 pounds; and (2) 80 bales of assorted textile remnants covered by Bill of

�.�\ DECISION ... C. T. Ae CASE NO . 26S4 Lading No . 71 , with a declared weight of 56 , 122 pounds . Upon actual examination of the two ship- ments , however , it was found by a 6ustoms examiner that the shipment under Bill of Lading No. 2 actually weighed 36 , 760 pounds , or 10 , 122 pounds more than the declared weight (seep . 16 , C~stoms Dec . ) , while the shipment covered by Bill of Lading No. 71 actually weighed 77 , 019 pounds , or 20 , 897 pounds in excess of the declared weight . (seep . 6, Customs rec . ) . Consequently , on October 13 , 1969 , the Chief of the Law Division, Bureau of Customs , sent a letter to petitioner requiring it to explain in writing and to show cause why no administrative fines should be imposed upon the vessel M/S "Fernstate11 for violation of Section 2523 of the Tariff and Customs Code. In a letter dated January 31 , 1970 , petitioner informed the Collector of Customs that the weights declared in the respective bills of lading covering the arti- cles in question were supplied by the shipper , Alro Textile Export Co ., Baltimore, U. S. A.; that the ship- ments were freighted on measurement basis and not on weight; that the weight is immaterial insofar as the freight is concerned and whatever weight was declared by the shipper was taken as the true and correct weight of the cargo by the carrier ; and lastly , that the declaration of the weight of the cargo in the

DECISION - C. T. A. CASE NO . 2684 :- 3 ... manifest is not required by law. Finding these explanations unsatisfactory , the Bureau of Customs instituted separate administr~tive c a ses against the vessel (Administrative Case No . V- 526/70 and Adminis- trative Case No . V- 526/70- A) for its failure to declare the correct weights of the 38 bales and 80 bales of assorted textile remnants , respectively . On November 13 , 1974 , the Collector of Customs r endered a consolidated decision holding the vessel and/ or petitioner herein liable for a fine of P22 , 856 . 00 with respect to Administrative Case No . V- 526/70 , and a ~ fine of P38 , 396 . 00 relative to Administrative Case No . V- 526/70- A, for violation of Section 2523 of the Tariff and Customs Code . Not satisfied with the decision of the Collector of Customs , petitioner appealed to the Commissioner of Customs who, in a decision dated March 18 , 1975, affirmed ,.the decision of the former . , Hence, the instant appeal . The sole issue for determination is whether or not there was a violation of Section 2523 of the Tariff and Customs Code , the provision of which states: SEC . 2 523 o Discrepancy Between Actual. �� . ��- � 1 and Declared Weight of 11anifewted Articleso- If the gross weight of any article or package described in the manifest exceeds by more than twenty per centum the gross weight ,� as de- . - clared in the manifest or bill of lading there- of , and the Collector shall be of the opinion

DECISION - C. T. A. CASE NO . 268~ 4- ... that such discrepancy was due to the care- lessness or incompetency of the master or pilot in command , owner or employee -of the vessel or aircraft , a fine of not more than fifteen per centum of the value of the package or article in respect to which the deficiency exists, may be imposed upon the importing vessel or aircraft . In its petition for review , petitioner maintains that there was no violation of the foregoing provi- sions of law because of the following: (1) That the discrepancy in weight , if any, was due to the fault or negligence of the shipper; (2) That the .freight wa s based on the measurement of the shipment and not on its weight so that the declaration of weight in the manifest is not required by law; and (3) That there was no evidence presented to prove the fault , negligence , carelessness or incompetence of the master for the alleged discrepancy in weight of the cargoes in . questiono Moreover, petitioner alleges that the fine im- posed by the Bureau of Customs is unreasonable, un- just , oppressive and confiscatory . The legal issue posed is not of first impression. This Court, in the case of Macondray and Co., Inc . vs. Commissioner of Customs (C TA Ca se No. 2~56, January 21 , 1977) ruled: As reg ards the contention of petitioner that the discrepancy is not due to the care- lessness or incompetence of the master, owner, or employee of the ves sel because the weight declared in the bill of lading or manifest was supplied by the shipper, and that under Section 612 of the Code of Commerce and even under the Tariff and Customs Code, the captain or master of the vessel is not required to ascertain the weight of the cargo, a similar issue was settled by this Court in the case of

DECISION - C. T. A. CASE NO . 2684 - �5 - "F . E. Zuelli. g , Inc ., in its capacity as agent of the /V 'Hungkong Grace ', VGo Corami~ioner of Customs" , CTA CAse No . 2360 , April 10 , 1975, '''herein it was ruled that the fact that the captain of a vessel is not careless on the bases of his duties under the Code of Commerce is no defense against this penalty . Because of its con- trolling effect on the present case , ~e will quote from the decision � � � � � On the other hand , petitioner claimed that the said discrepancy is by no means attributable to the mast,:;r or captain of the vessel because , under Article 612 of the Code of Commerce listing the duties of the said official , he is not required to ascertain the actual weight of the cargo of any parti- cular shipper. Consequently, it is argued that neither carelessness nor incompetence can be imputed against the captain of the vessel "Hongkong Grace" to justify the imposition of the penalty imposed by the Tariff and Customs Code . It is not Article 612 of the Code of Commerce which deals with the duties of the captain of a vessel but Section 2523 / of the Tariff and Customs Code that governs the case. Under the latter law the fact that the captain of a vessel is not careless on the bases of his duties as enu- merated in the Code of Commerce is no de- fense against the penalty . The law in~ eludes the carelessness of the owner or employee of the vessel . The explanation of the manager of the Shipping Division of petitioner to the effect that no ship- ping line in the United States has facili- ties for checking the weight or contents of the goods shipped therefrom; that the weight of the cargo is declared by th� shipper and any discrepancy in weight is beyond the control of the shipping company is not a_y~lid exs~~ . Accepting peti - tioner ' s explanation as a valid defense is virtually nullifying Section 2523 of the Tariff and Customs Code , brushing aside the provisions of Section 2523 of the S8id Code as a dead letter . Doing business in the Philippines, it behooves

DECISION Co T. A. CASE NO . 268~ - 6- petitioner to abide by our Customs laws and to ignore them is nothing short of gross carelessness . It is an omission of the concern that one with ordinary prudence should have of the Customs laws of the country with which it does business . (Underlining supplied . ) Anent petitioner ' s averment that the freight- age of the subject shipment was mad e on a measure- ment basis , suffice tt to state that freight age is merely the charge or compensation paid by the shipper or importer to the carrier , and is not a det erminative factor in the assessment and imposition of duties and penalties on the imported goods . As aptly observed by the respondent , freightage is never � factor in determining the responsibility of the vessel under Section 2523 of the Tariff and Customs Code . Relative to the penalties , however , it a~pears from the Customs records that the Bureau of Customs arrived at the amounts of P22 , 856 . 00 and ~38 , 396 . 00 (in the two Administrative Cases , respectively) by basing the 15% fine , which is the maximum allowable by law, on the total value of each shipment . To our mind, this pro- cedure or interpretation is not correct as it will unjustly include a s ba sis of the fine that portion of the values of the articles which are not included as part of the discrepancy, and thus will result to the imposition of penal tie.s that are not only ill egal but also excessive and exhorbitant . As already interpreted by us in previous cases, the 15% fine should only be based on the value of the articles where the discrepancy in weight exists, or on the difference in the values of the decl ared and the actual weights of the articles . ( See Macondray & Co . , Inc . vs . Corrumissioner of Cu s toms ,

DECISION - C. T. A. CASE NO . 2684 ' - 7- C. T. A. Case No . 2741 , Feb . 3 , 1977 ; Delgado Ship- ping Agencies , Inc . vs . Commissioner of Customs , C. T. A. Case No . 2685, Feb . 15, 197i . ) In this case, therefore , basing upon the data found in the Customs records , the fines to be imposed should be correspondingly reduced, as follows : In_A~i st~tLve Ca se NQ . 526/ 70 , the discre~ pancy between the declared and the actual wei ghts of the 38 bales of assorted textile remnants is 10 , 122 lbs . The discrepancy in pounds of these articles multiplied by the value of said p.rticles per pound , which is $0 . 85, or at the conversion rate of P3 . 92 at the time , would result in a discrep ancy in value of $8 , 603 . 70 , or P39 , 678 . 24 . Fifteen percent (15%) of P39 , 678 . 24 is P5 , 951 . 74 , whi ch is the fine legally imposable . In AQministrativ~ Case No . 526/70- A,(following the aforesaid procedure), the discrepancy between the actual and decl ared weights of the 80 bales of assorted textile remnants is 20 , 897 lbs . The total value of the discrepancy in pounds , multiplied by $0 . 85 or P3 . 92 (the value or equivalent per pound), would result in the discrepancy of value at $17 , 762 . 15, or P81 , 916 . 24 . 'Fifteen percent (15%) of P81 , 916 .'24 is Pl2,287 . l.j-4 , which is the fine leg ally imposable thereon .

DECISION - C. T. A. CASE NO . 2684 8- However , from the circumstances of this case, the Court finds no compelling justification to impose the maximum 15% penalty as it does not' appear that the negligence or incompetence of the master , owner , officer or employee of the vessel amounts to willf~l negligence or gross incompetence , and considering that the law allows latitude in the impositi on of the fine , it is deemed just and reason- able that only the amounts of ?4 , ooo . oo and ?9 ,,.000 . 00 be imposed as fines in the respective � administrative cases , o r a total of ~13 , 000 . 00 . WHEREFORE, the decision of the Commissioner of Customs is hereby modified , and the vessel 1'-1/S 11 Fernstate11 and/or petitioner Macondray & Co . , Inc . are hereby ordered to pay the administrative fines of F4 , ooo . oo and P9 , 00o . oo , or a total s~~ of ~13 , 000 _ oo , for violation of Section 2523 of the Tariff and Customs Code . SO ORDERED. Quezon City , April 24 , 1978 . -~~ CONS~ANTE C.cROAQUIN / Associate Judge I CONCUR: ~~~~ ~.~~ AMANTE F LER Acting Presi ing Judge