SUB-SEE PHILIPPINES INC., and NORTHERN ORIENTAL SHIPPING, LTD., v. HON. REY LEONARDO B. GUERRERO, in his official capacity as COMMISSIONER OF CUSTOMS, and ATTY. ELVIRA CRUZ, in her capacity as DISTRICT COLLECTOR OF CUSTOMS, PORT OF CEBU

REPUBLIC OF THE PHILIPPINES COURT OFTAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION SUB-SEE PHILIPPINES INC. CTA Case No. 10102 and NORTHERN ORIENTAL SHIPPING, LTD., Petitioners, -v e rs u s- Members: HON. REY LEONARDO B. DEL ROSARIO, P.J., Chairperson, MANAHAN, and GUERRERO, in his official REYES-FAJARDO, 1L. capacity as Promulgated: COMMISSIONER OF CUSTOMS and ATTY. ELVIRA CRUZ, in her capacity as DISTRICT COLLECTOR OF CUSTOMS, PORT OF CEBU, Respondents. X---------- - ----------------------- REYES-FAJARDO, J.: DECISION THE CASE Petitioners filed this Petition for Review praying for a judgment: (1) setting aside the assailed Decisions dated October 22, 2018 and May 28, 2019, respectively rendered by respondents, District Collector and Commissioner of Customs (" COC"); (2) lifting the Warrant of Seizure and Detention ("WSD") issued against the vessel, MV Northern Queen; and (3) releasing said vessel to p e titi o n e r s .

CTA Case No. 10102 Sub-see Philippines Inc. and Northern Oriental Shipping Ltd. 11. Han. Rey Leonardo B. Guerrero, in his official cnpncity ns Commissioner of Customs nnd Atty. Elvirn Cruz, in her cnpncity ns District Collector of Customs, Port of Cebu THE PARTIES Petitioner Sub-see Philippines, Inc. ("Sub-see"), a corporation duly organized and existing under the laws of the Philippines, is the duly authorized management company of the vessel subject of the present petition, MV Northern Queen, a foreign flag vessel registered under the laws of Tuvalu.1 Petitioner North Oriental Shipping, Ltd. ("North Oriental"), a corporation duly organized and existing under the laws of Belize, is the owner of the vessel.2 Respondent Hon. Rey Leonardo Guerrero is impleaded in his official capacity as Commissioner of the Bureau of Customs ("BOC"), with office address at Gj F OCOM Building, 16th Street, South Harbor, Port Area, Manila.3 Respondent District Collector, Atty. Elvira Cruz, is impleaded in her official capacity as the District Collector of the Port of Cebu, with office address at BOC, Pier 6, Gate 2, NRA, Port of Cebu.4 THE FACTS On October 19, 2007, MV Northern Queen arrived in the Sub- Port of Mactan. On the same date, Great Domestic Insurance Company of the Philippines (Formerly Domestic Insurance Company of the Philippines) issued Ordinary Re-export Bond No. 0185, in the amount of Three Million Five Hundred Thirty-Five Thousand Six Hundred Fifty Pesos and 50/ 100 (!>3,535,650.50) effective from October 19, 2007 until Aprill9, 2008. Petition for Review, Docket- Vol. I, p. 11 . /d. Petition for Review, vis-a-vis, Answer, Docket- Vol. I, pp. 11 and 218, respectively. 3 4 Petition for Review, vis-a-vis Par. 6, Answer, Docket- Vol. I, pp. 11 and 218, respectively.

CIA Case No. 10102 Sub-see Philippines Inc. and Northern Oriental Shipping Ltd. v. Han. Rey Leonardo B. Guerrero, in his official capacity as Commissioner of Customs and Atty. Elvira Cruz, in her capacity as District Collector of Customs, Port of Cebu On November 19, 2007, Vicente T. Suazo, Jr., Administrator of the Maritime Industry Authority ("MARINA"), wrote Captain Jens A. Hansen, Managing Director of Sub-see Philippines, Inc., informing him that his request for temporary registration of MV Northern Queen under Philippine flag for a period of one (1) year has been granted. It further provided that the bareboat charter authority for the vessel shall be valid until November 18, 2008. On December 3, 2007, claimant Northern Oriental Shipping, Ltd., through its customs broker, Stewart Y. Marquez, filed Import Entry No. 02901 for the vessel. On December 18, 2007, the Office of the Regional Director of MARINA issued a Certification recommending the release of MV Northern Queen from customs custody. On December 21, 2007, the Office of the Port Collector, Sub-port of Mactan, issued the Certificate of Approval for Conversion from Foreign Trade to Domestic Trade of MV Northern Queen. On February 17, 2008, Undersecretary Gaudencio A. Mendoza, Jr., from the Legal and Revenue Operations Group of the Department of Finance ("DOF"), allowed the release of said MV Northern Queen without payment of duties and taxes upon posting of a bond in an amount equivalent to One Hundred Fifty Percent (150 %) of the duties and taxes, and conditioned on the re-exporta tion thereof or the payment of duties and taxes upon termination of the charter period. On April 17, 2008, BF General Insurance Company Inc., issued BF Gen. Bond No. 00501-07 C(9) No. 02101 to renew the Re-Export Bond previously issued by Great Domestic Insurance Company of the Philippines, Inc. The new bond is valid until October 17, 2008. On July 21, 2008, Atty. Ernesto D. Urbano, Collector of Customs, Sub-Port of Mactan, issued Certificate of Payment SN POC: 026-2008 for MV Northern Queen.

CTA Case No. 10102 Sub-see Philippines Inc. nnd Northern Oriental Shipping Ltd. v. Hon. Rey Leonardo B. Guerrero, in his officinl cnpncity ns Commissioner of Cus toms nnd Athj. Elvirn Cruz, in her capncihJ as District Collector of Customs, Port of Cebu On September 30, 2008, another re-export bond was again posted for MV Northern Queen. The validity of the bond expires on April16, 2009. On November 18, 2008, the bareboat charter authority granted by MARINA to MV Northern Queen expired. On February 16, 2009, claimant Northern Oriental Shipping, Ltd. requested for the conversion of MV Northern Queen from Local to Foreign. The request w as approved on March 3, 2009. On March 6, 2009, a Clearance of Vessel to a Foreign Port was issued for MV Northern Queen . On October 7, 2011, Sector Commander Captain George G. Macarubbo issued a Memorandum recommending the issuance of a WSD against MV Northern Queen if it is not re-exported immediately or if there is no payment of customs duties and taxes considering that the bareboat charter authority had long expired. On October 12, 2011, the BOC wrote a Demand Letter addressed to Captain Jens A. H ansen d emanding the payment of Tw o Million Three Hundred Fifty-Five Thousand Seven Hundred Sixty-Seven Pesos (P2,355,767.00), representing duties and taxes, including interest as of October 12, 2011. On N ovember 17, 2011, Captain George G. Macarubo recommended the issuance of a WSD against the vessel MV Northern Queen considering tha t Captain Jens A. Hansen ignored the demand of the BOC. On N ovember 21, 2011, Atty. Cornelio C. Mercad o, legal counsel of Captain Jens A. H ansen, wrote then-District Collector Ronnie C. Silvestre and argued that the vessel was not subject to duties and taxes as it was on laid back status and awaiting determination of its seaworthiness prior to commissioning.

CTA Case No. 10102 Sub-see Philippines Inc. nnd Northern Orientnl Shipping Ltd. v. Han . Rey Leonnrdo B. Guerrero, in his official cnpncity ns Commissioner of Cus toms nnd Ath;. Elvirn Cruz, in her cnpncih; ns District Collector of Customs, Port of Cebu On March 14, 2012, the subject WSD (with Cebu Seizure Identification Case No . 03-2012) w as issu ed by the District Collector of the Port of Cebu,s ordering the District Commander to seize MV Northern Queen, for failure of the said vessel's own er to p ay duties and taxes due upon the expiry of its bareboa t charter privilege, and to take custod y of the same. The WSD also ordered the strict obser vance of Customs Mem oran dum Order ("CMO") No. 8-84, on making a return of service and the submission of inventory of articles seized. PROCEEDINGS BEFORE THE DISTRICT COLLECTOR On June 6, 2018, petition ers submitted their Position Paper,6 and on July 9, 2018, the Government Prosecutor, Atty. Paul Romeo B. Polloso, submitted his Comment on said Position Paper. 7 After su bmission of petitioners' Reply to the Prosecution 's Commen t on July 30, 2018,8 respon dent District Collector ren dered the assailed Decision dated October 22, 2018. The dispositive portion of w hich reads as follows: WHEREFORE, by virtue of the power vested in this office by law, the abovementioned Vessel subject matter of the subject case is hereby ORDERED and DECREED forfeited in favor of the government to be disposed of in the manner prescribed by law. SO ORDERED.9 PROCEEDINGS BEFORE THE COMISSIONER OF CUSTOMS On November 12, 2018, petitioners filed their Notice of Appeal and Memorandurn on AppeaP O s Par. 18, Pe ti tion for Review, vis-n-vis Par. 30, Answer, Docket - Vol. I, pp. 13 and 221, res pectively. Refer also to Par. 1, Answer (Docket - Vol. I, p. 217), in relation to Exhi bit "P-1" (Docket, Vol- I, p. 50). 6 Par. 22, Petition fo r Review, vis-n-vis Par. 34, Answer, Docke t - Vol. I, pp. 14 a nd 221, respectively. 7 Par. 23, Petition for Review, vis-n-vis Par. 35, Answer, Docket - Vol. I, pp. 14 and 221, respec ti v e ly. s Par. 24, Pe tition for Review, vis-a-vis Par. 36, Answer, Docket - Vol. I, pp. 14 and 221, respectively. 9 Par. 25, Pe tition for Review, vis-a-vis Par. 37, Answer, Docket - Vol. I, pp. 14 and 222, respectively. Refer also to Par. 1, Answer, Docket - Vol. I, p . 217.

CTA Case No. 10102 Sub-see Philippines Inc. and Northern Oriental Shipping Ltd. v. Han . Rey Leonardo B. Guerrero, in his officinl capacity as Commissioner of Cus toms and Atty. Elvirn Cruz, in her capacity as District Collector of Customs, Port of Cebu Thereafter, respondent COC rendered the Decision dated May 28, 2019 and received by petitioner on June 7, 2019, affirming the Decision of respondent District Collector, the d ispositive portion of which reads: WHEREFORE, premises considered, the Decision dated 22 October 2018 of the District Collector, Port of Cebu, is hereby AFFIRMED. Accordingly, the MV NORTHERN QUEEN is ordered and d ecreed FORFEITED in favor of the government to be disposed of in the manner provided by law. SO ORDERED."ll PROCEEDINGS BEFORE THIS COURT On July 4, 2019, petitioners filed their Petition for Review before the Court.12 On Ju ly 1, 2020, respondents filed their Answer.13 In the Resolution dated July 23, 2020/ 4 the Cou rt referred the case for mediation to the Philippine Mediation Center - Court of Tax Appeals. H owever, in view of the Back to Court Report from the Mediation Staff Assistan t, Ms. Avigail B. Sanchez, 15 the case was returned to this Court due to " Non-Appearan ce of PetitionerIs" . Thus, in its Resolution d ated November 26, 2020,16 the Court initially set the Pre-Trial Conference on March 18, 2021.17 10 Par. 27, Pe tition for Rev iew, vis-n-vis Pa r. 39, Answe r, Docket - Vol. I, pp. 14 a nd 222, res p ec ti v e ly. 11 Par. 28, Pe tition for Review, vis-n-vis Par. 40, Answer, Docket - Vol. I, pp. 15 and 222, respectively. Refe r also to Pa r. 1, Answer, Docket- Vol. I, p. 217. 12 Docket - Vol. I, p p. 10 to 24. 13 Docke t - Vol. I, p p. 217 to 230. I~ Docket - Vol. I, p p. 316 to 317. 15 Docket - Vo l. I, p. 423. 16 Docket - Vo l. I, p p. 435 to 436. 17 Refe r also to the Notice of Pre-T rial Confe rence dated December 3, 2020, Docket - Vol. I, pp. 437 to 440.

CTA Case No . 10102 Sub-see Philippines Inc. nnd Northern Orientnl Shipping Ltd. v. Han. Rey Leonnrdo B. Guerrero, in his official capaci ty ns Commissioner of Customs and Atty. Elvira Cruz, in her cnpncity ns District Collector of Customs, Port of Cebu On March 15, 2021, respondents filed their Pre-Trial Brief via electronic mail.18 On May 20, 2021, petitioners filed their Pre-Trial Brief also via electronic mail.19 Subsequently, on May 27, 2021, the Pre-Trial Conference was held via videoconference.2o During the said Conference, the Court gave the parties thirty (30) days within which to submit their Joint Stipulation of Facts and Issues ("JSFI"). In the Resolution dated November 25, 2021,21 for failure of the parties to file their JSFI, the Court deemed the parties' right to file the same waived, and terminated the Pre-Trial. Thus, on March 18, 2022, the Pre-Trial Order was issued.22 Trial ensued. Petitioners presented their documentary and testimonial evidence. They offered the testimonies of: (1) Mr. Elmer Lauron,23 former crew member of MV Northern Queen; (2) Captain Jens A. Hansen, 24 president of petitioners; and (3) Captain Darwin S. Lacorte,25 former second officer of petitioners. On April 5, 2022, petitioners filed their Formal Offer of Exhibits. 26 Respondents then filed their Comment to Petitioners' Formal Offer of Exhibits on April 7, 2022.27 In the Resolution dated May 16, 2022, 28 the Court admitted petitioners' offered exhibits, except for the following: 1. Exhibits "P-2", "P-6", "P-8", "P-9", and "P-10", for failure to present the originals thereof for comparison; 18 Docket- Vol. I, pp. 463 to469. 19 Docket - Vol. I, pp. 472to 483. 20 Notice of Resetting dated March 15, 2021, Docket - Vol. I, p. 459 to 460; Minutes of the hearingheld on, and Order dated, May 27, 2021, Docket- Vol. I, pp. 570 to575. 21 Docket- Vol. I, p. 728. 22 Docket- Vol. I, pp. 736to750. 23 Exhibit "P-25", Docket- Vol. I, pp. 551 to562; Minutes of the hearing held on, and Order dated, November4, 2021, Docket- Vol. II, pp. 630to633. Exhibit "P-26-a", Docket - Vol. I, pp. 532 to 538; Minutes of the hearing held on, and Order dated, March 22, 2022, Docket- Vol. II, pp. 751 to 759. 25 Exhibit "P-27", Docket- Vol. II, pp. 765to 776;Minutes ofthe hearingheld on, andOrder dated March22, 2022, Docket - Vol. II, pp. 751to 759. 26 Docket- Vol. II, pp. 805to814. 27 Docket- Vol. II, pp. 835 to842. 28 Docket - Vol. II, pp. 852 to854.

CTA Case No. 10102 Sub-see Philippines Inc. nn.d Northern. Orien.tnl Shipping Ltd. v. l-Ion.. Rey Leonardo B. Guerrero, in his officinl cnpncity ns Commissioner of Customs nnd Ath;. Elvira Cruz, in. her cnpncity ns District Collector of Customs, Port of Cebu 2. Exhibit "P-17'' for failure to present the original thereof for comparison and for failure to comply with Section 24, Rule 132 of the Revised Rules on Evidence, as am ended; and 3. Exhibits "P-24", "P-16", and "P-20", for failure to comply with Section 24, Rule 132 of the Revised Rules on Evidence, as amended. In the same Resolution, the Court gave both parties thirty (30) days to file their memoranda there being no witness for respondents to present.29 Petitioners then filed their Memorandum via electronic mail on July 4, 2022,30 while respondents' Memorandu1n was filed on July 26, 2022.31 On August 10, 2022, the case was submitted for decision.32 THE ISSUES The issues to be resolved in this case are as follows: 1. Whether or not petitioners are liable to pay customs duties and taxes to the BOC, and 2. Whether or not the forfeiture and seizure of MV Northern Queen is valid.33 Petitioners' arguments: 29 Docket- Vol. II, p. 854. 30 Docket- Vo l. II, pp. 855 to 871. 31 Docket - Vo l. II, pp. 939 to 952. 32 M inute Resolution dated A ugust 10, 2022, Docket- Vo l. II, p. 971. 33 Issues to be Tried or Reso lved, Pre-Tria l Order dated March 18, 2022, Docket- Vol. II, p. 744; Refer also to the Minutes of the hearing held on, and Order dated , May 27, 2021, Docket- Vol. I, pp. 570 to 575.

CTA Case No. 10102 Sub-see Philippines Inc. and Northern Orien tal Shipping Ltd. v. Han. Rey Leonardo B. Guerrero, in his official capacity as Commissioner of Customs and Atty. Elvira Cruz, in her capacity as District Collector of Customs, Port of Cebu Petitioners argue that respondents committed irreversible error in their Decisions d ated May 28, 2019 and October 22, 2018, holding petitioners liable for customs duties and taxes, considering that: (a) the vessel was never registered u nder Philippine flag nor issued a certificate of Philippine registry; (b) petitioners secured the vessel's re-export bond w ith validity until April 16, 2009; (c) the vessel departed from the port of Mactan on March 6, 2009 or before the expiry of its re-export bond on April 16, 2009; and (d) that the forfeiture and seizure of MV Northern Queen has no basis in fact or law. Respondents' counter-arguments: Respondents contend that the Decision dated October 22, 2018 by the District Collector is now final and executory; and that, in the alternative, respondents COC and District Collector did not commit any error w hen they ordered the forfeiture of MV Northern Queen in favor of the government. THE COURT'S RULING The Petition for Review lacks merit. The Decision of respondent District Collector has not yet attained finality. The circumstances warrant a relaxation of procedural rules with respect to the payment of docket fees. In the assailed Decision of responden t COC,34 it was fo und that petitioners' fa ilure to timely pay the required appeal fee was borne out of the following circumstances: COC's Decis ion dated May 28, 2019, Docket - Vol. I, p. 39; Par. 28, Petition for Review, vis-a-vis Par. 40, Answer, Docket - Vol. I, pp. 15 and 222, respective ly.

CTA Case No. 10102 Sub-see Philippines Inc. nnd Northern Orierztnl Shipping Ltd. 11. f-Ion. Rey Leonnrdo B. Guerrero, in his official cnpncity ns Commissioner of Customs nnd Atty. Elvirn Cruz, in her cnpncity ns District Collector of Customs, Port of Cebu 1. When petitioners filed their appeal on November 12, 2018, the cashier at the Port of Cebu did not know the correct amount to be paid for the appeal fee; 2. The next day, petitioners obtained a Manager's Check for the amount of the appeal fee but the wrong payee was indicated in the check; and 3. Petitioners were only able to obtain the Manager's Check with the correct payee and amount to be paid on November 14, 2018, or two days after the deadline for perfecting the appeal. Citing the case of Sps. Curata v. Philippine Ports Authority, 3s respondent COC held that the aforementioned circumstances surrounding petitioners' failure to pay the appeal fee within the reglementary period warrant a relaxation and liberal construction of the rules of procedure. The above ruling of the COC was not disputed by respondents in their Answer. However, respondents, in their Memorandum filed on July 26, 2022, argued that respondent District Collector's Decision dated October 22, 2018 already attained finality in view of petitioners' failure to pay the appeal fee at the time of filing the Notice of Appeal on November 12, 2018. Respondents allege that petitioners' Manifestation and Compliance filed on November 14, 2018, w ith attached photocopy of BDO Manager's Check No. 0013989 dated November 13, 2018 for payee BOC for the amount of P3,030.00 representing the appeal fee, does not show whether the actual Manager's Check was received by either the District Collector or the COC. The Court finds no reversible error in respondent COC's relaxation of the rules of procedure. Respondent COC correctly considered the circumstances of the present case and applied by analogy the ruling of the Supreme Court in Sps. Curata. Notably, in 35 G .R. No. 154211, June 22, 2009 .

CTA Case No. 10102 Sub-see Philippines Inc. and Northern Oriental Shipping Ltd. v. Han. Rey Leonardo B. Guerrero, in his official capacity as Commissioner of Customs and Atty. Elvim Cruz, in her capacihJ as District Collector of Customs, Port of Cebu Tanengian vs. Lorenzo, et al.,36 the Supreme Court held that where the party showed willingness to abide by the rules by immediately paying the required fees and considering the importance of the issue raised, the same calls for judicial leniency . To wit: The general rule is that appeal is perfected by filing a notice of appeal and paying the requisite docket fees and other lawful fees. However, all general rules admit of certain excep tions. In Mnctnn Cebu International Airport Authority v. Mnngubat, where the docket fees were paid six days late, we said that where the party showed w illingness to abide by the rules by immediately paying the required fees and taking into consideration the importance of the issues raised in the case, the same calls for judicial leniency, thus: In all, what emerges from all of the above is that the rules of procedure in the matter of paying the d ocket fees must be followed. However, there are exceptions to the stringent requirement as to call for a relaxation of the application of the rules, such as: (1) most persuasive and weighty reasons; (2) to relieve a litigant from an injustice not commensurate wi th his failure to comply w ith the prescribed procedure; (3) good faith of the defaulting party by immediately paying within a reasonable time from the time of the default; (4) the existence of special or compelling circumstances; (5) the merits of the case; (6) a cause not entirely ath�ibutable to the fault or negligence of the party favored by the suspension of the rules; (7) a lack of any showing that the review sought is merely frivolous and dilatory; (8) the other party will not be unjustly prejudiced thereby; (9) fraud, accident, mistake or excusable negligence without appellant's fault; (10) peculiar legal and equitable circumstances a ttendant to each case; (11) in the name of substantial justice and fair play; (12) importance of the issues involved; and (13) exercise of sound discretion by the judge guided by all the attendant circumstances. Concomitant to a liberal interpretation of the rules of procedure should be an effort on the part of the party invoking liberality to adequately explain his failure to abide by the rules. Anyone seeking exemption from the application of the Rule has the burden of proving 36 Tnnenginll v. Lorenzo, et nl., G.R. No. 173415, Ma rch 28, 2008.

CTA Case No. 10102 Sub-see Philippines Inc. nnrl Northern Orientnl Shipping Ltd. v. Hon. Rey Leonnrdo B. Guerrero, in his officinl cnpncitlj ns Commissioner of Customs nnd Atty. Elvirn Cruz, in her cnpncity ns District Collector of Customs, Port of Cebu that exceptionally meritorious instances exist which warrant such departure.37 As to this procedural rnatter, the Court finds no reason to disturb the findings of respondent COC. Thus, the Court shall proceed to address the merits of the case. Petitioners' liability to pay customs duties and taxes attached right after the expiration of the bareboat charter authority. Under the Tariff and Customs Code of the Philippines ("TCCP"), all articles imported from any foreign country into the Philippines shall be subject to duty upon each importation. Section 100 of the TCCP states: SECTION 100. Imported Articles Subject to Duty. - All articles when imported from any foreign country into the Philippines, shall be subject to duty upon each importation, even though previously exported from the Philippines, except as otherwise specifically provided for in this Code or in other laws.38 In connection thereto, Section 1202 of the TCCP provides: Section 1202. When Importation Begins and Deemed Terminated. -Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unlade therein. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the articles, or secured to be paid, at a port of entry and the legal permit for w ithdrawal shall have been granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs.39 37 Emphasis sup p lied . 38 Emphasis supplied. 39 Emphasis supplied.

CTA Case No. 10102 Sub-see Philippines Inc. nn.d Northern Orien.tnl Shipping Ltd. v. Han . Rey Leon.nrdo B. Guerrero, in his official cnpncihJ ns Commissioner of Customs nnd Atty. Elvira Cruz, in her cnpncity ns District Collector of Customs, Port of Cebu In conjunction thereto, Presidential Decree (PD) No. 760,40 as amended, temporarily gives a foreign-owned vessel the rights and privileges of a vessel of Philippine registry. Section 1 of PD No. 760, as amended, provides: SECTION 1. Any provision of law, decree, executive order, or rules and regulations to the contrary notw ithstanding, any foreign- owned vessel under time charter or lease to a Philippine national, as the term is defined in Section 3 of Presidential Decree No. 474, may be issued a temporary certificate of Philippine registry by the Maritime Industry Authority: Provided, That the said Charter or lease (1) has had the prior written approval of the Maritime Industry Authority, (2) shall be valid and effective for a period of not less than five years, and (3) shall be used exclusively in the coastwise trade in the Philippines: Provided, further, That the operation of the vessel shall be entirely in the hands of Philippine nationals and free from any participation or interference from the alien owner, except insofar as such action shall be to d irectly protect his rights as owner thereof: Provided, finally, That the registered vessel shall be manned completely by a Filipino crew, except in the case of specialized fishing vessel.41 Section 2 of PD No. 760, as amended, provides: Section 2. Any vessel issued a temporary certificate of Philippine registry as provided for in the section immediately preceding shall be entitled to all the rights and privileges of a vessel of a Philippine registry, as well as the protection of Philippine law so long as its temporary certificate of registration is valid and subsisting. Correspondingly, the vessel shall also be subject to all requirements, limitations and all the duties and obligations imposed upon vessels of Philippine registry.42 The law is clear that a valid and subsisting temporary certificate of Philippine registry from the MARINA is imperative for a foreign- owned vessel to enjoy the rights and privileges of a vessel of a Philippine registry (i.e., exemption from payment of import taxes and duties). 40 Allowing T he Temporary Registration of Foreign-Owned Vessels Under Time Charter or Lease to Ph ilip pine Nationals for Use in The Philippine Coastwise Trade Subject to Certain Conditio ns, July 31, 1975. 41 Emphasis supplied . 42 Emphasis supplied .

CTA Case No. 10102 Sub-see Philippines Inc. and Northern Oriental Shipping Ltd. v. Han. Rey Leonardo B. Guerrero, in his official cnpncity ns Commissioner of Customs nnd Atty. Elvirn Cruz, in her capacity as District Collector of Customs, Port of Cebu Here, it is undisputed that when MV Northern Queen arrived in the Sub-Port of Mactan on October 19, 2007, a re-export bond valid until April 19, 2008 was posted for the vessel. Thereafter, petitioners applied for a bareboat charter authority or a temporary certificate of Philippine registry from the MARINA. Because of their application for a bareboat charter authority, petitioners were not required to pay the necessary customs and taxes pursuant to Section 1 of PD No. 760, as amended. Petitioners were then granted by the MARINA a bareboat charter authority for MV Northern Queen on November 19, 2007 which was valid for a period of one (1) year. The DOF then allowed the release of MV Northern Queen on February 17, 2008 without payment of duties and taxes subject to the following conditions: 1) posting of a bond in an amount equivalent to One Hundred Fifty Percent (150 %) of the duties and taxes, and 2) the re-exportation thereof or the payment of duties and taxes upon termination of the charter period. Simply put the BOC initially treated MV Northern Queen's original entry into the Philippine waters as a conditional free importation in view of the bareboat charter authority granted to the vessel. With the knowledge of the bareboat charter authority granted to the vessel and that it was released under a re-export bond, petitioners should have known that its original entry was subject to specific conditions, among them, the obligation to guarantee the re- exportation of the vessel within a given period, or otherwise pay the customs duties on the vessel43 upon expiration of the bareboat charter a u thority . Considering, however, petitioners' failure to re-export the vessel after the expiration of the bareboat charter authority on November 18, 2008, the liability to pay the import duties already attached right after the expiration of said bareboat charter authority. As correctly argued by respondents, there is nothing in the TCCP that exempts petitioners from payment of taxes and duties upon expiration of a bareboat charter privilege. On the contrary, it 43 Secretary of Finnnee v. Oro Mnurn Shipping Lines, G.R. No. 156946, July 15, 2009.

CTA Case No. 10102 Sub-see Philippines Inc. nnd Northern Orientnl Shipping Uri. v. Hon. Rey Leonnrdo B. Guerrero, in his official cnpncity ns Commissioner of Customs nnd Attl;. Elvira Cruz, in her cnpncity ns District Collector of Customs, Port of Cebu was the bareboat charter which gave MV Northern Queen the rights and privileges of a vessel of a Philippine registry and enabled the release of the said vessel from customs custody withou t payment of taxes and duties. The subsequent posting and renewal of the re-export bond is of no moment as the bareboat charter authority had already expired. In any event, petitioners argue that they validly posted and renewed their original re-export bond with validity until April 16, 2009 on September 30, 2008, even before the expiration of the charter period. According to them, from October 2007 to April16, 2009, they are not liable to pay customs duties and taxes considering that the vessel is secured w ith a valid re-export bond and that the vessel already left the Philippines within said period. Petitioners further explain that the vessel was conditionally released without the payment of duties and taxes upon posting of re- exportation bond. While under a valid re-export bond, and provided that the condition on the re-exportation of the vessel within a given period is complied with, the vessel is not liable to pay customs duties and taxes. The Court does not agree. The posting of re-export bond by petitioners is inconsequential as petitioners' bareboat charter authority had already expired and was n ot renewed by petitioners. It bears stressing that the re-export bond draws its validity from the bareboat charter authority issued by the MARINA. Its purpose is to guarantee compliance of petitioners' undertaking with the BOC to re-export the imported vessels within the given period and pay the taxes and / or duties due thereon. 44 Thus, as a consequence of the expiration of the bareboat charter authority, the importation of MV Northern Queen changed from Autocorp Group v. Intrn Strntn Ass11rn11ce Corp., G.R. No. 166662, June 27, 2008.

CTA Case No. 10102 Sub-see Philippines Inc. rznd Northern Oriental Shipping Ltd. v. Han. Rey Leonardo B. Guerrero, in his official cnpncity ns Comm.issioner of Customs nnd Ath;. Elvira Cruz, in her cnpncihJ ns District Collector of Customs, Port of Cebu being a conditional free importation to a regular importation subject to duties. In fact, petitioners should have immediately re-exported MV Northern Queen or paid the taxes and duties due thereon after the expiration of the bareboat charter authority. Afterall, the release of said vessel was predicated on said bareboat charter authority and had there been none, petitioners would have been required to immediately pay the taxes and duties thereon. Besides, Section 800(b) of the Customs Modernization and Tariff Act is inapplicable in this case. Petitioners allege th at Section 800 paragraph (b) of Republic Act CRA") No. 10863 or the Customs Modernization and Tariff Act ("CMTA"),45 allowed the BOC to extend the time of exportation or payment of du ties, taxes and other charges for a term not exceeding six (6) months from the expiration of the original period. Section 800 (b) of the CMTA reads: SECTION 800. Conditionally Tax and/ or Duty-Exempt Importation. - The following goods shall be exempt from the payment of import duties upon compliance with the formali ties prescribed in the regulations w hich shall be promulgated by the Commissioner with the approval of the Secretary of Finance: Provided, That goods sold, bartered, hired or used for purposes other than w hat they were intended for and w ithout prior payment of the duty, tax or other charges w hich would have been due and payable at the time of enh�y if the goods had been entered without the benefit of this section, shall be subject to forfei ture and the importation shall constitute a fraudulent practice against customs laws: Provided, however, That a sale pursuant to a judicial order or in liquidation of the estate of a deceased person shall not be subject to the preceding proviso, without prejudice to the payment of duties, taxes and other charges: Provided, further, That the President may, upon the recommendation of the Secretary of 45 Custo ms Mode rnization and Tariff Act, Republic Act No. 10863, May 30, 2016.

CTA Case No. 10102 Sub-see Philippines Inc. and Northern Oriental Shipping Ltd. v. Han. Rey Leonardo B. Guerrero, in his official capacity as Commissioner of Customs and Atty. Elvira Cruz, in her capacity as District Collector of Customs, Port of Cebu Finance, suspend, disallow or completely withdraw, in whole or in part, any conditionally free importation under this section: (b) Equipment for use in the salvage of vessels or aircrafts, not available locally, upon identification and the giving of a security in an amount equal to one hundred percent (100%) of the ascertained duties, taxes and other charges thereon, conditioned for the exportation thereof or payment of corresponding duties, taxes and other charges w ithin six (6) months from the date of acceptance of the goods declaration: Provided, That the Bureau may extend the time for exportation or payment of d uties, taxes and other charges for a term not exceeding six (6) months from the expiration of the original period; ... A perusal of the records, however, shows that petitioners failed to present evidence to prove that the vessel imported in this case is an equipment for use in the salvage of vessels or aircrafts that is not available locally. It is also important to note that the CMTA was enacted on May 30, 2016, while the importation in this case happened sometime in October of 2007. Even in the earlier provision under Section 105 of the TCCP, which was later amended by Section 800 of the CMTA, the Court did not find basis in petitioners' claim that the BOC validly extended the period for re-exportation of the vessel with the issuance of the re-exportation bond on September 30, 2008. As such, petitioners' allegation that there was a valid re-exportation of the vessel in this case is utterly bereft of merit. There is substantial evidence to justify the seizure and forfeiture of the vessel. As a last-ditch effort to persuade the Court, petitioners argued that the forfeiture of the vessel has no factual and legal basis. For petitioners, the vessel's importation was not effected or attempted contrary to law or through any of the acts mentioned in Section 1113, paragraphs (f) and (l) of the CMTA.46 46 SECTION 1113. Property Subject to Seizure and Forfeiture. - Property that shall be subject to seizure and forfeiture include:

CTA Case No. 10102 Sub-see Philippines Inc. rznd Northern Orientnl Shipping Ltd. v. Han. Rey Leonnrdo B. Guerrero, in his officinl cnpncity ns Commissioner of Customs nnd Atty. Elvirn Cruz, in her cnpncity ns District Collector of Customs, Port of Cebu In this regard, the Court quotes a portion of the assailed Decision of respondent District Collector dated October 22, 2018 which was affirmed by respondent COC.47 The part reads: Claimant's failure to establish by way of substantial evidence that M/V Northern Queen actually departed the Port of Mactan on 06 March 2009 confirms the validity of the seizure and forfeiture of the said marine vessel pursuant to Section 2534 of the Tariff and Customs Code of the Philippines which provides: SEC. 2534. Seizure of Vessel or Aircraft for Delinquency of Owner or Officer. -When the owner, agent, master, pilot in command or other responsible officer of any vessel or aircraft becomes liable to be fined under the tariff and customs laws on account of a delinquency in the discharge of a duty imposed upon him with reference to the said vessel or aircraft, the vessel or aircraft itself may be seized and subjected in an administrative proceeding for the satisfaction of the fine or w hich such person w ould have been liable. (f) Good s, the importation or exportation of which are effected or attempted contrary to law, or any good s of prohibited importation or exportation, and all other goods which, in the opinion of the District Collector, have been used, a re or were entered to be used as instruments in the importation or the exportation of the former; (I) Goods sought to be impo rted o r exported: (1) Without going throu gh a customs office, whethe r the ac t was consummated, frustrated, or attempted; (2) Found in the baggage of a person arriving from abroad and undeclared by such person; (3) Through a fa lse d eclaration or affidav it executed by the owner, importer, exporte r, or consignee concerning the importation of such goods; (4) On the strength of a false invoice or other d ocument executed by the owner, importe r, exporter, or cons ignee concerning the importation or exportation of such good s; or (5) T hrough any other p ractice or device contra ry to law by means of w hich such goods entered thro ugh a customs office to the prejudice of the government. 47 Collector's Decision dated October 22, 2018, Docket - Vol. I, pp. 27 to 37; Par. 25, Petition for Rev ie w, vis-a-v is Par. 37, Answe r, Docke t - Vol. I, pp. 14 a nd 222, respectively.

CTA Case No. 10102 Sub-see Philippines Inc. nnd Northern Oriental Shipping Ltd. v. Han. Rey Leonardo B. Guerrero, in his officinl cnpncity ns Commissioner of Customs nnd Atty. Elvirn Cruz, in her cnpncity ns District Collector of Customs, Port of Cebu It can be recalled that a demand was made by the Bureau of Customs in October 2011 to Capt. Jens Hansen for the payment of duties and taxes for the vessel Northern Queen on the ground that despite the expiry of the charter authority in November 2008, the vessel was still in Philippine waters. Consequently, the warrant of seizure and detention against the vessel was issued considering that the demand went unheeded. Furthermore, assuming without admitting that M/ V Northern Queen had indeed left for Haikou, China and returned on October 2009, the fact alone that the vessel has been overstaying for more than eight (8) years is indicative that Claimant intends to use M/ V Northern Queen in the Philippines, and thus, subject to payment of duties and taxes. The Court agrees with respondents. It is clear that petitioners are liable for duties and taxes considering that MV Northern Queen extended its stay in the Philippines after the expiration of its bareboat charter authority and petitioners never presented any proof of its repairs nor any justification for its long stay in the country. Further, based on the records of the case, Captain Jens A. Hansen ignored the demand of respondent District Collector, made through a letter dated October 12, 2011, to pay the duties and taxes due on the MV Northern Queen. Petitioners, thereafter, merely relied on the renewed re-export bond posted for the vessel. The Court finds petitioners' acts to evade the payment of import duties and taxes at the proper time as patently con trary to law and good faith . It is well-settled that seizure and forfeiture proceedings under the tariff and custom s laws are not criminal in nature but are rather purely civil and administrative in character; the main purpose of which is to enforce the administrative fines or forfeiture incident to unlawful importa tion of good s or their deliberate possession.48 The degree of proof required is merely substantial evidence which means such relevant evidence as a reasonable mind n1ight accept as adequate to support a conclusion.49 ~8 People of tile Pllilippines v. Court of First ln stnnce of Riznl, Brnnc/1 IX, Q11ezon City, et nl., G.R. No. L-41 686, November 17, 1980; Feeder Jntem ntionnl Line, Pte., Ltd. v. Court of Appenls, et ~ nl., G.R. No. 94262, May 31, 1991. Feeder llltemntiollnl Li11e, Pte., Ltd. v. Court of Appenls, et nl., G.R. No. 94262, May 31, 1991.

CTA Case No. 10102 Sub-see Philippines inc. mui Northern Orien tal Shipping Ltd. v. Han. Rey Leonardo B. Guerrero, in his official capacity as Commissioner of Cus toms and Athj. Elvira Cruz, in her capacitt; as District Collector of Customs, Port of Cebu Taking altogether the facts and circumstances surrounding the case, as well as the overall conduct of petitioners, it is clear that respondents District Collector and COC fittingly held that there is substantial evidence of violation of the TCCP. As a result, MV Northern Queen was correctly subjected to seizure and forfeiture under Section 2530 (f) and (l) of the TCCP (now Section 1113, paragraphs (f) and (1) of the CMTA). As a final note, it must be stressed that there is a well- established presumption that government officials perform their functions with regularity. Clear and convincing evidence is required to disprove this presu1nption.so Unfortunately, petitioners failed to submit sufficient and convincing evidence that will overcome said presun1ption. WHEREFORE, in light of the foregoin g considerations, the Petition for Rev iew is DENIED for lack of merit. Accordingly, the assailed Decisions dated October 22, 2018 and May 28, 2019 rendered by respondents District Collector and Commissioner of Customs, respectively, are AFFIRMED. SO ORDERED. ~ ~r.- ~ - ~�~ MARIAN IV{/ F. REYiB-FAJARDO Associate Justice so Ynp v. Lng tnpon, G.R. No. 196347, January 23,2017.

CIA Case No. 10102 Sub-see Philippines Inc. nn.ri Northern Orien.tnl Shipping Ltd. v. Hon. Rey Leon.nrdo B. Guerrero, in his officinl cnpncity ns Commissioner of Customs nnd Atty. Eh.1irn Cruz, in her cnpncihJ ns District Collector of Customs, Port of Cebu WE CONCUR: Presiding Justice ~~'7.. ~ CATHERINE T. MANAHAN Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice