G.R. No. L-3875 - United States Tobacco Corp. vs. Luna

In July 1948, Republic Act No. 330 was enacted, authorizing the President to establish an import control system.

The Act aimed at controlling imports of non-essential or luxury articles and created an Import Control Board.
It empowered the Board to issue rules and regulations and penalize violations.

On November 29, 1949, the President issued Executive Order No. 295 under Republic Act No. 330.

Section 1 mandated that, from the date of effectivity, articles on the regulated list require an import license.
Section 12 further provided that shipments ordered without an import license would not be released by Customs and would be confiscated by the Import Control Board.
Notably, leaf tobacco was excluded from the import license requirement in this Executive Order.

Harry S. Stonehill, President of the United States Tobacco Corporation, sought confirmation regarding the importation of Virginia leaf tobacco.

He inquired whether leaf tobacco could be shipped without the need for an import license.
He also requested clarification on whether it could be imported as part of an investment if no foreign exchange was remitted to the investors.

On March 7, 1950, Secretary Cornelio Balmaceda of the Department of Commerce and Industry (also Chairman of the Import Control Board) responded by letter.

He stated that Virginia leaf tobacco was not subject to the import control rules under Executive Order No. 295.
The letter encouraged the shipment of leaf tobacco as raw material for the petitioner’s new cigarette factory, aligning with government policy on attracting new investments in manufacturing.

Acting upon the Secretary’s representation, various American investors, including the United States Tobacco Corporation, proceeded with shipping leaf tobacco to the Philippines.

On May 19, 1950, Republic Act No. 426 was approved, regulating imports and bringing leaf tobacco under the ambit of controlled articles.

Unlike the earlier Executive Order, Act No. 426 required an import license for all imports of leaf tobacco.

Pursuant to Act No. 426, the Import Control Board, through Resolution No. 1 issued on June 3, 1950, stipulated that

Import licenses would be issued for all imports not covered by the earlier Executive Order, subject to specific quota restrictions.

Based on the new rules and the directive of the Import Control Board, the Commissioner of Customs refused to release the petitioner’s shipments of leaf tobacco.

The refusal was supported by an allegation of authority under Section 1250 of the Revised Penal (Administrative) Code, as amended, to withhold delivery until legal requirements were met.

Modesto Formilleza, acting as technical assistant of the Import Control Commissioner, ordered the release of one shipment via four letters sent on June 12 and 13, 1950.
However, the Import Control Board, through the Import Control Commissioner, subsequently froze the remaining shipments and repudiated the technical assistant’s authority.

Whether goods in transit at the time of the enactment of Republic Act No. 426 (May 19, 1950) were subject to the provisions of the new Act, given that the petitioner's shipments were made in compliance with earlier established rules.
Whether the date of importation should legally be considered the date when the goods were shipped or the date when they arrived at the port of destination (Manila).
Whether the petitioner should be penalized and have its shipments confiscated for lacking an import license, when the Secretary of Commerce and Industry had previously assured that leaf tobacco was not subject to such a requirement.