TL;DR

The Supreme Court ruled that a barge used to transport illegally imported goods is subject to forfeiture, even if the tugboat towing it was released. This is because the barge operated under a charter agreement, disqualifying it from the common carrier exemption under the Tariff and Customs Code of the Philippines. The decision means that vessel owners who charter their vessels cannot claim exemption from forfeiture if those vessels are used for illegal activities, regardless of whether they are technically considered common carriers. Due diligence and strict adherence to customs regulations are crucial for vessel owners to avoid forfeiture.

Anchored by Contract: Why Charter Agreements Override Common Carrier Protections in Customs Seizure

The case of Commissioner of Customs vs. Gold Mark Sea Carriers, Inc. revolves around the forfeiture of the barge “Cheryl Ann” due to the illegal importation of used oil. The central legal question is whether the barge, owned by Gold Mark and chartered to Fuel Zone Filipinas Corporation, could be exempted from forfeiture as a common carrier, despite being used to transport illicit cargo. This issue arises from Section 2530 of the Tariff and Customs Code of the Philippines (TCCP), which generally subjects vessels used in illegal importation to forfeiture but provides an exemption for duly authorized common carriers not under charter or lease.

The legal battle began when the barge “Cheryl Ann,” towed by M/T Jacob 1, was detained in Surigao Port carrying used oil without the necessary import permits. While the District Collector initially dismissed the seizure warrant, the Commissioner of Customs reversed this, recommending forfeiture. The Court of Tax Appeals (CTA) initially sided with Gold Mark, arguing the barge was merely an accessory to the tugboat and exempt as a common carrier. However, the Supreme Court disagreed, reversing the CTA decisions and reinstating the forfeiture order. The Supreme Court’s reversal hinges on a critical interpretation of the common carrier exemption within the context of charter agreements.

The Court emphasized that importation begins when a vessel enters Philippine jurisdiction with the intention to unload cargo. In this case, the Charter Agreement between Gold Mark and Fuel Zone explicitly stated the discharge point as the “Philippines,” and the MARINA special permit confirmed Manila as the destination. This evidence, according to the Supreme Court, established a clear intent to import the used oil into the Philippines, regardless of the initial destination claims. The court highlighted Section 1202 of the TCCP:

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.

Furthermore, the Supreme Court scrutinized Section 2530 of the TCCP, which lists properties subject to forfeiture. Crucially, Section 2530(a) states that vessels used in unlawful importation are subject to forfeiture, unless they are “duly authorized common carrier[s] and as such a carrier [are] not chartered or leased.” The Court underscored that the existence of a Charter Agreement between Gold Mark and Fuel Zone was fatal to Gold Mark’s claim of exemption. The Court stated:

SECTION 2530. Property Subject to Forfeiture Under Tariff and Customs Laws. — Any vehicle, vessel or aircraft, cargo, article and other objects shall, under the following conditions be subjected to forfeiture:

a. Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully in the importation or exportation of articles or in conveying and/or transporting contraband or smuggled articles in commercial quantities into or from any Philippine port or place. The mere carrying or holding on board of contraband or smuggled articles in commercial quantities shall subject such vessel, vehicle, aircraft, or any other craft to forfeiture: Provided, That the vessel, or aircraft or any other craft is not used as duly authorized common carrier and as such a carrier it is not chartered or leased;

The Supreme Court rejected the CTA’s reliance on the principle of “accessory follows the principal,” arguing that each vessel had separate obligations and liabilities. The barge, carrying the illicit cargo, could not escape forfeiture simply because the tugboat’s case was initially dismissed. The Court reasoned that the common carrier exemption is specifically qualified: it applies only when the common carrier is “not chartered or leased.” Gold Mark’s barge, operating under a charter agreement, did not meet this condition. The Court emphasized that the law makes no distinction between types of charter agreements and that any charter agreement negates the exemption.

In essence, the Supreme Court’s decision clarifies that while common carriers generally enjoy an exemption from forfeiture for merely carrying contraband, this exemption is lost when the vessel operates under a charter agreement. This ruling places the onus on vessel owners to exercise greater diligence, especially when chartering their vessels, to ensure compliance with customs laws and prevent involvement in illegal activities. The presence of a charter agreement signals a level of control and responsibility that negates the protection afforded to unchartered common carriers.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Commissioner of Customs vs. Gold Mark Sea Carriers, Inc., G.R. No. 208318, June 30, 2021