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January 26, 1950

Note:   The Agreement entered into force December 20, 1949.

Embassy of the United States of America
Manila, December 20, 1949

No. 1226

Excellency:

I have the honor to inform your Excellency that effective today, December 20, 1949, military payment certificates will be used for payments to United States authorized personnel and as an official medium of exchange within establishments of the Armed Forces of the United States in the Philippines. The use of military payment certificates it is believed, will assist Your Excellency's Government in achieving the enforcement of the exchange control regulations inasmuch as personnel of the United States Armed Forces in the Philippines and their dependents will no longer be allowed to have dollars in their possession except upon departure from the Philippines. As Your Excellency is undoubtedly aware, military payment certificates have been used in Austria, Belgium, France, Germany, Italy, Japan, United Kingdom, Korea, Kyuku Islands, Free Territory of Trieste, Tripoli, Greece, Hungary and Yugoslavia.

Military payment certificates, which are issued in denominations of five, twenty-five and fifty cents and one, five and ten dollars, are for use only within United States bases in the Philippines and are of no value for transactions within the Philippine economy. Persons authorized to possess the certificates may echange them for pesos at the offices of Army, Navy, or Air Force disbursing officers.

The United States Armed Forces will continue, of course, to use pesos for payment of salaries of local personnel and for payment of local goods and services.

It is hoped that Your Excellency will perceive no objection to permitting American banks in the Philippines to maintain for the United States Armed Forces organizations and personnel deposit accounts expressed in military payment certificates.

Accept, Excellency, the renewed assurances of my highest consideration.

(SGD.) MYRON M. COWEN

His Excellency Elpidio Quirino
Secretary of Foreign Affairs
Republic of the Philippines Manila
Manila,

January 26, 1950

Excellency:

I have the honor to refer to your Excellency's note of December 20, 1949, regarding the use of military payment certificates within establishments of the Armed Forces of the United States in the Philippines.

In view of the fact that the matter had been the subject of direct negotiations between the President and your good self, I desire merely to confirm the agreement which was arrived at on the use of the scrips inside United States Armed Forces reservations by military, naval and air force personnel only, leaving the question whether or not such scrips are to be accepted for current account deposit in banks pending.

Accept, Excellency, the renewed assurances of my highest consideration.

(SGD.) FELINO NERI
Acting Secretary

His Excellency

MYRON M. CO WEN
American Ambassador Manila

MEMORANDUM

For: The Sub-committee on Taxation, Customs and Immigration
Subject: Disposition of Confiscated U.S. Military Payment Certificates

On February 7, 1952 the Bureau of Customs seized from a PAL Plane PI-C 293 which was bound for Tokyo, Japan, the amount of $35,371 of which $3,261 was in United States dollar bills and the balance of $32,110 in United States Army scrips. Pursuant to a decision dated July 24, 1952 of the Collector of Customs at Manila and approved by the Commissioner of Customs on August 5, 1952, the amount of $35,371 was forfeited to the Philippine Government. The decision was subsequently affirmed by the Board of Tax Appeals. The United States dollar bills have been added to the international reserves of the Philippines, but the United States Army scrips became the subject of negotiations.

On November 6, 1952, the Department of Foreign Affairs addressed a note to the United States Embassy, as follows:

The Department of Foreign Affairs presents its compliments to the Embassy of the United States of America and has the honor to inform the Embassy of the acquisition by the Philippine Government of $32,110.00 in United States Army scrips and to request information as to its proper disposition.

The amount of $32,110.00 in United States Army scrips was part of the total amount of $35,371.00 which was seized by the Philippine Bureau of Customs from a PAL Plane PI-C 293 bound for Tokyo, Japan, on February 7, 1952, as there was a clear attempt to bring the currency out of the country without license in contravention with regulations of the Central Bank of the Philippines. Pursuant to a decision dated August 5, 1952 of the Philippine Bureau of Customs and a resolution dated August 12, 1952 of the Philippine Board of Tax Appeals, the currency was forfeited to the Government of the Republic of the Philippines.

The Department would appreciate the views of the Embassy with regard to the steps to be taken by the Philippine Government in order to recover the value of the United States Army scrips.

Copies of the decision of the Philippine Bureau of Customs, the resolution of the Philippine Board of Tax Appeals, and a letter dated August 25, 1952 of the Surveyor of the Port of Manila to the Governor of the Central Bank of the Philippines are enclosed for the information of the Embassy. Enclosure: Copy each of—

1. Resolution dated August 12, 1952 of the Board of Tax Appeals.

2. Decision dated August 5, 1952 of the Commissioner of Customs.

3. Letter dated August 25, 1952 of the Surveyor of the Port of Manila to the Governor of the Central Bank of the Philippines.

Manila, November 6, 1952

In its note No. 750, the United States Embassy gave the following reply:

The Embassy of the United States of America presents its compliments to the Department of Foreign Affairs, Republic of the Philippines and has the honor to refer to Department of Foreign Affairs note dated November 6, 1952 concerning United States Military Payment Certificates valued at $32,110.00 seized on February 7, 1952 by the Philippine Bureau of Customs from Philippine Air Lines aircraft PI-C 293 bound from Manila to Tokyo, Japan.

The Embassy has discussed this matter with United States military authories, and is informed that according to United States law, and military regulations, United States Military Payment Certificates are not currency in the legal, or usual, sense of the term, but are certificates sold in exchange for rights to legal United States currency to persons authorized by the United States of America. These certificates are valid only in the United States of America. These certificates are valid only in United States Government establishments, for goods and services sold, or authorized sold, by the United States Government or its agencies, and only to individuals authorized by the government of the United States. One of the bask reasons for the use of Military Payment Certificates is to prevent the disrupting influences on the Philippine economy which might be caused by an unrestricted and uncontrolled flow of legal United States currency into the Philippine economy. For the United States military authorities to pay pesos to the Philippine Government for these Military Payment Certificates would bestow upon these Certificates the character of legal currency. The Embassy is deeply appreciative of the action taken by the Philippine Government in recovering these Military Payment Certificates but regrets that there seems to be no way under United States law for the Philippine Government to recover the value of the Military Payment Certificates. Confident of the support of the Philippine Government to measures adopted by the United States to insure stability in the Philippine economy, the Government of the United States to insure stability in the Philippine economy, the Government of the United States respectfully requests that the Philippine Government return the Military Payment Certificates in question to the United States military authorities for cancellation or destruction in accordance with United States law. American Embassy,

Manila, January 12, 1953.

In its note No. 1124 dated April 1.7, 1953, the United States Embassy inquired from the Department of Foreign Affairs about the status of this case. The substantive portion of said note reads:

In view of the fact that more than a year has elapsed since these Military Payment Certificates were seized, the Embassy would appreciate being informed of the status of this case, and hopes that the Philippine Government will be given prompt and favorable consideration to its request for the return of these Military Payment Certificates.

The Department of Foreign Affairs elevated this matter to the State Department through the Philippine Embassy. A communication was sent to the latter, as follows;

Manila, May 25, 1953

Sir:

On February 7, 1952 the Bureau of Customs seized from PAL Plane PI-C 293 which was bound for Tokyo, Japan, the amount of $37,371 of which $3,261 was in United States dollar bills and the balance of $32,110 in United States scrips. Pursuant to a decision dated July 24, 1952 of the Collector of Customs at Manila and approved on August 5, 1952, the amount of $35,371 was forfeited to the Philippine Government. The decision was subsequently affirmed by the Board of Tax Appeals. The United States dollar bills have been added to the international reserves of the Philippines but the United States Army scrips are pending disposition inasmuch as the later currency is usable only in United States installations.

The Department is now faced with the problem of obtaining from the Government of the United States conversion of the said military scrips in United States dollars.

The Collector of Customs legally forfeited the unmanifested military scrips in favor of the Philippine Government. The forfeiture is not only of the military scrips but a forfeiture also of the value represented by such scrips, since the Collector has elected, pursuant to Section 1399 of the Revised Administrative Code, on a declaration of forfeiture instead of a fine or other appropriate action.

The United States Embassy in Manila has denied the Department's representations with a view to the recovery of the said United States Army scrips. Enclosed are copies of this Department's note dated November 6, 1952, the Embassy's notes Nos. 750 and 1124 dated January 12, 1953 and April 17, 1953, respectively, for your guidance. For further information on the subject, there are also enclosed copies of the memoranda submitted by Counselor Lanuza and Mr. Lim on the matter.

The Department believes it proper to elevate this matter to the State Department for a favorable decision and you are therefore requested to make proper representations on the matter. A report of the progress of the negotiations taken hereon will be appreciated.

Very truly yours,
(SGD.) FELINO NERI
Acting Secretary

Mr. MELQUIADES J. GAMBOA
Philippine Charge d'Affaires a.i.
Philippine Embassy
Washington, D.C.

The substantive portion of the reply of Charge d'Affaires Gamboa, dated July 8, 1953, reads as follows:

We doubt that the amount involved, viz. $32,110, is sufficient to justify from the realistic point of view our refusal to grant the request of the United States Government to have these military certificates returned to them. Ordinarily, the possession of these certificates by parties not authorized by the United States Government acquired possession of these certificates legally, Philippine law is not the only factor to be considered in this respect. The basis of our claim is the existence of Philippine law, which justifies our forfeiture of the certificates, and in the absence of American law, which authorizes such payment, we feel very pessimistic about the final outcome of any representations we may make with the State Department.

In view of the foregoing, and considering the possible misunderstanding that may be brought about by our insistence on the payment by the United States Government for these certificates in pesos, the Department may wish to reconsider the matter.

In answer to the foregoing, the Department of Foreign Affairs dispatched the following letter:

Manila, August 27, 1953

Sir:

This is with reference to the Department's letter dated May 25, 1953 and your letter dated July 8, 1953, regarding the recovery of the value of the United States military scrips in the amount of $32,110 which were confiscated by the Philippine Government.

It will be recalled that the Department in its note of November 6, 1952, first served notice to the United States Embassy of the forfeiture to the Philippine Government of the said scrips, stating that "the Department would appreciate the views of the Embassy with regard to the steps to be taken by the Philippine Government in order to recover the value of the United States Army scrips". In its reply note, the United States Embassy, after stating that such scrips do not possess the character of legal currency, manifested that "there seems to he no way under United States law for the Philippine Government to recover the value of the Military Certificates", and requested the return of the said scrips for cancellation or destruction in accordance with United States law.

The Department is not convinced that no way may be found under United States law for the recovery by the Philippine Government of the value of said scrips. It is believed that the Philippine Government should not be considered a "person not authorized" by the United States to the possession of the scrips, taking into consideration the fact that the permission of the Philippine Government was secured by the United States Government for the use of military payment certificates in the United States military establishments. As a party to this fiscal arrangement, the Philippine Government should be entitled to the implied right of possession of such military certificates which it may have lawfully acquired by forfeiture or otherwise, including the right to be reimbursed therefore. The difficulty raised by the present question was not contemplated when permission was granted for the use of the military certificates, otherwise it would have expressly provided for this contingency.

In view of these considerations, it is desired that this matter should be brought to the attention of the State Department in the nature of an appeal

or request for reconsideration of the aforesaid note of the United States Embassy, rather than as an insistent demand for reimbursement.

Very truly yours,
(SGD.) FELINO NERI
Acting Secretary

The Honorable Emilio Abello
Philippine Minister
Washington, D.C., U.S.A.

The Embassy took up with the State Department this matter of getting the United States Government to convert the said military scrips into United States dollars. The reply of the State Department is stated in a note dated March 29, 1954, reads as follows:

The Secretary of State presents his compliments to the Charge d'Affaires ad interim of the Philippines and refers to a conversation between the Charge d'Affaires and an officer of the Department in regard to the payment of reimbursement to the Philippine Government for certain United States military payment certificates which were seized by the Philippine Bureau of Customs at the Manila International Airport on February 7, 1952. The Charge d'Affaires desired information as to whether the position set forth in Note No. 750 sent by the American Embassy in Manila to the Philippine Department of Foreign Affairs on January 12, 1953 accurately represented the present position of the United States Government.

This question has been discussed with the Secretary of the Army, who has now informed the Department of State that, "The views stated by the American Embassy to the Philippine Department of Foreign Affairs in the communication dated 12 January 1953 reflect the views of this Department and the Department of Defense with respect to this matter.

Department of State,
Washington, March 29, 1954

After transmitting the foregoing note to the Commissioner of Customs, the Foreign Affairs dispatched the following to the United States Embassy:

The Department of Foreign Affairs presents its compliments to the Embassy of the United States of America and has the honor to refer to the Embassy's notes Nos. 750 and 1124 of January 12, 1953 and April 17, 1953 respectively, concerning the United States military scrips in the amount of $32,110 which were seized in Manila on February 7, 1952 by the Philippine Bureau of Customs from a Philippine Air Line aircraft PI-C 293 then bound for Tokyo, Japan.

The Philippine Commissioner of Customs has advised the Department that his Office is now ready to turn over the subject scrips to the United States military authorities as requested by the Embassy in its notes referred to above. For that purpose, it is desired that the time and date for the turnover which shall take place at the Office of the Commissioner of Customs Customs Building, Port Area, Manila, be fixed; and that the name of the officer who may be designated and authorized to receive said military scrips be communicated to this Department well in advance of the date of the turnover.

Manila, October 6, 1954
WPA:BSP/rgf

A similar incident occurred on November 17, 1954 when the customs authorities at the Manila International Airport seized from Mr. Andres Zablan, crew member of the Northwest Airlines plane No. NC-34597 leaving for Japan, United States military scrips totalling $1,770.00. The procedure for the return of the $32,110 scrips was followed.

Compiled and submitted by:

ANTONIO P. LIM
Member, Technical Staff