The Countertrade Program of the Philippines
Philippine International Trading Corporation
Philippine Copyright c 2002 by the Philippine International Trading Corporation All rights reserved. No part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means now known or hereafter developed (electronic, mechanical, photocopying, recording or otherwise) without the prior written permission of the copyright owner and publisher of the book. PHILIPPINE INTERNATIONAL TRADING CORPORATION 5th Floor, NDC Building, No. 116 Tordesillas St., Salcedo Village 1227 Makati City, Philippines Tel. No. (632) 818-9801; 892-2149 Fax No. (632) 892-2021; 892-2054 E-mail :
[email protected]
Printed in the Philippines Reprinted: 2004
Contents Foreword…………………………………………………… Chapter I Fundamental Principles of Countertrade. Countertrade in General……………………………………… Benefits of Countertrade…………………………………….. Forms of Countertrade………………………………………. Counterpurchase…………………………………… … Offsets……………………………………………… Product Buy Back…………………….……………. Debt For Goods……………………………………… Build-Operate-Transfer (BOT)……………………… Any Variation or Combination of the Above……….. Adoption of Countertrade in Government Procurement……
iv 1 1 2 2 2 3 4 4 4 5 5
Chapter II Countertrade in the Philippines…………… 6 Highlights of Executive Order No. 120……………………… 6 Basic Features of the Implementing Rules and Regulations… 7 Role of PITC……………………………………………….. 8 Executive Order No. 120………………………………… 10 Implementing Rules and Regulations……………………… 14 Purpose…………………………………………… 14 Definition of Terms………………………………… 14 Coverage…………………………………………. 17 Exemptions………………………………………. 17 Countertrade Management and Administration……. 18 Processing and Evaluation of Countertrade Proposals in Bids/Offers of Foreign Suppliers…………. 21 Countertrade Performance…………………………. 23 Countertrade Monitoring and Crediting Procedures. 25 Accreditation of Philippine Manufacturers/Exporters 27 Reportorial Requirements and Review………………. 27
Chapter III Countertrade Integration in the Foreign Procurement Process………………………………… 33 Open Competitive Bidding & Limited Source Bidding………………………… 33 Other Alternative Modes of Procurement……………… 34 Chapter IV
Countertrade Milestones………………..
36
Appendix A Memorandum Circular No. CT-95.1/01… “Guidelines for the Evaluation and Approval of Offset Arrangements” Appendix B Memorandum Circular No. CT-95.4/01…….. “Amending Certain Provisions of Memorandum Circular No. CT-95.1/01” Appendix C Memorandum Circular No. CT-95.4/02……. “Inclusion of Countertrade Undertaking of Foreign Suppliers in Bidded or Negotiated Contracts” Appendix D Memorandum Circular No. CT-00.6/01 “Guidelines on Banking of Offset Credits”
Appendix E Department Circular No. 04…………… “Prescribing the Guidelines in the Implementation of Countertrade for Procurement Contracts under the Armed Forces of the Philippines Modernization Program” Sample Forms……………………………………………….... Countertrade Provisions in the Supply Contract………………. Countertrade/Offset Agreement……………………………….. List of Philippine Products and Services……………………. List of Eligible Indirect Offsets……………………………… List of Eligible (Defense-Related) Offsets…………………… FOREWORD To help meet the increasing challenge of globalization as well as to spur the country’s economic growth, a national policy on Countertrade was adopted in 1993 as a supplemental trade tool with respect to the Philippine Government’s importation of foreign capital equipment, machinery, products, goods and services valued at US$1 Million and above. This policy is enunciated in Executive Order No. 120 s. 1993 and its Implementing Rules and Regulations. By leveraging its own importations with reciprocal benefits to be provided by foreign suppliers/trader under countertrade, the government hopes to fast-track the inflow of investments, technology, industrial cooperation, specialized training and skills and other similar activities into the country including the expansion of trade and exports to other countries. Since 1989, the Philippine International Trading Corporation (PITC), a government-owned and controlled corporation under the Office of the President, has been at the forefront of countertrade in government foreign procurement programs. By virtue of E.O. 120 s. 1993, PITC was expressly mandated to administer and manage the countertrade program of the government. Over the last fifteen years, PITC has been instrumental in facilitating countertrade projects valued at over US$ 358 million relative to several foreign procurements of the Armed Forces of the Philippines, Philippine National Police, Philippine Coast Guard, Bureau of Fire & Protection and the National Food Authority among others, including “Debt for Goods” arrangements with several creditor countries of the Philippines. In addition to this, another US$ 189 million worth of projects are on-going implementation. This has allowed the country not only to recoup and preserve its foreign exchange but also enabled key industry sectors to develop and expand new markets and products for export, acquire sophisticated technology, obtain foreign direct investments, and avail of specialized technical/specialized training. This handbook intends to provide a basic understanding of countertrade and its application to foreign procurements/importations of the Philippine Government, including its various agencies, bureaus and offices.
Philippine International Trading Corporation October, 2004
CHAPTER
I
FUNDAMENTAL PRINCIPLES OF COUNTERTRADE
A.
COUNTERTRADE IN GENERAL COUNTERTRADE is a general term for an international transaction that is premised on some form of reciprocity. As a form of non-traditional trade, it can be distinguished by the presence of performance requirements prescribed by the buyer and agreed to by the seller as a condition of sale.1 These requirements aim to ensure that some “reciprocal” benefits are obtained by the buyer from the seller as a result of the sale. As defined by the Association Pour La Compesantion Des Exchanges Commerciaxuz, Countertrade is a “commercial transaction whereby the seller undertakes to purchase goods and/or services in the client’s country, to transfer technology or manufacturing licenses or provide services to the client’s country, or to undertake any other transaction in exchange for the client’s commitment to purchase the goods and/or services covered by the Main Supply Contract, such a commitment being a condition on the above transaction.”2 In application, countertrade is used to leverage government importations with trade, investments and other related beneficial projects to be provided by the seller or supplier.
B.
BENEFITS OF COUNTERTRADE Countertrade is a mechanism to: •
Channel back of recoup foreign exchange spent for an importation;
•
Gain access to advanced technology and training, new foreign investments, research and development and related support for national development and modernization programs;
•
Promote mutually beneficial collaborative business ventures between local industry sectors and their foreign counterparts through joint ventures and industrial cooperation;
•
Promote export products and markets.
Many developing nations and even developed nations require countertrade in their capital-intensive foreign procurement programs in order to fuel industrialization and sustain national development programs. The Philippine position is no different.
1 2
The Countertrade Contract Guide & Lexicon – Second Edition, 1994 As cited in the Countertrade Contract Guide & Lexicon – Second Edition, 1994
C.
FORMS OF COUNTERTRADE 1. COUNTERPURCHASE -- “An agreement whereby the primary supplier accepts parallel obligations to purchase products and/or services from the buyer’s country.”3 This form is also known as counter exports. Example: As a condition for the purchase of communication equipment by the buyer, the seller commits to buy goods and services from the buyer’s country. 2.
OFFSETS -- An agreement whereby the primary supplier commits, as a condition of sale, to undertake or to introduce a wide-range of industrial and commercial activities for the benefit of the buyer or the buyer’s country such as: • • • • •
Investments Technology transfer Training and skills upgrade Research and development Donations
Other forms of offsets may be projects that can contribute to the priority development programs of the buyer and/or support the national development programs of the buying country. These offsets may or may not be related to the equipment, machinery, products, or services being purchased. Thus, offsets are generally divided into two categories, to wit: Direct Offsets – offset arrangements that are directly related to the purchased equipment. Example: As a condition for the purchase of communication equipment by the buyer, the seller/supplier commits to invest in maintenance facility for the said equipment in the buyer’s country at no additional cost to the buyer. Indirect Offsets – offset arrangements that are not related to the purchased equipment. Example: As a condition for the purchase of communication equipment by the buyer, the seller/supplier commits to invest in a furniture factory in the buyer’s country at no additional cost to the buyer.
3.
PRODUCT BUY BACK -- An agreement whereby the seller/supplier of a turnkey production facility, machinery or equipment agrees to be paid, partially or fully, by the resultant products manufactured from the operation of the said facility or equipment. Example: The seller of a tomato processing machine agrees to be paid partially through the export of canned tomato paste produced by the machine. The buyer of the processing machine ensures that sufficient quantities of canned tomato paste are exported to the seller as partial payment for the machine.
4.
3
Ibid.
DEBT FOR GOODS -- A transaction whereby a debtor country offers its goods or services for export to cover full or partial payment for an outstanding debt.
Example: Creditor country agrees to accept coconut oil and other commodities from the debtor country as full payment of an outstanding debt. No foreign currency is paid/used to pay the debt. Local commodity suppliers are paid in local currency by the debtor agency.
D.
5.
BUILD-OPERATE-TRANSFER (BOT) and its variations -- Usually applied to major infrastructure contracts, this term refers to an arrangement whereby a project company or consortium (of local and foreign companies) is established to finance, construct and operate the project for a definite period of time. A combination of local and foreign funds ensures project financing at the end of the contract period.
6.
ANY VARIATION OR COMBINATION OF THE ABOVE -Variations or combinations of any of the aforementioned forms of countertrade are generally acceptable depending on the objectives for their adoption.
ADOPTION OF COUNTERTRADE IN GOVERNMENT PROCUREMENT In countries that have adopted countertrade as a part of a government procurement policy, foreign suppliers and contractors are usually advised of the countertrade requirements during the bidding stage or supply negotiations stage to enable them to coordinate and gather information on such program from the government’s designated countertrade office. These suppliers/contractors may be required to execute a written document committing them to perform countertrade in relation to a particular Supply Contract. The common practice is for suppliers to execute a “Countertrade/Offset Agreement” or a similar agreement after being awarded a supply contract which contains the countertrade/offset commitment of the supplier together with the manner and period of performance of such countertrade obligations and other related conditions.
CHAPTER
II
COUNTERTRADE IN THE PHILIPPINES
Executive Order No. 120 s. 1993 and the Implementing Rules and Regulations On August 19, 1993, former President Fidel V. Ramos issued Executive Order No. 120 which established a national policy on countertrade in the Philippines. A.
B.
Highlights of Executive Order No. 120 •
Directs the National Government, its departments, bureaus, agencies and offices, including government-owned and controlled corporations, to adopt countertrade as a supplemental trade tool in connection with transactions involving the importation or procurement of foreign capital equipment, machinery, products, goods and services entailing the payment of at least US DOLLARS: ONE MILLION (US$1,000,000.00) and above or its equivalent in other foreign currency and to negotiate and conclude, on a best efforts basis, agreements or arrangements on countertrade with respect to such importation.
•
Designates the Philippine International Trading Corporation (PITC) as the implementing agency for this program on behalf of the Department of Trade and Industry.
•
Mandates the formulation and adoption of implementing rules and regulations (IRR) for this program by an inter-agency committee composed of the Department of Trade and Industry, Department of Finance, National Economic and Development Authority, and the Philippine International Trading Corporation.
Basic Features of the Implementing Rules and Regulations On November 14, 1994, the aforesaid inter-agency committee issued the IRR of the E.O. 120 which outlined the fundamental procedures and guidelines for the Program: •
Covered Importations: Government importations and procurement of services from foreign suppliers entailing payment of at least US$ 1 Million and over or its equivalent in other foreign currency requires the adoption of countertrade.
•
Countertrade Integration: Government offices whose importations are covered by the IRR will ensure that countertrade is required of their foreign suppliers.
•
Countertrade Level: The countertrade obligation/commitment of foreign suppliers should not be less than 50% of the value of their supply contract with the government.
•
Countertrade Activities: Acceptable forms of countertrade include counterpurchase, direct and indirect offsets, buy-back arrangements, debt for goods, and Build-Operate-Transfer schemes.
•
Countertrade Agreement: Within 90 days from the award and signing of a supply contract with the Philippine government, the foreign supplier (or its designated assignee) signs a Countertrade Agreement with PITC outlining the terms and conditions of its countertrade performance.
C.
•
Countertrade Performance: The foreign suppliers are normally given two to three (2-3) years within which to fulfill the countertrade obligation.
•
Countertrade Monitoring: The Philippine International Trading Corporation (PITC) handles the evaluation, administration and monitoring of countertrade programs and ensures compliance with countertrade obligations by foreign suppliers.
•
Monitoring Fees (As per PITC BR No. 2002-01-06): The following fees are payable to PITC upon fulfillment of the countertrade obligation: ¾ For capital goods imports: 1.5 % of the value of the countertrade obligation; ¾ For commodities: 0.25% of the value of the countertrade obligation.
•
Performance Guarantees/Penalties: Performance guarantees and penalties for nonperformance shall be incorporated in the Countertrade Agreement to be signed between the supplier and PITC.
Role of PITC PITC established in 1973 and re-organized in 1977 as a full service and self-sustaining international state trading organization under the Department of Trade and Industry, is the government office responsible for the management and administration of the countertrade program of the Philippine government with the following key responsibilities as provided in the IRR of E.O. s. 1993: •
Formulation of countertrade policies;
•
Countertrade advisors/representative of government agencies;
•
Evaluation of countertrade proposals of foreign suppliers;
•
Negotiation, packaging and conclusion of countertrade contracts;
•
Monitoring of countertrade transactions and performance.
PITC’s Countertrade Group is administratively responsible for overseeing and carrying out the aforementioned tasks under the over-all supervision of the PITC President.
MALACANANG MANILA
EXECUTIVE ORDER NO. 120 DIRECTING THE NATIONAL GOVERNMENT, ITS DEPARTMENTS, BUREAUS, AGENCIES AND OFFICES, INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS, TO ADOPT COUNTERTRADE AS A SUPPLEMENTAL TRADE TOOL WITH RESPECT TO THE IMPORTATION OR PROCUREMENT OF FOREIGN CAPITAL EQUIPMENT, MACHINERY, PRODUCTS, GOODS AND SERVICES. WHEREAS, under Section 13, Article XII of the 1987 Constitution, the State is mandated to pursue a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the basis of the equality and reciprocity; WHEREAS, the adoption of the policy on countertrade is aimed at compensating the foreign exchange expended for the importation or procurement of foreign capital equipment, machinery, products, goods and services by the national government, its agencies or offices including governmentowned or controlled corporations, as well as to reciprocate for such importation or procurement through arranged counter exports of Philippine traditional or non-traditional products to the country of the supplier or any third country or through product buy back, offsets or investments; WHEREAS, countertrade arrangements are expected to result in the opening of the new markets for Philippine products and services, overcome quota and trade restrictions of other countries, and provide for technology transfer and industrial growth, particularly in strategic industries, such as energy, transport, infrastructure, telecommunications, and defense, as well as those listed under the Investments Priorities Plan and the Industrialization Modernization Program; and WHEREAS, the adoption of the policy on countertrade by the public sector will spur economic development and help the Philippines achieve “newly-industrialized country” status by the year 2000. NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order; Section 1. Coverage. All departments, bureaus, agencies, offices and instrumentalities, including government-owned or controlled corporations, are hereby directed to adopt countertrade as a supplemental trade tool in connection with transactions involving the importation or procurement of foreign capital equipment, machinery, products, goods, and services entailing the payment of at least United States Dollar. One Million (US$1,000,000.00) or its equivalent in other foreign currency, and to negotiate and conclude on a best-efforts basis, agreements or arrangements on countertrade with respect to such importation. Section 2. Definition of Terms. For purposes of the Executive Order, “Countertrade” shall refer to any of the following arrangements: (a)
(b)
Counterpurchase -- also known as counter exports, parallel transactions or reciprocal trade, whereby the foreign supplier reciprocally commits to purchase Philippine goods or services, to be exported to the supplier’s country or a third country; Product Buy Back -- whereby the foreign supplier of the equipment or machinery is paid for with the resultant product(s) or good(s) made or manufactured by such equipment or machinery;
(c)
(d)
(e)
Offset – whereby the foreign supplier commits to introduce investments or technology transfer in the Philippines, or assist in establishing new industries or improving existing industries to generate or save foreign exchange or create increased employment, which may or may not related to the machinery, equipment, products or goods imported or services procured; Trade-for-Debt Swap -- whereby a loan or credit accommodation obtained by a government agency or government-owned or controlled corporation from a foreign government or creditor which has remained outstanding and unpaid is arranged to be settled in full or partially by way of sales of products, goods or services to be provided by a third party rather than by payment in foreign currency; or Any form or combination or variation of the above arrangements that results in the inflow to the country of foreign exchange, or savings thereof, investments, training and technology transfer, grants for education, scientific, technological, environmental and related research programs or projects, which will enhance Philippine industrial or export competitiveness or contribute to the creation of new competitive industries, enhance existing industries or utilization of Philippine services or expertise by foreign clients, or result in the reduction of public debt.
Section 3. Implementing Agency. The Department of Trade and Industry, through the Philippine International Trading Corporation, is hereby directed to coordinate with all government agencies and government-owned or controlled corporations in formulating and implementing particular strategies on countertrade or similar arrangements for any planned importation or procurement of foreign capital goods, equipment, machinery, products, goods and services, with appropriate consultations to be made with the private sector. Section 4. Coordination by Government Agencies. The government agency or government-owned or controlled corporation concerned shall closely coordinate with, and provide information on any planned importation or procurement as well as countertrade efforts already undertaken to the Department of Trade and Industry and the Philippine International Trading Corporation prior to actual importation or procurement, in order to assure the efficient implementation of this Executive Order. Section 5. Supply Base and Trading Network. To achieve maximum implementation and dispersion of the benefits of Countertrade arrangements which may be concluded by government agencies or government-owned or controlled corporations, the Philippine International Trading Corporation shall maintain and enhance its supply base and trading network through constant and close coordination with various industry and export sectors to ensure the availability of adequate and acceptable products, goods and services which may be required under such countertrade arrangements. Section 6. Implementing Rules and Regulations. The Department of Trade and Industry, National Economic Development Authority, Department of Finance, and the Philippine International Trading Corporation shall jointly promulgate the appropriate guidelines, rules and regulations to implement this Executive Order. Section 7. Repealing Clause. The provisions of executive or administrative orders, rules, regulations and parts thereof inconsistent with this Executive Order are hereby repealed, amended or modified accordingly.
Section 8. Effectivity. This Executive Order shall take effect immediately. DONE in the City of Manila, this 19th day of August in the year Our Lord, Nineteen Hundred and Ninety-Three.
(signed) FIDEL V. RAMOS President of the Philippines
By the President:
(signed) TEOFISTO T. GUINGONA, JR. Executive Secretary
Republic of the Philippines DEPARTMENT OF TRADE AND INDUSTRY
RULES AND REGULATIONS IMPLEMENTING EXECUTIVE ORDER NO. 120 DATED AUGUST 19, 1993 ENTITLED “DIRECTING THE NATIONAL GOVERNMENT, ITS DEPARTMENTS, BUREAUS, AGENCIES AND OFFICES, INCLUDING GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS, TO ADOPT COUNTERTRADE AS A SUPPLEMENTAL TRADE TOOL WITH RESPECT TO THE IMPORTATION OR PROCUREMENT OF FOREIGN CAPITAL EQUIPMENT, MACHINERY, PRODUCTS, GOODS AND SERVICES.”
1.0
PURPOSE These rules and regulations are promulgated in compliance with section 6 of E.O. No. 120 dated 19 August 1993, mandating the Department of Trade and Industry, the Department of Finance, the National Economic and Development Authority and the Philippine International Trading Corporation to jointly formulate and issue the necessary guidelines and rules to implement the provisions of said Executive Order.
2.0 DEFINITION OF TERMS For purposes of these rules and regulations, the following terms shall have the following meanings: 2.1 “Countertrade” -- is a general term for an international transaction that is premised on some form of reciprocity which may be one (or a combination of) the transactions listed in this Section. 2.2 “Counterpurchase” -- also known as counter exports, counter delivery, parallel transactions or reciprocal trade – is a form of countertrade whereby the foreign supplier reciprocally commits to accept/purchase Philippine products or services to be exported to the foreign supplier’s country or to a third country. 2.3
“Offset” -- is a form of countertrade arrangement whereby the foreign supplier commits to introduce investments or technology transfer in the Philippines or assist in the establishment of new industries with export capacity and/or development and expansion of existing manufacturing, technological and industrial capabilities of the Philippines to generate/save foreign exchange and create/increase employment opportunities. These may or may not be related to the equipment, machinery, products, goods or services imported by the Philippines. If related, these are considered as Direct Offsets, and if not related, the same are considered as Indirect Offsets. Activities qualified as either Direct Offsets or Indirect Offsets are listed in Annex “A” hereof.
2.4
“Product Buy Back” -- is a form of countertrade whereby the foreign supplier of machinery, equipment, or technology is paid for by the resultant product(s) or good(s) made or manufactured from such equipment, machinery or technology. Some acceptable forms/variations of Product Buy-Back are listed in Annex “B” hereof.
2.5
“Trade-for-Debt Swap” or “Debt-for-Goods or Services” -- is a form of countertrade arrangement whereby a loan or credit obtained by a government agency or government-owned and controlled corporation from a foreign government or creditor is arranged to be settled in full or in part by way of delivery of products/goods or services.
3.0
2.6
“Any form or combination or variation of the above arrangements” -- shall mean any arrangement or transaction similar to or comprising any one or more versions, forms and/or combinations of the activities listed in Section 2.1 to 2.6 of these rules that result in the inflow to the country of foreign exchange or savings thereof, investments, training and technological transfers, grants for educational, scientific, technological, environmental and related research programs or utilization of Philippine services or expertise by foreign clients or result in the reduction of public debt. Such arrangements may also include: Debt-for-Nature, Debt-forCulture, Education and Debt-for-Technology and those enumerated in Section 2 (b) to (j) of R.A. 7718 amending R.A. 6957 (the BOT Law).
2.7
“Foreign Supplier” -- means the supplier of the imported capital equipment, machinery, products, goods, technology or services including agents or representatives thereof in the Philippines.
2.8
“Philippine Products” -- means any item produced, manufactured or assembled in the Philippines which has a minimum local content of at least 51%. Mineral, aquatic, agricultural, and forest resources derived from Philippine territory (not otherwise banned for exports by the Philippine Government) are included in this definition.
2.9
“Philippine Services” -- means any legitimate service rendered utilizing Filipino labor and skills.
COVERAGE 3.1 The provisions of E.O. No. 120 s. 1993 shall cover all importations or procurement of foreign capital equipment, machinery, products, goods and services of departments, bureaus, agencies, offices and instrumentalities of the National Government, including government-owned and controlled corporations entailing the payment of at least United States Dollars: ONE MILLION (US$1,000,000.00) or its equivalent in other foreign currency. 3.2
For purposes of determining the value of the government importations, the total contract price for said importation, whether on CIF, FOB or otherwise as appearing in the pertinent invoices/contracts, regardless of the delivery/shipment quantities (i.e. one-time shipment, partial shipment or by installment, etc.) and/or the manner of payment (i.e. in installments with or without down payments, in cash or credit, etc.) shall be considered in the determination of whether the same are covered by these rules and regulations. No splitting of purchase orders/contracts shall be allowed in circumvention of these guidelines.
4.0 EXEMPTIONS 4.1
The following importations are excluded from the coverage of these rules and regulations: a)
Those funded by outright donations or grant-in-aid under government-to-government arrangements.
b)
Those whose purchase or supply contracts were concluded prior to the signing of E.O. No. 120.
c)
Those to be used or to form part of finished or semi-finished products/goods for reexport.
d)
Those which may be exempted by the Secretary of Trade and Industry, motu propio upon the recommendation of PITC.
4.2
All exempted importations as enumerated in 4.1 above shall require the submission of an Application for Exemption to PITC enumerating the grounds for exemption; Provided that: PITC may issue a master exemption for recurring importations of the same kind by the same entity valid for a period of one (1) year, subject to renewals as merited by the circumstances.
4.3
After receipt of said Application for Exemption, PITC shall review the same and if warranted, approve the said application provided that in cases covered under Section 4.1 (d) hereof, PITC shall endorse the same to the Secretary of Trade and Industry for review and approval.
5.0 COUNTERTRADE MANAGEMENT AND ADMINISTRATION 5.1 Pursuant to Section 3 of E.O. No. 120, the Department of Trade and Industry through the Philippine International Trading Corporation (PITC) shall be the government office responsible for the implementation, management and administration of this Program. 5.2
Powers and Functions of PITC: a)
Formulation of policies relative to countertrade in the Philippines taking into consideration international developments and practices on countertrade in order to make countertrade a viable tool for the achievement of the goals of Philippines 2000.
b)
Outline terms of cooperation with other countries and appropriate international organizations on the use of countertrade as alternative trade tools.
c)
Endorse or recommend approval of applications for exemptions under Section 4.1 (d) hereof. Provide advisory/consultative services to Philippine government departments, bureaus, offices, agencies and government-owned and controlled corporations on policy matters relating to countertrade.
d)
e)
As necessary, act on countertrade-related issues including matters relating to the interpretation of these rules brought before it for proper adjudication.
f)
Issue such circulars/memoranda as may be necessary to implement these rules including the determination of procedures for the conduct of business and meetings relative to countertrade in government procurement.
g)
Coordinate and assist all government departments, agencies, bureaus, offices and instrumentalities including government-owned and controlled corporations in formulating and implementing appropriate strategies on countertrade and similar arrangements relative to any foreign procurement or importation of capital equipment, machineries, products, goods and services covered by these rules.
h)
Review and evaluate all countertrade/offset proposals submitted by foreign suppliers or entities relative to procurements/importations covered by these rules in coordination with the procuring office concerned.
i)
Secure and maintain an annual Government Countertrade Foreign Procurement List covering yearly government procurement/importations covered by these rules in cooperation with all government procuring offices concerned which shall be the basis for developing countertrade/offset packages and arrangements.
j)
Negotiate, formulate, package and conclude countertrade or similar arrangements, contracts and/or agreements with foreign suppliers or their designated nominees/agents relative to government procurement/importation covered by these rules.
k)
Submit regular status reports to the Secretary of Trade and Industry and concerned government agencies on the status of all countertrade transactions/projects in the country.
l)
Perform such other functions as may be necessary under the circumstances.
5.3
In addition to the foregoing, PITC shall be the over-all coordinating and monitoring office/agency of the Philippine Government for countertrade/offsets and shall act as the Countertrade nominee of procuring departments, bureaus, offices and instrumentalities of the National government including government-owned and controlled corporations with respect to countertrade in foreign procurement/importations.
5.4
PITC’s Countertrade Department shall be administratively responsible for overseeing and carrying out the functions enumerated above under the over-all supervision of the President of PITC.
6.0 PROCESSING AND EVALUATION OF BIDS/OFFERS OF FOREIGN SUPPLIERS
COUNTERTRADE
PROPOSALS
IN
6.1
All departments, bureaus, agencies, offices and instrumentalities of the National government including government-owned and controlled corporations must submit to the PITC no later than the second week of November of every calendar year, a list of proposed importations which are covered by these guidelines, together with their approximate values, product information and foreign suppliers of the said importation. In case an importation was not among those listed and submitted to the PITC during the previous year, the same must be submitted to PITC at least one (1) month before the intended date of bidding (for bidded purchases) or purchase (for negotiated purchases) of these items. This shall form a basis for an Annual Government Countertrade Foreign Procurement List to be drawn up by PITC.
6.2
PITC shall review the list submitted and shall thereafter coordinate with the government procuring offices concerned on (i) on the importations/procurements which are subject to countertrade and (ii) to ensure that all efforts are exerted for the inclusion of countertrade commitments of the foreign suppliers as one of the factors/criteria in the evaluation of the bidding documents/tenders and/or selection of a foreign supplier. To facilitate proper coordination, all government importing offices concerned shall designate a countertrade officer or a countertrade desk within their respective organizations which shall handle all countertrade matters relative to their foreign procurement and coordinate with PITC on said matter.
6.3
In the evaluation of the bid tenders or sales offers submitted by the foreign supplier, the government procuring agency/office concerned shall give preference/priority (product specifications, quality considerations, pricing and related terms being equal) to the foreign supplier offering the most favorable countertrade arrangement for the Philippines .
6.4 Within five (5) working days or earlier from selection of the foreign supplier of the capital equipment, machinery, products, goods or services, the government importing office concerned shall notify PITC in writing of the details of importations as well as the countertrade proposal of the foreign supplier selected together with copies of the bid tender or sales offer of the foreign supplier containing its countertrade commitments.
In case the winning foreign supplier has made no countertrade proposal/commitment, the government agency/office concerned must present to PITC proof that all efforts were exerted to solicit countertrade offers/proposals from said supplier; and PITC reserves the right to take necessary initiatives towards securing countertrade commitments from said supplier. 6.5
PITC shall evaluate the countertrade proposals submitted by the foreign supplier in accordance with the Evaluation Criteria established by PITC and thereafter coordinate with the foreign supplier on the final countertrade arrangements and supplemental contracts to be executed thereunder.
6.6
PITC shall keep the government importing office concerned appraised/updated on all subsequent developments relative to the countertrade package developed for their respective procurements/importations and solicit their cooperation/assistance in these matters as necessary.
7.0 COUNTERTRADE PERFORMANCE 7.1
Countertrade in its various forms shall be carried out/performed between PITC, as the countertrade nominee of the government procuring office, and the foreign supplier concerned or its designated countertrade nominee (hereinafter referred to as “Countertrader”). In this regard, a foreign supplier is allowed to transfer/assign its countertrade obligations to PITC or to any other Countertrader who shall fulfill its countertrade obligations, subject to prior written approval of such transfer/assignment by the government procuring office concerned and PITC. The selection of Countertrader, while being the prerogative of the foreign supplier, must adequately demonstrate to the satisfaction of PITC that the designated Countertrader is suitably capable of fulfilling the countertrade obligations in accordance with these rules.
7.2
PITC shall coordinate and negotiate directly with the foreign supplier or its Countertrader on the requirements, processes and contracts/agreements necessary to implement the countertrade component of government importations/procurement covered by these rules. PITC shall execute the necessary countertrade contracts with the foreign supplier or its Countertrader. Such countertrade contract or agreement must be finalized and signed by the parties not later than ninety (90) days from the signing of the Supply or Sales Contract between the foreign supplier and the government procuring agency/office.
7.3
The following standard terms and conditions, among others, shall be incorporated in the countertrade agreements/contracts to be entered into by the foreign supplier or its Countertrader: a)
The level of countertrade obligations of the foreign supplier or its Countertrader shall be a minimum of 50% of the contract price for said importation/procurement.
b)
The countertrade obligations must be carried out and fulfilled by the foreign supplier or its Countertrader not later than three years (with a grace period of two years) from the date of execution of the countertrade contract or agreement.
c)
Penalties for non-performance of countertrade obligations shall be imposed on the foreign supplier or its Countertrader ranging from 5% - 100% of the unfulfilled countertrade obligations payable to PITC.
d)
Performance or bank guarantees to secure payment of the penalties for non-fulfillment of countertrade obligations, in the form and manner acceptable to PITC, shall be submitted
to PITC by the foreign supplier or Countertrader no later than thirty (30) days from the execution of the countertrade agreement. The laws of the Philippines shall be the governing law of all countertrade contracts/agreements entered into pursuant to these rules. 8.0 COUNTERTRADE MONITORING AND CREDITING PROCEDURES 8.1
PITC shall institute and maintain monitoring and crediting procedures and rules to ascertain that countertrade obligations are performed in accordance with these rules and to credit the foreign supplier or its Countertrader for due performance thereunder, on a per transaction basis. In this regard, PITC is likewise authorized to impose and collect monitoring fees to meet costs for the management and operation of countertrade.
8.2
The foreign supplier or its Countertrader shall be required to submit certified true copies of supporting documents as may be required by PITC as evidence of each countertrade transaction undertaken, including but not limited to, the following: a)
Sales/export contracts and Commercial invoices;
b)
Bills of Lading or similar transport documents;
c)
Letters of Credit opened to Philippine manufacturers, contractors, or exporters;
d)
Bank certification or similar receipts for payment/funds issued by a Philippine-based bank or Philippine beneficiary of a countertrade transaction;
e)
Joint Venture or similar contracts/agreements relative to investments or offsets undertaken in the Philippines and SEC registration of new companies established pursuant to said arrangements;
f)
Certification from the Philippine beneficiary of an offset, buy-back or related transaction that the said transactions were carried out fully by the foreign supplier or Countertrader;
g)
Such other documents as may be required by PITC.
8.3
Failure to present required documents shall serve as sufficient basis to withhold or deny crediting any transaction against the countertrade obligations of the foreign supplier or the Countertrader.
8.4
The foreign supplier or its Countertrader shall be duly credited for performance of its countertrade/offset obligations on the basis of the following: a)
b)
c)
For Counterpurchase -- the FOB Invoice Value of each transaction; or 95% of the CIF Invoice Value if the CIF value is used; Provided that in either case, the local content value is at least 51%. For Philippine Services -- the labor/manpower costs for such services, excluding the costs of equipment or materials used, as appearing in the invoice/contract. For Offsets and related transactions -- the value of the investments, technology, grants, research, training, and related activities (as listed in Annex “B” hereof) introduced by the foreign supplier or its Countertrader as certified to by the direct Philippine beneficiary thereof, inclusive of the multipliers granted, if any, for said transactions.
d)
8.5
For Buy-Back and Debt-for-Goods/Services -- the FOB invoice value (or 95% of CIF value) of the products or goods exported as a result of the buy-back or Debt for Goods, inclusive of the multipliers granted, if any, for such transactions, as certified to by the Philippine beneficiary of the plant or equipment (for buy-back) or the Philippine debtor (for Debt-for-Goods).
Multipliers ranging from 2x to 5x shall be imputed to the value of certain desired activities undertaken by the foreign supplier or its Countertrader in the final crediting of its countertrade/offset obligations. The final multiplier to be used for a particular transaction shall be agreed to by PITC and the foreign supplier or its Countertrader prior to undertaking said transaction.
9.0 ACCREDITATION OF PHILIPPINE MANUFACTURERS/ EXPORTERS PITC shall accredited Philippine manufacturers/exporters and contractors nationwide who may wish to participate in countertrade transactions as suppliers of the Philippine products or services. 10.0 REPORTORIAL REQUIREMENTS AND REVIEW 10.1 The foreign supplier or its Countertrader shall submit quarterly and annual reports to PITC on the progress of their countertrade performance with a summary of transactions undertaken pursuant thereto. 10.2 PITC and the foreign supplier or its Countertrader shall hold midyear and yearly countertrade performance reviews. 10.3 PITC shall submit to the Department of Trade and Industry and the government procuring agency concerned a semi-annual status reports on the countertrade programs undertaken hereunder. 11.0 IMPLEMENTING GUIDELINES/CIRCULARS PITC is hereby authorized to issue such circulars and guidelines as may be necessary to implement and administer these rules and regulations, including those intended to clarify or interpret the provisions hereof. 12.0 ADJUDICATION 12.1 Any dispute arising from the implementation of these rules shall be referred to PITC for initial settlement/action. Should any of the parties concerned not be satisfied with the action/decision of PITC, the matter may be referred to the Secretary of Trade and Industry for decision. 12.2 Where the dispute involves the countertrade contract/agreement itself, and a party thereto is not satisfied with the decision of the Department of Trade and Industry, it may bring the same for arbitration in accordance with the arbitration rules and procedures adopted by the parties as contained in the countertrade contract/agreement. 13.0 SEPARABILITY CLAUSE If any provisions/sections of these rules should be declared invalid by a competent court of tribunal, the remaining provisions hereof, unaffected thereby, shall remain valid and binding.
14.0 RESPONSIBILITY/SANCTIONS 14.1 Compliance with these rules shall be a condition sine qua non for importations of all departments, bureaus, agencies, instrumentalities and offices of the National Government including government-owned and controlled corporations. The heads of all government departments, agencies, bureaus, offices and government-owned and controlled corporations shall ensure strict compliance of these rules and any violations hereof shall be dealt with in accordance with existing laws and regulations. 15.0 EFFECTIVITY These rules and regulations shall take effect 30 days after its publication in two (2) newspapers of general circulation. Done in Makati, Metro Manila, Philippines on 14 November 1994.
(signed) ROBERTO F. DE OCAMPO Department of Finance (signed) CIELITO F. HABITO National Economic and Development Authority
(signed) RIZALINO S. NAVARRO Department of Trade and Industry (signed) JOSE LUIS U. YULO, JR. Philippine International Trading Corporation
Annex “A” OFFSETS The following projects/activities in the Offset category, whether directly related (Direct Offsets) or not related (Indirect Offsets) to the original importation/purchase of foreign equipment, machineries, products, technology and services by the Philippine government, include, but shall not be limited to any of the following: 1.
Foreign direct investment in the local industries engaged in the manufacture of equipment, machinery, spare parts or components for the export market.
2.
Technology transfer and/or skills training resulting in the (a) capability to locally manufacture, manage, design and/or produce the imported equipment, machinery, spare parts or components; (b) ability to provide required local logistic and maintenance support of an imported machinery or equipment.
3.
Assistance in research and development activities which will enhance or improve the industrial, technological, or scientific capabilities of the Philippines.
4.
Assistance in opening up or diversifying foreign markets for the utilization of Philippine services.
5.
Investments in Philippine industries covered by the Investment Priorities Plan of the Board of Investment (BOI) and other eligible projects as may be prescribed/identified by the government from time to time.
6.
Donations or grants in educational, scientific, technological and related research and development programs, public or private, which will enhance Philippine industrial/export competitiveness and address environmental concerns in support of sustainable development.
7.
Introduction or development of environmental projects in support of sustainable growth for the Philippines.
8.
Other transactions or activities similar to the above which will further enhance Philippine economic or industrial interests and improve the country’s international balance of payments, as may be approved by PITC.
Annex “B” BUY – BACK ARRANGEMENTS The following forms/variations of buy–back arrangements may be considered under these rules on a caseto-case basis: 1.
Arrangement whereby the importation / purchase of equipment, machinery or technology is repaid with the resultant product.
2.
Arrangement whereby the importation/purchase of equipment, machinery or technology is repaid with non-resultant but related products supplied by either the same importing company/agency/office or by another business enterprise in the same industry sector.
3.
Arrangement whereby the importation/purchase of equipment, machinery or technology is repaid with unrelated products which are supplied by either the importing company/agency/office and/or another business enterprise in another industry sector.
4.
Arrangement whereby the importation/purchase of equipment, machinery or technology is repaid with a mixture of resultant and non-resultant products by the importing company/agency/office and/or another business enterprise.
5.
Arrangement whereby the foreign supplier of equipment or machinery is different from the foreign supplier of the technology; in which case, the foreign supplier of the equipment or machinery shall be the one to be linked with the buy-back commitment and the said supplier can also switch the obligation to buy-back the resultant products to a third party, which can be a trading company or another end-user.
CHAPTER
III
COUNTERTRADE INTEGRATION IN THE FOREIGN PROCUREMENT PROCESS
Under existing Philippine laws on government procurement, particularly, Republic Act No. 9184 and its IRR-A, all conditions, terms and requirements to be imposed on and complied with by government suppliers to enable them to apply for eligibility and to bid for government contracts must be clearly stated in the Bid Documents. For Non-bidded contracts, similar minimum requirements must be set by the procuring government office for suppliers who wish to supply the said government office with goods or services. Inasmuch as countertrade is a condition and requirement to be imposed on a government supplier of foreign goods or services, such condition or requirement must be contained either in the Bid Documents (for bidded procurements) or in the sales/supply terms (for non-bidded procurements). A.
Open Competitive Bidding & Limited Source Bidding 1.
2.
B.
Eligibility Requirements: Countertrade Undertaking Form a)
The Countertrade Undertaking Form per the format attached hereto as Annex “A” shall be included as one of the eligibility form/document to be accomplished and submitted by bidders applying for eligibility. Said form shall be considered as one of eligibility documents to be submitted pursuant Section 23 of the Implementing Rules and Regulations-A (IRR-A) of R.A. 9184 and shall be included in the Eligibility Envelope to be submitted by all bidders. It shall contain the countertrade level of commitment of said bidders as well as their commitment to sign a Countertrade Agreement with Philippine International Trading Corporation (PITC) within 90 days from signing of the Supply Contract with the Department.
b)
Failure or refusal to accomplish and submit the Countertrade Undertaking Form shall be sufficient basis for an applicant to be declared "ineligible" to participate in the bidding.
Signing of the Countertrade Agreement: a)
Within 90 days from the signing of the Supply Contract between the procuring government office and the winning SUPPLIER, the latter shall proceed to negotiate and sign a Countertrade Agreement with PITC in accordance with the provisions of the IRR of E.O. 120 s. 1993.
b)
Failure on the part of the winning supplier to sign a Countertrade Agreement with PITC as herein required shall entitle the procuring government office to disqualify the winning bidder from participating or submitting tenders for future procurements, without prejudice to the right of the procuring government office to enforce such other penalties and sanctions on said winning bidder as stipulated in the procurement contract or as warranted under the circumstances.
Other Alternative Modes of Procurement 1.
Conditions of Purchase/Sale: The countertrade requirement outlined in (A) above shall likewise apply to covered government foreign procurements conducted under Other Alternative Modes of Procurement as provided for under RA 9184 and its IRR and other related laws, rules and regulations. As such, the countertrade requirement shall be integrated
in the pertinent terms of sale/supply issued by the procuring government office to the selected foreign supplier. 2.
Countertrade provision in the Supply Contract: To ensure that foreign suppliers or their representatives in the Philippines are committed to perform countertrade, the following provision on countertrade shall be included in the Supply Contract: “Countertrade. Pursuant to the provisions of Executive Order No. 120 s. 1993 and its implementing rules and regulations on the adoption of countertrade in government foreign procurements, the Supplier binds itself to undertake countertrade arrangements equivalent to at least 50% of the value of the supply contract (or the imported value of the supply contract, as applicable) to be carried our in accordance with the terms and conditions of the Countertrade Agreement to be signed between the Supplier and Philippine International Trading Corporation (PITC), the government implementing agency for countertrade. The said Countertrade Agreement shall be signed within ninety (90) days from the signing of this Supply Contract.”
3.
Signing of the Countertrade Agreement: Within 90 days from the signing of the Supply Contract between the procuring government office and the winning SUPPLIER, the latter shall proceed to negotiate and sign a Countertrade Agreement with PITC in accordance with the provisions of the IRR of E.O. 120 s. 1993.
Flow chart showing the integration of countertrade in the procurement process: COUNTERTRADE FLOW start Agency’s Bids & Awards Committee (BAC) integrates Countertrade requirements in the Bid Documents
Supplier meets with PITC to discuss procedures & requirements for implementation of Countertrade including Offsets.
Supplier signs and submits Countertrade Undertaking as part of bid requirements of Agency
Agency conducts Public Bidding
If No Public Bidding
Public Bidding
Supplier and Agency sign the Supply Contract
Within (90) days from the effectivity of the Supply Contract, PITC and Supplier enter into a Countertrade/Offset Agreement
PITC and Supplier carry out the terms of the Countertrade/Offset Agreement
PITC provides the Agency with performance update of countertrade
end
Annex “A” SAMPLE TEXT OF AN UNDERTAKING TO PURSUE COUNTERTRADE RELATIVE TO THE SUPPLY OF (name of project) (cite type of importation) Pursuant to E.O. 120 s. 1993 relative to the adoption of COUNTERTRADE in government procurement, and in order to assist in the economic progress of the Philippines, the undersigned bidder hereby commits that should it be awarded the Supply Contract for the above-cited project by (Name of Importing Government Office) it shall, directly or through a nominated third party, undertake countertrade arrangements equivalent to ______% (not less than fifty percent (50%) of the value of the total Contract Price of the Supply Contract, said countertrade arrangements to be concluded in writing between the undersigned bidder and Philippine Government – within ninety (90) days from the signing of the said Supply Contract. Failure on the part of the undersigned bidder to comply with this Undertaking shall entitle (Name of Importing Government Office) to rescind/cancel the Supply Contract and award the same to another party and/or disqualify the undersigned from participating in future supply contracts with the said office without liability on the part of the latter. This Undertaking shall form part and parcel of the undersigned’s bid tender for the above project. Issued this ______ day of ________ in ____________, Philippines. ________________________ Name of Company (Supplier/Bidder)
__________________________ Name of Representative Title:
__________________________ Signature
CHAPTER IV COUNTERTRADE MILESTONES in the PHILIPPINES Since its inception in 1989, the Countertrade Program has played a vital role in the foreign procurement of various government agencies including government-owned and controlled corporations. From the period of 1989 to October, 2004 over US$358 million worth of trade (exports), investments, debt for goods and other offset activities have been generated. Moreover, US$189 million worth of countertrade obligations have been committed by various suppliers and are undergoing implementation.
PCG/DOT C 3.17%
DoE/NPC 0.79%
DoF/DILG 0.41%
PNP 4.92%
NFA 39.31%
DEBT FOR GOODS ARRANGEMENT 11.27%
AFP 40.13%
The pie chart of shows the Summary of Completed Countertrade Transactions by Agency contribution.
Armed Forces of the Philippines The Armed Forces of the Philippines (AFP), is the first government agency to adopt countertrade in its foreign procurement, has been instrumental in generating US$144 million worth of completed countertrade arrangements most of which have directly benefited the export and defense sectors. This value represents 40% (the biggest share) of all completed transactions among all government agencies which have adopted countertrade. To further strengthen the adoption of countertrade in the Asp’s foreign procurement, former Secretary of Defense Angelo T. Reyes signed last 20 July 2001 AFP Department Circular No. 4. It prescribed the guidelines in the implementation of countertrade for procurement contracts under the Armed Forces of the Philippines Modernization Program. Among the salient features of the department circular was the setting of the minimum countertrade level of commitment depending on the range of value of the supply contract. Please refer to Appendix “E”. Another feature of the AFP’s adoption of countertrade is the emphasis on defense related offset as its priority over other forms of countertrade. It is anticipated that more countertrade transactions will be generated as the AFP implements its modernization program. National Food Authority Although the National Food Authority (NFA) started to adopt countertrade in its rice importation as a matter of policy only in 2002, it ranks as the second largest agency with completed countertrade transactions valued at US$140 million. This amount represents 39% of all completed transactions of all government agencies. It is worth mentioning that majority of the completed counter-exports have been agricultural products thereby benefiting the local agriculture sector.
Philippine National Police Since 1996, the Philippine National Police (PNP) has adopted countertrade in its foreign procurement of patrol cars and motorcycles, hand pistols, communication and other related equipment. To date, completed countertrade transactions on all PNP procurement has contributed US $18 million or 5% of the total amount of all countertrade transactions. Inclusion of countertrade in PNP procurement was further strengthened by the signing of a Memorandum of Agreement on Countertrade between PITC and the PNP represented by former PNP Chief Leandro R. Mendoza last 04 May 2001.
Department of Interior & Local Government In 14 January 2001, a Memorandum of Agreement on Countertrade between PITC and the Department of Interior & Local Government (DILG) was signed by former DILG Secretary Jose D. Lina, Jr. DILG Memorandum Circular No. 2002-05 dated 16 January 2002 was subsequently issued. The Circular prescribed the adoption and integration of countertrade in the foreign procurement for all of the DILG and its attached offices. Todate, procurement of Fire trucks from Hyundai contributed US$1 million worth of countertrade transactions. Philippine Coast Guard / Department of Transportation & Communication The PCG/DOTC procurement of Australian Search and Rescue Vessels (Phase I) from Tenix Corporation resulted in US$11 million worth of counter exports.
A summary of all Philippine government procurement with completed countertrade transactions from 1989 to 2004 and the benefits derived from the adoption of countertrade is hereinafter provided.
SUMMARY OF COMPLETED TRANSACTIONS ARMED FORCES OF THE PHILIPPINES Countertrade
Value of
Foreign Supplier/
Equipment
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) HARRIS CORP.
Communication
(USA)
Equipment
CT*: Raiffeisen
100%
(US$) ●Semi-processed Rubber
1,326,225.60
1,561,917.80
Africa, Czech Rep., 1,525,521.60
Centrobank AG, Austria
New Zealand ●Assorted Bags
Feb. 2004
●Desiccated Coconut
HARRIS CORP.
Manpack
(USA)
Communication
Dec. 2003
100%
●Software Upgrade ●Rechargeable Batteries
6,102,086.40 ●Spare Modules
FN HERSTAL S.A.
Squad Automatic
(Belgium)
Weapon
June 2003
(SAW)
GREEK POWDER
Ammunition
100%
Japan, Ireland, USA
17,820.00 7,056,720.00
Germany 8,492,856.00
AFP
653,184.00 542,952.00 240,000.00
●Audit Inspection of the GA Facilities
225,000.00
319,153.18 ●Minimi SAW Session 100%
217,872.20
●UFT-5800 Automated Test Set
●Post Audit Report
(Greece) CT: Raiffeisen
Germany, Italy, South
326,250.00
60,000.00
AFP, Phil. Army & Government Arsenal (GA)
41,250.00
●Semi -processed Rubber
483,638.40
●Desiccated Coconut
277,095.00
760,733.40
New Zealand, Germany Italy & Czech Rep.
760,000.00
Egypt, Germany &
Centrobank AG, Austria
France
June 2003 *CT-Countertrader
SUMMARY OF COMPLETED TRANSACTIONS ARMED FORCES OF THE PHILIPPINES Countertrade
Value of
Foreign Supplier/
Equipment
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) FN HERSTAL S.A.
Squad Automatic
(Belgium)
Weapons
CT: Raiffeisen
(SAW)
85%
(US$) ●Semi-processed Rubber
1,808,534.68
1,808,534.68
Australia, New Zealand Germany, Italy &
1,808,534.68
Czech Rep.
Centrobank AG, Austria Feb. 2003 SNC-LAVALIN INC.
Aerial Rockets
100%
(Canada)
●Legal, Taxation & Accounting
772,835.35
1,630,712.78
Philippines
Permits & Registration 1,590,000.00 ●Engineering & Environmental
Sept. 2000
501,418.45
Consultancy ●Community Relations & Relocation Consultancy ●Public Relations ●Transportation Planning
65,972.36
●Project Monitoring Staff Office
28,152.33
●Rental & Staff Services HANWHA CORP.
Rockets
50%
135,753.63 103,794.45
22,786.21
●Garments
1,249,762.18
1,249,762.18
USA
●Copra Expeller Cake/Meal
1,585,697.14
2,649,761.60
The Netherlands
(Korea) Dec. 1999 GIAT (France) CT: Raiffeisen Centrobank AG , Austria Mar. 1996
1,249,762.00 Howitzers
100%
●Desiccated Coconut 2,648,465.00 ●Canned Tuna
415,087.00 352,663.76
●Copra Solvent Extraction
228,074.70
●Assorted Phil. Handicrafts
68,239.00
SUMMARY OF COMPLETED TRANSACTIONS ARMED FORCES OF THE PHILIPPINES Countertrade
Value of
Foreign Supplier/
Equipment
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) AGUSTA SPA
Trainer Jets
60%
(US$) ●Marine Products ( tako-yaki,
(Italy)
3,841,649.40
30,600,000.00
Italy
canned baby clams, frozen boiled
CT: Itochu Corp., Japan
30,600,000.00
scallops, squid) ●Low Color Coconut Oil
Aug. 1993
●Carageenan
1,963,760.25
South Africa
117,800.00
Italy
Offset Component ●Rehabilitation of New Leyte Edible
16,000,000.00
Philippines
Oil Manufacturing Co. ●Investment in Kinshi Phil. Corp.
8,426,790.35
●Investment in Phil. Strategic Investment Holdings GKN SANKEY
Armored Personnel
(UK)
Carriers
CT: Metallgesellschaft
100%
15,988,397.72
●Copper Cathodes
15,958,705.45
Singapore, China
7,821,205.75
Austria, Germany
●Cordless Phones
5,896,093.95
USA, Netherlands
●Fresh Frozen Shrimps
5,214,546.18
Japan
●Philacid
3,539,267.74
France, Netherlands
●Radar Detectors
1,612,735.20
USA, Netherlands
●Steel Sheets
1,500,922.21
62,000,000.00 ●Garments
Services Ltd., UK Jan. 1993
250,000.00
●Coconut Oil
65,722,539.42
USA, Netherlands
Indonesia
●OPP Pressure Tape
798,462.08
USA, Netherlands
●Pyrite Concentrates
661,495.89
China, Indonesia, Vietnam
Offset Component ●Investment in Temic Phil. ●Shipping Services ●Environmental Cooperation
6,582,461.52
Philippines
132,821.19 15,424.54
SUMMARY OF COMPLETED TRANSACTIONS ARMED FORCES OF THE PHILIPPINES Countertrade
Value of
Foreign Supplier/
Equipment
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) AGUSTA SPA (Italy) CT: Intersomer, Italy
Trainer Jets
40%
(US$) ●Crude Coconut Oil ●Garments/Fabric
28,888,722.49
South Africa
3,875,454.46
Italy
1,910,358.91
-do-
1,114,782.71
-do-
●Copra Expeller Cake
923,328.23
-do-
●Copra Solvent Extraction
217,875.00
-do-
●Various Porcelain
215,937.29
-do-
●Black Tiger Prawns
184,579.56
-do-
●Activated Coco Carbon
177,569.20
-do-
●Various Handicraft
107,100.00
-do-
29,000,000.00 ●Copra Cake ●Copra Solvent
Oct. 1989
20,161,737.13
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS OF AFP
US$
143,691,790.35
SUMMARY OF COMPLETED TRANSACTIONS PHILIPPINE NATIONAL POLICE Countertrade
Value of
Foreign Supplier/
Equipment
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) FABRICA D'ARMI
Hand Pistols
PIETRO BERETTA
(9 mm)
(Italy)
50%
(US$) ●Various Phil. Products
571,518.43
907,666.80
907,666.80
Hongkong, Abu Dhabi
CT: PITC
●Furniture
Jan. 2003
●Cavendish Banana
16,724.75
●Toyota Motor Parts
387,852.00
387,852.00
●Integrated Circuit
1,750,000.00
1,750,000.00
●NPK Fertilizer
7,116,500.00
7,234,062.61
TOYOTA MOTORS
Patrol Cars
Kuwait, Japan, Spain Singapore, South Africa
50%
319,423.62
Australia Japan Thailand
PHILS. INC. Mar. 2003 MOTOROLA (USA) June 1999 FABRICA D'ARMI
387,852.00 Communication Equipment Pistols
50%
100%
PIETRO BERETTA
●Various Garments
(Italy)
USA
1,750,000.00
7,233,821.40 ●Various Food Products
CT: PITC
●Rattan & Bamboo Products
66,396.00
Vietnam UAE & Kuwait
47,025.61
-do-
4,141.00
South Africa
Nov. 1998 PHILIP HARRIS
Scene of Crime
(UK)
Equipment
CT: Raiffeisen
50%
●Tobacco Strips/Stems
226,337.73
●New Tubular Woven PP Bags
129,017.18
Italy
77,603.23
Germany
492,857.10 ●Desiccated Coconut
492,857.10
Austria
Centrobank AG, Austria
●Canned Tuna
57,788.49
The Netherlands
Sept. 1997
●Sinamay Box
2,110.47
Austria
SUMMARY OF COMPLETED TRANSACTIONS PHILIPPINE NATIONAL POLICE Countertrade
Value of
Foreign Supplier/
Equipment
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) FABRICA D'ARMI
Pistols
100%
PIETRO BERETTA (Italy)
Sept. 1997
(Japan)
●Desiccated Coconut
744,242.00
●Virginia Tobacco Strips/Stems
448,272.00
Austria
176,339.00
Netherlands Japan
1,627,415.18 ●Canned Tuna
CT: PITC
KAWASAKI
(US$)
Motorcycles
100%
Norway, Germany
●Assorted Handbags
75,484.50
●Assorted Handbags
70,188.00
Spain
●Metal Vase, etc.
30,531.00
Austria Australia
●Assorted Handbags
29,830.00
●Handbags
27,251.05
USA
●Christmas Decors
13,780.00
Austria
●Jute Bags (Asstd. Colors)
11,503.80
Investment in the expansion and modernization of existing plant
2,015,942.29 Four major areas/components of Feb. 1997
1,627,421.35
the investment: ●New Painting Shop ●Assembly Line ●Extension of existing line ●Construction of additional assembly lines
France, Hongkong, Spain 1,805,448.86
1,805,448.86
Philippines
SUMMARY OF COMPLETED TRANSACTIONS PHILIPPINE NATIONAL POLICE Countertrade
Value of
Foreign Supplier/
Equipment
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) HORNET LTD. (Israel)
Pistols
100%
CT: Raiffeisen Centrobank AG, Austria
504,306.00
●Assorted Handbags
255,745.56
Japan
48,153.60
Netherlands
●Jute Bags Pistols
100%
PIETRO BERETTA (Italy) CT: Raiffeisen
Dec. 1996
Helicopters
(France)
70% ●5% Offset
Offset: Eurocopter
37,603.75
●65% Counterpurchase
France
USA 838,031.92
●Desiccated Coconut
166,860.00
Germany
103,369.50
Netherlands
Austria
●New Tubular Woven PP Bags
69,329.69
Italy
●Various Handicrafts
50,310.00
Austria
●Lamp, Vase, Jar, Goblet, Bowl
40,872.00
-do-
●Hand-woven Bags
31,394.62
Japan, Spain
●Assorted Handbags
26,426.11
●Helicopter Maintenance
Spain, France 1,737,661.91
Offset Component 123,120.00
Philippines
●Furniture
816,763.35
Australia, Malaysia
●Garments
432,114.43
UAE
200,212.22
USA, Denmark, Japan
Training & Skills Upgrade Counterpurchase Component
1,600,000.00
Oct. 1996
Austria
349,470.00
123,700.00
CT: Greficomix Int'l.,
845,808.91
●Virginia Tobacco Strips/Stems
838,031.92 ●Canned Tuna
Centrobank AG, Austria
EUROCOPTER
●Tobacco Strip
838,031.92 ●Canned Tuna
Dec. 1996 FABRICA D'ARMI
(US$)
Japan & Spain
1,723,700.00 ●Gifts & Housewares
Netherlands & Singapore ●Footwear and Accessories ●Lace
140,140.91
UAE
25,311.00
Brazil
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS OF PNP
US$
17,626,811.46
SUMMARY OF COMPLETED TRANSACTIONS NATIONAL FOOD AUTHORITY Countertrade
Value of
Foreign Supplier/
Commodity
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) DAEWOO INT'L CORP.
Rice
50%
(US$) ●Mixed Xylene
1,586,000.00
1,586,000.00
Korea
17,473,143.60
18,269,012.54
Vietnam
(Korea) July 2004 VIETNAM SOUTHERN
1,586,000.00 Rice
50%
FOOD CORP.
●NPK/DAP Fertilizer ●Portland Cement Clinker
(VINAFOOD)
18,257,812.50 ●Grinding Wheel
496,615.33
-do-
192,511.30
-do-
92,829.19
-do-
(Vietnam)
●Wire
Apr. 2003
●Corrugated Paper
9,507.19
-do-
●PVC Tubes
4,405.93
-do-
CHAI YAPORN RICE
Rice
51%
●Copper Cathodes
2,650,725.00
2,650,725.00
China & Korea
●Mixed Xylene
2,543,750.00
2,543,750.00
China
CO., LTD. (Thailand) Mar. 2003 MALAYSIA INT'L.
2,650,725.00 Rice
50%
TRADING. CORP. SND. BHD. (Malaysia) Mar. 2003
2,543,750.00
SUMMARY OF COMPLETED TRANSACTIONS NATIONAL FOOD AUTHORITY Countertrade
Value of
Foreign Supplier/
Commodity
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) VINAFOOD
Rice
50%
(Vietnam)
(US$) ●Naphtha
9,320,621.44
●Crude Coconut Oil
3,946,377.20
14,310,000.00 ●Low Color Coconut Oil Sept. 2002 DEPT. OF FOREIGN
●Cohin Coconut Oil Rice
50%
TRADE OF THE GOV'T.
●Naphtha
OF THAILAND (DFT)
8,098,875.00 ●Cochin Coconut Oil
Singapore Vietnam
715,648.52
-do-
661,326.99
-do-
6,964,498.31
●Low Color Coconut Oil
14,643,974.15
8,147,412.09
Japan
699,104.38
-do-
483,809.40
Singapore
CT: Itochu Corp., Japan Sept. 2002 CHINA NATIONAL
Rice
50%
CEREALS, OILS &
●Cochin Coconut Oil ●Crude Coconut Oil
FOODSTUFFS IMPORT
2,608,750.00 ●Low Color Coconut Oil
1,013,853.46
2,674,611.52
Japan
928,365.97
-do-
732,392.09
Malaysia
& EXPORT CORP. (COFCO) CT: Itochu Corp., Japan Sept. 2002 VINAFOOD
Rice
50%
(Vietnam)
●Naphtha
8,134,410.32
●NPK Fertilizer
3,294,849.20
Vietnam
1,918,252.29
-do-
13,837,500.00 ●Unglazed Newsprint July 2002
●Copra Expeller Cake/Meal ●Ammonium Sulfate
PROJECTS & EQUIP.
Rice
50%
CORP. LTD. OF INDIA (PEC LTD) July 2002
Singapore
580,000.00
-do-
79,000.00
-do-
●Naphtha
3,647,975.34
●Low Color Coconut Oil
1,814,920.53
Japan, Malaysia
1,437,041.30
Japan
7,937,500.00 ●Crude Coconut Oil
(India)
14,006,511.81
7,941,758.69
Singapore
●Copra Expeller
558,000.00
-do-
●Cochin Coconut Oil
483,821.52
Singapore
SUMMARY OF COMPLETED TRANSACTIONS NATIONAL FOOD AUTHORITY Countertrade
Value of
Foreign Supplier/
Commodity
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$) PEC LTD.
Rice
50%
(India) June 2002 PEC LTD. (India)
(US$) ●Copra Solvent Extraction Pellets
7,000,384.04
●NPK Fertilizer
6,741,642.64
-do-
5,556,746.40
-do-
18,844,558.00 ●Phosphoric Acid Solution Rice
50%
●Copper Cathodes
26,061,777.00
19,298,773.08
26,061,777.00
CT: Glencore Fareast 26,062,050.00 Rice
April 2002 DFT (Thailand)
Korea, Thailand, China
April 2002 DFT (Thailand)
Korea
50%
●Naphtha
6,129,000.00
6,129,000.00
Singapore
●Naphtha
6,128,825.00
6,128,825.00
Singapore
●NPK Fertilizer
4,672,875.00
4,672,875.00
Vietnam
●Naphtha
2,362,242.35
2,362,242.35
Singapore
●NPK Fertilizer
3,199,775.80
3,630,000.00
Vietnam
6,129,000.00 Rice
50%
CT: Itochu Corp. April 2002 VINAFOOD (Vietnam)
6,128,825.00 Rice
April 2002 TRADING CORP.
50% 4,672,875.00
Rice
50%
OF PAKISTAN CT: Itochu Corp.
2,096,512.50
April 2002 VINAFOOD (Vietnam) Mar. 2002
Rice
50%
3,630,000.00 ●Grinding Wheels
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS OF NFA
430,224.20
-doUS$
140,747,248.23
SUMMARY OF COMPLETED TRANSACTIONS OTHER AGENCIES Countertrade
Value of
Foreign Supplier/
Equipment
Commitment
Products Exported/
Countertrade
Total Amount
Destination/
Contract Date
Procured
(in % & equivalent
Offset Activities
Transaction
(US$)
Beneficiary
amount in US$)
(US$)
BUREAU OF FIRE / DEPT. OF INTERIOR AND LOCAL GOVERNMENT HYUNDAI CORP.
Fire Trucks
50%
●NPK Fertilizer
1,475,000.00
1,475,000.00
Vietnam
2,812,875.00
Freight from Indonesia
(Korea) CT: PITC
1,042,440.00
June 1999 DEPT. OF ENERGY/NATIONAL POWER CORP. PT INDOMINCO
Coal
50%
MANDIRI
Use of Phil. Shipping Co.-Filipinas Maritime Transport in the Delivery
(Indonesia)
to Philippines
2,812,875.00 of Coal to NPC by:
April 2003
1. PT Indominco 2. PT Jorong Barutama Geston-
2,258,588.50 554,286.50
PHIL. COAST GUARD/DEPT. OF TRANSPORTATION & COMMUNICATION TENIX DEFENCE PTY.
Search & Rescue
LTD. (Australia)
Vessel
CT: PITC
50%
●Copper Cathode
9,801,000.00
●Food Items & Phil Handicrafts
1,041,109.97
11,338,000.00 ●Rattan Furniture
Mar. 1999
●Granite Bench/Counter top
11,338,000.00
China Australia
492,360.00
-do-
3,530.03
-do-
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS OF OTHER AGENCIES
US$
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS
US$
14,150,875.00
316,216,725.04
SUMMARY OF COMPLETED TRANSACTIONS DEBT FOR GOODS ARRANGEMENT RP DEBTOR
PARTICULARS
AMOUNT OF
PRODUCTS EXPORTED
DEBT (US$) National Power
For the Purchase of
Corporation
Machinery and
(NPC)
Equipment Under
8,850,000.00 ●Crude Coconut Oil ●Garments
AMOUNT
TOTAL AMOUNT
(US$)
(US$)
3,448,443.80
●Personal Care & Hygiene Products
984,227.16
●Tropical Fruit Juices
642,902.40
Package
●Assorted Cigarettes
355,925.00
●Canned Sardines
270,768.52
For the Purchase of
Electrification
Mini-hydro
Administration
Equipment
8,850,000.00
Romania
3,012,733.12
a Soft Loan
National
DESTINATION
●Calamansi Nectar
135,000.00
11,500,000.00 ●Copper Cathodes
11,500,000.00
11,500,000.00
China
20,000,000.00 ●Sugar
11,680,481.07
20,000,000.00
Iraq
(NEA) Phil. National Bank
Obligation for
(PNB) & Phil.
Unfinished Road
National Construction
Projects in Iraq
Corp. (PNCC)
Dating Back to 1980
●Coconut Oil ●Pharmaceuticals
7,339,023.57 980,495.36
TOTAL OF COMPLETED DEBT FOR GOODS ARRANGEMENTS
US$
40,350,000.00
GRAND TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS
US$
358,041,725.04
Appendixes
Appendix A Republic of the Philippines Department of Trade and Industry Philippine International Trading Corporation Memorandum Circular No. CT-95.1/01 GUIDELINES FOR THE EVALUATION AND APPROVAL OF OFFSETS ARRANGEMENTS TO BE UNDERTAKEN PURSUANT TO E.O. 120 AND ITS IMPLEMENTING RULES AND REGULATIONS A.
INTRODUCTION These guidelines are promulgated pursuant to the provisions of E.O. 120 dated August 19, 1993 and its Implementing Rules and Regulations (IRR) signed on November 14, 1994, directing the adoption of countertrade as a supplemental tool with respect to the importation or procurement of foreign capital equipment, machinery, products, goods and services of the National Government, its departments, bureaus, agencies and offices including government owned and controlled corporations. These guidelines shall govern the evaluation, review, approval and implementation of OFFSET arrangements to be undertaken pursuant to E.O. 120 and its Implementing Rules and Regulations.
B.
OBJECTIVES OF OFFSETS Offsets in its various forms are generally intended to enhance the industrialization and technological development of the country by encouraging investments, technology transfers, research and development and related activities that would provide the appropriate environment and infrastructure needed to assist Philippine companies in achieving global product competitiveness and/or to correct imbalances in foreign exchange flows.
C.
ELIGIBLE OFFSETS As cited in Annex “A” of the IRR to E.O. 120, offsets may be Direct or Indirect. When the offsets to be undertaken is directly related to the capital equipment, machinery, goods or services imported by the Philippine government, the same is considered DIRECT. Otherwise, they are considered INDIRECT. Subject to the provisions of E.O. 120 and its IRR, the following are eligible categories of offset activities, to wit: C.1 FOREIGN INVESTMENTS: C.1.1 Definition “Foreign Investments” – as defined E.O. 226 otherwise known as the “Omnibus Investment Code of 1987”, shall mean equity investments owned by a non-Philippine national (in a Philippine enterprise), made in the form of foreign exchange or other assets actually transferred to the Philippines and registered with the Bangko Sentral Ng Pilipinas (BSP) and the Board of Investments (BOI), which shall assess and appraise the value of such assets other than foreign exchange.
C.1.2. Classes Foreign investments include original and additional investments. These may be in the form of cash or assets/properties. C.1.3 Exclusions The following are excluded and shall not be considered as foreign investments within the framework of these guidelines: (i) the receipt of stock dividends by all the stockholders of a new corporation on a pro-rata basis; (ii) ownership of bonds including income bonds, debentures, notes or other evidences of indebtedness; or (iii) purchase of stock options or stock warrants until the holder exercises the option and actually acquires stock from the corporation. C.1.4 Eligible Areas for Foreign Investments The following Philippine enterprises may be the beneficiaries of foreign investments, whether in cash or assets/property, under these guidelines: a) Pioneer Enterprises: Pioneer Enterprises expressly defined and enumerated in E.O. 226 and the current Investment Priorities Plan (IPP) of the BOI are eligible for investments hereunder. b) Non-Pioneer Enterprises: Non-Pioneer Enterprises expressly defined and enumerated in E.O. 226 and the current IPP of the BOI are eligible for investments hereunder. c) Investments in areas/activities not listed above or specifically identified in the IPP may be considered only on a case-to-case basis subject to such guidelines as may be determined by PITC. C.1.5 Requirements for Eligibility as Offsets a) Investments must come from a foreign-based institution or entity; b) If the investments are made in the form of cash, the funds must not be sourced or borrowed from the local Philippine banking system but from overseas; c) Where the investments are made in the form of personal property (other than cash), the same must be brand-new unless otherwise approved by PITC in writing; d) The investment, duly evidenced by stock certificates or similar instruments must not be withdrawn, transferred or assigned to another firm or entity by the original investor within five (5) years from date of investment except with the prior express written approval of PITC and the Philippine beneficiary thereof. An Undertaking to this effect shall be executed by the original investor upon approval of the investment proposal by PITC; and e) The investment must comply with the requirements/provisions of E.O. 226 and the current IPP, including the ownership requirements for registered enterprises.
C.2 TECHNOLOGY TRANSFER C.2.1 Definition “Technology Transfer” is the transfer to a Philippine firm, agency, or institution of specialized technical knowledge related to processes or products which are not otherwise available in the Philippine on normal commercial terms. C.2.2 Eligible Technology Transfer Arrangements The forms of technology transfer of propriety, non-propriety and intellectual property or information which are eligible as offsets under these guidelines include: a) Patents, formulae, technological rights or processes, licensing or know-how agreements, technical data packs, software, continuing access to current overseas expertise or data, more particularly in the areas listed in Annex “A” hereof. b) Transfer of equipment and resources not available in the Philippines under normal commercial terms. c) Other forms of technology transfer defined and/or prescribed by the Department of Science and Technology (DOST). C.2.3 Requirements for Eligibility as Offsets a) All technology transfer arrangements must be subject of appropriate written contracts/documents which are duly registered/approved by the Bureau of Patents, Trademarks and Technology Transfer; b) Technology transfer arrangements hereunder must result in the capability of the Philippine beneficiary to locally manufacture, manage, design, improve and/or utilize a new product or process, as certified to by the said Philippine beneficiary; c) The technology or process transferred hereunder must not be normally available in the Philippines; and d) Beneficiaries of these arrangements must be Filipinos or Philippine companies duly licensed or registered in accordance with the laws of the Philippines. C.3 RESEARCH AND DEVELOPMENT C.3.1 Thrusts of Research and Development To be eligible as offsets hereunder, research and development (R & D) activities must be directed towards the enhancement, improvement, advancement, and/or efficiency of Philippine industries, products, services, and/or environment. C.3.2 Eligible Areas for R & D The areas specified in items C.1.4 above, as eligible for foreign investments under these guidelines, shall likewise be eligible areas for R & D activities. Other areas for
R & D activities not otherwise specified therein shall be subject to PITC written approval on case-to-case basis. C.3.3 Requirements for Eligibility as Offsets a) R & D must be initiated and substantially supported/ financed by a foreign-based supplier/contractor; b) R & D must be associated with a scientific or technological activity preferably in the export sector and falling within the Science and Technology Agenda for National Development; c) R & D supplier/contractor must ensure that the results of the R & D are turned over to and owned by the Philippine beneficiary and if commercially viable, to be exploited under normal commercial terms for the benefit of the Philippines, such terms to be incorporated in appropriate contracts/documents to be submitted to PITC; d) R & D activities must utilize or be conducted in collaboration with local (Philippine) firms and institutions including government-owned manufacturing or research establishments or laboratories; and e) The R & D must be undertaken in accordance with the guidelines set forth by the DOST. C.4 TRAINING AND SKILLS UPGRADE C.4.1 Requirements for Eligibility as Offsets a) Training and skills upgrade programs must not be available in the Philippines; b) Training and skills upgrade programs must be initiated and substantially supported/financed by foreign-based supplier; c) Training and skills upgrade must assist in the dissemination of scarce, new or advanced technological or scientific knowledge or processes, particularly in the areas listed in Annex “A” hereof; d) Training and skills upgrade must be applicable to the Philippine setting/ environment; and e) Beneficiaries of the training or skills upgrade program must submit appropriate post-training/skills upgrade reports to PITC, duly certified by the Head of the Office concerned. C.5 DONATIONS/GRANTS C.5.1 Eligible Areas for Donations/Grants Donations or grants for educations, scientific, technological, research, social and environmental development programs/projects including those activities listed in C.1.4 above are eligible as offsets.
C.5.2 Eligible Donations/Grants Donations or grants may either be in the form of cash or property. C.5.3 Requirements for Eligibility as Offsets a) Donations or grants should come from foreign-based institutions; b) If donations/grants are in the form of foreign currency (cash), the same must be sourced from outside the Philippines and inwardly remitted to the Philippines. If in the form of property, the same must be appraised, evaluated and approved by the Philippine beneficiary thereof; c) Beneficiaries of the donations or grants may either be government or private institutions (including Non-Governmental Organizations – NGO) duly organized and existing under the laws of the Philippines; d) Donations or grants must be made directly to the Philippine beneficiaries thereof; and e) Donations or grants shall be duly evidenced by appropriate documents/deeds to be submitted to PITC together with a Certification from the Philippine beneficiaries evidencing receipt of the funds or property. C.6 ENVIRONMENTAL PROJECTS C.6.1 Definition “Environmental Projects” – as used herein shall refer to the projects directed towards the preservation, rehabilitation or development of the country’s ecological balance and the national use of resource to attain sustainable development as approved/endorsed by the Department of Environment and Natural Resources (DENR). C.6.2 Environmental Projects Eligible as Offsets a) Rehabilitation of degraded natural habitats within national parks or protected areas; b) Watershed rehabilitation and reforestation activities; c) Air, water and soil quality management projects including air and water pollution control projects; d) Solid and Liquid Waste Disposal/Recycling Projects; e) Projects pertaining to the introduction or development of renewable energy sources (i.e. solar energy and wind energy); and f) Projects analogous to the foregoing as expressly endorsed/approved by the DENR. C.6.3 Requirements for Eligibility as Offsets a) All environmental project proposals must be duly endorsed/approved for implementation by the DENR;
b) Said projects must be initiated and funded by foreign-based institutions from overseas sources; c) Said project shall be undertaken in close coordination with the DENR and local authorities of the targeted areas; and d) Said projects shall be deemed completed/accomplished only after the appropriate Certification to this effect is issued by the DENR and submitted to PITC. C.7 OTHERS Other activities or transactions similar to those previously enumerated above may be eligible as offsets PROVIDED: that all proposals relative thereto are submitted to PITC for proper evaluation and approval prior to implementation.
D.
VALUATION OF OFFSETS & MULTIPLIERS D.1 GUIDELINES a) Eligible offsets shall be valued based on the set criteria herein below established. b) Basic Multipliers shall be applied to the offset values as incentives for pursuing these offsets. Certain categories of offsets, when undertaken under certain conditions, will be granted an Incremental multiplier to be added to the Basic multiplier. These conditions and their corresponding multipliers are enumerated in Annex “B” and made integral parts hereof. To Illustrate: Foreign Investments in Pioneer Enterprises are given a Basic multiplier of x4. If the investment is made in an enterprise located in a Less Developed Area (LDA) as identified in the IPP, there is an incremental multiplier of 2 added to the Principal multiplier. To Compute: In the case cited above, if the investment is US$20,000, then the computation of offsets will be as follows: US$20,000 x (4 +2) = US$120,000 c) In cases where the eligible Offsets falls within two or more categories of offsets, the Basic multiplier to be applied to such activity shall be HIGHER multiplier without considering any Incremental multiplier, if applicable. d) Incremental Multipliers can only be added/applied if there is already a Basic multiplier provided for a particular offset activity. Where there is no offset activity with a Basic multiplier, then there can be no Incremental multiplier which can be applied/added. D.2 CRITERIA FOR VALUATION & APPLICATION OF MULTIPLIERS The following are the criteria for valuation and application of multipliers for specified offset activities/projects: D.2.1 FOREIGN INVESTMENTS: a) Criteria for Valuation
Foreign investments are valued based on the foreign currency-denominated capitalization actually put into an eligible enterprise, whether in cash or assets, original or additional. b) Basic Multiplier The Basic Multiplier to be applied to a particular foreign investment shall depend on whether the same is made in a (i) Pioneer or (ii) Non-Pioneer Enterprise as defined in these guidelines: Pioneer (P) : x4 Non-Pioneer (NP): x2 c) Incremental Multipliers may be applied/added to this Offset category per Annex “B” hereof. D.2.2 TECHNOLOGY TRANSFER a) Criteria for Valuation Technology Transfer arrangements are valued based on the actual US$ (or equivalent in other foreign currency) costs of the transfer or transaction value. b) Basic Multiplier A Basic multiplier of 3x the value of the technology transfer shall be applied. c) Incremental Multipliers may be applied/added to this offset category per Annex “B” hereof. D.2.3 RESEARCH AND DEVELOPMENT a) Criteria for Valuation R & D is valued based on the actual US$ (or equivalent in other foreign currency) costs incurred for the R & D undertaken. b) Basic Multiplier A multiplier of 3x the value of the R & D project shall be applied. c) No Incremental Multiplier shall be applied/added to this offset category. D.2.4 TRAINING AND SKILLS UPGRADE a) Criteria for Valuation The basis for valuation for training and skills upgrade shall be the actual costs of training/skills upgrade, including travel and living expenses incurred by the overseas supplier. b) Basic Multiplier
A multiplier of 3x the actual costs of the training and skills upgrade program shall be applied. c) No incremental multiplier shall be added/applied to this offset category. D.2.5 DONATIONS OR GRANTS a) Criteria for Valuation Donations or grants shall be based on the US$ value (or its equivalent in other foreign currency) of the donation or grant. If in property, the appraised market value thereof shall be used as basis. b) Basic Multiplier A multiplier equivalent to 2x the value of the donation or grant shall be applied. c) Incremental Multipliers may be applied/added to this offset category as per Annex “B” hereof. D.2.6 ENVIRONMENTAL PROJECTS a) Criteria for Valuation Environmental projects shall be valued based on the actual US$ (or its equivalent in other foreign currency) costs of the projects. b) Basic Multiplier A multiplier of 3x the value of the project shall be applied. c) No Incremental multiplier shall be applied/added to this offset category. D.2.7 OTHERS The criteria for valuation and multipliers to be applied to other offset transactions/activities, not expressly provided hereunder shall be provided/decided by PITC on a case-to-case basis. E.
APPROVAL OF OFFSET PROPOSALS Pursuant to the provisions of E.O. 120 and its IRR, all offset proposals of foreign suppliers of the government agencies or offices covered by IRR, shall be submitted to PITC for evaluation and approval no later than five (5) working days after the selection of the said foreign supplier, unless the said period is extended by PITC.
F.
SUPPLETORY DOCUMENT The provisions of E.O. 120 and its IRR shall be deemed incorporated and adopted by reference to this Circular and this Circular shall be considered as a binding supplement to the IRR.
G.
EFFECTIVITY This Circular shall take effect immediately. Makati, Metro Manila, 10 January 1995.
(signed) JOSE LUIS U. YULO, JR. President
ANNEX “A” ELIGIBLE AREAS FOR TECHNOLOGY TRANSFER & TRAINING/SKILLS UPGRADE PROGRAMS 1.
Archipelagic Geography • Mariculture • Aquaculture • Maritime Industries
2.
Natural Resources • Ecosystem Farming • Geothermal Technology • Renewable Energy Technologies • Jewelry
3.
Applied Sciences • Biotechnology • Medical/Health Professionals • Agribusiness • Management
4.
Ethno linguistic and Religious Diversity • Plural Development Processes • Tourism • Cross-cultural Communications
5.
Educational Infrastructure • Soft or Behavioral Technologies • HRD Tools • Group Dynamic Techniques • Computer Software • Entertainment
6.
Population • Conflict Management • Community Development Tools
ANNEX “B” INCREMENTAL MULTIPLIERS A.
Incremental Multipliers (mentioned in Item D.1 (b) of these Guidelines) may be applied/added to the Basic Multiplier of any of the following offset categories, to wit: • • •
B.
Foreign Investment Technology Transfer Donations or Grants
The following Incremental Multipliers are applicable only if the offsets listed in (A) above are undertaken or pursued in any one or more of the preferred areas enumerated below: Preferred Areas
C.
Incremental Multiplier
1)
In Export Winners identified in the current IPP or in enterprises engaged in non-traditional exports, also specified in the current IPP, provided that, in either case, at least 70% of production is for the export market.
Basic Multiplier + 2
2)
In Less Developed Areas (LDA’s) identified in the current IPP
Basic Multiplier + 2
3)
In areas outside Metro Manila (other than LDA’s)
Basic Multiplier + 1
4)
In rehabilitation, expansion or modernization projects identified in the current IPP
Basic Multiplier + 1
Where the said offsets are undertaken or pursued in more than one of the preferred areas listed in (B) above, the total multipliers (basic + incremental) to be applied to such offset shall not exceed 6x.
APPENDIX B Republic of the Philippines Department of Trade and Industry Philippine International Trading Corporation Memorandum Circular No. CT-95.4/01 AMENDING CERTAIN PROVISIONS OF MEMORANDUM CIRCULAR NO. CT-95.1/01 ON GUIDELINES FOR EVALUATION AND APPROVAL OF OFFSET ARRANGEMENTS UNDERTAKEN PURSUANT TO E.O. 120 AND ITS IMPLEMENTING RULES AND REGULATIONS A.
INTRODUCTION This Memorandum Circular is being issued for the purpose of amending certain provisions of Memorandum Circular No. CT-95.1/01 dated January 10, 1995 (“Circular CT-95.01/01”) entitled “Guidelines For the Evaluation and Approval of Offsets Arrangements to be Undertaken Pursuant to E.O. 120 and its Implementing Rules and Regulations”.
B.
AMENDMENTS/SUPPLEMENTS The following are the amendments to Circular CT-95.01/01:
. B.1 A new provision is inserted at the beginning of Item C (ELIGIBLE OFFSETS), to read as follows: “C. ELIGIBLE OFFSETS All offset activities, regardless of their types/categories, which are to be undertaken pursuant to E.O. 120 and its Implementing Rules and Regulations must, first and foremost, meet the test of ‘causality’, as defined hereunder. Causality – as the term is used herein shall mean that the proposed offset activities/transactions were initiated by the foreign supplier as a result of a countertrade obligation/commitment of said foreign supplier pursuant to a particular Supply/Sales Contract with the Philippine government. As a general rule, any offset activity/transaction undertaken after the effectivity date of a Specific Countertrade Agreement between the foreign supplier and PITC is presumed to have been undertaken as a result of said Specific Countertrade Agreement. As cited in Annex “A” of the IRR to E.O. 120, offsets may be Direct or Indirect. When the offset to be undertaken is directly related to the capital equipment, machinery, goods or services imported by the Philippine government, the same is considered DIRECT. Otherwise, they are considered INDIRECT. Subject to the causality provisions hereof and the provisions of E.O. 120 and its IRR, the following are eligible categories of offset activities, to wit:
x x
x x
x x
x x
x x
x x
x x
x x
x x
B.2 No. 4 Item B of Annex “B” of Circular CT-95.01/01 is deleted. There will no longer be any Incremental Multipliers for rehabilitation, modernization or expansion projects.
C.
INTEGRATED DOCUMENT From and after effectivity date hereof, all references to Circular CT-95.01/01 shall be deemed to refer to Circular CT-95.01/01 as amended by this Circular CT-95.4/01. Except as expressly amended/modified hereby, all terms and provisions set forth in Circular CT-95.1/91 shall remain unchanged and in full and force and effect and Circular CT-95.01/01 shall, from hereon, be read as a single integrated document incorporating the amendments/modifications effected hereby.
D.
EFFECTIVITY This Circular shall take effect immediately.
Makati City, 12 April 1995.
(signed) JOSE LUIS U. YULO, JR. President
APPENDIX C Republic of the Philippines Department of Trade and Industry Philippine International Trading Corporation Memorandum Circular No. CT-95.4/02 INCLUSION OF COUNTERTRADE UNDERTAKING OF FOREIGN SUPPLIERS IN BIDDED OR NEGOTIATED CONTRACTS COVERED BY E.O. 120 (S. 1993) AND ITS IMPLEMENTING RULES AND REGULATIONS A.
INTRODUCTION To ensure that “best efforts” are exerted by Government procuring offices to adopt countertrade as a supplemental trade tool with respect to their procurement/importation of foreign capital equipment, machinery, products, goods and services as mandated under E.O. 120 dated August 19, 1993 and its Implementing Rules and Regulations (“IRR”) dated January 10, 1995, the following measures shall be complied with.
B.
INTEGRATION OF A COUNTERTRADE UNDERTAKING/PROVISO IN BID TENDERS OR RELATED PRODUCT OFFERS OF FOREIGN SUPPLIERS B.1 It shall be the responsibility of all Government procuring offices, whose foreign procurement or importations are covered by E.O. 120 and its IRR, to require its foreign suppliers to submit, together with their bid tender (in case of bidded purchases) or product/sales offer (in case of negotiated purchases) a written Undertaking to pursue countertrade in the Philippines in the event that said supplier is awarded the subject contract. The text of said written Undertaking is hereto attached as Annex “A” and made integral parts hereof. B.2 The aforesaid Undertaking shall be signed by the duly authorized representative of the foreign supplier and shall be submitted to the Government procuring office together with, and at the time as, the bid tender or product/sales offer for the particular equipment, machinery, product, goods or services being offered to the government. B.3 The Government procuring office concerned shall take all necessary steps to integrate the above-mentioned requirement in its bidding or related procurement procedures for importations covered by E.O. 120 and its Implementing Rules and Regulations. To this end, said office shall ensure that its foreign suppliers are duly informed of such a requirement PRIOR to submission of their respective formal bid or related offers. B.4 Pursuant to Section 6.3 of the IRR, the Government procuring office shall, in the evaluation of bid tenders/offers of foreign suppliers, give preference/priority (product specifications, quality considerations, pricing and related terms being equal) to the foreign supplier offering the most favorable countertrade arrangement for the Philippines. B.5 Following Section 6.4 of the IRR, the Government procuring office shall, within five (5) working days from the selection of their foreign supplier, notify PITC in writing of the details of the importation/purchase together with the countertrade Undertaking of the selected foreign supplier.
C.
COMPLIANCE C.1 Compliance of the above-mentioned requirements shall be prima facie proof that “best efforts” were exerted by the concerned Government procuring office to ensure compliance with E.O. 120 and its IRR. C.2 Foreign suppliers who fail or refuse to submit such written Undertaking, as imposed by the Government procuring office concerned, may be disqualified by said procuring office, at its sole option/discretion.
D.
SUPPLETORY DOCUMENT This circular shall be considered as a binding supplement to the IRR and shall form integral parts hereof.
E.
EFFECTIVITY This Circular shall take effect immediately. Makati City, April 17, 1995. (signed) JOSE LUIS U. YULO, JR. President
Annex “A” Text of Countertrade Undertaking UNDERTAKING/COMMITMENT TO PURSUE COUNTERTRADE ARRANGEMENTS RELATIVE TO THE SUPPLY OF ________________________________________ (cite type of importation) Pursuant to the national policy on countertrade as enunciated in E.O. 120 S. 1993 relative to the adoption of countertrade in government procurement; and in order to assist in the economic progress of the Philippines, the undersigned bidder hereby commits that should it be awarded the Supply Contract for the above-cited project by the (name of government office) it shall, directly or through a nominated third party, undertake Countertrade Arrangements such as but not limited to the export of Philippine products, the usage of Philippine services, offsets, and/or investments and technology transfers for Philippine industrial development, equivalent to not less that fifty percent (50%) of the total contract price of the Supply Contract, said Countertrade Arrangements to be concluded in writing between the undersigned (or its duly designated nominee) and PITC within ninety (90) days from the signing of the Supply Contract. Failure on the part of the undersigned to comply with this commitment to enter into Countertrade Arrangements (directly or through its nominee) with PITC within the 90-day period prescribed herein shall entitle the (name of government office) to rescind/cancel the Supply Contract and award the same to another party and/or disqualify the undersigned from participating in future supply contracts with this office, without liability on the part of (name of government office). This Undertaking/Agreement shall form part and parcel of the undersigned’s bid tender for the above project. Issued this _________ day of ______________ in ____________, Metro Manila.
________________________ NAME OF COMPANY (SUPPLIER/BIDDER)
_____________________________ REPRESENTATIVE TITLE: ______________________
______________________________ SIGNATURE
APPENDIX D Republic of the Philippines Department of Trade and Industry Philippine International Trading Corporation Memorandum Circular No. CT-00.6/01 REVISED GUIDELINES ON BANKING OF OFFSET CREDITS UNDER E.O. 120 S. 1993 AND ITS IMPLEMENTING RULES AND REGULATIONS I.
INTRODUCTION In the interest of facilitating investment projects, technology transfer, training, research and other projects that are deemed vital to the Philippine economy, the banking of offset credits awarded to a foreign supplier (or its designated countertrader), for offset activities undertaken pursuant to E.O. 120 s. 1993 and its Implementing Rules and Regulations (IRR) shall be allowed subject to the guidelines prescribed hereunder. Counterpurchase activities are not eligible for banking of credits.
II.
DEFINITION OF TERMS 2.1
As used herein, the following terms shall mean as follows: 2.1.1 “Bankable or Eligible Offset Credits” mean the offset credits referred to in Section 3.1.1 hereof. 2.1.2
“Banking Approval Certificate” mean the clearance issued by PITC to a foreign supplier (or countertrader) to proceed with the implementation of the proposed offset project.
2.1.3 “Certificate of Banked (Forward) Credits” mean the certification issued by PITC accrediting completed offset project to be applied against future offset obligations with the Philippine Government. 2.1.4
“Forward Credits” mean offset credits held by a foreign supplier or its designated countertrader which are accredited by PITC (as the Philippine Government’s countertrade crediting office under the IRR) and substantiated by a Certificate/s of Banked Credits issued by PITC to be used/applied, subject to the conditions hereinafter outlined, against future offset obligations with the Philippine government.
2.1.5 “Offset Priorities” mean the Offset Priorities listing drawn up by procuring government departments, agencies or offices as part of their respective development or modernization programs and/or those investment activities that are contained/listed in the current Investment Priorities Plan (IPP) of the Board of Investment. 2.1.6 “Offset Credits” mean the value claimed by and awarded to a foreign supplier (or its designated countertrade) once said foreign supplier or countertrade discharges/performs the amount of its offset obligation /commitment in accordance with the Offset Priorities pursuant to E.O. 120 s. 1993 and its IRR or other pertinent Philippine laws or regulations on countertrade in government procurement.
2.2
Unless otherwise modified by or defined in the next preceding paragraph, the terms used in this circular shall have the same meaning attributed to them in E.O. 120 s. 1993, its IRR and pertinent countertrade-related circulars or issuances issued by this office.
III. BANKING OF OFFSET CREDITS 3.1 POLICY GUIDELINES 3.1.1 Subject to the conditions and procedures outlined in this circular, banking of credits or forward credits under E.O. 120 S. 1993 and its IRR shall refer only to the following offset credits: a) Offset credits awarded to a foreign supplier or its designated countertrader by PITC for offset transactions covered/included under the Offset Priorities as defined in Section 2.1.5 above, which credits are in excess of the offset obligation or commitment of said foreign supplier or countertrade with an existing offset obligation/commitment arising from a Supply Contract with the Philippine Government. b) Offset credits awarded to a foreign supplier or its designated countertrader by PITC for offset transaction covered/included under the Offset Priorities as defined in Section 2.1.5 above, which credits are awarded in advance of a Supply Contract with the Philippine Government. hereinafter referred to as “BANKABLE OFFSET CREDITS” 3.1.2
The foreign supplier or countertrader is given only one (1) year from date of issue of the Banking Approval Certificate granted by PITC within which to start implementation of the Offset Project. Failure to implement the said project within the herein period shall automatically nullify the said Certificate and PITC shall be authorized to grant approval to another foreign supplier or countertrader to pursue the same project.
3.1.3 Only the holder of a Certificate of Banked Credits is entitled to use/apply said credits against future offset obligations with the Philippine Government under the guidelines herein established. Example: If a foreign supplier has designated a countertrader to perform the former’s offset obligations, and the latter, after performance of the offsets, has bankable offset credits, only the said countertrader (and not the foreign supplier) may apply/use the bankable offset credits for future offset obligations with the Philippine government since it was the countertrader that actually performed the offset obligation/activity. The foreign supplier is not entitled to avail of such bankable offset credits. 3.1.4
Bankable Offset Credits may be applied/used against future offset obligations with the Philippine government only within three (3) years from the date of the Certificate of Banked Offset Credits. Said Certificate shall only be used after evaluation and approval of the completed offset project/activity.
3.1.5
An original holder of Certificate of Banked Credits (whether a foreign supplier or its designated countertrade) may assign or transfer unapplied or unused banked credits, either wholly or partially, to another firm or entity, for purposes of allowing the assignee/transferee to apply said credits against the latter’s existing offset obligation with the Philippine government subject, however, to all of the following conditions:
a) Formal written notification of a proposed transfer or assignment is given to PITC by the holder of Certificate of Banked Credits PRIOR to the transfer/assignment, providing PITC with the full details of the prospective assignee/ transferee (i.e. company name and profile, etc) including the latter’s existing offset obligations with the Philippine government to which such assigned/ transferred credits are intended to be applied/used; b) The transfer or assignment is subject to the final written approval/acceptance of PITC subject to the next succeeding section; c) The said credits can only be applied against the said assignee’s/transferee’s existing offset obligations with the Philippine government only if the importing government agency/office concerned approves such application of credits; d) Once transferred/assigned, the said assignee/transferee may no longer further transfer or assign such credits to any party for any reason whether such party is any affiliate or subsidiary of the original holder of the Certificate of Banked Credits; and e) The said credits must be used by said assignee/transferee within the three (3) year period stated in Section 3.1.4 above. Transfer or assignment of bankable offset credits not complaint with the foregoing conditions shall no legal or binding effect on the Philippine government. 3.1.6
The foreign supplier or countertrader shall be given three (3) years from date of Banking Approval Certificate to complete implementation of the proposed offset project. A grace period of two (2) or more years may be granted on a case-to-case basis subject to PITC approval/assessment of the offset project.
3.1.7
In the event the foreign supplier or countertrader fails to complete the offset project within the periods given in 3.1.6, the Banking Approval Certificate previously granted shall be revoked and no offset credit shall accrue to the foreign supplier or countertrader.
3.1.8 If the foreign supplier or countertrader fails to win a Supply Contract with any Philippine government agency or office within the validity period of the banked offset credit, as established in 3.1.4 above, there shall be no obligation to refund any of the fees paid to PITC in connection with the banking of offset credits and no obligation whatsoever on the part of PITC or the Philippine government shall arise relative to the credits banked under these guidelines. 3.2 BANKING PROCEDURES 3.2.1
Application for Offset Project Eligibility: For an offset project to qualify as eligible for banking under this circular, the foreign supplier or countertrader shall secure pre-approval to proceed with the said offset project and earn bankable offset credits and submit the following documents/requirements to PITC: a) Letter of Intent/Application to bank EXCESS offset credits (arising from an existing offset obligation where an excess credit is expected) or FORWARD
credits (for an offset project to be undertaken in anticipation of a supply contract with the Philippine government). b) Offset Project Profile detailing the offset activity to be undertaken, with a Project Feasibility Study or similar document, which provides a technical description of project, benefits to be derived from the project, company or people behind the project (and their track record), resources required, and other information relevant to the project that will enable PITC to assess the viability and acceptability of the proposed project in collaboration with concerned government and industry sectors. c) Company Profile of foreign supplier or countertrader, detailing, among others, ownership structure and subsidiaries/affiliates, financial statement for the last 3 years, major business/projects, highlighting previous offset projects accomplished in the Philippines and in other countries. d) Payment of PITC processing fees of US DOLLARS: ($1,000.00) per application. 3.2.2
ONE THOUSAND
Review and Approval of Offset Project Proposal PITC shall review and, if acceptable, approve the proposed offset project submitted by the foreign supplier or countertrader (for implementation) within at least thirty (30) days from date of submission of complete data/documents enumerated under 3.2.1 above. Said period may be extended depending on the complexities of the project and the feedback process hereinafter outlined. The review/approval process shall entail the following: a) Assessment as to whether the proposed offset project is listed/included in the Offset Priorities as defined in Section 2.1 above. b) Consultations with the government office or agency where the foreign supplier or countertrader expects to win a supply contract and where the offset credit is initially expected to be applied. c) Review/assessment of viability of the proposed offset project in consultation with the Board of Investments (BOI), National Economic and Development Authority (NEDA) and related industry sectors. For technology transfer, training, or research and development projects, the endorsement of the pertinent government office/agency (supervising the industry involved) attesting to the need/acceptability of the project shall likewise be secured. d) Securing the approval/endorsement of the procuring government agency/office accepting the proposed offset project and allowing the banking of offset credits resulting from the said project (as applicable). e) Preparation and release of the Banking Approval Certificate by PITC officially authorizing the foreign supplier or countertrader to implement the approved offset project.
3.2.3
Requirements for Implementation and Monitoring of Approved Offset Projects: a) Investment Projects: The foreign supplier or countertrader shall submit/comply with the following:
a.1) Submit to PITC a Business Plan and Timetable to develop/operationalize the Offset Project within 90 days from receipt of the Banking Approval Certificate. a.2) Should the investment project entail a joint venture with a Philippine firm, the foreign supplier/countertrader has six (6) months, from submission of the said Business Plan to identify, negotiate and finalize the terms of the Joint Venture Agreement with the Philippine joint venture partner. The list of prospective partners shall be furnished PITC who shall conduct its own assessment of the proposed partners. In this regard, the foreign supplier may, if it so desires, request the assistance of PITC to package the joint venture, subject to payment of appropriate service fees. PITC shall act as witness to the Joint Venture Agreement and shall likewise be furnished a copy of the JVA. a.3) If the investment project will not entail the formation of a Joint Venture with a Philippine partner, but merely an investment in an existing firm/ project, the foreign supplier has six (6) months from submission of the Business Plan to submit the nature/details of said firm/project and the extent of investment therein. a.4) The foreign supplier/ countertrader has ninety (90) days from date of signing of the Joint Venture Agreement (for joint ventures) or Investment Agreement (for non-joint ventures) to register the business venture with the Securities and Exchange Commission and the Board of Investments, furnishing PITC with copies of the pertinent Certificates of Registration within five (5) days from release thereof. a.5) The foreign supplier shall submit a report of the remittance of its equity investments in the new joint venture or business venture within sixty (60) days from release of Certificates of Registration with the SEC and BOI. a.6) The foreign supplier/ countertrader shall submit to PITC a Quarterly Report of operations of the venture/ activity for the first two (2) years of operation within 60 days from the end of the quarter and a Semi-Annual Report for the succeeding three (3) years thereafter within ninety 90 days from the end of the semester. These reports shall contain, among other, the following:
Start-up and operations costs, financial reports, cash flows, personnel complement (technical and administrative), organizational structure and the like;
Report on operations, including on-going and future projects, contracts and agreements signed by the new venture; Report on sales and prospective sales and other related activities.
b) Technology Transfers, Research and Development, Donations, Training and other Offset Projects: The foreign supplier/countertrader shall submit/comply with the following: b.1) Submit to PITC a Business Plan and Timetable to develop/operationalize the offset project within ninety (90) days from date of the Banking Approval Certificate.
b.2) The foreign supplier/ countertrader has six (6) months from date of submission of the Business Plan to identify, negotiate and, upon assessment and approval of PITC, finalize/sign agreements with the chosen Philippine beneficiary/company of the proposed offset project. b.3) The pertinent agreement(s) with the Philippine beneficiary/ company of the offset project shall be witnessed by PITC who shall likewise be furnished with a copy of said agreement(s). b.4) The foreign supplier/ countertrader shall submit a Quarterly Progress Report for the first two (2) years of operation reckoned from the date of the pertinent agreement(s) with the Philippine beneficiary/ company within 60 days from the end of the quarter, and a Semi-Annual Report for the succeeding three (3) years thereafter within 90 days from the end of the semester. These reports must likewise be accompanied by the Acceptance Certificate of the offset project recipient/ beneficiary. 3.3 ACCREDITATION PROCEDURES 3.3.1
For Investment Projects: a) Foreign supplier/countertrader shall, upon completion of the offset project, submit to PITC a Request for Accreditation (for banking purposes) indicating the offset value being claimed for accreditation per the form attached hereto as Annex “A”. b) Together with the Request for Accreditation shall be attached a Transaction Summary detailing the total equity investments in support of the offset value being claimed for crediting classified as cash, property, equipment or the like, duly supported by the following:
Certified true copy of wire transfers or remittance of the funds/cash representing the foreign investments in the offset project;
Summary/list of property or equipment imported into the Philippines and invested/purchased for the project and the FOB/CIF costs thereof, together with certified copies of import documents such as bills of lading/airway bill, SGS CRF, commercial invoice, payment documents (Letter of Credit, telegraphic transfer, etc.)
Certified copies of Certificates of title or lease agreement for property/warehouse/office used by the JV company or firm (except those used for residential purposes).
Other documents as may be deemed necessary in support of the offset values being claimed for crediting.
Secretary’s Certificate of the JV Company or Firm attesting to the Board Resolution approving the total value of equity investments made by the foreign supplier/countertrader for this offset project, per the Transaction Summary above.
c) PITC shall have at least thirty (30) days within which to review and process the above Request for Accreditation and all the supporting documents hereto. PITC
shall also compute multipliers (where applicable) for the offset project and discuss the same with the foreign supplier/Countertrader. d) Upon approval of the accreditation, PITC shall issue the following in the name of the foreign supplier/Countertrader:
Certificate of Banked (Forward) Credits – per the form attached hereto as Annex “B”; and
Debit Note for PITC monitoring fees per the schedule outlined in (e) below
e) The foreign supplier/countertrader shall pay PITC’s monitoring/accreditation fees per the following rates based on the offset value accredited by PITC: ========================================== OFFSET VALUE FEES (in US$) (in US$) ========================================== 1M - 50 M 1.5% over 50M - 100M
750,000 plus 1.25% over 50M - 100M
over 100M - 150M
1,375,000 plus 1% over 100M - 150M
over 150M - 200M
1,875,000 plus 0.75% over 150M - 200M
over 200M - 400M
2,250,000 plus 0.5% over 200M - 400M
over 400M
3,250,000 plus 0.25% over 400M
Said fees shall be paid directly to PITC (Attn: Treasury Department) either in bank draft or through telegraphic transfer to a PITC designated account within fifteen (15) banking days from the receipt of PITC’s debit note and Certificate of Banked (Forward) Credits. Non-payment of the said fees shall be a ground to revoke/cancel Certificate of Banked (Forward) Credits issued by PITC to the foreign supplier/countertrader concerned. The above-mentioned monitoring fees shall in lieu of the monitoring fees due PITC for the same accredited offset activity in the event the same is applied to an existing offset obligation with the Philippine government. 3.3.2
For Technology Transfers, Research and Development, Donations, Training and other offset projects: a) Foreign supplier/countertrader shall, upon completion of the offset project, submit to PITC a Request for Accreditation (for banking purposes) indicating the offset value being claimed for accreditation as per the form attached hereto as Annex “A”.
b) Together with the Request for Accreditation shall be attached a Transaction Summary detailing the accomplishments and breakdown of offset value being claimed for crediting and banking, duly supported by the following:
Certified copy of agreements/contract signed between the foreign supplier/countertrader and the offset project recipient relative to the offset project.
Acceptance Certificate evidencing the written approval/acceptance of the completed offset project by the recipient thereof, duly confirmed by its governing board, if a corporation, or by its Department Secretary, if a government agency or office;
Justification for the proposed offset value being claimed for crediting/banking; and
Documents/contracts/receipts in support of the expenditures being claimed as offset credit for the project;
Certified copy of the Final Report submitted for the offset project, i.e. Research & Development Studies (for R & D projects); Post-Training Reports (for training projects); Technology Transfer Report, duly certified by the Intellectual Property Office and DOST Registration of technology transfer projects, etc.
c) PITC shall have at least thirty (30) days within which to review and process the above Request for Accreditation and all the supporting documents thereto. PITC shall also compute multipliers (where applicable) for the offset project and discuss the same with the foreign supplier/countertrader. d) Upon approval of the accreditation, PITC shall issue the following in the name of the foreign supplier/countertrader:
Certificate of Banked (Forward) Credits – per the form attached hereto as Annex “B”; and
Debit Note for PITC monitoring fees per the schedule outlined in (e) below:
e) Upon filing of the Request for Accreditation and Transaction Summary, the foreign supplier/countertrader shall pay PITC’s monitoring/accreditation fees per the following rates based on the offset value being submitted for accreditation: ========================================== OFFSET VALUE FEES (in US$) (in US$) ========================================== 1M - 50 M
1.5%
over 50M - 100M
750,000 plus 1.25% over 50M - 100M
over 100M - 150M
1,375,000 plus 1% over 100M - 150M
over 150M - 200M
1,875,000 plus 0.75% over 150M - 200M
over 200M - 400M
2,250,000 plus 0.5% over 200M - 400M
over 400M
3,250,000 plus 0.25% over 400M
Said fees shall be paid directly to PITC (Attn: Treasury Department) either in bank draft or through telegraphic transfer to a PITC designated account within fifteen (15) banking days from the receipt of PITC’s debit note and Certificate of Banked (Forward) Credits. Non-payment of the said fees shall be a ground to revoke/cancel Certificate of Banked (Forward) Credits issued by PITC to the foreign supplier/countertrader concerned. The above-mentioned monitoring fees shall in lieu of the monitoring fees due PITC for the same accredited offset activity in the event the same is applied to an existing offset obligation with the Philippine government. IV. PITC REPORTORIAL REQUIREMENTS PITC shall maintain records/reports of all transactions covered by this circular, as follows: 4.1 Monitoring Logbook for individual foreign suppliers/countertraders containing records of all approved applications for banking of offset credits and progress of accomplishments of the same.
V.
4.2
Record of all Certificates of Banked Credits released/approved for both forward and excess credits including its utilization, applications and approved transfer/assignments thereof.
4.3
For completed offset projects, a Statement of Outstanding Offset Credits reflecting all unused/unapplied offset credits shall be submitted by PITC to the foreign supplier/countertrader every six (6) months from date of release of the Certificate of Banked Credits.
4.4
For on-going offset projects, a Performance Report Summary shall be furnished by PITC to the foreign supplier/countertrader every six (6) months from date of release of the Certificate of Banked Credits, reflecting progress of accomplishments and expected completion dates.
4.5
The concerned government procuring agency or office through their respective Heads shall be furnished a copy of the reports listed in 4.3 and 4.4 above.
SUPPLETORY DOCUMENT This circular shall be considered as a binding supplement to the IRR and shall form an integral part thereof.
VI. REPEALING CLAUSE PITC Memorandum Circular No. CT-98.4/01 dated April 1, 1998 and all prior issuances inconsistent herewith are hereby repealed.
VII. APPLICATION The provisions hereof shall not apply retroactively to offset transactions already completed, undertaken or approved for implementation PRIOR to June 15, 2000. VIII. EFFECTIVITY This Circular shall take effect on June 15, 2000. MAKATI CITY, PHILIPPINES, June 15, 2000.
(signed) SYLVIA R. VELOSO President
Annex “A” Republic of the Philippines Office of the President PHILIPPINE INTERNATIONAL TRADING CORPORATION REQUEST FOR ACCREDITATION (For Completed Offset Project) Applicant: __________________________________________________ (Name of Company who implemented/facilitated offset project) Address : __________________________________________________ Tel. No. : ___________________ Fax No.: ______________________ E-Mail : ___________________ Telex : ______________________ Offset Project Title: __________________________________________ PITC Approval No. / ________________________________________ Date (PITC Approval of Letter of Intent/Application to Offset Project) Offset Project Timeline: Started: _________________ Completed: ___________________ Offset Project Details/Particulars: (Please attach Transaction Summary together with supporting documents required under Sub-Section 3.3.3 (b) of PITC M.C. # CT-00.6/01) Offset Value for Accreditation : (in words and figures) US DOLLARS: _________________________________ US$ : _________________________________ We hereby attest to the truth, accuracy and authenticity of the information and documentation herein provided in support of this request for accreditation of our Offset Project for banking purposes pursuant to existing regulations. We understand that any false statements or misrepresentations made hereon will entitle PITC to disapprove this request without any liability or obligation on the part of the Philippine Government. Submitted By : ___________________________________________ (Name and Title of Authorized Company Representative) _______________________ (Signature) Date _____________________
Annex “B” Republic of the Philippines Office of the President PHILIPPINE INTERNATIONAL TRADING CORPORATION CBC Ref. No. ___________________
Date: ________________ CERTIFICATE OF BANKED CREDITS
Pursuant to its Request for Accreditation dated ________________, and after due evaluation of all supporting documents thereto, this Certificate of Banked Credits is issued if favor of: Company Name: _______________________________________________ Company Address: ______________________________________________ for the following Offset Project duly completed as follows: Offset Project Title: _____________________________________________ Project Completion Date: _______________________________________ Banking Approval Certificate No. ______________ Date ______________ The value of the offset credit awarded for this project and hereunder banked is: US DOLLARS : ________________________________________ (in words) US$ : ________________________________________
(in figures)
Subject to pertinent provisions of PITC Memorandum Circular No. CT-00.6/01 dated June 15, 2000, this Certificate shall entitle the holder to apply the credits herein awarded against future offset obligations with the Philippine Government within three (3) years from the date hereof. The transfer/assignment of this Certificate shall likewise be subject to the pertinent provision of the aforementioned circular. Issued in Makati City, Philippines. PITC
PHILIPPINE INTERNATIONAL TRADING CORPORATION By:
___________________________ President
Corporate Seal
APPENDIX E Republic of the Philippines Department of National Defense DEPARTMENT CIRCULAR NUMBER 04 PRESCRIBING THE GUIDELINES IN THE IMPLEMENTATION OF COUNTERTRADE FOR PROCUREMENT CONTRACTS UNDER THE ARMED FORCES OF THE PHILIPPINES MODERNIZATION PROGRAM
CHAPTER 1.0 Article 1.1
GENERAL POLICIES & GUIDELINES Countertrade and The Modernization Act
1.1.1 Applicability of Executive Order No. 120 (s. 1993) and its Implementing Rules and Regulations. - Executive Order No. 120 (series of 1993) and its Implementing Rules and Regulations (IRR) directs the Philippine government, its departments, bureaus, agencies including government owned and controlled corporations to adopt countertrade as a supplemental trade tool with respect to the importation of foreign capital equipment, machinery, products, goods, and services, equivalent to at least US$ 1 Million and above. The provisions of E.O. 120 (series of 1993) and its IRR shall apply to all countertrade arrangements covered by this Circular unless otherwise expressly provided herein. 1.1.2 Republic Act No. 7898, otherwise known as the "AFP Modernization Act" states in Section 10(b) that "In order to reduce foreign exchange outflow, generate local employment opportunities and enhance technology transfer to the Philippines, the Secretary of National Defense shall, as far as feasible, incorporate in each contract/agreement special foreign exchange reduction schemes such as countertrade, in country manufacture, co-production, or other innovative arrangements or combinations thereof." 1.1.3. DND Department Circular No. 01 dated March 6, 2000 prescribing the "Implementing Rules and Regulations of the Armed Forces of the Philippines Modernization Program," particularly Section 3.2.11 thereof, states "In contracts worth US One Million Dollar ($ 1 M) or more involving the acquisition or upgrade of equipment or weapons systems from foreign suppliers, the provisions of Executive Order No. 120 (1993) and its Implementing Rules and Regulations shall apply." Article 1.2 Coverage. - This Department Circular shall cover all procurements including acquisitions and upgrades of equipment and weapon systems, under the AFP Modernization Program approved by Congress through Joint Resolutions No. 28 from foreign suppliers valued at least US$ 1 Million and above or its equivalent in other convertible foreign currency and hereby further prescribes the minimum countertrade requirements and procedures to be adopted pursuant thereto. CHAPTER 2.0
Article 2.1
COUNTERTRADE COMMITMENT OF SUPPLIERS Countertrade Level
2.1.1 For procurement contracts involving US$ 1 Million and above of its equivalent in other foreign currency, the minimum commitment to be required of the foreign supplier/manufacturer shall be as follows:
VALUE OF SUPPLY CONTRACTS (IN US$) $1 Million - $20 Million
MINIMUM COUNTERTRADE COMMITMENT/OBLIGATIONS 100% of the value of Supply Contract
over $20 Million $40 Million
90% of the value of Supply Contract
over $40 Million – $60 Million
80% of the value of Supply Contract
over $60 Million – $80 Million
70% of the value of Supply Contract
over $80 Million – $100 Million
60% of the value of Supply Contract
over $100 Million
80% of the value of Supply Contract
2.1.2 Notwithstanding the foregoing, the Secretary of National Defense may revise or modify the minimum countertrade obligation on a case-to-case basis upon determination by him that the same is for the best interest of the government and such other factors that would strengthen the defense cooperation between the Philippines and a foreign state. 2.1.3 The "value" of the Supply Contract, for purposes of this Circular, shall mean the FOB CIF value (whichever is applicable) of the Supply Contract, excluding Philippine taxes and duties. Article 2.2 Countertrade Program - The countertrade program to be offered by suppliers/manufacturers/contractors of the AFP may consist of either direct or indirect Offsets exclusively related to Defense projects, and/or counterpurchase of Philippine goods and services as defined in the IRR of E.O. 120 (1993). CHAPTER 3.0
Article 3.1
3.1.1
INTEGRATING COUNTERTRADE IN THE VARIOUS METHODS OF PROCUREMENT UNDER THE AFP MODERNIZATION PROGRAM Open Competitive Bidding & Limited Source Bidding Eligibility Requirements: Countertrade Undertaking Form
a). The Countertrade Undertaking Form per the format attached hereto as Appendix I, shall be included in the eligibility forms/documents to be accomplished by parties applying for eligibility. Said form shall be considered as one of the eligibility documents to be submitted pursuant to Section 4.3 and 4.4 of the Implementing Rules and Regulations of E.O. 302 (series of 1996), as amended. It shall contain the countertrade level of commitment of said bidders as well as their commitment to sign a Countertrade Agreement with Philippine International Trading Corporation (PITC) when awarded the Supply Contract by the AFP. b) Failure or refusal to accomplish and submit the Countertrade Undertaking Form shall be sufficient basis for an applicant to be deemed "ineligible" to participate in the bidding.
3.1.2
Bidding Documents: Countertrade Proposal Sheet
a). Eligible bidders shall also be required to accomplish and submit a Countertrade Proposal Sheet, per the form attached hereto as Appendix 2, together with a brief summary of the countertrade program to be undertaken in support thereof. b) The duty accomplished Countertrade Proposal Sheet and its attachments shall be part of the bid documents to be submitted by the bidders concerned on the bidding date. c). In case of tie where there are two or more lowest Calculated Bids/Offers, postqualification will be done at the same time to determine the responsive bid/offer. If still two or more bidders pass in the post qualification, countertrade proposal will be used as tiebreaker in accordance with IRR's of E.O. 120 (1993). However, due consideration shall be given to offers with higher percentage of offsets that directly benefit the AFP and/or the Government Arsenal. d) The Countertrade Proposal Sheet and its attachments shall serve as the countertrade program commitment of suppliers/manufacturers/contractors. They shall be incorporated in the Countertrade Agreement and in the Supply Contract to be signed pursuant to this Circular, as applicable. 3.1.3
Signing of the Countertrade Agreement
a). Within 90 days from the signing of the procurement contract between the Secretary of National Defense (SND) and the winning bidder, the latter shall execute the corresponding Countertrade Agreement with PITC in accordance with existing laws and regulations. b) Failure on the part of the winning bidder to sign a Countertrade Agreement with PITC as herein required shall entitle the DND/AFP to disqualify the winning bidder from participating in or submitting bids for future procurements of the AFP, without prejudice on the part of the DND/AFP to enforce such other penalties and sanctions, or such other relief for damages as may be warranted under existing laws, rules and regulations. Article 3.2 Alternative Methods of Procurement - The countertrade requirements outlined in Articles 3.1.2 (a) and (d) and 3.1.3 above shall likewise apply to procurements under the AFP Modernization Program conducted through alternative methods of procurement as provided for under E.O. 302 (series of 1996), as amended, and other methods of procurement allowed by existing laws, rules and regulations. CHAPTER 4.0
FINAL RPOVISIONS
Article 4.1 Separability Clause - If any provision of this circular is declared invalid by a competent court or tribunal the remaining provisions hereof, unaffected thereby, shall remain valid and binding. Article 4.2 Effectivity - This circular will take effect fifteen (15) days from the date of its submission for publication with the Office of the National Administrative Register, University of the Philippine Law Center.
(signed) ANGELO T. REYES Secretary Office of the Secretary, DND Doc Ref: Memo 20010025
APPENDIX 1 Republic of the Philippines DEPARTMENT OF NATIONAL DEFENSE Camp Emilio Aguinaldo, Quezon City Application for Eligibility Form No.: AFP Procurement Project Ref.:
_________________ _________________ COUNTERTRADE UNDERTAKING FORM
This Undertaking and proposal are hereby submitted pursuant to the eligibility requirements for the procurement project of ______________________________ by the Armed Forces of the Philippine (AFP). We hereby commit that should we be awarded the Contract for the ________________________, we shall directly or through a nominated third party, undertake Countertrade arrangements equivalent to not less than _____ % of the value of the Contract, excluding Philippine taxes and duties, as per the schedule provided for under Article 2.1 of DND Department Circular No. 04 dated July 20, 2001 (Please refer to Legend below). We submit the following Countertrade Proposals (with attachments) outlining our basic Countertrade Program should we be awarded the Contract, which constitutes our total Countertrade Obligation equivalent to ____ % of the value of the Contract, to wit:
Offsets: Counterpurchase
____% of our Countertrade Obligation ____% of our Countertrade Obligation
We further commit that should we be awarded the Contract, we will negotiate and sign a Countertrade Agreement with the Philippine International Trading Corporation (PITC) within ninety (90) days from approval of the Contract with the AFP. Failure on the part of the undersigned Bidder to comply with this Undertaking shall entitle the Purchaser to rescind/cancel the Supply Contract and award the same to another party and/or disqualify the undersigned from participating in future supply contracts with the AFP/DND without liability on the part of the latter. This Undertaking and proposal shall form part of the undersigned eligibility documents and failure on our part to submit the same shall render us "ineligible" to participate in the bidding for the above project. Furthermore, we hereby acknowledge that the countertrade proposal will still be subject for negotiations taking into consideration the current requirements of the AFP. Issued this __________ day of __________________, 20 ____ in ______________ Philippines. Company Name of Manufacturer ___________________________________ Corporate Name/Title of Representative ___________________________________ Signature of Representative ___________________________________
Corporate seal
LEGEND: VALUE OF SUPPLY CONTRACT (IN US $) $1 Million - $20 Million
COUNTERTRADE OBLIGATION 100% of Value of Supply Contract
over $20 Million - $40 Million
90% of Value of Supply Contract
over $40 Million - $60 Million
80% of Value of Supply Contract
over $60 Million - $80 Million
70% of Value of Supply Contract
over $80 Million - $100 Million
60% of Value of Supply Contract
over $100 Million
80% of Value of Supply Contract
REPUBLIC OF THE PHILIPPINES ) ______________________________ _)
S.S.
SUBSCRIBED AND SWORN TO before me this ___ day of _______________ 200__ in ____________________ affiant exhibiting to me his/her: (for Philippine residents) Community Tax Certificate No. ___________ issued in __________________ on _____________________ (for non-Philippine residents) Passport No.___________________ issued in _________________on _____________________. Notary Public Until 31 December 20 _____ PTR No. ________________ Issued at : _______________ Issued on : ______________
LIST OF PHILIPPINE PRODUCTS AND SERVICES APPAREL 1. LADIES WEAR • Knitted pullovers & cardigans in acrylic wool & other blends • Blouses, skirts & coordinates, woven or knitted fabrics • Jogging suits in polycotton interlock fleece • Denim jeans, skirts & jackets • T-shirts with fancy designs, prints, beadwork & appliqué • Panties in nylon or polycotton knit/underwear & foundation garments • Swimsuits • Hand crochet blouses, vest, coordinates • Bridal wear/formal wear 2. MENS WEAR • Knitted pullover & cardigans in acrylic & wool • Polo’s, t-shirts in polycotton knit • Jogging suits in polycotton interlock fleece • Athletic t-shirts, shorts & pants • Denim, jeans, jackets & overalls • Industrial uniforms (overalls, jacket & pants) • Swimming trunks & beach shorts • Woven shirts • Jackets, parkas, windbreaker 3. CHILDRENS WEAR • Denim jeans, jackets, dresses & overalls • Infant's short sets, rompers & overalls • Pajamas/sleepwear • Jogging suits • Short or pullover & pants coordinates • Trousers & shorts • Knitted sweaters, cardigans & pullover • Snowsuits & jackets • Socks • Swimsuits 4. INDUSTRIAL/MILITARY WEAR & ACCESSORIES • Uniforms • Caps & hats • Boots/safety shoes • Backpack/bags • Tent • Pistol belt & other accessories 5. FOOTWEAR • Men's ladies' & children's athletic shoes • Children's school shoes • Men's casual leather shoes with rubber soles • Rubber & plastic beach sandals • Parts of footwear
•
Other footwear
6. FASHION ACCESSORIES AND LEATHER GOODS • Costume jewelry, precious jewelry • Bags made of fabric & indigenous materials • Hair accessories, hats & other headgear • Wallets, purses & cosmetic cases • Belts • Knitted caps, mufflers, mittens • Leather & non leather gloves • Travel goods • Other accessories 7. TEXTILES FOR MANUFACTURE OF GARMENTS & ACCESSORIES • Denims, canvas, twill • Hand-woven fabrics in indigenous fibers • Laces • Knitted fabrics 8. PROMOTIONAL ITEMS/GIVEAWAYS • T-shirts, sweatshirts, parka • Caps & hats • Hanky & pocket chief with embroidery • Nylon bags, pouches • Corporate pins • Coin purses, key chains, cosmetic cases 9. APPAREL ACCESSORIES/COMPONENTS • Beaded, embroidered laces & appliqués • Embroidered collars • Buttons in shell, wood • Bridal accessories
CONSUMER PRODUCTS 1. FURNITURE (INDOOR, OUTDOOR, GAZEBO) • Rattan • Wicker • Buri • Wrought iron • Stone • Bamboo • Wood • Combination of above • Other materials 2. GIFTS & HOUSEWARES • Knife blocks • Basketry • Capiz lamps, desk sets, kitchen wares • Linens (tableware’s, hankies) imported/local material
• • • • •
•
Bed sheets, bedcovers Towels Wooden bowls, trays, etc. Wooden spoons Gift items ¾ Gift packaging ¾ Stationery items ¾ Everyday items, party novelties & favors ¾ Table top accessories Novelties ¾ Christmas decors & other holiday decors ¾ Hangers ¾ Wind chimes ¾ Souvenirs & corporate giveaways
3. HOME & OFFICE FURNISHING • Artificial flowers & plants • Sea shell novelties • Stone lamps, ashtrays, etc. • Paper mache figurines • Capiz lamp bases • Brass wares (candle holders, etc.) • Abaca carpets • Curtains • Lamps & lighting fixtures, chandeliers • Bedding, embroideries • Magazine racks, coat/hat hangers, umbrella stands 4. TOYS • Baby pianos • Dolls & stuff toys • Educational items & games • Puzzle • Hobby kits & crafts, DIY kits • Fabrics • Novelties 5. EDUCATIONAL HOUSEHOLD APPLIANCES • Electric fans • Air conditioners • Televisions • Audio systems • Video systems • Freezers • Refrigerators • Sing-a-long system • Microwave ovens • Ranges, stoves, ovens, kitchen wood • Sewing machines • Washing machines •
6. OTHER CONSUMER MANUFACTURERS • Mechanical & similar lighters • Sporting goods • Medical/optical goods • Umbrellas & sunshades • Musical instruments • Others (other consumer manufacturers) 7. CONTRACT SALES ARRANGEMENTS • Interior design service • Custom-made furniture • Furnishings for hotels, restaurants, offices, etc. 8. WINES & SPIRITS • Philippine rum • Philippine vodka (coconut wine) • Strawberry wine 9. TOBACCO PRODUCTS • Cigars/cigarettes 10. FOOD & FOOD PREPARATION • Processed Foods ¾ Canned ¾ Pureed ¾ Powdered ¾ Dried frozen ¾ Dehydrated ¾ Meat & meat preparation ¾ Dairy products & birds eggs ¾ Cereal & cereal preparations ¾ Vegetable & fruits ¾ Sugar preparations & honey ¾ Coffee ¾ Cocoa, tea, spices ¾ Feeding stuff for animals • Fresh Food ¾ Fresh fruits, juices & vegetables ¾ Fresh bananas ¾ Cashew nuts • Fish & other marine products • Vegetables & root crops • Beverages ¾ Fruit juices & drinks ¾ Herbal teas ¾ Coffee ¾ Rum ¾ Beer o Alcoholic o Non-alcoholic • Fish & other marine products ¾ Fish & other seafood's ¾ Dried seaweed's
• • • • •
¾ Seaweed's flour for pet foods ¾ Carrageenan Spices, seasoning, condiments Noodles Cassava chips & starch Snacks Chocolate candies & confectionery items
11. PHARMACEUTICALS • Local brands • Generics • Herbal medicine
COMMODITIES & INDUSTRIAL PRODUCTS 1. COCONUT PRODUCTS • Crude coconut oil • "Cochin" coconut oil • RBD coconut oil • Copra meal • Desiccated coconut • Coconut shell charcoal • Glycerin, crude & refined • Soap noodles • Fresh young coconut/fresh matured coconuts • Fatty acids & alcohol • Molasses • Olco chemicals • Activated carbon 2. FERTILIZERS • DAP, 16-20-0, 16-16-S- 13S • Organic fertilizers • Merchant Grade Phosphoric Acid 3. STEEL PRODUCTS • Wire rods • Galvanized iron (G.I.) sheets • Prefab metal structures 4. MINERALS • Feldspar • Limestone • Nickel • Manganese ore • Copper concentrate/copper cathodes • Copper wires & cables • Metallurgical & refractory chromites • Coal briquettes • Nickel
5. AUTOMOTIVE • Asian utility vehicles (AUV), Jeepney • Motorcycles (local content of at least 51%) • Bicycles (local content of at least 51%) • SKD Engines 6. CONSTRUCTION MATERIALS • Building wires & cables • Float glasses • Roofing materials ( color roof) • KD falcatta boards/Core/Lumber • Solid Wooden Panel Door • KD Parquet flooring 7. CORDAGE • Manila rope • Synthetic rope
8. SPECIAL MANUFACTURED PRODUCTS • Woven polypropylene (WPP) bags • Polyethylene (PE) liners • Polypropylene (PP) - various applications • Aluminum & by products
LIST OF PHILIPPINE EXPORT SERVICES 1. COMPUTER SOFTWARE • Application software development • System software development • Turnkey system development • Consulting services • System integration • Multimedia products (All platforms for presentation, games, training, education, entertainment, CD-ROM applications) 2. ENGINEERING CONSULTING SERVICES • Architectural, civil, structural, sanitary, mechanical & electrical design • Pre-investment or feasibility studies • Surveys (geodetic, geotechnical, geological, hydrological) • Project planning & programming • Detailed design (multi-discipline) • Construction management & supervision • Operation & maintenance • Environmental studies 3. MANAGEMENT CONSULTING SERVICES • Financial management • Marketing management • Sales management • Production & operations management
• • • •
Quantitative management Systems & procedure management Accounting & audit management Institutional development
4. CONTRACT SALES ARRANGEMENT • Design services (interior design, furniture design & product development) • Quality inspection • Production monitoring • Procurement • Importation • Installation/human resources • Consolidation and shipping 5. HEALTH CARE SERVICES 6. TOURISM 7. FILM ANIMATION 8. SHIP REPAIR & DRY DOCKING 9. CALL CENTERS 10. LANGUAGE TUTORIALS
LIST OF ELIGIBLE INDIRECT OFFSETS Investment/Joint venture, technology transfer, skills training, research and development, donations and other related activities in the following, but not limited to, are considered as eligible offsets: 1. AGRI-FOOD & FORESTRY-BASED INDUSTRIES • Meat and/ore Dairy Processing • Mechanized Agricultural Equipment • Food/Fruit Processing • Genetic Engineering • Fishery & Aquaculture • Agriculture/Marine Inputs & Services 2. INDUSTRIES SECTOR • Iron & Steel • Cement • Mining • Petrochemical Processing • Sucrochemicals • Refine Petroleum Products • Chemical/Natural Fibers and Filament Yarns • Aluminum Fabrication • Polymers • Semiconductors and computers • Superconductors • Advanced Ceramics • Engines • Motors • Turbines • Machine Tools • Lasers • Microprocessors • Robotics • Micro motors • Power Plant Design and Construction • Coal, oil, steam power, hydroelectric power, geothermal • Solar Cells, Nuclear Fission, Nuclear Fusion • Telephone, Radio, Television, Computers, CD ROM, Artificial Intelligence, Fiber optic Communication • Other Consumer Electronics, Industrial Electronics, Electronic components and parts 3. ENGINEERING INDUSTRIES • Engineering Products ¾ Machinery Equipment, Parts and Accessories ¾ Aluminum Rods o Electrical Equipment o Transport Equipment o Information Handling Equipment o Instrumentations o Tools, Dies, and Fixtures o Telecommunications • Metalworking
• • • • • • • •
¾ Metal Casting ¾ Heat Treatment ¾ Welding ¾ Electroplating ¾ Machine Building ¾ Forging Car manufacturing Stamping/press working Assembly of motor vehicles Manufacture of vehicle parts and components Automotive grade castings, high-alloy steel for machine building Modernization of precision engineering sub sector, including automotive and machinery parts manufacturing Ship building, ship repair, ship breaking Other ocean-going and aircraft
4. HEALTH • Herbal medicines • Diagnostic center • Specialized medical centers ¾ Kidney dialysis ¾ Ophthalmologic ¾ Dental surgery • Mobile hospital/clinic ¾ Joint venture/kit manufacturing ¾ Equipment installed ¾ Modular system • Medical lasers • Pharmaceuticals – antibiotic, acetylsalicylic • Vaccine • Laser surgery • Imaging technologies • Portable water purifications system • Disaster communication system • Optical fiber sensors and laser microscopes 5. ENVIRONMENTAL INDUSTRIES • Environmental support facilities • Material recovery facilities • Bio-remediation factory
