PRESCRIBING INCENTIVES FOR THE ESTABLISHMENT OF MULTINATIONAL REGIONAL WAREHOUSES BY MULTINATIONAL COMPANIES SUPPLYING SPARE PARTS OR MANUFACTURED COMPONENTS AND RAW MATERIALS TO THE ASIA-PACIFIC AREA.

• Number: Presidential Decree No. 1419
• Sections: 15

Preamble

WHEREAS, the objective of accelerating the development of

the Philippines as the business and financial capital of Southeast Asia and

thereby hastening the economic and social development of the country can be

accomplished further by attracting multinational companies to base their

regional warehouse in the Philippines;

WHEREAS, the said regional warehouses will not earn or

derive any income from the host country and all their expenses are financed by

their head offices or parent companies;

WHEREAS, the attainment of the aforesaid goal will mean the

creation of a new source of dollar revenue for the government and the increase

of foreign exchange receipts for export of Philippine products; a boost to air

travel, new construction and real estate development, new job opportunities,

increase in local tourism and potential investors;

WHEREAS, the establishment of regional warehouses in the

Philippines by multinational companies would prevent and spare local industries

from incurring substantial but needless losses from factory down time because of

lack of imported spare parts of raw materials and from the heavy cost of

inventory financing due to unavailability of imported spare parts or

manufactured components and raw materials;

WHEREAS, the establishment of regional warehouses in the

Philippines by multinational companies will also promote trade, communication

and cooperation between the Philippines and other member-nations of the

Association of Southeast Asian Nations (ASEAN) and will thereby serve its goal

towards regional self-reliance;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers vested in me by the Constitution, do hereby

order and decree:

Section 1

SECTION 1. A multinational company organized and existing

under any laws other than those of the Philippines which is engaged in

international trade and supplies, spare parts or manufactured components and raw

materials to its distributors or markets in the Asia-Pacific area and which has

established or will simultaneously establish a regional or area headquarters in

the Philippines in accordance with the provisions of Presidential Decree No.

218, as amended, and the rules and regulations implementing the same may also

establish regional warehouse or warehouses in the Philippines, after securing a

license therefore from the Secretary of Trade, upon the favorable recommendation

of the Bureau of Customs.

The following minimum requirements shall be submitted or complied with by the

said foreign entity in accordance with the rules and regulations to be issued by

the Secretary of Trade as provided for in Section 10 hereof.

A certification from the Philippine Commercial Attache or in the absence of

such an official, a Philippine Consul in the foreign firms home country that

said foreign firm is engaged in international trade and supplies or will supply

spare parts or manufactured components and raw materials to its distributors or

markets in the Asia-Pacific Region.

A certification from a principal officer of the foreign entity to the effect

that the said foreign entity has been authorized by its Board of Directors or

governing body to establish its regional warehouse in the Philippines,

specifying that:

The activities of the regional warehouse shall be limited to serving as a

supply depot for the storage, deposit, safekeeping of its spareparts of

manufactured components and law materials including the packing, covering,

putting up, marking, labelling and cutting or altering to customers

specification, mounting and/or packaging into kits or marketable lots thereof,

to fill up transactions and sales made by its head offices or parent companies

and to serving as a storage or warehouse of goods purchased locally by the home

office of the multinational for export abroad; Provided, That, said

locally purchased goods for export may be stored in the Regional Warehouse only

after they have been cleared for exports in accordance with the laws and

regulations governing exports. The regional warehouse shall not directly engage

in trade nor directly solicit business, promote any sale, nor enter into any

contract for the sale or disposition of goods in the Philippines.

The regional warehouse will not derived any income from the sources within

the Philippines and its personnel will not participate in any manner in the

management of any subsidiary affiliate, or branch office it might have in the

Philippines.

The personnel of the regional headquarters shall be responsible for the

operation of the regional warehouse subject to Section 9, subsection (a)

hereof.

The multinational company shall pay the government through the Department of

Trade a license fee of Five Thousand Pesos (P5,000.00) per annum and through the

Regional Collector of Customs a storage fee equivalent to Ten Pesos (P10.00) for

the first Four Thousand Pesos (P4,000.00) worth of articles to be stored in the

Regional Warehouse on the basis of their C & F value and One Peso (P1.00)

for every One Thousand Pesos (P1,000.00) worth of articles in excess of the said

first Four Thousand Pesos (P4,000.00). Of the total fees collected, seventy-five

per cent (75%) shall accrue to the general and twenty-five per cent (25%) shall

accrue to a special account in the General Fund for the Department of Trade to

support its trade promotion projects.

An application for the establishment of a bonded regional warehouse shall be

made in writing to the Department of Trade. The application shall describe the

premises, the location, and capacity of the regional warehouse and the purpose

for which the building is to be used.

The Department of Trade in consultation

with the Regional Collector of Customs of the district where the Warehouse will

be situated shall cause an examination of the premises to be made with reference

particularly to its location, construction and means provided for the

safekeeping of its articles and if found satisfactory, it may authorize its

establishment subject the following conditions:

That the articles to be stored in the warehouse are spare parts or

manufactured components and/or raw materials of the multinational company

operator for distribution and supply to its Asian-Pacific markets;

That the entry or importation, storage or re-export of the goods destined

for or to be stored in the regional warehouses will not involve any dollar

outlay from Philippine sources;

That they are such character as to be readily identifiable for re-export;

and in case of local distribution they shall be subject to Section 2, subsection

(b) and Section 3, subsection (b) hereof;

That they shall be identified, examined and appraised by the Regional

Collector of Customs and they shall be directly delivered to and kept in the

regional warehouses and released therefrom only in accordance with Section 2,

subsection (b) and Section 3, subsection (a) and (b) and Section (4) hereof;

Each shipment of goods which will be stored in the regional warehouse shall

be covered by an affidavit of the multinational company operator setting forth

that said articles shall be exclusively used as supply for its Asian-Pacific

markets and stating the C & F price thereof;

The multinational company operator shall file an ordinary warehouse bond in

an amount equal to One hundred percent (100%) of the ascertained customs duties

on the articles imported without prejudice to its filing a general warehousing

bond in lieu of the ordinary warehousing bond.

SEC.

2. Tax Treatment of Imported Articles in the Regional

Warehouse.

Except as otherwise provided in this Decree, imported spare parts or

manufactured components, raw materials and other items including any packages,

coverings, brands and labels and warehouse equipment as may be allowed by the

Department of Trade for use exclusively on the goods stored, except those

prohibited by law, brought into the regional warehouse from abroad to be kept,

stored and/or deposited or used therein and re-exported directly therefrom under

the supervision of the Regional Collector of Customs for distribution to its

Asian-Pacific markets according to Section 3, subsection (a) hereof shall

not be subject to customs duty, internal revenue tax, export tax nor to local

taxes, the provisions of law to the contrary notwithstanding.

Any spare parts, manufactured components, raw materials and other items

sent, delivered, released or taken from the regional warehouse to the local

market in accordance with Section 3, subsection (b) hereof shall be subject to

the payment of customs duties, taxes and other charges and for which purpose,

the proper commercial invoice of the head offices or parent companies shall be

submitted to the Regional Collector of Customs; and shall be subject to laws and

regulations governing imported merchandise, provided that in case any of the

foregoing items are sold, bartered, hired or used for purposes other than that

they were intended for without prior compliance with Section 3, subsection (b)

hereof and without prior payment of the duty, tax or other charge which would

have been due and payable at the time of entry if the articles had been entered

without the benefit of this decree, shall be subject to forfeiture and the

importation shall constitute a fraudulent practice against customs revenue

punishable under Section Thirty-Six Hundred and Two, as amended, of the Tariff

and Customs Code of the Philippines; Provided, further, That a sale

pursuant to a judicial order shall not be subject to the preceding proviso

without prejudice to the payment of duties, taxes and other charges.

Section 3 Procedure for Withdrawal of Articles from Regional Warehouse.

SEC. 3. Procedure for Withdrawal of Articles from

Regional Warehouse.—

The provision of the law to the contrary notwithstanding, articles received

into such regional warehouse may be withdrawn or relieved therefrom for direct

shipment and for re-exportation to foreign countries under the supervision of

the Regional Collector of Customs, who shall certify to such shipment and

exportation or lading for immediate exportation as the case may be, describing

the articles by their mark or otherwise, the quantity, the date of exportation,

and the none of the vessel or aircraft. All labor performed, and services

rendered under these provisions shall be under the supervision of the aforesaid

customs official and at the expense of the multi-national company operator.

The provision of the law to the contrary notwithstanding articles received,

into such regional warehouses may be withdrawn or removed therefrom to fill up

orders or contracts of sale, distribution or supply made by and between the

local buyers, distributors of indentors and the head offices or parent companies

of the multinational company subject to Section 2, subsection (b) hereof; under

the supervision of the Regional Collector of Customs, who shall certify to such

delivery, removal or release as the case may be, describing the articles by

their mark or otherwise, the quantity, the date of delivery, removal or release,

and the name of the local buyers, distributors or indentors to whom they were

delivered and subject to Section 2, subsection (b) and Section 7, subsection (b)

hereof. The withdrawal must be made by a person to whom the articles are ordered

to be delivered by the head office or parent company of the multinational

company. All labor performed and services rendered under these provisions shall

be under the supervision of the aforesaid customs official and at the expense of

the multinational company operator.

Section 4 Period of storage in Regional Warehouse.

SEC. 4. Period of storage in Regional

Warehouse.—The provision of the law in Section 1908 of the Tariff and

Customs Code of the Philippines, as amended, to the contrary notwithstanding,

articles duly entered for warehousing may remain in regional warehouses for a

period of five (5) years from the time of their transfer to the Regional

Warehouse, which period may be extended with the approval of the Secretary of

Trade for additional periods of two (2) years upon payment of the corresponding

storage fee on the unexported articles, as provided for under section 1

subsection (c) for each such extension until they are re-exported in accordance

with Section 3, subsection (a) hereof or delivered locally in accordance with

Section 5

SEC. 5. Regional headquarters of multinational companies

which have been licensed to operate regional warehouses in the Philippines and

their foreign personnel, their respective spouses and unmarried children under

twenty-one (21) years of age shall be governed by the provisions or Presidential

Decree No. 218, as amended, and shall be entitled to all the benefits provided

thereunder.

Section 6 Jurisdiction and Control over Articles Stored in Regional Warehouse.

SEC. 6. Jurisdiction and Control over Articles Stored in

Regional Warehouse.—

The provisions of law to the contrary notwithstanding, the Regional Collector

of Customs shall exercise jurisdiction and supervision over all articles

entering the Philippines destined for regional warehouses including the

following:

Supervise the receiving, handling, custody, entry, examination,

classification, appraisal and delivery of articles destined for regional

warehouses, causing all said articles to be entered at the customshouse and

causing all such articles to be identified, classified and appraised in

accordance with existing customs laws and regulations unless herein otherwise

provided.

Require the invoice to state the place from which the articles are shipped,

the date when and the person to whom and he person by whom they are shipped; the

port of entry to which he articles are destined a detailed description of the

articles according to the terms of the heading or sub-headings, if especially

mentioned in this Code; otherwise, the description must be in sufficient detail

to enable the articles to be identified both the Tariff classification and

statistical purposes, indicating their correct commodity description, in

customary terms or commercial designation, including the grade or quality,

numbers, marks or symbols under which they are sold by the seller or

manufacturer, together with the marks and numbers of the packages in which the

articles are packed; the quantities in the weight and measures of the country in

the place from which the articles are shipped, and in the weights and measures

used in the Code; the value of each articles in the unit of quantity in which

the articles are usually bought and sold, in the currency in which the

transactions are usually made, or, in the absence of such value, the price in

such currency which the manufacturer, seller, shipper or owners would have

received, or was willing to receive, for articles if sold in the ordinary course

of trade and in the usual wholesale quantities in the country of exportation;

all charges upon the articles itemized by name and amount when known to the

seller or shipper; or all charges by name (e.g., insurance, freight, cases,

containers, coverings and cost of packing) included in invoice prices when the

amounts for such charges are unknown to the manufacturer or shipper.

Authorize the immediate transfer of the entered articles to the regional

warehouse where the examination, classification and appraisal of the articles

pursuant to sub-section (a) hereof may be conducted.

Section 7 Waiver of Consular Invoice.

SEC. 7. Waiver of Consular Invoice.—

No consular invoice need be presented for articles destined for regional

warehouses. However, in lieu thereof, a certificate of export from the

Philippine Consular official in the country of origin of the shipment attesting

to the origin of exportation and the C & F value of the articles shall be

required. In case of distribution to local buyers, distributors or indentors,

the head office’s or parent company's commercial invoice shall be presented to

the Regional Collector of Customs supervising the distribution or release.

The provisions of law to the contrary notwithstanding, after the articles

shall have been examined by the Regional Collector of Customs, in accordance

with Section 1401-1403 of the Tariff and Customs Code, the Collector of Customs

shall determine the accurate tariff bought and sold. Moreover, in case of local

distribution to local buyers, distributors or indentors the proper customs

official shall require the presentation of the head office's or parent company's

commercial invoice and impose the proper duties, taxes and other charges thereon

in accordance with the Tariff and Customs Code and other applicable law.

Section 8 (a) Supervision and Storekeeping of the Regional Warehouses.

SEC. 8. (a) Supervision and Storekeeping of the

Regional Warehouses.—The regional warehouse operator shall submit to the

Collector of Customs for approval the name of a qualified and responsible person

who will take charge of managing the regional warehouse. Said person (Manager)

who shall be responsible for the goods in the warehouse shall be subject to the

supervision of the collector of Customs.

The Regional Warehouse storekeeper shall be regular Customs personnel.

(b) Packing, Covering, Branding, Labelling, and Cutting to Customers'

Specification.—All labor performed for packing, covering, branding,

labelling, mounting and cutting or adjusting of the articles to customers'

specification shall be subject to the supervision of the Collector of

Customs.

Section 9 Rules and Regulations.

SEC. 9. Rules and Regulations.—The Secretary of

Trade in consultation with the Secretary of Finance shall, within thirty (30)

days from the effectivity of this Decree, issue the implementing rules and

regulations governing the establishment of a regional warehouse by a regional or

area headquarters in the Philippines and for the effective implementation of

this Decree including Section 10 hereunder.

The Commissioner of Customs in consultation with the Secretary of Trade and

with the approval of the Secretary of Finance, shall issue the rules and

regulations to implement the provisions in this Decree are intended to

facilitate and assure the smooth and speedy inflow of the articles to and from

the regional warehouses.

Section 10 Penalties.

SEC. 10. Penalties.—Any willful violation by the

regional or area headquarters of a multinational company which has established

regional warehouse or warehouses of any provision of this Decree, or its

implementing rules and regulations, or any provision of existing laws shall

constitute a sufficient cause for the cancellation of its license or

registration in addition to the penalties hereinabove provided in Section 2,

sub-section (b) and Section 4 hereof.

Section 11

SEC. 11. The regional or area headquarters of multinational

companies establishing regional warehouses shall be exempt from the provisions

of Republic Act No. 5455.

Section 12 Definition of Terms.

SEC. 12. Definition of Terms.—For purpose of this

Decree:

"Spare parts or manufactured components" shall mean any article designed or

manufactured for the special purpose of being used in or to replace, a component

or integral part of a machine, equipment, vehicle or industrial plant and which

by reason of some characteristics is generally classified as capital goods and,

is primarily adapted for use a component part of such machines, equipment,

vehicles or industrial plant, as may be allowed by any implementing rules and

regulations.

"Raw materials" shall mean materials in their natural state or in crude form

as well as products made from crude material or materials which may have

undergone manufacturing or process as may be allowed by any implementing rules

and regulations.

"Code" shall mean the tariff and customs Code of the Philippines as amended.

Section 13

SEC. 13. Any provision of existing laws, decrees, orders,

rules or regulations inconsistent with this decree are hereby repealed, modified

or amended accordingly.

Section 14

SEC. 14. This Decree shall take effect immediately.

Done in the City of Manila, this 9th day of June in the year of Our Lord,

nineteen hundred and seventy-eight.

(Sgd.) FERDINAND E. MARCOS

President of the

Philippines

By the President:

(Sgd.) JACOBO C. CLAVE

Presidential Executive

Assistant

Section 3

Section 3, subsection (b) hereof. Any articles withdrawn, released or removed

contrary to the provisions of said Section 3, subsection (a) and (b) shall be

forfeited pursuant to the provisions of Section 2, subsection (b) hereof.