AMENDING CERTAIN SECTIONS OF REPUBLIC ACT NUMBERED SEVENTEEN HUNDRED AND EIGHTY-NINE, AS AMENDED, OTHERWISE KNOWN AS THE REPARATIONS LAW

• Number: Presidential Decree No. 332
• Sections: 12

Preamble

WHEREAS, it is the policy of the Government to utilize all

reparations payments from Japan in such manner as shall assure the

maximum possible economic benefit to the Filipino people;

WHEREAS, it has been shown that majority of reparations

end-users in the private sector have failed to properly utilize the

reparations goods and/or services received by them, and to pay the

amortizations thereon as they fall due, thus resulting in huge

arrearages to the detriment of the Philippine economy; and

WHEREAS, such failure of the end-users in the private sector

to comply with their obligations is mainly due to the very low rates of

interest being charged under the existing law;

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

Philippines, by virtue of the powers in me vested by the Constitution as

Commander-in-Chief of all the Armed Forces of the Philippines, and

pursuant to Proclamation No. 1081, dated September 21, 1972, and General

Order No. 1, dated September 22, 1972, as amended, and in order to

effect the desired changes and reforms in the utilization and

disposition of reparations so as to assure the maximum possible economic

benefit to the Filipino people, and in order to augment the limited

government resources available for public projects, do hereby order and

decree the amendment of Republic Act Numbered 1789, as amended, as

follows:

Section 1

SECTION 1. Section two, paragraph (a) of Republic Act

Numbered 1789, as amended, is hereby amended to read as follows:

"SEC. 2. Implementation. — To implement the policy

declared in Section one hereof, the procurement, disposition and

utilization of all goods and services procured from Japan under the

terms of the Reparations Agreement shall be carried out as closely as

possible to promote the economic rehabilitation and development of the

country and in accordance with the broad program, criteria and

priorities established by the National Economic and Development

Authority, in addition to the following criteria:

"(a) Capital goods and services. — Pursuant to the

policy declared in Section one hereof, the capital goods and services

received as reparations shall be made available only after due

compliance with all the conditions specified in this Act to approved

government projects for each year included in the economic and social

development program adopted by the National Economic and Development

Authority upon application from the agency concerned and duly endorsed

by the proper department head concerned and the National Economic and

Development Authority, as well as to Filipino citizens and entities

wholly owned by Filipino citizens, whose applications must be

accompanied in each case by the requisite project study prepared in

accordance with the form prescribed for the purpose by the Commission

and approved by the National Economic and Development Authority and a

sworn statement as to whether the applicant has already been granted any

previous application and procurement order and the value of the

reparations goods and/or services involved and actually delivered, and

who will themselves utilize such goods and/or services as bona fide

producers or manufacturers: Provided, That no private person,

private company, establishment, or entity shall be granted more than one

application for reparations goods and services and in no case the

aggregate total of reparations goods and services granted to any such

private person, private company, establishment, or entity shall be more

than one and a half million dollars, except when a greater amount is

necessary for the realization of any project certified by the President

of the Philippines after consultation with the National Economic and

Development Authority to be vital to the economic development of the

country and except further that the applicant may further apply for

expanson or development purposes when so authorized by the President of

the Philippines after consultation with the National Economic and

Development Authority: Provided, further, That where there are

two applicants for the same reparations goods, all other things being

equal, the person who first applied shall be given preference: Provided,

finally, That reparations intended for electrification,

educational material, equipment and machinery, including those for

fishery and vocational schools, cottage industries, fire-fighting

equipment, telecommunications, railroad, base metal mining, steel and

cement manufacturing, logging and shipping shall be given top priority.

The list of projects shall be given the widest dissemination and

publicity possible."

Section 2

SEC. 2. Paragraphs (b) and (d) of Section 2 of the same Act

are hereby amended to read as follows:

"(b) Goods other than capital goods. — Goods other than

capital goods that may be procured from reparations shall be limited to

such goods as may not be obtainable from the normal sources of imports

and to highly essential consumer goods and construction materials not

classified as capital goods, the total value and detailed listing of

which shall be made by the Commission created in Section 5 hereof and

approved by the President upon recommendation of the National Economic

and Development Authority. Such goods shall be procured for and sold

through such agency selected by the Commission only to bona fide

retailers who are Filipino citizens or entities wholly owned by

Filipino citizens who shall resell the same directly to consumers or

end-users."

"(d) Cash payment. — The twenty million dollars cash payment

shall accrue to a Trust Fund to be used exclusively for the benefit and

rehabilitation of veterans of the Philippines in World War II, and their

widows and orphans, as Congress may from time to time provide: Provided,

That the procurement of consumers goods intended to generate the trust

fund for veterans, their orphans and widows, of World War II, shall be

undertaken by the Commission upon the recommendation of and in

consultation with the National Economic and Development Authority and

the same shall be disposed by the agency selected by the Commission

under paragraph (b) of this Section and the proceeds thereof shall be

deposited in accordance with the provisions of this Section. There shall

be advanced from the Special Economic Development Fund created in

Section three of this Act such amounts as may be needed to complete the

scheduled cash payments of four million United States dollars every year

for a period of five years in such a manner that the total cash

payments of twenty million United States dollars shall have been

collected at the end of five years."

Section 3

SEC. 3. Paragraphs (e) and (h) of Section 2 of the same Act

are hereby repealed and paragraphs (f) and (g) of the same Section are

hereby amended to read as paragraphs (e) and (f), respectively.

Section 4

SEC. 4. Section 3 of the same Act is hereby amended to read

as follows:

"SEC. 3. Special Economic Development Fund. — The

proceeds from the sale of reparations goods and utilization of services,

together with interests earned, shall be constituted into a Special

Economic Development Fund out of which the National Assembly may

appropriate by special laws, from time to time, such amounts as may be

necessary to constitute a Special Trust Fund which shall be available to

the Development Bank of the Philippines and the Philippine National

Bank for loans for economic and industrial development projects as well

as for construction, reconstruction, repair and/or improvement of public

school buildings in amounts not exceeding eighty percent of the value

of the securities and payable within a period not exceeding twenty years

depending upon the kind of loan and with interest at a rate not

exceeding four percent per annum: Provided, That the

Development Bank of the Philippines and the Philippine National Bank

shall charge for their services only the actual cost thereof and shall

not make any profit therefrom: Provided, further, That fifty

percent of such Special Trust Fund shall be available for industrial

loans, thirty percent for agricultural loans (but not more than twenty

percent of such agricultural loans may be granted on any single

agricultural crop), and the remaining twenty percent which shall be

given top priority, for public building construction, reconstruction,

repair and/or improvement, as the National Assembly may provide from

time to time. The sum of twenty million pesos shall likewise be set

aside from the said Special Economic Development Fund to constitute a

revolving fund which shall be used exclusively to aid in the

establishment of rural banks, subject to the provisions of Republic Act

Numbered Seven Hundred Twenty, otherwise known as the 'Rural Banks Act,'

as amended, and the further sum of fifty million pesos for the purchase

of landed estates as provided for in the Land Tenure Act and such other

landed estates as provided for by other special acts."

Section 5

SEC. 5. Paragraphs (a) and (a-1) of Section 6 of the same

Act are hereby amended to read as follows:

"(a) To prepare sufficiently in advance of need, on the basis of

the previously approved reparations program and approved applications

for reparations goods and services, a tentative schedule of goods and

services clearly indicating thereon the name of the applicant end-user

and the amount allocated for each project to be procured from Japan

every year which, when approved by the President of the Philippines upon

recommendation of the National Economic and Development Authority,

shall form the basis of consultation between the Philippine and Japanese

Governments towards the formulation of the schedule called for in

Article four of the Reparations Agreement. A copy each, duly certified

by the Commission, of the approved applications and studies of the

projects included in the tentative schedule shall be transmitted to the

Mission together with the tentative schedule. No additional project, and

no change involving any item or project in a tentative or agreed

schedule, whether by addition, substitution or deletion, whether in

kind, quantity, or value, whether partial or total, shall be submitted

to the Japanese Government until the same has been endorsed by the

National Economic and Development Authority and approved by the

President in accordance with the foregoing, except in cases where the

proposed change involves only the increase or decrease in the amount

allocated for a specific item or project listed in the tentative or

agreed schedule, and does not involve any addition of, or change in, any

other item or project as provided above, and the total of such increase

or decrease, whether effected at one time or several times, does not

exceed ten percent of the amount originally allocated for the

corresponding item or project in the tentative schedule. The agreed

schedule, and any addition, substitution or deletion hereinabove

referred to, as may thereafter be made in accordance with this Act and

agreed to by the Japanese Government, shall, after its conclusion with

the Japanese Government, be immediately published in full, indicating

clearly the name of the end-users concerned, for three consecutive times

every other day in two newspapers of general circulation, one in

Tagalog and one in English by the Commission in the Philippines, and

both in English by the Philippine Reparations Mission in Japan.

"(a-1) To issue procurement orders for the acquisition of

reparations goods and/or services on the basis of the agreed schedule.

The procurement order shall specify, among others, the following: (1)

the name of the applicant end-users; (2) the item in the agreed

schedule; (3) the name of the project; (4) the amount of the procurement

order; and (5) the date of issuance of the procurement order. The

amount of each procurement order shall be strictly in accordance with

the allocation for each project as agreed upon between the Philippine

and Japanese Governments. The procurement orders for all the projects

shall be issued only after the conclusion of the agreed schedule. No

procurement order for the acquisition of goods and/or services intended

for government agencies shall be issued by the Commission until after it

shall have duly ascertained and verified that the agencies concerned

have (1) the capacity and have duly provided for the payment of the 2%

service fee and all incidental charges in connection with the

procurement and delivery of the goods and/or services, and (2) the

technical capacity to take delivery and utilize efficiently the goods

applied for, and unless all the following conditions shall have been

previously complied with: (1) the government agency concerned must have

previously prepared and submitted to the satisfaction of the Commission a

financial, economic and technological study concerning the feasibility

of the project together with the complete plans and specifications

thereof; (2) the application must have been previously approved by

resolution of the Commission; (3) the project must be among those

specifically included in the reparations schedule agreed upon and

effective between the Philippine and Japanese Governments at the time of

the issuance of the procurement order; and (4) the agreed schedule

showing the names of the applicant end-users must have been published in

accordance with this Act. No procurement order for the acquisition of

reparations goods and/or services intended for private parties shall be

issued by the Commission until after it shall have duly ascertained and

verified that the applicant concerned (1) has enough financial resources

and capacity to pay, and (2) has the technical capacity to take

delivery and utilize efficiently the goods applied for, and unless all

the following conditions shall have been previously complied with: (1)

the private applicant end-user concerned must have previously prepared

and submitted to the satisfaction of the Commission a financial,

economic and technological study of the project together with the

complete plans and specifications thereof favorably endorsed as

prescribed in Section two of this Act, and a certification from the

Securities and Exchange Commission or the Bureau of Commerce, as the

case may be, attesting that the applicant end-user concerned is

qualified under this Act; (2) the application must have been previously

approved by resolution of the Commission; (3) the project concerned must

be among those specifically included in the reparations schedule agreed

upon and effective between the Philippine and Japanese Governments at

the time of issuance of the procurement order: Provided, That

no procurement order shall be issued until after the private applicant

end-user concerned shall have made a cash down payment for the project

applied for which shall be 10 percent of the value of the project

computed at the current rate of exchange of the peso to the U.S. dollar

prevailing at the time of payment; and (4) the agreed schedule showing

the names of the applicant end-users must have been published in

accordance with this Act. The private applicant shall be required to

submit proof to substantiate that both his financial resources and

capacity to pay are commensurate with the value of the goods and/or

services applied for, and that he has had experience or has contracted

an appropriate number of experts in the particular field. He shall also

be required to put up collaterals sufficient to cover the balance of the

cost of the goods and/or services: Provided, further, That in

the case of corporations, the principal officers thereof shall be

required to sign a guarantee contract whereby they shall be jointly and

severally liable with the corporation to answer for the obligation so

contracted. Notwithstanding the foregoing, no procurement order shall

take effect until after the lapse of one week after its final

publication indicating the name and address of the applicant end-user,

the name of the project subject of the procurement order, and the

specific item in the reparations schedule agreed upon and effective

between the Philippine and Japanese Governments at the time of issuance

of the procurement order, three successive times every other day in two

newspapers of general circulation, one in Tagalog and one in English, in

the Philippines, and both in English in Japan, by the Commission and

the Mission, respectively. As required herein, the Commission shall

publish each and every procurement order within one week after its

issuance and the Mission, within one week after receipt of the

procurement order. Any procurement order which does not wholly comply

with all of the above requirements shall ipso facto be considered null

and void, if such noncompliance has been through the fault or negligence

of the applicant end-user. After the procurement order for reparations

intended for a specific end-user has been properly issued in accordance

with the foregoing, such procurement order may not be revoked or

suspended except when the end-user in whose favor the procurement order

has been issued is adjudged, after due investigation wherein he has been

given the opportunity to be heard and represented by counsel, to, be

disqualified or found guilty of fraud in connection with his application

under this Act: Provided, That pending final decision, the

procurement of the goods, except actual delivery thereof to the end-user

concerned, shall not be suspended: Provided, however, That an

end-user who has been found disqualified by the Commission may appeal to

the President within thirty days from the receipt of the Commission's

decision. The decision of the President which must be made not later

than thirty days after the submission of the appeal to him, shall be

final, and shall become effective upon receipt thereof by the end-user

concerned. In case the end-user fails to appeal, the decision of the

Commission shall become final immediately after the lapse of the period

for appeal. A party who has been adjudged disqualified shall forfeit the

down payment without prejudice to any action, criminal or otherwise,

which may be taken against him by the proper government agency. The

Commission is hereby required to render a decision on any complaint

submitted to it regarding the qualifications of an end-user within

ninety days from the date of the formal submission of such complaint in

writing.”

Section 6

SEC. 6. Section 10 of the same Act is hereby amended to

read as follows:

"SEC. 10. Operating Funds. —The funds for the

approved budget of the Commission shall be provided for in the annual

General Appropriation Acts. All the warehousing charges, other charges,

and/or expenses paid and advanced by the Commission from the Special

Economic Development Fund (reparations proceeds) as authorized in the

General Appropriation Acts for reparations goods repossessed by it shall

be considered part of the operating expenditures of the Commission in

the particular fiscal years when they were paid as authorized. Likewise,

all service fees and incidental charges collected by the Commission

pursuant to this Act shall form part of its operating funds."

Section 7

SEC. 7. Section 12 of the same Act is hereby further amended

to read as follows:

"SEC. 12. Terms of Sale. — Capital goods and

complementary services intended for government projects, irrespective of

the classification of the project, shall be transferred to the agencies

concerned without cost: Provided, That said agencies shall pay

in cash a service fee of two (2%) per cent of the cost of the goods

and/or services, and all incidental charges incurred in connection with

the procurement and delivery of such goods and/or services, computed at

the current rate of exchange of the peso to the U.S. dollar prevailing

at the time of payment. The government agencies concerned shall enter in

their books pf accounts the peso F.O.B. value of the goods and/or

services received by them computed at the current rate of exchange of

the peso to the U.S. dollar prevailing at the time of delivery, as

follows:

"(1) National government offices, agencies, institutions

and/or instrumentalities depending solely on appropriations from the

National Assembly for their operating expenses shall enter the peso

F.O.B. value as additional appropriation for them.

"(2) National government offices, agencies, institutions and/or

instrumentalities with revolving funds provided by law shall enter the

peso F.O.B. value as additional appropriation fur said revolving fund.

"(3) National government offices, agencies, institutions and/or

instrumentalities with capital stock provided by law shall enter the

peso F.O.B. value as subscription of the Government to such capital

stock.

"(4) Government-owned or -controlled corporations shall enter the peso

F.O.B. value as subscription of the Government to their capital stock.

"(5) Provincial, city and municipal governments shall enter the peso

F.O.B. value as contribution of the National Government to their

operating expenses.

"The foregoing provisions shall also apply to all government

projects, irrespective of the classification of the projects, the

reparations goods and/or services of which have already been procured

and delivered to the government end-users concerned, and the contracts

for the transfer thereof shall be modified accordingly: Provided,

That whatever amount or amounts that may have already been paid by said

government end-users for service fee, incidental charges and/or the

peso F.O.B. value of the reparations goods and/or services, including

interest thereon, if any shall not be refunded.

"Capital goods and complementary services disposed of to private

parties as provided for in subsection (a) of Section two hereof shall

be sold on cash or credit basis under rules and regulations as may be

determined by the Commission, All private end-users shall pay the peso

F.O.B. value of reparations goods and/or services received by them plus a

service fee of 2 percent of the value of such goods and/or services,

and all incidental charges in connection with the procurement and

delivery thereof, all computed at the current rate of exchange of the

peso to the U.S. dollar prevailing at time of delivery under the terms

and conditions provided herein. Sales on credit basis shall be payable

on installments: Provided, That the deposit or down payment

required to be paid under subsection (a-1) of Section 6 hereof shall be

applied as first payment without interest on the F.O.B. value on the

date of delivery of the reparations goods and/or services: Provided,

further, That in case of capital goods for the utilization of

which an initial investment before operation of not more than twenty

percent of the cost of such goods is required, the first installment

with interest shall be paid on the third month after delivery of the

goods, and in the case of capital goods for the utilization of which an

initial investment before operation of more than twenty percent of the

cost of such goods is required, and also in the case of ocean-going

vessels, the first installment with interest shall be paid on the

twelfth month after delivery of the goods, extendible when deemed to be

justified by the Commission not exceeding one year. The balance, in both

cases, shall be paid in equal annual installments within a period to be

fixed by the Commission considering the life expectancy of the goods

but in no case exceeding ten years from the date the first installment

falls due, with interest at twelve percent (12%) per annum and an

additional interest of one and one-hall percent (1 1/2%) per month for

delinquency in the payment of installments: Provided, That in

the case of vessels, the procurement cost thereof shall be paid within

the period provided for in Republic Act Numbered Fourteen Hundred and

Seven, as amended. Goods other than capital goods procured as

reparations shall be sold for cash only at prevailing prices for similar

goods.

"In all transactions involving the transfer of capital goods and

services from reparations to the authorized private parties specified

in this Act, the sale shall be directly to end-users and not through

middlemen. The contract of sale and the corresponding schedule of

payment shall be executed upon delivery of the reparations goods and/or

services pertaining to each allocation in a particular agreed schedule

irrespective of whether or not the project has been given a complete

allocation, or needs an additional allocation for completion or

expansion, or has an additional allocation in the succeeding annual

reparations schedule or schedules. All reparations machinery and

equipment in the possession of private end-users, whether utilized or

not, shall be declared 'Completely delivered' unless within 30 days from

date of receipt of instructions to end-users, they shall file with the

Commission their respective written proofs justifying their alleged

claims.

"The contract of sale shall bear the conditions that no capital

goods thus acquired shall be resold, leased or in any manner disposed of

except to Filipino citizens or to entities wholly owned by Filipino

citizens who shall continue the utilization thereof in the projects for

which the goods were originally intended or in similar projects included

in the economic development program of a similar priority, subject,

however, to the further condition that groups, associations and

corporations which are recipients of such goods shall not permit any

subsequent change in ownership or control as shall at any time

thereafter change the control or ownership wholly held therein by

Filipino citizens. It shall further contain a provision that any

transfer of ownership, whether by virtue of a private contract or

through court proceedings, shall be to Filipino citizens who shall begin

utilizing them in such projects as the National Economic and

Development Authority shall determine within one year from notice of the

Authority's decision."

Section 8

SEC. 8. To Section 12 of the same Act, there are hereby

added paragraphs (a-1) and (a-2) to read as follows:

"(a-1) The foregoing provisions of this Section, insofar as it

relates to the computation of the peso F.O.B. value of the reparations

goods and/or services, the execution of the sales contract and

corresponding schedule of payments, the time of application of the

deposit or down payment as first payment without interest and the due

date of the first installment with interest on the balance, and the

imposition of interest of 12 percent per annum on the balance and an

additional 1 1/2% per month for delinquency, shall also apply to all

projects of private end-users in the current 17th year reparations

schedule and to all other projects of private end-users where the

reparations goods and/or services have already been delivered but the

contracts and corresponding schedules of payment have not as yet been

executed at the time of the issuance of this Decree, in which case, said

private end-users shall, within a period of three months from issuance

of this Decree, execute the sales contracts and corresponding schedules

of payments, otherwise the sanction provided for under paragraph (a-2)

of this Section shall be taken against them.

"(a-2) All private end-users with pending accounts with the Commission

at the time of the issuance of this Decree shall be allowed to

restructure their accounts beyond the maximum allowable period of

amortization as provided for under this Act: Provided, That

said end-users shall first be required to pay 10 percent of the total

accrued accounts at the time of the issuance of this Decree:

Provided, further. That interest at the rate of 12 percent per

annum shall be imposed on the restructured yearly amortization with an

additional monthly interest of 11/2% percent for delinquency and said

end-users shall be required to put up additional collaterals sufficient

to cover the value of the restructured account, and in the case of

corporations, the principal officers thereof shall be required to sign

the Contract of restructuring jointly and severally with the

corporation: Provided, finally, That all delinquent private

end-users of reparations goods and/or services are hereby given a period

of three (3) months within which to restructure or update their

accounts with the Commission; otherwise, the latter, with the assistance

of the Armed Forces of the Philippines, shall extrajudicially repossess

said reparations goods and attach all other assets of said private

end-users and shall sell, transfer, or otherwise dispose of the same in a

manner as provided for herein, without prejudice to such civil and/or

criminal action that may be taken against them under this Act and/or

other existing laws. All reparations goods so repossessed and/or to be

repossessed shall be sold through public bidding, or through negotiation

if the public bidding will fail, either by lot or by piece, at such

price and under such terms and conditions as may be determined

reasonable by the Commission upon the recommendation of an appraisal

committee to be constituted by the Commission and in which at least one

(1) member each must come from the office of the Commission Auditor and

the National Economic and Development Authority: Provided, That

government instrumentalities will be given the first option to acquire

the reparations goods which they may need or can utilize, in which case

said reparations goods shall be transferred to them without cost and the

appraised value thereof as determined by the Commission shall be

entered in their books of accounts in accordance with this Section. All

expenses incurred in connection with the transfer of said goods shall be

borne by the government agencies concerned.

"The Commission is hereby authorized to pay out of the Special

Economic Development Fund such amount or amounts as may be necessary for

all the expenses and/or charges in connection with the repossession of

reparations goods and attachment of other assets of private end-users

and the sale thereof through public bidding or negotiations as

hereinabove provided."

Section 9

SEC. 9. All reference to the National Economic Council in

Republic Act Numbered 1789, as amended, shall be understood to mean the

National Economic and Development Authority.

Section 10

SEC. 10. All provisions of Republic Act Numbered 1789,

as amended, the rules and regulations promulgated thereunder, and all

other laws, executive orders, or parts thereof, inconsistent with this

Decree are hereby repealed, modified and/or amended accordingly.

Section 11

SEC. 11. This Decree shall take effect immediately.

Done in the City of Manila, this 9th day of November, in the

year of Our Lord, nineteen hundred and seventy-three.

(Sgd.) FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.) ROBERTO V. REYES

Assistant Executive Secretary