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

• Number: Presidential Decree No. 790
• Sections: 9

Preamble

WHEREAS, Section 6 and 12 of Republic Act No. 1789, as

amended, require private end-users of reparations goods and services to

put up collaterals sufficient to cover the cost thereof and/or the

amount of their restructured accounts;

WHEREAS, said sections of the law further require private

end-users to pay an interest of 12% per annum on the cost of the goods

and services payable in installments and/or the amount of their

restructured accounts;

WHEREAS, said private end-users find it difficult to comply

with said requirements considering that they also have to obtain further

financing from other sources for the putting up and operation of their

projects;

WHEREAS, a relaxation of said requirements would greatly

help private end-users in the successful prosecution of their projects,

thus enabling them to contribute to the economic progress of the

country; and

WHEREAS, it is the policy of the Government to assist and

promote private industry to enable them to help in the building up of

the national economy.

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

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

do hereby decree and order the amendment of Sections 6 and 12 of

Republic Act No. 1789, as amended, as follows:

Section 1

SECTION 1. The following portion of Paragraph (a-1) of

Section 2

SEC. 2. The following portions of the various paragraphs of

Section 3

SEC. 3. The paragraph inserted by Presidential Decree No.

746 after the third paragraph of Section 12 of the same law is hereby

repealed.

Section 4

SEC. 4. The amendments contained in this Decree shall

have retroactive effect as of November 9, 1973, the date of effectivity

of Presidential Decree No. 332.

Section 5

SEC. 5. All provisions of existing laws, decrees,

orders, rules and regulations, or parts thereof, inconsistent herewith

are hereby repealed or amended accordingly.

Section 6

Section 6 of Republic Act No. 1789, as amended, relative to the putting

up of collaterals, is hereby amended to read as follows:

"SEC. 6. (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 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-users 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 5% 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

obligate himself to put up the performance bond specified in Section

12-A of this Act before the delivery 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 reparation 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 non-compliance 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 qualification of

an end-user within ninety days from the date of the formal submission

of such complaint in writing."

Section 12

Section 12 of the same law, as indicated hereunder, are 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 of 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:

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.

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 for said

revolving fund.

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.

Government-owned or controlled corporations shall enter the

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

stock.

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 sub-section (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% 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 per cent 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 per cent 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 payment falls due, with

interest at 3% per annum and an additional interest of 1 ½% 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 prorated 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.

* * * * * * *

"(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 3% per annum on the balance and an additional

interest of 1½% 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 sendees 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% of the total accrued

accounts at the time of the issuance of this Decree: Provided,

further, That interest at the rate of 3% per annum shall be imposed on

the restructured yearly amortization with an additional monthly interest

of 1½% for delinquency and said end-users shall be required to put up a

performance bond in an amount, equivalent to 10% of 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 good

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 peso book value thereof,

less depreciation if any, 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.

* * * * * * *

Section 6

SEC. 6. This Decree shall take effect immediately.

Done in the City of Manila, this 30th day of August, in the

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

(Sgd.)

FERDINAND E. MARCOS

President

Republic of the Philippines

By the President:

(Sgd.)

ROBERTO V. REYES

Acting Executive Secretary