REVISED GUIDELINES ON BANKING OF OFFSET CREDITS UNDER E.O. NO. 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” means the offset credits referred to in Section 3.1.1 hereof.
2.1.2 “Banking Approval Certificate” means 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” means 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” means 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
IRR0 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” means 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” means the value claimed by and awarded to a
foreign supplier (or its designated countertrader) once said foreign
supplier or countertrader 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
meanings 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 countertrader 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 transactions
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 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
Certificates shall only be issued 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 countertrader) 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 an affiliate or subsidiary or the
original holder of the Certificate of Banked Credits; ande. 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 compliant
with the foregoing conditions shall have 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 an 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 at 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 ONE THOUSAND ($1000.00) per application.
3.2.2 Review and Approval of Offset Project Proposal
PITC shall review and, if acceptable, approve the proposed offset
project submitted by the foreign 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 consultations 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 is 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 who 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 90 days from the end of the semester. These reports
shall contain, among other, the following:* Start-up and operational 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 a PITC a Business Plan and Timetable to
develop/operationalize the offset project within ninety (90) days from
the date of the Banking Approval Certificate.b.2 The foreign supplier/countertrader has
six/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/countertrade 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
3.3.3. 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 as 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 investment 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 importation 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 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. 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
(in US$)FEES
(in US$)
1M – 50 M
1.5%
over 50 M – 100 M
750,000 plus 1.25% over 50 M – 100M
over 100 M – 150 M
1,375,000 plus 1% over 100 M – 150 M
over 150 M – 200 M
1,875,000 plus .75% over 150 M – 200 M
over 200 M – 400 M
2,250,000 plus .5% over 200 M – 400 M
Said fees shall be paid directly to PITC (Attn: Treasury Department)
either in bank draft or through telegraphic transfer to PITC designated
account within fifteen (15) banking days from the receipt of PITCs
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 be 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.
3.3.4 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 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/contracts 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 and Development Studies ( for R & D
projects); Post-Training Report (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
(in US$)FEES
(in US$)
1M – 50 M
1.5%
over 50 M – 100 M
750,000 plus 1.25% over 50 M – 100M
over 100 M – 150 M
1,375,000 plus 1% over 100 M – 150 M
over 150 M – 200 M
1,875,000 plus .75% over 150 M – 200 M
over 200 M – 400 M
2,250,000 plus .5% over 200 M – 400 M
over 400 M
3,250,000 plus .25% over 400 M
Said fees shall be paid directly to PITC (Attn: Treasury Department)
either in bank draft or through telegraphic transfer to 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 be 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.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.
V
Suppletory Document
This circular shall be considered as a binding supplement to the IRR and shall form integral parts thereof.
VI
Repealing Clause
PITC Memorandum Circular No. CT-98.41/01 dated April 1, 1998 and all
prior issuances inconsistent herewith are hereby repealed.
VII
Application
The provision 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.
Adopted: 15 June 2000
(SGD.) SYLVIA R. VELOSO
President