G/SCM/Q2/PHL/22  
 
24 October  2022 
(22-7946) Page: 1/5 
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES  
REPLIES TO QUESTIONS POSED BY THE UNITED STATES1 REGARDING  
THE NEW AND FULL NOTIFICATION OF THE PHILIPPINES2 
The following communication, dated and received on 19 October  2022 but received on 24 October 
2022, is being circulated at the request of the delegation of the Philippines . 
 
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Question 1 – Export Development Act (Republic Act No. 7844)  
Our understanding of this act is that it provides a variety of structu res, mechanisms, and 
incentives to encourage, facilitate, and support Philippine exporters. We have the 
following questions with regard to the incentives provided under this act.  
a. Why did the Philippines not include this act and the incentives and programs 
contained in the act in either its most recent notification to the SCM Committee or 
its prior notifications?  
Reply : 
The Export Development Act (EDA) was notified in the previous New and Full Notifications 
Pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies 
and Countervailing Measures covering the periods of (1) 1998 to 20163 and (2) 2017 to 
2018.4 
b. We understand that the act provides tax credits, starting from 2.5% for the first 
5% increase in annual export revenue, and an additional 5% and 7.5% for the next 
two incremental 5% increases in annual export revenues. Is this correct? If so, it 
would seem that these credits are conditioned on increasing export revenue. Is 
that correct? Please explain how this incentive is consistent with Article 3.1(a) of 
the SCM Agreement.  
Reply : 
Section 16(b -c) and the incentives therein lapsed in 1997 and 1999, respectively. 
Meanwhile, Section 16(d) has not been implemented due to the non -issuance of a 
supplanting revenue regulation from  the Bureau of Internal Revenue. Finally, Section 16(e) 
was in force only until 31 December 1997 as provided by the EDA, and was not extended.  
 
1 G/SCM/Q2/PHL/21.  
2 G/SCM/N/372/PHL . 
3 G/SCM/N/38/PHL, G/SCM/N/48/PHL, G/SCM/N/60/PHL, G/SCM/N/71/PHL, G/SCM/N/95/PHL, 
G/SCM/N/123/PHL, G/SCM/N/155/PHL, G/SCM/N/186/PHL, G/SCM/N/220/PHL, G/SCM/N/253/PHL, 
G/SCM/N/284/PHL, G/SCM/N/315/PHL dated 22 November 2017.  
4 G/SCM/N/343/PHL/Suppl.1 dated 1 0 September 2019.  G/SCM/Q2/PHL/22  
 
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  c. We understand that the act provides "Exemption from Presidential Decree No. 
1853, provided that the importation s hall be used for the production of goods and 
services for export." Please provide details of Presidential Decree No. 1853 and 
the value provided by this incentive?  
Reply : 
The Presidential Decree No. 1853 or "Requiring Deposits of Duties at the Time of Open ing of 
Letters of Credit Covering Imports and for Other Purposes " mandates the following:  
• Provisions of existing law and regulations to the contrary notwithstanding, no financial 
institution shall open any letter of credit covering imports unless the appli cant for such letter 
of credit deposits the full amount of duties due on the importation.  
• The amount of the duties due shall be based on the declaration of the applicant for the letter 
of credit/importer, subject to the penalties prescribed under Sec. 2503  of the Tariff and 
Customs Code of 1978, as amended .5 
• The provisions of this Decree shall likewise apply even for importation under other types of 
payments arrangements or on a deferred payment basis.  
d. We understand that the act provides that "Importation of machinery and 
equipment and accompanying spare parts which are used in the manufacture of 
exported products at zero percent [0%] duty for a period of three [3] years, until 
1997." Is this incentive still applicable? If so, how do manufacturers demonstra te 
that the machinery and equipment is used in the manufacture of exported 
products?  
Reply : 
The provision for Duty -Free Importation of Machinery and Equipment and Accompanying 
Spare Parts is no longer applicable and was only in effect until December 31, 19 97. 
e. We understand that the act provides that "For exporters of non -traditional 
products who use or substitute locally produced raw materials, capital equipment 
and/or spare parts, tax credits equivalent to twenty -five percent [25%] of the 
duties that would  have been paid had these inputs been imported." We understand 
that this program may have expired. Is that correct? If not, what is the annual 
value of the tax credits provided by this provision? Further, if this program is still 
in effect, please explain how this incentive is consistent with Article  3.1(b) of the 
SCM agreement?  
Reply : 
The provision "For exporters of non -traditional products who use or substitute locally 
produced raw materials, capital equipment and/or spare parts, tax credits equivalent to 
 
5 Sec. 2503 of the Tariff and Customs Code of 1978. Undervaluation, Misclassification and Misdeclaration 
in Entry. - When the dutiable value of the imported articles shall be so declared and entered that the duties, 
based on the declarati on of the importer on the face of the entry would be less by ten percent (10%) than 
importer 's description on the face of the entry would less by ten percent (10%) than should be legally collected 
based on the tariff classification of when (the dutiable we ight, measurement or quantity of imported articles is 
found upon examination to exceed by ten percent (10%) or more than the entered weight, measurement or 
quantity, a surcharge shall be collected from the importer in an amount of not less than the differe nce between 
the full duty and the estimated duty based upon the declaration of the importer, nor more than twice of such 
difference: Provided, That an undervaluation, misdeclaration in weight, measurement or quantity of more than 
thirty percent (30%) betwe en the value, weight, measurement or quantity declared in the entry, and the 
actual value, weight, quantity, or measurement shall constitute a prima facie evidence of fraud penalized under 
Section 2530 of this Code: Provide, further, That any misdeclaratio n or undeclared imported article/items 
found upon examination shall ipso facto be forfeited in favour  of the Government to be disposed of pursuant to 
the provisions of this Code.  
When the undervaluation, misdescription, misclassification or misdeclaration in the import entry is 
intentional, the importer shall be subject to penal provision under Section 3602 of this Code (R.A. 7651, 
June 04, 1993).  G/SCM/Q2/PHL/22  
 
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  twenty -five percent [25%] of the duties that would have been paid had these inputs been 
imported " was only in effect until December 31, 1997 and was not extended.  
f. We understand that the act requires that government financial institutions "shall 
extend credit facilities to be used for plant and equipment expansion purposes, 
among others. These credit facilities shall offer preferential and simplified credit 
schemes to exporters." How do exporters demonstrate eligibility  for this program? 
What is the interest rate offered by these facilities as compared to the market rate?  
Reply : 
Large -sized expo rters avail of credit facilities from banks. For SMEs, the Small Business 
Corporation was strengthened through the Magna Carta for SMEs which included exporters. 
Hence, there is no exclusive facility for exporters.  
Question 2 - Investment Promotion Program  
The Secretariat Report on the Philippines' latest Trade Policy Review (TPR)6 indicated that 
certain tax incentives provided by the Board of Investments under the Omnibus 
Investment Code  are contingent upon exports reaching 70 % of production for foreign -
owned enterprises or 50 % of production for Philippine -owned companies. In response to 
our previous questions7, the Philippines indicated that these measures were under review.  
a. Could the P hilippines provide an update on the status of the review of these 
measures?  
Reply : 
With the enactment of the CREATE Act, the Omnibus Investment Code of 1987 or Executive 
Order No. 226 was amended. The nationality and export bias, where foreign enterprises are 
required a higher export commitment compared to Philippine -owned enterprises, no longer 
apply to projects that will register with any Investment Promotion Agency (IPA) such as the 
BOI or the Philippine Export Zone Authority (PEZA).  
b. If the measures are still in place, could the Philippines discuss the incentives in 
the context of the requirements of Article 3.1(a) of the SCM Agreement?  
Reply : 
Please refer to the updates provided above.  
c. Will the Philippines consider updating its subsidy notification to ad dress all 
elements of the program, with sufficient detail pursuant to Article 25.3 of the SCM 
Agreement?  
Reply : 
The Philippines complies with the biennial submission of the New and Full Notification 
Pursuant to Article XVI:1 of the GATT 1994 and Article 25  of the Agreement on Subsidies 
and Countervailing Measures. New enacted laws and/or amendments will be covered in the 
succeeding notifications.  
Question 3 - Comprehensive Motor Vehicle Development Program  
On page 12, paragraph 2.9.1 of the Philippines' not ification, it is indicated that the 
program provides tax concessions on imports of completely knocked -down (CKD) parts 
and components pursuant to EO No. 877 -A. However, the program title and the policy 
objective stated in the notification indicates a much broader program of support than 
 
6 WT/TPR/S/368/Rev.1, page 46, paragraph 3.59.  
7 WT/TPR/M/368/Add.1, page 90.  G/SCM/Q2/PHL/22  
 
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  these particular tax concessions on CKD imports alone. Also, according to the Philippines' 
latest TPR8, the provisions under the program are currently under review. Publicly 
available information suggests that the program may have export and/or local -content 
contingency elements.  
a. Could the Philippines clarify or elaborate on what types of tax concessions th is 
program provides?  
Reply : 
The Motor Vehicle Development Program (MVDP) does not provide any tax concessions to 
program participants, but only provides preferential duty rates on importation of Knocked 
Down (KD) for assembly purposes. A preferential tariff rate of one (1) percent is available 
to program participants on their KD importation of Internal Combustion Engine (ICE) 
vehicles, while a zero (0) percent tariff is available if the KD importation is for electric, 
hybrid, flex fuel, co mpressed natural gas, hydrogen or other alternative fuel vehicles.  
b. What other business incentives does the program provide to the motor vehicle 
sector besides the tax concessions on CKD imports?  
Reply : 
There are no tax concessions provided under the progra m, or to the program participants.  
c. What is the current status of the program review?  
Reply : 
The review of the program is still ongoing.  
d. To the extent the program includes export -contingent and local -content -
contingent elements, could the Philippines discus s these elements in the context 
of the requirements of Articles 3.1(a) and (b) of the SCM Agreement?  
Reply : 
The MVDP does not impose an export requirement, or provides incentive for export, and 
does not require local content. Furthermore, the Philippines currently does not have any 
export program and/or local content requirement for motor vehicles.  
e. Will the Philippines consider updating its notification pursuant to Article 25 of the 
Subsidies Agreement, to address all other support elements of the program 
besides the tax concessions on CKD imports?  
Reply : 
The Philippines complies with the biennial submission of the New and Full Notification 
Pursuant to Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies 
and Countervailing  Measures. New enacted laws and/or amendments will be covered in the 
succeeding notifications.  
Question 4 – Programs Previously Notified  
The United States notes that certain programs were reported in the prior notification9, 
which were not included in the  most recent notification, specifically the Fisheries Industry 
Support Programs  and Support to Commercial Fisheries (Section 35 of RA 8550 ). 
 
8 WT/TPR/S/368/Rev.1, page 71, paragraph 4.67.  
9 G/SCM/N/343/PHL/Suppl.1 . G/SCM/Q2/PHL/22  
 
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  a. Did these programs lapse in 2015? Have they been replaced by other programs?  
Reply : 
No Fisheries Industry Support Programs nor any fisheries subsidy requiring notification under 
Article 25 of the Agreement on Subsidies and Countervailing Measures (ASCM), was 
implemented for the period 2019 to 2020. Details could be found below:  
1. Support to Commercial Fisheries  
• Incentives for Commercial Fisheries as provided in Section 35 of the Philippine Fisheries 
Code, as amended by Republic Act 10654, was not implemented since no funds were 
appropriated for the purpose.  
2. Regional Fish Ports  
• The establishment of fish ports under Presidential Decree 977 or "Creating the Philippine 
Fish Marketing Authority, defining its functions and powers, and for other purposes ", as 
amended by Executive Order 772, is not a form of subsidy covered by the Agreem ent 
on Subsidies and Countervailing Measures.  
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