G/SCM/Q2/PHL/21  
 
8 April 2022  
(22-2875) Page: 1/3 
Committee on Subsidies and Countervailing Measures  Original: English  
 
SUBSIDIES  
QUESTIONS POSED BY THE UNITED STATES  REGARDING  
THE NEW AND FULL NOTIFICATION OF THE PHILIPPINES1 
The following communication, dated  and received on  7 April 2022 , is being circulated at the request 
of the delegation of the United States . 
 
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The United States appreciates the Philippines'  2021 subsidy notification, which was submitted in a 
timely manner. The United States notes that this notification  may under -report programs that satisfy 
the criteria for notification.  
Question 1 – Export Development Act ( Republic Act No. 7844 ) 
Our understanding of this act is that it provides a variety of structures, mechanisms, and incentives 
to encourage, facilitat e, 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 p rior notification s?  
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 . 
c. We understand that the act provides "Exemption from Presidential Decree No. 1853, 
provided that the importation shall be used for the production of g oods and services for 
export. " Please provide details of Presidential Decree No. 1853 and the value provided by 
this incentive?  
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, h ow do manufacturers demonstrate that the machinery and equipment is 
used in the manufacture of exported  products?  
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 th at 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 annua l value of the tax credits provided by this provision? Further, 
if this program is still in effect, p lease explain how this incentive is consistent with 
Article  3.1(b) of the SCM agreement?  
 
1 G/SCM/N/372/PHL .  G/SCM/Q2/PHL/21  
 
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  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 other s. 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?  
Question 2 - Investment Promotion Program  
The Secretariat Report on the Philippines' latest Trade Policy Review (TPR)2 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 questions3, the Philippines 
indicated that these measures were under review.  
a. Could the Philippines provide an update on the s tatus of the review of these measures?  
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?  
c. Will the Philippines consider updating its subsidy notificati on to address all elements of the 
program, with sufficient detail pursuant to Article 25.3 of the SCM Agreement?  
Question 3 - Comprehensive Motor Vehicle Development Program  
On page 12, paragraph 2.9.1 of the Philippines' notification, 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  these particular tax concessions on CKD imports alone. 
Also, according to the Philippines' latest TPR4, 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 this program 
provides?  
b. What other business incentives does the program provide to the motor vehicle sector besides 
the tax concessions on CKD imports?  
c. What is the current status of the program review?  
d. To the extent the program includes export -contingent and local -content -contingent 
elements, could the Philippines discuss these elements in the context of the requirements of 
Article s 3.1(a) and (b) of the SCM Agreement?  
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?  
Question 4 – Programs Previously No tified  
The United States notes that certain programs were reported in the prior notification5, 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 ). 
 
2 WT/TPR/S/368/Rev.1, page 46, paragraph 3.59.  
3 WT/TPR/M/368/Add.1, page 90.  
4 WT/TPR/S/368/Rev.1, page 71, paragraph 4.67.  
5 G/SCM/N/343/PHL/Suppl.1 . G/SCM/Q2/PHL/21  
 
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  a. Did these programs lapse in 2015? Have they been replaced by other programs?  
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