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THIRTEENTH CONGRESS OF THE REPUBLI 
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OF THE PHILIPPINE 
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First Regular Session 
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S E N A T  
s. No. 
Introduced by Senator S. R. Osmetia Ill 
~ EXPLANATORY NQT 
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Foreign investments are important to the Philippine economy, especially to 
bridge the gap between savings and investments, in the light of the country's 
low savings rate. 
Foreign investments have proven useful, for example, in 
financing infrastructure development projects. 
Countertrade refers to various forms of trade financing in which an 
international sale of products, services and technology is conditional upon a sale 
in the opposite direction involving payment primarily in goods and services in lieu 
of money. In other words, countertrade is a mechanism which could benefit the 
Philippine economy in two ways: 1) as method of financing the huge investments 
needed for development; and 2) as a way of developing market access for 
Philippine exports of goods and services. 
This bill proposes a national policy on countertrade in order to facilitate 
mutually beneficial transactions between the Philippines and 
our trading 
partners. Some of the salient features of this bill are as follows: 
All countertrade agreements shall meet the criteria that relate to price, 
commercial viability, quality and level of technology, social benefit, and 
access to new markets in accordance with existing import, export and 
foreign exchange procedures, and rules and regulations of the 
Philippines. 
The Philippine International Trading Corporation shall be the exclusive 
government entity responsible for undertaking all countertrade 
arrangements for and in behalf of the Philippine government, its agencies 
and instrumentalities. 
The Department of Trade and Industry (DTI), in consultation with the 
National Economic and Development Authority (NEDA) and the Bang ko 
Sentral ng Pilipinas (BSP) shall be responsible for the formulation of the 
guidelines and rules and regulations that would effectively carry out the 
counter trade program and its variations between foreign suppliers and 
Philippine buyers, importers and exporters. 
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In view of the foregoing, early passage of this bill is earnestly requested. 
n, 
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SERGIO OSMENA 111 
Senator 


THIRTEENTH CONGRESS OF THE REPUBLIC 
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OF THE PHILIPPINE 
First Regular Session 
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S E N A T E  
S. No. 
Introduced by Senator S. R. OsmeAa Ill 
AN ACT 
ESTABLISHING A NATIONAL POLICY ON COUNTERTRADE 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
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SECTION 1. 
Tit/e. - This Act shall be known 
as the "Countertrade 
2 Act of 2004." 
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SEC. 2. Declaration of Policy, - It is the declared policy of the State to 
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encourage and develop countertrade with the end in view of increasing and 
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promoting both exports of traditional and non-traditional products; diversifying 
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and creating additional exports; finding new market outlets; establishing markets 
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in countries lacking in foreign exchange; improving the balance of trade position 
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with specific countries; strengthening and consolidating export markets that are 
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facing international competition; saving foreign exchange; developing a wide 
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SEC. 3. Definition. For purposes of this Act, "countertrade" shall refer to 
range of sources of essential imports; and promoting technology transfer. 
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the various form of trade financing methods in which an international sale of 
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products, services and technology is conditional upon a sale in the opposite 
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direction involving payment primarily in goods or services in lieu of money. 
SEC. 4. Forms of Countertrade. - For purposes of the preceding Section, 
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countertrade transactions may take the following forms or a combination thereof; 


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a) Barter - the direct exchange of goods without the use of money in 
which the goods are of approximately equal value; 
b) Offset - an arrangement wherein the buyer compels the seller to 
manufacture certain components in the buyer’s country or agrees to transfer the 
latest production technology thereby reducing the demand for hard currency; 
c) Counter purchase - an arrangement where the seller is granted normal 
payment terms, with the buyer requiring the seller to utilize all or a percentage of 
the payment to purchase products in the buyer’s country within a specific period 
of time; 
d) Composition - an agreement wherein the seller of a product, service or 
technology takes full or partial payment in the form of a product; 
e) Buy-back 
- a long-term arrangement where the supplier of 
technology, equipment or a plant agrees to accept as partial or full payment, 
goods that are produced by the equipment, technology or plant supplied; 
9 SWAP - a type of transaction involving bulk products, located in 
alternative sites, which are traded with a nearer purchaser in order to save on 
transportation costs. Differences in the quality of goods being substituted are 
worked out in the swap contract; 
g) Switch 
- an arrangement resorted to by a country involved -in. a 
bilateral trade agreement which finds itself with a trade deficit. The deficit is 
transferred to a third party which purchases goods from the deficit country and 
sells them for hard currency. Often substantially discounted, the price of goods 
transferred to the third party is used to clear the account; 
h) Bilateral Clearing Accounts 
- a government-to-government trade 
agreement to monitor trade flows between the contracting parties; and 
i) Special Trade Agreements - these are variations of bilateral clearing 
accounts to facilitate non-cash transactions with countries that do not have 
sufficient hard currencies. 


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The above forms or combinations of countertrade transactions or their 
variations may supplement but not supplant conventional trading arrangements 
or trade under convertible currency payments. 
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SEC. 5. Commercial Viability. - All counter-trade arrangements shall 
meet the criteria that relate to price, commercial viability, quality and level of 
technology, social benefit and access to new markets in accordance with existing 
import, export and foreign exchange procedures, and rules and regulations of the 
Philippines. 
SEC. 6. Role of the Philippine lnternational Trading Corporation. - In 
addition to its existing functions, the Philippine lnternational Trading Corporation 
(PITC) shall be the implementing arm of all countertrade programs or policies in 
close coordination with the private sector and the concerned government 
agencies. It shall also perform the following functions. 
a) Undertake all countertrade arrangements for and in behalf of the 
Philippine Government, its agencies, entities and other instrumentalities except in 
cases where private individuals have been duly authorized by the Department of 
Trade and Industry (DTI) to undertake the same as provided for in Section 8 
hereof; 
b) Formulate short and long-term marketing plans which would promote 
Philippine exports using the various counter-trade schemes; 
c) Act as an information collection and dissemination center on 
countertrade regarding products to be exchanged including' price, grades, . 
quantity, quality and other standards and the list of potential local and overseas 
buyers and sellers involved in imports and export on policies and guidelines on 
countertrade with the objective of persuading them to participate in countertrade 
transactions; 
d) Provide adequate training to all interested parties in planning, 
negotiating and managing countertrade; 


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e) Submit to the Department of Trade and Industry (DTI) and the National 
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Economic and Development Authority 
(NEDA) monthly reports on all 
countertrade transactions. It shall also coordinate with the Bangko Sentral and 
the Bureau of Customs for the consolidation of reports on the volume of exports 
and imports under countertrade arrangements; 
f) Call upon any government, bureau, office, agency or instrumentality.of I 
the Government, including government-owned and controlled corporations for 
such information or assistance it may need in the exercise of its powers and 
performance of its functions. 
SEC. 7 .  Countertrade Arrangements; General Rule; Exception; Private 
Sector Participation. - The Philippine International Trading Corporation (PITC) 
shall be the exclusive government entity responsible for undertaking all 
countertrade arrangements for and in behalf of the Philippine Government, and 
its agencies, entities and instrumentalities: Provided, That where a private firm 
has been authorized by the Department of Trade and Industry (DTI), it may 
venture into the same for and in behalf of the Government: Provided, finally, 
That all private companies, especially overseas trading companies which are 
duly registered with the Securities and Exchange Commission (SEC), including 
procedures/exporters and suppliers of Philippine products, may participate in 
countertrade arrangements either in its own behalf or on behalf of another firm. 
SEC. 8. Allowable Exporf Commodities. - Except for a buy-back type or 
scheme of countertrade, only the following export commodities shall be eligible 
for countertrade: 
a) Manufactured 
or 
semi-manufactured 
non-traditional 
export 
commodities; 
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b) Export commodities, traditional or non-traditional, declared by the 
National Economic and Development Authority (NEDA) to be in excess supply 
locally; and 


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c) Such other commodities declared by NEDA to be eligible for 
countertrade from time to time. 
SEC. 
9. Allowable lmpoti! Commodities. - Commodities eligible for 
importation 
under 
the 
countertrade 
arrangements 
shall 
consist 
of 
essentiaVstrategic imports which the Philippines need in substantial quantities 
such as rice, wheat, oil, coal, animal feeds, fertilizers, machinery and equipment, 
military hardware, aircraft, vehicle and such other commodities as may be 
declared by the National Economic and Development Authority (NEDA). 
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Raw materials, supplies, machines, equipment, spare parts, services or 
technology may also be subject to countertrade provided that they are not locally 
available in sufficient quantities, or of comparable quality and at competitive 
p r ices. 
SEC. 
10. 
Public Work Contracts. - Foreign contractors who have 
successfully bidded local public works contract shall purchase Philippine 
products at least fifty percent (50%) of the value of the said public works contract. 
They shall use or resell these goods in their country, unless prior authorization 
from the supplier is obtained to use or resell them elsewhere. 
SEC. 
11. 
Payment Agreement. - For purposes of this Act, all 
countertrade arrangements provided for in Section 3 hereof, export and imports, 
shall require specific Bangko Sentral approval. 
SEC. 12. Rules and Regulations. -Within six (6) months from the date 
of the effectivity of this Act, The Department of Trade and Industry (DTI), in 
consultation with the National Economic and Development Authority (NEDA) and 
the Bangko Sentral ng Pilipinas, shall promulgate the necessary rules and 
regulations to implement this Act. 
SEC. 13. Repealing Clause. - All laws, decrees, executive orders, rules 
and regulations, or parts hereof inconsistent with the provision of this Act are 
hereby repealed, amended or modified accordingly. 
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SEC. 
14. Separability Clause. - If for any reason, any section or 
provision of this Act is declared null and void, parts or provisions hereof which 
are not affected by such declaration shall continue to be in full force and effect. 
SEC. 15. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in at least two (2) newspapers of general 
circulation whichever comes earlier. 
Approved, 
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