Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

17 Congress
Second Regular Session

HOUSE BILLNO._6196

Introduced by Deputy Speaker Raneo “Ranie” E. Abu

AN ACT
PROMOTING THE ADOPTION OF COUNTERTRADE ON THE
IMPORTATION AND PROCUREMENT OF FOREIGN CAPITAL
EQUIPMENT, MACHINERY, PRODUCTS, GOODS AND SERVICES BY
THE GOVERNMENT

EXPLANATORY NOTE

This bill seeks to promote the adoption of the countertrade policy on the
importation and procurement of foreign capital equipment, machinery, products,
goods and services by the government.

Countertrade refers to various forms of trade 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.

The countertrade policy was adopted by virtue of Executive Order No. 120,
issued by former President Fidel Valdez Ramos on August 19, 1993. It directs the
National Government, its departments, bureaus, agencies and offices, including
government-owned and -controlled corporations, to adopt the countertrade policy as
a supplemental trade tool with respect to importation or procurement of foreign
capital equipment, machinery, products, goods and services entailing the payment
of at least One Million (US$1,000,000.00) United States Dollars or its equivalent in
other foreign currency, and to negotiate and conclude on a best-efforts basis,
agreements or arrangements on countertrade with respect to such importation.

The countertrade policy is a great tool in opening new markets for Philippine
products and services, overcoming quota and trade restrictions of other countries,


and providing for technology transfer and industrial growth, particularly in strategic
industries, such as energy, transport, infrastructure, telecommunications and
defense. It provides a mechanism for countries with limited access to liquid funds
to exchange goods and services with other nations. Additionally, it provides the
exporting nation with an opportunity to offer goods and services in a larger
international market promoting growth within the industry. However, under
Executive Order No. 120, government agencies which adopt the countertrade policy
must comply with the rigid requirements on procurement under Republic Act No.
9184, otherwise known as “Government Procurement Reform Act.” This causes
delay on the countertrade processes and transactions.

Under this bill, all transactions under the countertrade arrangement entered
into by the government offices, departments, bureaus and agencies, including
government-owned and -controlled corporations on importation or procurement of
foreign equipment, machinery, products, goods and services, are exempt from the
procurement processes and bidding requirements provided under Republic Act No.
9184. With the passage of the proposed countertrade law, the current problems on
the immediate procurement of needed supplies, parts and equipment for the
maintenance of existing industries such as the transport sector will be resolved. This
will also facilitate the inflow of investments and technologies into the country and
the expansion of trade and export with other countries.

In view of the foregoing, immediate passage of this bill is earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

17” Congress
Second Regular Session.

HOUSE BILL NO.

Introduced by Deputy Speaker Raneo “Ranie” E. Abu

AN ACT
PROMOTING THE ADOPTION OF COUNTERTRADE ON THE
IMPORTATION AND PROCUREMENT OF FOREIGN CAPITAL
EQUIPMENT, MACHINERY, PRODUCTS, GOODS AND SERVICES BY
THE GOVERNMENT

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Short Title. — This Act shall be known as the “Countertrade

Act.”

SEC. 2. Declaration of Policy. — It is the policy of the State to pursue a trade
policy that serves the general welfare and utilizes all forms and arrangements of
exchange on the basis of equality and reciprocity. Towards this end, the State shall
promote the adoption of countertrade to compensate the foreign exchange expended

for the importation or procurement of foreign capital equipment, machinery,


products, goods and services by the government, and to reciprocate for such
importation or procurement through arranged counter exports of our traditional or
non-traditional products to the country of the supplier or any third country, or

through product buy back, offsets or investments.
SEC. 3. Definition of Terms. — As used in this Act:

(a) | Countertrade refers to the various form of trade financing methods in
which an international sale of products, services and technology is conditional upon
a sale in the opposite direction involving payment primarily in goods or services in
lieu of money;

(b) Foreign supplier refers to a supplier of the imported capital equipment,
machinery, products, goods, technology or services including agents or
representatives in the Philippines;

(c) Philippine products refer to any item produced, manufactured or
assembled in the Philippines which has a minimum local content of at least 51%;
and

(d) Philippine services refer to any legitimate service rendered utilizing

Filipino labor and skill.

SEC. 4. Coverage. — All government offices, departments, bureaus, agencies

and instrumentalities, including government-owned and -controlled corporations are


hereby directed to adopt the countertrade policy as a supplemental trade tool in
connection with transactions involving the importation or procurement of foreign
capital equipment, machinery, products, goods and services entailing the payment
of at least One Million (US$ 1,000,000.00) United States Dollars or its equivalent in
other foreign currency, and to negotiate and conclude on a best-efforts basis,

agreements or arrangements on countertrade with respect to such importation.

SEC. 5. Countertrade Transactions. — The Philippine International Trading
Corporation (PITC) is the primary agency responsible for the implementation,

management and administration of the countertrade transactions.
Countertrade transactions or arrangement may be in the following forms:

(a) Barter. - A countertrade arrangement wherein there is a direct exchange
of goods without the use of money and the goods are of approximately in equal
value;

(b) | Counterpurchase. - A countertrade arrangement, also known as
counter exports, counter deliveries, parallel transactions or reciprocal trades,
wherein a foreign supplier reciprocally commits to accept or purchase Philippine
products or services to be exported to the foreign supplier's country or to third

country;


(c) Offset. - A countertrade arrangement wherein a foreign supplier
commits to introduce investments or technology transfer in the Philippines, or assist
in the establishment of new industries with export capacity or in the development
and expansion of existing manufacturing, technological and industrial capabilities
of the Philippines, to generate or save foreign exchange and create or increase
employment opportunities which may or may not be related to the machinery,
equipment, products or goods imported or services procured;

(d) Product Buy Back. - A countertrade arrangement wherein a foreign
supplier of machinery, equipment or technology is paid for by the resultant products
or goods made or manufactured from such equipment, machinery or technology; and

(e)  Trade-for-Debt Swap or Debt-for-Goods or Services. - A countertrade
arrangement wherein a loan or credit accommodation obtained by a government
agency or government-owned and controlled corporations from a foreign
government or creditor is arranged to be settled in full or in part by way of delivery

of products, goods or services.

SEC. 6. Powers and Functions of PITC. — The PITC shall exercise the

following powers and functions:

(a) Formulate policies relative to the countertrade in the Philippines taking
into consideration the international developments and practices on the countertrade

in order to make the countertrade a viable tool for promoting Philippine exports;


(b) Outline terms of cooperation with other countries and appropriate

international organizations on the use of the countertrade as an alternative trade tool;
(c) Endorse or recommend approval of applications for the countertrade;

(d) Provide advisory or consultative services to Philippine government
departments, bureaus, offices, agencies and government-owned and -controlled

corporations on policy matters relating to countertrade;

(e) Act on countertrade-related issues including matters relating to the

interpretation of this Act;

(f) Issue such circulars or memoranda as may be necessary to implement
this Act including the determination of procedures for the conduct of businesses and

meetings relative to the countertrade in government procurement;

(g) | Coordinate and assist all government departments, agencies, bureaus,
offices and instrumentalities including government-owned and -controlled
corporations in formulating and implementing appropriate strategies on the
countertrade and similar arrangements relative to any foreign procurement or
importation of capital equipment, machineries, products, goods and services covered

by this Act;


(h) Review and evaluate all countertrade or offset proposals submitted by
foreign suppliers or entities relative to procurements or importations covered by this

Act in coordination with the procuring office;

(i) Secure and maintain an annual Government Countertrade Foreign
Procurement List covering yearly government procurement or importation covered
by this Act in cooperation with all government procuring offices which shall be the

basis for developing countertrade or offset packages and arrangements;

Gj) Negotiate, formulate and conclude countertrade arrangements,
contracts or agreements with foreign suppliers or their designated nominees or

agents relative to government procurement or importation covered by this Act;

(k) Submit regular status reports to the Secretary of Trade and Industry on

the status of all countertrade transactions or projects in the country;

(l) Serve as over-all coordinating and monitoring agency of the Philippine
Government for countertrade or offset and act as the countertrade nominee of
procuring departments, bureaus, offices and instrumentalities of the national
government including government-owned and -controlled corporations with respect

to the countertrade in foreign procurement or importation; and

(m) Exercise such other powers and functions and perform such other duties

as may be authorized, delegated or assigned.


SEC. 7. Processing and Evaluation of Countertrade Proposals. — All
government offices, agencies, bureaus, departments including government-owned
and -controlled corporations must submit to the PITC a list of proposed importations,
together with their approximate values, product information and foreign suppliers of
the said importation not later than the second week of November of every calendar

year.

The PITC shall evaluate the countertrade proposals submitted by the foreign
supplier in accordance with the evaluation criteria established by the PITC and
thereafter, coordinate with the foreign supplier on the final countertrade

arrangements and supplemental contracts to be executed.

In the evaluation of the offer submitted by the foreign supplier, the PITC shall
give preference to the foreign supplier offering the most favorable countertrade

arrangement for the Philippines.

The PITC shall update the importing office on the subsequent developments
relative to the countertrade package developed for their respective procurement and

solicit their cooperation in these matters as necessary.

SEC. 8. Countertrade Monitoring and Crediting Procedures. — The PITC
shall institute and maintain monitoring and crediting procedures and rules to

ascertain that countertrade obligations are performed in accordance with this Act and


credit the foreign supplier or its designated countertrade nominee for due
performance, on a per transaction basis. The PITC shall impose and collect
monitoring fees to cover the expenses for the management and operation of

countertrade.

SEC.9. Exemptions. — All transactions under the countertrade agreement
entered by any government offices, departments, bureaus and agencies, including
government-owned and -controlled corporations on importation or procurement of
foreign equipment, machinery, products, goods and services shall be exempted from
the procurement processes and bidding requirements under Republic Act No. 9184

or the “Government Procurement Reform Act.”

SEC. 10. Accreditation. — The PITC shall formulate accreditation process for
Philippine manufacturers, exporters and contractors to qualify as suppliers of the

Philippine products or services in countertrade transactions.

SEC. 11. Reportorial Requirements. — The foreign supplier or designated
countertrade nominee shall submit quarterly and annual reports to PITC on the
progress of their countertrade performance with a summary of transactions
undertaken. The PITC and the foreign supplier or its designated countertrade

nominee shall hold mid-year and yearly countertrade performance reviews and the


PITC shall submit to the Department of Trade and Industry a semi-annual status

reports on the countertrade programs undertaken.

SEC. 12. Implementing Rules and Regulations. — Within ninety (90) days
from the effectivity of this Act, the Secretary of Trade and Industry shall, in
coordination with the President of the Philippine International Trading Corporation,

issue the necessary rules and regulations for the effective implementation of this Act.
SEC. 13. Separability Clause. — If any provision or part of this Act is declared

invalid or unconstitutional, the remaining parts or provisions not affected shall

remain in full force and effect.

SEC. 14. Repealing Clause. — Executive Order No. 120 is hereby repealed.
All other laws, decrees, orders, rules and regulations and other issuances, or parts
thereof, which are inconsistent with the provisions of this Act are hereby repealed

or amended accordingly.

SEC. 15. Effectivity. — This Act shall take effect fifteen (15) days after its

publication in the Official Gazette or in a newspaper of general circulation.

Approved,