Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

NINETEENTH CONGRESS
First Regular Session

HOUSE BLN 491

Introduced by Representative Stella Luz A. Quimbo

AN ACT STRENGTHENING THE PHILIPPINE FOOTWEAR, LEATHER GOODS
AND TANNERY INDUSTRIES, PROVIDING INCENTIVES AND FUNDS
THEREFOR, AND FOR OTHER PURPOSES.

EXPLANATORY NOTE

Our industries in footwear, leather goods and tannery remain among the most
enduring manufacturing sectors in the country. For instance, the shoe industry in the
Philippines began as early as 1887 in the City of Marikina. When the Americans came,
the US colonial government provided business owners with resources such as
imported leather, copper nails, and modern sewing machines, as well as opening trade
schools.

The Philippine joined the World Trade Organization (WTO) in the 1980s, which
liberalized many industries, including the footwear sector. Though the influx of foreign
products brought greater competition, better product quality and lower prices, the lack
of proper incentives and a supportive business environment led to a drastic shift in
local industry and massive displacements. By the 2000's, 80 percent of the local
supply of shoes in the country came from China, and the share of local brands in the
footwear market significantly decreased.

The Board of Investments (BO!) states that the shoe industry is concentrated in the
NCR, Central Luzon and CALABARZON. Most shoe manufacturers are considered as
micro or small enterprises. The footwear industry continues to show economic
potential. The gross value-added share of the sector was 3.75 million pesos in 2014,
and rose to 5.024 million in 2017.

It is essential that the government is able to promote a policy environment that dually
strengthens competition in the market, while at the same time providing the proper
business conditions and incentives for local industries to flourish and be able to
compete. In 2004, Republic Act No. 9290 or the “Footwear, Leather Goods and
Tannery Industries Development Act” was enacted. The goal of the law was to bolster
the covered industries so that it could generate employment, create quality and
affordable products, and develop further SMEs in these sectors. However, it has been
20 years since the passage of this law, thus requiring the need for urgent updating
For example, the development incentives stated under RA 9290 have already long
passed its 10-year effectivity. These incentives included zero duty on imported capital

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equipment, gross income deductions for training expenses, and tax credits on
domestically purchased supplies and materials.

This measure aims to establish a new law that would reinvigorate the footwear. leather
goods and tannery industries. The bill shall reestablish development incentives for
these sectors. These include providing industry players with support for marketing and
promotional campaigns, green lane servicing in transactions with the government, and
assistance in accessing foreign markets. Rebates will also be given for those who
subcontract MSMEs or source raw materials from them that incorporates small
businesses into the supply chain

The bill also aims to provide industry players with preferential access to credit through
low-interest package loans from the Landbank of the Philippines (LBP), the
Development Bank of the Philippines (DBP), and the Small Business (SB)
Corporation. It shall also create a Competitiveness Enhancement Fund, which would
direct import duties of products from the foreign counterparts of these industries into
incentives so that our local businesses may flourish

Finally, the bill established an Industry Roadmap for the footwear, leather and tannery
industries. This Roadmap shall be made in consultation between the government,
industry players, and other important stakeholders to ensure that there is a clear and
coherent framework with regards to developing these local industries

By providing the proper support and incentives for our footwear, leather goods and
tannery industries, businesses will be empowered to further create world-class
products that can easily compete with the rest of the world. This would lead to more
business, higher quality of products, and better opportunities for the industries and for
the people

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

STELLA/(.UZ A. QUIMBO, PhD
Representative
Second District, Marikina City


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

NINETEENTH CONGRESS
First Regular Session

House BILLNO. 491

Introduced by Representative Stella Luz A. Quimbo

AN ACT STRENGTHENING THE PHILIPPINE FOOTWEAR, LEATHER GOODS
AND TANNERY INDUSTRIES, PROVIDING INCENTIVES AND FUNDS
THEREFOR, AND FOR OTHER PURPOSES

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 "Philippine Footwear,
Leather Goods and Tannery Industries Development Act of 2022.”

SEC 2. Declaration of Policy. — Recognizing that the footwear, leather goods and
tannery industries have the potential to generate employment through their integrated
development, and increase the country's foreign exchange earnings through exports
and import substitutes, it shall be the policy of the State to support, promote and
encourage the growth and development of these local industries including their supply
chain. To this end, the State shall develop these industries by:

a) establishing an adequate support structure to assist the viability of the
footwear, leather goods and tannery industries and make them competitive;

b) providing appropriate and time-bound incentives and programs to accelerate
the growth of these industries;

©) ensuring a ready domestic market by requiring government agencies to
purchase products made by these industries and encouraging the private
sector to do the same;

d) encouraging the institutionalization of industry associations, organizations
and cooperatives of footwear, leather goods and tannery, to promote
improvement and advancement of skills and craftsmanship of Filipino
workers therein; and

e) creating a business environment to encourage local micro, small and
medium enterprises in said industries to join the formal sector.

SEC 3. Developmental Incentives. - The following incentives shall be available to
qualified enterprises of the footwear, leather goods, and tannery industries herein
referred to as “covered industries” and their supply chain for a maximum period of ten
(10) years from the date of registration:
a) preferential access to financing at flexible loan terms;
b) rebate for investments in modern machineries and equipment and new
technologies;


c) rebate for subcontracting to micro, small and medium enterprises (MSMEs)
or sourcing of raw materials or services from MSMEs;

4) support for marketing, promotional campaigns, fairs, exhibitions and
conferences including distribution;

e) discounted lease rates in government duty-free shops, and other
establishments for promotion and sales of the Department of Trade and
Industry (DTI), Department of Tourism (DOT), Local Government Units
(LGUs), and other government agencies:

f) access to customs bonded manufacturing warehouse;

4) green lane servicing in business processes with government; and

h) assistance on accessing foreign markets, matching with possible foreign
partners, market intelligence and other similar support

SEC. 4. Eligibility for Incentives. — To qualify for developmental incentives under
Section 4 of this Act, enterprises belonging to covered industries including their supply
chain must be at least 60 percent Filipino-owned, duly registered with the Board of
Investments (BOI), and possess internationally comparable quality, including sizing of
footwear, which shall be in accordance with, at least, the Philippine National
Standards

Manufacturing companies with foreign ownership higher than 40 percent cannot
avail of the developmental incentives under this Act, but may avail of the incentives
under RA 11534 or the CREATE Law.

SEC 5. Covered Industries Development and Competitiveness Enhancement
Fund. — To implement the policy enunciated in this Act, there is hereby created the
Covered Industries Development and Competitiveness Enhancement Fund herein
referred to as the "the Fund’. The Fund shall consist of 20% duties and Value-Added
Tax (VAT) collected from the importations of covered industries, including interests, if
any. The Fund shall be automatically credited to a Special Account in the General
Fund of the National Treasury which shall be in place within ninety (90) days upon the
effectivity of this Act: Provided, that fund releases shall not be subject to any ceiling
by the Department of Budget and Management (DBM).

Subject to the usual accounting and auditing rules and regulations, the Fund shall be
allocated and disbursed for developmental and competitiveness enhancement
activities and support, such as, but not limited to, the following:

a) access to preferential credit for modernization of plant machineries &
equipment and technologies;

b) subsidy for marketing, promotional campaigns, and participation to fairs,
exhibitions and conferences;

c) subsidy for distribution;

d) subsidy for lease rates in government duty-free shops, and other
establishments for promotion and sales of DTI, DOT, LGUs, and other
government agencies; and

e) assistance in accessing quality raw materials (e.g., establishment of
consolidating office abroad)


The respective Heads of all implementing agencies that have been provided with the
Fund as provided under this Act shail be accountable and responsible in ensuring that
the said Funds are fully utilized in accordance with the provisions of this Act. The
Secretary of the Department of Trade and Industry (DT!) shall coordinate with other
implementing agencies on the determination, adoption and implementation of the
programs based on this law for the development of the covered industries.

The Fund shall be released directly to the implementing agencies based on allowable
developmental activities and interventions as provided for in this Act: Provided, That
the unutilized portion of the Fund allocated to the implementing agencies shall not
revert to the General Fund but shall continue to be used for the purpose for which it
was set aside.

Any program undertaken in accordance with this Act shall only be deemed
complementary and supplementary to and shall not be a replacement of any existing
programs for the covered industries already implemented by the DTI and other
agencies concerned

Provided, That the implementing agencies and other identified agencies shall,
whenever feasible, procure from accredited local manufacturers to assist in the
promotion of locally manufactured machineries, equipment and technology.

Subject to the usual accounting and auditing rules and regulations, the Fund shall be
allocated and disbursed as follows:

a) Shared Service Facilities - Twenty percent (20%) of the Fund shall be
released to the implementing agencies and other identified agencies in this
Act as grant in kind for the establishment, upgrading, and maintenance of
shared service facilities and modernization thereof by equipping it with new
and tested technology such as but not limited to needed hardware and
software for manufacturing operation, training, R&D, testing and design
including tapping of solar power and other similar innovative technology to
ensure sufficient supply of reliable and low-cost energy and other innovation
on utilizing, conserving and optimizing usage of resources with the inclusion
of sustainable waste management., in providing developmental support for
the covered industries and their supply chain, such as, but not limited to,
training facilities or institutions, R&D, innovation centers, promotion facilities,
testing laboratories, stockpiling, consolidation of importation of raw materials,
consolidation of outputs for public tender, shared retail outlets, and similar
structures.

b) Credit Assistance — Twenty percent (20%) of the Fund shall be released to
and implemented by the SB Corporation, Landbank of the Philippines (LBP)
and Development Bank of the Philippines (DBP). It shall be made available
with minimal interest rates and with minimum collateral requirements to
manufacturers of the covered industries and cooperatives thereof for
acquisition of machineries and equipment, software and technology, and/or
raw materials and supplies, working capital, R&D, and other operational
costs; Provided, That the industries, whenever feasible, shall procure from

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local manufacturers to assist in the promotion of locally manufactured raw
materials, supplies, machineries, equipment, software and other innovative
technology.

¢) Creation and Strengthening of Linkages to Local Supply Chain Players -
Fifteen percent (15%) of the Fund shall be released to and implemented by
the implementing agencies and other identified agencies to enhance
subsidies to qualified enterprises that exhibit good performance, including
creation of linkages to local supply chain players in the covered industries,
such as, but not limited to, outsourcing, subcontracting to MSMEs by larger
enterprises.

d) Marketing and Promotions - Fifteen percent (15%) of the Fund shall be
released to and implemented by the implementing agencies and other
identified agencies to subsidize marketing and promotional campaigns and
participation to fairs, exhibitions and conferences of covered industries.

e) Sales and Distribution - Fifteen percent (15%) of the Fund shall be released
to and implemented by the implementing agencies and other identified
agencies to subsidize distribution expenses of covered industries, including
subsidy for lease rates in government duty-free shops, and other
establishments for promotion and sales of DTI, DOT, LGUs, and other
government agencies.

) Access to Quality Raw Materials - Fifteen percent (15%) of the Fund shall be
released to and implemented by the implementing agencies and other
identified agencies to assist covered industries in accessing quality raw
materials, which may include the establishment of linkages with local
manufacturers in the supply chain, especially MSMEs; and operation of a
supply consolidation office abroad

The Congressional Oversight Committee shall conduct a periodic review of the use of
the Footwear Fund. At the end of the sixth (6th) year, a mandatory review shall be
conducted by the Congressional Oversight Committee to determine whether the
Footwear Fund and its use as provided for under this Act shall be continued, amended,
or terminated.

SEC 6. Access to Credit, Loans and Official Development Assistance Funds for
the covered industries. -The SB Corporation, LBP and DBP are hereby mandated
to formulate Modernization Credit and Loan Package Facility for the covered industries
under this Act, which shall provide low interest loans to manufacturers seeking to
improve and modernize their production facilities. Similarly, LBP and DBP shall make
available to manufacturers of covered industries the official development assistance
channeled through them.

The SB Corporation, LBP and DBP shall allot a part of such credit and loan package
facility, including the official development assistance, to the MSMEs of the covered
industries.


SEC 7. Industry Roadmap for Covered Industries. - Upon the effectivity of this Act,
the DTI, in consultation with the National Economic and Development Authority
(NEDA). Department of Finance (DOF), DBM, Department of Science and Technology
(DOST), Technical Education and Skills Development Authority (TESDA), Department
of the Interior and Local Government (DILG), Department of Education (DepEd),
Commission on Higher Education (CHED), Armed Forces of the Philippines (AFP),
Philippine National Police (PNP), Investment Promotion Agencies (IPAs), and industry
associations of covered industries and other relevant agencies thereto, shall be given
a maximum of one hundred eighty (180) days to formulate and adopt industry
roadmaps of the covered industries to restructure the government's delivery of support
services.

SEC 8. Government Procurement. — All government agencies, offices, bureaus,
LGUs, state universities and colleges, government-owned and controlled
corporations, government financial institutions and its subsidiaries, and all other
government instrumentalities, with procurement requirements from the covered
industries and directly sourcing footwear, leather goods and tannery products, are
mandated to source their procurement requirements that are being manufactured or
can be manufactured by local producers and manufacturers. Proactive posting and
publication requirements relevant to public biddings, public tenders and other
information that would ensure compliance and transparency in policies and
implementation hereof shall be adopted.

The procedures under Republic Act No. 9184, otherwise known as the “Government
Procurement Reform Act”, on competitive bidding shall apply when there are more
than one (1) focal manufacturer or producer; Provided, that the procurement shall be
done in the most judicious, economical, and expeditious manner. Otherwise, the
procedures for the alternative methods of procurement shall be applied.”

Government procuring entities shall give preference to manufacturing enterprises of
covered industries participating in their bidding and procurement which are not
registered in and enjoying incentives from any Investment Promotion Agency. The
award shall be made to the lowest domestic non-IPA registered bidder, provided his
bid is not more than fifteen percent (15%) in excess of the lowest bid of IPA-registered
enterprises.

Ecozone locators that establish linkages with domestic MSMEs may be provided
additional preference when participating in bids

The implementing rules and regulations (IRR) shall provide the necessary
requirements and procedures on this Act.

SEC 9. Inclusive Business ~ It is hereby encouraged that government procuring
entities shall provide preference to participating enterprises belonging to covered
industries that will bid for goods and are able to show proof of substantial linkage
integration with MSMEs in their supply or value chain.

SEC 10. Lead Implementing Agency. - The DTI shall monitor, oversee and
supervise the implementation of this Act, and shall submit a yearly report thereof to
the President and to Congress.


SEC 11. Product Development. - The DTI, DOST, Philippine Internationa! Trading
Corporation (PITC), and other relevant government agencies and offices shall be
responsible for product development training and support for appropriate technology
and capital equipment acquisition geared towards global competition and the export
market. In coordination with the host LGU, the DTI, with the assistance of the
aforementioned agencies, shall develop initiatives and programs for the covered
industries.

SEC 12. Support Programs from Government Agencies. - Government agencies,
such as but not limited to, DTI, DOST, and TESDA shall develop support programs for
the development and enhancement of competitiveness of the covered industries and
shall prioritize them in providing relevant grants, trainings and support programs

SEC 13. Support Services from DTI - FTSC. Within the premises and under the
jurisdiction of the Commercial Posts of the Department of Trade and Industry (DT!),
the Foreign Trade Service Corps (FTSC) shall provide regular relevant information
and market intelligence on covered industries as to trends, emerging policies and
regulations, emerging opportunities, among others. They shall also support the
covered industries in accessing foreign markets, matching with possible foreign
partners, buyers, suppliers, distributors and may likewise act as consolidators of
orders and/or quality raw material supplies. Related operational expenses may be
eligible for allocation from the Fund

SEC 14. Creation of a Unit in BO! for the implementation of this Act's provisions
for the covered industries. — A separate unit in the BOI, attached agency of DTI, is
hereby established to ensure the implementation of the provisions of this Act. For this
purpose, the operating expenses of the new unit, including the creation, maintenance
of four (4) plantitla positions for the new unit, and one (1) plantilla position for a local
hire in a foreign office that will function as a marketer/consolidator of raw materials and
supplies in that country, shall be appropriated additional funds under the BOI's annual
budget.

SEC 15. Penalties. - The following prohibited acts shall be imposed with the penalties
provided herein:

a) False or Fraudulent Information. Any person or enterprise that knowingly
presents or submits to government offices any false or fraudulent declaration,
application, value-add, or other information shall be penalized by a fine
ranging from Two Hundred Thousand Pesos (P200,000.00) to Five Hundred
Thousand Pesos (P500,000.00). it will be blacklisted frhencefoth from the
Program.

b) Goods Not Locally Made. Any person or enterprise that falsely characterizes
goods as locally made shall be penalized by a fine ranging from Five
Hundred Thousand Pesos (P500,000.00) to One Million Pesos
(P1,000,000.00).


c) Violation of Section 8. Any employee of government procurement entities
violating Section 8 of this Act shall be penalized by a fine equivalent to ten
percent (10%) of the approved budget for the contract.

d) Other Violations. Any other violation of this Act and its implementing rules
and regulations shall be penalized by a fine equivalent to One Hundred
Thousand Pesos (P100,000.00).

In the case of enterprises, the penaity shall be imposed on the chief operating
officer, chief executive officer, directors or officers responsible for the
violation.

€) Blacklisting

The penalties under this Act shall be without prejudice to the filing of cases punishable
under other existing laws, rules or regulations.

SEC 16. Implementing Rules and Regulations. — Within ninety (90) days from the
approval of this Act, the DTI shall, upon consultation with relevant government
agencies, promulgate the rules and regulations implementing the provisions of this
Act.

SEC 17. Separability Clause. - !f any provision or part of this Act is declared
unconstitutional, the remaining provisions thereof not otherwise affected shall remain
in full force and effect.

SEC 18. Repealing Clause. — Republic Act No. 9290 otherwise known as Footwear,
Leather Goods and Tannery Industries Development Act, is hereby repealed.

All other laws, decrees and executive orders inconsistent with this Act are hereby
repealed or modified accordingly.

SEC 19. Effectivity. — This Act shail take effect fifteen (15) days from the date of its
publication in the Official Gazette or in at least one (1) newspaper of general
circulation.

Approved,