P.D. No. 1419 : PHILIPPINE LAWS, STATUTES and CODES : CHAN ROBLES VIRTUAL LAW LIBRARY
M a n i l a
PRESIDENTIAL DECREE No. 1419
PRESCRIBING INCENTIVES FOR THE ESTABLISHMENT OF MULTINATIONAL REGIONAL WAREHOUSES BY MULTINATIONAL COMPANIES SUPPLYING SPARE PARTS OR MANUFACTURED COMPONENTS AND RAW MATERIALS TO THE ASIA-PACIFIC AREA
WHEREAS, the objective of accelerating the development of the Philippines as the business and financial capital of Southeast Asia and thereby hastening the economic and social development of the country can be accomplished further by attracting multinational companies to base their regional warehouse in the Philippines;
WHEREAS, the said regional warehouse will not earn or derive any income from the host country and all their expenses are financed by their head offices or parent companies;
WHEREAS, the attainment of the aforesaid goal will mean the creation of a new source of dollar revenue for the government and the increase of foreign exchange receipts for export of Philippine products; a boost to air travel, new construction and real estate development, new job opportunities, increase in local tourism and potential investors;
WHEREAS, the establishment of regional warehouses in the Philippines by multinational companies would prevent and spare local industries from incurring substantial but needless losses from factory down time because of lack of imported spare parts of raw materials and from the heavy cost of inventory financing due to unavailability of imported spare parts or manufactured component and raw materials;
WHEREAS, the establishment of regional warehouses in the Philippines by multinational companies will also promote trade, communication and cooperation between the Philippines and other member-nations of the Association of Southeast Asian Nations (ASEAN) and will thereby serve its goal towards regional self-reliance;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and decree:
Section 1. A multinational company organized and existing under any laws other than those of the Philippines which is engaged in international trade and supplies, spare parts or manufactured components and raw materials to its distributors or markets in the Asia-Pacific area and which has established or will simultaneously establish a regional or area headquarters in the Philippines in accordance with the provisions of Presidential Decree No. 218, as amended, and the rules and regulations implementing the same may also establish regional warehouse or warehouses in the Philippines, after securing a license therefore from the Secretary of Trade, upon the favorable recommendation of the Bureau of Customs.
The following minimum requirements shall be submitted or complied with by the said foreign entity in accordance with the rules and regulations to be issued by the Secretary of Trade as provided for in Section 10 hereof.
(a) A certification from the Philippine Commercial Attachor in the absence of such an official, a Philippine Consul in the foreign firms home country that said foreign firm is engaged in international trade and supplies or will supply spare parts or manufactured components and raw materials to its distributors or markets in the Asia-Pacific Region.
(b) A certification from a principal officer of the foreign entity to the effect that the said foreign entity has been authorized by its Board of Directors or governing body to establish its regional warehouse in the Philippines, specifying that:
1. The activities of the regional warehouse shall be limited to serving as a supply depot for the storage, deposit, safekeeping of its spare parts or manufactured components and raw materials including the packing, covering, putting up, marking, labeling and cutting or altering to customers specification, mounting and/or packaging into kits or marketable lots thereof, to fill up transactions and sales made by its head offices or parent companies and to serving as a storage or warehouse of goods purchased locally by the home office of the multinational for export abroad; Provided, That, said locally purchased goods for export may be stored in the Regional Warehouse only after they have been cleared for exports in accordance with the laws and regulations governing exports. The regional warehouse shall not directly engage in trade nor directly solicit business, promote any sale, nor enter into any contract for the sale or disposition of goods in the Philippines.
2. The regional warehouse will not derived any income from the sources within the Philippines and its personnel will not participate in any manner in the management of any subsidiary affiliate, or branch office it might have in the Philippines.
3. The personnel of the regional headquarters shall be responsible for the operation of the regional warehouse subject to Sec. 9, subsection (a) hereof.
(c) The multinational company shall pay the government through the Department of Trade a license fee of Five Thousand Pesos (P5,000.00) per annum and through the Regional Collector of Customs a storage fee equivalent to Ten Pesos (P10.00) for the first Four Thousand Pesos (P4,000.00) worth of articles to be stored in the Regional Warehouse on the basis of their C & F value and One Peso (P1.00) for every One Thousand Pesos (P1,000.00) worth of articles in excess of the said first Four Thousand Pesos (P4,000.00). Of the total fees collected, seventy-five per cent (75%) shall accrue to the general and twenty-five percent (25%) shall accrue to a special account in the General Fund for the Department of Trade to support its trade promotion projects.
(d) An application for the establishment of a bonded regional warehouse shall be made in writing to the Department of Trade. The application shall describe the premises, the location, and capacity of the regional warehouse and the purpose for which the building is to be used.
The Department of Trade in consultation with the Regional Collector of Customs of the district where the Warehouse will be situated shall cause an examination of the premises to be made with reference particularly to its location, construction and means provided for the safekeeping of it articles and if found satisfactory, it may authorize its establishment subject to the following conditions:
1. That the articles to be stored in the warehouse are spare parts or manufactured components and/or raw materials of the multinational company operator for distribution and supply to its Asian-Pacific markets;
2. That the entry or importation, storage or re-export of the goods destined for or to be stored in the regional warehouses will not involve any dollar outlay from Philippine sources;
3. That they are such character as to be readily identifiable for re-export; and in case of local distribution they shall be subject to Sec. 2, subsection (b) and Sec. 3, subsection (b) hereof;
4. That they shall be identified, examined and appraised by the Regional Collector of Customs and they shall be directly delivered to and kept in the regional warehouse and released therefrom only in accordance with Sec. 2, subsection (b) and Sec. 3, subsection (a) and (b) and Section (4) hereof;
5. Each shipment of goods which will be stored in the regional warehouse shall be covered by an affidavit of the multinational company operator setting forth that said articles shall be exclusively used as supply for its Asian-Pacific markets and stating the C & F price thereof;
6. The multinational company operator shall file an ordinary warehousing bond in an amount equal to ONE HUNDRED PER CENT (100%) of the ascertained customs duties on the articles imported without prejudice to its filing a general warehousing bond in lieu of the ordinary warehousing bond.
Sec. 2. Tax Treatment of Imported Articles in the Regional Warehouse.
(a) Except as otherwise provided in this Decree, imported spare parts or manufactured components, raw materials and other items including any packages, covering, brands and labels and warehouse equipment as may be allowed by the Department of Trade for use exclusively on the goods stored, except those prohibited by law, brought into the regional warehouse from abroad to be kept, stored and/or deposited or used therein and re-exported directly therefrom under the supervision of the Regional Collector of Customs for distribution to its Asian-Pacific markets according to Sec. 3, subsection (a) hereof/shall not be subject to custom duty, internal revenue tax, export tax nor to local taxes, the provisions of law to the contrary notwithstanding.
(b) Any spare parts, manufactured components, raw materials and other items sent, delivered, released or taken from the regional warehouse to the local market in accordance with Sec. 3, subsection (b) hereof shall be subject to the payment of customs duties, taxes and other charges and for which purpose, the proper commercial invoice of the head offices or parent companies shall be submitted to the Regional Collector of Customs; and shall be subject to laws and regulations governing imported merchandise, provided that in case any of the foregoing items are sold, bartered, hired or used for purposes other than that they were intended for without prior compliance with Sec. 3, subsection (b) hereof and without prior payment of the duty, tax or other charge which would have been due and payable at the time of entry if the articles had been entered without the benefit of this decree, shall be subject to forfeiture and the importation shall constitute a fraudulent practice against customs revenue punishable under Section Thirty-Six Hundred and Two, as amended, of the Tariff and Customs Code of the Philippines; Provided, further that a sale pursuant to a judicial order shall not be subject to the preceding proviso without prejudice to the payment of duties, taxes and other charges.
Sec. 3. Procedure for Withdrawal of Articles from Regional Warehouse.
(a) The provision of the law to the contrary notwithstanding, articles received into such regional warehouse may be withdrawn or removed therefrom or direct shipment and for re-exportation to foreign countries under the supervision of the Regional Collector of Customs, who shall certify to such shipment and exportation, or lading for immediate exportation as the case may be, describing the articles by their mark or otherwise, the quantity, the date of exportation, and the name of the vessel or aircraft. All labor performed and services rendered under these provisions shall be under the supervision of the aforesaid customs official and at the expense of the multinational company operator.
(b) The provision of the law to the contrary notwithstanding articles received into such regional warehouses may be withdrawn or removed therefrom to fill up orders or contracts of sale, distribution or supply made by and between the local buyers, distributors of indentors and the head offices or parent companies of the multinational company subject to Sec. 2, subsection (b) hereof; under the supervision of the Regional Collector of Customs, who shall certify to such delivery, removal or release as the case may be, describing the articles by their mark or otherwise, the quantity, the date of delivery, distributors or indentors to whom they were delivered and subject to Sec. 2, subsection (b) and Sec. 7, subsection (b) hereof. The withdrawal must be made by a person to whom the articles are ordered to be delivered by the head office of parent company of the multinational company. All labor performed and services rendered under these provisions shall be under the supervision of the aforesaid customs official and at the expense of the multinational company operator.
Sec. 4. Period of Storage in Regional Warehouse. The provision of the law in Section 1908 of the Tariff and Customs Code of the Philippines, as amended, to the contrary notwithstanding, article duly entered for warehousing may remain in regional warehouses for a period of five (5) years from the time of their transfer to the Regional Warehouse, which period may be extended with the approval of the Secretary of Trade for additional periods of two (2) years upon payment of the corresponding storage fee on the unexported articles, as provided for under section 1 subsection (c) for each such extension until they are re-exported in accordance with Sec. 3, subsection (a) hereof or delivered locally in accordance with Sec. 3, subsection (b) hereof. Any articles withdrawn, released or removed contrary to the provisions of said Sec. 3, subsection (a) and (b) shall be forfeited pursuant to the provisions of Sec. 2, subsection (b) hereof.
Sec. 5. Regional headquarters of multinational companies which have been licensed to operate regional warehouses in the Philippines and their foreign personnel, their respective spouses and unmarried children under twenty-one (21) years of age shall be governed by the provisions or Presidential Decree No. 218, as amended, and shall be entitled to all the benefits provided thereunder.
Sec. 6. Jurisdiction and Control over Articles Stored in Regional Warehouse.
The provisions of law to the contrary notwithstanding, the Regional Collector of Customs shall exercise jurisdiction and supervision over all articles entering the Philippines destined for regional warehouses including the following:
(a) Supervise the receiving, handling, custody, entry, examination, classification, appraisal and delivery of articles destined for regional warehouses, causing all said articles to be entered at the customhouse and causing all such articles to be identified, classified, and appraised in accordance with existing customs laws and regulations unless herein otherwise provided.
(b) Require the invoice to state the place from which the articles are shipped, the date when and the person to whom and the person by whom they are shipped; the port of entry to which the articles are destined a detailed description of the articles according to the terms of the heading or sub-headings, if especially mentioned in this Code; Otherwise, the description must be in sufficient detail to enable the articles to be identified both the Tariff classification and statistical purposes, indicating their correct commodity description, in customary terms or commercial designation, including the grade or quality, numbers, marks or symbols under which they are sold by the seller or manufacturer, together with the marks and numbers of the packages in which the articles are packed; the quantities in the weight and measures of the country in the place from which the articles are shipped, and in the weights and measures used in the Code; the value of each articles in the unit of quantity in which the articles are usually bought and sold, in the currency in which the transactions are usually made, or, in the absence of such value, the price in such currency which the manufacturer, seller, shipper or owners would have received, or was willing to receive for articles if sold in the ordinary course of trade and in the usual wholesale quantities in the country of exportation; all charges upon the articles itemized by name and amount when known to the seller or shipper; or all charges by name (e.g., insurance, freight, cases, containers, coverings and cost of packing) included in invoice prices when the amounts for such charges are unknown to the manufacturer or shipper.
(c) Authorize the immediate transfer of the entered articles to the regional warehouse where the examination, classification and appraisal of the articles pursuant to sub-section (a) hereof may be conducted.
Sec. 7. Waiver of Consular Invoice.
(a) No consular invoice need be presented for articles destined for regional warehouses. However, in lieu thereof, a certificate of export from the Philippine Consular official in the country of origin of the shipment attesting to the origin of exportation and the C & F value of the articles shall be required. In case of distribution to local buyers, distributors or indentors, the head office's or parent company's commercial invoice shall be presented to the Regional Collector of Customs supervising the distribution or release.
(b) The provisions of law to the contrary notwithstanding, after the articles shall have been examined by the Regional Collector of Customs, in accordance with Section 1401-1403 of the Tariff and Customs Code, the Collector of Customs shall determine the accurate tariff bought and sold. Moreover, in case of local distribution to local buyers, distributors or indentors the proper customs official shall require the presentation of the head office's or parent company's commercial invoice and impose the proper duties, taxes and other charges thereon in accordance with the Tariff and Customs Code and other applicable law.
Sec. 8. (a) Supervision and Storekeeping of the Regional Warehouses. The regional warehouse operator shall submit to the Collector of Customs for approval the name of a qualified and responsible person who will take charge of managing the regional warehouse. Said person (Manager) who shall be responsible for the goods in the warehouse shall be subject to the supervision of the Collector of Customs.
The Regional Warehouse storekeeper shall be regular Customs personnel.
(b) Packing, Covering, Branding, Labeling, and Cutting to Customers Specification. All labor performed for packing, covering, branding, labeling, mounting and cutting or adjusting of the articles to customers' specification shall be subject to the supervision of the Collector of Customs.
Sec. 9. Rules and Regulations. The Secretary of Trade in consultation with the Secretary of Finance shall, within thirty (30) days from the effectivity of this Decree, issue the implementing rules and regulations governing the establishment of a regional warehouse by a regional or area headquarters in the Philippines and for the effective implementation of this Decree including Section 10 hereunder.
The Commissioner of Customs in consultation with the Secretary of Trade and with the approval of the Secretary of Finance, shall issue the rules and regulations to implement the provisions in this Decree are intended to facilitate and assure the smooth and speedy inflow of the articles to and from the regional warehouses.
Section 10. Penalties. Any willful violation by the regional or area headquarters of a multinational company which has established regional warehouse or warehouses of any provision of this Decree, or its implementing rules and regulations, or any provision of existing laws shall constitute a sufficient cause for the cancellation of its license or registration in addition to the penalties hereinabove provided in Sec. 2, sub-section (b) and Sec. 4 hereof.
Section 11. The regional or area headquarters of multinational companies establishing regional warehouses shall be exempt from the provisions of Republic Act No. 5455.
Section 12. Definition of Terms. For purpose of this Decree:
1. "Spare parts or manufactured components" shall mean any article designed or manufactured for the special purpose of being used or to replace, a component or integral part of a machine, equipment, vehicle or industrial plant and which by reason of some characteristics is generally classified as capital goods and, is primarily adapted for use a component part of such machines, equipment, vehicles or industrial plant, as may be allowed by any implementing rules and regulations.
2. "Raw materials" shall mean materials in their natural state or in crude form as well as products made from crude material or materials which may have undergone manufacturing or process as may be allowed by any implementing rules and regulations.
3. "Code" shall mean the tariff and Customs Code of the Philippines as amended.
Section 13. Any provision of existing laws, decrees, orders, rules or regulations inconsistent with this decree are hereby repealed, modified or amended accordingly.
Section 14. This Decree shall take effect immediately.
Done in the City of Manila, this 9th day of June, in the year of Our Lord, nineteen hundred and seventy-eight.