QuestionsQuestions (EXECUTIVE ORDER NO. 120)
Executive Order No. 120 cites Section 13, Article XII of the 1987 Constitution, which mandates that the State pursue a trade policy serving the general welfare and utilizing all forms and arrangements of exchange on the basis of equality and reciprocity.
Its main purpose is to direct the national government and related entities to adopt countertrade as a supplemental trade tool for importing or procuring foreign capital equipment, machinery, products, goods, and services—aimed at compensating foreign exchange expenditures and enabling reciprocal arrangements such as counter exports, offsets, buy-backs, or investments.
All departments, bureaus, agencies, offices, instrumentalities, and including government-owned or controlled corporations are covered, as to transactions involving covered imports or procurements of foreign capital goods and services.
The transaction must involve payment of at least US$1,000,000.00 or its equivalent in other foreign currency.
It directs agencies to negotiate and conclude countertrade agreements or arrangements on a “best-efforts basis,” meaning it is not phrased as an absolute guarantee of a completed countertrade deal, but requires strong, good-faith efforts.
It defines Countertrade as arrangements including (a) Counterpurchase, (b) Product Buy Back, (c) Offset, (d) Trade-for-Debt Swap, or any combination/variation resulting in foreign exchange inflow/savings, investments/training/technology transfer, grants for research programs, enhanced competitiveness, utilization of Philippine services/expertise by foreign clients, or reduction of public debt.
It is an arrangement where the foreign supplier reciprocally commits to purchase Philippine goods or services for export to the supplier’s country or a third country.
In product buy back, the foreign supplier of the equipment or machinery is paid with the resultant products or goods made or manufactured by that equipment or machinery.
An offset is where the foreign supplier commits to introduce investments or technology transfer in the Philippines, assist in establishing new industries or improving existing industries to generate or save foreign exchange or create increased employment, which may or may not be directly related to the imported machinery or procured services.
It is an arrangement where an outstanding, unpaid loan or credit accommodation obtained by a government agency or GOCC from a foreign government or creditor is settled fully or partially by sales of products/goods/services provided by a third party rather than payment in foreign currency.
The concerned agency/GOCC must closely coordinate with and provide information on planned imports/procurements and any countertrade efforts already undertaken to the Department of Trade and Industry (DTI) and the Philippine International Trading Corporation (PITC) before actual importation or procurement.
DTI, through the Philippine International Trading Corporation (PITC), is tasked to coordinate with government agencies and GOCCs in formulating and implementing countertrade strategies.
It requires that appropriate consultations be made with the private sector while formulating and implementing particular strategies.
PITC must maintain and enhance its supply base and trading network through constant and close coordination with industry and export sectors to ensure availability of adequate and acceptable products, goods, and services needed under countertrade arrangements.
DTI, the National Economic Development Authority (NEDA), the Department of Finance (DOF), and PITC must jointly promulgate the guidelines, rules, and regulations to implement the EO.
Provisions of executive or administrative orders, rules, regulations, and parts thereof inconsistent with the EO are repealed, amended, or modified accordingly.
It takes effect immediately.