Question & AnswerQ&A (MEMORANDUM ORDER NO. 73)
The main purpose is to amend Memorandum Order No. 51 dated January 22, 2002, specifically to revise the local content and net foreign exchange earning requirements in the Car Development Program (CDP), Commercial Vehicle Development Program (CVDP), and Motorcycle Development Program (MDP) to comply with WTO-TRIMS Agreements.
The Agreement on Trade-Related Investment Measures (TRIMS) under the World Trade Organization (WTO) influenced the amendments, requiring the elimination of local content and net foreign exchange earnings requirements that violate the TRIMS provisions.
The phase-out period allows a gradual reduction of local content and net foreign exchange earnings requirements until July 1, 2003, when such requirements will be entirely removed, complying with the WTO-TRIMS phase-out schedule.
Local content requirements decrease over time: from 35% (Jan 1 - June 30, 2002), to 30% (July 1 - Dec 31, 2002), to 25% (Jan 1 - June 30, 2003), and then 0% starting July 1, 2003.
Local content refers to the percentage of vehicle parts or components that must be sourced or manufactured locally within the Philippines by participants in the CDP, CVDP, and MDP.
NFEE requirements mandate participants to earn foreign exchange by exporting automotive products to offset their imports of completely knocked down (CKD) units. These requirements are set with specific percentages for different categories until June 30, 2003, after which the requirement is zero starting July 1, 2003.
Section 3 repeals or modifies any other executive orders, administrative orders, rules, and regulations inconsistent with this Memorandum Order, effectively nullifying any conflicting provisions.
Memorandum Order No. 73 took effect immediately upon adoption on September 12, 2002.
The Memorandum Order was promulgated by then-President Gloria Macapagal-Arroyo, with the Executive Secretary Alberto G. Romulo executing the order.
Compliance ensures that the Philippines adheres to its international obligations by removing trade measures, like local content and NFEE requirements, that are inconsistent with WTO rules, thereby promoting fair trade practices and avoiding trade disputes.