Constitutional basis and declared intent
- The order anchors the policy on Section 13, Article XII of the 1987 Constitution, which mandates a State trade policy that serves the general welfare and uses all forms of exchange on the basis of equality and reciprocity.
- The order aims to compensate the foreign exchange expended for importation or procurement of foreign capital equipment, machinery, products, goods, and services by the national government and its instrumentalities.
- The order requires reciprocation through arranged counter exports of Philippine products to the supplier country or a third country, or through mechanisms including product buy back, offsets, or investments.
- The order expects countertrade to open new markets, overcome quota and trade restrictions, and provide technology transfer and industrial growth in strategic areas (including energy, transport, infrastructure, telecommunications, and defense) and in industries identified through national development programs.
Coverage and procurement threshold
- All departments, bureaus, agencies, offices, and instrumentalities, including government-owned or controlled corporations, must adopt countertrade as a supplemental trade tool for covered transactions under Section 1.
- Countertrade is required for transactions involving the importation or procurement of foreign capital equipment, machinery, products, goods, and services.
- The transaction must entail payment of at least United States Dollars: One Million (US$1,000,000.00) or its equivalent in other foreign currency.
- Covered agencies must negotiate and conclude, on a best-efforts basis, agreements or arrangements on countertrade for such importation or procurement.
What counts as “Countertrade”
- Section 2 defines “Countertrade” to include the following arrangements:
- Counterpurchase (also known as counter exports, parallel transactions, or reciprocal trade) applies when the foreign supplier reciprocally commits to purchase Philippine goods or services to be exported to the supplier’s country or a third country.
- Product Buy Back applies when the foreign supplier is paid with the resultant product(s) or good(s) made or manufactured by the imported equipment or machinery.
- Offset applies when the foreign supplier commits to introduce investments or technology transfer in the Philippines, or assist in establishing new industries or improving existing industries to generate or save foreign exchange or create increased employment, whether or not related to the imported machinery, equipment, products, goods, or services procured.
- Trade-for-Debt Swap applies when a loan or credit accommodation obtained by a government agency or government-owned or controlled corporation from a foreign government or creditor that has remained outstanding and unpaid is settled in full or partially by sales of products, goods, or services to be provided by a third party instead of payment in foreign currency.
- Any combination or variation is included when it results in the inflow of foreign exchange, foreign exchange savings, investments, training and technology transfer, educational/scientific/technological/environmental research grants or projects, enhancement of Philippine industrial or export competitiveness, creation or strengthening of competitive industries, utilization of Philippine services or expertise by foreign clients, or reduction of public debt.
Implementing agency and coordination
- The Department of Trade and Industry, through the Philippine International Trading Corporation, coordinates with all government agencies and government-owned or controlled corporations for countertrade strategies under Section 3.
- Coordination must include appropriate consultations with the private sector.
- Government agencies and government-owned or controlled corporations must closely coordinate with and provide information to the Department of Trade and Industry and the Philippine International Trading Corporation on planned importation/procurement and countertrade efforts already undertaken before actual importation or procurement, to assure efficient implementation under Section 4.
- The Philippine International Trading Corporation must maintain and enhance its supply base and trading network to maximize dispersion of countertrade benefits by ensuring availability of adequate and acceptable products, goods, and services needed under countertrade arrangements under Section 5.
- The Department of Trade and Industry, National Economic Development Authority, Department of Finance, and the Philippine International Trading Corporation jointly promulgate the appropriate guidelines, rules and regulations to implement the Executive Order under Section 6.
Repeal and effectivity
- Section 7 repeals, amends, or modifies, as applicable, provisions of executive or administrative orders, rules, regulations, and parts thereof that are inconsistent with Executive Order No. 120.
- Section 8 provides that the Executive Order takes effect immediately.
- The order was completed in Manila on August 19, 1993, and bears the signatures of Fidel V. Ramos and Teofisto T. Guingona, Jr., Executive Secretary.