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Legal basis and treaty framework

Section 1 ties the cordage quota to the Revised Agreement between the Republic of the Philippines and the United States of America concerning Trade and Related Matters dated September six nineteen hundred fifty-five.
The Revised Agreement includes a schedule item and allocation timing referenced for cordage in Section 1, including a defined allocation window from January first, nineteen hundred fifty-six to July third, nineteen hundred seventy-four, inclusive.
Sections 2 and 3 tie buttons of pearl or shell, cigars, scrap and filler tobacco, and coconut oil to the Protocol to the Revised Agreement and corresponding paragraph references for duty-free treatment.
Section 4 implements quota diminutions linked to paragraph 2, Article II, of the Revised Agreement for the duty-free allotment reduction formula.

Policy and governing purpose

Republic Act No. 1602 establishes an annual allocation system for Philippine export quotas into the United States and provides rules for reallocation of unallocated quota balances.
The Act establishes administration rules that ensure quota fulfillment through reporting, reversion to the Government, and redistribution to eligible manufacturers.

Defined term: “manufacturers”

Section 11 defines “manufacturers” for the Act’s purposes.
Manufacturers are persons (natural or juridical) who, by physical or chemical process, alter the exterior texture or form or the inner substance of raw materials or partially manufactured/manufactured products to prepare them for special industrial use.
Manufacturers include those who alter quality to reduce materials to marketable shape or prepare them for industrial uses.
Manufacturers include those who combine raw materials or products (same or different kinds) so the finished product can be put to special uses not possible in original form.
Manufacturers include those who, by such processes, produce finished products for sale or distribution to others, and not for their own use or consumption.

Quota allocations and allotments by product

Section 1 allocates the absolute quota on cordage to Philippine manufacturers whose products were exported to the United States during any of calendar years nineteen hundred forty-seven to nineteen hundred fifty-five, or to their successors in interest.
The allocation basis for cordage is proportionately on the basis of highest volume of exportation to the United States in any calendar year during 1947 to 1955, inclusive (for successors, use the predecessor’s highest volume).
Section 2 allocates the duty-free quota on buttons of pearl or shell for calendar years nineteen hundred fifty-six, nineteen hundred fifty-seven and nineteen hundred fifty-eight to manufacturers whose articles were exported to the United States during 1947 to 1955, or to their successors in interest.
Section 2 preserves regular quota holders who actively manufactured and exported buttons during 1947 to 1955 and who did not transfer, lease, or sell the whole or part of their quotas, granting them retention of quotas under the 1946 Trade Agreement.
Section 2 allocates the unallocated balance (after deducting quotas of regular quota holders) to active non-regular producers using a highest export volume basis for the period 1952 to 1955 (and caps any such quota so it does not exceed that of permanent quota holders).
Section 2 allocates any further remaining balance to regular quota holders during 1947 to 1955 using the highest export volume basis over 1947 to 1955.
Section 3 allocates duty-free quotas for:
- (1) cigars (exclusive of cigarettes, cheroots of all kinds, and paper cigars and cigarettes including wrappers);
- (2) scrap tobacco and stemmed and unstemmed filler tobacco described in paragraph 602 of the United States Tariff Act of 1930, as amended; and
- (3) coconut oil;
  for calendar years 1956, 1957 and 1958 to manufacturers of the corresponding quota class whose exports were in 1947 to 1955, in amounts equal to highest volume of exportation but not less than two hundred fifty thousand pounds for scrap and stemmed and unstemmed filler tobacco.
Section 4 fixes the duty-free allotment for each quota holder for each calendar year during the three-year period from 1959 to 1961 and each succeeding three-year period until calendar year 1973 as equal to the allotment for 1956 to 1958.
Section 4 reduces each quota holder’s duty-free allotment proportionately when total duty-free quota allotments exceed the total duty-free quota due to diminution under paragraph 2, Article II, of the Revised Agreement, with reduction tied to the total duty-free quota on each article for the corresponding three-year period.
Section 5 provides for assignment to the Government and subsequent allocation of any unallocated balance of any quota after allocations under Sections 1, 2, and 3.

Unallocated balances and reallocation rules

Section 5 assigns unallocated quota balance to the Government for disposition and makes it available for allocation to manufacturers able and ready to export to the United States at the time of allocation.
Section 5(a) allocates fifty per centum of the unallocated balance to regular quota holders during 1947 to 1955 who filled their regular quotas under the Act, using a basis of average yearly production as shown by taxes paid to the Bureau of Internal Revenue and/or other satisfactory evidence.
Section 5(b) allocates the remaining fifty per centum to quota holders under the Act other than those in Section 5(a) who filled their current regular quotas, using the same basis as in Section 5(a).
Section 5(c) authorizes cascading redistribution: if portions designated to Section 5(a) quota holders remain unallocated due to inability to obtain the allocation, those portions may be allocated to Section 5(b)-type quota holders who filled current quotas, again using the same average-production basis.
The redistribution cascading in Section 5(c) continues similarly if quota holders in the subsequent tier fail to obtain the allocation, until the unallocated remainder reaches allocation to non-quota manufacturers who engaged in production during calendar year 1956 or thereafter, using the same basis as in Section 5(a).
For cigars, Section 5 reserves fifty per centum of the unallocated balance for new manufacturers; if they cannot fill it, the balance is allocated to old manufacturers.
Section 5 awards quota status permanence after sustained export performance:
- regular quota holders who receive additional allotments from unallocated quotas and export continuously for three years become entitled in succeeding years to the average of their additional exportation for the three-year period as part of their regular quotas;
- non-quota holders who receive allotments from unallocated quotas and export continuously for three years become entitled to the average of their exportation for the three-year period as their regular quotas, and thereafter have the status of regular quota holders.
Section 5 subjects these additional allotments/regularized entitlements to the duty-free allotment rule of Section 4.

Reporting, forfeiture, and automatic reduction

Section 6 requires that within the first eight months of each calendar year, each quota allotment holder reports to the proper office the amount of the allotment for that year that the holder is or will be unable to export to the United States.
Section 6 provides that allotment amounts that cannot be exported during the remainder of the calendar year, after establishment by sufficient evidence, are disposed of in a manner that ensures fulfillment of the quota for that year.
Section 6 mandates permanent loss of rights when a quota holder either fails to submit the required report or submits a falsified report, resulting in permanent loss of the right to the allotment and to any allotment thereafter.
Section 6 mandates automatic adjustment for failure to fill: if a quota holder fails to fill the yearly quota, the next year’s allotment is automatically reduced by the amount of deficiency, and the holder may export to the United States only the amount representing the holder’s total exportation during the preceding year.
Section 6 provides that any allotment lost under these rules reverts to the Government as unallocated quota, and the Government disposes of it under Section 5.

Abandonment, exclusions, and hardship relief

Section 7 treats a quota holder’s cessation of manufacture of the relevant class of article or product as permanent abandonment if the holder ceases to manufacture, causing the allotment to revert to the Government as unallocated quota for disposal under Section 5.
Section 7 treats permanent abandonment when a quota holder fails within one year from the date of approval of this Act to make use of the right to the allotment, causing reversion to the Government as unallocated quota under Section 5.
Section 8 provides that the penalties in Sections 6 and 7 do not apply to quota holders whose failure to fill their quota or to make use of the right to allotment within one year from the date of approval of this Act is due to circumstances or conditions beyond their control.

Executive authority and rulemaking

Section 9 authorizes the President of the Philippines, either directly or through a designated National Government department, bureau, office, or instrumentality, to carry into effect the provisions of the Act.
Section 10 authorizes the President or the head of the designated National Government entity to issue rules and regulations governing the issuance of allotments and licenses and other necessary rules and regulations.

Repeal, separability, and sunset

Republic Act No. 1602 contains no separability clause, repeal clause, or sunset provision in its operative text.