Law Summary

I. Applicable Periods for Countertrade Obligations

This section outlines the performance periods required for countertrade obligations based on the value of the obligations.

• Performance Periods:
  • Obligations valued at $50M - $100M:
    • Primary Period: 3 years
    • Grace Period: 2 years
    • Total: 5 years
  • Obligations valued at $100M - $150M:
    • Primary Period: 4 years
    • Grace Period: 2 years
    • Total: 6 years
  • Obligations valued at $150M - $200M:
    • Primary Period: 5 years
    • Grace Period: 2 years
    • Total: 7 years
  • Obligations valued at $200M - $400M:
    • Primary Period: 6 years
    • Grace Period: 2 years
    • Total: 8 years
  • Obligations valued at over $400M:
    • Primary Period: 7 years
    • Grace Period: 2 years
    • Total: 9 years

II. PITC Monitoring/Management Fees

This provision details the fees associated with PITC's monitoring and management of countertrade obligations, expressed as a percentage of the total countertrade obligations.

• Fee Structure:
  • Obligations valued at $1M - $50M: 1.5%
  • Obligations valued at $50M - $100M: 1.25%
  • Obligations valued at $100M - $150M: 1.00%
  • Obligations valued at $150M - $200M: 0.75%
  • Obligations valued at $200M - $400M: 0.50%
  • Obligations valued at over $400M: 0.25%

III. Penalty for Non-Performance and Guarantees

This section stipulates the penalties for non-performance of countertrade obligations and the guarantees required to secure these penalties.

• Penalties:

  • A penalty of 10% of the unfulfilled countertrade obligations shall be imposed.

• Guarantees:

  • A guarantee shall be provided to secure the payment of the penalty for non-performance:
    • 50% of the penalty must be secured by a Bank Guarantee.
    • 50% of the penalty must be secured by a Corporate Guarantee (not a comfort letter).
  • Terms and conditions for the bank and corporate guarantees must be approved by PITC.

Key Takeaways

• The memorandum establishes clear periods and fees associated with countertrade obligations for the procurement of MRFs and OPVs for the Philippine Air Force and Navy.
• Performance periods increase with the value of countertrade obligations, with total durations ranging from 5 to 10 years depending on the amount.
• PITC will charge management fees that decrease as obligation values increase, ensuring a structured financial obligation.
• Non-performance incurs a significant penalty, with explicit guarantees required to secure payment, ensuring compliance with the outlined countertrade agreements.