Law Summary

Introduction

Executive Order No. 280, issued on July 25, 1987, by President Corazon C. Aquino, aims to enhance the incentive structure of Letter of Instructions (LOI) No. 1352 to promote crude oil export processing in the Philippines. This amendment includes provisions for intermediate products as feedstocks and allows for swaps or exchanges of petroleum products.

Purpose and Justification

• Legal Principle: The Executive Order recognizes the necessity of promoting foreign-owned crude oil export processing and the local processing of imported crude oil to bolster the national economy.
• Key Justifications:
  • Enhance foreign exchange earnings from local refineries.
  • Improve competitive positioning of local refineries against regional counterparts.
  • Address inadequacies in the existing tax incentive scheme under LOI No. 1352.

Amendment of LOI No. 1352

Inclusion of Feedstocks

• Provision: Item-section No. 1 of LOI No. 1352 is amended to allow foreign entities to bring crude oil and intermediate products for processing by local refineries.
• Key Definitions:
  • Feedstocks: Intermediate products brought in for refining.
  • Foreign Entity: Any non-domestic entity that retains ownership of the crude and intermediate products.
• Requirements:
  • Processing agreements must be established between foreign entities and local oil companies.
  • Processing fees must be paid in foreign currency.
• Additional Detail:
  • Local oil companies may process their own-imported crude to capitalize on export opportunities.

Swaps and Exchanges of Petroleum Products

New Arrangements

• Provision: Item-section No. 5 of LOI No. 1352 is amended to include subsection 5-A, permitting swaps/exchanges of petroleum products.
• Key Features:
  • Swaps must be on a value-for-value basis, adhering to internationally recognized pricing.
  • The foreign entity retains tax benefits as long as exchanged products are exported.
• Requirements:
  • The foreign entity shall not be deemed to have engaged in trade in the Philippines, thus exempting them from local taxes on swaps.
  • Local oil companies must adhere to excise taxes on local sales of swapped products but can recover export-related duties and fees.

Continuity of Incentives

• Legal Principle: The Executive Order ensures that existing incentives under LOI No. 1352 are not diminished or disrupted.
• Key Details:
  • Existing privileges and benefits remain intact despite the amendments.

Implementation and Administrative Oversight

• Provision: Various government bodies, including the Department of Finance and the Energy Regulatory Board, are tasked with facilitating the execution of this order.
• Requirements: Immediate implementation is mandated, ensuring compliance across relevant agencies.

Repealing and Separability Clauses

• Repealing Clause: Inconsistent laws, decrees, and regulations are repealed or modified to align with the provisions of this Executive Order.
• Separability Clause: Should any provision be found invalid, other provisions remain unaffected.

Effectivity

• Timeframe: The Executive Order takes effect immediately upon publication in the Official Gazette.

Key Takeaways

• Executive Order No. 280 expands and enhances the incentive structure for crude oil export processing in the Philippines.
• It introduces provisions for the inclusion of feedstocks and facilitates swaps/exchanges of petroleum products.
• The order ensures continuity of existing incentives and specifies the roles of various government agencies in its implementation.
• Immediate effectivity is stipulated following publication, with clear provisions for tax exemptions and compliance requirements.