Export Development Act of 1994

Definitions and who qualifies

An “Exporter” is any person, natural or juridical, licensed to do business in the Philippines that is engaged directly or indirectly in the production, manufacture, or trade of products or services that earns at least fifty percent (50%) of its normal operating revenues from the sale of its products or services abroad for foreign currency.
The “Exporter” definition limits services to information technology services, construction services, and other services as defined jointly by the Department of Finance (DOF) and the Department of Trade and Industry (DTI).
Services rendered by overseas contract workers are not covered within the definition of “Exporter.”
“Export promotion” covers a range of export activities undertaken by public and private sectors, including networking (including export support services and trade/market information), trade fairs and missions, advisory services, seminars/lectures/workshops/conferences/training on export-related subjects, publication of export-related documents, and handling of quality standards and product design, among other activities aimed at promoting exports and implementing the Philippine Export Development Plan.
“Export incentives” are support measures provided by the government to exporters to encourage investment in the export sector, create a freer trade environment, motivate exporters to increase export sales and perform competitively, and increase the country’s export sales.
An “Accredited organization” is the organization of exporters granted accreditation by the Export Development Council under Section 7(l).

Key operating principles for export growth

Monetary and foreign exchange policies must establish and maintain a competitive exchange rate, with measures to provide safety nets for sectors adversely affected by these policies, consistent with Section 3 of Republic Act No. 7653.
Fiscal and credit policies must provide adequate funds for public and private investments and business expansion while keeping the cost of credit comparable to international levels and ensuring access to loanable funds for SMEs and highly technical export enterprises, especially in the countryside.
Agricultural policies must build viability and competitiveness, facilitate linkage with industry, and strengthen the agri-industrial base of the country’s export thrust.
Trade, tariff, and customs policies must engender competitiveness of domestic industries and facilitate participation in international trade.
Technical support policies must improve the quality of export products, including technology transfers, R & D, technical training, and related activities, supported by State colleges and universities to diffuse technology, information, and training to the countryside for agri-industrial and export development through DOST and DA.
Government infrastructure policies must ensure adequate supply and quality of power, water (e.g., for irrigation), transportation (e.g., shipping and cargo handling), and communication to support the national export drive.
The link between export growth and countryside development must be strengthened through policies favorable to SMEs, regional industrial centers, and export processing zones to boost rural and farm-based entrepreneurship in identified geographic economic growth areas.
Labor and industrial relations policies must recognize inevitable industrial shifts to achieve international competitiveness, focus on accords between labor and management for sustained productivity and competitiveness increases, integrate dual training schemes into the primary and secondary education program, and adopt reasonable price and income policies to safeguard labor interests.
Government agencies affecting exporters must simplify procedures to minimize bureaucratic red tape, including the Board of Investments (BOI), Bureau of Customs (BOC), and Bureau of Internal Revenue (BIR).
Provisions of existing laws deemed detrimental to the export sector must be repealed in subsequent acts.

Philippine Export Development Plan and Council

The President must approve a rolling three-year Philippine Export Development Plan (PEDP) prepared by the DTI that forms part of the Medium-term Philippine Development Plan (MTPDP).
The PEDP must be formulated in consultation with the private sector and must be validated and updated semestrally.
The PEDP must define annual and medium-term export thrusts, strategies, programs, and projects, and must be jointly implemented by the government, exporters, and other concerned sectors.
The existing Export Development Council, created by Executive Order No. 98 (1993) as modified by Executive Order No. 110 (1993) and Executive Order No. 180 (1994), must be strengthened and institutionalized to oversee implementation of the PEDP and coordinate policy reforms supporting the Plan.
The Council must approve the PEDP, coordinate, monitor, and assess its implementation, and institute appropriate adjustments when conditions in the domestic and international environment change.
The Council must periodically review and assess the country’s export performance, problems, and prospects.
The Council must identify main bottlenecks affecting exports across policy framework, physical infrastructure, finance, technology, production, promotions, and marketing.
The Council must mandate specific departments and agencies to address bottlenecks and require concerned Secretaries to submit progress report(s) at the next meeting(s).
The Council must ensure export quality control by overseeing the formulation and implementation of quality control guidelines so Philippine exports match world-class products.
The Council must impose sanctions on any government agency or officer or employee thereof, or private sector entity, that impedes efficient exportation of Philippine goods.
The Council must recommend to Congress proposed legislation contributing to export development.
The Council must submit quarterly reports to Congress.
The Council must formulate policies or recommend measures and draw up a study within ninety (90) days from approval of the Act relating to rationalization of government export promotion and development functions/activities/programs for eventual transfer to the private sector within two (2) years after approval.
The Council must formulate policies for granting incentives to exporters.
The Council must adopt policies, rules, procedures, and administrative systems for efficient and effective exercise of its powers and functions, including creating or adopting an executive committee or secretariat.
The Council must grant and review accreditation of the organization of exporters under later guidelines, and accreditation must favor the organization that is dominant among other existing export organizations as determined under those guidelines.
The Council must issue standards and policies for Local Government Units (LGUs) to ensure LGU plans and budgets support national agri-industrial growth and export competitiveness thrusts and ensure optimal allocation of expenditures; the DILG and regional development councils must be the channels for coursing these standards and policies.

Council composition, meetings, funding, and accreditation

The Council must be chaired by the Secretary of the Department of Trade and Industry.
Other Council members must include the Director-General of the National Economic and Development Authority, the Secretary of the Department of Finance, the Governor of the Bangko Sentral ng Pilipinas, and Secretaries of DTI, DOST, DA, Department of Foreign Affairs, and Department of Labor and Employment.
The Council must include nine (9) representatives from the private sector, with a majority being recommendees of the accredited organization, and one private-sector representative appointed as vice-chairman.
The Council may call other heads of executive agencies, private organizations, or individuals to attend meetings and assist in resolving issues affecting their offices.
Such heads called upon must respond to Council queries within two (2) weeks from receipt.
The President must appoint private-sector representatives not ex officio members upon nomination of the accredited organization, ensuring balanced representation from Visayas and Mindanao and various sectors (including labor, agricultural and traditional export sectors versus non-agricultural and non-traditional export sectors and the like).
Private-sector representatives must serve for two (2) years, and replacements for resignation, death, or incapacity must serve for the remainder of the member’s term.
The Council must meet once a month, and the President or chairman may convene it anytime when deemed necessary.
The President must preside over meetings on a quarterly basis.
Funding for the Council’s activities and operational expenses must come jointly from government budgetary appropriations and private sector contributions as provided for in Executive Order No. 98.
The Council must accredit a single umbrella organization of exporters pursuant to Section 7(l) for three (3) years, after which the Council must review accreditation before granting or re-granting.
The accredited organization must recommend private sector representatives to the Council with balanced sectoral representation, represent export sector interests, and coordinate/support/assist the DTI regarding formulation and implementation of government export promotion programs and policies.
If export promotion functions are privatized under the Act, the accredited organization must be responsible for performance of those privatized export promotion functions.
The accredited organization must manage the Philippine Trade Center, including authority to enter into contracts with specific organizations or firms for operation of certain promotion facilities or functions.
The Council must accredit and review accreditation under guidelines promulgated by the Council.

Export financing, promotion privatization, and Trade Center

The Council must conduct necessary legal and feasibility study/recommendation on aligning and rationalizing government programs relative to export financing and existing organizations primarily or exclusively dealing with export financing, guarantee, and insurance.
The study must consider creation of a private sector-led export financing institution whose services focus on supporting operations of exporters and indirect exporters, particularly SMEs.
The study must include the proposed institution’s powers, functions, operations, and government equity contributions, and must prepare a bill creating it when necessary for recommendation to Congress within six (6) months from the effectivity of the Act.
Government counterpart funds must come from direct budgetary appropriations, consolidated capital funds of government institutions involved in export financing and guarantees, or equity contributions from government finance institutions.
The Council, through the DTI, must prepare an export promotion privatization program within ninety (90) days from approval of the Act and must identify the appropriate funding mechanism; privatization must be completed within two (2) years.
While a funding mechanism is not yet in place, the national government must grant financial and technical assistance to the accredited organization on a project-to-project basis.
The national government must appropriate sums exclusively earmarked for export promotion and information until a funding mechanism is established.
The Council must formulate criteria for availing of assistance, and the primary consideration must encourage the formation of a nationwide marketing cooperative for export promotion.
The government must assist the private sector in establishing Philippine trade centers that house trade promotion offices and serve as permanent exhibit sites for export products.
The government must provide land for the center through a land grant or long-term lease to the accredited organization and must arrange financing for construction of trade complexes.
After establishment, the centers must be managed by the accredited organization.

Export incentives and tax credits

In addition to incentives provided by the Board of Investments, exporters must receive the following incentives:
Exporters must be exempt from Presidential Decree No. 1853, provided importation is used for production of goods and services for export.
Importation of machinery and equipment and accompanying spare parts used in manufacture of exported products must be subject to zero percent (0%) duty for three (3) years, until 1997.
Exporters must receive a tax credit for imported inputs and raw materials primarily used for production and packaging of export goods that are not readily available locally, valid for five (5) years, with the tax credit issued within thirty (30) days from exportation.
Exporters must receive a tax credit for increase in current year export revenue computed as follows:
- The first 5% increase in annual export revenue over the previous year yields a credit of 2.5% applied on the incremental export revenue converted to pesos at the current rate.
- The next 5% increase yields a credit of 5.0%.
- The next 5% increase yields a credit of 7.5%.
- In excess of 15%, the increase yields a credit of 10%.
Such tax credit is granted only for the year when performance is achieved, and export revenues used in the calculation must be verified as prescribed under the implementing rules and regulations.
Exporters of non-traditional products who use or substitute locally produced raw materials, capital equipment, and/or spare parts must receive tax credits equivalent to twenty-five percent (25%) of the duties that would have been paid had these inputs been imported.
That 25% incentive must be available for three (3) years upon effectivity of the Act and may be extended for another three (3) years by the President upon recommendation of the Secretary of Finance.
The Secretary of Finance, in consultation with the Export Development Council, must prepare a list of non-traditional exports entitled to avail of the incentive.
The incentives must be granted only upon presentation of a Bureau of Export Trade Promotion (BETP) certification of the exporter’s eligibility in compliance with minimum wage and SSS laws, and in the case of importations, the imported items must be used exclusively for production of export goods.
While the Eximbank is not yet established, DBP, PNB, and LBP must develop within one (1) year long-term peso and dollar credit facilities for plant and equipment expansion, and those facilities must offer preferential and simplified credit schemes to exporters.
All tax credits provided under the Act must be negotiable.

Administrative procedures, penalties, and effectivity

The Secretaries of Trade and Industry and Finance, in consultation with the Council, must formulate the rules and regulations to implement the provisions of the Act.
Any person, entity, government instrumentality, or institution found to be willfully violating or grossly negligent in executing the mandates of the Act must result in expulsion from office of its chief executive and operating officers, as well as the responsible officers thereof.
The same violators must be prohibited from holding any government position for at least two (2) years.
The President must appoint upon effectivity of the Act the nine (9) private sector representatives to the Council, who serve a term of two (2) years; thereafter, appointment follows Section 9.
Budget for the old Export Development Council must be transferred to the new Council upon effectivity, and thereafter operation and maintenance sums must be included in the annual General Appropriations Act.
The Council must function immediately one (1) month after approval of the Act.
The Act’s provisions are separable; if any provision is declared unconstitutional, the remaining provisions remain in force and effect.
All inconsistent laws, decrees, executive orders, administrative orders, rules and regulations, or parts thereof are repealed, amended, or modified accordingly.
The Act takes effect two (2) days after publication in the Official Gazette or in at least two (2) national newspapers of general circulation in the Philippines, whichever comes earlier.
The Act was approved on December 21, 1994.