Law Summary
Use and Return of Machinery and Equipment Lent to Sub-Contractors
- Machinery and equipment lent by economic zone contractors to sub-contractors must be specified in the LOA.
- Such equipment is to be used exclusively for the farm-out/sub-contracting purpose.
- Equipment must be returned at the end of the LOA validity period.
- If the contractor continues the arrangement by securing a valid LOA and consistent movement of goods, the maximum usage periods for sub-contractors are:
- PEZA-registered economic zone enterprises: indefinite use.
- Non-economic zone enterprises with CBMW: up to two years.
- Non-economic zone enterprises without CBMW: up to one year.
Conditions for Transfer of Goods and Processed Outputs
- Economic zone contractors must arrange PEZA Police Transshipment services for accompanying raw materials, parts, components, goods, and machinery during transfer through customs territory.
- Alternatively, contractors may post surety bonds covering taxes and import duties on these goods during transshipment.
- Similar security measures (PEZA Police or surety bonds) apply during the return transfer of processed subcontracting outputs and equipment.
- For non-economic zone sub-contractors without CBMW, contractors must post surety bonds for the entire sub-contracting period covering taxes and duties.
Supersession of Previous Orders and Circulars
- This Memorandum Order supersedes EPZA General Circular No. 83-002 (1983), PEZA Memorandum Circular 2000-01, and all other related orders governing farm-out/sub-contracting material movement.
- The order is intended for guidance and strict compliance by all affected parties.