Rules on Foreign Trade Transactions

General Policy and Classification Rules

Section 1 establishes the general policy that all kinds of merchandise imports are allowed.
Section 1 allows restrictions or prohibitions for reasons of public health and safety, national security, international commitments, and development/rationalization of local industry.
Section 2 defines “Freely Importable Commodities” as commodities neither regulated nor prohibited under Sections 3 and 4.
Section 3 defines “Regulated Commodities” as commodities whose importation requires clearances/permits from appropriate government agencies including the Central Bank.
Section 4 defines “Prohibited Commodities” as commodities whose importation is not allowed under existing laws.

Import Coverage, Regulated and Prohibited Items

Importation of Freely Importable Commodities may be effected without prior approval or clearance from any government agency (Section 2).
Regulated commodities listed in Section 3 require the following permits/clearances from the named agencies:
- Acetic anhydride (513.77-01) — Dangerous Drugs Board (DDB).
- Dangerous Drugs — DDB.
- Fish and Fish Preparations (Appendix 1) — Bureau of Fisheries and Aquatic Resources (BFAR).
- Animals, animal effects, animal products, meat and meat products including meat of bovine animals of subgroup 011.1 (Appendix 2) — National Meat Inspection Commission (NMIC)/Bureau of Animal Industry (BAI).
- Rice and Corn — National Food Authority.
- Sodium Cyanide (523.81-01) — Bureau of Food & Drug (BFAD).
- Chlorofluorocarbon (511.38-01) — BFAD.
- Penicillins/derivatives (541.31-00/542.13-01/542.13-09) — BFAD.
- Refined petroleum products (Appendix 3) — Energy Regulatory Board (ERB).
- Coal and Coal derivatives (Appendix 4) — ERB.
- Color Reproduction Machines (Subgroup 751.3) — NBI and Cash Department, Central Bank.
- Various Chemicals for the manufacture of explosives (Appendix 5) — PNP Firearms and Explosives Office (PNP-FEO).
- Firearms, Ammunition, and Parts — PNP-FEO.
- Onions, garlic, potatoes and cabbage, for seedling purposes — Bureau of Plant Industry.
- Specific Consumer Durable Goods (Appendix 6) — DTI/BOI.
- Pesticides incl. Agricultural Chemicals (Appendix 7) — Fertilizer & Pesticide Authority.
- Motor Vehicles, Parts and Components (Appendix 8) — DTI/BOI.
- Raw Sugar (061.11-01/061.11-02/061.11-09/061.12-00) — Sugar Regulatory Administration.
- Truck and automobile tires and tubes, used, of all sizes (LOI 1086-November 25, 1980) — DTI.
- No-dollar imports of used motor vehicles — DTI.
- All commodities originating from Socialist and other centrally-planned economy countries — Philippine International Trading Corporation (PITC).
- All commodities originating from the Union of South Africa — PITC/DFA.
- Warships of all kinds — Maritime Industry Authority.
- Computers/peripherals imported by government agencies in excess of P 2M within a fiscal year — National Computer Center.
- Others (Appendix 9) — CBP.
Prohibited commodities in Section 4 are:
- Those specifically listed under Section 101 of the Tariff and Customs Code (Appendix 10).
- Onions, potatoes, garlic and cabbages, except for seedling purposes (R.A. 1296.).
- Coffee (R.A. 2712.).
- Used clothing and rags (R.A. 4653.).
- Toy guns (LOI 1264 dated July 31, 1982.).

Import Payment Modes and Bank Course

Section 5 requires that all foreign exchange remittances for imports under the listed modes of payment shall be transacted thru AABs:
- Letter of Credit (L/C).
- Documents Against Payment (D/P).
- Documents Against Acceptance (D/A).
- Open Account Arrangement (O/A).
Section 6 requires L/Cs to be opened on or before the date of shipment and requires only one L/C for each import transaction.
Section 6 requires L/C opening through submission to the AAB of:
- Duly accomplished L/C application.
- Firm offer/proforma invoice showing specific quantity, unit cost and total cost, complete description/specification, and PSCC statistical code.
- Permits/clearances from appropriate government agencies when applicable.
- Duly accomplished Import Entry Declaration (IED) serving as basis for payment of advanced duties as required under PD 1853.
Section 6 mandates that L/Cs be negotiated in accordance with the approved L/C terms and be governed by the Uniform Customs and Practices on Documentary Credits (ICC 400), with strict observance of pre-shipment inspection/Clean Report of Findings (CRF) for L/Cs valued at US$ 500.00 and above.
Section 7 defines D/P as a mode where shipping documents are released to the importer by the local bank through the seller’s bank only upon receipt of payment; AABs release documents after payment or credit extension and remit payment to the supplier through the correspondent bank abroad.
Section 8 defines D/A and O/A:
- D/A releases documents upon the importer’s written acceptance of the seller’s bill of exchange.
- O/A releases documents directly by the seller to the importer upon the importer’s promise to pay after shipment without coursing through banks.

Import D/A and O/A Eligibility and Limits

Section 8(c) allows imports under D/A and O/A by:
- Export producers/manufacturers, oil firms, and franchised public utility concerns without prior CB approval.
- Domestic producers/manufacturers with prior CB approval.
Section 8(d)(1) requires D/A and O/A importations to be registered with the Central Bank.
Section 8(d)(2) prohibits payment for unregistered D/A/OA imports and allows payments prior to maturity only for imports already registered.
Section 8(d)(2) permits extensions of payment/maturity only if:
- The importer reports the extension to a specific date; and
- The cumulative maturity including all extensions does not exceed 360 days from:
  - date of draft acceptance for D/A, or
  - B/L date for O/A.
Section 8(d)(3) requires that D/A obligations and O/A obligations exceeding 360 days from the applicable starting date be referred to the Central Bank for approval.
Section 8(d)(4) provides that Appendix 11 contains the mechanics of reporting and registration of D/A and O/A imports.

CISS Inspection Rules for Imports

Section 12 requires goods destined for importation into the Philippines to be inspected in the countries of supply by inspector(s) authorized by the Government under a Comprehensive Import Supervision Scheme (CISS).
Section 12 requires CISS inspection for quality, quantity, price/HCV, verification of Tariff and Customs Code, classification and verification of Tariff rate.
Section 12(a) requires that L/Cs opened for CISS-inspected importations contain a specific clause requiring presentation of a copy of final settlement invoice bearing an adhesive security label affixed by Societe General de Surveillance S.A. (SGS S.A.) or affiliates/representatives showing the number and date of the corresponding Clean Report of Findings (CRF), and rejecting letters of guarantee for non-presentation of the adhesive security label.
Section 12(b) requires for imports effected without letter of credit (including D/P, D/A, O/A, consignment, and no-dollar basis) that the importer submit written details plus pertinent proforma invoice to the CICCD for endorsement to the SGS MLO for inspection.
Section 13 makes the following commodities subject to inspection:
- Goods sold and/or supplied from all countries with FOB value of US$500.00 and above.
- Goods invoiced or declared as off-quality under descriptive terms indicating non-brand-new/first quality, regardless of value.
Section 14 provides that Joint Order 1-91 governs CISS implementation.

Use of Philippine Flag Carriers

Section 15 implements P.D. 1466 dated June 11, 1978 by requiring Philippine-flag air carriers and/or vessels unless the prescribed waiver is obtained.
Section 15(a) requires government offices and government-owned or -controlled corporations that procure transportation or obtain export/import cargo transportation between the Philippines and abroad (funded by Republic of the Philippines funds or their instrumentalities/corporations) to obtain transportation services from Philippine flag air carriers and/or vessels.
Section 15(b) requires parties granted a loan/credit or whose obligations are guaranteed by the Government or its financial institutions to utilize Philippine flag air carriers and/or vessels for export/import cargoes between the Philippines and abroad when cargoes are paid from the loan/credit/guaranteed loan or credit proceeds.
Section 15(b) requires that when such parties ship or agree to ship on FOB basis, they must select/nominate suitable Philippine flag air carriers and/or vessels for the carriage.
Section 16 requires observance of implementing rules issued by the Philippine Shippers Council dated September 7, 1978.

CBRC Requirements and Issuance for Imports

Section 17 requires a Central Bank Release Certificate (CBRC) for:
- Imports under D/A and O/A arrangements; and
- Imports of regulated items under Section 3, regardless of mode of payment.
Section 18 directs that AABs shall issue CBRC using the revised format in Appendix 12.
For D/A and O/A, Section 18(a) requires CBRC issuance upon AAB receipt of complete shipping documents (including the CRF if applicable) plus submission of:
- Duly accomplished Record of Goods Imported (RGI); and
- The pertinent import permit.
For regulated items effected thru L/Cs, Section 18(b) requires CBRC issuance upon AAB receipt of complete shipping documents inclusive of CRF (if applicable) plus the pertinent import permit.
For regulated items under D/P, Section 18(c) requires CBRC issuance upon AAB receipt of payment (or credit extension) from the importer plus presentation of the CRF and pertinent import permits.

Exports: Policy, Declarations, Payments, Remittance

Section 19 establishes policy to encourage commodity exports that generate foreign exchange earnings and ensure those earnings are remitted through the domestic banking system.
Section 19 allows commodity exports without restriction except for certain commodities regulated for reasons of national interest.
Section 20 classifies exports as:
- Exports with foreign exchange proceeds governed by Chapters IX–XV; and
- Exports without foreign exchange proceeds governed by Chapter XVI.
For every export shipment involving foreign exchange proceeds, Section 21 requires exporters to accomplish Form CBP 6-21-02, Revised 1991 (Export Declaration (ED) With Foreign Exchange Proceeds).
Section 21 requires exporters to ASEAN countries to accomplish the ED even if paid in Philippine Pesos, and requires submission of the completed ED to the AAB, which shall forward it to the BOC.
Section 22 allows a Monthly Export Declaration (MED) for frequent and recurring exports, subject to prior CB approval, using the ED form with the word Monthly in the title; the MED authority is valid for one (1) year.
Section 23 requires the price declared in the ED to be the fair market value or current market quotation on the date of sale.
Section 24 requires the AAB to register all EDs it issues and to adopt a control number as prescribed by CB attached as Appendix 13, and requires that no ED be issued unless the L/C, Purchase Order or Sales Contract is submitted to the AAB.
Section 25 sets a maximum validity period for an ED of 90 days from date of issue (inclusive of extensions) provided the expiry date does not go beyond the delivery period in the L/C, P.O. or S.C.
Section 26 allows amendments to the ED by AABs at any time before export negotiation; amendments for exports requiring prior CB approval are referred to CB for approval.
Section 27 authorizes AABs to cancel EDs without prior CB approval upon surrender of the unused original (ED1) copy.

Export Payment Modes, Currency, and Remittance Period

Section 28 provides that these export modes of payment do not need prior CB approval:
- L/C
- D/P
- D/A
- O/A
- Cash Against Documents (CAD)
- Prepayment/Export Advance
Section 28 defines Prepayment/Export Advance and distinguishes it based on whether remittance is made within 30 days before shipment (prepayment) or more than 30 days before shipment (export advance).
Section 28 requires disclosure to the AAB of whether a prepayment/export advance is intended as prepayment or export advance and the shipment date.
Section 28 allows bank draft/telegraphic transfer, buyer’s checks, traveller’s checks, or acceptable foreign currency notes for prepayment/export advance; buyer’s checks must be cleared before shipment.
Section 28 allows the AAB to give due course to exporters availing export advances from buyers under red clause or similar provisions in the L/C, P.O. or S.C., regardless of amount, provided maturity does not exceed 360 days from availment date; advances beyond 360 days require CB approval.
Section 31 allows export payments in enumerated currencies including U.S. Dollar, Japanese Yen, Pound Sterling, Deutsche Mark, Hongkong Dollar, Swiss Franc, French Franc, Canadian Dollar, Australian Dollar, Singapore Dollar, Belgian Franc, Australian Dollar, and others listed, including such other currencies that may be declared.
Section 31(b) permits payments in Philippine Pesos for:
- Exports to ASEAN countries, provided CB is not asked to intervene in clearing balances from this payment scheme; and
- Gold sales to CB as constructive exports under Section 43.
Section 32 requires inward remittance of the foreign exchange proceeds representing the full invoice value within one hundred eighty (180) days from date of shipment, and requires selling for pesos to an AAB within three (3) business days from receipt.
Section 32 allows depositing up to 40% of such proceeds in a Special Foreign Currency Deposit Account (SFCDA) only if the full invoice value/balance is inwardly remitted and paid within the required period.

Export Approval Requirements and Clearance Lists

Section 33 requires prior CB approval only for these export transactions:
- Those providing deductions of any kind from full shipment value, except deductions for payment of exports advances or for the value of consigned imported inputs of the exported commodity.
- Those payable beyond 180 days from shipment date.
- Those involving export of gold not otherwise classified as primary gold, secondary gold and gold-bearing jewelry.
- Those involving export of legal tender Philippine peso notes and coins, checks, money orders, and other bills of exchange drawn in pesos against Philippine banks, with total face value exceeding P5,000.00.
Section 33 directs that the ED covering transactions requiring prior CB approval must be referred by the AAB to CB for approval prior to shipment.
Section 34 requires export clearance from the appropriate government agency/office indicated in Appendix 14 for products listed there.

Negotiation, Payment Certification, and Reporting

Section 35 requires export negotiation:
- The exporter must negotiate the bill of exchange/account with the AAB within ten (10) banking days from date of shipment, together with the bill of lading/air waybill, signed commercial invoice, and other documents required.
- The AAB certifies negotiation on the back of the negotiated copy of the ED and includes it in the AAB’s Daily Report on Export Negotiations.
Section 35 requires that when export advances are availed, the AAB making the advance must be the same AAB that negotiates the export documents intended to pay the advances.
Section 35 allows direct submission of shipping documents to the buyer for fully prepaid shipments or on O/A basis, provided copies of each document are submitted to the AAB within ten (10) banking days from date of shipment for record/monitoring.
Section 36 requires that upon receipt of export proceeds, the AAB certifies receipt on the payment copy of the ED and reports the same to CB in its Daily Report on Export Proceeds Received, subject to Appendix 15 guidelines.

Export Retention and SFCDA Use

Section 37 allows any commodity exporter to retain a maximum of 40% of foreign exchange receipts from exports in an SFCDA with any AAB in the Philippines.
Section 38 allows the SFCDA to be used freely for any purpose by the exporter concerned.
Section 39 requires observance by the AAB and the exporter of the guidelines under Appendix 16.

Export Financing, Rediscounting, and Forfeiting

Section 40 allows all exporters to avail FCDU loans to exporters from a Foreign Currency Deposit Unit (FCDU) of a local commercial bank up to 70% of L/C, P.O. or S.C. without prior CB approval, subject to Appendix 17 guidelines.
Section 41 allows an AAB to rediscount with the CB eligible paper of exporter-clients under existing CB guidelines, provided the portion financed by FCDU loans is excluded and only the balance not financed by an FCDU loan may be rediscounted.
Section 42 allows an exporter to sell its export bill and all rights over an export shipment to an Offshore Banking Unit (OBU) or a foreign financial institution provided:
- The sale is without recourse to the exporter and any previous holder; and
- The foreign exchange proceeds are considered export proceeds and are inwardly remitted under existing rules.

Gold Exports and Constructive Exports

Section 43 allows export of primary and secondary gold provided that 60% of foreign exchange from gold exports is sold to the CB through the exporter’s AAB, and the CB’s designated account with a foreign bank is credited within 24 hours from receipt of proceeds under CB guidelines in Appendix 18.
Section 43 defines primary gold as those produced and exported by PASAR or by primary gold producers classified as such by the Bureau of Mines and Geo-Sciences.
Section 44 treats these as constructive exports eligible for benefits of regular exports:
- Gold sales to CB.
- Sales to bonded manufacturing warehouses of export-oriented manufacturers, to Export Processing Zones, to BOI-registered export traders operating bonded trading warehouses supplying raw materials for export products, and to diplomatic missions in the Philippines, paid in foreign currency.
- Sales to/from Duty Free Philippines (DFP) paid in foreign currency.
Section 44 requires for constructive exports under the second category that an ED be accomplished for each sale and that a delivery receipt signed by buyer be submitted in lieu of a bill of lading/air waybill.
Section 44 requires that for sales of DFP, an MED be accomplished instead of an ED without prior CB approval.

Exports Without Foreign Exchange and Approvals

Section 45 requires that every export shipment on a no-dollar basis be covered by an Export Declaration Without Foreign Exchange Proceeds (ED w/o FX) issued by an AAB using CBP Form No. 6-21-04, except household and personal effects forming part of accompanied baggage of an outgoing passenger leaving the Philippines.
Section 46 allows a MED without Foreign Exchange for frequent and recurring no-dollar exports subject to prior CB approval.
Section 47 requires prior CB approval before shipment only for:
- Export samples/specimens for promotional/testing purposes exceeding US$5,000.00 per shipment or US$50,000.00 per year per exporter.
- Other no-dollar shipments exceeding US$2,000.00 per shipment or US$5,000.00 per year per exporter, except the enumerated categories below which do not require prior CB approval:
  - Unaccompanied household and personal effects of a Philippine/foreign diplomatic representative with diplomatic passport.
  - Unaccompanied household/personal effects and professional instruments and tools of trade of an outgoing foreigner/Philippine emigrant/Philippine resident leaving on a foreign assignment, shipped within 90 days before or after departure.
  - Tourist purchases by an outgoing foreign tourist/non-Philippine resident shipped within 90 days before or after departure.
  - Items for exhibit in trade fairs abroad, provided that within 90 days from termination of the fair the foreign exchange proceeds of items sold, net of fair-related expenses, are inwardly remitted and the exporter submits to CB, thru the AAB, full accounting reports of items sold and unsold.
  - Items sent abroad for repair/replacement/refill/processing/use in projects and to be imported back to the Philippines, with written undertaking to return within one (1) year from shipment date or upon termination of the project.
  - Films previously imported under lease.
  - Office reports, records and printed matter not intended for resale.
  - Empty containers to be returned to owner-supplier.
  - Unpaid rejected imports.
  - Ship spares previously landed for repairs and left behind by ocean-going vessels.
  - Items imported on consignment under General Warehousing/Re-Export Bond returned unprocessed due to excess/order cancellation or for replacement or returned as production scraps.

Export Retention, CISS Imports, CBRC, and Reporting Deadlines

Section 48 requires Central Bank reporting of import transactions and export transactions by specified forms, supporting documents, and deadlines.
For Import Transactions (submitted to the Central Bank), the daily submission deadline is within two (2) banking days from transaction date:
- Daily Report of Regular LCs Opened (IOS Form 1, Schedule 12) with accomplished info sheet, copy of L/C, copy of proforma invoice.
- Daily Report of Negotiations on Regular LCs (IOS Form 1, Schedule 13) with none.
- Daily Report of Confirmation/Amendments of LCs (IOS Form 1, Schedule 14) with none.
- Daily Report of DA/OA Availments (IOS Form 1, Schedule 15) with accomplished RGI; copy of CBRC; copy of shipping documents.
- Daily Report of DA/OA Repayments (IOS Form 1, Schedule 16) with none.
- Daily Report of FX Remittances (CBP Form 6-15-09, Appendix 19) with copy of CBRC (for regulated imports) under D/P imports and copy of complete shipping documents.
For Export Transactions, reporting includes deadlines and frequencies:
- Daily Report on Export Negotiations under IOS Form 1, Schedule 10: submitted (2) banking days after transaction date.
- Daily Report on Export Proceeds Received under IOS Form 1, Schedule 11: submitted daily within (2) two banking days after transaction date.
- Report on Export Declarations Issued (With and Without Foreign Exchange Proceeds) (Appendix 20): Monthly—within 7 banking days from end of reference month.
- Report on Red Clause and Other Export Advances (Appendix 21): Monthly—within 7 banking days after each report month.
- Report on SFCDA Opened, Closed and Outstanding Balance During the Report Month (Appendix 22): Monthly—within ten (10) banking days after each report month.
Section 49 provides filing procedures: reports are filed with the CICCD or the Export Department as the case may be or with CB Regional Offices, or sent by mail or special delivery, with submission date determined by:
- Acknowledgement of receipt date (if filed directly), or
- Postmark/registry receipt date (if mailed).
Section 50 imposes fines for late and/or incomplete submission of reports:
- P100 per banking day for the first five (5) successive banking days of delay.
- P150 per banking day for the next five (5) successive banking days of delay.
- P200 per banking day for successive banking days of delay until the report has been filed.
Section 50 provides how fines are collected:
- By debit to the AAB’s current account deposit maintained with CB upon notice from CICCD/Export Department.
- If paid through check or cash, by remittance to the Cash Department of the Central Bank thru CICCD/Export Department.

Enforcement, Post-Verification, Sanctions, Repeal and Separability

Section 51 requires post-verification of import/export transactions reported by AABs by the Central Bank to verify compliance and for monitoring purposes.
Section 52 provides penal sanctions for