Counter Trade Handbook

The Countertrade Program of the Philippines
Philippine International Trading Corporation

Philippine Copyright c 2002
by the Philippine International Trading Corporation
All rights reserved. No part of this publication may be reproduced, stored or introduced into a retrieval
system, or transmitted, in any form or by any means now known or hereafter developed (electronic,
mechanical, photocopying, recording or otherwise) without the prior written permission of the copyright
owner and publisher of the book.
PHILIPPINE INTERNATIONAL TRADING CORPORATION

5th Floor, NDC Building, No. 116 Tordesillas St., Salcedo Village
1227 Makati City, Philippines
Tel. No. (632) 818-9801; 892-2149
Fax No. (632) 892-2021; 892-2054
E-mail : countertrade@pitc.com.ph
Printed in the Philippines

Reprinted: 2004
Contents
Foreword…………………………………………………… iv
Chapter I Fundamental Principles of Countertrade. 1
Countertrade in General……………………………………… 1
Benefits of Countertrade…………………………………….. 2
Forms of Countertrade………………………………………. 2
Counterpurchase…………………………………… … 2
Offsets……………………………………………… 3
Product Buy Back…………………….……………. 4
Debt For Goods……………………………………… 4
Build-Operate-Transfer (BOT)……………………… 4
Any Variation or Combination of the Above……….. 5
Adoption of Countertrade in Government Procurement…… 5
Chapter II Countertrade in the Philippines…………… 6

Highlights of Executive Order No. 120……………………… 6
Basic Features of the Implementing Rules and Regulations… 7
Role of PITC……………………………………………….. 8
Executive Order No. 120………………………………… 10
Implementing Rules and Regulations……………………… 14
Purpose…………………………………………… 14
Definition of Terms………………………………… 14
Coverage…………………………………………. 17
Exemptions………………………………………. 17
Countertrade Management and Administration……. 18
Processing and Evaluation of Countertrade Proposals in
Bids/Offers of Foreign Suppliers…………. 21
Countertrade Performance…………………………. 23
Countertrade Monitoring and Crediting Procedures. 25
Accreditation of Philippine Manufacturers/Exporters 27
Reportorial Requirements and Review………………. 27
Chapter III Countertrade Integration in the Foreign

Procurement Process………………………………… 33
Open Competitive Bidding &
Limited Source Bidding………………………… 33
Other Alternative Modes of Procurement……………… 34
Chapter IV Countertrade Milestones……………….. 36
Appendix A Memorandum Circular No. CT-95.1/01…

“Guidelines for the Evaluation and Approval of Offset Arrangements”
Appendix B Memorandum Circular No. CT-95.4/01……..

“Amending Certain Provisions of Memorandum Circular No. CT-95.1/01”
Appendix C Memorandum Circular No. CT-95.4/02…….

“Inclusion of Countertrade Undertaking of Foreign Suppliers in Bidded or Negotiated Contracts”
Appendix D Memorandum Circular No. CT-00.6/01

“Guidelines on Banking of Offset Credits”
Appendix E Department Circular No. 04……………
“Prescribing the Guidelines in the Implementation of Countertrade for Procurement
Contracts under the Armed Forces of the Philippines Modernization Program”
Sample Forms………………………………………………....
Countertrade Provisions in the Supply Contract……………….
Countertrade/Offset Agreement………………………………..
List of Philippine Products and Services…………………….

List of Eligible Indirect Offsets………………………………
List of Eligible (Defense-Related) Offsets……………………
FOREWORD
To help meet the increasing challenge of globalization as well as to spur the country’s economic growth,
a national policy on Countertrade was adopted in 1993 as a supplemental trade tool with respect to the
Philippine Government’s importation of foreign capital equipment, machinery, products, goods and
services valued at US$1 Million and above. This policy is enunciated in Executive Order No. 120 s.
1993 and its Implementing Rules and Regulations.
By leveraging its own importations with reciprocal benefits to be provided by foreign suppliers/trader
under countertrade, the government hopes to fast-track the inflow of investments, technology, industrial
cooperation, specialized training and skills and other similar activities into the country including the
expansion of trade and exports to other countries.
Since 1989, the Philippine International Trading Corporation (PITC), a government-owned and
controlled corporation under the Office of the President, has been at the forefront of countertrade in
government foreign procurement programs. By virtue of E.O. 120 s. 1993, PITC was expressly
mandated to administer and manage the countertrade program of the government.
Over the last fifteen years, PITC has been instrumental in facilitating countertrade projects valued at over
US$ 358 million relative to several foreign procurements of the Armed Forces of the Philippines,
Philippine National Police, Philippine Coast Guard, Bureau of Fire & Protection and the National Food
Authority among others, including “Debt for Goods” arrangements with several creditor countries of the
Philippines. In addition to this, another US$ 189 million worth of projects are on-going implementation.
This has allowed the country not only to recoup and preserve its foreign exchange but also enabled key
industry sectors to develop and expand new markets and products for export, acquire sophisticated
technology, obtain foreign direct investments, and avail of specialized technical/specialized training.
This handbook intends to provide a basic understanding of countertrade and its application to foreign
procurements/importations of the Philippine Government, including its various agencies, bureaus and
offices.

October, 2004
CHAPTER I
FUNDAMENTAL PRINCIPLES OF COUNTERTRADE
A. COUNTERTRADE IN GENERAL
COUNTERTRADE is a general term for an international transaction that is premised on some form
of reciprocity.
As a form of non-traditional trade, it can be distinguished by the presence of performance

requirements prescribed by the buyer and agreed to by the seller as a condition of sale.1 These
requirements aim to ensure that some “reciprocal” benefits are obtained by the buyer from the seller
as a result of the sale.
As defined by the Association Pour La Compesantion Des Exchanges Commerciaxuz, Countertrade

is a “commercial transaction whereby the seller undertakes to purchase goods and/or services in the
client’s country, to transfer technology or manufacturing licenses or provide services to the client’s
country, or to undertake any other transaction in exchange for the client’s commitment to purchase
the goods and/or services covered by the Main Supply Contract, such a commitment being a
condition on the above transaction.”2
In application, countertrade is used to leverage government importations with trade, investments

and other related beneficial projects to be provided by the seller or supplier.
B. BENEFITS OF COUNTERTRADE
Countertrade is a mechanism to:
• Channel back of recoup foreign exchange spent for an importation;
• Gain access to advanced technology and training, new foreign investments, research and
development and related support for national development and modernization programs;
• Promote mutually beneficial collaborative business ventures between local industry sectors and
their foreign counterparts through joint ventures and industrial cooperation;
• Promote export products and markets.
Many developing nations and even developed nations require countertrade in their capital-intensive
foreign procurement programs in order to fuel industrialization and sustain national development
programs. The Philippine position is no different.
1
The Countertrade Contract Guide & Lexicon – Second Edition, 1994
2
As cited in the Countertrade Contract Guide & Lexicon – Second Edition, 1994
C. FORMS OF COUNTERTRADE
1. COUNTERPURCHASE -- “An agreement whereby the primary supplier accepts parallel

obligations to purchase products and/or services from the buyer’s country.”3 This form is also
known as counter exports.
Example: As a condition for the purchase of communication equipment by the buyer, the
seller commits to buy goods and services from the buyer’s country.
2. OFFSETS -- An agreement whereby the primary supplier commits, as a condition of sale, to

undertake or to introduce a wide-range of industrial and commercial activities for the benefit
of the buyer or the buyer’s country such as:
• Investments
• Technology transfer
• Training and skills upgrade
• Research and development
• Donations
Other forms of offsets may be projects that can contribute to the priority development
programs of the buyer and/or support the national development programs of the buying
country. These offsets may or may not be related to the equipment, machinery, products, or
services being purchased.
Thus, offsets are generally divided into two categories, to wit:
Direct Offsets – offset arrangements that are directly related to the purchased equipment.
seller/supplier commits to invest in maintenance facility for the said equipment in the buyer’s
country at no additional cost to the buyer.
Indirect Offsets – offset arrangements that are not related to the purchased equipment.
seller/supplier commits to invest in a furniture factory in the buyer’s country at no additional
cost to the buyer.
3. PRODUCT BUY BACK -- An agreement whereby the seller/supplier of a turnkey

production facility, machinery or equipment agrees to be paid, partially or fully, by the
resultant products manufactured from the operation of the said facility or equipment.
Example: The seller of a tomato processing machine agrees to be paid partially through the
export of canned tomato paste produced by the machine. The buyer of the processing machine
ensures that sufficient quantities of canned tomato paste are exported to the seller as partial
payment for the machine.
4. DEBT FOR GOODS -- A transaction whereby a debtor country offers its goods or services
for export to cover full or partial payment for an outstanding debt.
3
Ibid.
Example: Creditor country agrees to accept coconut oil and other commodities from the
debtor country as full payment of an outstanding debt. No foreign currency is paid/used to
pay the debt. Local commodity suppliers are paid in local currency by the debtor agency.
5. BUILD-OPERATE-TRANSFER (BOT) and its variations -- Usually applied to major

infrastructure contracts, this term refers to an arrangement whereby a project company or
consortium (of local and foreign companies) is established to finance, construct and operate
the project for a definite period of time. A combination of local and foreign funds ensures
project financing at the end of the contract period.
6. ANY VARIATION OR COMBINATION OF THE ABOVE -- Variations or

combinations of any of the aforementioned forms of countertrade are generally acceptable
depending on the objectives for their adoption.
D. ADOPTION OF COUNTERTRADE IN GOVERNMENT PROCUREMENT
In countries that have adopted countertrade as a part of a government procurement policy, foreign
suppliers and contractors are usually advised of the countertrade requirements during the bidding
stage or supply negotiations stage to enable them to coordinate and gather information on such
program from the government’s designated countertrade office. These suppliers/contractors may be
required to execute a written document committing them to perform countertrade in relation to a
particular Supply Contract. The common practice is for suppliers to execute a
“Countertrade/Offset Agreement” or a similar agreement after being awarded a supply contract
which contains the countertrade/offset commitment of the supplier together with the manner and
period of performance of such countertrade obligations and other related conditions.
CHAPTER II
COUNTERTRADE IN THE PHILIPPINES
Executive Order No. 120 s. 1993

and the Implementing Rules and Regulations
On August 19, 1993, former President Fidel V. Ramos issued Executive Order No. 120 which established
a national policy on countertrade in the Philippines.
A. Highlights of Executive Order No. 120
• Directs the National Government, its departments, bureaus, agencies and offices, including
government-owned and controlled corporations, to adopt countertrade as a supplemental trade
tool in connection with transactions involving the importation or procurement of foreign
capital equipment, machinery, products, goods and services entailing the payment of at least
US DOLLARS: ONE MILLION (US$1,000,000.00) and above or its equivalent in other
foreign currency and to negotiate and conclude, on a best efforts basis, agreements or
arrangements on countertrade with respect to such importation.
• Designates the Philippine International Trading Corporation (PITC) as the implementing

agency for this program on behalf of the Department of Trade and Industry.
• Mandates the formulation and adoption of implementing rules and regulations (IRR) for this
program by an inter-agency committee composed of the Department of Trade and Industry,
Department of Finance, National Economic and Development Authority, and the Philippine
International Trading Corporation.
B. Basic Features of the Implementing Rules and Regulations
On November 14, 1994, the aforesaid inter-agency committee issued the IRR of the E.O. 120 which
outlined the fundamental procedures and guidelines for the Program:
• Covered Importations: Government importations and procurement of services from foreign

suppliers entailing payment of at least US$ 1 Million and over or its equivalent in other
foreign currency requires the adoption of countertrade.
• Countertrade Integration: Government offices whose importations are covered by the IRR
will ensure that countertrade is required of their foreign suppliers.
• Countertrade Level: The countertrade obligation/commitment of foreign suppliers should not

be less than 50% of the value of their supply contract with the government.
• Countertrade Activities: Acceptable forms of countertrade include counterpurchase, direct and

indirect offsets, buy-back arrangements, debt for goods, and Build-Operate-Transfer schemes.
• Countertrade Agreement: Within 90 days from the award and signing of a supply contract
with the Philippine government, the foreign supplier (or its designated assignee) signs a
Countertrade Agreement with PITC outlining the terms and conditions of its countertrade
performance.
• Countertrade Performance: The foreign suppliers are normally given two to three (2-3) years
within which to fulfill the countertrade obligation.
• Countertrade Monitoring: The Philippine International Trading Corporation (PITC) handles

the evaluation, administration and monitoring of countertrade programs and ensures
compliance with countertrade obligations by foreign suppliers.
• Monitoring Fees (As per PITC BR No. 2002-01-06): The following fees are payable to PITC
upon fulfillment of the countertrade obligation:
¾ For capital goods imports: 1.5 % of the value of the countertrade obligation;
¾ For commodities: 0.25% of the value of the countertrade obligation.
• Performance Guarantees/Penalties: Performance guarantees and penalties for non-

performance shall be incorporated in the Countertrade Agreement to be signed between the
supplier and PITC.
C. Role of PITC
PITC established in 1973 and re-organized in 1977 as a full service and self-sustaining international
state trading organization under the Department of Trade and Industry, is the government office
responsible for the management and administration of the countertrade program of the Philippine
government with the following key responsibilities as provided in the IRR of E.O. s. 1993:
• Formulation of countertrade policies;
• Countertrade advisors/representative of government agencies;
• Evaluation of countertrade proposals of foreign suppliers;
• Negotiation, packaging and conclusion of countertrade contracts;
• Monitoring of countertrade transactions and performance.
PITC’s Countertrade Group is administratively responsible for overseeing and carrying out the
aforementioned tasks under the over-all supervision of the PITC President.
MALACANANG
MANILA
EXECUTIVE ORDER NO. 120
DIRECTING THE NATIONAL GOVERNMENT, ITS DEPARTMENTS, BUREAUS,

AGENCIES AND OFFICES, INCLUDING GOVERNMENT-OWNED OR
CONTROLLED CORPORATIONS, TO ADOPT COUNTERTRADE AS A
SUPPLEMENTAL TRADE TOOL WITH RESPECT TO THE IMPORTATION OR
PROCUREMENT OF FOREIGN CAPITAL EQUIPMENT, MACHINERY,
PRODUCTS, GOODS AND SERVICES.
WHEREAS, under Section 13, Article XII of the 1987 Constitution, the State is mandated to pursue
a trade policy that serves the general welfare and utilizes all forms and arrangements of exchange on the
basis of the equality and reciprocity;
WHEREAS, the adoption of the policy on countertrade is aimed at compensating the foreign
exchange expended for the importation or procurement of foreign capital equipment, machinery,
products, goods and services by the national government, its agencies or offices including government-
owned or controlled corporations, as well as to reciprocate for such importation or procurement through
arranged counter exports of Philippine traditional or non-traditional products to the country of the
supplier or any third country or through product buy back, offsets or investments;
WHEREAS, countertrade arrangements are expected to result in the opening of the new markets for
Philippine products and services, overcome quota and trade restrictions of other countries, and provide
for technology transfer and industrial growth, particularly in strategic industries, such as energy,
transport, infrastructure, telecommunications, and defense, as well as those listed under the Investments
Priorities Plan and the Industrialization Modernization Program; and
WHEREAS, the adoption of the policy on countertrade by the public sector will spur economic
development and help the Philippines achieve “newly-industrialized country” status by the year 2000.
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue
of the powers vested in me by law, do hereby order;
Section 1. Coverage. All departments, bureaus, agencies, offices and instrumentalities,

including government-owned or controlled corporations, are hereby directed to adopt countertrade as a
supplemental trade tool in connection with transactions involving the importation or procurement of
foreign capital equipment, machinery, products, goods, and services entailing the payment of at least
United States Dollar. One Million (US$1,000,000.00) or its equivalent in other foreign currency, and to
negotiate and conclude on a best-efforts basis, agreements or arrangements on countertrade with respect
to such importation.
Section 2. Definition of Terms. For purposes of the Executive Order, “Countertrade” shall refer to
any of the following arrangements:
(a) Counterpurchase -- also known as counter exports, parallel transactions or reciprocal trade,
whereby the foreign supplier reciprocally commits to purchase Philippine goods or services, to
be exported to the supplier’s country or a third country;
(b) Product Buy Back -- whereby the foreign supplier of the equipment or machinery is paid for
with the resultant product(s) or good(s) made or manufactured by such equipment or
machinery;
(c) Offset – whereby the foreign supplier commits to introduce investments or technology
transfer in the Philippines, or assist in establishing new industries or improving existing
industries to generate or save foreign exchange or create increased employment, which may or
may not related to the machinery, equipment, products or goods imported or services
procured;
(d) Trade-for-Debt Swap -- whereby a loan or credit accommodation obtained by a government
agency or government-owned or controlled corporation from a foreign government or creditor
which has remained outstanding and unpaid is arranged to be settled in full or partially by way
of sales of products, goods or services to be provided by a third party rather than by payment
in foreign currency; or
(e) Any form or combination or variation of the above arrangements that results in the inflow to
the country of foreign exchange, or savings thereof, investments, training and technology
transfer, grants for education, scientific, technological, environmental and related research
programs or projects, which will enhance Philippine industrial or export competitiveness or
contribute to the creation of new competitive industries, enhance existing industries or
utilization of Philippine services or expertise by foreign clients, or result in the reduction of
public debt.
Section 3. Implementing Agency. The Department of Trade and Industry, through the Philippine
International Trading Corporation, is hereby directed to coordinate with all government agencies and
government-owned or controlled corporations in formulating and implementing particular strategies on
countertrade or similar arrangements for any planned importation or procurement of foreign capital
goods, equipment, machinery, products, goods and services, with appropriate consultations to be made
with the private sector.
Section 4. Coordination by Government Agencies. The government agency or government-owned

or controlled corporation concerned shall closely coordinate with, and provide information on any
planned importation or procurement as well as countertrade efforts already undertaken to the Department
of Trade and Industry and the Philippine International Trading Corporation prior to actual importation or
procurement, in order to assure the efficient implementation of this Executive Order.
Section 5. Supply Base and Trading Network. To achieve maximum implementation and
dispersion of the benefits of Countertrade arrangements which may be concluded by government
agencies or government-owned or controlled corporations, the Philippine International Trading
Corporation shall maintain and enhance its supply base and trading network through constant and close
coordination with various industry and export sectors to ensure the availability of adequate and
acceptable products, goods and services which may be required under such countertrade arrangements.
Section 6. Implementing Rules and Regulations. The Department of Trade and Industry, National
Economic Development Authority, Department of Finance, and the Philippine International Trading
Corporation shall jointly promulgate the appropriate guidelines, rules and regulations to implement this
Executive Order.
Section 7. Repealing Clause. The provisions of executive or administrative orders, rules,

regulations and parts thereof inconsistent with this Executive Order are hereby repealed, amended or
modified accordingly.
Section 8. Effectivity. This Executive Order shall take effect immediately.
DONE in the City of Manila, this 19th day of August in the year Our Lord, Nineteen Hundred and
Ninety-Three.
(signed)
FIDEL V. RAMOS
President of the Philippines
By the President:
(signed)
TEOFISTO T. GUINGONA, JR.
Executive Secretary
Republic of the Philippines
DEPARTMENT OF TRADE AND INDUSTRY
RULES AND REGULATIONS IMPLEMENTING EXECUTIVE ORDER NO. 120

DATED AUGUST 19, 1993 ENTITLED “DIRECTING THE NATIONAL
GOVERNMENT, ITS DEPARTMENTS, BUREAUS, AGENCIES AND OFFICES,
INCLUDING GOVERNMENT-OWNED AND CONTROLLED CORPORATIONS, TO
ADOPT COUNTERTRADE AS A SUPPLEMENTAL TRADE TOOL WITH RESPECT
TO THE IMPORTATION OR PROCUREMENT OF FOREIGN CAPITAL
EQUIPMENT, MACHINERY, PRODUCTS, GOODS AND SERVICES.”
1.0 PURPOSE
These rules and regulations are promulgated in compliance with section 6 of E.O. No. 120 dated 19
August 1993, mandating the Department of Trade and Industry, the Department of Finance, the
National Economic and Development Authority and the Philippine International Trading
Corporation to jointly formulate and issue the necessary guidelines and rules to implement the
provisions of said Executive Order.
2.0 DEFINITION OF TERMS
For purposes of these rules and regulations, the following terms shall have the following meanings:
2.1 “Countertrade” -- is a general term for an international transaction that is premised on some
form of reciprocity which may be one (or a combination of) the transactions listed in this
Section.
2.2 “Counterpurchase” -- also known as counter exports, counter delivery, parallel transactions or
reciprocal trade – is a form of countertrade whereby the foreign supplier reciprocally commits
to accept/purchase Philippine products or services to be exported to the foreign supplier’s
country or to a third country.
2.3 “Offset” -- is a form of countertrade arrangement whereby the foreign supplier commits to
introduce investments or technology transfer in the Philippines or assist in the establishment
of new industries with export capacity and/or development and expansion of existing
manufacturing, technological and industrial capabilities of the Philippines to generate/save
foreign exchange and create/increase employment opportunities. These may or may not be
related to the equipment, machinery, products, goods or services imported by the Philippines.
If related, these are considered as Direct Offsets, and if not related, the same are considered
as Indirect Offsets. Activities qualified as either Direct Offsets or Indirect Offsets are listed
in Annex “A” hereof.
2.4 “Product Buy Back” -- is a form of countertrade whereby the foreign supplier of machinery,
equipment, or technology is paid for by the resultant product(s) or good(s) made or
manufactured from such equipment, machinery or technology. Some acceptable
forms/variations of Product Buy-Back are listed in Annex “B” hereof.
2.5 “Trade-for-Debt Swap” or “Debt-for-Goods or Services” -- is a form of countertrade

arrangement whereby a loan or credit obtained by a government agency or government-owned
and controlled corporation from a foreign government or creditor is arranged to be settled in
full or in part by way of delivery of products/goods or services.
2.6 “Any form or combination or variation of the above arrangements” -- shall mean any
arrangement or transaction similar to or comprising any one or more versions, forms and/or
combinations of the activities listed in Section 2.1 to 2.6 of these rules that result in the inflow
to the country of foreign exchange or savings thereof, investments, training and technological
transfers, grants for educational, scientific, technological, environmental and related research
programs or utilization of Philippine services or expertise by foreign clients or result in the
reduction of public debt. Such arrangements may also include: Debt-for-Nature, Debt-for-
Culture, Education and Debt-for-Technology and those enumerated in Section 2 (b) to (j) of
R.A. 7718 amending R.A. 6957 (the BOT Law).
2.7 “Foreign Supplier” -- means the supplier of the imported capital equipment, machinery,
products, goods, technology or services including agents or representatives thereof in the
Philippines.
2.8 “Philippine Products” -- means any item produced, manufactured or assembled in the
Philippines which has a minimum local content of at least 51%. Mineral, aquatic, agricultural,
and forest resources derived from Philippine territory (not otherwise banned for exports by the
Philippine Government) are included in this definition.
2.9 “Philippine Services” -- means any legitimate service rendered utilizing Filipino labor and
skills.
3.0 COVERAGE
3.1 The provisions of E.O. No. 120 s. 1993 shall cover all importations or procurement of foreign
capital equipment, machinery, products, goods and services of departments, bureaus, agencies,
offices and instrumentalities of the National Government, including government-owned and
controlled corporations entailing the payment of at least United States Dollars: ONE
MILLION (US$1,000,000.00) or its equivalent in other foreign currency.
3.2 For purposes of determining the value of the government importations, the total contract price
for said importation, whether on CIF, FOB or otherwise as appearing in the pertinent
invoices/contracts, regardless of the delivery/shipment quantities (i.e. one-time shipment,
partial shipment or by installment, etc.) and/or the manner of payment (i.e. in installments
with or without down payments, in cash or credit, etc.) shall be considered in the
determination of whether the same are covered by these rules and regulations. No splitting of
purchase orders/contracts shall be allowed in circumvention of these guidelines.
4.0 EXEMPTIONS
4.1 The following importations are excluded from the coverage of these rules and regulations:
a) Those funded by outright donations or grant-in-aid under government-to-government

arrangements.
b) Those whose purchase or supply contracts were concluded prior to the signing of E.O.
No. 120.
c) Those to be used or to form part of finished or semi-finished products/goods for re-

export.
d) Those which may be exempted by the Secretary of Trade and Industry, motu propio
upon the recommendation of PITC.
4.2 All exempted importations as enumerated in 4.1 above shall require the submission of an
Application for Exemption to PITC enumerating the grounds for exemption; Provided that:
PITC may issue a master exemption for recurring importations of the same kind by the same
entity valid for a period of one (1) year, subject to renewals as merited by the circumstances.
4.3 After receipt of said Application for Exemption, PITC shall review the same and if warranted,
approve the said application provided that in cases covered under Section 4.1 (d) hereof, PITC
shall endorse the same to the Secretary of Trade and Industry for review and approval.
5.0 COUNTERTRADE MANAGEMENT AND

ADMINISTRATION
5.1 Pursuant to Section 3 of E.O. No. 120, the Department of Trade and Industry through the
Philippine International Trading Corporation (PITC) shall be the government office
responsible for the implementation, management and administration of this Program.
5.2 Powers and Functions of PITC:
a) Formulation of policies relative to countertrade in the Philippines taking into

consideration international developments and practices on countertrade in order to make
countertrade a viable tool for the achievement of the goals of Philippines 2000.
b) Outline terms of cooperation with other countries and appropriate international

organizations on the use of countertrade as alternative trade tools.
c) Endorse or recommend approval of applications for exemptions under Section 4.1 (d)
hereof.
d) Provide advisory/consultative services to Philippine government departments, bureaus,
offices, agencies and government-owned and controlled corporations on policy matters
relating to countertrade.
e) As necessary, act on countertrade-related issues including matters relating to the

interpretation of these rules brought before it for proper adjudication.
f) Issue such circulars/memoranda as may be necessary to implement these rules including

the determination of procedures for the conduct of business and meetings relative to
countertrade in government procurement.
g) Coordinate and assist all government departments, agencies, bureaus, offices and
instrumentalities including government-owned and controlled corporations in
formulating and implementing appropriate strategies on countertrade and similar
arrangements relative to any foreign procurement or importation of capital equipment,
machineries, products, goods and services covered by these rules.
h) Review and evaluate all countertrade/offset proposals submitted by foreign suppliers or

entities relative to procurements/importations covered by these rules in coordination
with the procuring office concerned.
i) Secure and maintain an annual Government Countertrade Foreign Procurement List

covering yearly government procurement/importations covered by these rules in
cooperation with all government procuring offices concerned which shall be the basis for
developing countertrade/offset packages and arrangements.
j) Negotiate, formulate, package and conclude countertrade or similar arrangements,
contracts and/or agreements with foreign suppliers or their designated nominees/agents
relative to government procurement/importation covered by these rules.
k) Submit regular status reports to the Secretary of Trade and Industry and concerned
government agencies on the status of all countertrade transactions/projects in the
country.
l) Perform such other functions as may be necessary under the circumstances.
5.3 In addition to the foregoing, PITC shall be the over-all coordinating and monitoring
office/agency of the Philippine Government for countertrade/offsets and shall act as the
Countertrade nominee of procuring departments, bureaus, offices and instrumentalities of the
National government including government-owned and controlled corporations with respect to
countertrade in foreign procurement/importations.
5.4 PITC’s Countertrade Department shall be administratively responsible for overseeing and
carrying out the functions enumerated above under the over-all supervision of the President of
PITC.
6.0 PROCESSING AND EVALUATION OF COUNTERTRADE PROPOSALS IN

BIDS/OFFERS OF FOREIGN SUPPLIERS
6.1 All departments, bureaus, agencies, offices and instrumentalities of the National government
including government-owned and controlled corporations must submit to the PITC no later
than the second week of November of every calendar year, a list of proposed importations
which are covered by these guidelines, together with their approximate values, product
information and foreign suppliers of the said importation. In case an importation was not
among those listed and submitted to the PITC during the previous year, the same must be
submitted to PITC at least one (1) month before the intended date of bidding (for bidded
purchases) or purchase (for negotiated purchases) of these items. This shall form a basis for
an Annual Government Countertrade Foreign Procurement List to be drawn up by PITC.
6.2 PITC shall review the list submitted and shall thereafter coordinate with the government
procuring offices concerned on (i) on the importations/procurements which are subject to
countertrade and (ii) to ensure that all efforts are exerted for the inclusion of countertrade
commitments of the foreign suppliers as one of the factors/criteria in the evaluation of the
bidding documents/tenders and/or selection of a foreign supplier.
To facilitate proper coordination, all government importing offices concerned shall designate
a countertrade officer or a countertrade desk within their respective organizations which shall
handle all countertrade matters relative to their foreign procurement and coordinate with PITC
on said matter.
6.3 In the evaluation of the bid tenders or sales offers submitted by the foreign supplier, the
government procuring agency/office concerned shall give preference/priority (product
specifications, quality considerations, pricing and related terms being equal) to the foreign
supplier offering the most favorable countertrade arrangement for the Philippines .
6.4 Within five (5) working days or earlier from selection of the foreign supplier of the capital
equipment, machinery, products, goods or services, the government importing office
concerned shall notify PITC in writing of the details of importations as well as the
countertrade proposal of the foreign supplier selected together with copies of the bid tender or
sales offer of the foreign supplier containing its countertrade commitments.
In case the winning foreign supplier has made no countertrade proposal/commitment, the
government agency/office concerned must present to PITC proof that all efforts were exerted
to solicit countertrade offers/proposals from said supplier; and PITC reserves the right to take
necessary initiatives towards securing countertrade commitments from said supplier.
6.5 PITC shall evaluate the countertrade proposals submitted by the foreign supplier in
accordance with the Evaluation Criteria established by PITC and thereafter coordinate with
the foreign supplier on the final countertrade arrangements and supplemental contracts to be
executed thereunder.
6.6 PITC shall keep the government importing office concerned appraised/updated on all
subsequent developments relative to the countertrade package developed for their respective
procurements/importations and solicit their cooperation/assistance in these matters as
necessary.
7.0 COUNTERTRADE PERFORMANCE
7.1 Countertrade in its various forms shall be carried out/performed between PITC, as the
countertrade nominee of the government procuring office, and the foreign supplier concerned
or its designated countertrade nominee (hereinafter referred to as “Countertrader”). In this
regard, a foreign supplier is allowed to transfer/assign its countertrade obligations to PITC or
to any other Countertrader who shall fulfill its countertrade obligations, subject to prior
written approval of such transfer/assignment by the government procuring office concerned
and PITC. The selection of Countertrader, while being the prerogative of the foreign supplier,
must adequately demonstrate to the satisfaction of PITC that the designated Countertrader is
suitably capable of fulfilling the countertrade obligations in accordance with these rules.
7.2 PITC shall coordinate and negotiate directly with the foreign supplier or its Countertrader on
the requirements, processes and contracts/agreements necessary to implement the countertrade
component of government importations/procurement covered by these rules. PITC shall
execute the necessary countertrade contracts with the foreign supplier or its Countertrader.
Such countertrade contract or agreement must be finalized and signed by the parties not later
than ninety (90) days from the signing of the Supply or Sales Contract between the foreign
supplier and the government procuring agency/office.
7.3 The following standard terms and conditions, among others, shall be incorporated in the
countertrade agreements/contracts to be entered into by the foreign supplier or its
Countertrader:
a) The level of countertrade obligations of the foreign supplier or its Countertrader shall be
a minimum of 50% of the contract price for said importation/procurement.
b) The countertrade obligations must be carried out and fulfilled by the foreign supplier or
its Countertrader not later than three years (with a grace period of two years) from the
date of execution of the countertrade contract or agreement.
c) Penalties for non-performance of countertrade obligations shall be imposed on the

foreign supplier or its Countertrader ranging from 5% - 100% of the unfulfilled
countertrade obligations payable to PITC.
d) Performance or bank guarantees to secure payment of the penalties for non-fulfillment of

countertrade obligations, in the form and manner acceptable to PITC, shall be submitted
to PITC by the foreign supplier or Countertrader no later than thirty (30) days from the
execution of the countertrade agreement.
The laws of the Philippines shall be the governing law of all countertrade
contracts/agreements entered into pursuant to these rules.
8.0 COUNTERTRADE MONITORING AND CREDITING PROCEDURES
8.1 PITC shall institute and maintain monitoring and crediting procedures and rules to ascertain
that countertrade obligations are performed in accordance with these rules and to credit the
foreign supplier or its Countertrader for due performance thereunder, on a per transaction
basis. In this regard, PITC is likewise authorized to impose and collect monitoring fees to
meet costs for the management and operation of countertrade.
8.2 The foreign supplier or its Countertrader shall be required to submit certified true copies of
supporting documents as may be required by PITC as evidence of each countertrade
transaction undertaken, including but not limited to, the following:
a) Sales/export contracts and Commercial invoices;
b) Bills of Lading or similar transport documents;
c) Letters of Credit opened to Philippine manufacturers, contractors, or exporters;
d) Bank certification or similar receipts for payment/funds issued by a Philippine-based

bank or Philippine beneficiary of a countertrade transaction;
e) Joint Venture or similar contracts/agreements relative to investments or offsets

undertaken in the Philippines and SEC registration of new companies established
pursuant to said arrangements;
f) Certification from the Philippine beneficiary of an offset, buy-back or related transaction

that the said transactions were carried out fully by the foreign supplier or Countertrader;
g) Such other documents as may be required by PITC.
8.3 Failure to present required documents shall serve as sufficient basis to withhold or deny
crediting any transaction against the countertrade obligations of the foreign supplier or the
Countertrader.
8.4 The foreign supplier or its Countertrader shall be duly credited for performance of its
countertrade/offset obligations on the basis of the following:
a) For Counterpurchase -- the FOB Invoice Value of each transaction; or 95% of the CIF
Invoice Value if the CIF value is used; Provided that in either case, the local content
value is at least 51%.
b) For Philippine Services -- the labor/manpower costs for such services, excluding the
costs of equipment or materials used, as appearing in the invoice/contract.
c) For Offsets and related transactions -- the value of the investments, technology, grants,
research, training, and related activities (as listed in Annex “B” hereof) introduced by
the foreign supplier or its Countertrader as certified to by the direct Philippine
beneficiary thereof, inclusive of the multipliers granted, if any, for said transactions.
d) For Buy-Back and Debt-for-Goods/Services -- the FOB invoice value (or 95% of CIF
value) of the products or goods exported as a result of the buy-back or Debt for Goods,
inclusive of the multipliers granted, if any, for such transactions, as certified to by the
Philippine beneficiary of the plant or equipment (for buy-back) or the Philippine debtor
(for Debt-for-Goods).
8.5 Multipliers ranging from 2x to 5x shall be imputed to the value of certain desired activities
undertaken by the foreign supplier or its Countertrader in the final crediting of its
countertrade/offset obligations. The final multiplier to be used for a particular transaction shall
be agreed to by PITC and the foreign supplier or its Countertrader prior to undertaking said
transaction.
9.0 ACCREDITATION OF PHILIPPINE MANUFACTURERS/

EXPORTERS
PITC shall accredited Philippine manufacturers/exporters and contractors nationwide who may wish
to participate in countertrade transactions as suppliers of the Philippine products or services.
10.0 REPORTORIAL REQUIREMENTS AND REVIEW
10.1 The foreign supplier or its Countertrader shall submit quarterly and annual reports to PITC on
the progress of their countertrade performance with a summary of transactions undertaken
pursuant thereto.
10.2 PITC and the foreign supplier or its Countertrader shall hold midyear and yearly countertrade
performance reviews.
10.3 PITC shall submit to the Department of Trade and Industry and the government procuring
agency concerned a semi-annual status reports on the countertrade programs undertaken
hereunder.
11.0 IMPLEMENTING GUIDELINES/CIRCULARS
PITC is hereby authorized to issue such circulars and guidelines as may be necessary to implement
and administer these rules and regulations, including those intended to clarify or interpret the
provisions hereof.
12.0 ADJUDICATION
12.1 Any dispute arising from the implementation of these rules shall be referred to PITC for initial
settlement/action. Should any of the parties concerned not be satisfied with the action/decision
of PITC, the matter may be referred to the Secretary of Trade and Industry for decision.
12.2 Where the dispute involves the countertrade contract/agreement itself, and a party thereto is
not satisfied with the decision of the Department of Trade and Industry, it may bring the same
for arbitration in accordance with the arbitration rules and procedures adopted by the parties
as contained in the countertrade contract/agreement.
13.0 SEPARABILITY CLAUSE
If any provisions/sections of these rules should be declared invalid by a competent court of

tribunal, the remaining provisions hereof, unaffected thereby, shall remain valid and binding.
14.0 RESPONSIBILITY/SANCTIONS
14.1 Compliance with these rules shall be a condition sine qua non for importations of all
departments, bureaus, agencies, instrumentalities and offices of the National Government
including government-owned and controlled corporations. The heads of all government
departments, agencies, bureaus, offices and government-owned and controlled corporations
shall ensure strict compliance of these rules and any violations hereof shall be dealt with in
accordance with existing laws and regulations.
15.0 EFFECTIVITY
These rules and regulations shall take effect 30 days after its publication in two (2) newspapers of
general circulation.
Done in Makati, Metro Manila, Philippines on 14 November 1994.
(signed) (signed)
ROBERTO F. DE OCAMPO RIZALINO S. NAVARRO
Department of Finance Department of Trade and Industry
(signed) (signed)
CIELITO F. HABITO JOSE LUIS U. YULO, JR.
National Economic and Philippine International Trading Corporation
Development Authority
Annex “A”
OFFSETS
The following projects/activities in the Offset category, whether directly related (Direct Offsets) or not
related (Indirect Offsets) to the original importation/purchase of foreign equipment, machineries,
products, technology and services by the Philippine government, include, but shall not be limited to any
of the following:
1. Foreign direct investment in the local industries engaged in the manufacture of equipment,
machinery, spare parts or components for the export market.
2. Technology transfer and/or skills training resulting in the (a) capability to locally manufacture,
manage, design and/or produce the imported equipment, machinery, spare parts or components; (b)
ability to provide required local logistic and maintenance support of an imported machinery or
equipment.
3. Assistance in research and development activities which will enhance or improve the industrial,
technological, or scientific capabilities of the Philippines.
4. Assistance in opening up or diversifying foreign markets for the utilization of Philippine services.
5. Investments in Philippine industries covered by the Investment Priorities Plan of the Board of
Investment (BOI) and other eligible projects as may be prescribed/identified by the government
from time to time.
6. Donations or grants in educational, scientific, technological and related research and development
programs, public or private, which will enhance Philippine industrial/export competitiveness and
address environmental concerns in support of sustainable development.
7. Introduction or development of environmental projects in support of sustainable growth for the

Philippines.
8. Other transactions or activities similar to the above which will further enhance Philippine economic
or industrial interests and improve the country’s international balance of payments, as may be
approved by PITC.
Annex “B”
BUY – BACK ARRANGEMENTS
The following forms/variations of buy–back arrangements may be considered under these rules on a case-
to-case basis:
1. Arrangement whereby the importation / purchase of equipment, machinery or technology is repaid

with the resultant product.
2. Arrangement whereby the importation/purchase of equipment, machinery or technology is repaid

with non-resultant but related products supplied by either the same importing
company/agency/office or by another business enterprise in the same industry sector.

with unrelated products which are supplied by either the importing company/agency/office and/or
another business enterprise in another industry sector.

with a mixture of resultant and non-resultant products by the importing company/agency/office
and/or another business enterprise.
5. Arrangement whereby the foreign supplier of equipment or machinery is different from the foreign
supplier of the technology; in which case, the foreign supplier of the equipment or machinery shall
be the one to be linked with the buy-back commitment and the said supplier can also switch the
obligation to buy-back the resultant products to a third party, which can be a trading company or
another end-user.
CHAPTER III
COUNTERTRADE INTEGRATION IN THE FOREIGN PROCUREMENT PROCESS
Under existing Philippine laws on government procurement, particularly, Republic Act No. 9184 and its
IRR-A, all conditions, terms and requirements to be imposed on and complied with by government
suppliers to enable them to apply for eligibility and to bid for government contracts must be clearly stated
in the Bid Documents. For Non-bidded contracts, similar minimum requirements must be set by the
procuring government office for suppliers who wish to supply the said government office with goods or
services.
Inasmuch as countertrade is a condition and requirement to be imposed on a government supplier of

foreign goods or services, such condition or requirement must be contained either in the Bid Documents
(for bidded procurements) or in the sales/supply terms (for non-bidded procurements).
A. Open Competitive Bidding & Limited Source Bidding
1. Eligibility Requirements: Countertrade Undertaking Form
a) The Countertrade Undertaking Form per the format attached hereto as Annex “A” shall
be included as one of the eligibility form/document to be accomplished and submitted by
bidders applying for eligibility. Said form shall be considered as one of eligibility
documents to be submitted pursuant Section 23 of the Implementing Rules and
Regulations-A (IRR-A) of R.A. 9184 and shall be included in the Eligibility Envelope to
be submitted by all bidders. It shall contain the countertrade level of commitment of said
bidders as well as their commitment to sign a Countertrade Agreement with Philippine
International Trading Corporation (PITC) within 90 days from signing of the Supply
Contract with the Department.
b) Failure or refusal to accomplish and submit the Countertrade Undertaking Form shall be
sufficient basis for an applicant to be declared "ineligible" to participate in the bidding.
2. Signing of the Countertrade Agreement:
a) Within 90 days from the signing of the Supply Contract between the procuring
government office and the winning SUPPLIER, the latter shall proceed to negotiate and
sign a Countertrade Agreement with PITC in accordance with the provisions of the IRR
of E.O. 120 s. 1993.
b) Failure on the part of the winning supplier to sign a Countertrade Agreement with PITC
as herein required shall entitle the procuring government office to disqualify the winning
bidder from participating or submitting tenders for future procurements, without
prejudice to the right of the procuring government office to enforce such other penalties
and sanctions on said winning bidder as stipulated in the procurement contract or as
warranted under the circumstances.
B. Other Alternative Modes of Procurement
1. Conditions of Purchase/Sale: The countertrade requirement outlined in (A) above shall

likewise apply to covered government foreign procurements conducted under Other
Alternative Modes of Procurement as provided for under RA 9184 and its IRR and other
related laws, rules and regulations. As such, the countertrade requirement shall be integrated
in the pertinent terms of sale/supply issued by the procuring government office to the selected
foreign supplier.
2. Countertrade provision in the Supply Contract: To ensure that foreign suppliers or their
representatives in the Philippines are committed to perform countertrade, the following
provision on countertrade shall be included in the Supply Contract:
“Countertrade. Pursuant to the provisions of Executive Order No. 120 s. 1993 and its
implementing rules and regulations on the adoption of countertrade in government
foreign procurements, the Supplier binds itself to undertake countertrade arrangements
equivalent to at least 50% of the value of the supply contract (or the imported value of
the supply contract, as applicable) to be carried our in accordance with the terms and
conditions of the Countertrade Agreement to be signed between the Supplier and
Philippine International Trading Corporation (PITC), the government implementing
agency for countertrade. The said Countertrade Agreement shall be signed within
ninety (90) days from the signing of this Supply Contract.”
3. Signing of the Countertrade Agreement:
Within 90 days from the signing of the Supply Contract between the procuring government
office and the winning SUPPLIER, the latter shall proceed to negotiate and sign a
Countertrade Agreement with PITC in accordance with the provisions of the IRR of E.O. 120
s. 1993.
Flow chart showing the integration of countertrade in the procurement process:
COUNTERTRADE FLOW
start
Agency’s Bids & Awards Committee (BAC) integrates

Countertrade requirements in the Bid Documents
Supplier meets with PITC to discuss procedures & requirements

for implementation of Countertrade including Offsets.
Supplier signs and submits Countertrade Undertaking as part of

bid requirements of Agency
Agency conducts Public Bidding
If No Public Public
Bidding Bidding
Supplier and Agency sign the Supply Contract
Within (90) days from the effectivity of the

Supply Contract, PITC and Supplier enter
into a Countertrade/Offset Agreement
PITC and Supplier carry out the

terms of the Countertrade/Offset
Agreement
PITC provides the Agency with

performance update of countertrade
end
Annex “A”
SAMPLE TEXT OF AN
UNDERTAKING TO PURSUE COUNTERTRADE
RELATIVE TO THE SUPPLY OF
(name of project)
(cite type of importation)
Pursuant to E.O. 120 s. 1993 relative to the adoption of COUNTERTRADE in government
procurement, and in order to assist in the economic progress of the Philippines, the undersigned bidder
hereby commits that should it be awarded the Supply Contract for the above-cited project by (Name of
Importing Government Office) it shall, directly or through a nominated third party, undertake
countertrade arrangements equivalent to ______% (not less than fifty percent (50%) of the value of the
total Contract Price of the Supply Contract, said countertrade arrangements to be concluded in writing
between the undersigned bidder and Philippine Government – within ninety (90) days from the signing of
the said Supply Contract.
Failure on the part of the undersigned bidder to comply with this Undertaking shall entitle (Name of
Importing Government Office) to rescind/cancel the Supply Contract and award the same to another party
and/or disqualify the undersigned from participating in future supply contracts with the said office
without liability on the part of the latter.
This Undertaking shall form part and parcel of the undersigned’s bid tender for the above project.
Issued this ______ day of ________ in ____________, Philippines.
________________________ __________________________
Name of Company Name of Representative
(Supplier/Bidder) Title:
__________________________
Signature
CHAPTER IV
COUNTERTRADE MILESTONES in the PHILIPPINES
Since its inception in 1989, the Countertrade Program has played a vital role in the foreign procurement
of various government agencies including government-owned and controlled corporations. From the
period of 1989 to October, 2004 over US$358 million worth of trade (exports), investments, debt for
goods and other offset activities have been generated. Moreover, US$189 million worth of countertrade
obligations have been committed by various suppliers and are undergoing implementation.
DoE/NPC
DoF/DILG
PCG/DOT C 0.79%
0.41%
3.17%
PNP DEBT FOR GOODS

4.92% ARRANGEMENT
11.27%
NFA
AFP
39.31%
40.13%
The pie chart of shows the Summary of Completed Countertrade Transactions by

Agency contribution.
Armed Forces of the Philippines
The Armed Forces of the Philippines (AFP), is the first government agency to adopt countertrade in its
foreign procurement, has been instrumental in generating US$144 million worth of completed
countertrade arrangements most of which have directly benefited the export and defense sectors. This
value represents 40% (the biggest share) of all completed transactions among all government agencies
which have adopted countertrade.
To further strengthen the adoption of countertrade in the Asp’s foreign procurement, former Secretary of
Defense Angelo T. Reyes signed last 20 July 2001 AFP Department Circular No. 4. It prescribed the
guidelines in the implementation of countertrade for procurement contracts under the Armed Forces of
the Philippines Modernization Program. Among the salient features of the department circular was the
setting of the minimum countertrade level of commitment depending on the range of value of the supply
contract. Please refer to Appendix “E”.
Another feature of the AFP’s adoption of countertrade is the emphasis on defense related offset as its
priority over other forms of countertrade.
It is anticipated that more countertrade transactions will be generated as the AFP implements its
modernization program.
National Food Authority
Although the National Food Authority (NFA) started to adopt countertrade in its rice importation as a
matter of policy only in 2002, it ranks as the second largest agency with completed countertrade
transactions valued at US$140 million. This amount represents 39% of all completed transactions of all
government agencies. It is worth mentioning that majority of the completed counter-exports have been
agricultural products thereby benefiting the local agriculture sector.
Philippine National Police
Since 1996, the Philippine National Police (PNP) has adopted countertrade in its foreign procurement of
patrol cars and motorcycles, hand pistols, communication and other related equipment. To date,
completed countertrade transactions on all PNP procurement has contributed US $18 million or 5% of the
total amount of all countertrade transactions.
Inclusion of countertrade in PNP procurement was further strengthened by the signing of a Memorandum
of Agreement on Countertrade between PITC and the PNP represented by former PNP Chief Leandro R.
Mendoza last 04 May 2001.
Department of Interior & Local Government
In 14 January 2001, a Memorandum of Agreement on Countertrade between PITC and the Department
of Interior & Local Government (DILG) was signed by former DILG Secretary Jose D. Lina, Jr. DILG
Memorandum Circular No. 2002-05 dated 16 January 2002 was subsequently issued. The Circular
prescribed the adoption and integration of countertrade in the foreign procurement for all of the DILG
and its attached offices.
Todate, procurement of Fire trucks from Hyundai contributed US$1 million worth of countertrade
transactions.
Philippine Coast Guard /

Department of Transportation & Communication
The PCG/DOTC procurement of Australian Search and Rescue Vessels (Phase I) from Tenix Corporation
resulted in US$11 million worth of counter exports.
A summary of all Philippine government procurement with completed countertrade transactions from
1989 to 2004 and the benefits derived from the adoption of countertrade is hereinafter provided.
SUMMARY OF COMPLETED TRANSACTIONS
ARMED FORCES OF THE PHILIPPINES
Countertrade Value of
Foreign Supplier/ Equipment Commitment Products Exported/ Countertrade Total Amount Destination/
Contract Date Procured (in % & equivalent Offset Activities Transaction (US$) Beneficiary
amount in US$) (US$)
HARRIS CORP. Communication 100% ●Semi-processed Rubber 1,326,225.60 1,561,917.80 Germany, Italy, South
(USA) Equipment Africa, Czech Rep.,
CT*: Raiffeisen 1,525,521.60 New Zealand
Centrobank AG, Austria ●Assorted Bags 217,872.20 Japan, Ireland, USA
Feb. 2004 ●Desiccated Coconut 17,820.00 Germany
HARRIS CORP. Manpack 100% ●Software Upgrade 7,056,720.00 8,492,856.00 AFP
(USA) Communication ●Rechargeable Batteries 653,184.00
Dec. 2003 6,102,086.40 ●Spare Modules 542,952.00
●UFT-5800 Automated Test Set 240,000.00
FN HERSTAL S.A. Squad Automatic 100% ●Audit Inspection of the GA Facilities 225,000.00 326,250.00 AFP, Phil. Army &
(Belgium) Weapon ●Post Audit Report 60,000.00 Government Arsenal (GA)
June 2003 (SAW) 319,153.18 ●Minimi SAW Session 41,250.00
GREEK POWDER Ammunition 100% ●Semi -processed Rubber 483,638.40 760,733.40 New Zealand, Germany
(Greece) ●Desiccated Coconut 277,095.00 Italy & Czech Rep.
CT: Raiffeisen 760,000.00 Egypt, Germany &
Centrobank AG, Austria France
June 2003
*CT-Countertrader

FN HERSTAL S.A. Squad Automatic 85% ●Semi-processed Rubber 1,808,534.68 1,808,534.68 Australia, New Zealand
(Belgium) Weapons Germany, Italy &
CT: Raiffeisen (SAW) 1,808,534.68 Czech Rep.
Centrobank AG, Austria
Feb. 2003
SNC-LAVALIN INC. Aerial Rockets 100% ●Legal, Taxation & Accounting 772,835.35 1,630,712.78 Philippines
(Canada) Permits & Registration
1,590,000.00 ●Engineering & Environmental 501,418.45
Sept. 2000 Consultancy
●Community Relations &
Relocation Consultancy 135,753.63
●Public Relations 103,794.45
●Transportation Planning 65,972.36
●Project Monitoring Staff Office 28,152.33
●Rental & Staff Services 22,786.21
HANWHA CORP. Rockets 50% ●Garments 1,249,762.18 1,249,762.18 USA
(Korea)
Dec. 1999 1,249,762.00
GIAT (France) Howitzers 100% ●Copra Expeller Cake/Meal 1,585,697.14 2,649,761.60 The Netherlands
CT: Raiffeisen ●Desiccated Coconut 415,087.00
Centrobank AG , Austria 2,648,465.00 ●Canned Tuna 352,663.76
●Copra Solvent Extraction 228,074.70
Mar. 1996 ●Assorted Phil. Handicrafts 68,239.00
AGUSTA SPA Trainer Jets 60% ●Marine Products ( tako-yaki, 3,841,649.40 30,600,000.00 Italy
(Italy) canned baby clams, frozen boiled
CT: Itochu Corp., Japan 30,600,000.00 scallops, squid)
●Low Color Coconut Oil 1,963,760.25 South Africa
Aug. 1993 ●Carageenan 117,800.00 Italy
Offset Component
●Rehabilitation of New Leyte Edible 16,000,000.00 Philippines
Oil Manufacturing Co.
●Investment in Kinshi Phil. Corp. 8,426,790.35
●Investment in Phil. Strategic
Investment Holdings 250,000.00
GKN SANKEY Armored Personnel 100% ●Coconut Oil 15,988,397.72 65,722,539.42 USA, Netherlands
(UK) Carriers ●Copper Cathodes 15,958,705.45 Singapore, China
CT: Metallgesellschaft 62,000,000.00 ●Garments 7,821,205.75 Austria, Germany
Services Ltd., UK ●Cordless Phones 5,896,093.95 USA, Netherlands
●Fresh Frozen Shrimps 5,214,546.18 Japan
Jan. 1993 ●Philacid 3,539,267.74 France, Netherlands
●Radar Detectors 1,612,735.20 USA, Netherlands
●Steel Sheets 1,500,922.21 Indonesia
●OPP Pressure Tape 798,462.08 USA, Netherlands
●Pyrite Concentrates 661,495.89 China, Indonesia, Vietnam
Offset Component
●Investment in Temic Phil. 6,582,461.52 Philippines
●Shipping Services 132,821.19
●Environmental Cooperation 15,424.54

AGUSTA SPA Trainer Jets 40% ●Crude Coconut Oil 20,161,737.13 28,888,722.49 South Africa
(Italy) ●Garments/Fabric 3,875,454.46 Italy
CT: Intersomer, Italy 29,000,000.00 ●Copra Cake 1,910,358.91 -do-
●Copra Solvent 1,114,782.71 -do-
Oct. 1989 ●Copra Expeller Cake 923,328.23 -do-
●Copra Solvent Extraction 217,875.00 -do-
●Various Porcelain 215,937.29 -do-
●Black Tiger Prawns 184,579.56 -do-
●Activated Coco Carbon 177,569.20 -do-
●Various Handicraft 107,100.00 -do-
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS OF AFP US$ 143,691,790.35

PHILIPPINE NATIONAL POLICE
FABRICA D'ARMI Hand Pistols 50% ●Various Phil. Products 571,518.43 907,666.80 Kuwait, Japan, Spain
PIETRO BERETTA (9 mm) Singapore, South Africa
(Italy) 907,666.80 Hongkong, Abu Dhabi
CT: PITC ●Furniture 319,423.62 Australia
Jan. 2003 ●Cavendish Banana 16,724.75 Japan
TOYOTA MOTORS Patrol Cars 50% ●Toyota Motor Parts 387,852.00 387,852.00 Thailand
PHILS. INC.
Mar. 2003 387,852.00
MOTOROLA (USA) Communication 50% ●Integrated Circuit 1,750,000.00 1,750,000.00 USA
June 1999 Equipment 1,750,000.00
FABRICA D'ARMI Pistols 100% ●NPK Fertilizer 7,116,500.00 7,234,062.61 Vietnam
PIETRO BERETTA ●Various Garments 66,396.00 UAE & Kuwait
(Italy) 7,233,821.40 ●Various Food Products 47,025.61 -do-
CT: PITC ●Rattan & Bamboo Products 4,141.00 South Africa
Nov. 1998
PHILIP HARRIS Scene of Crime 50% ●Tobacco Strips/Stems 226,337.73 492,857.10 Austria
(UK) Equipment ●New Tubular Woven PP Bags 129,017.18 Italy
CT: Raiffeisen 492,857.10 ●Desiccated Coconut 77,603.23 Germany
Centrobank AG, Austria ●Canned Tuna 57,788.49 The Netherlands
Sept. 1997 ●Sinamay Box 2,110.47 Austria

FABRICA D'ARMI Pistols 100% ●Desiccated Coconut 744,242.00 1,627,421.35 Norway, Germany
PIETRO BERETTA ●Virginia Tobacco Strips/Stems 448,272.00 Austria
(Italy) 1,627,415.18 ●Canned Tuna 176,339.00 Netherlands
●Assorted Handbags 75,484.50 Japan
CT: PITC ●Assorted Handbags 70,188.00 Spain
●Metal Vase, etc. 30,531.00 Austria
Sept. 1997 ●Assorted Handbags 29,830.00 Australia
●Handbags 27,251.05 USA
●Christmas Decors 13,780.00 Austria
●Jute Bags (Asstd. Colors) 11,503.80 France, Hongkong, Spain
KAWASAKI Motorcycles 100% Investment in the expansion and 1,805,448.86 Philippines
(Japan) modernization of existing plant 1,805,448.86
2,015,942.29 Four major areas/components of
Feb. 1997 the investment:
●New Painting Shop
●Assembly Line
●Extension of existing line
●Construction of additional
assembly lines
HORNET LTD. (Israel) Pistols 100% ●Tobacco Strip 504,306.00 845,808.91 Austria
CT: Raiffeisen Centro- ●Assorted Handbags 255,745.56 Japan
bank AG, Austria 838,031.92 ●Canned Tuna 48,153.60 Netherlands
Dec. 1996 ●Jute Bags 37,603.75 USA
FABRICA D'ARMI Pistols 100% ●Virginia Tobacco Strips/Stems 349,470.00 838,031.92 Austria
PIETRO BERETTA ●Desiccated Coconut 166,860.00 Germany
(Italy) 838,031.92 ●Canned Tuna 103,369.50 Netherlands
CT: Raiffeisen ●New Tubular Woven PP Bags 69,329.69 Italy
Centrobank AG, Austria ●Various Handicrafts 50,310.00 Austria
●Lamp, Vase, Jar, Goblet, Bowl 40,872.00 -do-
Dec. 1996 ●Hand-woven Bags 31,394.62 Japan, Spain
●Assorted Handbags 26,426.11 Spain, France
EUROCOPTER Helicopters 70% Offset Component 1,737,661.91
(France) ●5% Offset ●Helicopter Maintenance 123,120.00 Philippines
Offset: Eurocopter 123,700.00 Training & Skills Upgrade
●65% Counter- Counterpurchase Component
CT: Greficomix Int'l., purchase ●Furniture 816,763.35 Australia, Malaysia
France 1,600,000.00 Japan & Spain
●Garments 432,114.43 UAE
Oct. 1996 1,723,700.00 ●Gifts & Housewares 200,212.22 USA, Denmark, Japan
Netherlands & Singapore
●Footwear and Accessories 140,140.91 UAE
●Lace 25,311.00 Brazil
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS OF PNP US$ 17,626,811.46

NATIONAL FOOD AUTHORITY
Foreign Supplier/ Commodity Commitment Products Exported/ Countertrade Total Amount Destination/
DAEWOO INT'L CORP. Rice 50% ●Mixed Xylene 1,586,000.00 1,586,000.00 Korea
(Korea)
July 2004 1,586,000.00
VIETNAM SOUTHERN Rice 50% ●NPK/DAP Fertilizer 17,473,143.60 18,269,012.54 Vietnam
FOOD CORP. ●Portland Cement Clinker 496,615.33 -do-
(VINAFOOD) 18,257,812.50 ●Grinding Wheel 192,511.30 -do-
(Vietnam) ●Wire 92,829.19 -do-
Apr. 2003 ●Corrugated Paper 9,507.19 -do-
●PVC Tubes 4,405.93 -do-
CHAI YAPORN RICE Rice 51% ●Copper Cathodes 2,650,725.00 2,650,725.00 China & Korea
CO., LTD. (Thailand)
Mar. 2003 2,650,725.00
MALAYSIA INT'L. Rice 50% ●Mixed Xylene 2,543,750.00 2,543,750.00 China
TRADING. CORP. SND.
BHD. (Malaysia) 2,543,750.00
Mar. 2003
VINAFOOD Rice 50% ●Naphtha 9,320,621.44 14,643,974.15 Singapore
(Vietnam) ●Crude Coconut Oil 3,946,377.20 Vietnam
14,310,000.00 ●Low Color Coconut Oil 715,648.52 -do-
Sept. 2002 ●Cohin Coconut Oil 661,326.99 -do-
DEPT. OF FOREIGN Rice 50% ●Naphtha 6,964,498.31 8,147,412.09 Japan
TRADE OF THE GOV'T. ●Low Color Coconut Oil 699,104.38 -do-
OF THAILAND (DFT) 8,098,875.00 ●Cochin Coconut Oil 483,809.40 Singapore
CT: Itochu Corp., Japan
Sept. 2002
CHINA NATIONAL Rice 50% ●Cochin Coconut Oil 1,013,853.46 2,674,611.52 Japan
CEREALS, OILS & ●Crude Coconut Oil 928,365.97 -do-
FOODSTUFFS IMPORT 2,608,750.00 ●Low Color Coconut Oil 732,392.09 Malaysia
& EXPORT CORP.
(COFCO)
CT: Itochu Corp., Japan
Sept. 2002
VINAFOOD Rice 50% ●Naphtha 8,134,410.32 14,006,511.81 Singapore
(Vietnam) ●NPK Fertilizer 3,294,849.20 Vietnam
13,837,500.00 ●Unglazed Newsprint 1,918,252.29 -do-
July 2002 ●Copra Expeller Cake/Meal 580,000.00 -do-
●Ammonium Sulfate 79,000.00 -do-
PROJECTS & EQUIP. Rice 50% ●Naphtha 3,647,975.34 7,941,758.69 Singapore
CORP. LTD. OF ●Low Color Coconut Oil 1,814,920.53 Japan, Malaysia
INDIA (PEC LTD) 7,937,500.00 ●Crude Coconut Oil 1,437,041.30 Japan
(India) ●Copra Expeller 558,000.00 -do-
July 2002 ●Cochin Coconut Oil 483,821.52 Singapore

PEC LTD. Rice 50% ●Copra Solvent Extraction Pellets 7,000,384.04 19,298,773.08 Korea
(India) ●NPK Fertilizer 6,741,642.64 -do-
June 2002 18,844,558.00 ●Phosphoric Acid Solution 5,556,746.40 -do-
PEC LTD. (India) Rice 50% ●Copper Cathodes 26,061,777.00 26,061,777.00 Korea, Thailand,
CT: Glencore Fareast China
April 2002 26,062,050.00
DFT (Thailand) Rice 50% ●Naphtha 6,129,000.00 6,129,000.00 Singapore
April 2002 6,129,000.00
DFT (Thailand) Rice 50% ●Naphtha 6,128,825.00 6,128,825.00 Singapore
CT: Itochu Corp.
April 2002 6,128,825.00
VINAFOOD (Vietnam) Rice 50% ●NPK Fertilizer 4,672,875.00 4,672,875.00 Vietnam
April 2002 4,672,875.00
TRADING CORP. Rice 50% ●Naphtha 2,362,242.35 2,362,242.35 Singapore
OF PAKISTAN
CT: Itochu Corp. 2,096,512.50
April 2002
VINAFOOD (Vietnam) Rice 50% ●NPK Fertilizer 3,199,775.80 3,630,000.00 Vietnam
Mar. 2002 3,630,000.00 ●Grinding Wheels 430,224.20 -do-
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS OF NFA US$ 140,747,248.23
OTHER AGENCIES
BUREAU OF FIRE / DEPT. OF INTERIOR AND LOCAL GOVERNMENT
HYUNDAI CORP. Fire Trucks 50% ●NPK Fertilizer 1,475,000.00 1,475,000.00 Vietnam
(Korea)
CT: PITC 1,042,440.00
June 1999
DEPT. OF ENERGY/NATIONAL POWER CORP.
PT INDOMINCO Coal 50% Use of Phil. Shipping Co.-Filipinas 2,812,875.00 Freight from Indonesia
MANDIRI Maritime Transport in the Delivery to Philippines
(Indonesia) 2,812,875.00 of Coal to NPC by:
April 2003 1. PT Indominco 2,258,588.50
2. PT Jorong Barutama Geston- 554,286.50
PHIL. COAST GUARD/DEPT. OF TRANSPORTATION & COMMUNICATION
TENIX DEFENCE PTY. Search & Rescue 50% ●Copper Cathode 9,801,000.00 11,338,000.00 China
LTD. (Australia) Vessel ●Food Items & Phil Handicrafts 1,041,109.97 Australia
CT: PITC 11,338,000.00 ●Rattan Furniture 492,360.00 -do-
Mar. 1999 ●Granite Bench/Counter top 3,530.03 -do-
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS OF OTHER AGENCIES US$ 14,150,875.00
TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS US$ 316,216,725.04

DEBT FOR GOODS ARRANGEMENT
RP DEBTOR PARTICULARS AMOUNT OF PRODUCTS EXPORTED AMOUNT TOTAL AMOUNT DESTINATION
DEBT (US$) (US$) (US$)
National Power For the Purchase of 8,850,000.00 ●Crude Coconut Oil 3,448,443.80 8,850,000.00 Romania
Corporation Machinery and ●Garments 3,012,733.12
(NPC) Equipment Under ●Personal Care & Hygiene Products 984,227.16
a Soft Loan ●Tropical Fruit Juices 642,902.40
Package ●Assorted Cigarettes 355,925.00
●Canned Sardines 270,768.52
●Calamansi Nectar 135,000.00
National For the Purchase of 11,500,000.00 ●Copper Cathodes 11,500,000.00 11,500,000.00 China
Electrification Mini-hydro
Administration Equipment
(NEA)
Phil. National Bank Obligation for 20,000,000.00 ●Sugar 11,680,481.07 20,000,000.00 Iraq
(PNB) & Phil. Unfinished Road ●Coconut Oil 7,339,023.57
National Construction Projects in Iraq ●Pharmaceuticals 980,495.36
Corp. (PNCC) Dating Back to 1980
TOTAL OF COMPLETED DEBT FOR GOODS ARRANGEMENTS US$ 40,350,000.00
GRAND TOTAL OF COMPLETED COUNTERTRADE TRANSACTIONS US$ 358,041,725.04

Appendixes
Appendix A

Department of Trade and Industry
Memorandum Circular No. CT-95.1/01
GUIDELINES FOR THE EVALUATION AND APPROVAL

OF OFFSETS ARRANGEMENTS TO BE UNDERTAKEN
PURSUANT TO E.O. 120 AND ITS
IMPLEMENTING RULES AND REGULATIONS
A. INTRODUCTION
These guidelines are promulgated pursuant to the provisions of E.O. 120 dated August 19, 1993 and
its Implementing Rules and Regulations (IRR) signed on November 14, 1994, directing the
adoption of countertrade as a supplemental tool with respect to the importation or procurement of
foreign capital equipment, machinery, products, goods and services of the National Government, its
departments, bureaus, agencies and offices including government owned and controlled
corporations.
These guidelines shall govern the evaluation, review, approval and implementation of OFFSET
arrangements to be undertaken pursuant to E.O. 120 and its Implementing Rules and Regulations.
B. OBJECTIVES OF OFFSETS
Offsets in its various forms are generally intended to enhance the industrialization and technological
development of the country by encouraging investments, technology transfers, research and
development and related activities that would provide the appropriate environment and
infrastructure needed to assist Philippine companies in achieving global product competitiveness
and/or to correct imbalances in foreign exchange flows.
C. ELIGIBLE OFFSETS
As cited in Annex “A” of the IRR to E.O. 120, offsets may be Direct or Indirect. When the offsets
to be undertaken is directly related to the capital equipment, machinery, goods or services imported
by the Philippine government, the same is considered DIRECT. Otherwise, they are considered
INDIRECT. Subject to the provisions of E.O. 120 and its IRR, the following are eligible categories
of offset activities, to wit:
C.1 FOREIGN INVESTMENTS:
C.1.1 Definition
“Foreign Investments” – as defined E.O. 226 otherwise known as the “Omnibus

Investment Code of 1987”, shall mean equity investments owned by a non-Philippine
national (in a Philippine enterprise), made in the form of foreign exchange or other
assets actually transferred to the Philippines and registered with the Bangko Sentral Ng
Pilipinas (BSP) and the Board of Investments (BOI), which shall assess and appraise
the value of such assets other than foreign exchange.
C.1.2. Classes
Foreign investments include original and additional investments. These may be in the
form of cash or assets/properties.
C.1.3 Exclusions
The following are excluded and shall not be considered as foreign investments within
the framework of these guidelines: (i) the receipt of stock dividends by all the
stockholders of a new corporation on a pro-rata basis; (ii) ownership of bonds
including income bonds, debentures, notes or other evidences of indebtedness; or (iii)
purchase of stock options or stock warrants until the holder exercises the option and
actually acquires stock from the corporation.
C.1.4 Eligible Areas for Foreign Investments
The following Philippine enterprises may be the beneficiaries of foreign investments,

whether in cash or assets/property, under these guidelines:
a) Pioneer Enterprises: Pioneer Enterprises expressly defined and enumerated in E.O.

226 and the current Investment Priorities Plan (IPP) of the BOI are eligible for
investments hereunder.
b) Non-Pioneer Enterprises: Non-Pioneer Enterprises expressly defined and

enumerated in E.O. 226 and the current IPP of the BOI are eligible for investments
hereunder.
c) Investments in areas/activities not listed above or specifically identified in the IPP

may be considered only on a case-to-case basis subject to such guidelines as may
be determined by PITC.
C.1.5 Requirements for Eligibility as Offsets
a) Investments must come from a foreign-based institution or entity;
b) If the investments are made in the form of cash, the funds must not be sourced or
borrowed from the local Philippine banking system but from overseas;
c) Where the investments are made in the form of personal property (other than cash),
the same must be brand-new unless otherwise approved by PITC in writing;
d) The investment, duly evidenced by stock certificates or similar instruments must

not be withdrawn, transferred or assigned to another firm or entity by the original
investor within five (5) years from date of investment except with the prior express
written approval of PITC and the Philippine beneficiary thereof. An Undertaking
to this effect shall be executed by the original investor upon approval of the
investment proposal by PITC; and
e) The investment must comply with the requirements/provisions of E.O. 226 and the
current IPP, including the ownership requirements for registered enterprises.
C.2 TECHNOLOGY TRANSFER
C.2.1 Definition
“Technology Transfer” is the transfer to a Philippine firm, agency, or institution of

specialized technical knowledge related to processes or products which are not
otherwise available in the Philippine on normal commercial terms.
C.2.2 Eligible Technology Transfer Arrangements
The forms of technology transfer of propriety, non-propriety and intellectual property

or information which are eligible as offsets under these guidelines include:
a) Patents, formulae, technological rights or processes, licensing or know-how

agreements, technical data packs, software, continuing access to current overseas
expertise or data, more particularly in the areas listed in Annex “A” hereof.
b) Transfer of equipment and resources not available in the Philippines under normal
commercial terms.
c) Other forms of technology transfer defined and/or prescribed by the Department of

Science and Technology (DOST).
a) All technology transfer arrangements must be subject of appropriate written

contracts/documents which are duly registered/approved by the Bureau of Patents,
Trademarks and Technology Transfer;
b) Technology transfer arrangements hereunder must result in the capability of the

Philippine beneficiary to locally manufacture, manage, design, improve and/or
utilize a new product or process, as certified to by the said Philippine beneficiary;
c) The technology or process transferred hereunder must not be normally available in

the Philippines; and
d) Beneficiaries of these arrangements must be Filipinos or Philippine companies

duly licensed or registered in accordance with the laws of the Philippines.
C.3 RESEARCH AND DEVELOPMENT
C.3.1 Thrusts of Research and Development
To be eligible as offsets hereunder, research and development (R & D) activities must

be directed towards the enhancement, improvement, advancement, and/or efficiency of
Philippine industries, products, services, and/or environment.
C.3.2 Eligible Areas for R & D
The areas specified in items C.1.4 above, as eligible for foreign investments under
these guidelines, shall likewise be eligible areas for R & D activities. Other areas for
R & D activities not otherwise specified therein shall be subject to PITC written
approval on case-to-case basis.
a) R & D must be initiated and substantially supported/ financed by a foreign-based

supplier/contractor;
b) R & D must be associated with a scientific or technological activity preferably in

the export sector and falling within the Science and Technology Agenda for
National Development;
c) R & D supplier/contractor must ensure that the results of the R & D are turned over
to and owned by the Philippine beneficiary and if commercially viable, to be
exploited under normal commercial terms for the benefit of the Philippines, such
terms to be incorporated in appropriate contracts/documents to be submitted to
PITC;
d) R & D activities must utilize or be conducted in collaboration with local

(Philippine) firms and institutions including government-owned manufacturing or
research establishments or laboratories; and
e) The R & D must be undertaken in accordance with the guidelines set forth by the
DOST.
C.4 TRAINING AND SKILLS UPGRADE
a) Training and skills upgrade programs must not be available in the Philippines;
b) Training and skills upgrade programs must be initiated and substantially

supported/financed by foreign-based supplier;
c) Training and skills upgrade must assist in the dissemination of scarce, new or
advanced technological or scientific knowledge or processes, particularly in the
areas listed in Annex “A” hereof;
d) Training and skills upgrade must be applicable to the Philippine setting/

environment; and
e) Beneficiaries of the training or skills upgrade program must submit appropriate

post-training/skills upgrade reports to PITC, duly certified by the Head of the
Office concerned.
C.5 DONATIONS/GRANTS
C.5.1 Eligible Areas for Donations/Grants
Donations or grants for educations, scientific, technological, research, social and

environmental development programs/projects including those activities listed in C.1.4
above are eligible as offsets.
C.5.2 Eligible Donations/Grants
Donations or grants may either be in the form of cash or property.
a) Donations or grants should come from foreign-based institutions;
b) If donations/grants are in the form of foreign currency (cash), the same must be
sourced from outside the Philippines and inwardly remitted to the Philippines. If
in the form of property, the same must be appraised, evaluated and approved by the
Philippine beneficiary thereof;
c) Beneficiaries of the donations or grants may either be government or private

institutions (including Non-Governmental Organizations – NGO) duly organized
and existing under the laws of the Philippines;
d) Donations or grants must be made directly to the Philippine beneficiaries thereof;

and
e) Donations or grants shall be duly evidenced by appropriate documents/deeds to be

submitted to PITC together with a Certification from the Philippine beneficiaries
evidencing receipt of the funds or property.
C.6 ENVIRONMENTAL PROJECTS
C.6.1 Definition
“Environmental Projects” – as used herein shall refer to the projects directed towards
the preservation, rehabilitation or development of the country’s ecological balance and
the national use of resource to attain sustainable development as approved/endorsed by
the Department of Environment and Natural Resources (DENR).
C.6.2 Environmental Projects Eligible as Offsets
a) Rehabilitation of degraded natural habitats within national parks or protected areas;
b) Watershed rehabilitation and reforestation activities;
c) Air, water and soil quality management projects including air and water pollution
control projects;
d) Solid and Liquid Waste Disposal/Recycling Projects;
e) Projects pertaining to the introduction or development of renewable energy sources

(i.e. solar energy and wind energy); and
f) Projects analogous to the foregoing as expressly endorsed/approved by the DENR.
a) All environmental project proposals must be duly endorsed/approved for

implementation by the DENR;
b) Said projects must be initiated and funded by foreign-based institutions from
overseas sources;
c) Said project shall be undertaken in close coordination with the DENR and local
authorities of the targeted areas; and
d) Said projects shall be deemed completed/accomplished only after the appropriate

Certification to this effect is issued by the DENR and submitted to PITC.
C.7 OTHERS
Other activities or transactions similar to those previously enumerated above may be eligible
as offsets PROVIDED: that all proposals relative thereto are submitted to PITC for proper
evaluation and approval prior to implementation.
D. VALUATION OF OFFSETS & MULTIPLIERS
D.1 GUIDELINES
a) Eligible offsets shall be valued based on the set criteria herein below established.
b) Basic Multipliers shall be applied to the offset values as incentives for pursuing these
offsets. Certain categories of offsets, when undertaken under certain conditions, will be
granted an Incremental multiplier to be added to the Basic multiplier. These conditions
and their corresponding multipliers are enumerated in Annex “B” and made integral parts
hereof.
To Illustrate: Foreign Investments in Pioneer Enterprises are given a Basic multiplier of

x4. If the investment is made in an enterprise located in a Less Developed Area (LDA) as
identified in the IPP, there is an incremental multiplier of 2 added to the Principal
multiplier.
To Compute: In the case cited above, if the investment is US$20,000, then the
computation of offsets will be as follows:
US$20,000 x (4 +2) = US$120,000
c) In cases where the eligible Offsets falls within two or more categories of offsets, the Basic
multiplier to be applied to such activity shall be HIGHER multiplier without considering
any Incremental multiplier, if applicable.
d) Incremental Multipliers can only be added/applied if there is already a Basic multiplier

provided for a particular offset activity. Where there is no offset activity with a Basic
multiplier, then there can be no Incremental multiplier which can be applied/added.
D.2 CRITERIA FOR VALUATION & APPLICATION OF MULTIPLIERS
The following are the criteria for valuation and application of multipliers for specified offset
activities/projects:
D.2.1 FOREIGN INVESTMENTS:
a) Criteria for Valuation

Foreign investments are valued based on the foreign currency-denominated
capitalization actually put into an eligible enterprise, whether in cash or assets,
original or additional.
b) Basic Multiplier
The Basic Multiplier to be applied to a particular foreign investment shall depend

on whether the same is made in a (i) Pioneer or (ii) Non-Pioneer Enterprise as
defined in these guidelines:
Pioneer (P) : x4
Non-Pioneer (NP): x2
c) Incremental Multipliers may be applied/added to this Offset category per Annex

“B” hereof.
D.2.2 TECHNOLOGY TRANSFER
Technology Transfer arrangements are valued based on the actual US$ (or
equivalent in other foreign currency) costs of the transfer or transaction value.
b) Basic Multiplier
A Basic multiplier of 3x the value of the technology transfer shall be applied.
c) Incremental Multipliers may be applied/added to this offset category per Annex

“B” hereof.
D.2.3 RESEARCH AND DEVELOPMENT
R & D is valued based on the actual US$ (or equivalent in other foreign currency)
costs incurred for the R & D undertaken.
b) Basic Multiplier
A multiplier of 3x the value of the R & D project shall be applied.
c) No Incremental Multiplier shall be applied/added to this offset category.
D.2.4 TRAINING AND SKILLS UPGRADE
The basis for valuation for training and skills upgrade shall be the actual costs of
training/skills upgrade, including travel and living expenses incurred by the
overseas supplier.
b) Basic Multiplier
A multiplier of 3x the actual costs of the training and skills upgrade program shall
be applied.
c) No incremental multiplier shall be added/applied to this offset category.
D.2.5 DONATIONS OR GRANTS
Donations or grants shall be based on the US$ value (or its equivalent in other
foreign currency) of the donation or grant. If in property, the appraised market
value thereof shall be used as basis.
b) Basic Multiplier
A multiplier equivalent to 2x the value of the donation or grant shall be applied.
c) Incremental Multipliers may be applied/added to this offset category as per Annex

“B” hereof.
D.2.6 ENVIRONMENTAL PROJECTS
Environmental projects shall be valued based on the actual US$ (or its equivalent
in other foreign currency) costs of the projects.
b) Basic Multiplier
A multiplier of 3x the value of the project shall be applied.
c) No Incremental multiplier shall be applied/added to this offset category.
D.2.7 OTHERS
The criteria for valuation and multipliers to be applied to other offset

transactions/activities, not expressly provided hereunder shall be provided/decided by
PITC on a case-to-case basis.
E. APPROVAL OF OFFSET PROPOSALS
Pursuant to the provisions of E.O. 120 and its IRR, all offset proposals of foreign suppliers of the
government agencies or offices covered by IRR, shall be submitted to PITC for evaluation and
approval no later than five (5) working days after the selection of the said foreign supplier, unless
the said period is extended by PITC.
F. SUPPLETORY DOCUMENT
The provisions of E.O. 120 and its IRR shall be deemed incorporated and adopted by reference to
this Circular and this Circular shall be considered as a binding supplement to the IRR.
G. EFFECTIVITY
This Circular shall take effect immediately.
Makati, Metro Manila, 10 January 1995.
(signed)
JOSE LUIS U. YULO, JR.
President
ANNEX “A”
ELIGIBLE AREAS FOR TECHNOLOGY TRANSFER & TRAINING/SKILLS UPGRADE

PROGRAMS
1. Archipelagic Geography
• Mariculture
• Aquaculture
• Maritime Industries
2. Natural Resources
• Ecosystem Farming
• Geothermal Technology
• Renewable Energy Technologies
• Jewelry
3. Applied Sciences
• Biotechnology
• Medical/Health Professionals
• Agribusiness
• Management
4. Ethno linguistic and Religious Diversity
• Plural Development Processes
• Tourism
• Cross-cultural Communications
5. Educational Infrastructure
• Soft or Behavioral Technologies
• HRD Tools
• Group Dynamic Techniques
• Computer Software
• Entertainment
6. Population
• Conflict Management
• Community Development Tools
ANNEX “B”
INCREMENTAL MULTIPLIERS
A. Incremental Multipliers (mentioned in Item D.1 (b) of these Guidelines) may be applied/added to
the Basic Multiplier of any of the following offset categories, to wit:
• Foreign Investment
• Technology Transfer
• Donations or Grants
B. The following Incremental Multipliers are applicable only if the offsets listed in (A) above are
undertaken or pursued in any one or more of the preferred areas enumerated below:
Preferred Areas Incremental Multiplier
1) In Export Winners identified Basic Multiplier + 2

in the current IPP or in enterprises
engaged in non-traditional exports,
also specified in the current IPP,
provided that, in either case, at
least 70% of production is for
the export market.
2) In Less Developed Areas (LDA’s) Basic Multiplier + 2

identified in the current IPP
3) In areas outside Metro Manila Basic Multiplier + 1

(other than LDA’s)
4) In rehabilitation, expansion or Basic Multiplier + 1

modernization projects
identified in the current IPP
C. Where the said offsets are undertaken or pursued in more than one of the preferred areas listed in
(B) above, the total multipliers (basic + incremental) to be applied to such offset shall not exceed
6x.
APPENDIX B

AMENDING CERTAIN PROVISIONS OF

MEMORANDUM CIRCULAR NO. CT-95.1/01
ON GUIDELINES FOR EVALUATION AND APPROVAL
OF OFFSET ARRANGEMENTS
UNDERTAKEN PURSUANT TO E.O. 120 AND
ITS IMPLEMENTING RULES AND REGULATIONS
A. INTRODUCTION
This Memorandum Circular is being issued for the purpose of amending certain provisions of
Memorandum Circular No. CT-95.1/01 dated January 10, 1995 (“Circular CT-95.01/01”) entitled
“Guidelines For the Evaluation and Approval of Offsets Arrangements to be Undertaken Pursuant
to E.O. 120 and its Implementing Rules and Regulations”.
B. AMENDMENTS/SUPPLEMENTS
The following are the amendments to Circular CT-95.01/01:
.
B.1 A new provision is inserted at the beginning of Item C (ELIGIBLE OFFSETS), to read as
follows:
“C. ELIGIBLE OFFSETS
All offset activities, regardless of their types/categories, which are to be undertaken pursuant
to E.O. 120 and its Implementing Rules and Regulations must, first and foremost, meet the
test of ‘causality’, as defined hereunder.
Causality – as the term is used herein shall mean that the proposed offset
activities/transactions were initiated by the foreign supplier as a result of a countertrade
obligation/commitment of said foreign supplier pursuant to a particular Supply/Sales Contract
with the Philippine government.
As a general rule, any offset activity/transaction undertaken after the effectivity date of a
Specific Countertrade Agreement between the foreign supplier and PITC is presumed to have
been undertaken as a result of said Specific Countertrade Agreement.
As cited in Annex “A” of the IRR to E.O. 120, offsets may be Direct or Indirect. When the
offset to be undertaken is directly related to the capital equipment, machinery, goods or
services imported by the Philippine government, the same is considered DIRECT. Otherwise,
they are considered INDIRECT.
Subject to the causality provisions hereof and the provisions of E.O. 120 and its IRR, the
following are eligible categories of offset activities, to wit:
x x x x x x x x x
x x x x x x x x x
B.2 No. 4 Item B of Annex “B” of Circular CT-95.01/01 is deleted.
There will no longer be any Incremental Multipliers for rehabilitation, modernization or

expansion projects.
C. INTEGRATED DOCUMENT
From and after effectivity date hereof, all references to Circular CT-95.01/01 shall be deemed to
refer to Circular CT-95.01/01 as amended by this Circular CT-95.4/01. Except as expressly
amended/modified hereby, all terms and provisions set forth in Circular CT-95.1/91 shall remain
unchanged and in full and force and effect and Circular CT-95.01/01 shall, from hereon, be read as
a single integrated document incorporating the amendments/modifications effected hereby.
D. EFFECTIVITY
Makati City, 12 April 1995.
(signed)
President
APPENDIX C

INCLUSION OF COUNTERTRADE UNDERTAKING

OF FOREIGN SUPPLIERS IN BIDDED OR NEGOTIATED
CONTRACTS COVERED BY E.O. 120 (S. 1993) AND ITS
IMPLEMENTING RULES AND REGULATIONS
A. INTRODUCTION
To ensure that “best efforts” are exerted by Government procuring offices to adopt countertrade as a
supplemental trade tool with respect to their procurement/importation of foreign capital equipment,
machinery, products, goods and services as mandated under E.O. 120 dated August 19, 1993 and its
Implementing Rules and Regulations (“IRR”) dated January 10, 1995, the following measures shall
be complied with.
B. INTEGRATION OF A COUNTERTRADE UNDERTAKING/PROVISO IN BID TENDERS

OR RELATED PRODUCT OFFERS OF FOREIGN SUPPLIERS
B.1 It shall be the responsibility of all Government procuring offices, whose foreign procurement
or importations are covered by E.O. 120 and its IRR, to require its foreign suppliers to submit,
together with their bid tender (in case of bidded purchases) or product/sales offer (in case of
negotiated purchases) a written Undertaking to pursue countertrade in the Philippines in the
event that said supplier is awarded the subject contract.
The text of said written Undertaking is hereto attached as Annex “A” and made integral parts
hereof.
B.2 The aforesaid Undertaking shall be signed by the duly authorized representative of the foreign
supplier and shall be submitted to the Government procuring office together with, and at the
time as, the bid tender or product/sales offer for the particular equipment, machinery, product,
goods or services being offered to the government.
B.3 The Government procuring office concerned shall take all necessary steps to integrate the
above-mentioned requirement in its bidding or related procurement procedures for
importations covered by E.O. 120 and its Implementing Rules and Regulations.
To this end, said office shall ensure that its foreign suppliers are duly informed of such a
requirement PRIOR to submission of their respective formal bid or related offers.
B.4 Pursuant to Section 6.3 of the IRR, the Government procuring office shall, in the evaluation of
bid tenders/offers of foreign suppliers, give preference/priority (product specifications, quality
considerations, pricing and related terms being equal) to the foreign supplier offering the most
favorable countertrade arrangement for the Philippines.
B.5 Following Section 6.4 of the IRR, the Government procuring office shall, within five (5)
working days from the selection of their foreign supplier, notify PITC in writing of the details
of the importation/purchase together with the countertrade Undertaking of the selected foreign
supplier.
C. COMPLIANCE
C.1 Compliance of the above-mentioned requirements shall be prima facie proof that “best
efforts” were exerted by the concerned Government procuring office to ensure compliance
with E.O. 120 and its IRR.
C.2 Foreign suppliers who fail or refuse to submit such written Undertaking, as imposed by the
Government procuring office concerned, may be disqualified by said procuring office, at its
sole option/discretion.
D. SUPPLETORY DOCUMENT
This circular shall be considered as a binding supplement to the IRR and shall form integral parts
hereof.
E. EFFECTIVITY
Makati City, April 17, 1995.
(signed)
President
Annex “A”
Text of Countertrade Undertaking
UNDERTAKING/COMMITMENT TO PURSUE COUNTERTRADE ARRANGEMENTS RELATIVE TO THE

SUPPLY OF
________________________________________
(cite type of importation)
Pursuant to the national policy on countertrade as enunciated in E.O. 120 S. 1993 relative to the adoption of countertrade
in government procurement; and in order to assist in the economic progress of the Philippines, the undersigned bidder
hereby commits that should it be awarded the Supply Contract for the above-cited project by the (name of government
office) it shall, directly or through a nominated third party, undertake Countertrade Arrangements such as but not limited
to the export of Philippine products, the usage of Philippine services, offsets, and/or investments and technology
transfers for Philippine industrial development, equivalent to not less that fifty percent (50%) of the total contract price
of the Supply Contract, said Countertrade Arrangements to be concluded in writing between the undersigned (or its duly
designated nominee) and PITC within ninety (90) days from the signing of the Supply Contract.
Failure on the part of the undersigned to comply with this commitment to enter into Countertrade Arrangements (directly
or through its nominee) with PITC within the 90-day period prescribed herein shall entitle the (name of government
office) to rescind/cancel the Supply Contract and award the same to another party and/or disqualify the undersigned
from participating in future supply contracts with this office, without liability on the part of (name of government
office).
This Undertaking/Agreement shall form part and parcel of the undersigned’s bid tender for the above project.
Issued this _________ day of ______________ in ____________, Metro Manila.
________________________ _____________________________
NAME OF COMPANY REPRESENTATIVE
(SUPPLIER/BIDDER) TITLE: ______________________
______________________________
SIGNATURE
APPENDIX D

REVISED GUIDELINES ON BANKING OF

OFFSET CREDITS UNDER E.O. 120 S. 1993
AND ITS IMPLEMENTING RULES AND REGULATIONS
I. INTRODUCTION
In the interest of facilitating investment projects, technology transfer, training, research and other
projects that are deemed vital to the Philippine economy, the banking of offset credits awarded to a
foreign supplier (or its designated countertrader), for offset activities undertaken pursuant to E.O.
120 s. 1993 and its Implementing Rules and Regulations (IRR) shall be allowed subject to the
guidelines prescribed hereunder. Counterpurchase activities are not eligible for banking of credits.
II. DEFINITION OF TERMS
2.1 As used herein, the following terms shall mean as follows:
2.1.1 “Bankable or Eligible Offset Credits” mean the offset credits referred to in Section 3.1.1
hereof.
2.1.2 “Banking Approval Certificate” mean the clearance issued by PITC to a foreign
supplier (or countertrader) to proceed with the implementation of the proposed offset
project.
2.1.3 “Certificate of Banked (Forward) Credits” mean the certification issued by PITC
accrediting completed offset project to be applied against future offset obligations with
the Philippine Government.
2.1.4 “Forward Credits” mean offset credits held by a foreign supplier or its designated
countertrader which are accredited by PITC (as the Philippine Government’s
countertrade crediting office under the IRR) and substantiated by a Certificate/s of
Banked Credits issued by PITC to be used/applied, subject to the conditions
hereinafter outlined, against future offset obligations with the Philippine government.
2.1.5 “Offset Priorities” mean the Offset Priorities listing drawn up by procuring
government departments, agencies or offices as part of their respective development or
modernization programs and/or those investment activities that are contained/listed in
the current Investment Priorities Plan (IPP) of the Board of Investment.
2.1.6 “Offset Credits” mean the value claimed by and awarded to a foreign supplier (or its
designated countertrade) once said foreign supplier or countertrade
discharges/performs the amount of its offset obligation /commitment in accordance
with the Offset Priorities pursuant to E.O. 120 s. 1993 and its IRR or other pertinent
Philippine laws or regulations on countertrade in government procurement.
2.2 Unless otherwise modified by or defined in the next preceding paragraph, the terms used in
this circular shall have the same meaning attributed to them in E.O. 120 s. 1993, its IRR and
pertinent countertrade-related circulars or issuances issued by this office.
III. BANKING OF OFFSET CREDITS
3.1 POLICY GUIDELINES
3.1.1 Subject to the conditions and procedures outlined in this circular, banking of credits or
forward credits under E.O. 120 S. 1993 and its IRR shall refer only to the following
offset credits:
a) Offset credits awarded to a foreign supplier or its designated countertrader by

PITC for offset transactions covered/included under the Offset Priorities as defined
in Section 2.1.5 above, which credits are in excess of the offset obligation or
commitment of said foreign supplier or countertrade with an existing offset
obligation/commitment arising from a Supply Contract with the Philippine
Government.
b) Offset credits awarded to a foreign supplier or its designated countertrader by

PITC for offset transaction covered/included under the Offset Priorities as defined
in Section 2.1.5 above, which credits are awarded in advance of a Supply Contract
with the Philippine Government.
hereinafter referred to as “BANKABLE OFFSET CREDITS”
3.1.2 The foreign supplier or countertrader is given only one (1) year from date of issue of
the Banking Approval Certificate granted by PITC within which to start
implementation of the Offset Project. Failure to implement the said project within the
herein period shall automatically nullify the said Certificate and PITC shall be
authorized to grant approval to another foreign supplier or countertrader to pursue the
same project.
3.1.3 Only the holder of a Certificate of Banked Credits is entitled to use/apply said credits
against future offset obligations with the Philippine Government under the guidelines
herein established.
Example: If a foreign supplier has designated a countertrader to perform the former’s

offset obligations, and the latter, after performance of the offsets, has bankable offset
credits, only the said countertrader (and not the foreign supplier) may apply/use the
bankable offset credits for future offset obligations with the Philippine government
since it was the countertrader that actually performed the offset obligation/activity.
The foreign supplier is not entitled to avail of such bankable offset credits.
3.1.4 Bankable Offset Credits may be applied/used against future offset obligations with the
Philippine government only within three (3) years from the date of the Certificate of
Banked Offset Credits. Said Certificate shall only be used after evaluation and
approval of the completed offset project/activity.
3.1.5 An original holder of Certificate of Banked Credits (whether a foreign supplier or its
designated countertrade) may assign or transfer unapplied or unused banked credits,
either wholly or partially, to another firm or entity, for purposes of allowing the
assignee/transferee to apply said credits against the latter’s existing offset obligation
with the Philippine government subject, however, to all of the following conditions:
a) Formal written notification of a proposed transfer or assignment is given to PITC
by the holder of Certificate of Banked Credits PRIOR to the transfer/assignment,
providing PITC with the full details of the prospective assignee/ transferee (i.e.
company name and profile, etc) including the latter’s existing offset obligations
with the Philippine government to which such assigned/ transferred credits are
intended to be applied/used;
b) The transfer or assignment is subject to the final written approval/acceptance of

PITC subject to the next succeeding section;
c) The said credits can only be applied against the said assignee’s/transferee’s
existing offset obligations with the Philippine government only if the importing
government agency/office concerned approves such application of credits;
d) Once transferred/assigned, the said assignee/transferee may no longer further

transfer or assign such credits to any party for any reason whether such party is any
affiliate or subsidiary of the original holder of the Certificate of Banked Credits;
and
e) The said credits must be used by said assignee/transferee within the three (3) year
period stated in Section 3.1.4 above.
Transfer or assignment of bankable offset credits not complaint with the foregoing
conditions shall no legal or binding effect on the Philippine government.
3.1.6 The foreign supplier or countertrader shall be given three (3) years from date of
Banking Approval Certificate to complete implementation of the proposed offset
project. A grace period of two (2) or more years may be granted on a case-to-case
basis subject to PITC approval/assessment of the offset project.
3.1.7 In the event the foreign supplier or countertrader fails to complete the offset project
within the periods given in 3.1.6, the Banking Approval Certificate previously granted
shall be revoked and no offset credit shall accrue to the foreign supplier or
countertrader.
3.1.8 If the foreign supplier or countertrader fails to win a Supply Contract with any
Philippine government agency or office within the validity period of the banked offset
credit, as established in 3.1.4 above, there shall be no obligation to refund any of the
fees paid to PITC in connection with the banking of offset credits and no obligation
whatsoever on the part of PITC or the Philippine government shall arise relative to the
credits banked under these guidelines.
3.2 BANKING PROCEDURES
3.2.1 Application for Offset Project Eligibility:
For an offset project to qualify as eligible for banking under this circular, the foreign
supplier or countertrader shall secure pre-approval to proceed with the said offset
project and earn bankable offset credits and submit the following
documents/requirements to PITC:
a) Letter of Intent/Application to bank EXCESS offset credits (arising from an

existing offset obligation where an excess credit is expected) or FORWARD
credits (for an offset project to be undertaken in anticipation of a supply contract
with the Philippine government).
b) Offset Project Profile detailing the offset activity to be undertaken, with a Project
Feasibility Study or similar document, which provides a technical description of
project, benefits to be derived from the project, company or people behind the
project (and their track record), resources required, and other information relevant
to the project that will enable PITC to assess the viability and acceptability of the
proposed project in collaboration with concerned government and industry sectors.
c) Company Profile of foreign supplier or countertrader, detailing, among others,

ownership structure and subsidiaries/affiliates, financial statement for the last 3
years, major business/projects, highlighting previous offset projects accomplished
in the Philippines and in other countries.
d) Payment of PITC processing fees of US DOLLARS: ONE THOUSAND

($1,000.00) per application.
3.2.2 Review and Approval of Offset Project Proposal
PITC shall review and, if acceptable, approve the proposed offset project submitted by
the foreign supplier or countertrader (for implementation) within at least thirty (30)
days from date of submission of complete data/documents enumerated under 3.2.1
above. Said period may be extended depending on the complexities of the project and
the feedback process hereinafter outlined. The review/approval process shall entail the
following:
a) Assessment as to whether the proposed offset project is listed/included in the

Offset Priorities as defined in Section 2.1 above.
b) Consultations with the government office or agency where the foreign supplier or
countertrader expects to win a supply contract and where the offset credit is
initially expected to be applied.
c) Review/assessment of viability of the proposed offset project in consultation with

the Board of Investments (BOI), National Economic and Development Authority
(NEDA) and related industry sectors. For technology transfer, training, or research
and development projects, the endorsement of the pertinent government
office/agency (supervising the industry involved) attesting to the need/acceptability
of the project shall likewise be secured.
d) Securing the approval/endorsement of the procuring government agency/office
accepting the proposed offset project and allowing the banking of offset credits
resulting from the said project (as applicable).
e) Preparation and release of the Banking Approval Certificate by PITC officially

authorizing the foreign supplier or countertrader to implement the approved offset
project.
3.2.3 Requirements for Implementation and Monitoring of Approved Offset Projects:
a) Investment Projects: The foreign supplier or countertrader shall submit/comply

with the following:
a.1) Submit to PITC a Business Plan and Timetable to develop/operationalize the
Offset Project within 90 days from receipt of the Banking Approval
Certificate.
a.2) Should the investment project entail a joint venture with a Philippine firm,
the foreign supplier/countertrader has six (6) months, from submission of the
said Business Plan to identify, negotiate and finalize the terms of the Joint
Venture Agreement with the Philippine joint venture partner. The list of
prospective partners shall be furnished PITC who shall conduct its own
assessment of the proposed partners. In this regard, the foreign supplier may,
if it so desires, request the assistance of PITC to package the joint venture,
subject to payment of appropriate service fees. PITC shall act as witness to
the Joint Venture Agreement and shall likewise be furnished a copy of the
JVA.
a.3) If the investment project will not entail the formation of a Joint Venture with
a Philippine partner, but merely an investment in an existing firm/ project, the
foreign supplier has six (6) months from submission of the Business Plan to
submit the nature/details of said firm/project and the extent of investment
therein.
a.4) The foreign supplier/ countertrader has ninety (90) days from date of signing
of the Joint Venture Agreement (for joint ventures) or Investment Agreement
(for non-joint ventures) to register the business venture with the Securities
and Exchange Commission and the Board of Investments, furnishing PITC
with copies of the pertinent Certificates of Registration within five (5) days
from release thereof.
a.5) The foreign supplier shall submit a report of the remittance of its equity
investments in the new joint venture or business venture within sixty (60)
days from release of Certificates of Registration with the SEC and BOI.
a.6) The foreign supplier/ countertrader shall submit to PITC a Quarterly Report
of operations of the venture/ activity for the first two (2) years of operation
within 60 days from the end of the quarter and a Semi-Annual Report for the
succeeding three (3) years thereafter within ninety 90 days from the end of
the semester. These reports shall contain, among other, the following:
Start-up and operations costs, financial reports, cash flows, personnel

complement (technical and administrative), organizational structure and
the like;
Report on operations, including on-going and future projects, contracts

and agreements signed by the new venture;
Report on sales and prospective sales and other related activities.
b) Technology Transfers, Research and Development, Donations, Training and

other Offset Projects: The foreign supplier/countertrader shall submit/comply
with the following:
b.1) Submit to PITC a Business Plan and Timetable to develop/operationalize the

offset project within ninety (90) days from date of the Banking Approval
Certificate.
b.2) The foreign supplier/ countertrader has six (6) months from date of
submission of the Business Plan to identify, negotiate and, upon assessment
and approval of PITC, finalize/sign agreements with the chosen Philippine
beneficiary/company of the proposed offset project.
b.3) The pertinent agreement(s) with the Philippine beneficiary/ company of the
offset project shall be witnessed by PITC who shall likewise be furnished
with a copy of said agreement(s).
b.4) The foreign supplier/ countertrader shall submit a Quarterly Progress Report
for the first two (2) years of operation reckoned from the date of the pertinent
agreement(s) with the Philippine beneficiary/ company within 60 days from
the end of the quarter, and a Semi-Annual Report for the succeeding three (3)
years thereafter within 90 days from the end of the semester. These reports
must likewise be accompanied by the Acceptance Certificate of the offset
project recipient/ beneficiary.
3.3 ACCREDITATION PROCEDURES
3.3.1 For Investment Projects:
a) Foreign supplier/countertrader shall, upon completion of the offset project, submit

to PITC a Request for Accreditation (for banking purposes) indicating the offset
value being claimed for accreditation per the form attached hereto as Annex “A”.
b) Together with the Request for Accreditation shall be attached a Transaction

Summary detailing the total equity investments in support of the offset value being
claimed for crediting classified as cash, property, equipment or the like, duly
supported by the following:
Certified true copy of wire transfers or remittance of the funds/cash

representing the foreign investments in the offset project;
Summary/list of property or equipment imported into the Philippines and

invested/purchased for the project and the FOB/CIF costs thereof, together with
certified copies of import documents such as bills of lading/airway bill, SGS
CRF, commercial invoice, payment documents (Letter of Credit, telegraphic
transfer, etc.)
Certified copies of Certificates of title or lease agreement for

property/warehouse/office used by the JV company or firm (except those used
for residential purposes).
Other documents as may be deemed necessary in support of the offset values

being claimed for crediting.
Secretary’s Certificate of the JV Company or Firm attesting to the Board

Resolution approving the total value of equity investments made by the foreign
supplier/countertrader for this offset project, per the Transaction Summary
above.
c) PITC shall have at least thirty (30) days within which to review and process the
above Request for Accreditation and all the supporting documents hereto. PITC
shall also compute multipliers (where applicable) for the offset project and discuss
the same with the foreign supplier/Countertrader.
d) Upon approval of the accreditation, PITC shall issue the following in the name of
the foreign supplier/Countertrader:
Certificate of Banked (Forward) Credits – per the form attached hereto as

Annex “B”; and
Debit Note for PITC monitoring fees per the schedule outlined in (e) below
e) The foreign supplier/countertrader shall pay PITC’s monitoring/accreditation fees

per the following rates based on the offset value accredited by PITC:
==========================================
OFFSET VALUE FEES
(in US$) (in US$)
==========================================
1M - 50 M 1.5%
over 50M - 100M 750,000 plus 1.25%

over 50M - 100M
over 100M - 150M 1,375,000 plus 1%

over 100M - 150M
over 150M - 200M 1,875,000 plus 0.75%

over 150M - 200M
over 200M - 400M 2,250,000 plus 0.5%

over 200M - 400M
over 400M 3,250,000 plus 0.25%

over 400M
Said fees shall be paid directly to PITC (Attn: Treasury Department) either in bank draft
or through telegraphic transfer to a PITC designated account within fifteen (15) banking
days from the receipt of PITC’s debit note and Certificate of Banked (Forward) Credits.
Non-payment of the said fees shall be a ground to revoke/cancel Certificate of Banked
(Forward) Credits issued by PITC to the foreign supplier/countertrader concerned.
The above-mentioned monitoring fees shall in lieu of the monitoring fees due PITC for the
same accredited offset activity in the event the same is applied to an existing offset
obligation with the Philippine government.
3.3.2 For Technology Transfers, Research and Development, Donations, Training and other
offset projects:
a) Foreign supplier/countertrader shall, upon completion of the offset project, submit

to PITC a Request for Accreditation (for banking purposes) indicating the offset
value being claimed for accreditation as per the form attached hereto as Annex
“A”.
b) Together with the Request for Accreditation shall be attached a Transaction
Summary detailing the accomplishments and breakdown of offset value being
claimed for crediting and banking, duly supported by the following:
Certified copy of agreements/contract signed between the foreign

supplier/countertrader and the offset project recipient relative to the offset
project.
Acceptance Certificate evidencing the written approval/acceptance of the

completed offset project by the recipient thereof, duly confirmed by its
governing board, if a corporation, or by its Department Secretary, if a
government agency or office;
Justification for the proposed offset value being claimed for crediting/banking;
and
Documents/contracts/receipts in support of the expenditures being claimed as

offset credit for the project;
Certified copy of the Final Report submitted for the offset project, i.e. Research
& Development Studies (for R & D projects); Post-Training Reports (for
training projects); Technology Transfer Report, duly certified by the
Intellectual Property Office and DOST Registration of technology transfer
projects, etc.
c) PITC shall have at least thirty (30) days within which to review and process the
above Request for Accreditation and all the supporting documents thereto. PITC
shall also compute multipliers (where applicable) for the offset project and discuss
the same with the foreign supplier/countertrader.
d) Upon approval of the accreditation, PITC shall issue the following in the name of
the foreign supplier/countertrader:
Certificate of Banked (Forward) Credits – per the form attached hereto as

Annex “B”; and
Debit Note for PITC monitoring fees per the schedule outlined in (e) below:
e) Upon filing of the Request for Accreditation and Transaction Summary, the foreign
supplier/countertrader shall pay PITC’s monitoring/accreditation fees per the
following rates based on the offset value being submitted for accreditation:
==========================================
OFFSET VALUE FEES
(in US$) (in US$)
==========================================
1M - 50 M 1.5%
over 50M - 100M 750,000 plus 1.25%

over 50M - 100M
over 100M - 150M 1,375,000 plus 1%

over 100M - 150M
over 150M - 200M 1,875,000 plus 0.75%
over 150M - 200M
over 200M - 400M 2,250,000 plus 0.5%

over 200M - 400M
over 400M 3,250,000 plus 0.25%

over 400M
Said fees shall be paid directly to PITC (Attn: Treasury Department) either in bank draft
or through telegraphic transfer to a PITC designated account within fifteen (15) banking
days from the receipt of PITC’s debit note and Certificate of Banked (Forward) Credits.
Non-payment of the said fees shall be a ground to revoke/cancel Certificate of Banked
(Forward) Credits issued by PITC to the foreign supplier/countertrader concerned.
The above-mentioned monitoring fees shall in lieu of the monitoring fees due PITC for the
same accredited offset activity in the event the same is applied to an existing offset
obligation with the Philippine government.
IV. PITC REPORTORIAL REQUIREMENTS
PITC shall maintain records/reports of all transactions covered by this circular, as follows:
4.1 Monitoring Logbook for individual foreign suppliers/countertraders containing records of all
approved applications for banking of offset credits and progress of accomplishments of the
same.
4.2 Record of all Certificates of Banked Credits released/approved for both forward and excess
credits including its utilization, applications and approved transfer/assignments thereof.
4.3 For completed offset projects, a Statement of Outstanding Offset Credits reflecting all
unused/unapplied offset credits shall be submitted by PITC to the foreign
supplier/countertrader every six (6) months from date of release of the Certificate of Banked
Credits.
4.4 For on-going offset projects, a Performance Report Summary shall be furnished by PITC to
the foreign supplier/countertrader every six (6) months from date of release of the Certificate
of Banked Credits, reflecting progress of accomplishments and expected completion dates.
4.5 The concerned government procuring agency or office through their respective Heads shall be
furnished a copy of the reports listed in 4.3 and 4.4 above.
V. SUPPLETORY DOCUMENT
This circular shall be considered as a binding supplement to the IRR and shall form an integral part
thereof.
VI. REPEALING CLAUSE
PITC Memorandum Circular No. CT-98.4/01 dated April 1, 1998 and all prior issuances
inconsistent herewith are hereby repealed.
VII. APPLICATION
The provisions hereof shall not apply retroactively to offset transactions already completed,
undertaken or approved for implementation PRIOR to June 15, 2000.
VIII. EFFECTIVITY
This Circular shall take effect on June 15, 2000.
MAKATI CITY, PHILIPPINES, June 15, 2000.
(signed)
SYLVIA R. VELOSO
President
Annex “A”

Office of the President
REQUEST FOR ACCREDITATION

(For Completed Offset Project)
Applicant: __________________________________________________
(Name of Company who implemented/facilitated offset project)
Address : __________________________________________________
Tel. No. : ___________________ Fax No.: ______________________
E-Mail : ___________________ Telex : ______________________
Offset Project Title: __________________________________________
PITC Approval No. / ________________________________________
Date (PITC Approval of Letter of Intent/Application to Offset Project)
Offset Project Timeline:
Started: _________________ Completed: ___________________
Offset Project Details/Particulars: (Please attach Transaction Summary together with supporting documents
required under Sub-Section 3.3.3 (b) of PITC M.C. # CT-00.6/01)
Offset Value for Accreditation : (in words and figures)
US DOLLARS: _________________________________
US$ : _________________________________
We hereby attest to the truth, accuracy and authenticity of the information and documentation herein provided in
support of this request for accreditation of our Offset Project for banking purposes pursuant to existing
regulations. We understand that any false statements or misrepresentations made hereon will entitle PITC to
disapprove this request without any liability or obligation on the part of the Philippine Government.
Submitted By : ___________________________________________
(Name and Title of Authorized Company Representative)
_______________________
(Signature)
Date _____________________
Annex “B”
Office of the President
CBC Ref. No. ___________________ Date: ________________
CERTIFICATE OF BANKED CREDITS
Pursuant to its Request for Accreditation dated ________________, and after due evaluation of all supporting
documents thereto, this Certificate of Banked Credits is issued if favor of:
Company Name: _______________________________________________

Company Address: ______________________________________________
for the following Offset Project duly completed as follows:
Offset Project Title: _____________________________________________

Project Completion Date: _______________________________________
Banking Approval Certificate No. ______________ Date ______________
The value of the offset credit awarded for this project and hereunder banked is:
US DOLLARS : ________________________________________
(in words)
US$ : ________________________________________ (in figures)
Subject to pertinent provisions of PITC Memorandum Circular No. CT-00.6/01 dated June 15, 2000, this Certificate
shall entitle the holder to apply the credits herein awarded against future offset obligations with the Philippine
Government within three (3) years from the date hereof.
The transfer/assignment of this Certificate shall likewise be subject to the pertinent provision of the aforementioned
circular.
Issued in Makati City, Philippines.

PITC
Corporate
PHILIPPINE INTERNATIONAL
Seal
TRADING CORPORATION
By: ___________________________
President
APPENDIX E

Department of National Defense
DEPARTMENT CIRCULAR NUMBER 04
PRESCRIBING THE GUIDELINES IN THE IMPLEMENTATION OF COUNTERTRADE FOR

PROCUREMENT CONTRACTS UNDER THE ARMED FORCES OF THE PHILIPPINES
MODERNIZATION PROGRAM
CHAPTER 1.0 GENERAL POLICIES & GUIDELINES
Article 1.1 Countertrade and The Modernization Act
1.1.1 Applicability of Executive Order No. 120 (s. 1993) and its Implementing Rules and
Regulations. - Executive Order No. 120 (series of 1993) and its Implementing Rules and
Regulations (IRR) directs the Philippine government, its departments, bureaus, agencies including
government owned and controlled corporations to adopt countertrade as a supplemental trade tool
with respect to the importation of foreign capital equipment, machinery, products, goods, and
services, equivalent to at least US$ 1 Million and above. The provisions of E.O. 120 (series of
1993) and its IRR shall apply to all countertrade arrangements covered by this Circular unless
otherwise expressly provided herein.
1.1.2 Republic Act No. 7898, otherwise known as the "AFP Modernization Act" states in
Section 10(b) that "In order to reduce foreign exchange outflow, generate local employment
opportunities and enhance technology transfer to the Philippines, the Secretary of National Defense
shall, as far as feasible, incorporate in each contract/agreement special foreign exchange reduction
schemes such as countertrade, in country manufacture, co-production, or other innovative
arrangements or combinations thereof."
1.1.3. DND Department Circular No. 01 dated March 6, 2000 prescribing the "Implementing
Rules and Regulations of the Armed Forces of the Philippines Modernization Program," particularly
Section 3.2.11 thereof, states "In contracts worth US One Million Dollar ($ 1 M) or more involving
the acquisition or upgrade of equipment or weapons systems from foreign suppliers, the provisions
of Executive Order No. 120 (1993) and its Implementing Rules and Regulations shall apply."
Article 1.2 Coverage. - This Department Circular shall cover all procurements including
acquisitions and upgrades of equipment and weapon systems, under the AFP Modernization Program
approved by Congress through Joint Resolutions No. 28 from foreign suppliers valued at least US$ 1
Million and above or its equivalent in other convertible foreign currency and hereby further prescribes the
minimum countertrade requirements and procedures to be adopted pursuant thereto.
CHAPTER 2.0 COUNTERTRADE COMMITMENT OF

SUPPLIERS
Article 2.1 Countertrade Level
2.1.1 For procurement contracts involving US$ 1 Million and above of its equivalent in
other foreign currency, the minimum commitment to be required of the foreign
supplier/manufacturer shall be as follows:
VALUE OF SUPPLY MINIMUM COUNTERTRADE
CONTRACTS (IN US$) COMMITMENT/OBLIGATIONS
$1 Million - $20 Million 100% of the value of Supply Contract
over $20 Million - 90% of the value of Supply Contract

$40 Million
over $40 Million – 80% of the value of Supply Contract

$60 Million

$80 Million

$100 Million
over $100 Million 80% of the value of Supply Contract
2.1.2 Notwithstanding the foregoing, the Secretary of National Defense may revise or
modify the minimum countertrade obligation on a case-to-case basis upon determination by him
that the same is for the best interest of the government and such other factors that would strengthen
the defense cooperation between the Philippines and a foreign state.
2.1.3 The "value" of the Supply Contract, for purposes of this Circular, shall mean the
FOB CIF value (whichever is applicable) of the Supply Contract, excluding Philippine taxes and
duties.
Article 2.2 Countertrade Program - The countertrade program to be offered by

suppliers/manufacturers/contractors of the AFP may consist of either direct or indirect Offsets
exclusively related to Defense projects, and/or counterpurchase of Philippine goods and services as
defined in the IRR of E.O. 120 (1993).
CHAPTER 3.0 INTEGRATING COUNTERTRADE IN THE

VARIOUS METHODS OF PROCUREMENT
UNDER THE AFP MODERNIZATION
PROGRAM
Article 3.1 Open Competitive Bidding &

Limited Source Bidding
3.1.1 Eligibility Requirements: Countertrade

Undertaking Form
a). The Countertrade Undertaking Form per the format attached hereto as Appendix I, shall be
included in the eligibility forms/documents to be accomplished by parties applying for eligibility.
Said form shall be considered as one of the eligibility documents to be submitted pursuant to
Section 4.3 and 4.4 of the Implementing Rules and Regulations of E.O. 302 (series of 1996), as
amended. It shall contain the countertrade level of commitment of said bidders as well as their
commitment to sign a Countertrade Agreement with Philippine International Trading Corporation
(PITC) when awarded the Supply Contract by the AFP.
b) Failure or refusal to accomplish and submit the Countertrade Undertaking Form shall be
sufficient basis for an applicant to be deemed "ineligible" to participate in the bidding.
3.1.2 Bidding Documents: Countertrade Proposal Sheet
a). Eligible bidders shall also be required to accomplish and submit a Countertrade Proposal
Sheet, per the form attached hereto as Appendix 2, together with a brief summary of the
countertrade program to be undertaken in support thereof.
b) The duty accomplished Countertrade Proposal Sheet and its attachments shall be part of
the bid documents to be submitted by the bidders concerned on the bidding date.
c). In case of tie where there are two or more lowest Calculated Bids/Offers, post-
qualification will be done at the same time to determine the responsive bid/offer. If still two or more
bidders pass in the post qualification, countertrade proposal will be used as tiebreaker in accordance
with IRR's of E.O. 120 (1993). However, due consideration shall be given to offers with higher
percentage of offsets that directly benefit the AFP and/or the Government Arsenal.
d) The Countertrade Proposal Sheet and its attachments shall serve as the countertrade
program commitment of suppliers/manufacturers/contractors. They shall be incorporated in the
Countertrade Agreement and in the Supply Contract to be signed pursuant to this Circular, as
applicable.
3.1.3 Signing of the Countertrade Agreement
a). Within 90 days from the signing of the procurement contract between the Secretary of
National Defense (SND) and the winning bidder, the latter shall execute the corresponding
Countertrade Agreement with PITC in accordance with existing laws and regulations.
b) Failure on the part of the winning bidder to sign a Countertrade Agreement with PITC as
herein required shall entitle the DND/AFP to disqualify the winning bidder from participating in or
submitting bids for future procurements of the AFP, without prejudice on the part of the DND/AFP
to enforce such other penalties and sanctions, or such other relief for damages as may be warranted
under existing laws, rules and regulations.
Article 3.2 Alternative Methods of Procurement - The countertrade requirements outlined

in Articles 3.1.2 (a) and (d) and 3.1.3 above shall likewise apply to procurements under the AFP
Modernization Program conducted through alternative methods of procurement as provided for under
E.O. 302 (series of 1996), as amended, and other methods of procurement allowed by existing laws, rules
and regulations.
CHAPTER 4.0 FINAL RPOVISIONS
Article 4.1 Separability Clause - If any provision of this circular is declared invalid by a
competent court or tribunal the remaining provisions hereof, unaffected thereby, shall remain valid and
binding.
Article 4.2 Effectivity - This circular will take effect fifteen (15) days from the date of its
submission for publication with the Office of the National Administrative Register, University of the
Philippine Law Center.
(signed)
ANGELO T. REYES
Secretary
Office of the Secretary, DND
Doc Ref: Memo 20010025
APPENDIX 1
DEPARTMENT OF NATIONAL DEFENSE
Camp Emilio Aguinaldo, Quezon City
Application for Eligibility Form No.: _________________

AFP Procurement Project Ref.: _________________
COUNTERTRADE UNDERTAKING FORM
This Undertaking and proposal are hereby submitted pursuant to the eligibility requirements for the procurement project
of ______________________________ by the Armed Forces of the Philippine (AFP).
We hereby commit that should we be awarded the Contract for the ________________________, we shall directly or
through a nominated third party, undertake Countertrade arrangements equivalent to not less than _____ % of the value of the
Contract, excluding Philippine taxes and duties, as per the schedule provided for under Article 2.1 of DND Department
Circular No. 04 dated July 20, 2001 (Please refer to Legend below).
We submit the following Countertrade Proposals (with attachments) outlining our basic Countertrade Program should
we be awarded the Contract, which constitutes our total Countertrade Obligation equivalent to ____ % of the value of the
Contract, to wit:
Offsets: ____% of our Countertrade Obligation

Counterpurchase ____% of our Countertrade Obligation
We further commit that should we be awarded the Contract, we will negotiate and sign a Countertrade Agreement with
the Philippine International Trading Corporation (PITC) within ninety (90) days from approval of the Contract with the AFP.
Failure on the part of the undersigned Bidder to comply with this Undertaking shall entitle the Purchaser to
rescind/cancel the Supply Contract and award the same to another party and/or disqualify the undersigned from participating in
future supply contracts with the AFP/DND without liability on the part of the latter.
This Undertaking and proposal shall form part of the undersigned eligibility documents and failure on our part to submit
the same shall render us "ineligible" to participate in the bidding for the above project.
Furthermore, we hereby acknowledge that the countertrade proposal will still be subject for negotiations taking into
consideration the current requirements of the AFP.
Issued this __________ day of __________________, 20 ____ in ______________ Philippines.
Company Name of Manufacturer

___________________________________ Corporate
seal
Corporate Name/Title of Representative
___________________________________
Signature of Representative
___________________________________
LEGEND:
VALUE OF SUPPLY COUNTERTRADE

CONTRACT (IN US $) OBLIGATION
$1 Million - $20 Million 100% of Value of Supply Contract
over $20 Million - $40 Million 90% of Value of Supply Contract
over $100 Million 80% of Value of Supply Contract
REPUBLIC OF THE PHILIPPINES )

______________________________ _) S.S.
SUBSCRIBED AND SWORN TO before me this ___ day of _______________ 200__ in ____________________
affiant exhibiting to me his/her: (for Philippine residents) Community Tax Certificate No. ___________ issued in
__________________ on _____________________ (for non-Philippine residents) Passport No.___________________ issued
in _________________on _____________________.
Notary Public
Until 31 December 20 _____
PTR No. ________________
Issued at : _______________
Issued on : ______________
LIST OF PHILIPPINE PRODUCTS AND SERVICES
APPAREL
1. LADIES WEAR
• Knitted pullovers & cardigans in acrylic wool & other blends
• Blouses, skirts & coordinates, woven or knitted fabrics
• Jogging suits in polycotton interlock fleece
• Denim jeans, skirts & jackets
• T-shirts with fancy designs, prints, beadwork & appliqué
• Panties in nylon or polycotton knit/underwear & foundation garments
• Swimsuits
• Hand crochet blouses, vest, coordinates
• Bridal wear/formal wear
2. MENS WEAR
• Knitted pullover & cardigans in acrylic & wool
• Polo’s, t-shirts in polycotton knit
• Jogging suits in polycotton interlock fleece
• Athletic t-shirts, shorts & pants
• Denim, jeans, jackets & overalls
• Industrial uniforms (overalls, jacket & pants)
• Swimming trunks & beach shorts
• Woven shirts
• Jackets, parkas, windbreaker
3. CHILDRENS WEAR
• Denim jeans, jackets, dresses & overalls
• Infant's short sets, rompers & overalls
• Pajamas/sleepwear
• Jogging suits
• Short or pullover & pants coordinates
• Trousers & shorts
• Knitted sweaters, cardigans & pullover
• Snowsuits & jackets
• Socks
• Swimsuits
4. INDUSTRIAL/MILITARY WEAR & ACCESSORIES

• Uniforms
• Caps & hats
• Boots/safety shoes
• Backpack/bags
• Tent
• Pistol belt & other accessories
5. FOOTWEAR
• Men's ladies' & children's athletic shoes
• Children's school shoes
• Men's casual leather shoes with rubber soles
• Rubber & plastic beach sandals
• Parts of footwear
• Other footwear
6. FASHION ACCESSORIES AND LEATHER GOODS

• Costume jewelry, precious jewelry
• Bags made of fabric & indigenous materials
• Hair accessories, hats & other headgear
• Wallets, purses & cosmetic cases
• Belts
• Knitted caps, mufflers, mittens
• Leather & non leather gloves
• Travel goods
• Other accessories
7. TEXTILES FOR MANUFACTURE OF GARMENTS & ACCESSORIES

• Denims, canvas, twill
• Hand-woven fabrics in indigenous fibers
• Laces
• Knitted fabrics
8. PROMOTIONAL ITEMS/GIVEAWAYS
• T-shirts, sweatshirts, parka
• Caps & hats
• Hanky & pocket chief with embroidery
• Nylon bags, pouches
• Corporate pins
• Coin purses, key chains, cosmetic cases
9. APPAREL ACCESSORIES/COMPONENTS
• Beaded, embroidered laces & appliqués
• Embroidered collars
• Buttons in shell, wood
• Bridal accessories
CONSUMER PRODUCTS
1. FURNITURE (INDOOR, OUTDOOR, GAZEBO)

• Rattan
• Wicker
• Buri
• Wrought iron
• Stone
• Bamboo
• Wood
• Combination of above
• Other materials
2. GIFTS & HOUSEWARES

• Knife blocks
• Basketry
• Capiz lamps, desk sets, kitchen wares
• Linens (tableware’s, hankies) imported/local material
• Bed sheets, bedcovers
• Towels
• Wooden bowls, trays, etc.
• Wooden spoons
• Gift items
¾ Gift packaging
¾ Stationery items
¾ Everyday items, party novelties & favors
¾ Table top accessories
• Novelties
¾ Christmas decors & other holiday decors
¾ Hangers
¾ Wind chimes
¾ Souvenirs & corporate giveaways
3. HOME & OFFICE FURNISHING

• Artificial flowers & plants
• Sea shell novelties
• Stone lamps, ashtrays, etc.
• Paper mache figurines
• Capiz lamp bases
• Brass wares (candle holders, etc.)
• Abaca carpets
• Curtains
• Lamps & lighting fixtures, chandeliers
• Bedding, embroideries
• Magazine racks, coat/hat hangers, umbrella stands
4. TOYS
• Baby pianos
• Dolls & stuff toys
• Educational items & games
• Puzzle
• Hobby kits & crafts, DIY kits
• Fabrics
• Novelties
5. EDUCATIONAL HOUSEHOLD APPLIANCES

• Electric fans
• Air conditioners
• Televisions
• Audio systems
• Video systems
• Freezers
• Refrigerators
• Sing-a-long system
• Microwave ovens
• Ranges, stoves, ovens, kitchen wood
• Sewing machines
• Washing machines
•
6. OTHER CONSUMER MANUFACTURERS
• Mechanical & similar lighters
• Sporting goods
• Medical/optical goods
• Umbrellas & sunshades
• Musical instruments
• Others (other consumer manufacturers)
7. CONTRACT SALES ARRANGEMENTS

• Interior design service
• Custom-made furniture
• Furnishings for hotels, restaurants, offices, etc.
8. WINES & SPIRITS

• Philippine rum
• Philippine vodka (coconut wine)
• Strawberry wine
9. TOBACCO PRODUCTS
• Cigars/cigarettes
10. FOOD & FOOD PREPARATION

• Processed Foods
¾ Canned
¾ Pureed
¾ Powdered
¾ Dried frozen
¾ Dehydrated
¾ Meat & meat preparation
¾ Dairy products & birds eggs
¾ Cereal & cereal preparations
¾ Vegetable & fruits
¾ Sugar preparations & honey
¾ Coffee
¾ Cocoa, tea, spices
¾ Feeding stuff for animals
• Fresh Food
¾ Fresh fruits, juices & vegetables
¾ Fresh bananas
¾ Cashew nuts
• Fish & other marine products
• Vegetables & root crops
• Beverages
¾ Fruit juices & drinks
¾ Herbal teas
¾ Coffee
¾ Rum
¾ Beer
o Alcoholic
o Non-alcoholic
• Fish & other marine products
¾ Fish & other seafood's
¾ Dried seaweed's
¾ Seaweed's flour for pet foods
¾ Carrageenan
• Spices, seasoning, condiments
• Noodles
• Cassava chips & starch
• Snacks
• Chocolate candies & confectionery items
11. PHARMACEUTICALS
• Local brands
• Generics
• Herbal medicine
COMMODITIES & INDUSTRIAL PRODUCTS
1. COCONUT PRODUCTS
• Crude coconut oil
• "Cochin" coconut oil
• RBD coconut oil
• Copra meal
• Desiccated coconut
• Coconut shell charcoal
• Glycerin, crude & refined
• Soap noodles
• Fresh young coconut/fresh matured coconuts
• Fatty acids & alcohol
• Molasses
• Olco chemicals
• Activated carbon
2. FERTILIZERS
• DAP, 16-20-0, 16-16-S- 13S
• Organic fertilizers
• Merchant Grade Phosphoric Acid
3. STEEL PRODUCTS
• Wire rods
• Galvanized iron (G.I.) sheets
• Prefab metal structures
4. MINERALS
• Feldspar
• Limestone
• Nickel
• Manganese ore
• Copper concentrate/copper cathodes
• Copper wires & cables
• Metallurgical & refractory chromites
• Coal briquettes
• Nickel
5. AUTOMOTIVE
• Asian utility vehicles (AUV), Jeepney
• Motorcycles (local content of at least 51%)
• Bicycles (local content of at least 51%)
• SKD Engines
6. CONSTRUCTION MATERIALS
• Building wires & cables
• Float glasses
• Roofing materials ( color roof)
• KD falcatta boards/Core/Lumber
• Solid Wooden Panel Door
• KD Parquet flooring
7. CORDAGE
• Manila rope
• Synthetic rope
8. SPECIAL MANUFACTURED PRODUCTS

• Woven polypropylene (WPP) bags
• Polyethylene (PE) liners
• Polypropylene (PP) - various applications
• Aluminum & by products
LIST OF PHILIPPINE EXPORT SERVICES
1. COMPUTER SOFTWARE
• Application software development
• System software development
• Turnkey system development
• Consulting services
• System integration
• Multimedia products (All platforms for presentation, games, training, education, entertainment,
CD-ROM applications)
2. ENGINEERING CONSULTING SERVICES

• Architectural, civil, structural, sanitary, mechanical & electrical design
• Pre-investment or feasibility studies
• Surveys (geodetic, geotechnical, geological, hydrological)
• Project planning & programming
• Detailed design (multi-discipline)
• Construction management & supervision
• Operation & maintenance
• Environmental studies
3. MANAGEMENT CONSULTING SERVICES

• Financial management
• Marketing management
• Sales management
• Production & operations management
• Quantitative management
• Systems & procedure management
• Accounting & audit management
• Institutional development
4. CONTRACT SALES ARRANGEMENT

• Design services (interior design, furniture design & product development)
• Quality inspection
• Production monitoring
• Procurement
• Importation
• Installation/human resources
• Consolidation and shipping
5. HEALTH CARE SERVICES
6. TOURISM
7. FILM ANIMATION
8. SHIP REPAIR & DRY DOCKING
9. CALL CENTERS
10. LANGUAGE TUTORIALS

LIST OF ELIGIBLE INDIRECT OFFSETS
Investment/Joint venture, technology transfer, skills training, research and development, donations and
other related activities in the following, but not limited to, are considered as eligible offsets:
1. AGRI-FOOD & FORESTRY-BASED INDUSTRIES

• Meat and/ore Dairy Processing
• Mechanized Agricultural Equipment
• Food/Fruit Processing
• Genetic Engineering
• Fishery & Aquaculture
• Agriculture/Marine Inputs & Services
2. INDUSTRIES SECTOR
• Iron & Steel
• Cement
• Mining
• Petrochemical Processing
• Sucrochemicals
• Refine Petroleum Products
• Chemical/Natural Fibers and Filament Yarns
• Aluminum Fabrication
• Polymers
• Semiconductors and computers
• Superconductors
• Advanced Ceramics
• Engines
• Motors
• Turbines
• Machine Tools
• Lasers
• Microprocessors
• Robotics
• Micro motors
• Power Plant Design and Construction
• Coal, oil, steam power, hydroelectric power, geothermal
• Solar Cells, Nuclear Fission, Nuclear Fusion
• Telephone, Radio, Television, Computers, CD ROM, Artificial Intelligence, Fiber optic
Communication
• Other Consumer Electronics, Industrial Electronics, Electronic components and parts
3. ENGINEERING INDUSTRIES
• Engineering Products
¾ Machinery Equipment, Parts and Accessories
¾ Aluminum Rods
o Electrical Equipment
o Transport Equipment
o Information Handling Equipment
o Instrumentations
o Tools, Dies, and Fixtures
o Telecommunications
• Metalworking
¾ Metal Casting
¾ Heat Treatment
¾ Welding
¾ Electroplating
¾ Machine Building
¾ Forging
• Car manufacturing
• Stamping/press working
• Assembly of motor vehicles
• Manufacture of vehicle parts and components
• Automotive grade castings, high-alloy steel for machine building
• Modernization of precision engineering sub sector, including automotive and machinery parts
manufacturing
• Ship building, ship repair, ship breaking
• Other ocean-going and aircraft
4. HEALTH
• Herbal medicines
• Diagnostic center
• Specialized medical centers
¾ Kidney dialysis
¾ Ophthalmologic
¾ Dental surgery
• Mobile hospital/clinic
¾ Joint venture/kit manufacturing
¾ Equipment installed
¾ Modular system
• Medical lasers
• Pharmaceuticals – antibiotic, acetylsalicylic
• Vaccine
• Laser surgery
• Imaging technologies
• Portable water purifications system
• Disaster communication system
• Optical fiber sensors and laser microscopes
5. ENVIRONMENTAL INDUSTRIES
• Environmental support facilities
• Material recovery facilities
• Bio-remediation factory

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The Countertrade Program of the Philippines

Philippine International Trading Corporation

PHILIPPINE INTERNATIONAL TRADING CORPORATION

Printed in the Philippines

Chapter II Countertrade in the Philippines…………… 6

Chapter III Countertrade Integration in the Foreign

Chapter IV Countertrade Milestones……………….. 36

Appendix A Memorandum Circular No. CT-95.1/01…

Appendix B Memorandum Circular No. CT-95.4/01……..

Appendix C Memorandum Circular No. CT-95.4/02…….

Appendix D Memorandum Circular No. CT-00.6/01

List of Philippine Products and Services…………………….

Philippine International Trading Corporation

FUNDAMENTAL PRINCIPLES OF COUNTERTRADE

As a form of non-traditional trade, it can be distinguished by the presence of performance

As defined by the Association Pour La Compesantion Des Exchanges Commerciaxuz, Countertrade

In application, countertrade is used to leverage government importations with trade, investments

Countertrade is a mechanism to:

• Channel back of recoup foreign exchange spent for an importation;

• Promote export products and markets.

1. COUNTERPURCHASE -- “An agreement whereby the primary supplier accepts parallel

2. OFFSETS -- An agreement whereby the primary supplier commits, as a condition of sale, to

Thus, offsets are generally divided into two categories, to wit:

3. PRODUCT BUY BACK -- An agreement whereby the seller/supplier of a turnkey

5. BUILD-OPERATE-TRANSFER (BOT) and its variations -- Usually applied to major

6. ANY VARIATION OR COMBINATION OF THE ABOVE -- Variations or

D. ADOPTION OF COUNTERTRADE IN GOVERNMENT PROCUREMENT

COUNTERTRADE IN THE PHILIPPINES

Executive Order No. 120 s. 1993

A. Highlights of Executive Order No. 120

• Designates the Philippine International Trading Corporation (PITC) as the implementing

B. Basic Features of the Implementing Rules and Regulations

• Covered Importations: Government importations and procurement of services from foreign

• Countertrade Level: The countertrade obligation/commitment of foreign suppliers should not

• Countertrade Activities: Acceptable forms of countertrade include counterpurchase, direct and

• Countertrade Monitoring: The Philippine International Trading Corporation (PITC) handles

• Performance Guarantees/Penalties: Performance guarantees and penalties for non-

• Formulation of countertrade policies;

• Countertrade advisors/representative of government agencies;

• Evaluation of countertrade proposals of foreign suppliers;

• Negotiation, packaging and conclusion of countertrade contracts;

• Monitoring of countertrade transactions and performance.

EXECUTIVE ORDER NO. 120

DIRECTING THE NATIONAL GOVERNMENT, ITS DEPARTMENTS, BUREAUS,

Section 1. Coverage. All departments, bureaus, agencies, offices and instrumentalities,

Section 4. Coordination by Government Agencies. The government agency or government-owned

Section 7. Repealing Clause. The provisions of executive or administrative orders, rules,

RULES AND REGULATIONS IMPLEMENTING EXECUTIVE ORDER NO. 120

2.0 DEFINITION OF TERMS

2.5 “Trade-for-Debt Swap” or “Debt-for-Goods or Services” -- is a form of countertrade

a) Those funded by outright donations or grant-in-aid under government-to-government

c) Those to be used or to form part of finished or semi-finished products/goods for re-

5.0 COUNTERTRADE MANAGEMENT AND

5.2 Powers and Functions of PITC:

a) Formulation of policies relative to countertrade in the Philippines taking into

b) Outline terms of cooperation with other countries and appropriate international

e) As necessary, act on countertrade-related issues including matters relating to the

f) Issue such circulars/memoranda as may be necessary to implement these rules including

h) Review and evaluate all countertrade/offset proposals submitted by foreign suppliers or

i) Secure and maintain an annual Government Countertrade Foreign Procurement List

l) Perform such other functions as may be necessary under the circumstances.

6.0 PROCESSING AND EVALUATION OF COUNTERTRADE PROPOSALS IN

7.0 COUNTERTRADE PERFORMANCE