Country Specific Market Information -- Part III

III. LEGAL AND REGULATORY CONSIDERATIONS

III. LEGAL AND REGULATORY CONSIDERATIONS

A. General Legal Issues

 1. Local Legal Representation

For firms conducting operations in the Philippines, or those firms dealing with representatives or distributors in the Philippines, it is advisable to retain a local attorney or law office to assist with legal matters. An attorney in the Philippines is in the best position to help you comply with applicable Filipino rules, laws and regulations, as well as helping you to gain access to the various government offices involved in the process. In addition to following the tips in section II.B. of the General Legal and Regulatory Section, a list of recommended lawyers is available from the U.S. Embassy in Manila at:

1201 Roxas Blvd., Manila, Philippines
Eugene Martin, Deputy Chief of Mission
Phone: (632) 521-7116 ext. 2276; Fax : (632) 522-4361
Internet: eugene.martin@dos.us-state.gov

2. Business Structures

a. Using a Sales Agent or Distributor.

Agent and distributor arrangements are common in the Philippines. There are no Filipino laws that impede termination of an agent/distributor contract; however, these contracts usually specify that 30 days notice must be given in the event of cancellation. The standard agent's commission is typically in the range of 5%. Agents and distributors in the Philippines should be registered with the Philippine Securities and Exchange Commission. In addition to the tips provided in the section II.C.2 of the General Legal and Regulatory Section, U.S. firms seeking agents or distributors in the Philippines are encouraged to use the services of the U.S. & Foreign Commercial Service, Manila, such as the "Agent/Distributor Service (ADS)" or the "Gold Key Service" which can be accessed at:

U.S. & Foreign Commercial Service (US & FCS)
Carmine D'Aloisio, Counselor for Commercial Affairs; or
David Murphy, Commercial Attach�
2nd Floor, 395 Sen. Gil J. Puyat Ave., Makati City, APO AP 96440
Phone: (632) 890-9717; 895-3002; 890-9362
Fax : (632) 895-3028
Internet: cdaloisi@doc.gov or dmurphy@doc.gov
b. Technology Transfers or Licensing.

The Bureau of Patents, Trademarks, and Technology Transfer under the Department of Trade and Industry is the government body that approves and supervises all licensing/technology transfer agreements. In the Philippines, the term technology transfer refers to contracts or agreements entered into by and between domestic Filipino companies and foreign/foreign-owned companies involving the transfer of systematic knowledge for the manufacture of a product, or the application of a process; rendering of a service, including management contracts; licensing of all forms of industrial property rights including marketing/distributorship agreements involving the license to use foreign trademarks, trade names and service marks and other marks of a proprietary nature.

Included in the foregoing arrangements are local distributorships, export marketing agreements that involve the licensing of foreign trademarks, and retainerships of foreign firms or individual technicians for the rendering of management and/or technical consultancy services as part of the technology transfer or licensing agreement.

So that royalties may be remitted in full, net of taxes, at the prevailing exchange rate, a royalty or technical service contract between a resident and non-resident (payment for which is based on the value of the article manufactured, used, or sold) must be registered with the Bangko Sentral ng Pilipinas (Central Bank). The Bank may be contacted at:

Bangko Sentral ng Pilipinas (BSP)
(Central Bank of the Philippines)
Gabriel C. Singson, Governor
Mabini St., Malate, Manila
Phone: (632) 507-051; 595-435; Fax: (632) 521-5224

To be entitled to registration, foreign investors must meet each of the following conditions:

  • The contract must provide for a fixed term of not more than 10 years with no automatic renewal clause. Renewal is allowed upon prior approval of the Technology Transfer Registry (TTR). An indefinite term may be allowed for royalty-free agreements and arrangements for the outright purchase of technology.
  • The contract must not contain the restrictive business clauses identified under section 12 of the Registration Rules. An example of this would be a clause that restricts, directly or indirectly, the export of the licensed products under the technology transfer arrangement unless justified for the protection of the legitimate interest of the technology supplier, such as the ability to export to countries where an exclusive license to manufacture and/or distribute the licensed product(s) has already been granted.
  • If the arrangement involves the transfer of technology through the licensing of patents and/or know-how and trade secrets, the royalties or fees cannot exceed 5% of net sales in order to be granted automatic approval. If the royalty rates are higher than 5%, they may be approved, subject to a determination of the reasonableness of the requested fee. Withholding taxes on all payments relating to the contract would be for the account of the licenser.
  • The contract must also contain requisite provisions as provided in Section 13 of the Registration Rules, i.e. that the laws of the Republic of the Philippines shall govern the interpretation of the contract and in the event of litigation, the venue is agreed to be the Philippines.
  • A bonus royalty of 2% of net foreign exchange earnings may be allowed if the technology supplier commits to assist the technology recipient in the export of the licensed product(s).

c. Joint Ventures.

An increasingly common method for enterprises embarking on business operations in the Philippines is through joint ventures with local enterprises. Philippine law on joint venture corporations states that where activity to be undertaken is partially "nationalized", the foreign entity is limited to 40% equity participation. Nationalized means reserved for ownership by Filipino citizens only.

d. Acquisitions, Investment & Ownership.

The Philippine Government welcomes free enterprise, provides incentives to needed investments, and respects the private sector's right to freely acquire or dispose of its properties or business interests. However, acquisitions, mergers and other combinations of business interests involving foreign equity must comply with foreign nationality caps specified in the Constitution and other laws. In 1991, the Philippine government repealed the law which limited foreign ownership to 40 percent of all domestic enterprises and which only allowed companies which exported 70% of their output to be 100% foreign owned. Currently, foreign investors are allowed to own 100% of all Philippine businesses, except those listed on the "Negative List". Legislation passed in March 1996 lowered the minimum capital requirement at which majority foreign ownership would be allowed from USD500,000 to USD200,000. With respect to land ownership, non-Philippine nationals cannot own land in the Philippines, other than by hereditary succession.

Depending on the industry or activity, a "Negative List" fully or partially restricts foreign ownership under two broad categories.

For those businesses wishing to establish office in the Philippines, each of the following requirements must be met before it can start operations:

If you are a foreign corporation doing business in the Philippines, you need to ensure that you have a license to do such. According to Section 133 of the Corporation code, if you do not have a license you cannot sue in Philippine courts. This could, for example, preclude you from utilizing the court system to enforce your contractual or intellectual property rights. On the other hand, your business can be sued in Philippine courts whether or not you have a license to do business. Also, according to Article 42, Executive Order No. 226, if you are not properly registered, you could be required to refund investment incentives and/or be subject to local fines or penalties.

3. Contract Issues / Dispute Settlement

Contracts in the Philippines are governed under the Civil Code of the Philippines, (Republic Act No. 386) which took effect on August 30, 1950, specifically Book IV, Obligations and Contracts. An obligation is defined in the Code as a "juridical necessity to give, to do or not to do." (Art. 1156). Such may arise from law, contracts, quasi-contracts, acts or omissions punishable by law, or "quasi-delicts" (torts). (Art. 1157). A contract is defined as a meeting of the minds between two persons where one binds himself, with respect to the other, to give something or to render some service. (Art. 1350). The Philippine Constitution guarantees the right to enter into contracts freely and the Code provides that "The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy." (Art. 1306). However, the contract must bind both parties and if the fulfillment of the contract depends solely upon the will of one party, the conditional obligation shall be void. Contracts for sales are governed by the Philippine Civil Code Articles 1458 to 1637.

a. Contract Execution.

It is advisable to have contracts and agreements executed in the Philippines so that the laws of the Republic of the Philippines shall govern the interpretation of the these documents, and in the event of litigation the venue will likewise be the Philippines. Legal documents notarized by Philippine lawyers can be authenticated by the U.S. Embassy Special Consular Services Branch.

b. Dispute Resolution.

As a member of the International Center for the Settlement of Investment Disputes (ICSID) and of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the Philippines accepts binding international arbitration. Republic Act 876 allows parties to submit to arbitration, and any resulting decisions are enforceable in court if necessary.

Trade disputes are generally handled through the Ministry of Trade. A special division, the Trade Arbitration and Conciliation Division, established both the system and procedures to govern the resolution of trade and commercial disputes. The Trade Arbitration and Conciliation Division evaluates and investigates trade complaints arising from international trade transactions between local exporters, export producers and manufacturers, and foreign businessmen counterparts; settles trade disputes or conflicts between local exporters and foreign businesses; assists local exporters in the preparation of their export contracts and provides other legal services to help avoid any possible overseas trade conflicts; and creates relationships externally to facilitate the resolution of any trade problem or issue in an export transaction. In addition, the Division investigates complaints arising from unfair and unethical trade practices referred by the Bureau of consumer Affairs and other offices with the Ministry of Trade.

Disputes before the Division are handled either through arbitration or conciliation. Conciliation is defined as an attempt to achieve an amicable settlement and requires the agreement of the parties. The parties present a statement of the claims, a brief outline of their views, and copies of any written documentation. A meeting is schedules where the parties present their views and may be represented, should they so desire. Conciliation will either settle the dispute, provide a basis for an agreement, or fail.

Since most contracts contain an arbitration clause, this is also a common method of dispute resolution. The arbitration procedure is initiated by a written complaint setting out the names and addresses of the parties, a statement of claim, a factual statement, the points at issue, and the remedy or relief sought. A copy of the contract, if it exists, must be attached, and one can submit other supporting documents. A committee is established to review the matter and notice sent to the other party who is given an opportunity to respond. The committee may then proceed on the basis of the written submissions, oral proceedings, or both. An award must be determined within six months of the commencement of the proceedings and may either be a single award covering all issues, an interim award, a final award disposing of the matter, or an amicable settlement reached by the parties.

c. Government Contracts.

The Philippine Government itself is a large direct importer (usually through competitive bidding) of many essential products. Philippine Government procurement regulations permit a foreign company to bid on government procurement only if it maintains a registered branch office or a registered resident agent in the Philippines. The first step in obtaining Government business is to be placed on the Bidder's Mailing List of the agency with which the applicant is interested in doing business. This is done by sworn application accompanied by certified copies of the company's application for the Certificate of Registration issued by the Philippine Bureau of Commerce, articles of incorporation, a receipted franchise tax bill, an up-to-date financial statement, and other attachments as required. Application forms of the various procurement agencies are substantially the same in most respects.

All procurements of the Philippine military agencies are undertaken directly from manufacturers except in some limited cases. In addition, foreign contractors are allowed to participate in the construction of only internationally bid and foreign-financed/assisted projects in the Philippines. For this purpose, foreign contractors must apply to the Philippine Contractors Accreditation Board (PCAB) for a special license which is issued on a project-by-project basis.

4. Personnel and Labor Issues

a. General Labor Considerations.

All issues regarding employment and labor are governed by the Labor Code of 1974, which amended and consolidated all of the various Philippine labor laws. It governs the relations between workers and employers, making unfair labor practices a criminal offense. Workers in the Philippines have the right to organize and are, in fact, encouraged to join labor organizations for purposes of collective bargaining. A normal working day is eight hours with overtime payable for any time in excess of eight hours at a rate of at least 125% and overtime must also be paid for work on a normal rest day, holiday, or special holiday at 130 - 150%. A normal work week is six days and every employer is required to give an employee a rest day of not less than 24 consecutive hours in each seven-day period. Employees are also entitles to five days of annual paid leave.

The Labor Code also contains special provisions regarding the employment of women. The Philippines has adopted fair employment standards and no employer may discriminate against any female employee regarding terms of employment, conditions of employment, pay, and compensation. However, women may not be employed in work that requires them to stand continuously or to lift heavy object and cannot work from midnight to 6 am or between the hours of 10 PM and midnight, in the industrial sector, unless engaged as a managerial, technical, or health/welfare employee.

b. Termination of Employment.

The Minister of Labor must approve all establishment shutdowns and the dismissal of any regular employee with over one year of service unless it is for a just cause. Just causes are 1) serious misconduct or willful disobedience by the employee of the lawful orders of his employer; 2) gross and habitual neglect by the employee or his duties; 3) fraud or willful breach by the employee of the trust placed in him by his employer; 4) commission of a crime or offense by the employee against the employer; and 5) other analogous causes. Employment may also be terminated due to the installation of labor saving devices, redundancy, retrenchment to prevent losses, or the closing of the business but written notice must be served on the employees and Department of Labor and Employment at least one month prior to the termination. If employment is terminated due to one of these latter consideration, severance pay is due to the employee which, at a minimum, is one months pay. The normal age for retirement in the Philippines is 60 years of age.

c. Compensation and Medical.

Every employer with one or more employees must contribute, on a monthly basis, one percent of the employees total salary credit to the Employee's Compensation Program. Contributions to the Medicare scheme are also compulsory for members of the Social Security System and Government Service Insurance. Contributions are divided equally between the employer and employee, are made monthly and coverage includes hospital, surgical, and medical care for the employee and all legal dependents.

Compensation for industrial accidents is set by the Employees compensation Commission and will not exceed that limit unless the employer is proven negligent or in violation of the law.

d. Employment of Foreign Nationals.

The employment of foreigners is generally discouraged unless they possess skills that are not widely available among Filipinos. Foreign nationals in supervisory, technical or advisory positions may be employed for a period not exceeding five years from registration the employment. Employment of foreign nationals the positions of president, treasurer and general manager (or their equivalents) may be retained beyond the stipulated period when the majority of capital stock is owned by foreign investors.

e. Passports and Visas.

Passports are required for travel to the Philippines. Foreign nationals desiring to enter the Philippines for business purposes are permitted to enter and remain in the country for specific time periods as non-immigrants under provisions of Philippine Immigration Law. Persons may come and stay in the Philippine for business, pleasure, or health reasons without a visa for not more than 21 days and are exempt from payment of immigration fees and charges. This may be extended for another 38 days (visa waiver). Thereafter, they may apply for the regular monthly extensions for a maximum stay of one year and fifty nine days.

Temporary visitors who have been allowed to stay in the country for more than 6 months may apply for Alien Certificate of Registration (ACR) and Certificate of Residence as Temporary Visitor (CRTV) with the main office of the Bureau of Immigration (BI) or with its subports which have territorial jurisdiction over these aliens.

Some special circumstances may occur and specialized visas and employment arrangements may be available. These include:

In addition, the treaty between the U.S. and the Philippines sets forth conditions that may allow for expatriates to be exempt from taxes in the Philippines.

B. Other Specific Requirements.

1. Import Restrictions, Tariffs and Taxes.

The Philippines has (with a few exceptions, i.e., automobiles and motorcycles) a four-tiered 30-20-10-3 tariff, and averaged 15.58% as of May 27, 1996. A value added tax (VAT) of 10% is imposed on imports for resale or reuse. The VAT is based on the total value used by the Bureau of Customs (BOC) in determining tariff and customs duties, plus import duties, excise taxes, and other charges (other charges refer to charges on imports prior to release from customs custody, including postage, insurance and commissions).

The Philippines Bureau of Customs uses a product's export value as a basis for computing dutiable value of imports. Export value is the cost that the same or identical product is offered freely for sale in the principal export markets of the source country. If the export value cannot be ascertained though this process, the following may be used as a basis: cost at country of manufacturer/origin, third country cost or domestic wholesale selling price. The GOP is committed to move its customs valuation scheme to Transaction Value (TV) by January 1, 2000.

Before any importation into the Philippines can be made, an importer must identify the product in the Philippine Standard Commodity Classification Manual. This commodity classification is the general basis for determining whether the item is freely importable, prohibited, or regulated. For freely importable products, no permit is required, but for regulated or prohibited items, a commodity clearance from the appropriate government agency is required.

Import documentation is generally routed through Authorized Agent Banks (AABs). There are several modes of payment by which an importer can pay its supplier:

  • Letter of Credits (L/Cs), Documents against Acceptance (D/A), Open Account (O/A), Documents against Payment (D/P) and Direct Remittance are used for imports involving foreign exchange remittances.
  • Imports without foreign exchange remittance are paid on a self-funded (no-dollar) basis, whereby imports are funded from importer's own foreign currency deposit accounts overseas.
  • Special Import Arrangements can be done on a consignment basis, open account arrangement and lease, lease-purchase, leverage lease, lease with the option to purchase and similar arrangements. These transactions do not require prior Bangko Sentral approval but will follow existing rules and regulations of the Bureau of Customs.

Customs Memorandum Order (CMO) No. 149-88 requires the registration of all importers/consignees who regularly import or lease twice a year in commercial quantity. Application forms can be secured from the Customs Intelligence and Investigation Service or in the outports from the District of the Sub-Port Collector.

The Philippine Government has engaged the services of the Societe Generale de Surveillance S.A. (SGS) to implement the "Globalized Comprehensive Import Supervision Scheme (CISS)." Under this scheme, any importation into the Philippines valued at USD500.00 and above and coming from any country of supply is subject to pre-shipment inspection by SGS in the country of origin. Complete SGS guidelines are contained in the Central Bank Memorandum to all AABs and Customs Memorandum Order No. 39-92 dated March 31, 1992. Guidance on this system is available from the U.S. Embassy's Commercial Section, or from SGS' main U.S. office in New York City.

Prior to or upon arrival of the shipment, an importer should file an import entry together with all supporting documents with the Entry Processing Division (EPD) of the BOC. When all documentation is completed and processed, the imported goods are released at the Pier and Inspection Division of BOC and/or transferred (for warehousing entries) to the: (1) Consignee's Warehouse, Customs Bonded Warehouse or Container Yard-Container Freight Station; (2) Customs Common Bonded Warehouse; (3) Firm's Bonded Manufacturing Warehouse; or (4) EPZA Warehouse.

All articles brought into the Philippines for repair, processing or reconditioning to be re-exported upon completion are exempted from the payment of import duties provided that a bond amounting to one and one-half times the ascertained duties and taxes and other charges is paid to the Bureau of Customs. Products that are commercial samples, for exhibit purposes or of no appreciable commercial value are exempted from import duty.

The minimum labeling requirements apply for every imported or locally manufactured product:

  • Registered trade or brand name.
  • Duly registered trademark.
  • Duly registered business name.
  • Address of the manufacturer, importer or repacker of the consumer product in the Philippines.
  • General make or active ingredients.
  • Net quantity of contents, in terms of weight, measure or numerical count in the metric system.
  • Country of manufacture, if imported.
  • If a consumer product is manufactured, refilled or repacked under license from a principal, the label shall state the facts.

Following additional information may be required by the relevant government agency:

  • Whether the product is flammable or inflammable.
  • Directions for use, if necessary.
  • Warning of toxicity.
  • Wattage, voltage or amperes.
  • Process of manufacture used, if necessary.

If the product is certified to have passed the consumer product standard prescribed by the Bureau of Product Standards, the label must contain the Product Standard (PS) quality mark. Exemptions from the above marking requirements include: articles that cannot be marked prior to shipment without injury or at prohibitive expense; crude substances, crude products, and products imported for use by the importer and not for resale in their imported form; or products produced 20 or more years ago. For these items, the container must indicate the country of origin and product name. Mislabeling, misrepresentation or misbranding may subject the entire shipment to seizure and disposal.

2. Taxation.

Taxes on corporations are based on whether the corporation is classified as domestic (organized under Philippine law) or foreign. A foreign corporation will be classified as "resident" if its business dealings actually involve presence in the Philippines (e.g., use of a branch office). Taxation of individuals is based on classification as citizens, resident aliens (generally, where the planned duration of stay is indefinite), nonresident aliens engaged in trade or business (generally, where the length of stay in the Philippines exceeds 180 days), or nonresident aliens not engaged in trade or business. Residency is important to determine matters such as application of tax treaties. A tax specialist should be consulted to advise you on how to best organize your company for tax purposes. Some areas to investigate closely for those doing business in the Philippines may include:

3. Intellectual Property.

The Philippine Government is a party to the Paris Convention for the Protection of Industrial Property, the Patent Cooperation Treaty, and is a member of the World Trade Organization and the World Intellectual Property Organization. Official responsibility for enforcing intellectual property rights (IPR) is shared by a number of Philippine Government agencies, including the Department of Trade and Industry (through the Bureau of Patents, Trademarks and Technology Transfer); the Department of Finance's Customs Bureau, as well as the Economic Intelligence and Investigation Bureau; the Department of Justice, local courts and police departments. An Inter-Agency Committee is the charged with recommending, coordinating, enforcing and implementing IPR-related policies and programs.

In 1993, the Philippines was moved from U.S. Trade Representative's (USTR) special 301 "priority" watch list to the "regular" watch list following the signing of an agreement between the two Governments which significantly strengthens IPR protection in the Philippines. The Philippines has so far implemented the administrative/executive items on schedule. While administrative enforcement of intellectual property rights has improved, IPR owners who must have recourse to the courts experience slower and less certain enforcement.

Recently, the Philippines moved to name special IPR courts. The Philippine Supreme Court, with Administrative Order No. 113-95, designated 48 courts to handle IPR violations in an effort to speed up adjudication of IPR cases. The order instructs all judges to terminate "as far as practicable" the trial of IPR cases in 60 days and to render judgment in another 30 days. While a positive step, it remains to be seen if the new courts will, in practice, resolve past problems in gaining judicial protection for IPR.

In order to protect your products from intellectual property rights (IPR) infringement, you should register their patents, trademarks, and brand names with the Bureau of Patents and Trademarks located at:

Bureau of Patents, Trademarks and Technology Transfer
1st Floor 361 Trade & Industry Bldg.
Sen. Gil J. Puyat Ave., Makati City
Phone: (632) 890-5211; 890-4950
Fax : (632) 890-4936
If you are seeking to protect or enforce your intellectual property rights in the Philippines, it is advisable to use an in in-country attorney specializing in IPR. A list of Philippine lawyers specializing in IPR cases is available from the U.S. Embassy's Commercial Section.

a. Patents.

Patents are covered by Republic Act 165 (Philippine Patent Law, as amended). Licensing is required if, after two years from registration, the patented item is not being utilized in the Philippines on a commercial scale or if the domestic demand for the patented article is not being met to an adequate extent and on reasonable terms. The life of a patent ranges from 5 to 17 years, depending on the type of patent registered. Inventions are protected for 17 years. Utility model patents and industrial design patents are protected for 5 years, and extendible for another two terms.

b. Trademarks.

Trademarks are covered by Republic Act 166 (Philippine Trademark Law, as amended). Trademark protection is granted for 20 years, and extendible indefinitely for succeeding 25-year terms. Every 5 years, the trademark owner must file an affidavit of use or non-use to avoid cancellation of registration. Non-use of a mark must be for reasons totally beyond the control of a registrant. Government restrictions, such as import bans, constitute justified non-use. Current practice dictates that internationally well-known marks should not be denied protection because of non-registration or lack of use in the Philippines. Pending legislation seeks to incorporate this practice as a specific provision under the Philippines' IPR laws.

Trademark protection is limited to the manufacturing or marketing of the specific class of goods applied for, and to products with a logical linkage to the protected mark. You should be aware that trademark counterfeiting is widespread in the Philippines. The U.S. / Philippine IPR agreement calls for amendments to the Philippine trademark law to provide protection for internationally well-known marks.

c. Copyrights.

Copyrights are addressed by Presidential Decree 49 and application for registration is through the National Library. Copyright protection is extended to U.S. citizens via Proclamation No. 99 of the Philippines. Philippine law is overly broad in allowing the reproduction, adaptation or translation of published works without the authorization of the copyright owner. The presidential decree allows the reprinting of any textbook or reference book required by the curriculum and certified by a school registrar if the material is actually retailing at 250 pesos or above or, if not actually retailing, the foreign list price converts to 250 pesos (about USD 9.50) or above. A 3% fee is paid to the foreign owner of the rights to the work in question.

d. Trade Secrets.

While there are no codified rules on the protection of trade secrets, existing civil and criminal statutes protect trade secrets and confidential information.

4. Foreign Corrupt Practices Act.

Historically, the Philippines has been associated with issues related to corruption. This environment has been improving, however, those exporting to or investing in the Philippines should be aware of the Foreign Corrupt Practices Act and know the difference, for example, between legal forms of facilitating payments and those type of payments which are or may be illegal (see Section II.D.1 in the "General Legal and Regulatory "Section).

5. Antitrust.

The Philippines currently has no comprehensive anti-trust legislation. However, there are statutes prohibiting unfair trade practices and the Philippines reserves the right, under the Constitution, to interfere in cases where unfair trade practices (such as price and production manipulation) adversely affect public interest. For example, Article 186 of the Philippine Penal Code makes certain acts in restraint of trade a crime. This Article allows punishment by both imprisonment and fines. Additionally, Section 19, Article XII of the 1987 Constitution contains a provision dealing with restraints of trade or unfair competition.

C. Environmental Policy and Regulations

1. International Conventions.

As the realization has grown that protection of the environment must be addressed on a global basis, the number of multilateral and bilateral agreements has proliferated. International environmental law is among the most dynamic with the negotiation of over 200 agreements since the early 1980s.

A review of the international treaties and conventions to which the Philippines is a party is essential. However, determining the applicability requires care and any such review must be continually updated. Although there may be environmental obligations, the country may not be a party to the relevant treaty or the treaty may not place any binding obligations on the state. Oftentimes, the treaty itself will not contain any important obligations, rather, these will be included in various protocols, to which the country may or may not be a party.

Three of the most important and newest multinational environmental treaties, Climate Change3, Biodiversity4, and Desertification5 have no real enforceable obligations at this time. However, other agreements, such as the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and the 1987 Montreal Protocol to the 1985 Vienna Convention for the Protection of the Ozone Layer (Montreal Protocol) use trade restrictions as a means of achieving international environmental standards. For example, CITES permits parties to prohibit imports and exports of endangered and threatened species of wildlife. The Montreal Protocol requires that the use and production of chlorofluorocarbons and other ozone depleting chemicals be phased out and stipulates that parties ban the imports of controlled substances from nonparty states. Although these treaties may conflict with the General Agreement on Trade and Tariffs (GATT), they are, in effect, exceptions to the GATT since as later treaties, they have priority. Where, however, a nonparty is a GATT member, GATT obligations remain and a waiver must be sought in the case of any conflicts. So, the use of these conventions is far from absolute.

There is an ongoing debate regarding the wisdom of using such international agreements to enforce environmental standards. One of the major questions is whether or not nations should be permitted to impose trade restrictions unilaterally based upon these agreements or only when such agreements are multilateral.

2. Country Specific Policies.

Generally, it is to be advised that the environmental concerns of the Filipino people should be heeded. The Philippine Constitution provides the basis for environmental protections and requires "the protection of the rights of indigenous cultural communities to their ancestral lands to ensure their economic, social, and cultural well-being." [1987 Philippine Constitution, Art. XII, section 5] Local environmental protections and restrictions apply to foreign owned enterprises and ones operations cannot be detrimental to the country's general health and environment in order to obtain coverage from most guarantee agencies.

Within the Philippines, the Department of Environment and Natural Resources is the primary agency responsible for protection, conservation, management, development, and exploration of natural resources. The Department of Environment and Natural Resources has been accused of making economic development of greater importance than environmental protection and conservation, but local environmental groups have become more active in recent years. Concerns over adverse environmental impacts by business activities have been presented by citizens groups. In one of the more prominent issues, the Philippines Environmental Action Network (PEAN) exerted pressure on Mitsubishi Corporation to halt production of a coal-fired thermal plant in Masinloc. The major environmental drivers within the country are:

There are significant issues regarding environmental policies and regulation in the Philippines. Although the basis laws and regulations exist, they are inconsistently enforced. There is generally weak enforcement of environmental laws and few incentives to invest in pollution abatement equipment. Fines for the discharge of pollutants may be imposed, but these fines have not been adjusted since 1976, despite numerous devaluations of the peso. Wastewater treatment systems are generally not properly maintained, operated, or improved. The general regulatory framework generally relies on standards applicable to all sources regardless of size or type of industry. Air pollution and water standards apply to all industrial facilities, with no difference for size or pollution intensity. Water discharge standards are further based on concentrations of pollutants rather than on total loadings to water bodies which allows dilution to be a means for compliance.

3. Applicable U.S. Restrictions.

Recently, the use of trade restrictions as a means of imposing environmental policies on foreign countries has gained favor.

Trade restrictions in the name of environmental quality may be grouped into four categories. The first category includes regulations on imports and exports adopted by all nations to safeguard their domestic resources and environment and to protect public health and safety. The imposition of such restrictions has traditionally been considered the prerogative of each sovereign state. The second category of trade restrictions is increasingly used as a policy tool to enforce environmental standards in international agreements. As discussed in the prior sections, these international conventions are subject to substantial debate and their enforcement is in question.

The third means of imposing trade restrictions is fairly controversial. States with stringent environmental controls are questioning the adequacy of environmental controls in other nations. The concern, however, is not merely about environmental issues but is tied to fears of unfair competition from foreign companies that are not subject to strict pollution controls. As a means of correcting these two perceived problems, a nation may employ unilateral trade restrictions to enforce national environmental objectives and induce the other nations to adopt equal environmental protections. Such measures often take the form of a surcharge or a ban on the import of certain goods. One such example of this has been the use of fish product embargoes by the United States. The U.S. has used such embargoes to achieve conservation and environmental objectives, the best known of which is probably the U.S. Tuna Ban where, pursuant to the Marine Mammal Protection Act, the United States banned imports of yellowfin tuna from countries that used dolphin-unfriendly methods. However, this type of trade restriction is subject to the provisions of the General Agreement on Trade and Tariffs (GATT) which forbids prohibitions and restrictions on exports.

Finally, the fourth category of environmental trade restrictions consists of controls on the export of hazardous products, technologies, and waste. Countries may ban the export of products that are barred from use in their own territory, they may permit the export of those products under regulations that require prior informed consent, or may negotiate multilateral approaches to the problem that adopt international standards for the hazards involved. For example, the export of pesticides is regulated by the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). The Act requires the registration of all pesticides sold in interstate or foreign commerce. Before an unregistered pesticide may be lawfully exported from the United States, the foreign purchaser must acknowledge in writing that the chemical is unregistered for us in the United States. This written statement which the exporter is required to obtain, must be submitted to the U.S. Environmental Protection Agency who then forwards copies to U.S. embassies in the importing countries for submission to appropriate officials. The US EPA is also required to notify foreign governments and international agencies when the registered status of a pesticide is canceled or suspended. Exported pesticides must also be adequately labeled as registered or unregistered under U.S. law.

The export of hazardous wastes has also been the subject of international negotiation. The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (Basel Convention) requires detailed notification and consent of the receiving country as a precondition for authorizing international waste shipments. Upon receipt of an exporters notice of intent to ship hazardous waste, the competent authority of the exporting country must provide the intended importing country, as well as any transit countries, with written notification of the proposed shipment. The notification must furnish detailed information, including the contractual parties, the terms, the composition and quantity of the waste, the measures to be taken in care of an accident, insurance data, and the proposed place and method of disposal. The importing country and any transit countries must submit a written response consenting to the shipment, denying permission for it, imposing conditions or requesting further information. Furthermore, under the Convention, parties must prohibit the export of the waste whenever there is reason to believe that it will not be managed in an environmentally sound manner.

 
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