Retail

Trade Liberalization Act 2000 Section 2: Declaration of Policy Rationale: Shift from a protectionist policy to a more liberal one, to increase competition and efficiency among retailers RTLA 200: Amended Retail Trade Nationalization Law (1957), which only allowed Filipinos or Filipino wholly owned corporations to engage in the retail industry Goals: Increase global competitiveness of Filipino goods and services Bring down prices for Filipino consumers Benefit small retailers; sari-sari stores Section 3: Definitions Retail Trade shall mean any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for consumption. a. Habitual must not be incidental to the primary purpose of a corporation Exemptions: Operating a pharmacy in a hospital, selling cellphones by a telecom company, used for a public service; operating a restaurant in a hotel b. General Public Target clientele or customers not only to a particular person Generally they are final users Not only look at nature of goods but also require purpose or use to which goods are bought What about sale limited to officers of a company? Yes, still included! c. Consumer merchandise, commodities Use of goods resulting in immediate destruction, gradual decay, transformation of other goods Goods which DIRECTLY satisfy human wants and desires needed for home and daily life i. Some examples: Food, drugs, cosmetics, devices ii. Is this a consumer good? 1. A manufacturer who sells rubber products to government enterprises used for automotive assembly plants? NO 2. Diesel generating unit: NO iii. Distinguished from producer goods: tools/raw material which are factors in production of other goods that satisfy wants indirectly "High-end or luxury goods" shall refer to goods which are not necessary for life maintenance and whose demand is generated in large part by the highest income groups. Examples: jewelry, designer bags, clothing or footwear, leisure and sporting goods, electronics and other personal effects Exceptions, not covered by the law: Sales by manufacturer, laborer or worker, or processor to the general public: Capital does not exceed P100,000 Sales regardless of capitalization o Farmer or agriculturalists products of his farm (regardless of capital) o Restaurant operations (regardless of capital), provided its only incidental to the business o Those manufactured, processed, or assembled in a single outlet

Products to use a service to the general public Sale to government, its agencies, GOCCs

Sec. 4: Natural-born Filipino who has lost his citizenship Acquire same rights as a Filipino citizen if he resides in the Philippines at least 180 days/year

Section 5: Foreign Equity Participation Who may invest or engage in retail trade? To determine who may qualify, the law creates 4 categories based on how much capital is needed to invest in a particular retail endeavor.
! Category!A! Category!B! Category!C! Category!D!(High!end! or!Luxury!products)! $250,000!

Paid;up!capital!equivalent!to:! <!$2.5!million!!! Who!may!invest!or!engage!in! Exclusively+for+ Filipinos+&+entities+ retail!business?!! wholly+owned+by+ Filipinos++ +

Safety!mechanisms!
Public!offering!for!shares!of! stock!(Sec.!7)! Promotion!of!Locally! Manufactured!goods!(Sec.!9)! + + + +

$2.5!!x!<!$7.5!million! X!!$7.5!million! May+be+wholly+owned+by+ foreigners+except+for+the+ May+be+wholly+owned+by+foreigners++ first+2+years+of+effectivity+of+ this+Act+(60%)+ (Sec. 6) Investments+for+the+establishment+of+the+store++ + $830,000+ Maintain+full+amount+of+prescribed+minimum+capital+requirement+in+the+ Philippines+(certified+by+BSP+and+DTI)+ + + 80%+:+30%+:+8+years+ 30%+of+aggregate+stock+inventory+made+in+the+ Philippines+:+10+years+

10%+of+aggregate+stock+ inventory+made+in+the+ Philippines+:+10+years+

Section 7: Public offering of shares of stock If foreign ownership under Categories B & C exceeds 80%, then they must offer 30% of equity to the public through any stock exchange in the Philippines within 8 years from start of operations

What if a domestic entity is owned by another entity rather than individuals, when is it deemed domestic owned? Grandfather rule: Look at the controlling interest of individual stockholders in the second layer of corporate ownership o Investments: A corporation with 60% of capital owned by Filipinos is considered a Philippine national o Ex: 7-11 is owned primarily by President Chain Store, another corporation. Its shares of stocks are predominantly owned by Taiwanese, hence PCS will be considered as a Taiwanese national

 Who are foreign retailers? Not a Filipino citizen Entity not wholly-owned by Filipinos including domestic entities not wholly-owned by Filipinos Can any foreigner or foreign entity invest in our retail industry? NO! Must possess these qualifications o Minimum net worth $200 million in Categories B and C $50 million in Category D 5 retailing branches or franchises worldwide unless retailer has at least one store capitalized at $25 m o 5-year track record in retailing o Reciprocity rights: we will allow them if they will also allow us the same rights and privileges Section 9: Promotion of locally-manufactured products See table. This will take effect 10 years following the effectivity of RTLA 2000 Stock inventory refers to the actual goods or products for resale Section 10: Prohibited activities of qualified foreign retailers Qualified foreign investors may not engage in certain activities such as: o Use of mobile or rolling stores/carts o Use sales reps o Door-to-door selling o Operate restaurants and sari-sari stores o And others provided by DTI Section 11: Implementing Agency; Rules and Regulations Primarily: DTI Secondarily: o SEC o BSP o NEDA Section 12: Penalty Clause Yes, punishable imprisonment of 6 yrs 1 day x 8 yrs Or Fine P1m x P20 m Application of Anti-Dummy Law; Exceptions Foreigners may not use Filipinos as dummies to enjoy privileges reserved for Filipinos or Filipino corporations Exception: Technical work, provided no Filipino can do such & with express authority of Presidente Later amended by PD 715 to allow aliens to be members of Board of Directors of governing bodies of corporations engaged in partially nationalized activities Under Anti-dummy law, allowed or not allowed? 1. Filipina common-law wife of a Chinese national: yes, she is allowed if uses capital from paraphernal properties; If her husband takes part in mgmt., there is a violation 2. Alien donates money to a Filipino citizen to invest in retail trade: Allowed, if done in good faith o