Legislators in the Philippines currently drafting an anti-smuggling bill are considering making it mandatory for manufacturing exporters to put up letters of credit (L/Cs) if they want to withdraw from Customs the parts, components and raw materials they need to make goods for exports.

The Philippine Exporters Confederation (Philexport), however, is not happy with this and several other clauses in the Philippines' draft anti smuggling legislation currently being finalised by the Senate's Ways and Means Committee.

Sectoral bias

Philexport says the draft legislation is biased towards the imported textile and garments sectors and against exporters and domestic producers competing against imports.

The draft law contemplates a ban on the warehousing of all finished goods except textiles and garments, and it allows the garments and textile industry the exclusive privilege of withdrawing imports without government authority.

If the legislation is passed, importers of finished products, meanwhile, will be allowed to withdraw from customs imported goods by simply posting surety bonds.

Exporters penalised

Exporters however will enjoy neither of these privileges according to Philexport.

It says exporters will only be able to withdraw from Customs parts and raw material imports if they present bank guarantees or irrevocable domestic L/Cs. Surety bonds will not be honoured.

Financial constraints

Philexport complains that the guarantee or L/C arrangements, if forced upon exporters, would unnecessarily tie up their working capital.

The exporters association says around 80 per cent of Philippine exports - which totalled US$46 billion last year - depend on imported raw materials.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.