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January 15, 1953

Note: The Agreement entered info force, February 9, 1953.

Reference: This Agreement is also published in 185 UNTS, p. 384.

The Philippine Secretary of Foreign Affairs to the American Ambassador

REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FOREIGN AFFAIRS

Manila, December 29, 1952

Excellency.:

I have the honor to refer to outstanding tax problems confronting United States military authorities operating in the Philippines under the Military Bases Agreement which have been the subject of several communications from the Embassy particularly Note 629 and the memorandum of conversation attached thereto which embodies the discussions on the subject between representatives of the various agencies of the Philippine Government concerned and the Embassy.

Following a study of the problems raised by the Embassy on the matter and by way of implementing Articles V and XVIII of the aforesaid Agreement, my Government is now prepared to assure United States military agencies and their instrumentalities including their authorized contractors operating in the Philippines exemption from the contractor's tax of 3%, the excise or compensating tax of 7% and upwards, the foreign exchange tax of 17%, and the import licensing formality and fee of 2% in respect of goods and services imported by such agencies and instrumentalities from abroad or procured locally from importers, manufacturers and producers either by such agencies and instrumentalities directly or through the agency of private contractors acting for and in behalf, provided that such goods and services are exclusively destined for and actually utilized in the construction, operation, maintenance and defense of the bases, and provided further that the exemptions herein specified are subject to the following conditions.

In the case of the contractor's tax of 3%, the excise or compensating tax of 7% arid upwards and the import licensing formality and fee of 2%, the Philippine Government requires of the United States base commanders concerned or their respective contracting officers:

(a) to furnish this Department, through the Embassy, with four (4) certified copies of the bill of materials necessary for the accomplishment of any military project or construction under contract;

(b) to furnish this Department, through the Embassy, in the same number of copies specified in paragraph (a) a statement of the local bank upon which the letter or letters of credit will be opened, the name of the contractor or the importer if other than the contractor, the name of the carrying vessel or vessels and the approximate date or dates of arrival thereof;

(c) to assure this Department, through the Embassy, that all applicable contracts entered into contain a clause requiring the contractor concerned to account to the United States base commander or contracting officer, and/or to Philippine authorities concerned when so required, for all materials brought into the Philippines under each contract and the bill of materials corresponding to such contract; for this purpose a certificate in quadruplicate of the actual arrival, delivery and use of the materials and equipment required for which exemption has been granted should also be furnished duly supported by the pertinent commercial invoices and bills of lading;

(d) to furnish this Department, through the Embassy, a certificate in quadruplicate showing any material brought into the Philippines by any contractor in excess of the requirement of the United States Government for any military project or contruction after making a reasonable allowance normally not in excess of 3% for breakage and deterioration of each item specified in the bill of materials;

(e) to include in all contracts a clause prohibiting the removal from sites under the control of the United States military authorities concerned any material in excess of contract requirements or any material that has been rejected because of inferior quality until such excess or surplus material is first reported to the Department and the requisite clearance obtained for the removal of such materials. Normally, clearance will be granted in a few days.

(f) to furnish this Department, through the Embassy, with a certificate in quadruplicate of any changes in the bills of materials resulting from modifications or revisions of, contracts so that the appropriate taxes could be assessed and collected on the materials not required in the performance of such contracts as modified or revised;

(g) to report, upon discovery thereof, to this Department,, through the Embassy, any irregularity or excessive importation of goods into the Philippines by contractors under contract with the United States Government and/or any of its military agencies operating in the Philippines under the Military Bases Agreement;

(h) prior to the removal of imported goods from customs custody, to issue and furnish this Department, through the Embassy, four (4) copies appropriate certificate of every incoming shipment identifying such shipment to be a part, or the total, of the materials required in a specific contract or contracts as shown in the relevant bill or bills of materials; that in order to facilitate identification and clearance of each shipment, reference to the particular contract, project and/or job manner should be indicated in the certificate;

(i) to furnish this Department, through the Embassy, with two (2) certified copies each of the payment vouchers issued to individual contractors as payments are made, including such relevant data about these payments when and if requested by this Department;

(j) to submit to this Department, through the Embassy, such other data or information which experience may indicate to be necessary in order to further insure the limitation of the exemptions herein granted for the exclusive purpose for which they are expressly intended.

If for the purpose of expediting work in any military project it is considered necessary to acquire materials and equipment from stocks previously imported into the Philippines thereby making it necessary for the importers concerned in turn to replace their stocks thus disposed of, the United States base commanders concerned or their respective contracting officers are requested to furnish this Department, through the Embassy, a certificate in quadruplicate listing the previously-imported materials actually used on the projects and stating that the materials were furnished from local stocks because of the urgency of the need for them and requesting that the application for their replacement be approved. The Philippine Government is prepared to exempt from the three taxes and fee above-specified all importations for purposes of replacement if the materials and equipment covered by the application are of the type and quantity actually utilized in projects under the Military Bases Agreement. If the proposed replacement to be imported covers items that are not of the type and quantity actually purchased and utilized in United States military projects, a copy of the pertinent application to import such other items should be furnished this Department through the Embassy for individual consideration.

Subject to further agreement between the representatives of the American Embassy and this Department as to the administrative procedure by which the desired exemption from documentary stamp taxes on negotiable instruments issued by the United States agencies and instrumentalities operating under the provisions of Article XVIII of the Military Bases Agreement, could most conveniently be effected with particular reference to the specific agencies and instrumentalities to which the exemption is intended to apply, the Philippine Government agrees to the desired exemption from this tax.

The Philippine Government has already approved the exemption of imported materials from the import licensing formality and fee for all materials and equipment which are consigned to United States military bases in the Philippines pursuant to Resolution No. 81 of the Import Control Commission, dated May 22, 1952. A copy of this document is herewith enclosed for the information of the Embassy and the United States military authorities concerned. It is with a view to facilitating this exemption, however, particularly as it would also apply to importations of private contractors and importers acting for and in behalf of United States military authorities that an additional copy each of all the documents required to support any importation of materials for the purpose of securing exemptions from the contractor's tax of 3%, the excise or compensating tax of 7% and upwards, and the foreign exchange tax of 1795 is desired by the Philippine Government for the information and reference file of the Import Control Commission.

My government proposes that these exemptions take effect immediately upon receipt of a formal assurance from your Excellency's Government that the conditions above specified are acceptable and will be complied with by the United States military authorities concerned. Upon Your Excellency's acceptance of this agreement, my Government will immediately undertake to provide the necessary implementation by administrative means or otherwise, and to inform Your Excellency of the details hereof.

Accept, Excellency, the renewed assurances of my highest consideration.

His Excellency R. A. SPRUANCE
Ambassador of the United States of America
Manila

AGREEMENT IMPLEMENTING THE MILITARY BASES AGREEMENT WITH THE UNITED STATES

RESOLUTION NO. 81

(ADOPTED BY THE IMPORT CONTROL COMMISSION ON MAY 22, 1952)

"In conformity with the commitments o£ the Government of the Republic of the Philippines to the United States Government in official communications, treaties and agreements between the two governments, the usages of international law and diplomatic courtesies normally accorded diplomatic missions, it is hereby resolved:

"1. That shipments consigned to the United States Embassy and Consulates, the United States Armed Services, and other American Government Federal Agencies and U.S. citizen personnel for their official and personal use, are free from import control.

"2. That the exemption shall also apply to shipments consigned to other diplomatic or consular missions in the Philippines in accordance with the usages of International Law."

II

THE AMERICAN AMBASSADOR TO THE PHILIPPINE SECRETARY OF FOREIGN AFFAIRS

AMERICAN EMBASSY

Manila, December 29, 1952

Excellency:

I have the honor to refer to Your Excellency's note of December 29, 1952 and the Philippine Government proposals to implement Articles V and XVIII of the Military Bases Agreement.

I have discussed these proposals with the American base commanders and I am pleased to inform Your Excellency that they conform with our understanding of the staff level oral discussions, and with the wishes and needs of the American military authorities.

This note, therefore, is the formal assurance of my Government that the conditions specified in Your Excellency's note under acknowledgment are acceptable and will be complied with by the United States military authorities concerned.

It is my understanding that the Philippine Government will, on receipt of this note of acceptance of this agreement, undertake to provide the necessary implementation by administrative means or otherwise, of all of the provisions contained in this agreement and to inform me of the details thereof.

Accept, Excellency, the renewed assurances of my highest consideration.

R. A. SPRUANCE

His Excellency JOAQUIN M. ELIZALDE
Secretary of Foreign Affairs
Republic of the Philippines