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May 04, 1972

Note: The Agreement entered into force, May 4, 1972.

Reference: This Agreement is also published in XI DFA TS No. 1, P. 49.

The Government of the Republic of the Philippines and the Government of the United States of America have agreed to the sale of agricultural commodities specified below. This agreement shall consist of the Preamble, Parts I and III of the March 24, 1970 agreement, the Convertible Local Currency Credit Annex of the April 16, 1971 agreement and the following Part II:

PART II - PARTICULAR PROVISIONS

Item I.  Commodity Table:

Item II. Payment Terms:

Convertible Local Currency Credit

1. Initial Payment — 5 percent

2. Currency Use Payment — 20 percent of the dollar amount of the financing by the Government of the exporting country under this agreement is payable to the Government of the exporting country in accordance with paragraph 6 of the Convertible Local Currency Credit

Annex applicable to this agreement and on the following schedule one-half use payment applicable under this agreement will be due on May 1, 1973 and the balance of the currency use payment will be due on December 1, 1973. No requests for payment will be made by the Government of the exporting country prior to the first disbursement by the Commodity Credit Corporation under this agreement.

3. Number of Installment Payment — 15.

4. Amount of Each Installment Payment — Approximately equal annual amounts.

5.  Due Date of First Installment Payment — 5 years after date of last delivery of commodities in each calendar year.

6.   Initial Interest Rate — 2 percent.

7.   Continuing Interest Rate — 3 percent.

Item III. Usual Marketing Table:

Item IV. Export Limitations:

A.  The export limitation period with respect to each commodity financed under this agreement for commodities the same as the  commodities financed under this agreement shall be the period beginning on the date of this agreement and ending on the terminal date of the supply period or on the date  when all of the relevant commodities have been imported and utilized whichever date occurs later.

B.  For the purposes of Part I, Article III--A 3 of the agreement, the commodities considered to be the same as the commodities financed under this agreement are: for cotton — raw upland cotton and cotton and cotton textile; for feedgrains — corn, corn meal, barley, grain sorghum, rye, oats and including mixed feeds containing predominantly such grains; for tobacco - no export limitation required; for tallow

- no export limitation required.

C.  Permissible Exports:

The Government of the Philippines agrees that should Philippine exports of cotton textiles be increased during United States Fiscal Year 1973, or any such subsequent supply period during which cotton is being imported or  utilized, to over 41  million square yards it will procure and import with its own resources from the United States of America an additional quantity of cotton at least equal to the raw cotton content of such increase in its textile exports.

Item V. Self-Help Measures:

The Government of the Philippines continues to accord high priority increasing agricultural production and improving marketing. Among the principal areas to be emphasized are the following:

1. The Government of the Philippines will make every effort to assure that credit needs of small farmers, particularly in designated land reform areas are satisfied. Short term as well as medium and long credit will be provided at reasonable interest rates.

2. The Government of the Philippines intends to focus priority attention to the establishment of a rational and comprehensive water development policy. The policy will insure that majorefforts of government agencies are fully coordinated and directed to meeting the needs of the agricultural sector to the fullest extent and in the most efficient manner possible.

Within this overall context the Government of the Philippines intends to give adequate attention to irrigation needs to insure success of the new multi-cropping emphasis  outlined in the agricultural four-year plan.

3. The Government of the Philippines intends to focus a major portion its efforts to upgrading adaptive agricultural research capabilities and to the development of new packages of technology for food and feedgrain crops other than rice.    

4. The Government of the Philippines will give increased attention to the improvement and development production, marketing and distribution systems for rice, feedgrains, fish, meat and meat products.

5. The Government of the Philippines has agreed to give continuing and expanded attention  and support to ongoing population programs.

This effort will include substantial local currency support, major assistance to and  encouragement of initiatives by non-government organizations, active support from  Government of the  Philippines' agencies and implementation of policies contained in the 1971 Philippine population law. The Government of the Philippines also agrees to the use of currency generated under this agreement should it be necessary for successful implementation  of the  population programs.

6. In order to further accelerate agricultural and rural Developments, the Government of the Philippines will allocate an agreed percentage of the proceeds of this agreement for the implementation of a program designed to bring electrification to to the rural areas of the Philippines. In order to facilitate such a program, the Government of the Philippines has developed  a developed a Comprehensive National Electrification Plan which delineates the requirements and programs for the power sector including generation, transmission and  distribution projects along with the proposed financial plan for implementing this program.

Item VI. Economic Development Purposes for Which Proceeds Accruing to Importing Country are to be Used;

For economic development purposes as may be mutually agreed upon, including the self-help measures specified in Item V.

Item. VII. Other Provisions:

1.    The Government of the exporting country shall bear the cost of oceanfreight differential for commodities it requires to be  carried in United States flag vessels but, notwithstanding the provisions of Paragraph 1 of the Convertible Local Currency Credit Annex, it shall not finance the balance of the cost of ocean transportation of such commodities.

2.    The currency use payment under Part II, Item II 2 of this agreement shall be credited against (a) the amount of each year's interest payment due during the period prior to the due date of the first installment payment, starting with the first year, plus (b) the combined payments of principal and interest starting with the first installment payment, until value of the currency use payment has been offset.

3.    Notwithstanding paragraph 4 of the Convertible Local Currency Credit Annex, the Government of the importing country may withhold from deposit in the special account referred to in such paragraph or may withdraw from amounts deposited therein so much of the proceeds accruing to it from the sale of commodities financed under this agreement as is equal to the amount of the currency use payments made by the Government of the importing country.

4.    With reference to paragraph 4 of the Convertible Local Currency Annex, the Government of the importing country may make deposits proceeds from the sale of commodities included in Item I above within one year from the sale of the commodities within the importing country.

IN  WITNESS WHEREOF,  the respective  representatives, duly authorized for the purpose, have signed the present agreement.

DONE at Manila, in duplicate, this 4th day of May, 1972.

ADDENDUM TO AGREED MINUTES
PL-480 Title I Negotiations

Place    : Department of Foreign Affairs

Manila

Date     :  May 4, 1972

Currency Use Payments

Subsequent to the signing of the Agreed Minutes, the Chairman of the

U.S. Panel informed the Philippine Panel through Mr. Sergio Barrera (in the absence of Chairman Ancheta) of the following instruction just received from Washington:  With regard to actual payment of the currency use payments (CUP) under this agreement, although payments of the currency use payments of CUP  will fall due on the two dates specified, May 1, 1973 and December  1, 1973, actual payment of the amounts  due shall be  made only when the United States Government requests payment on or subsequent to those dates.

Importance of Immediate Request for Purchase Authorizations

The Chairman of the U.S. Panel emphasized the importance of having the Philippine Government instruct the Philippine Embassy in Washington to

request purchase authorizations for tobacco and feedgrains, and also tallow, immediately after the agreement is signed on May 4, 1972.

AGREED MINUTES
PL-480 Title Negotiations

Place    : Conference Room
Presidential Economic Staff
1440 Arlegui, Manila

Dates    : March 14, to April 25, 1972

For the Government of the Republic of the Philippines

Mr. Ruben B. Ancheta
Chairman, Presidential Economic Staff

Mr. Sergio A. Barrera
Member, National Economic Council

Mr. Bienvenido Villavicencio
Member, National Economic Council

Mrs. Angelina Tiangco
Member, Central Bank of the Philippines

Mrs. Alicia Reyes
Member, Development Bank of the Philippines

For the Government of the United States of America

Mr. Theodore A. Wahl
First Secretary of U.S. Embassy, Chairman

Mr. Joseph Guardiano
Program Officer, USAID, Mission to the Philippines, Member

Mr. Frank H. Denton
Program Officer, USAID, Mission to the Philippines, Member

Mr. Grover S. Robinson
Controller, USAID, Mission to the Philippines, Member

Mr. Frank I. Waddle
Agricultural Attache, U.S. Embassy, Member

Mr. John T. Hopkins
Assistant Agricultural Attache, U.S. Embassy, Alternate

Text and Terms

The two Panels agreed on the text of the Agreement to be signed at 10:30 a.m. on May 4, 1972.

The terms of the Agreement, mutually decided upon, are reflected in the written Agreement and the following documents which are an integral part of the Agreement:

a. The Preamble, Parts I and III  of the March 24, 1970 agreement; and

b. The Convertible Local Currency Credit Annex of the April  16, 1971 agreement.

The two Panels also agreed that:

a.  The March 23, 1970, Self-Help Minute of Understanding and

b. The termination clause of the March 24, 1970 agreement, apply to this Agreement as well.

Further Understanding Concerning Terms of Agreement

Subject to successful conclusion of third country consultations, it is the intention of the two governments to amend this Agreement later to  increase the feedgrains  from 110,000 metric  tons (Maximum  Export Market Value $6,127,000)  to 140,000  metric tons  (Maximum Export  Market  Value $7,558,000). It is understood that the purchase by the Government of the Philippines of feedgrains under this Agreement in excess of 86,300 metric tons is subject to certification by the Philippine Government's National Economic Council of such import needs.

It was specified during the negotiations that tallow to be imported under terms of the Agreement is to be used for animal feed only. The United States Panel noted that feed grade tallow is an essentially different commodity from tallow used for soap-making and similar purposes and voiced the expectation that the Government of the Philippines would make every effort to import 1,000 tons of feed grade tallow for experimental animal feed tests. The hope was also expressed that imports of feed grade tallow, particularly those used for experimental purposes, would not be subject to the Philippine tariff for "tallow". The  Philippine Panel indicated that this would be difficult in view of the need for Congressional action to alter the tariff schedule.

It was noted that the 5 percent Initial Payment is to be made in dollars at the time Letters of Credit are opened under specific Purchase Authorizations.

The two Panels agreed that the term "sale" as used in the phrase ".. .one year from the sale of the commodities within the importing country", appearing in Part II, Item VIII, Paragraph 4 of the Agreement, shall be interpreted to mean the date of arrival of the commodity in the importing country.

With respect to Paragraph 4 of the Convertible Local Currency Credit

Annex, it was agreed that the amount to be deposited in the special account does not include the related ocean transportation costs because such costs are not financed under this Agreement.

Use of Peso Proceeds

During the negotiations the Philippine Panel proposed inclusion in the minutes of a statement that peso proceeds could be allocated only for projects authorized  by Philippine law. The United States Panel pointed to the importance of avoiding provisions which would jeopardize the flexibility of the program to meet both self-help commitments and the letter and spirit of P.L. 480 legislation. It was decided that the language was not necessary since the purposes for which these funds might be used, including self-help measures under Part II, Item V. 5 and 6, have already been agreed to in separate bilateral agreements or will be covered by similar agreements in the future.

Shipment of Commodities

The United States Panel informed the Government of the Philippines that every effort should be made to purchase (loaded at United States ports)2,000 metric tons of tobacco by midnight June 30, 1972, since any portion of this 2,000 metric tons not shipped by then  will be lost to the  program. Tne value of such unpurchased quantity of tobacco would also be lost to the Agreement, except in the event that the United States Government later authorizes transfer of this value to use for feedgrain purchases, prior to end of the CY 1972 supply period.

The Government of the Philippines was also urged to purchase as much as possible of the feedgrains authorized under the program by midnight June 30,  1972, and the hope was expressed that 60,000 metric tons or more, could be purchased (loaded at United States ports) before that date.

The Philippine Panel was informed that cotton will probably not be shipped under this program before October or November 1972.

Usual Marketing Requirements

It was urged that the usual marketing requirement for each commodity

specified in the Agreement was acceptable to the Government of the Philippines and that the UMR is presumed to be the minimum quantity that would be imported through normal channels in the absence of a PL — 480 Title I sales agreement and, therefore, must be imported commercially even though the full allotment under  Title I is  not utilized. It was further agreed that purchases against the usual marketing requirements are to be financed by the Philippines from its own resources.

It is understood that, to the maximum extent feasible, the Government of the United States is prepared to finance under three-year credits the portions of the usual marketing requirements in Part II, Item III of this Agreement which are required to be purchased from the United States. To this end, the United States Government has to date, provided three-year  credits of $13,000,000 for cotton and/or tobacco for shipment by June 30, 1972. Additional three-year credits are contemplated for cotton and/or tobacco (and possibly feedgrains) to be shipped during the period July 1, 1972 to December 31, 1972.

Rights to Cancel Purchase Authorizations

It was agreed that the United States Government, on prior notice to the Government of the Philippines, may cancel the uncommitted balance of a purchase authorization or refuse to issue a purchase authorization at anytime that a commodity is determined no longer to be available for PL-480  programs, even though it is included in the commodity list of the Agreement.

Self-Help

The Government of the Philippines understands that in order to fulfill requirements of PL-480  legislation it is required to report  annually by December 1 on progress made in carrying out self-help measures included in the Agreement and on any  other  related measures which contribute to improvement of agricultural production.

Compliance Reporting Requirement

It was agreed that the Government of the Philippines would provide compliance data, as specified in  Part I, Article III, D. 2. 3. and 4. of the Agreement, 15 days after the close of each calendar quarter. The Government of the Philippines agrees to return completed "arrival and shipping information" (ADP sheets) with appropriate notations certifying receipt of all commodities as soon as possible, but not later than 30 days from the date of unloading in the importing country or 30 days from the receipt of the ADP sheets, whichever is later.

Individuals for Consultation

It was agreed that the Government of the Philippines will designate an individual or agency with  whom representatives of the United States Government may consult regarding the implementation of the Agreement such as (1) commodity arrival and off-loading information, (2) marking or identifying and  publicizing arrivals, (3) assurances against resale and  transshipment (4) data relating to imports and exports. The Philippine Panel informed the U.S. Panel that the Chairman of the Reporting Committee for the Agricultural Commodities Agreements created under Administrative Order No. 241, series of 1970,  has been designated to assume responsibility for liaison with the United  States  Government  concerning the  following  additional points; (5) information on deposits and disbursements  of local currency proceeds, (6) carrying out self-help measures and (7) reconciliation of accounts.

Ocean Freight (Differential)

The United States Panel pointed out that the United States Government will pay only the ''differential" between United States and foreign flag rates on the 50 percent required to be shipped in United States flag vessels. It was noted that the differentials are computed on the basis of third flag freight rates which reflect the actual freight market conditions at a particular time, and that a differential is computed individually for each United States flag vessel.

World Trade Considerations

It was understood by the Government of the Philippines that violation of Part I, Article III A. 1.2. and 3.  may halt purchase authorizations, prejudice possible  new agreements, and result in a dollar refund.

Identification and Publicity

It was agreed that the Government of the Philippines would publicize widely that the commodities financed under the Agreement  are being provided on a concessional basis.

Interest Bearing Accounts

It was agreed that pesos due to the United States Government under this Agreement may be deposited in interest bearing accounts in banks in Philippines selected by the Government of the United States of America.

Cost and Value Figures

It was noted and agreed that commodity commitments of the Agreement are in terms of dollar values  and not quantities  and that the export market values of commodities represent the total amount for which purchase authorizations would be issued. In the case of cotton subject to foreign arbitration for quality, the market value also includes the 2 percent of the dollar value of raw cotton which is required to by the importing country.