83 OG No. 31, 3528-117 Supp. (August 3, 1987)
"1. Any foreign entity/third party offshore may bring into the Philippines crude oil, and other feedstocks/intermediate products for further processing into finished petroleum products, over which it shall retain ownership, to be processed by a local oil company under a processing agreement, in consideration for a processing fee payable in foreign currency, into refined petroleum products which the foreign entity/affiliate shall ship out of the Philippines. It is understood that all references herein to foreign-owned crude oil shall also include such intermediate products for feedstocks.SECTION 2. Swaps/exchanges. - Item-section No. 5 of LOI No. 1352 is also hereby amended by inserting an additional subsection No. 5-A at the end thereof, to read as follows:
"Local oil companies may process additional volumes of their own-imported crude to exploit export opportunities for petroleum products as they occur."
"5-A. Swaps/exchanges. Any arrangements for the swap/exchange of petroleum products (on the one part) processed by a local oil company refinery out of the foreign-owned crude oil under an export processing agreement, as herein contemplated, and originally intended for export by the foreign entity/affiliate, with petroleum products (on the other part) refined by the belonging to a local oil company, on a value-for-value basis using internationally recognized reference prices as may be specified hereafter by the Energy Regulatory Board (e.g., prices at Singapore, USA, North West Europe, etc.) shall be allowed; in which case, such foreign entity/affiliate shall continue to enjoy all the benefits and incentives under this Letter of Instructions, provided, that the petroleum products received in swap/exchange from the local oil company are actually exported by the foreign entity/affiliate. Such foreign entity/affiliate shall not be deemed howsoever to have engaged in trade or business in the Philippines, and, therefore, no taxes, duties, fees, charges and other imposts, including income taxes, shall be due and collected on account of such swap/exchange of petroleum products.SECTION 3. - Continuity of export processing incentives. - Nothing in this Order or in any prior and existing other laws, presidential decrees, executive orders, letters of instructions, including administrative orders, rules and regulations, since the enactment of LOI No. 1352, shall operate or be construed as an interruption, disruption, diminution or impairment whatsoever of the privileges, benefits and incentives available under LOI No. 1352, previous to the effectivity of this Order.
"For purposes of such product swaps/exchanges, the petroleum products to be actually exported by the foreign entity/affiliate after the swap/exchange shall be deemed to be the processing yield, results for the crude oil brought into the country by the foreign entity/affiliate, as certified to by the Energy Regulatory Board.
"The petroleum products received in swap/exchange by the local oil company, if these are intended for local sale, shall be subject to applicable excise taxes, fees, charges and other imposts, except customs duties and other import charges and fees since they have already been paid by the local oil company on their products given in swap/exchange. However, the subsequent export of said swapped/exchanged petroleum products by the local oil company shall continue to be given the same tax/duty treatment accorded to other petroleum product exports, thereby allowing recovery by the local oil company of the import duties, charges, imposts and other fees paid on its products given in swap/exchange. The local oil companies shall be allowed to recover the excise taxes, including taxes on refinery fuel and loss volumes, that may have been paid in the case of products given in swap/exchange which were taken or lifted from tax-paid stocks."