Revised Manual of Rules and Regulations Governing Non-Trade Foreign Exchange Transactions

January 3, 1992 CBP CIRCULAR NO. 1318-92 REVISED MANUAL OF RULES AND REGULATIONS GOVERNING NON-TRADE FOREIGN EXCHANGE TRANSACTIONS Pursuant to Resolution No. 1323 dated December 4, 1991 and Resolution No. 1415 dated January 3, 1992, the Monetary Board hereby adopts and promulgates the following rules and regulations governing non-trade foreign exchange transactions: CHAPTER I Foreign Exchange Receipts and Acquisitions SECTION 1. Foreign Exchange Earnings of Residents . Only the following residents of the Philippines are required to sell foreign exchange earned, acquired or received by them in connection with their business operations: a. Recruitment, placement, manning and crewing agencies; b. Insurance companies or agents; c. Communication and telecommunication companies; d. Hotels, restaurants, resorts, gift shops and duty-free shops, tour operators, travel agents organizing domestic tours and other establishments duly accredited by the Department of Tourism as tourism-oriented establishments; e. Airline owners and operators engaged in international flight operations; f. Shipowners and operators engaged in overseas operations; g. Those engaged in port operations, marine services, catering services, hauling services and other similar services abroad; h. Local agents of foreign carriers; i. Those rendering management, engineering, planning and other services abroad, whether as prime contractors or sub-contractors; j. Those winning construction or supply contracts on foreign-assisted projects; k. Overseas construction contractors and construction-related contractors; l. Amusement and gaming establishments; m. Indentors, commission agents, or Philippine representatives of foreign firms; n. Oil companies engaged in selling aviation gasoline, bunker oil and other oil products to aircrafts and vessels of foreign companies; o. Recipients of profits, dividends, earnings, divestment proceeds from outward investments funded with foreign exchange purchased from AABs. The sale shall be to Authorized Agent Banks (AABs) and shall be made within three (3) business days from receipt of foreign exchange in the Philippines. Foreign exchange acquired or received abroad by the above-mentioned Philippine residents shall be inwardly remitted net of operational expenses paid in foreign exchange, within fifteen (15) business days from the date of acquisition, and shall be sold for pesos to AABs within three (3) business days from their receipt in the Philippines. Except as may be provided by regulations that may be enacted from time to time, export receipts, proceeds of foreign loans, and foreign exchange inwardly remitted as foreign investments shall continue to be sold to AABs. Whenever the term "resident" is used in this Circular, it shall have the same meaning as provided in Section 49 (e) hereof unless the context of the provision indicates otherwise. SECTION 2. Authorized Agent Banks (AABs) . All categories of banks duly-licensed by the Central Bank (CB) shall be considered as Authorized Agent Banks. SECTION 3. Reportorial Requirements . All residents mentioned in Section 1 (a to o) are required to submit to the Foreign Exchange Regulations Department of the Central Bank (hereinafter referred to as FERD),a duly notarized report regarding their foreign exchange earnings, acquisitions or receipts, under a report form prescribed by said Department. SECTION 4. Verification . The Central Bank thru FERD may undertake the examination of the books of accounts and related records on foreign exchange transactions of resident persons mentioned in Section 1 (a to o) hereof to verify compliance with the provisions of this Circular. SECTION 5. Special Deposit Account . Upon application and on grounds of operational necessity, any resident foreign exchange earner mentioned in Section 1 may be allowed by the Central Bank, subject to such limitations and conditions as may be imposed, to retain a portion of its foreign exchange earnings in a special foreign currency deposit account with AABs. Foreign airlines and shipping companies authorized to do business in the Philippines may also open and maintain such accounts where they may deposit their foreign exchange receipts from the sale of passenger tickets and miscellaneous charge orders (MCOs) in the Philippines prior to their outward remittance pursuant to existing regulations. SECTION 6. Inward Remittance Requirement for Multinational Headquarters . Multi-national area headquarters in the Philippines under Presidential Decree No. 218 now Book III of E.O. 226 shall annually remit to the Philippines not less than US$50,000.00 or its equivalent in acceptable foreign exchange for its operations. A certification issued by an AAB of inward remittance and conversion to pesos of at least US$50,000.00 or its equivalent in acceptable foreign currencies shall be submitted to FERD within thirty (30) days after the close of each fiscal/calendar year. SECTION 7. School Expenses of Foreign Students .Foreign exchange which the Department of Education, Culture and Sports (DECS) requires foreigners accepted for enrollment in Philippine colleges and universities to bring into the Philippines for the purpose of paying for their tuition fees, other school expenses, board and lodging shall be sold to an AAB for pesos. SECTION 8. Issuance of Receipts . Purchases of foreign exchange for pesos by AABs shall be covered by their own official receipts. CHAPTER II General Rules on Foreign Exchange Disbursements and Transfers of Local and Foreign Currencies SECTION 9. Transfer Abroad of Foreign Exchange . Foreign exchange not required to be sold to AABs under Section 1 of this Circular or under any regulation, may be freely sold or brought out of the country. SECTION 10. Import of Foreign Exchange . Any person, whether a resident or a non-resident, may freely bring into the Philippines any amount of foreign exchange. SECTION 11. Import/Export of Philippine Currency . No person may import or export nor bring with him into or out of the country, Philippine notes and coins, checks, money orders and other bills of exchange drawn in pesos against banks operating in the Philippines in an amount exceeding P5,000.00 without authorization by the Central Bank. SECTION 12. Contracts Involving Consideration in Foreign Exchange . Except as may be allowed by this Circular, foreign exchange shall not be sold by an AAB to fund a contract involving a non-trade transaction, such as a foreign loan, entered into by a resident stipulating payment or outward remittance of foreign exchange, unless such contract has been previously approved by the Central Bank. SECTION 13. Prohibition Against Deposits Abroad of Residents . No resident shall open and maintain foreign exchange, deposit accounts abroad involving outward remittance of foreign exchange unless otherwise permitted by law or by Central Bank regulations. SECTION 14. Sale of Foreign Exchange by (AABs) . AABs may sell foreign exchange without need of prior Central Bank approval for certain transactions as provided in this Chapter. SECTION 15. Travel Allowances for Residents . AABs may sell to residents travel funds up to a maximum of US$5,000.00 per trip, per person irrespective of age, and regardless of duration, destination or purpose of travel. SECTION 16. Educational Expenses . AABs may sell foreign exchange up to a maximum of $30,000.00 per person per year to cover reasonable educational expenses upon presentation of proof of enrollment in the school abroad. SECTION 17. Medical Expenses . AABs may sell foreign exchange for reasonable health and medical expenses abroad upon presentation of an estimate of such expenses or proof of actual expenses from a foreign hospital, clinic or physician. The sale of an amount in excess of US$50,000.00 shall require prior Central Bank approval. SECTION 18. Support of Dependents Abroad . AABs may sell to a resident up to a maximum of US$1,000.00 per month for each dependent to cover the monthly living allowance abroad of a: (1) child not more than 21 years of age, (2) spouse, or(3) parent, upon presentation of proof that the dependent is in fact residing abroad and of documents evidencing applicant's relationship with the claimed dependent. SECTION 19. Other Remittances of Residents . AABs may sell to residents foreign exchange for the following purposes, provided these are supported by documents evidencing the legitimacy of the obligation and the correctness of the amount applied for: a. Port disbursements abroad of aircraft and vessels of Philippine registry or chartered leased by domestic operators for fuel, ship's stores and similar supplies, harbor/airfield fees, repairs and maintenances; b. Mail fees; c. Fees for correspondence courses; d. Salvage fees; e. Foreign advertising costs; f. International settlement of accounts for telegraph, telegram, cable, radio, satellite and other communication facilities; g. Membership dues and registration/examination fees; h. Subscription to foreign magazines or periodicals for non-commercial use; i. Real property taxes due to foreign governments; j. Income taxes due to foreign governments from foreign nationals with special temporary visa and Department of Labor and Employment (DOLE) employment permit, if required by law, who are employed in the Philippines and whose entire compensation (salary, allowances, bonuses and other fringe benefits) is paid for in foreign exchange inwardly-remitted thru an AAB to the Philippines; k. Commissions on exports due foreign agents not exceeding 5% of the value of the export shipments; l. Rebates, discounts & refunds of export proceeds due to defective export shipments; and m. Maintenance expenses of overseas trade offices of exporters. SECTION 20. Transfers of Emigrant's Assets . AABs may sell foreign exchange to emigrants for remittance of their assets to their new country of domicile, as follows: Initially, US$50,000.00 or 50% of total capital assets, whichever is higher. The balance may be remitted in two (2) equal annual installments beginning one year after the initial remittance is made Applications shall be accompanied by documents evidencing proof of emigrant's acquisition of permanent residence status abroad and that the amounts applied for remittance represent assets of the emigrant. SECTION 21. Remittance of Salaries of Temporary Residents . AABs may sell foreign exchange to foreign nationals with special temporary visas employed in the Philippines under Department of Labor and Employment (DOLE) employment permits not more than 50% of their salaries (excluding bonus and other fringe benefits) net of withholding tax due. Applications to purchase foreign exchange shall be accompanied by copies of employment contract of the expatriate and Alien Employment Permit issued by DOLE. SECTION 22. Technology Transfer Payments . AABs may sell foreign exchange for the remittance of royalties, fees, rentals or other forms of payment due a foreign or foreign-owned company abroad under a technology transfer agreement, upon submission of proof that the agreement has been approved and registered with the Bureau of Patents, Trademarks and Technology Transfer (BPTTT),and that the amount of royalty/fee/rental sought to be remitted is in accordance with the terms of the agreement as approved and registered. Technology Transfer Arrangements shall refer to contracts or agreements entered into by and between domestic companies and foreign companies and/or foreign-owned companies involving the transfer of systematic knowledge for the manufacture of a product, for the application of a process or for the rendering of a service, including the transfer, assignment or licensing of all forms of industrial property rights; computer software licensing contracts; marketing/distributorship agreements for the marketing of products locally; and management contracts. SECTION 23. Payments for Copyrights . AABs may sell foreign exchange for the remittance of: a. Royalties/fees due non-resident authors, publishers or copyright owners of textbooks or reference books reprinted by local publishers or printers under reprinting awards of the Reprint Committee constituted pursuant to P.D. 285 as amended by P.D. 200 and P.D. 1203; or b. Royalty payments for other copyright grants other than for the reprinting of textbooks and reference books upon submission of proof that such payments are in accordance with the terms of the covering agreement as approved by the Central Bank thru FERD. SECTION 24. Producer's Shares in Movie Revenues/TV Film Rentals . AABs may sell foreign exchange for the remittance of the producer's share in the net revenues (gross proceeds less local distribution expenses) derived from the distribution/exhibition of movie films brought into the country under a distributorship contract as approved by the Central Bank. AABs may also sell foreign exchange for the remittance of TV/film rentals or license fees in accordance with the rates stipulated in the contract as approved by the Central Bank. SECTION 25. Retainer Fees . AABs may sell to a resident foreign exchange for the remittance of retainer's fees due foreign professionals acting as liaison, counsel, agent or representative abroad of the resident upon submission of proof that such remittance is in accordance with the terms of a contract or agreement as approved by the Central Bank. SECTION 26. Reinsurance Premia . AABs may sell to a resident insurance company or broker or to the resident agent of a foreign insurance company foreign exchange for the remittance of reinsurance premia to reinsurers/reinsurance brokers abroad, and payments for losses upon presentation of a clearance to make such remittance from the Office of the Insurance Commissioner. SECTION 27. Revenues of Foreign Airlines and Shipping Companies . AABs may sell to foreign airlines or shipping companies authorized to operate in the Philippines or to their resident agents, foreign exchange for remittance of receipts from ticket sales or freight payments, net of commissions due local agents and other local expenses, upon submission of a statement of net remittable receipts certified by an independent certified public accountant and proof of payment of applicable taxes. SECTION 28. Lease Payments on Aircrafts and Fees for Charter of Vessels . AABs may sell foreign exchange to residents for remittance of lease payments on aircraft or bareboat or time charter fees due foreign-owned vessels upon submission of proof that the lease or charter contract has been approved by the Central Bank, and that the amount applied for remittance is in accordance with the terms of the contract as approved. SECTION 29. Taxes . In all cases where AABs are authorized to sell foreign exchange for remittance, the AAB shall ensure that taxes, when required, have been paid and that the remittance is net of such taxes. SECTION 30. Reportorial Requirement . All AABs are required to submit daily to FERD, under IOS Form I, a report of their foreign exchange sales to residents for any of the purposes set forth in this Circular. SECTION 31. Verification . The FERD shall subject to post-audit, foreign exchange sales of AABs, to verify compliance with the provisions of this Circular. CHAPTER III Foreign Investments in the Philippines SECTION 32. Definition of Foreign Investment . For purposes of this Circular, foreign investment shall mean investment in the form of foreign exchange and/or other assets actually transferred to the Philippines which assets shall be assessed and appraised by the Central Bank. SECTION 33. Necessity of registration . All foreign investments in equity or in securities listed in the Philippine stock exchanges (listed securities) or in certificates of indebtedness issued by the Philippine government or its agencies/instrumentalities shall be registered in order to be entitled to capital repatriation and dividend/interest remittance privileges. SECTION 34. Where to Register a. Direct Foreign Equity Investment Direct foreign equity investments shall be registered with the Central Bank thru the Foreign Exchange Operations and Investments Department (FEOID),provided, that foreign equity investments in a domestic bank not listed in the stock exchange shall be registered only after approval of the foreign investment by the Monetary Board. b. Investment in Government/Listed Securities Applications for registration of foreign investment in certificates of indebtedness issued by the Philippine government, or its political subdivision, agencies/instrumentalities or in securities listed in the Philippine stock exchanges including new issues, additional issues, stock rights, stock dividends, stock splits and the like, shall be filed by an authorized securities dealer/broker(ASD/B) or underwriter with the Central Bank or with the custodian bank designated by the foreign investor. The Central Bank or designated custodian bank shall accordingly issue the Central Bank Securities Transaction Document (STD).The original copy of STDs issued by custodian banks on behalf of the Central Bank, together with the complete supporting documents shall be submitted with in two banking days from its issuance to Central Bank thru FEOID, for post audit. c. Capitalized Oil/Geothermal Expenditures Capitalized oil/geothermal energy exploration/development expenditures shall be registered with the Central Bank as foreign investment. For this purpose, capitalized oil/geothermal exploration/development expenditures shall refer to expenses incurred by firms pursuant to government-approved service contracts, which expenditures shall be recovered from future revenues earned from the project. SECTION 35. Registration Procedure . The procedure for registration of foreign investments including the requisite supporting documents is outlined in Appendix "A" hereof entitled, "Registration Procedure". SECTION 36. What Investment Can Be Registered . Registration shall only be granted to foreign investments: a. authorized to enter the Philippines under existing laws; and b. actually transferred to the Philippines in the form of: 1. Cash Foreign exchange duly certified by an AAB to have been inwardly remitted and converted into pesos for the account of the investee; and 2. In kind Other eligible assets consisting of: i) machinery and equipment; and ii) raw materials, supplies, spare parts, and other items necessary for the operation of the investee firm. The value of such eligible assets shall be assessed and appraised by the Central Bank. SECTION 37. Full and Immediate Repatriation /Remittance Privileges . Foreign investments duly registered with the Central Bank or with a custodian bank duly designated by the foreign investor, shall be entitled to full and immediate capital repatriation/dividend/interest remittance privileges. Without prior Central Bank approval, AABs are authorized to sell and to remit the equivalent foreign exchange representing sales/divestment proceeds or dividends/interest of duly registered foreign investment upon application and submission of a Central Bank Confirmation Document and other requisite supporting documents set forth in the procedures outlined in Appendix "B" hereof entitled, "Capital Repatriation/Dividend/Interest Remittance Procedure". SECTION 38. Unregistered Foreign Investments . Foreign investments not duly registered with the Central Bank or with the investors' designated custodian bank shall not be entitled to repatriation/remittance privileges except as provided in the immediately following section. SECTION 39. Investments Prior to March 15, 1973 . Capital repatriation or dividend remittance of direct foreign equity investments made prior to March 15, 1973 when Central Bank registration was not yet required under existing rules and regulations, shall be governed by the rules on Transfer of Emigrants' Assets outlined in Section 20 hereof. SECTION 40. Debt to Equity . Investments financed thru the debt to equity under Central Bank Circular No. 1111 dated August 26, 1986, Revised Central Bank Circular No. 1111 dated October 20, 1987 and Central Bank Circular No. 1267 dated December 20, 1990 shall be governed by said Circulars or any subsequent amendment thereto. SECTION 41. Other Related Remittances . The following foreign exchange remittances shall require prior Central Bank approval: a. Share in head office expenses of Philippine branches of foreign firms; b. Share in exploration expenditures of Filipino companies advanced by foreign companies/firms. SECTION 42. Temporary Placement of Divestment Proceeds . Pending reinvestment or repatriation, divestment proceeds of duly registered foreign investment, as well as cash dividends, interest payments, and divestment proceeds of stock dividend/splits declared on said registered investments, may, at the option of the foreign investor, be lodged with a selling ASD/B or in a trust/other liability account or in interest earning deposit accounts, e.g. savings and/or time deposit accounts with any bank. Interest earned thereon, net of taxes, shall be remittable in full, subject to the procedures outlined in Appendix "C" hereof entitled "Procedure for Temporary Placements of Divestment Proceeds/Cash Dividends/Interest Payments". SECTION 43. Reinvestment . Foreign investors may reinvest divestment proceeds or remittable dividends/interest of their Central Bank registered investments. The registration of such reinvestments shall be filed with the Central Bank or with the custodian bank designated by the foreign investor, as the case may be. SECTION 44. Imports and Exports of Stock Certificates of Philippine Firms .The Central Bank STDs duly signed by the authorized Central Bank officer shall serve as the authority to import/export the stock certificates of listed securities issued to foreign investors. SECTION 45. Reportorial Requirements . All sales and purchases of Central Bank registered foreign investments in listed securities shall be reported monthly by ASD/Bs to the Central Bank thru FEOID in the prescribed form within two (2) banking days from the end of reference month. CHAPTER IV Outward Investments by Philippine Residents SECTION 46. Outward Investments by Philippine Residents . A resident may invest abroad only if: a. the investments are funded by withdrawals from foreign currency deposit units (FCDUs);or b. the funds to be invested are not among those required to be sold to AAB for pesos; or c. specifically authorized by the Central Bank or by law. SECTION 47. Prior Central Bank Approval of Outward Investments . Prior Central Bank approval thru FEOID, shall be required on outward investments funded by foreign exchange purchased from AABs. The application for approval and registration of outward investments by residents shall be accompanied with the following documents: a. Project feasibility study on the foreign exchange earnings to be generated with priority for the development of new market for Philippine products; b. Statement as to whether the area of investment shall be made in industries whose period of gestation is fairly short, and whose products have developed markets abroad; c. Proposed financial scheme of the project; d. Projected income for three (3) years; and e. Such other documents as may be required on a case-to-case basis. Outward investments under stock option plan shall be governed by the following guidelines: a. Applicant-investor shall be limited to Filipino employees/executives of local subsidiaries/branches of foreign companies; b. The proposed investment shall generate foreign exchange earnings for the country; c. The investee-firm must have been operating profitably for the last three(3)consecutive years immediately preceding the application; d. The host country of the investee-firm must have no exchange control restrictions on outward remittances of foreign exchange accruing on the investments; and e. The investment shall be limited only to shares of stock of the head office or parent company of the local subsidiary/branch. SECTION 48. Inward Remittance and Sale to AABs . Foreign exchange acquired or received by residents as dividends/earnings/divestment proceeds from outward investments under the immediately preceding section, shall be inwardly remitted within fifteen (15) days from the date they acquired ownership thereof, and shall be sold for pesos to AABs within three (3) business days from their receipt in the Philippines. dctai CHAPTER V Offshore Banking System SECTION 49. Definition of Terms . As used in this Chapter, the following terms shall have the meaning indicated unless the context clearly indicates otherwise: a. "Offshore Banking" shall refer to the conduct of banking transactions in foreign currencies involving the receipt of funds principally from external sources and utilization of such funds, as provided herein; b. "Offshore Banking Unit" or "OBU" shall refer to a branch, subsidiary, or affiliate of a foreign banking corporation which is duly authorized by the Central Bank of the Philippines to transact offshore banking business in the Philippines; c. "Net office funds" shall refer to the funds remitted by the head office or branch abroad of a foreign bank to the OBU, as well as unremitted earnings of the OBU, minus such funds for the foreign bank's account as have been advanced by the OBU or is otherwise due from the head office or branch of such foreign bank; d. "Deposits" shall refer to funds in foreign currencies which are accepted and held by an OBU in the regular course of business, with the obligation to return an equivalent amount to the owner thereof, with or without interest; e. "Resident" shall mean i. an individual citizen of the Philippines residing therein; or ii. an individual who is not a citizen of the Philippines but is permanently residing therein; or iii. a corporation or other juridical person organized under the laws of the Philippines; or iv. a branch, subsidiary, affiliate, extension office or any other unit of corporations or juridical persons which are organized under the laws of any country and operating in the Philippines. f. "Non-resident" shall mean an individual, corporation or other juridical person not included in the above definition of "resident"; g. "Foreign currency deposit unit" or "FCDU" shall refer to that unit of a local bank or of a local branch of a foreign bank authorized by the Central Bank to engage in foreign currency-denominated transactions, pursuant to the provisions of R.A. 6426, as amended. "Local bank" shall refer to a thrift bank or a commercial bank organized under the laws of the Republic of the Philippines. "Local branch of a foreign bank" shall refer to a branch of a foreign bank doing business in the Philippines, pursuant to the provisions of R.A. No. 337, as amended; h. "Acceptable foreign exchange" comprise those foreign currencies which are acceptable to and exchangeable at the Central Bank and which form part of the international reserves of the country. SECTION 50. Approvals Required . A foreign bank may operate an offshore banking unit (OBU) in the Philippines, after issuance to it of a Certificate of Authority to operate by the Monetary Board and registration with the Securities and Exchange Commission. SECTION 51. Criteria for Selection . The following factors shall serve as basis for the issuance of certificate of authority to operate an offshore banking unit: (a) liquidity and solvency positions; (b) networth and resources base; (c) managerial and international banking expertise of applicant bank; (d) contribution to the Philippine economy; and (e) other relevant factors, such as participation in the equity of local commercial banks and appropriate geographic representations. SECTION 52. Pre-Operation Requirements . Upon advice from the Central Bank, a qualified bank shall submit a sworn undertaking of its head office, or parent company, through any of its duly authorized officers, supported by an appropriate resolution of its board of directors, to the effect that it shall: a. on demand, provide the necessary currencies to cover liquidity needs that may arise or other shortfall that its OBU may incur; b. manage the operations of its OBU soundly and with prudence, c. train continually a specific number of Filipinos in international banking and foreign exchange trading with a view to reducing the number of expatriates; d. provide and maintain in its offshore banking unit net office funds in the minimum amount of US$1 million; e. start operations of its OBU within 180 days from receipt of its certificate of authority to operate such unit; f. comply with applicable local laws relating to labor and employment; g. submit, before start of operations, other documents as may be required by the Central Bank such as certification or similar documents showing that it is duly authorized by the proper Government entity of its country to engage in offshore banking business in the Philippines. SECTION 53. Annual Fee . Upon issuance of a certificate of authority to operate an OBU in the Philippines, and yearly thereafter, the authorized bank shall pay the Central Bank a fee of not less than US$20,000.00. SECTION 54. Transactions with Non-Residents and/or with OBUs . An OBU may freely engage in all normal banking transactions with non-residents and/or with other OBUs, involving any currency other than the Philippine peso; Provided, that, in case of deposits of non-bank non-residents, each deposit shall be at least US$50,000.00 or its equivalent in other foreign currencies. SECTION 55. Transactions with Foreign Currency Deposit Units (FCDUs) . Subject to Central Bank regulations on FCDUs, an OBU may freely engage in the following transactions with FCDUs in any currency other than the Philippine peso: a. Accept time, demand and call deposits or issue negotiable certificates of time deposits; b. Borrow with maturities not exceeding 360 days; c. Deposit; d. Extend loans and advances; e. Invest in short-term debt instruments; f. Discount bills, acceptances, and negotiable certificates of deposits; g. Engage in foreign exchange trading; and h. Engage in such other transactions as are authorized under this section between OBUs and resident banks authorized to accept foreign currency deposits under the provisions of R.A. No. 6426, as amended. SECTION 56. Transactions with Residents which are not banks . An OBU may engage in the following transactions with residents which are not banks: a. Purchase foreign currency-denominated debt instruments; b. Extend foreign currency loans and advances, subject to existing regulations on foreign borrowings; c. Arrange importations of resident borrowers who are recipients of Central Bank-approved OBU foreign currency loans, subject to existing regulations on foreign borrowings; d. Negotiate inward (export) Letters of Credit (L/Cs) coursed thru their worldwide network of branches and correspondents subject to the following conditions: 1. OBUs shall bring foreign exchange which shall be sold to the domestic banking system and shall be sourced outside of the Trade Facility; 2. OBUs share in the total export L/C negotiation business shall be limited to of the growth (incremental) element in the country's total annual export. (In 1991, this shall not exceed US$400 million [which amount corresponds to 50% of the anticipated increase of 10% or US$900 million over 1990 exports].The initial limit of US$400 million for 1991 would be increased, on a cumulative basis, by a similarly assessed figure for 1992 and subsequent years until this equals 10% of total exports. Exports not covered by L/Cs, i.e.,done thru documents against acceptance/open account arrangements should be considered subject to this overall limit); 3. The submission to the Central Bank by the Offshore Bankers Association of the detailed mechanics of the process for equitably allocating the export negotiation business among the individual members of the Association. e. Provide full foreign exchange service for all foreign currency non-trade remittances and trade remittances resulting from or related to their own negotiation of export L/Cs; f. Render financial, advisory and related services; and g. Refinance trust receipts without prior Central Bank approval arising from import transactions of Philippine residents in U.S. dollars or in other acceptable foreign currencies and shall be limited to bankers acceptances which are used to refinance import bills under letters of credit. Except as provided in Section 55, OBUs are not authorized to receive deposits from residents in any currency. SECTION 57. Peso Deposits . OBUs may open and maintain peso deposit accounts with domestic agent banks exclusively for the following purposes: a. To meet administrative and other operating expenses, such as salaries, rentals and the like; and b. To pay to the designated persons or corporations in the Philippines, the peso equivalent of foreign exchange inward remittances of Filipino overseas workers or of Filipino or multinational companies, coursed through the OBUs correspondent banks abroad. SECTION 58. Financial Assistance to Officers/Employees . OBUs may extend financial assistance (real estate, car, personal loans, etc.) in local currency to their Filipino officers and employees as part of their fringe benefit programs, subject to the following conditions: a. The Filipino employees loan program shall be financed through any of the following means: 1. By inward remittance of acceptable foreign currencies from the head office/other foreign-based branches and/or 2. By assignment to the Manila OBU of the peso dividends due the Head Office/foreign-based branches otherwise remittable abroad under existing regulations. b. OBUs may grant foreign currency loans to their expatriate officers without need of Central Bank approval; c. AAB's authority to extend peso loans to Filipino officers and employees of OBUs as an alternative method of handling the financial assistance program shall be subject to the following conditions: 1. The OBU concerned shall place US dollar deposits with an AAB to support the program in an amount equal to or greater than the equivalent of the peso loans on the AAB's books; 2. In case of default in payment and/or termination of employment of the employee concerned, the OBU will assume the balance of the loan plus interest and other charges, if any, to be paid through an inward remittance of foreign exchange; and 3. Any portion of the interest expense of said loans to be assumed by the OBU shall be paid thru an inward remittance of foreign exchange. SECTION 59. Secrecy of Deposits . The provisions of R.A. No. 6426 (Foreign Currency Deposit Act), as amended, shall apply to deposits in OBUs; Provided, however, that numbered deposit accounts shall not be used. SECTION 60. Exemption from Certain Laws . The provisions of Act No. 2655 (Usury Law) as amended, R.A. No. 529 (Uniform Currency Law) as amended, and R.A. No. 3591 (Deposit Insurance Law) as amended, shall not apply to transactions and/or deposits in OBUs in the Philippines. cdlex SECTION 61. Accounting and Reporting . OBUs shall maintain an accounting system in accordance with guidelines prescribed by the Central Bank. Periodically or as required, existing reports shall continue to be submitted in the prescribed forms to the Central Bank thru FERD. SECTION 62. Supervision . The operations and activities of offshore banking units shall be conducted under the supervision of the Central Bank of the Philippines. SECTION 63. Taxes, Customs Duties . Transactions of OBUs in the Philippines shall be subject to such taxes as are prescribed in Presidential Decree No. 1034, as implemented by regulations of the Bureau of Internal Revenue. SECTION 64. Revocation/Suspension . The Monetary Board, by the recommendation of the Governor, may revoke or suspend the authority of an Offshore Banking Unit to operate in the Philippines for violation of P.D. No. 1034 or these regulations. CHAPTER VI Representative Offices of Foreign Banks SECTION 65. Definition of Terms . As used in this Chapter, the following terms shall have the meaning indicated unless the context clearly indicates otherwise: a. "Foreign Bank" shall refer to a bank or banking corporation formed, organized and existing under any foreign law. b. "Representative Office" shall refer to a liaison office of a foreign bank which deals directly with the public by promoting and giving information about the foreign bank's services offered. It does not include the regional or area headquarters of a foreign bank registered and licensed under existing laws. SECTION 66. Criteria for Approval . The Monetary Board may authorize qualified foreign banks to open representative offices in the Philippines if, in its judgment, the public interest and economic conditions, both general and local, justify the establishment of such office. The following factors, among others, shall serve as basis for issuance of authority to open a representative office in the Philippines: (a) liquidity and solvency positions; (b) net worth and resources base; (c) financial and credit standing in the international banking community; (d) exposure in the Philippines; and (e) other relevant factors, such as Philippine commercial and financial relationships with the country where applicant bank is based. SECTION 67. Authorized Activities of Representative Offices . Authorized representative offices may promote and provide information about the services/products offered by the foreign banks but may not transact banking business, such as acceptance of deposits, issuance of letters of credit and foreign exchange trading. Transactions generated through the promotional efforts of the representative office may be booked only by the foreign bank abroad. SECTION 68. Fees . Banks with representative offices to be established after the effectivity of this Circular shall, upon issuance by the Central Bank of a Certificate of Authority, pay the Central Bank a license fee of US$2,000.00. SECTION 69. Use of the term "Representative Office" . Foreign banks authorized to operate representative offices shall, in their representation with the public, carry with their name the additional term "Representative Office" to properly guide the public on the nature and extent of their activities. SECTION 70. Licensing . The licensing and operations of representative offices including the implementation of these regulations and such other rules and regulations that may be issued from time to time shall be the responsibility of FERD. SECTION 71. Visitorial Power . The Central Bank may, from time to time, look into the affairs of the representative offices if the Central Bank has reasonable ground to believe that these offices are in fact engaged in banking activities in violation of the terms and conditions of the license. SECTION 72. Reporting . Representative Offices shall submit to FERD, annual reports of their Head Office and, periodically as may be required, reports on the transactions of their Head Office in the Philippines in such form as may be prescribed for the purpose. SECTION 73. Revocation of License . The Monetary Board may revoke the license of a representative office if it finds after due investigation that: (a) the representative office or its officers have violated the provisions of this Circular and any other applicable rules and regulations of the Central Bank of the Philippines; or (b) its Head Office is found to be in imminent danger of insolvency or that its continuance in business will involve probable loss to those transacting business with it, pursuant to Section 16 of R.A. 337, as amended. CHAPTER VII Foreign Currency Deposit System SECTION 74. Definition of Terms . As used in this Chapter, the following terms shall have the meaning indicated unless the context clearly indicates otherwise: a. "Foreign Currency Deposit Unit" or "FCDU" shall refer to that unit of a local bank or a of a local branch of a foreign bank authorized by the Central Bank to engage in foreign currency-denominated transactions, pursuant to the provisions of R.A. 6426, as amended. ("Local bank" shall refer to a thrift bank or a commercial bank organized under the laws of the Republic of the Philippines. "Local branch of a foreign bank" shall refer to a branch of a foreign bank doing business in the Philippines, pursuant to the provisions of R.A. No. 337, as amended); b. "Short-term" loans and securities shall refer to credit accommodations with maturities of one year or less; c. "Long-term" loans and securities shall refer to credit accommodations with maturities of more than one year. The definition of such other terms used in this Chapter shall be consistent with the definition of terms used under the Chapter on Offshore Banking System. SECTION 75. Qualification Requirements . a. Only commercial banks can be authorized to function under the expanded foreign currency deposit system, pursuant to the provisions of R.A. 6426, as amended, provided, that they meet the following minimum qualifications: 1. Its networth or combined capital accounts is at least equal to the minimum capital requirement for commercial banks as may be prescribed by the Monetary Board from time to time. Networth or combined capital accounts as used herein shall refer to the total of unimpaired paid-in capital, surplus, and undivided profits, net of such valuation reserves and other capital adjustments as may be required by Central Bank; 2. It has shown profitable operations for a period of two (2) consecutive business years immediately preceding the date of application. Its profitability, solvency, and liquidity ratios must be satisfactory; 3. It has substantially complied with applicable laws and existing Central Bank rules and regulations; 4. Bank officers shall have at least two (2) years of actual experience in foreign exchange operations or related activities or have undergone training in foreign exchange operations acceptable to the Central Bank. b. In addition to commercial banks which are already operating as FCDUs, thrift banks may apply with the Central Bank for a certificate of authority to operate an FCDU, provided that they meet the following minimum qualifications: 1. Its networth or combined capital accounts is at least P50 million; 2. It has shown profitable operations for a period of two (2) consecutive business years immediately preceding the date of application. Additionally, its profitability, solvency, and liquidity ratios, must be at par or above the thrift banking industry averages during such preceding two (2) business years; 3. It has substantially complied with applicable laws and existing Central Bank rules and regulations; 4. Bank officers shall have at least two (2) years of actual experience in foreign exchange operations or related activities or have undergone training in foreign exchange operations acceptable to the Central Bank. SECTION 76. Authorized Transactions . a. Thrift banks which are granted a certificate of authority to operate an FCDU are authorized to engage in the following transactions in any acceptable foreign currency: 1. Accept deposits and trusts accounts (for banks authorized to engage in trust operations) from residents and non-residents, provided that deposits and trust accounts from residents shall not include foreign exchange required to be sold for pesos under Section 1 of this Circular; 2. Deposit, on short-term maturity, with foreign banks abroad, OBUs, and other FCDUs; 3. Invest in foreign currency-denominated debt instruments, which are of short-term maturity and are readily marketable; 4. Grant short-term foreign currency loans to domestic enterprises, which are export-oriented, in accordance with CB regulations and/or those registered with the Board of Investments under the provisions of the Export Incentive Act (R.A. 6135); 5. Borrow, on short-term maturity, from other FCDUs; and from foreign banks abroad and OBUs, subject to existing rules on foreign borrowings; 6. Engage in foreign currency-foreign currency swap with the Central Bank, OBUs, and other FCDUs. b. Commercial banks, which are authorized to operate under the expanded foreign currency deposit system under Section 75 hereof, may engage in the following transactions in any acceptable foreign currency: 1. Accept deposits and trust accounts from residents and non-residents, provided that deposits and trust accounts from residents shall not include foreign exchange required to be sold for pesos under Section 1 of this Circular; 2. Deposit with foreign banks abroad, OBUs and other FCDUs; 3. Invest in foreign currency-denominated debt instruments; 4. Subject to Central Bank prior approval when required by Central Bank regulations, extend foreign currency loans to any domestic enterprises without the limitations prescribed in the first paragraph of Section 4 of R.A. 6426, as amended by P.D. 1035 regarding maturity and marketability; 5. Borrow from other FCDUs; and from non-residents and OBUs, subject to existing rules on foreign borrowings; 6. Engage in foreign currency-foreign currency swap with the Central Bank, other FCDUs, and OBUs; 7. Engage in foreign exchange trading; and with prior Central Bank approval, engage in financial futures and options trading; 8. On request/instructions of its foreign correspondent bank, it may: i) issue letters of credit for a non-resident importer in favor of a non-resident exporter; ii) pay, accept, or negotiate drafts/bills of exchange drawn under the letter of credit; iii) make payment to the order of the non-resident exporter. Provided, that the foreign correspondent bank shall deposit sufficient foreign exchange with the FCDU issuing the letter of credit to cover all drawings. SECTION 77. Foreign Currency Cover Requirements . FCDUs shall maintain at all times, a one hundred percent (100%) cover for their foreign currency liabilities. For purposes of complying with this requirement, the principal offices in the Philippines of the authorized banks and all its branches located therein shall be considered as a single unit. The foreign currency cover shall consist of the following: a. For Thrift Banks 1. Foreign currency deposits with the Central Bank; 2. Foreign currency deposits of short-term maturity, with foreign banks abroad, OBUs, and other FCDUs; 3. Short-term foreign currency loans, except those classified by the Central Bank as bad or uncollectible debts; 4. Investments in foreign currency-denominated debt instruments, which are of short-term maturities and are readily marketable; 5. Foreign currency notes and coins on hand; 6. Foreign currency swapped with the Central Bank, OBUs and other FCDUs; 7. Foreign currency interests receivable; 8. Such other assets, as may be determined by the Monetary Board as eligible cover. b. Commercial Banks in addition to the above, the following shall also be considered as eligible asset cover: 1. Foreign currency loans maturing beyond one (1) year, except those classified by the Central Bank as bad or uncollectible debts; 2. Investments in foreign currency-denominated debt instruments, irrespective of maturity. For purposes of this Section, only real accounts shall qualify as eligible asset cover. SECTION 78. Foreign Currency Deposit with the Central Bank . FCDUs of thrift banks shall maintain at all times foreign currency deposits with the Central Bank equivalent to at least fifteen percent (15%) of their foreign currency deposit liabilities. The Central Bank may pay interest on the foreign currency deposit and if requested shall exchange the foreign currency notes and coins into foreign currency instruments drawn on its depository banks. FCDUs of commercial banks shall be exempt from maintaining fifteen percent (15%) of the cover in the form of foreign currency deposit with the Central Bank. SECTION 79. Currency Composition of the Cover . FCDUs of thrift banks shall maintain the foreign currency cover in the same currency as that of the corresponding foreign currency deposit liability. FCDUs of commercial banks shall maintain not less than seventy percent (70%) of the foreign currency cover in the same currency liability and thirty percent (30%) or less, at the option of the FCDU, may be denominated in other acceptable foreign currencies. SECTION 80. Secrecy of Deposits . Pursuant to R.A. No. 6426, as amended, all foreign currency deposits are declared and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall such foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial, administrative or legislative, or any other entity whether public or private. SECTION 81. Numbered Accounts . Authorized banks may adopt a numbered account system. SECTION 82. Withdrawability and Transferability of Deposits . There shall be no restrictions on the withdrawal by the depositor of his deposit or on the transferability of the same abroad except those arising from the contract between the depositor and the bank. SECTION 83. Insurance Coverage . Foreign currency deposits shall be insured under the provisions of R.A. No. 3591, as amended. Depositors are entitled to receive payment in the same currency in which the insured deposits are denominated. SECTION 84. Rates of Interest . Authorized banks are free to pay any rate of interest on foreign currency deposits. SECTION 85. Eligibility as Collateral . Deposits under the Foreign Currency Deposit System are eligible as collateral for peso loans or for foreign currency loans to domestic enterprises. SECTION 86. Taxes . All foreign currency deposits made under this Chapter, including interest and all other income or earnings of such deposits, are exempt from any and all taxes whatsoever irrespective of whether or not these deposits are made by residents or non-residents so long as the deposits are eligible or allowed under aforementioned laws and in the case of non-residents, irrespective of whether or not they are engaged in trade or business in the Philippines. The transactions of FCDUs shall, however, be subject to such taxes as are provided by law and regulations of the Bureau of Internal Revenue. SECTION 87. Exemption from Court Order or Process . Foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. SECTION 88. Inapplicability of Certain Laws . The provisions of R.A. No. 529 (Uniform Currency Law) as amended, and Act No. 2655 (Usury Law) as amended, shall not apply to banks in respect to their foreign currency transactions under this Chapter. SECTION 89. Accounting . The foreign currency deposits and their corresponding cover shall be considered as funds separate and distinct from the regular assets and liabilities of the authorized banks. Authorized banks shall maintain a separate accounting for transactions covered by this Chapter that will enable preparation of the Balance Sheet and Profit and Loss Statement covering said funds. Periodically or as required, existing reports shall continue to be submitted in the prescribed forms to FERD of the Central Bank of the Philippines. SECTION 90. Supervision . The Governor or the head of the appropriate department of the Central Bank personally, or by deputies, are authorized to verify the books of account and transactions of each authorized bank, to verify the eligible cover, as well as review all other requirements under these regulations and the bank's compliance with the provisions of law and these regulations. SECTION 91. Prospective Effect of Regulations . In the event a new enactment or regulation is issued decreasing the rights hereunder granted, such new enactment or regulation shall not apply to foreign currency deposits already made or existing at the time of issuance of such new enactment or regulation, but such new enactment or regulation shall apply only to foreign currency deposits made after its issuance. SECTION 92. Sanctions . Any willful violation of R.A. 6426, as amended, or any regulation duly promulgated by the Monetary Board pursuant thereto shall subject the offender upon conviction to an imprisonment of not less than one year nor more than five (5) years or a fine of not less than five thousand pesos nor more than twenty-five thousand pesos, or both such fine and imprisonment at the discretion of the court. The Central Bank may revoke or suspend the authority of a bank to accept new foreign currency deposit for violation of R.A. No. 6426 or these regulations, or if such bank ceases to possess the minimum qualifications required. CHAPTER VIII Fiscal Agency Service SECTION 93. Responsibility as Fiscal Agent . The Central Bank, in compliance with the provisions of Article 1 Chapter V of R.A. 265, as amended, shall act as fiscal agent and banker when requested by the Government for its foreign exchange transactions. For this purpose, Government shall refer to the national government, its political subdivisions and instrumentalities, including government-owned and controlled corporations (GOCCs). SECTION 94. Functions and Services . Subject to the usual auditing requirements, the Central Bank thru the Foreign Exchange Operations and Investments Department (FEOID),shall perform the specific fiscal agency service (FAS) functions when requested by the Government, to wit: a. Directly service the foreign exchange requirements of the Government; b. Engage the services of AABs to service such foreign exchange requirements in accordance with existing Central Bank policy, rules and regulations; c. Administer the fiscal agency funds (FAF) of the Government for the account of the Treasurer of the Philippines (TOP),as follows: i) peso working fund deposited with the Central Bank under the "Demand Deposit-Others (FAF)" account; and ii) US dollar working fund deposited with various PNB overseas branches and other depository banks abroad; d. Execute fund transfers from above accounts to other accounts upon order of TOP; and e. Perform such other functions as may be duly authorized by TOP. SECTION 95. Fiscal Agency Transactions . a. Except as provided in this Chapter, the pertinent provisions of Chapter II of this Circular, entitled "GENERAL RULES ON FOREIGN EXCHANGE DISBURSEMENT AND TRANSFERS OF LOCAL AND FOREIGN CURRENCIES",shall be applicable to Government transactions involving invisible payments/remittances; b. AABs may sell to the Government foreign exchange for salaries/allowances and operating expenses of overseas-personnel/offices up to a maximum of US$5,000.00 per beneficiary, per month; c. Importations by government agencies/offices shall be governed by the pertinent provisions of Central Bank Circular No. 1029 dated October 12, 1984, as amended (CONSOLIDATED RULES AND REGULATIONS TO GOVERN IMPORT TRANSACTIONS). SECTION 96. Transactions Financed by the Government's Own Foreign Exchange Resources . The foreign exchange disbursements provided under Section 95 above may however be directly settled by the Government without availing of the FAS and/or prior Central Bank approval, if the corresponding foreign exchange to service such obligations is not sourced from the Central Bank or the AABs. SECTION 97. Settlement of Fiscal Agency Service Transactions . a. In cases where the foreign exchange is sold by the Central Bank and TOP provides the corresponding peso equivalent for the FAS transactions, the peso equivalent shall be settled thru the "Demand Deposit-Others (FAF)" account or other TOP deposit accounts maintained with Central Bank as TOP may direct. For this purposes, such FAS transactions shall always be supported by a specific written authorization from the TOP, among other documents; b. In cases where the foreign exchange is sold by the AABs and TOP provides the corresponding peso equivalent of said transactions, the peso equivalent shall be settled thru the clearing account of the servicing AAB with Central Bank. The appropriate TOP deposit account with Central Bank shall be accordingly charged/debited. Said FAS applications shall always be supported by a specific written authorization from TOP, among other documents; c. In cases where the foreign exchange is sold by the AABs but the government agency/office provides the peso equivalent of such transactions, said agency/office concerned shall settle the peso equivalent thereof directly with the servicing AAB. SECTION 98. Fiscal Agency Service Applications . Duly accomplished FAS application Form No. 1, Revised 1990 shall be filed in quintuplicate by the Government agency/office concerned with the Central Bank or directly with AABs as provided in this Circular, indicating the following particulars: a. Signature of the head of the government agency/office having control over appropriations of funds authorized by law or regulations to issue fiscal instructions; b. Certifications by the accounting officer or other official of the government agency/office having control over commitments or appropriations as to availability of funds; and c. A full description of the FAS transactions. SECTION 99. General Guidelines and Other Rules . a. Government agencies/office, including GOCCs shall: i) Provide the Central Bank thru FEOID a list of the specimen signatures of their officials/personnel authorized to sign, certify, authenticate, and follow-up FAS applications; and ii) observe the pertinent provisions of laws, rules and regulations on their foreign exchange disbursements; b. Government personnel, who fail to secure their travel allowances before departure, shall be reimbursed in pesos after arrival; c. Government personnel on home/vacation leave shall be paid in pesos for the duration of said leave; d. Government shall secure a written certification from the Philippine Airlines and/or Philippine Aerospace Development Corporation that the services cannot be performed by them for the repair of government aircraft, except the Presidential aircraft. LLphil CHAPTER IX Gold Transactions SECTION 100. Authority of the Central Bank . The Central Bank, pursuant to the provisions of Section 72 of R.A. 265, as amended, is authorized to buy and sell gold. SECTION 101. Definition of Terms . a. "Primary Gold " gold produced directly from its ore, marketable in its primary form. For purposes of this regulation, primary gold shall refer to gold produced by primary gold producers; b. Primary Gold Produce r" entity duly registered with the Securities and Exchange Commission (SEC) which has for its primary purpose production/mining of gold and classified by the Bureau of Mines as a primary gold producer; c. " Secondary Gold " gold produced from alteration of a primary mineral like copper, or gold as by-product of copper and other ores; d. " Secondary Gold Producer " entity duly registered with the SEC which produces gold resulting from alteration of a primary mineral like copper, or producer of copper or other minerals with gold and silver as by-products; e. " Small-Scale Mining " mining activities which rely heavily on manual labor using simple implements and methods and do not use explosives or heavy mining equipment as defined by R.A. 7076 approved 27 June 1991. This shall include gold panning; f. " Small-Scale Miner " a Filipino citizen who, individually or in the company of other Filipino citizens, voluntarily forms a cooperative duly licensed by the Department of Environment and Natural Resources (DENR) to engage in small-scale mining as defined herein. This shall include gold panners; g. " Gold Buying Price " Central Bank's buying price using the prevailing international market buying price for gold, multiplied by Central Bank's buying rate for US dollars against pesos on the date of purchase; h. " Gold Selling Price " Central Bank's selling price using the prevailing international market selling price for gold, multiplied by Central Bank's selling rate for US dollars against pesos on the date of sale. SECTION 102. Sale of Gold . a. " Primary gold " All primary gold shall be delivered and sold by the owner or producer thereof to Central Bank; b. " Secondary Gold " Gold obtained as by-product of mineral concentrates, ores, matte, slime and precipitates may be exported abroad for smelting and sale. The dollar proceeds from such sales shall be sold to Central Bank through the seller's authorized agent bank which shall credit the proceeds to Central Bank's designated account with a foreign bank within 24 hours from receipt of said proceeds. Locally-smelted secondary gold shall be delivered and sold to Central Bank; c. " Gold from Small-Scale Miners " All gold produced by small-scale miners in any mineral area shall be sold to Central Bank; d. " Gold in other forms " Gold in forms other than any of the above may be sold to Central Bank. SECTION 103. Purchase of Gold by Central Bank . a. " Primary Gold " Central Bank shall purchase gold from all primary gold producers at the gold buying price and shall prescribe and collect refining, assaying, storage, and other charges. The seller will initially be paid 100% of the estimated gold content of the gold delivered and sold to Central Bank. If the gold producer's average gold assay during any one quarter is found to have been overstated by 0.2% or more, the initial payment for gold deliveries during the succeeding quarter shall not exceed 90%.The remaining 10% shall be paid after completion of the final assay; b. " Gold from Small-Scale Mining " Central Bank shall purchase gold produced by small-scale miners at the gold buying price. Corresponding refining, assaying, storage and other such charges shall likewise be prescribed and collected for such purchases. Central Bank may pay commissions/handling fees on such gold purchases, as may be warranted. The seller will initially be paid 95% of the estimated gold content of the gold delivered and sold to Central Bank. The remaining 5% shall be paid after completion of the final assay; c. " Gold in other forms " All other gold offered for sale to Central Bank may be purchased under the same guidelines as (b) above. SECTION 104. Repurchase/Resale Option . a. Within one hundred eighty (180) days from original sale to Central Bank, primary gold producers shall be given the option to repurchase and sell back the gold to Central Bank. The repurchase price shall be one-half of the sum of the Original Sale Price, the Accumulated Interest and the Final Sale Price. Accumulated Interest shall be computed at an interest rate to be determined by Central Bank. The Final Sale Price shall be the gold buying price on the date of resale; b. Small-scale miners shall be given one option to avail of a higher price of gold within ten (10) working days from the day of delivery using the gold buying price on that day as basis for the final payment. SECTION 105. Sale of Gold Grains/Pellets . The following shall govern Central Banks sale of gold grains/pellets to jewelry manufacturers and other industrial users: a. Application to buy gold shall be filed with Central Bank in the prescribed form; b. Central Bank shall sell gold at the gold selling price plus a service fee to cover cost including cost of conversion and packaging of gold grains or pellets; c. The gold purchaser shall submit to Central Bank a quarterly report of production output and gold inventory within fifteen (15) days after the end of the quarter. SECTION 106. Purchases/Sales by the Private Sector . Except as provided for in this Circular, purchases and sales of gold and/or gold-bearing metals in the Philippines may be made by and between Philippine residents without specific approval from Central Bank. Banks may buy and sell gold in the international free gold market, subject to prior Central Bank approval. SECTION 107. Export of Gold . a. No person shall export or bring out, or attempt to export or bring out of the Philippines, gold and/or gold-bearing materials, in any shape, form and quantity without prior approval from the Central Bank Export Department; b. This requirement shall not apply to the following: 1. Gold forming an integral or necessary part of one's personal effects or of items intended as gifts or souvenirs provided that such personal effects or gifts or souvenir items shall not be brought out in commercial quantities; 2. Gold brought in by tourists and non-residents, provided that the entry or importation thereof in the country is properly declared in the Held-Baggage Receipt Form of the Bureau of Customs; 3. Secondary gold exported under Section 102 (b) hereof; and 4. Jewelry. c. All gold sold to Central Bank by primary and secondary gold producers and small-scale miners are considered constructive exports and are entitled to rediscounting when appropriate. SECTION 108. Import of Gold . a. Any entity or individual desiring to import gold and/or gold-bearing materials, excluding jewelry, shall secure an import authority from the Central Bank Current Import and Commodity Classification Department (CICCD); b. This requirement shall not apply to the following: 1. Importations of gold-bearing materials which form part of one's personal effects and are not in commercial quantities, or which are exempt from the Central Bank release certificate requirement pursuant to Sec. 26 of Circular No. 1029; and 2. Importations of gold-bearing materials for artistic, dental or industrial use through letters of credit (L/Cs) opened with local commercial banks by domestic or export producers and dental laboratories/establishments. SECTION 109. Gold Forwarding Hedging . Any contract covering gold forward hedging entered into by a primary gold producer with a financial institution or metals trader shall be subject to prior Central Bank approval and submission of its latest gold statistical report. The Central Bank approval for third party gold transactions, if so secured, shall not relieve the primary gold producer from its obligation to have its primary gold production refined and sold to MGRD. CHAPTER X Final Provisions SECTION 110. Penal Sanctions . In cases not covered by Section 92 hereof, any person found guilty of violating the provisions of this Circular shall suffer the penalties prescribed under Sections 33 and 34 of R.A. 265, as amended. Administrative sanctions may also be imposed upon banking institutions, found violating this Circular including their directors and officers responsible for such violation. LLjur SECTION 111. Repealing Clause . All existing provisions of Circulars 365, 960 and 1028, including amendments thereto, with the exception of the second paragraph of Section 68 of Circular 1028, as well as all other existing central Bank rules and regulations or parts thereof, which are inconsistent with or contrary to the provisions of this Circular, are hereby repealed or modified accordingly: Provided, however, that regulations, violations of which are the subject of pending actions or investigations, shall not be considered repealed insofar as such pending actions or investigations are concerned, it being understood that as to such pending actions or investigations, the regulations existing at the time the cause of action accrued shall govern. SECTION 112. Separability Clause . Nothing herein is intended, nor shall be construed, to repeal or amend any law or statute. Should any provision of this Revised Manual or any part thereof, be declared unconstitutional or invalid, the remaining provisions or parts thereof shall remain in full force and effect, and continue to be valid and binding. SECTION 113. Effectivity . This Circular shall take effect fifteen (15) days after its publication in a newspaper of general circulation. For the Monetary Board: (SGD.) JOSE L. CUISIA, JR. Governor