1 Preferential Treatment for Goods Produced by Taiwanese Companies inside the Subic and Clark Freeport Zones (under the Taiwan-Subic-Clark Economic Corridor)

2 Options and Alternatives For products manufactured in Subic and Clark and sold in the domestic market, Philippines has two options: – Provide tariff concessions by way of reduced tariffs or lower local value content (i.e. 25%) to be implemented through a ‘Framework Agreement’ with Taiwan and/or by simple issuance of an Executive Order – Apply the Revised AFTA-CEPT Rules of Origin (40% local content rule or product specific rule)

3 Options and Alternatives For products manufactured in Subic and Clark and exported to other ASEAN countries, the Philippines has to apply the Revised AFTA-CEPT Rules of Origin as follows: – Apply the 40% Regional / Local Content Rule – Apply the Product Specific Rule such as the Change in Tariff Heading

4 Sample Costing Template (Determination of 40% local content) AFTA-CEPT COST ANALYSIS Description of Exported Article H.S Code Number Export Price per Unit (FOB)$2, USD% I. Non-ASEAN Components (Materials, Parts and Components)(refer to Annex A)$1, % II. Philippine (ASEAN) Content $1, % II.1 Materials Produced in the Philippines(refer to Annex B)$ % II.2 Direct Processing Cost(refer to Annex C)$ % II.3 Other Direct Processing Cost(refer to Annex D)$ % II.4 Overhead and General Expense (General and Administrative Expense, Manufacturing Expenses)(refer to Annex E)$ % Ex-Factory Cost 36.35% II.5 Profit(refer to Annex E)$ % II.6 Transport and Customs Clearance Cost from Factory to Port(refer to Annex G)$ % FOB Export Price $2, %

5 Policy Issue on Domestic Sale Goods manufactured in Subic-Clark and sold in the domestic market are subject to higher duty treatment (when compared to those manufactured in PEZA) PEZA finished goods subject to lower duty (duty rate for raw materials) Subic-Clark finished goods subject to higher duty (duty rate of finished product; except for Yokohama) Need for Executive Order or BOC issuance