Reporting on Importing and Exporting in the Philippines

Introduction
International trade plays a significant role in the economies of both the
Philippines. Import and export activities contribute to economic growth, employment,
and revenue generation, making these sectors crucial.
Import and Export
Exporting involves selling goods and services from a domestic market to an
overseas one, while importing refers to acquiring foreign goods and bringing them into
the home country. Importing and exporting can be classified into two categories: direct
and indirect.

Direct Importing and Exporting

Direct importing and exporting involve a business or individual in one country trading
goods directly with a business or individual in another country, without involving third-
party intermediaries.

 Direct Importing
o This occurs when a company imports goods directly from a foreign
supplier to the domestic market. The importing company negotiates with
the foreign supplier, handles shipping, customs, and distribution.
o Example: A Philippine electronics company directly imports
semiconductors from a supplier in Japan, managing the transaction and
logistics without third-party agents.
 Direct Exporting
o In direct exporting, a company in the exporting country sells its products
directly to foreign buyers, assuming responsibility for shipping, distribution,
and handling customer relationships.
 Advantages of Direct Trade
o Higher profit margins due to the lack of intermediaries.
o Stronger control over the customer relationship, brand, and supply chain.
o Direct feedback from customers can improve product adaptation and
service.
 Challenges of Direct Trade
o Increased administrative and logistical responsibilities for customs,
compliance, and shipping.
o Higher risk of handling international market entry complexities, including
cultural and regulatory barriers.

Indirect Importing and Exporting

Indirect importing and exporting involve the use of intermediaries or third parties to
facilitate the trade of goods between countries.
  Indirect Importing
o In indirect importing, a company sources products from foreign countries
through intermediaries like import agents, wholesalers, or distributors
based in its domestic market. This allows the importing company to
purchase foreign goods without directly dealing with foreign suppliers.
o Example: A store in the Philippines buys European fashion products from
a local distributor, so they don’t have to deal with import paperwork or
customs.
 Indirect Exporting
o In indirect exporting, a company sells its products to intermediaries (export
agents, trading companies, or distributors) who then handle the overseas
sales. The intermediaries manage foreign market distribution, compliance,
and logistics.
 Advantages of Indirect Trade
o Reduced administrative burden since intermediaries handle
documentation, shipping, and compliance.
o Lower market entry risk, as intermediaries often have established
networks and market knowledge.
o Helpful for smaller businesses with limited resources or international trade
experience.
 Challenges of Indirect Trade
o Lower profit margins due to intermediary fees or commission.
o Limited control over branding, customer relationships, and product
positioning in foreign markets.
o Potentially slower response times for handling customer feedback and
making product adjustments.

Advantages of Importing and Exporting

 It provides an easy entry point into global trade and creates significant
employment opportunities.
 It requires less time and financial investment compared to other methods of
entering international markets.
 It is relatively low-risk when compared to other international business avenues.
 Since no country can be fully self-sufficient, imports and exports are vital for a
nation's economic function and growth.
 It allows countries to access the best available technologies, products, and
services worldwide.
 It offers better control over trade activities compared to setting up a local market,
with reduced risk.

Limitations of Importing and Exporting

 Additional costs, such as packaging, transportation, protection, and insurance,

increase the total cost of goods.
 Exporting may not be possible if the destination country imposes import
restrictions.
 Domestic businesses that are closer to the customer may offer better services
than foreign companies.
 Products are subject to quality standards; exporting substandard goods can
damage a country’s reputation.
 Obtaining the necessary licenses and completing the documentation for
international trade can be complex and time-consuming.
 Without careful management, there is a risk of losing control over the domestic
market and existing customers.

 Certain products require government permission to be exported. Below is a

detailed list of products requiring additional permission as well as the concerned
government authority:
o Endangered species of flora and fauna (Bureau of Biodiversity
Management)
o Animals and animal products (Bureau of Animal Industry)
o Fish and fish products (Bureau of Fisheries and Aquatic Resources)
o Plants (Bureau of Plant Industry)
o Rice (National Food Authority)
o Radioactive materials (Philippine Nuclear Research Institute)
o Sugar and molasses (Sugar Regulatory Administration).
 Products with import limitations
o Food products: Food additives must comply with the Philippine Food Act
and regulations from the BFAD.
o Plant products: The Bureau of Plant Industry (BPI) examines shipments of
wood products for pests.
o Drugs and chemicals: The Food and Drug Administration (FDA) regulates
household pesticides.
o Used motor vehicles: Used motor vehicles are subject to regulation.
o Electrical appliances: Electrical appliances are subject to regulation.
o Tobacco products: Tobacco products are subject to regulation.
o Mineral products: Mineral products are subject to regulation.
 Products prohibited from import:
o Explosives, firearms, and weapons of war
o Gambling equipment
o Lottery and sweepstakes tickets
o Narcotics and synthetic drugs
o Used clothing and rags
o Hazardous waste
o Laundry and industrial detergents with hard surfactants
 o Polychlorinated biphenyls (PCBs)
o Live piranha, shrimp, and prawns

Overview of Importing and Exporting in the Philippines

 Key Imports and Exports

o Imports: The Philippines' top imports include electronics, machinery,
mineral fuels, plastics, vehicles, and iron/steel products.
o Exports: Key exports include electronic products (especially
semiconductors), machinery, agricultural goods (like coconuts and
bananas), and garments.
 Top Trading Partners
o The Philippines' main trading partners are China, Japan, the United
States, South Korea, and ASEAN countries, making up a large share of
both imports and exports.
 Challenges in Trade
o The Philippines faces infrastructure limitations (like limited port capacity)
and bureaucratic hurdles, which can delay trade operations.
o Complex customs procedures and sometimes high tariffs can affect the
ease of doing business.
 Opportunities for Growth
o There is a growing demand for agricultural exports and electronics in the
global market.
o Emerging free trade agreements, like the Regional Comprehensive
Economic Partnership (RCEP), are expected to reduce barriers and foster
growth.

General Policies, Required Documents, and Taxes for Importing and Exporting in
the Philippines

 General Policies
o The Philippines operates under a combination of local regulations and
international trade agreements to regulate imports and exports.
o Key regulatory authorities include the Bureau of Customs (BOC) and the
Philippine Economic Zone Authority (PEZA), especially for businesses
within economic zones.
o The country adheres to several trade agreements, including ASEAN Free
Trade Area (AFTA) and the Regional Comprehensive Economic
Partnership (RCEP), which lower tariffs and promote trade among
member countries.
 Documents to be Submitted
o Importers need to submit a Bill of Lading or Airway Bill, Commercial
Invoice, Import Entry Declaration (required by the BOC), Certificate of
Origin (for preferential tariffs under trade agreements), and a Packing List.
o Exporters are typically required to submit an Export Declaration, Sales
Invoice, Certificate of Origin, and the Packing List.
 o For regulated goods, additional permits and licenses may be needed from
agencies like the Department of Trade and Industry (DTI) or the
Department of Agriculture (DA), depending on the product.

Bill of Lading Sample

Packing List Example

 Taxes to be Paid
o Import duties are levied on goods entering the Philippines, calculated
based on the product’s declared value and tariff classification.
o Imported goods are also generally subject to a 12% Value-Added Tax
(VAT), and certain goods, like alcohol and tobacco, may incur excise
taxes.
o Exported goods are often VAT-exempt, promoting export activity by
reducing tax costs on Philippine-made products sold internationally.

Philippines

 Regulatory Bodies: The Bureau of Customs oversees imports and exports,

ensuring compliance with tariffs and trade regulations.
 Key Regulations: Various licenses are required depending on the goods; food
and agricultural products are strictly regulated.
 Tariffs and Taxes: The Philippines imposes tariffs on many imported goods,
although it has preferential rates with certain trade partners.

Trade Agreements and Free Trade Zones

 Philippines’ Trade Agreements

o The Philippines is part of the ASEAN Free Trade Area, which promotes
trade among Southeast Asian nations. Other agreements include the
Generalized System of Preferences (GSP) with the EU, RCEP, and
agreements with individual countries.
  Free Trade Zones
o Philippines: Some regions and economic zones offer tax incentives to
attract foreign direct investment, below are samples of ecozones
 Clark Freeport Zone
 Poro Point Freeport Zone
 John Hay Special Economic Zone
 Subic Bay Freeport Zone
 Cagayan Special Economic Zone
 Zamboanga City Special Economic Zone
 Freeport Area of Bataan.

Economic Impact of Import and Export on the Philippines

 Impact on GDP and Economic Growth

o Exports are a critical part of the Philippine economy, contributing to
manufacturing and agriculture sectors.
 Employment Opportunities
o In the Philippines, exporting industries support job creation, especially in
agriculture and electronics manufacturing.
 Revenue from Tariffs and Taxes
o The Philippines earns revenue from import tariffs.

Economic Impact of Trade Policies and Taxes

 The tax structures and streamlined processes in the Philippines significantly

affect trade efficiency and economic performance.
 The Philippines’ reliance on VAT and customs duties helps generate government
revenue, though these taxes can impact costs for businesses.

References:
1. https://www.toppr.com/guides/business-studies/international-business/importing-
and-exporting/#:~:text=Exporting%20refers%20to%20the%20selling,them
%20into%20one%27s%20home%20country
2. https://business.gov.nl/running-your-business/international-business/export/
exporting-yourself-or-using-a-commercial-agent-or-distributor/
3. https://customs.gov.ph/guidelines-on-importation/
4. https://customs.gov.ph/guidelines-on-exportation/
5. https://customs.gov.ph/what-is-a-free-trade-agreement/
6. https://www.peza.gov.ph/mandate-and-functions
7. https://finder.tariffcommission.gov.ph/
8. https://www.bir.gov.ph/tax-info-details
9. https://asean.org/our-communities/economic-community/
10. https://www.customs.gov.sg/businesses/importing-goods/import-procedures/
11. https://www.customs.gov.sg/businesses/exporting-goods/export-procedures/
12. https://www.iras.gov.sg/taxes/goods-services-tax-(gst)/claiming-gst-(input-tax)/
importing-of-goods
13. https://www.customs.gov.sg/businesses/importing-goods/controlled-and-
prohibited-goods-for-import/
14. https://www.mti.gov.sg/Trade/Free-Trade-Agreements/RCEP