Chapter 3 - Trading Conditions

Foreign Trade | The Opportunities
Packaging and Labeling | Negotiating a Deal| Distributon Selling and Pricing

Philippine export products must comply with international standards on packaging and labeling. Among these are a large number of environmental laws and regulations such as eco-labeling. The DTI maintains that the proper packaging and labeling of exports is one of the key issues, which have a direct impact on the competitiveness of Philippine products.

According to the Department of Science and Technology (DOST), packaging in the Philippines is becoming more sophisticated and less costly. In addition, customer demands are increasingly dictating the trends in the packaging industry (although as noted there are still many industries that could benefit from assistance and advice in this area). The Philippine packaging industry, highly fragmented and diversified was worth approximately US$1.4 billion in 1997 - the last year for which statistics are available. The food and beverage sector is its primary market (75%) followed by the health care and pharmaceutical sector (10%).

The Packaging Institute of the Philippines (PIP), the major packaging association in the country, was formed in 1967, and represents more than 200 suppliers, manufacturers, and users of all forms of packaging materials, as well as equipment and consumables suppliers.

Every imported or locally manufactured product must display the following information:

i. Registered trade or brand name;

ii. Duly registered trademark;

iii. Duly registered business name;

iv. Address of the manufacturer, importer or re-packer of the consumer product in the Philippines;

v. General make or active ingredients;

vi. Net quantity of contents, in terms of weight, measure or numerical count in the metric system;

vii. Country of manufacture, if imported;

viii. If a consumer product is manufactured, refilled, or repacked under license from a principal, the label must state this.

The following additional information may also be required by the responsible government agency for specific segments of the market:

ix. Whether the product is flammable or inflammable;

x. Directions for use, if necessary;

xi. Warning of toxicity;

xii. Wattage, voltage or amperes;

xiii. Process of manufacture used, if necessary.

Once a product has been certified to have passed the consumer product standard prescribed by the Bureau of Product Standards of the Department of Trade and Industry, its label must contain the Product Standard (PS) quality mark.

Local Trading Terms

Trading on the local market - buying and selling - has its own idiosyncrasies of which foreigners seeking to enter the local market should be aware.

Contractual arrangements between local buyer and seller are usually based on the "conformé" which is usually attached to the letter of offer or pro-forma invoice.

A legal contract is entered into when the buyer accepts the offer of the seller by signing and returning the conformé either by commercial post or (more usually) by messenger or by fax. There could be problems of enforcement relating to any contracts entered into by e-mail unless the two parties were known to one another.

Payment collection can be a problem in the Philippines and many companies seek to manage their cash flow by delaying payment well beyond what could be considered normal commercial terms. Again, caution is advised before entering into sizeable contracts with companies or organizations where the business relationship is not well established.

Although the practice of issuing post-dated cheques is not legal in the Philippines it is nevertheless a common practice and one that is still widely accepted despite its illegality. The requirement for a post-dated cheque is often used to ensure payment for service is actually received.

Formally, factoring of debts is not widely practiced in the commercial sector although among many small businesses the practice of selling debts for collection by local "security agents" appears to be not uncommon. Foreigners engaging in this practice are putting themselves at risk with the authorities and could find themselves unwelcome in the Philippines since it is often associated with local crime syndicates or thugs. It is not uncommon to read of stories in the press where debtors have been murdered over a debt amounting to less than one thousand pesos.

Payment by credit card is common in consumer transactions but less common in business-to-business transactions. E-commerce is still in its infancy in the Philippines although a number of local banks are now seeking to introduce payment gateways for automated on-line payment of accounts. Online payment systems such as PayPal cannot be used with local credit cards.



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