DEPARTMENT CIRCULAR NO. DC2020-02-0005 GUIDELINES ON THE DUTY-FREE IMPORTATION AND MONITORING OF THE UTILIZATION OF RE MACHINERY, EQUIPMENT, MATERIALS AND SPARE PARTS AND THEIR TRANSFER AND OTHER DISPOSITION [Note: Issued February 13, 2020, Secretary Cusi. Signature block garbled in OCR. 9 main sections plus Annexes A and B (application forms for importation and sale/disposition).] WHEREAS, Section 4 of Republic Act (RA) No. 7638 or the "Department of Energy Act of 1992" mandates the DOE to prepare, integrate, coordinate, supervise, and control all plans, programs, projects, and activities of the Government relative to energy exploration, development, utilization, distribution, and conservation; WHEREAS, Section 2(b) of RA No. 9513 or the "Renewable Energy Act of 2008" (hereinafter referred to as the "RE Law") mandates the increase of utilization of renewable energy (RE) by institutionalizing the development of national and local capabilities in the use of renewable energy systems and promoting its efficient and cost-effective commercial application by providing fiscal and non-fiscal incentives; WHEREAS, the RE Law calls for the Government to establish the necessary infrastructure and mechanisms for all existing and new RE Developers/Operators to fully avail of the fiscal and non-fiscal incentives provided upon the effectivity of the RE Law; WHEREAS, Section 2 of RA No. 9485, as amended by RA No. 11032, or the "Ease of Doing Business and Efficient Government Service Delivery Act of 2018" mandated the government to promote transparency in each agency with regard to the manner of transacting with the public, which shall encompass a program for the adoption of simplified requirements and procedures that will reduce red tape and expedite business and non- business related transactions in government; NOW THEREFORE, for and in consideration of the foregoing premises, the DOE does hereby promulgate the following guidelines: --- SECTION 1. SCOPE AND APPLICATION. This Circular shall govern the processing and approval of application for Certificate of Endorsement (COE), as well as issuance thereof for the duty-free importation of machinery, equipment, materials and spare parts used for RE operations. It shall likewise govern the application for COE involving temporary exportation, as well as sale, transfer, assignment, donation or other modes of disposition of originally imported capital equipment/machinery including spare parts brought into the RE facilities of the RE Developer/Operator which availed of duty-free importation. SECTION 2. DEFINITION OF TERMS. As used in this Circular, the following shall be construed to mean, unless the context clearly provides otherwise: a. Applicant — means the RE Developer/Operator or accredited manufacturers, fabricators, and suppliers of locally-produced renewable energy components applying for COE from the DOE relative to the duty-free importation of machinery, equipment, materials and spare parts, and temporary exportation, and the sale or donation of unserviceable or used machinery, equipment, materials, and spare parts duly filed pursuant to this Circular. b. Certificate of Endorsement — means the document issued by the DOE in accordance with Section 15(b) of RA No. 9513 endorsing the application for duty-free importation of RE machinery, equipment, materials and spare parts to the RE Developer/Operator, to exempt the Applicant from payment of tariff duties on the importation. COE may also be issued pursuant to Section 21(a) of RA No. 9513, if applicable. c. Emergency Importation — means the importation of machinery, equipment, materials and spare parts not included in the work program but urgently needed to prevent accidents, losses, and unnecessary delays and expenses. d. Exportation — means the act of sending or transmitting, from the Philippines to a foreign territory, machinery, equipment, materials, and spare parts covered by a previously issued COE by the DOE, for the purpose of repairs and/or regular maintenance. e. Importation — means the act of bringing in machinery, equipment, materials, spare parts which are directly and actually needed and will be used exclusively in the RE facilities for RE operations from a foreign territory into the Philippine jurisdiction, with intent to land. f. Machinery, Equipment, Materials and Spare Parts — means capital equipment, major components thereof, non-perishable tools, machines and other mechanical, chemical and/or electrical apparatus, including control and communication equipment, whether fixed or movable; usual components of machinery and/or equipment which are subject to wear and tear arising from normal use, utilization and operation; and materials which are intended to be used in the creation of a mechanical structure, needed in RE operations. g. RE Developer/Operator — means an individual or judicial entity created, registered and/or authorized to operate in the Philippines in accordance with existing Philippine Laws and engage in the exploration, development and utilization of RE resources and actual operation of RE systems/facilities. It shall include existing entities engaged in the exploration, development, and/or utilization of RE resources, or the generation of electricity from RE resources, or both. h. RE Operation — means engaging in the exploration, development, utilization, distribution and conservation of RE resources and actual operation of RE systems/facilities, and all other operations incidental thereto conducted within the Philippines. i. RE Operating Contract — shall refer to the service agreement between the DOE and RE Developer for the development and/or utilization of biomass, solar and other RE Resources which, due to their inherent technical characteristics, need not go through the Pre-Development Stage. j. RE Resources — means energy resources that do not have an upper limit on the total quantity to be used. Such resources are renewable on a regular basis, and whose renewal rate is relatively rapid to consider availability over an indefinite period of time. These include, among others, biomass, solar, wind, geothermal, ocean energy, and hydropower conforming to internationally accepted norms and standards on dams, and other emerging renewable energy technologies. k. RE Service Contract — shall refer to a service agreement between the Philippine Government, through the President or the DOE Secretary, and RE Developer, covering an appropriate period as stated therein, in which the RE Developer shall have the exclusive right to explore, develop and utilize geothermal, hydropower, wind, ocean and other RE Resources within a particular area. l. Shipping Documents — refers to proforma invoice and/or other quotation together with shipment forms indicating the name of customers and date, method, quantities, and specification of shipment. m. Technical Obsolescence — means that the design or specification of the asset no longer fulfils the function for which it was originally designed and/or the machinery, equipment, materials and spare parts covered by previously DOE-issued COE has diminished in value caused by changes in technology and new inventions rendering it less desirable in the industry, including a decline in value due to improved alternatives becoming available that are more cost effective, as may be verified and approved by the DOE. --- SECTION 3. CONDITIONS FOR THE EVALUATION OF APPLICATION FOR DUTY-FREE IMPORTATION OF RE MACHINERY, EQUIPMENT, MATERIALS AND SPARE PARTS. A. Duty-Free Importation of RE Machinery, Equipment, Materials and Spare Parts. Pursuant to Section 15(b) of RA No. 9513, within the **first ten (10) years** upon the issuance of a Certification of Registration to an RE Developer/Operator, the importation of RE machinery, equipment, materials and spare parts, including control and communication equipment, shall be exempt from tariff duties provided the following conditions are met: 1. The RE machinery, equipment, materials and spare parts are **not manufactured domestically** in reasonable quantity and quality at competitive prices; 2. The RE machinery and equipment are directly and actually needed and will be **used exclusively in the RE facilities** for transformation into energy and delivery of energy to the point of use. Actual, direct and exclusive use means the direct and immediate and actual application of the machinery, equipment, materials and spare parts themselves to the RE facilities; 3. The importation of materials and spare parts shall be restricted only to component materials and parts for the **specific machinery and/or equipment** authorized to be imported; 4. The kind of capital machinery and equipment to be imported must be in accordance with the **approved work and financial program** of the RE facilities; and 5. The RE machinery, equipment, materials, spare parts are covered by **shipping documents in the name of the duly registered RE Developer/Operator** to whom the shipment will be directly delivered by customs authorities. B. Duty-Free Importation of Components, Parts, and Materials for RE Equipment Manufacturing. Pursuant to Section 21(a) of RA No. 9513, all shipments necessary for the manufacture and/or fabrication of RE equipment and components shall be exempted from importation tariff and duties and value added tax: Provided, that the said components, parts and materials are: 1. Not manufactured domestically in reasonable quantity and quality at competitive prices; 2. Directly and actually needed and shall be used exclusively in the manufacture/fabrication of RE equipment. Actual, direct and exclusive use means the direct and immediate and actual application of the components, parts, or materials for the manufacture and/or fabrication of RE equipment and components; 3. Covered by shipping documents in the name of the duly registered manufacturer/fabricator to whom the shipment will be directly delivered by customs authorities; and 4. Prior approval of the DOE should be obtained before the importation of such components, parts and materials. --- SECTION 4. PROCEDURES FOR THE ISSUANCE OF CERTIFICATE OF ENDORSEMENT FOR DUTY-FREE IMPORTATION. 1. File 4 original sets of Application Form (Annex A), sworn before a Notary Public by a duly authorized officer. One application covers one (1) complete shipment/transaction. 2. Declare under oath that machinery/equipment of comparable price and quality are not manufactured in the Philippines, and are directly and actually needed for exclusive RE use. 3. Attach shipping documents in the name of the RE Developer/Operator. 4. Submit documentary requirements: (a) Board of Investment (BOI) Certificate of Registration; (b) Pro-forma Invoice; (c) Computation of Estimated Duties to be waived; (d) Technical Data Specification. 5. File at least **thirty (30) calendar days** prior to the actual importation. 6. File at the DOE Records Management Division (RMD). 7. Processing flow: - RMD → REMB-OD within **1 day** of receipt - REMB-OD → concerned Division within **1 day** - Concerned Division: completeness check within **1 day**; issues Order of Payment for processing fee to Treasury Division - For incomplete applications: notify Applicant within **3 working days** - After payment of processing fee: **3 working days** technical evaluation + REMB Director approval - Legal Services: **3 working days** review → revert to REMB - Endorsement to Undersecretary and Assistant Secretary; **5 working days** to approve/disapprove - REMB Director: **2 working days** to sign COE - COE → RMD for **dry seal** → released to Applicant within **2 working days** - Capital equipment (heavy equipment, special use, fuel, etc.): approved by DOE **Secretary** (not Undersecretary) 8. Disapproval: Applicant may submit request for reconsideration or revised application within **15 calendar days** from receipt of notice; treated as new application requiring new processing fee. 9. For sale/disposition applications: use Application Form (Annex B); route through Renewable Energy Resources Compliance Division of Financial Services before REMB. --- SECTION 5. EMERGENCY IMPORTATION. In case of Emergency Importation, the Applicant shall submit a written request showing necessity, subject to conditions and procedures under Section 3. Emergency Importation is allowed for: a) Rehabilitation/repair of RE facility damaged by Force Majeure; or b) Replacement for existing machinery and equipment that may cause imminent danger to workers, community, and/or environment. The Applicant shall comply with Bureau of Customs (BOC) regulations, including posting of a bond. Proof of compliance shall be submitted to the DOE within **fifteen (15) calendar days** from date of posting of bond. --- SECTION 6. POST IMPORTATION REQUIREMENTS. 1. Within **thirty (30) calendar days** following release from BOC custody: submit copies of official documents indicating description, quantity and price of imported items, names of supplier and carrying vessels, and other particulars. 2. Within **fifteen (15) days** of placement/installation: advise DOE in writing of the precise location and actual use of the importation. --- SECTION 7. SALE OR DISPOSITION OF CAPITAL EQUIPMENT. Any sale, transfer, assignment, donation, or other modes of disposition of originally imported capital equipment/machinery including materials and spare parts, brought into RE facilities within **ten (10) years** from date of importation shall require **prior endorsement of the DOE**. Such endorsement shall be granted only if any of the following conditions is present: 1. If made to another RE Developer/Operator enjoying tax and duty exemption on imported capital equipment — **no taxes/duties** required; 2. If made to a non-RE Developer/Operator — **payment of taxes and duties on net book value** (original cost less accumulated normal depreciation) required; 3. Exportation of the used capital equipment for repair/maintenance or source documents for RE development — **no taxes/duties** required; or 4. For reasons of proven **technical obsolescence** as determined by the DOE — **no taxes/duties** required. When sale or disposition is made **after ten (10) years** from date of importation: no taxes or duties required in any case. --- SECTION 8. EXPORTATION. The DOE shall issue COE for exportation when: 1. The exportation is only temporary and covered by a previously issued DOE COE; and 2. Machinery, equipment, materials and spare parts are to be exported for repair and/or maintenance, as endorsed by the DOE. In case of exportation without prior DOE endorsement and BOI approval: the Applicant shall be liable to pay **twice the amount of duties** originally waived. --- SECTION 9. DOE INSPECTION, REPORTORIAL REQUIREMENTS, RECORDING AND DATABASE. 1. All Applications shall, at any reasonable time with prior notice, be subject to DOE inspection. DOE shall have right of entry to any premises to inspect covered machinery/equipment. 2. Applicant shall create a database of covered machinery/equipment and submit **semi-annual reports** to the DOE on the summary and status of all applications. 3. RMD shall prepare and submit a **monthly list of approved COEs** to the Mabuhay Lane of the Department of Finance for reconciliation reference, with copy to REMB. 4. REMB's concerned Division shall keep all records of applications and maintain a database for records and reference. --- SECTION 10. POST AUDIT. After DOE endorsement and BOI issuance of Duty Free Importation Certificate, the DOE through the Financial Services Compliance Division, with REMB assistance and BOI representatives, shall conduct **annual post audit** in accordance with the Accounting Procedures in the Applicant's Service/Operating Contract. Fifteen (15) calendar days prior written notice required. --- SECTION 11. PROHIBITED ACTS, ADMINISTRATIVE FINES AND PENALTIES. Subject to Department Order No. DO2012-07-004 (Rules of Practice and Procedures before the DOE), and pursuant to Section 36 of RA No. 9513, any person who wilfully commits the following shall be subject to penalties: 1. Falsification or tampering of public documents or official records to avail of incentives; and/or 2. Non-compliance with any or all provisions of this Circular. Any person who wilfully aids or abets the commission of prohibited acts or causes their commission shall be liable in the same manner as the principal. --- SECTION 12. SEPARABILITY CLAUSE. If any provision of this Circular is declared unconstitutional or invalid, such part not affected shall remain in full force and effect. SECTION 13. REPEALING CLAUSE. Any circulars, orders, letters of instruction or issuances contrary to or inconsistent with this Circular are hereby repealed, modified, or amended accordingly. SECTION 14. EFFECTIVITY. This Circular shall take effect fifteen (15) days after its publication in at least two (2) newspapers of general circulation. Copies of this Circular shall be filed with the National Administrative Registrar of the University of the Philippines Law Center. Issued at the Energy Center, Rizal Drive, Bonifacio Global City, Taguig City. February 13, 2020 Secretary --- [Annexes A and B: Standard application forms for (A) duty-free importation of RE machinery/equipment and (B) sale/disposition of capital equipment — included in original PDF pages 10–11. Key certifications per Annex A: (1) authorized signatory; (2) within first 10 years of Certificate of Registration; (3) exclusive RE use; (4) not manufactured domestically; (5) spare parts for authorized equipment only; (6) per approved work/financial program; (7) entry port and arrival date; (8) shipping documents in RE Developer's name.]