Requesting Entity: Armed Forces of the Philippines

Issues Concern: Issuance of a Letter of Credit for Foreign Manufacturers or Suppliers

Details

Whether or not Section 42.5 of the Implementing Rules and Regulations Part A of Republic Act 9184 prohibits the issuance of a letter of credit in favor of foreign manufacturers or suppliers.

The prohibition against the issuance of a letter of credit in favor of a Philippine entity’s foreign manufacturer or supplier contemplates a situation where the Philippine entity acts as the distributor or local supplier of the foreign manufacturer or supplier, where the Philippine entity acts as the agent, and the foreign manufacturer or supplier is the principal.

As can be gleaned from the above-cited provision (Sec. 42.5, IRR-A), the issuance of a letter of credit in favor of a foreign manufacturer or supplier is not prohibited, what the provision disallows is the issuance of a letter of credit in favor of a foreign manufacturer or supplier of a Philippine entity.