19 February, 2019
Recent developments
The National Economic and Development Authority (NEDA) has issued the revised guidelines for the formulation of the list of foreign retailers selling high-end or luxury goods (Revised Guidelines). The Revised Guidelines were issued pursuant to the rules and regulations implementing the Retail Trade Liberalization Act (RTLA)(RTLA IRR), which requires the Inter-Agency Committee on Tariff and Related Matters of the NEDA Board (Inter-Agency Committee) to issue guidelines on the formulation of the list of foreign retailers selling high-end or luxury goods (NEDA List).
Pursuant also to the RTLA IRR and simultaneous with the issuance of the Revised Guidelines, the Inter-Agency Committee also released the NEDA List as of 31 December 2018.
Implications for foreign retailers seeking for inclusion in the NEDA List
The Revised Guidelines clarify the nature of the goods that should be sold by the foreign retailers requesting for inclusion in the NEDA List.
The previous guidelines issued by the NEDA (Old Guidelines) provided a general criteria that “high-end or luxury goods” are those demanded in large by the higher income groups. The Revised Guidelines specifically provide that “high-end or luxury goods” are those demanded in a large part by higher income groups which belong to the A and B income classes based on the 2015 Family Income and Expenditure Survey (i.e. under the seventh to tenth decile per capita income with total annual family income of PhP 587,817 and above).
The Old Guidelines provided that “high-end or luxury goods” shall include but shall not be limited to jewelry, branded or designer clothing or footwear, wearing apparel, leisure and sporting goods, electronics and other personal effects, as may be determined using the Philippine Standard Commodity Classification, National Internal Revenue Code, and existing studies on retail trade elasticities of demand, among others. The Revised Guidelines specify that “high-end or luxury goods” must be priced at least 200% higher than brands or products usually consumed by those who belong to the C income group in the Philippines.
Foreign retailers seeking inclusion in the NEDA List must submit proof of compliance of their goods with the criteria indicated above.
What the guidelines say
The Revised Guidelines provide the following criteria for the type of goods sold by the foreign retailer seeking inclusion in the NEDA List. Under the Revised Guidelines, the type of goods sold must:
- not be necessary for life maintenance (i.e., goods that are not necessities in the sense that life can go on without some minimum quantity of the item or can be dispensed with altogether if circumstances require);
- be high-end or luxury goods such as jewelry, branded or designer clothing and footwear, wearing apparel, leisure and sporting goods, electronics, other personal effects and goods of a similar nature with majority of products priced at least 200% higher than brands/products usually consumed by those who belong to the C income group in the Philippines; and
- be demanded in a large part by higher income groups which belong to the A and B income classes based on the 2015 Family Income and Expenditure Survey i.e. under the seventh to tenth decile per capita income with total annual family income of PhP 587,817 and above.
The Revised Guidelines retained the documentary requirements of the NEDA for inclusion in the NEDA List. These are, as follows:
- a formal request stating the foreign retailer’s intention to be included in the list of foreign retailers selling high-end or luxury goods. The request of the foreign retailer should contain, but may not be limited to, the following: (i) name; (ii) type of business organization; (iii) type of goods sold; (iv) country where the business was organized; (v) principal office address; and (vi) specialization or line of business;
- a letter from the principal office accompanied with a certificate of authentication coming from the Philippine Embassy stating that the foreign retailer has at least a 5-year track record in retailing and the organization has at least 5 retailing stores/branches in operation anywhere around the world;
- information on the total number of stores in operation worldwide (franchises, flagship stores and boutiques) highlighting stores located in areas frequented by tourist and high-income groups;
- detailed information on all its products and brand portfolio with complete product catalogues and price lists. The price lists should include the standard world price and the suggested retail price;
- annual report; and
- other documents/information that may be deemed necessary for the evaluation of the request
Actions to consider
The Revised Guidelines provides a more objective criteria in ascertaining whether foreign retailers may qualify for inclusion in the NEDA List. It sets forth the specific criteria used by the NEDA in evaluating applications, which foreign retailers must consider in determining whether or not they qualify for inclusion in the NEDA List.
Foreign retailers that intend to file an application for inclusion in the NEDA List must ensure that they deal in high-end or luxury goods that:
(i) are demanded in a large part by higher income groups which belong to the A and B income classes based on the 2015 Family Income and Expenditure Survey (i.e. under the seventh to tenth decile per capita income with total annual family income of PhP 587,817 and above); and
(ii) are priced at least 200% higher than brands or products usually consumed by those who belong to the C income group in the Philippines.
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