ACT NO.

2137 THE WAREHOUSE RECEIPTS LAW

I THE ISSUE OF WAREHOUSE RECEIPTS

SECTION 1. Persons who may issue receipts. Warehouse receipts may be issued
by any warehouseman.
SECTION 2. Form of receipts; essential terms. Warehouse receipts need not be in
any particular form but every such receipt must embody within its written or printed
terms:
(a) The location of the warehouse where the goods are stored,
(b) The date of the issue of the receipt,
(c) The consecutive number of the receipt,
(d) A statement whether the goods received will be delivered to the bearer, to a
specified person or to a specified person or his order,
(e) The rate of storage charges,
(f) A description of the goods or of the packages containing them,
(g) The signature of the warehouseman which may be made by his authorized
agent,
(h) If the receipt is issued for goods of which the warehouseman is owner, either
solely or jointly or in common with others, the fact of such ownership, and
(i) A statement of the amount of advances made and of liabilities incurred for which
the warehouseman claims a lien. If the precise amount of such advances made or of
such liabilities incurred is, at the time of the issue of, unknown to the
warehouseman or to his agent who issues it, a statement of the fact that advances
have been made or liabilities incurred and the purpose thereof is sufficient.
A warehouseman shall be liable to any person injured thereby for all damages
caused by the omission from a negotiable receipt of any of the terms herein
required.
SECTION 3. Form of receipts. What terms may be inserted. A warehouseman
may insert in a receipt issued by him any other terms and conditions provided that
such terms and conditions shall not:
(a) Be contrary to the provisions of this Act.
(b) In any wise impair his obligation to exercise that degree of care in the safekeeping of the goods entrusted to him which is reasonably careful man would
exercise in regard to similar goods of his own.
SECTION 4. Definition of non-negotiable receipt. A receipt in which it is stated
that the goods received will be delivered to the depositor or to any other specified
person, is a non-negotiable receipt.
SECTION 5. Definition of negotiable receipt. A receipt in which it is stated that the
goods received will be delivered to the bearer or to the order of any person named
in such receipt is a negotiable receipt.

No provision shall be inserted in a negotiable receipt that it is non-negotiable. Such

provision, if inserted shall be void.
SECTION 6. Duplicate receipts must be so marked. When more than one
negotiable receipt is issued for the same goods, the word "duplicate" shall be plainly
placed upon the face of every such receipt, except the first one issued. A
warehouseman shall be liable for all damages caused by his failure so to do to any
one who purchased the subsequent receipt for value supposing it to be an original,
even though the purchase be after the delivery of the goods by the warehouseman
to the holder of the original receipt.
SECTION 7. Failure to mark "non-negotiable." A non-negotiable receipt shall have
plainly placed upon its face by the warehouseman issuing it "non-negotiable," or
"not negotiable." In case of the warehouseman's failure so to do, a holder of the
receipt who purchased it for value supposing it to be negotiable, may, at his option,
treat such receipt as imposing upon the warehouseman the same liabilities he
would have incurred had the receipt been negotiable.
This section shall not apply, however, to letters, memoranda, or written
acknowledgment of an informal character.
II OBLIGATIONS AND RIGHTS OF WAREHOUSEMEN UPON THEIR RECEIPTS

SECTION 8. Obligation of warehousemen to deliver. A warehouseman, in the

absence of some lawful excuse provided by this Act, is bound to deliver the goods
upon a demand made either by the holder of a receipt for the goods or by the
depositor; if such demand is accompanied with:
(a) An offer to satisfy the warehouseman's lien;
(b) An offer to surrender the receipt, if negotiable, with such indorsements as would
be necessary for the negotiation of the receipt; and
(c) A readiness and willingness to sign, when the goods are delivered, an
acknowledgment that they have been delivered, if such signature is requested by
the warehouseman.
In case the warehouseman refuses or fails to deliver the goods in compliance with a
demand by the holder or depositor so accompanied, the burden shall be upon the
warehouseman to establish the existence of a lawful excuse for such refusal.
SECTION 9. Justification of warehouseman in delivering. A warehouseman is
justified in delivering the goods, subject to the provisions of the three following
sections, to one who is:
(a) The person lawfully entitled to the possession of the goods, or his agent;
(b) A person who is either himself entitled to delivery by the terms of a nonnegotiable receipt issued for the goods, or who has written authority from the
person so entitled either indorsed upon the receipt or written upon another paper;
or
(c) A person in possession of a negotiable receipt by the terms of which the goods
are deliverable to him or order, or to bearer, or which has been indorsed to him or in
blank by the person to whom delivery was promised by the terms of the receipt or
by his mediate or immediate indorser.

SECTION 10. Warehouseman's liability for misdelivery. Where a warehouseman

delivers the goods to one who is not in fact lawfully entitled to the possession of
them, the warehouseman shall be liable as for conversion to all having a right of
property or possession in the goods if he delivered the goods otherwise than as
authorized by subdivisions (b) and (c) of the preceding section, and though he
delivered the goods as authorized by said subdivisions, he shall be so liable, if prior
to such delivery he had either:
(a) Been requested, by or on behalf of the person lawfully entitled to a right of
property or possession in the goods, not to make such deliver; or
(b) Had information that the delivery about to be made was to one not lawfully
entitled to the possession of the goods.
SECTION 11. Negotiable receipt must be cancelled when goods delivered. Except
as provided in section thirty-six, where a warehouseman delivers goods for which he
had issued a negotiable receipt, the negotiation of which would transfer the right to
the possession of the goods, and fails to take up and cancel the receipt, he shall be
liable to any one who purchases for value in good faith such receipt, for failure to
deliver the goods to him, whether such purchaser acquired title to the receipt before
or after the delivery of the goods by the warehouseman.
SECTION 12. Negotiable receipts must be cancelled or marked when part of goods
delivered. Except as provided in section thirty-six, where a warehouseman
delivers part of the goods for which he had issued a negotiable receipt and fails
either to take up and cancel such receipt or to place plainly upon it a statement of
what goods or packages have been delivered, he shall be liable to any one who
purchases for value in good faith such receipt, for failure to deliver all the goods
specified in the receipt, whether such purchaser acquired title to the receipt before
or after the delivery of any portion of the goods by the warehouseman.
SECTION 13. Altered receipts. The alteration of a receipt shall not excuse the
warehouseman who issued it from any liability if such alteration was:
(a) Immaterial,
(b) Authorized, or
(c) Made without fraudulent intent.
If the alteration was authorized, the warehouseman shall be liable according to the
terms of the receipt as altered. If the alteration was unauthorized but made without
fraudulent intent, the warehouseman shall be liable according to the terms of the
receipt as they were before alteration.
Material and fraudulent alteration of a receipt shall not excuse the warehouseman
who issued it from liability to deliver according to the terms of the receipt as
originally issued, the goods for which it was issued but shall excuse him from any
other liability to the person who made the alteration and to any person who took
with notice of the alteration. Any purchaser of the receipt for value without notice of
the alteration shall acquire the same rights against the warehouseman which such
purchaser would have acquired if the receipt had not been altered at the time of
purchase.
SECTION 14. Lost or destroyed receipts. Where a negotiable receipt has been lost
or destroyed, a court of competent jurisdiction may order the delivery of the goods
upon satisfactory proof of such loss or destruction and upon the giving of a bond

with sufficient sureties to be approved by the court to protect the warehouseman

from any liability or expense, which he or any person injured by such delivery may
incur by reason of the original receipt remaining outstanding. The court may also in
its discretion order the payment of the warehouseman's reasonable costs and
counsel fees.
The delivery of the goods under an order of the court as provided in this section,
shall not relieve the warehouseman from liability to a person to whom the
negotiable receipt has been or shall be negotiated for value without notice of the
proceedings or of the delivery of the goods.
SECTION 15. Effect of duplicate receipts. A receipt upon the face of which the
word "duplicate" is plainly placed is a representation and warranty by the
warehouseman that such receipt is an accurate copy of an original receipt properly
issued and uncanceled at the date of the issue of the duplicate, but shall impose
upon him no other liability.
SECTION 16. Warehouseman cannot set up title in himself. No title or right to the
possession of the goods, on the part of the warehouseman, unless such title or right
is derived directly or indirectly from a transfer made by the depositor at the time of
or subsequent to the deposit for storage, or from the warehouseman's lien, shall
excuse the warehouseman from liability for refusing to deliver the goods according
to the terms of the receipt.
SECTION 17. Interpleader of adverse claimants. If more than one person claims
the title or possession of the goods, the warehouseman may, either as a defense to
an action brought against him for non-delivery of the goods or as an original suit,
whichever is appropriate, require all known claimants to interplead.
SECTION 18. Warehouseman has reasonable time to determine validity of claims.
If someone other than the depositor or person claiming under him has a claim to the
title or possession of goods, and the warehouseman has information of such claim,
the warehouseman shall be excused from liability for refusing to deliver the goods,
either to the depositor or person claiming under him or to the adverse claimant until
the warehouseman has had a reasonable time to ascertain the validity of the
adverse claim or to bring legal proceedings to compel claimants to interplead
RZgShW.
SECTION 19. Adverse title is no defense except as above provided. Except as
provided in the two preceding sections and in sections nine and thirty-six, no right
or title of a third person shall be a defense to an action brought by the depositor or
person claiming under him against the warehouseman for failure to deliver the
goods according to the terms of the receipt.
SECTION 20. Liability for non-existence or misdescription of goods. A
warehouseman shall be liable to the holder of a receipt for damages caused by the
non-existence of the goods or by the failure of the goods to correspond with the
description thereof in the receipt at the time of its issue. If, however, the goods are
described in a receipt merely by a statement of marks or labels upon them or upon
packages containing them or by a statement that the goods are said to be goods of
a certain kind or that the packages containing the goods are said to contain goods
of a certain kind or by words of like purport, such statements, if true, shall not make
liable the warehouseman issuing the receipt, although the goods are not of the kind
which the marks or labels upon them indicate or of the kind they were said to be by
the depositor.
SECTION 21. Liability for care of goods. A warehouseman shall be liable for any
loss or injury to the goods caused by his failure to exercise such care in regard to

them as reasonably careful owner of similar goods would exercise, but he shall not
be liable, in the absence of an agreement to the contrary, for any loss or injury to
the goods which could not have been avoided by the exercise of such care 2BwJuIj.
SECTION 22. Goods must be kept separate. Except as provided in the following
section, a warehouseman shall keep the goods so far separate from goods of other
depositors and from other goods of the same depositor for which a separate receipt
has been issued, as to permit at all times the identification and redelivery of the
goods deposited.
SECTION 23. Fungible goods may be commingled if warehouseman authorized. If
authorized by agreement or by custom, a warehouseman may mingle fungible
goods with other goods of the same kind and grade. In such case, the various
depositors of the mingled goods shall own the entire mass in common and each
depositor shall be entitled to such portion thereof as the amount deposited by him
bears to the whole.
SECTION 24. Liability of warehouseman to depositors of commingled goods. The
warehouseman shall be severally liable to each depositor for the care and redelivery
of his share of such mass to the same extent and under the same circumstances as
if the goods had been kept separate.
SECTION 25. Attachment or levy upon goods for which a negotiable receipt has
been issued. If goods are delivered to a warehouseman by the owner or by a
person whose act in conveying the title to them to a purchaser in good faith for
value would bind the owner, and a negotiable receipt is issued for them, they can
not thereafter, while in the possession of the warehouseman, be attached by
garnishment or otherwise, or be levied upon under an execution unless the receipt
be first surrendered to the warehouseman or its negotiation enjoined. The
warehouseman shall in no case be compelled to deliver up the actual possession of
the goods until the receipt is surrendered to him or impounded by the court Pq6gS.
SECTION 26. Creditor's remedies to reach negotiable receipts. A creditor whose
debtor is the owner of a negotiable receipt shall be entitled to such aid from courts
of appropriate jurisdiction, by injunction and otherwise, in attaching such receipt or
in satisfying the claim by means thereof as is allowed at law or in equity in these
islands in regard to property which can not readily be attached or levied upon by
ordinary legal process.
SECTION 27. What claims are included in the warehouseman's lien. Subject to the
provisions of section thirty, a warehouseman shall have a lien on goods deposited or
on the proceeds thereof in his hands, for all lawful charges for storage and
preservation of the goods; also for all lawful claims for money advanced, interest,
insurance, transportation, labor, weighing, coopering and other charges and
expenses in relation to such goods, also for all reasonable charges and expenses for
notice, and advertisements of sale, and for sale of the goods where default had
been made in satisfying the warehouseman's lien.
SECTION 28. Against what property the lien may be enforced. Subject to the
provisions of section thirty, a warehouseman's lien may be enforced:
(a) Against all goods, whenever deposited, belonging to the person who is liable as
debtor for the claims in regard to which the lien is asserted, and
(b) Against all goods belonging to others which have been deposited at any time by
the person who is liable as debtor for the claims in regard to which the lien is
asserted if such person had been so entrusted with the possession of goods that a
pledge of the same by him at the time of the deposit to one who took the goods in

good faith for value would have been valid.

SECTION 29. How the lien may be lost. A warehouseman loses his lien upon
goods:
(a) By surrendering possession thereof, or
(b) By refusing to deliver the goods when a demand is made with which he is bound
to comply under the provisions of this Act.
SECTION 30. Negotiable receipt must state charges for which the lien is claimed.
If a negotiable receipt is issued for goods, the warehouseman shall have no lien
thereon except for charges for storage of goods subsequent to the date of the
receipt unless the receipt expressly enumerated other charges for which a lien is
claimed. In such case, there shall be a lien for the charges enumerated so far as
they are within the terms of section twenty-seven although the amount of the
charges so enumerated is not stated in the receipt.
SECTION 31. Warehouseman need not deliver until lien is satisfied. A
warehouseman having a lien valid against the person demanding the goods may
refuse to deliver the goods to him until the lien is satisfied.
SECTION 32. Warehouseman's lien does not preclude other remedies. Whether a
warehouseman has or has not a lien upon the goods, he is entitled to all remedies
allowed by law to a creditor against a debtor for the collection from the depositor of
all charges and advances which the depositor has expressly or impliedly contracted
with the warehouseman to pay.
SECTION 33. Satisfaction of lien by sale. A warehouseman's lien for a claim which
has become due may be satisfied as follows:
(a) An itemized statement of the warehouseman's claim, showing the sum due at
the time of the notice and the date or dates when it becomes due,
(b) A brief description of the goods against which the lien exists,
(c) A demand that the amount of the claim as stated in the notice of such further
claim as shall accrue, shall be paid on or before a day mentioned, not less than ten
days from the delivery of the notice if it is personally delivered, or from the time
when the notice shall reach its destination, according to the due course of post, if
the notice is sent by mail,
(d) A statement that unless the claim is paid within the time specified, the goods
will be advertised for sale and sold by auction at a specified time and place.
In accordance with the terms of a notice so given, a sale of the goods by auction
may be had to satisfy any valid claim of the warehouseman for which he has a lien
on the goods. The sale shall be had in the place where the lien was acquired, or, if
such place is manifestly unsuitable for the purpose of the claim specified in the
notice to the depositor has elapsed, and advertisement of the sale, describing the
goods to be sold, and stating the name of the owner or person on whose account
the goods are held, and the time and place of the sale, shall be published once a
week for two consecutive weeks in a newspaper published in the place where such
sale is to be held. The sale shall not be held less than fifteen days from the time of
the first publication. If there is no newspaper published in such place, the
advertisement shall be posted at least ten days before such sale in not less than six
conspicuous places therein.

From the proceeds of such sale, the warehouseman shall satisfy his lien including
the reasonable charges of notice, advertisement and sale. The balance, if any, of
such proceeds shall be held by the warehouseman and delivered on demand to the
person to whom he would have been bound to deliver or justified in delivering
goods.
At any time before the goods are so sold, any person claiming a right of property or
possession therein may pay the warehouseman the amount necessary to satisfy his
lien and to pay the reasonable expenses and liabilities incurred in serving notices
and advertising and preparing for the sale up to the time of such payment. The
warehouseman shall deliver the goods to the person making payment if he is a
person entitled, under the provision of this Act, to the possession of the goods on
payment of charges thereon. Otherwise, the warehouseman shall retain the
possession of the goods according to the terms of the original contract of deposit.
SECTION 34. Perishable and hazardous goods. If goods are of a perishable nature,
or by keeping will deteriorate greatly in value, or, by their order, leakage,
inflammability, or explosive nature, will be liable to injure other property , the
warehouseman may give such notice to the owner or to the person in whose names
the goods are stored, as is reasonable and possible under the circumstances, to
satisfy the lien upon such goods and to remove them from the warehouse and in the
event of the failure of such person to satisfy the lien and to receive the goods within
the time so specified, the warehouseman may sell the goods at public or private
sale without advertising. If the warehouseman, after a reasonable effort, is unable
to sell such goods, he may dispose of them in any lawful manner and shall incur no
liability by reason thereof.
The proceeds of any sale made under the terms of this section shall be disposed of
in the same way as the proceeds of sales made under the terms of the preceding
section.
SECTION 35. Other methods of enforcing lien. The remedy for enforcing a lien
herein provided does not preclude any other remedies allowed by law for the
enforcement of a lien against personal property nor bar the right to recover so much
of the warehouseman's claim as shall not be paid by the proceeds of the sale of the
property.
SECTION 36. Effect of sale. After goods have been lawfully sold to satisfy a
warehouseman's lien, or have been lawfully sold or disposed of because of their
perishable or hazardous nature, the warehouseman shall not thereafter be liable for
failure to deliver the goods to the depositor or owner of the goods or to a holder of
the receipt given for the goods when they were deposited, even if such receipt be
negotiable 7mNEzBb.
III NEGOTIATION AND TRANSFER OF RECEIPTS

SECTION 37. Negotiation of negotiable receipt of delivery. A negotiable receipt

may be negotiated by delivery:
(a) Where, by terms of the receipt, the warehouseman undertakes to deliver the
goods to the bearer, or
(b) Where, by the terms of the receipt, the warehouseman undertakes to deliver the
goods to the order of a specified person, and such person or a subsequent indorsee
of the receipt has indorsed it in blank or to bearer.
Where, by the terms of a negotiable receipt, the goods are deliverable to bearer or

where a negotiable receipt has been indorsed in blank or to bearer, any holder may
indorse the same to himself or to any other specified person, and, in such case, the
receipt shall thereafter be negotiated only by the indorsement of such indorsee.
SECTION 38. Negotiation of negotiable receipt by indorsement. A negotiable
receipt may be negotiated by the indorsement of the person to whose order the
goods are, by the terms of the receipt, deliverable. Such indorsement may be in
blank, to bearer or to a specified person. If indorsed to a specified person, it may be
again negotiated by the indorsement of such person in blank, to bearer or to
another specified person. Subsequent negotiation may be made in like manner.
SECTION 39. Transfer of receipt. A receipt which is not in such form that it can be
negotiated by delivery may be transferred by the holder by delivery to a purchaser
or donee.
A non-negotiable receipt can not be negotiated, and the indorsement of such a
receipt gives the transferee no additional right.
SECTION 40. Who may negotiate a receipt. A negotiable receipt may be
negotiated:
(a) By the owner thereof, or
(b) By any person to whom the possession or custody of the receipt has been
entrusted by the owner, if, by the terms of the receipt, the warehouseman
undertakes to deliver the goods to the order of the person to whom the possession
or custody of the receipt has been entrusted, or if, at the time of such entrusting,
the receipt is in such form that it may be negotiated by delivery.
SECTION 41. Rights of person to whom a receipt has been negotiated. A person
to whom a negotiable receipt has been duly negotiated acquires thereby:
(a) Such title to the goods as the person negotiating the receipt to him had or had
ability to convey to a purchaser in good faith for value, and also such title to the
goods as the depositor or person to whose order the goods were to be delivered by
the terms of the receipt had or had ability to convey to a purchaser in good faith for
value, and
(b) The direct obligation of the warehouseman to hold possession of the goods for
him according to the terms of the receipt as fully as if the warehouseman and
contracted directly with him.
SECTION 42. Rights of person to whom receipt has been transferred. A person to
whom a receipt has been transferred but not negotiated acquires thereby, as
against the transferor, the title of the goods subject to the terms of any agreement
with the transferor.
If the receipt is non-negotiable, such person also acquires the right to notify the
warehouseman of the transfer to him of such receipt and thereby to acquire the
direct obligation of the warehouseman to hold possession of the goods for him
according to the terms of the receipt.
Prior to the notification of the warehouseman by the transferor or transferee of a
non-negotiable receipt, the title of the transferee to the goods and the right to
acquire the obligation of the warehouseman may be defeated by the levy of an
attachment or execution upon the goods by a creditor of the transferor or by a
notification to the warehouseman by the transferor or a subsequent purchaser from
the transferor of a subsequent sale of the goods by the transferor.

SECTION 43. Transfer of negotiable receipt without indorsement. Where a

negotiable receipt is transferred for value by delivery and the indorsement of the
transferor is essential for negotiation, the transferee acquires a right against the
transferor to compel him to indorse the receipt unless a contrary intention appears.
The negotiation shall take effect as of the time when the indorsement is actually
made.
SECTION 44. Warranties of a sale of receipt. A person who, for value, negotiates
or transfers a receipt by indorsement or delivery, including one who assigns for
value a claim secured by a receipt, unless a contrary intention appears, warrants:
(a) That the receipt is genuine,
(b) That he has a legal right to negotiate or transfer it,
(c) That he has knowledge of no fact which would impair the validity or worth of the
receipt, and
(d) That he has a right to transfer the title to the goods and that the goods are
merchantable or fit for a particular purpose whenever such warranties would have
been implied, if the contract of the parties had been to transfer without a receipt of
the goods represented thereby.
SECTION 45. Indorser not a guarantor. The indorsement of a receipt shall not
make the indorser liable for any failure on the part of the warehouseman or
previous indorsers of the receipt to fulfill their respective obligations.
SECTION 46. No warranty implied from accepting payment of a debt. A
mortgagee, pledgee, or holder for security of a receipt who, in good faith, demands
or receives payment of the debt for which such receipt is security, whether from a
party to a draft drawn for such debt or from any other person, shall not, by so doing,
be deemed to represent or to warrant the genuineness of such receipt or the
quantity or quality of the goods therein described AOdd.
SECTION 47. When negotiation not impaired by fraud, mistake or duress. The
validity of the negotiation of a receipt is not impaired by the fact that such
negotiation was a breach of duty on the part of the person making the negotiation
or by the fact that the owner of the receipt was induced by fraud, mistake or duress
or to entrust the possession or custody of the receipt to such person, if the person
to whom the receipt was negotiated or a person to whom the receipt was
subsequently negotiated paid value therefor, without notice of the breach of duty,
or fraud, mistake or duress Yr8tb.
SECTION 48. Subsequent negotiation. Where a person having sold, mortgaged, or
pledged goods which are in warehouse and for which a negotiable receipt has been
issued, or having sold, mortgaged, or pledged the negotiable receipt representing
such goods, continues in possession of the negotiable receipt, the subsequent
negotiation thereof by the person under any sale or other disposition thereof to any
person receiving the same in good faith, for value and without notice of the previous
sale, mortgage or pledge, shall have the same effect as if the first purchaser of the
goods or receipt had expressly authorized the subsequent negotiation.
SECTION 49. Negotiation defeats vendor's lien. Where a negotiable receipt has
been issued for goods, no seller's lien or right of stoppage in transitu shall defeat
the rights of any purchaser for value in good faith to whom such receipt has been
negotiated, whether such negotiation be prior or subsequent to the notification to
the warehouseman who issued such receipt of the seller's claim to a lien or right of

stoppage in transitu. Nor shall the warehouseman be obliged to deliver or justified

in delivering the goods to an unpaid seller unless the receipt is first surrendered for
cancellation.
IV CRIMINAL OFFENSES

SECTION 50. Issue of receipt for goods not received. A warehouseman, or an

officer, agent, or servant of a warehouseman who issues or aids in issuing a receipt
knowing that the goods for which such receipt is issued have not been actually
received by such warehouseman, or are not under his actual control at the time of
issuing such receipt, shall be guilty of a crime, and, upon conviction, shall be
punished for each offense by imprisonment not exceeding five years, or by a fine
not exceeding ten thousand pesos, or both.
SECTION 51. Issue of receipt containing false statement. A warehouseman, or any
officer, agent or servant of a warehouseman who fraudulently issues or aids in
fraudulently issuing a receipt for goods knowing that it contains any false
statement, shall be guilty of a crime, and upon conviction, shall be punished for
each offense by imprisonment not exceeding one year, or by a fine not exceeding
two thousand pesos, or by both.
SECTION 52. Issue of duplicate receipt not so marked. A warehouse, or any
officer, agent, or servant of a warehouseman who issues or aids in issuing a
duplicate or additional negotiable receipt for goods knowing that a former
negotiable receipt for the same goods or any part of them is outstanding and
uncanceled, without plainly placing upon the face thereof the word "duplicate"
except in the case of a lost or destroyed receipt after proceedings are provided for
in section fourteen, shall be guilty of a crime, and, upon conviction, shall be
punished for each offense by imprisonment not exceeding five years, or by a fine
not exceeding ten thousand pesos, or by both.
SECTION 53. Issue for warehouseman's goods or receipts which do not state that
fact. Where they are deposited with or held by a warehouseman goods of which
he is owner, either solely or jointly or in common with others, such warehouseman,
or any of his officers, agents, or servants who, knowing this ownership, issues or
aids in issuing a negotiable receipt for such goods which does not state such
ownership, shall be guilty of a crime, and, upon conviction, shall be punished for
each offense by imprisonment not exceeding one year, or by a fine not exceeding
two thousand pesos, or by both.
SECTION 54. Delivery of goods without obtaining negotiable receipt. A
warehouseman, or any officer, agent, or servant of a warehouseman, who delivers
goods out of the possession of such warehouseman, knowing that a negotiable
receipt the negotiation of which would transfer the right to the possession of such
goods is outstanding and uncanceled, without obtaining the possession of such
receipt at or before the time of such delivery, shall, except in the cases provided for
in sections fourteen and thirty-six, be found guilty of a crime, and, upon conviction,
shall be punished for each offense by imprisonment not exceeding one year, or by a
fine not exceeding two thousand pesos, or by both cpAop.
SECTION 55. Negotiation of receipt for mortgaged goods. Any person who
deposits goods to which he has no title, or upon which there is a lien or mortgage,
and who takes for such goods a negotiable receipt which he afterwards negotiates
for value with intent to deceive and without disclosing his want of title or the
existence of the lien or mortgage, shall be guilty of a crime, and, upon conviction,
shall be punished for each offense by imprisonment not exceeding one year, or by a
fine not exceeding two thousand pesos, or by both.

V INTERPRETATION

SECTION 56. Case not provided for in Act. Any case not provided for in this Act
shall be governed by the provisions of existing legislation, or in default thereof, by
the rule of the law merchant.
SECTION 57. Name of Act. This Act may be cited as the Warehouse Receipts Act.
SECTION 58. Definitions. (a) In this Act, unless the content or subject matter
otherwise requires:
"Action" includes counterclaim, set-off, and suits in equity as provided by law in
these islands.
"Delivery" means voluntary transfer of possession from one person to another.
"Fungible goods" means goods of which any unit is, from its nature by mercantile
custom, treated as the equivalent of any other unit.
"Goods" means chattels or merchandise in storage or which has been or is about to
be stored.
"Holder" of a receipt means a person who has both actual possession of such
receipt and a right of property therein.
"Order" means an order by indorsement on the receipt.
"Owner" does not include mortgagee.
"Person" includes a corporation or partnership or two or more persons having a joint
or common interest.
To "purchase" includes to take as mortgagee or as pledgee.
"Receipt" means a warehouse receipt.
"Value" is any consideration sufficient to support a simple contract. An antecedent
or pre-existing obligation, whether for money or not, constitutes value where a
receipt is taken either in satisfaction thereof or as security therefor.
"Warehouseman" means a person lawfully engaged in the business of storing goods
for profit.
(b) A thing is done "in good faith" within the meaning of this Act when it is in fact
done honestly, whether it be done negligently or not.
SECTION 59. Application of Act. The provisions of this Act do not apply to receipts
made and delivered prior to the taking effect hereof.
SECTION 60. Repeals. All acts and laws and parts thereof inconsistent with this
Act are hereby repealed.
SECTION 61. Time when Act takes effect. This Act shall take effect ninety days
after its publication in the Official Gazette of the Philippines shall have been
completed.

ACT No. 3952

THE BULK SALES LAW (as amended)
AN ACT TO REGULATE THE SALE, TRANSFER, MORTGAGE OR ASSIGNMENT
OF GOODS, WARES, MERCHANDISE, PROVISIONS OR MATERIALS, IN BULK,
AND PRESCRIBING PENALTIES FOR THE VIOLATION OF THE PROVISIONS
THEREOF
Section 1. This Act shall be known as "The Bulk Sales Law."
Sec. 2. Sale and transfer in bulk. Any sale, transfer, mortgage or assignment
of a stock of goods, wares, merchandise, provisions, or materials otherwise than in
the ordinary course of trade and the regular prosecution of the business of the
vendor, mortgagor, transferor, or assignor, or sale, transfer, mortgage or
assignment of all, or substantially all, of the business or trade theretofore conducted
by the vendor, mortgagor, transferor, or assignor, or of all, or substantially all, of
the fixtures and equipment used in and about the business of the vendor,
mortgagor, transferor, or assignor, shall be deemed to be a sale and transfer in
bulk, in contemplation of this Act: Provided, however, That if such vendor,
mortgagor, transferor or assignor, produces and delivers a written waiver of the
provisions of this Act from his creditors as shown by verified statements, then, and
in that case, the provisions of this section shall not apply.
Sec. 3. Statement of creditors. It shall be the duty of every person who shall
sell, mortgage, transfer, or assign any stock of goods, wares, merchandise,
provisions or materials in bulk, for cash or on credit, before receiving from the
vendee, mortgagee, or his, or its agent or representative any part of the purchase
price thereof, or any promissory note, memorandum, or other evidence therefor, to
deliver to such vendee, mortgagee, or agent, or if the vendee, mortgagee, or agent
be a corporation, then to the president, vice-president, treasurer, secretary or
manager of said corporation, or, if such vendee or mortgagee be a partnership firm,
then to a member thereof, a written statement, sworn to substantially as hereinafter
provided, of the names and addresses of all creditors to whom said vendor or
mortgagor may be indebted, together with the amount of indebtedness due or
owing, or to become due or owing by said vendor or mortgagor to each of said
creditors, which statement shall be verified by an oath to the following effect:
PHILIPPINE ISLANDS
PROVINCE OR CITY OF _________________}
Before me, the undersigned authority, personally appeared __________________
(vendor, mortgagor, agent or representative, as the case may be), bearing cedula
No. ____________ issued at ___________ on the day of _____________ who, by me being
first duly sworn, upon his oath, deposes and states that the foregoing statement
contains the names of all of the creditors of ________________ (vendor, or mortgagor)
together with their addresses, and that the amount set opposite each of said
respective names, is the amount now due and owing, and which shall become due
and owing by _____________ (vendor or mortgagor) to such creditors, and that there
are no creditors holding claims due or which shall become due, for or on account of
goods, wares, merchandise, provisions or materials purchased upon credit or on
account of money borrowed, to carry on the business of which said goods, wares,
merchandise, provisions or materials are a part, other than as set forth in said
statement.
______________________
Subscribed and sworn to before me this _______ day of ______, 19___, at ________
Sec. 4. Fraudulent and void sale, transfer or mortgage. Whenever any
person shall sell, mortgage, transfer, or assign any stock of goods, wares,
merchandise, provisions or materials, in bulk, for cash or on credit, and shall receive

any part of the purchase price, or any promissory note, or other evidence of
indebtedness for said purchase price or advance upon mortgage, without having
first delivered to the vendee or mortgagee or to his or its agent or representative,
the sworn statement provided for in section three hereof, and without applying the
purchase or mortgage money of the said property to the pro rata payment of the
bona fide claim or claims of the creditors of the vendor or mortgagor, as shown
upon such sworn statement, he shall be deemed to have violated this Act, and any
such sale, transfer or mortgage shall be fraudulent and void.
Sec. 5. Inventory. It shall be the duty of every vendor, transferor, mortgagor, or
assignor, at least ten days before the sale, transfer or execution of a mortgage upon
any stock of goods, wares, merchandise, provisions or materials, in bulk, to make a
full detailed inventory thereof and to preserve the same showing the quantity and,
so far as is possible with the exercise of reasonable diligence, the cost price to the
vendor, transferor, mortgagor or assignor of each article to be included in the sale,
transfer or mortgage, and notify every creditor whose name and address is set forth
in the verified statement of the vendor, transferor, mortgagor, or assignor, at least
ten days before transferring possession thereof, personally or by registered mail, of
the price, terms conditions of the sale, transfer, mortgage, or assignment.
Sec. 6. Any vendor, transferor, mortgagor or assignor of any stock of goods, wares,
merchandise, provisions or materials, in bulk, or any person acting for, or on behalf
of any such vendor, transferor, mortgagor, or assignor, who shall knowingly or
willfully make, or deliver or cause to be made or delivered, a statement, as provided
for in section three hereof, which shall not include the names of all such creditors,
with the correct amount due and to become due to each of them, or shall contain
any false or untrue statement, shall be deemed to have violated the provisions of
this Act.
Sec. 7. It shall be unlawful for any person, firm or corporation, as owner of any
stock of goods, wares, merchandise, provisions or materials, in bulk, to transfer title
to the same without consideration or for a nominal consideration only.
Sec. 8. Nothing in this Act contained shall apply to executors, administrators,
receivers, assignees in insolvency, or public officers, acting under judicial process.
Sec. 9. The sworn statement containing the names and addresses of all creditors of
the vendor or mortgagor provided for in section three of this Act, shall be registered
in the Bureau of Commerce. For the registration of each such sworn statement a fee
of five pesos shall be charged to the vendor or mortgagor of the stock of goods,
wares, merchandise, provisions or materials, in bulk.
Sec. 10. The provisions of this Act shall be administered by the Director of the
Bureau of Commerce and Industry, who is hereby empowered, with the approval of
the Department Head, to prescribe and adopt from time to time such rules and
regulations as may be deemed necessary for the proper and efficient enforcement
of the provisions of this Act.Sec. 11. Any person violating any provision of this Act
shall, upon conviction thereof, be punished by imprisonment not less than six
months, nor more than five years, or fined in sum not exceeding five thousand
pesos, or both such imprisonment and fine, in the discretion of the court.Sec.
12. This Act shall take effect on its approval.
Approved: 01 December 1972

PRESIDENTIAL DECREE No. 115 January 29, 1973

PROVIDING FOR THE REGULATION OF TRUST RECEIPTS TRANSACTIONS
WHEREAS, the utilization of trust receipts, as a convenient business device to assist
importers and merchants solve their financing problems, had gained popular
acceptance in international and domestic business practices, particularly in
commercial banking transactions;
WHEREAS, there is no specific law in the Philippines that governs trust receipt
transactions, especially the rights and obligations of the parties involved therein
and the enforcement of the said rights in case of default or violation of the terms of
the trust receipt agreement;
WHEREAS, the recommendations contained in the report on the financial system
which have been accepted, with certain modifications by the monetary authorities
included, among others, the enactment of a law regulating the trust receipt
transactions;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue
of the powers vested in me by the Constitution, as Commander-in-Chief of all the
Armed Forces of the Philippines, and pursuant to Proclamation No. 1081, dated
September 21, 1972, and General Order No. 1, dated September 22, 1972, as
amended, and in order to effect the desired changes and reforms in the social,
economic, and political structure of our society, do hereby order and decree and
make as part of the law of the land the following:
Section 1. Short Title. This Decree shall be known as the Trust Receipts Law.
Section 2. Declaration of Policy. It is hereby declared to be the policy of the state
(a) to encourage and promote the use of trust receipts as an additional and
convenient aid to commerce and trade; (b) to provide for the regulation of trust
receipts transactions in order to assure the protection of the rights and enforcement
of obligations of the parties involved therein; and (c) to declare the misuse and/or
misappropriation of goods or proceeds realized from the sale of goods, documents
or instruments released under trust receipts as a criminal offense punishable under
Article Three hundred and fifteen of the Revised Penal Code.
Section 3. Definition of terms. As used in this Decree, unless the context otherwise
requires, the term
(a) "Document" shall mean written or printed evidence of title to goods.
(b) "Entrustee" shall refer to the person having or taking possession of goods,
documents or instruments under a trust receipt transaction, and any successor in
interest of such person for the purpose or purposes specified in the trust receipt
agreement.
(c) "Entruster" shall refer to the person holding title over the goods, documents, or
instruments subject of a trust receipt transaction, and any successor in interest of
such person.
(d) "Goods" shall include chattels and personal property other than: money, things
in action, or things so affixed to land as to become a part thereof.

(e) "Instrument" means any negotiable instrument as defined in the Negotiable

Instrument Law; any certificate of stock, or bond or debenture for the payment of
money issued by a public or private corporation, or any certificate of deposit,
participation certificate or receipt, any credit or investment instrument of a sort
marketed in the ordinary course of business or finance, whereby the entrustee, after
the issuance of the trust receipt, appears by virtue of possession and the face of the
instrument to be the owner. "Instrument" shall not include a document as defined in
this Decree.
(f) "Purchase" means taking by sale, conditional sale, lease, mortgage, or pledge,
legal or equitable.
(g) "Purchaser" means any person taking by purchase.
(h) "Security Interest" means a property interest in goods, documents or
instruments to secure performance of some obligations of the entrustee or of some
third persons to the entruster and includes title, whether or not expressed to be
absolute, whenever such title is in substance taken or retained for security only.
(i) "Person" means, as the case may be, an individual, trustee, receiver, or other
fiduciary, partnership, corporation, business trust or other association, and two
more persons having a joint or common interest.
(j) "Trust Receipt" shall refer to the written or printed document signed by the
entrustee in favor of the entruster containing terms and conditions substantially
complying with the provisions of this Decree. No further formality of execution or
authentication shall be necessary to the validity of a trust receipt.
(k) "Value" means any consideration sufficient to support a simple contract.
Section 4. What constitutes a trust receipt transaction. A trust receipt transaction,
within the meaning of this Decree, is any transaction by and between a person
referred to in this Decree as the entruster, and another person referred to in this
Decree as entrustee, whereby the entruster, who owns or holds absolute title or
security interests over certain specified goods, documents or instruments, releases
the same to the possession of the entrustee upon the latter's execution and delivery
to the entruster of a signed document called a "trust receipt" wherein the entrustee
binds himself to hold the designated goods, documents or instruments in trust for
the entruster and to sell or otherwise dispose of the goods, documents or
instruments with the obligation to turn over to the entruster the proceeds thereof to
the extent of the amount owing to the entruster or as appears in the trust receipt or
the goods, documents or instruments themselves if they are unsold or not otherwise
disposed of, in accordance with the terms and conditions specified in the trust
receipt, or for other purposes substantially equivalent to any of the following:
1. In the case of goods or documents, (a) to sell the goods or procure their sale; or
(b) to manufacture or process the goods with the purpose of ultimate sale: Provided,
That, in the case of goods delivered under trust receipt for the purpose of
manufacturing or processing before its ultimate sale, the entruster shall retain its
title over the goods whether in its original or processed form until the entrustee has
complied fully with his obligation under the trust receipt; or (c) to load, unload, ship
or tranship or otherwise deal with them in a manner preliminary or necessary to
their sale; or
2. In the case of instruments,
a) to sell or procure their sale or exchange; or
b) to deliver them to a principal; or
c) to effect the consummation of some transactions involving delivery to a
depository or register; or
d) to effect their presentation, collection or renewal
The sale of goods, documents or instruments by a person in the business of selling
goods, documents or instruments for profit who, at the outset of the transaction,
has, as against the buyer, general property rights in such goods, documents or
instruments, or who sells the same to the buyer on credit, retaining title or other
interest as security for the payment of the purchase price, does not constitute a
trust receipt transaction and is outside the purview and coverage of this Decree.

Section 5. Form of trust receipts; contents. A trust receipt need not be in any
particular form, but every such receipt must substantially contain (a) a description
of the goods, documents or instruments subject of the trust receipt; (2) the total
invoice value of the goods and the amount of the draft to be paid by the entrustee;
(3) an undertaking or a commitment of the entrustee (a) to hold in trust for the
entruster the goods, documents or instruments therein described; (b) to dispose of
them in the manner provided for in the trust receipt; and (c) to turn over the
proceeds of the sale of the goods, documents or instruments to the entruster to the
extent of the amount owing to the entruster or as appears in the trust receipt or to
return the goods, documents or instruments in the event of their non-sale within the
period specified therein.
The trust receipt may contain other terms and conditions agreed upon by the
parties in addition to those hereinabove enumerated provided that such terms and
conditions shall not be contrary to the provisions of this Decree, any existing laws,
public policy or morals, public order or good customs.
Section 6. Currency in which a trust receipt may be denominated. A trust receipt
may be denominated in the Philippine currency or any foreign currency acceptable
and eligible as part of international reserves of the Philippines, the provisions of
existing law, executive orders, rules and regulations to the contrary
notwithstanding: Provided, however, That in the case of trust receipts denominated
in foreign currency, payment shall be made in its equivalent in Philippine currency
computed at the prevailing exchange rate on the date the proceeds of sale of the
goods, documents or instruments held in trust by the entrustee are turned over to
the entruster or on such other date as may be stipulated in the trust receipt or other
agreements executed between the entruster and the entrustee.
Section 7. Rights of the entruster. The entruster shall be entitled to the proceeds
from the sale of the goods, documents or instruments released under a trust receipt
to the entrustee to the extent of the amount owing to the entruster or as appears in
the trust receipt, or to the return of the goods, documents or instruments in case of
non-sale, and to the enforcement of all other rights conferred on him in the trust
receipt provided such are not contrary to the provisions of this Decree.
The entruster may cancel the trust and take possession of the goods, documents or
instruments subject of the trust or of the proceeds realized therefrom at any time
upon default or failure of the entrustee to comply with any of the terms and
conditions of the trust receipt or any other agreement between the entruster and
the entrustee, and the entruster in possession of the goods, documents or
instruments may, on or after default, give notice to the entrustee of the intention to
sell, and may, not less than five days after serving or sending of such notice, sell
the goods, documents or instruments at public or private sale, and the entruster
may, at a public sale, become a purchaser. The proceeds of any such sale, whether
public or private, shall be applied (a) to the payment of the expenses thereof; (b) to
the payment of the expenses of re-taking, keeping and storing the goods,
documents or instruments; (c) to the satisfaction of the entrustee's indebtedness to
the entruster. The entrustee shall receive any surplus but shall be liable to the
entruster for any deficiency. Notice of sale shall be deemed sufficiently given if in
writing, and either personally served on the entrustee or sent by post-paid ordinary
mail to the entrustee's last known business address.
Section 8. Entruster not responsible on sale by entrustee. The entruster holding a
security interest shall not, merely by virtue of such interest or having given the
entrustee liberty of sale or other disposition of the goods, documents or instruments
under the terms of the trust receipt transaction be responsible as principal or as
vendor under any sale or contract to sell made by the entrustee.
Section 9. Obligations of the entrustee. The entrustee shall (1) hold the goods,
documents or instruments in trust for the entruster and shall dispose of them
strictly in accordance with the terms and conditions of the trust receipt; (2) receive
the proceeds in trust for the entruster and turn over the same to the entruster to
the extent of the amount owing to the entruster or as appears on the trust receipt;
(3) insure the goods for their total value against loss from fire, theft, pilferage or

other casualties; (4) keep said goods or proceeds thereof whether in money or
whatever form, separate and capable of identification as property of the entruster;
(5) return the goods, documents or instruments in the event of non-sale or upon
demand of the entruster; and (6) observe all other terms and conditions of the trust
receipt not contrary to the provisions of this Decree.
Section 10. Liability of entrustee for loss. The risk of loss shall be borne by the
entrustee. Loss of goods, documents or instruments which are the subject of a trust
receipt, pending their disposition, irrespective of whether or not it was due to the
fault or negligence of the entrustee, shall not extinguish his obligation to the
entruster for the value thereof.
Section 11. Rights of purchaser for value and in good faith. Any purchaser of goods
from an entrustee with right to sell, or of documents or instruments through their
customary form of transfer, who buys the goods, documents, or instruments for
value and in good faith from the entrustee, acquires said goods, documents or
instruments free from the entruster's security interest.
Section 12. Validity of entruster's security interest as against creditors. The
entruster's security interest in goods, documents, or instruments pursuant to the
written terms of a trust receipt shall be valid as against all creditors of the entrustee
for the duration of the trust receipt agreement.
Section 13. Penalty clause. The failure of an entrustee to turn over the proceeds of
the sale of the goods, documents or instruments covered by a trust receipt to the
extent of the amount owing to the entruster or as appears in the trust receipt or to
return said goods, documents or instruments if they were not sold or disposed of in
accordance with the terms of the trust receipt shall constitute the crime of estafa,
punishable under the provisions of Article Three hundred and fifteen, paragraph one
(b) of Act Numbered Three thousand eight hundred and fifteen, as amended,
otherwise known as the Revised Penal Code. If the violation or offense is committed
by a corporation, partnership, association or other juridical entities, the penalty
provided for in this Decree shall be imposed upon the directors, officers, employees
or other officials or persons therein responsible for the offense, without prejudice to
the civil liabilities arising from the criminal offense.
Section 14. Cases not covered by this Decree. Cases not provided for in this
Decree shall be governed by the applicable provisions of existing laws.
Section 15. Separability clause. If any provision or section of this Decree or the
application thereof to any person or circumstance is held invalid, the other
provisions or sections hereof and the application of such provisions or sections to
other persons or circumstances shall not be affected thereby.
Section 16. Repealing clause. All Acts inconsistent with this Decree are hereby
repealed.
Section 17. This Decree shall take effect immediately.
Done in the City of Manila, this 29th day of January, in the year of Our Lord,
nineteen hundred and seventy-three.
Republic Act No. 7042
June 13, 1991
AN ACT TO PROMOTE FOREIGN INVESTMENTS, PRESCRIBE THE
PROCEDURES FOR REGISTERING ENTERPRISES DOING BUSINESS IN THE
PHILIPPINES, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled::
Section 1. Title. - This Act shall be known as the, "Foreign Investments Act of
1991".
Section 2. Declaration of Policy. - It is the policy of the State to attract, promote
and welcome productive investments from foreign individuals, partnerships,
corporations, and governments, including their political subdivisions, in activities
which significantly contribute to national industrialization and socioeconomic
development to the extent that foreign investment is allowed in such activity by the
Constitution and relevant laws. Foreign investments shall be encouraged in

enterprises that significantly expand livelihood and employment opportunities for

Filipinos; enhance economic value of farm products; promote the welfare of Filipino
consumers; expand the scope, quality and volume of exports and their access to
foreign markets; and/or transfer relevant technologies in agriculture, industry and
support services. Foreign investments shall be welcome as a supplement to Filipino
capital and technology in those enterprises serving mainly the domestic market.
As a general rule, there are no restrictions on extent of foreign ownership of export
enterprises. In domestic market enterprises, foreigners can invest as much as one
hundred percent (100%) equity except in areas included in the negative list. Foreign
owned firms catering mainly to the domestic market shall be encouraged to
undertake measures that will gradually increase Filipino participation in their
businesses by taking in Filipino partners, electing Filipinos to the board of directors,
implementing transfer of technology to Filipinos, generating more employment for
the economy and enhancing skills of Filipino workers.
Section 3. Definitions. - As used in this Act:
a) The term "Philippine national" shall mean a citizen of the Philippines or a
domestic partnership or association wholly owned by citizens of the Philippines; or a
corporation organized under the laws of the Philippines of which at least sixty
percent (60%) of the capital stock outstanding and entitled to vote is owned and
held by citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a Philippine
national and at least sixty (60%) of the fund will accrue to the benefit of the
Philippine nationals: Provided, That where a corporation and its non-Filipino
stockholders own stocks in a Securities and Exchange Commission (SEC) registered
enterprise, at least sixty percent (60%) of the capital stocks outstanding and
entitled to vote of both corporations must be owned and held by citizens of the
Philippines and at least sixty percent (60%) of the members of the Board of
Directors of both corporations must be citizens of the Philippines, in order that the
corporations shall be considered a Philippine national;
b) The term "investment" shall mean equity participation in any enterprise
organized or existing under the laws of the Philippines;
c) The term "foreign investment" shall mean as equity investment made by a nonPhilippine national in the form of foreign exchange and/or other assets actually
transferred to the Philippines and duly registered with the Central Bank which shall
assess and appraise the value of such assets other than foreign exchange;
d) The praise "doing business" shall include soliciting orders, service contracts,
opening offices, whether called "liaison" offices or branches; appointing
representatives or distributors domiciled in the Philippines or who in any calendar
year stay in the country for a period or periods totalling one hundred eighty (180)
days or more; participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and any other act
or acts that imply a continuity of commercial dealings or arrangements, and
contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business organization:
Provided, however, That the phrase "doing business: shall not be deemed to include
mere investment as a shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such investor; nor having
a nominee director or officer to represent its interests in such corporation; nor
appointing a representative or distributor domiciled in the Philippines which
transacts business in its own name and for its own account;
e) The term "export enterprise" shall mean an enterprise which produces goods for
sale, or renders services to the domestic market entirely or if exporting a portion of
its output fails to consistently export at least sixty percent (60%) thereof; and
g) The term "Foreign Investments Negative List" or "Negative List" shall mean a list
of areas of economic activity whose foreign ownership is limited to a maximum of
forty ownership is limited to a maximum of forty percent (40%) of the equity capital
of the enterprise engaged therein.

Section 4. Scope. - This Act shall not apply to banking and other financial
institutions which are governed and regulated by the General Banking Act and other
laws under the supervision of the Central Bank.
Section 5. Registration of Investments of Non-Philippine Nationals. Without need of prior approval, a non-Philippine national, as that term is defined in
Section 3 a), and not otherwise disqualified by law may upon registration with the
Securities and Exchange Commission (SEC), or with the Bureau of Trade Regulation
and Consumer Protection (BTRCP) of the Department of Trade and Industry in the
case of single proprietorships, do business as defined in Section 3 (d) of this Act or
invest in a domestic enterprise up to one hundred percent (100%) of its capital,
unless participation of non-Philippine nationals in the enterprise is prohibited or
limited to a smaller percentage by existing law and/or limited to a smaller
percentage by existing law and/or under the provisions of this Act. The SEC or
BTRCP, as the case may be, shall not impose any limitations on the extent of foreign
ownership in an enterprise additional to those provided in this Act: Provided,
however, That any enterprise seeking to avail of incentives under the Omnibus
Investment Code of 1987 must apply for registration with the Board of Investments
(BOI), which shall process such application for registration in accordance with the
criteria for evaluation prescribed in said Code: Provided, finally, That a nonPhilippine national intending to engage in the same line of business as an existing
joint venture in his application for registration with SEC. During the transitory period
as provided in Section 15 hereof, SEC shall disallow registration of the applying nonPhilippine national if the existing joint venture enterprise, particularly the Filipino
partners therein, can reasonably prove they are capable to make the investment
needed for they are competing applicant. Upon effectivity of this Act, SEC shall
effect registration of any enterprise applying under this Act within fifteen (15) days
upon submission of completed requirements.
Section 6. Foreign Investments in Export Enterprises. - Foreign investment in
export enterprises whose products and services do not fall within Lists A and B of
the Foreign Investment Negative List provided under Section 8 hereof is allowed up
to one hundred percent (100%) ownership.
Export enterprises which are non-Philippine nationals shall register with BOI and
submit the reports that may be required to ensure continuing compliance of the
export enterprise with its export requirement. BOI shall advise SEC or BTRCP, as the
case may be, of any export enterprise that fails to meet the export ratio
requirement. The SEC or BTRCP shall thereupon order the non-complying export
enterprise to reduce its sales to the domestic market to not more than forty percent
(40%) of its total production; failure to comply with such SEC or BTRCP order,
without justifiable reason, shall subject the enterprise to cancellation of SEC or
BTRCP registration, and/or the penalties provided in Section 14 hereof.
Section 7. Foreign Investments in Domestic Market Enterprises. - NonPhilippine nationals may own up to one hundred percent (100%) of domestic market
enterprises unless foreign ownership therein is prohibited or limited by existing law
or the Foreign Investment Negative List under Section 8 hereof.
A domestic market enterprise may change its status to export enterprise if over a
three (3) year period it consistently exports in each year thereof sixty per cent
(60%) or more of its output.
Section 8. List of Investment Areas Reserved to Philippine
Nationals (Foreign Investment Negative List). - The Foreign Investment
Negative List shall have three (3) component lists: A, B, and C:
a) List A shall enumerate the areas of activities reserved to Philippine nationals by
mandate of the Constitution and specific laws.
b) List B shall contain the areas of activities and enterprises pursuant to law:
1) Which are defense-related activities, requiring prior clearance and authorization
from Department of National Defense (DND) to engage in such activity, such as the
manufacture, repair, storage and/or distribution of firearms, ammunition, lethal
weapons, military ordnance, explosives, pyrotechnics and similar materials; unless
such manufacturing or repair activity is specifically authorized, with a substantial

export component, to a non-Philippine national by the Secretary of National

Defense; or
2) Which have implications on public health and morals, such as the manufacture
and distribution of dangerous drugs; all forms of gambling; nightclubs, bars,
beerhouses, dance halls; sauna and steambath houses and massage clinics.
Small and medium-sized domestic market enterprises with paid-in equity capital
less than the equivalent of five hundred thousand US dollars (US$500,000) are
reserved to Philippine nationals, unless they involve advanced technology as
determined by the Department of Science and Technology. Export enterprises which
utilize raw materials from depleting natural resources, with paid-in equity capital of
less than the equivalent of five hundred thousand US dollars (US$500,000) are
likewise reserved to Philippine nationals.
Amendments to List B may be made upon recommendation of the Secretary of
National Defense, or the Secretary of Health, or the Secretary of Education, Culture
and Sports, indorsed by the NEDA, or upon recommendation motu propio of NEDA,
approved by the President, and promulgated by Presidential Proclamation.
c) List C shall contain the areas of investment in which existing enterprises already
serve adequately the needs of the economy and the consumer and do not require
further foreign investments, as determined by NEDA applying the criteria provided
in Section 9 of this Act, approved by the President and promulgated in a Presidential
Proclamation.
The Transitory Foreign Investment Negative List established in Sec. 15 hereof shall
be replaced at the end of the transitory period by the first Regular Negative List to
the formulated and recommended by the NEDA, following the process and criteria
provided in Section 8 and 9 of this Act. The first Regular Negative List shall be
published not later than sixty (60) days before the end of the transitory period
provided in said section, and shall become immediately effective at the end of the
transitory period. Subsequent Foreign Investment Negative Lists shall become
effective fifteen (15) days after publication in two (2) newspapers of general
circulation in the Philippines: Provided, however, That each Foreign Investment
Negative List shall be prospective in operation and shall in no way affect foreign
investments existing on the date of its publication.
Amendments to List B and C after promulgation and publication of the first Regular
Foreign Investment Negative List at the end of the transitory period shall not be
made more often than once every two (2) years.
Section 9. Determination of Areas of Investment for Inclusion in List C of
the Foreign Investment Negative List. - Upon petition by a Philippine national
engage therein, an area of investment may be recommended by NEDA for inclusion
in List C of the Foreign Investment Negative List upon determining that it complies
with all the following criteria:
a) The industry is controlled by firms owned at least sixty percent (60%) by Filipinos;
b) Industry capacity is ample to meet domestic demand;
c) Sufficient competition exists within the industry;
d) Industry products comply with Philippine standards of health and safety or, in the
absence of such, with international standards, and are reasonably competitive in
quality with similar products in the same price range imported into the country;
e) Quantitative restrictions are not applied on imports of directly competing
products;
f) The leading firms of the industry substantially comply with environmental
standards; and
g) The prices of industry products are reasonable.
The petition shall be subjected to a public hearing at which affected parties will
have the opportunity to show whether the petitioner industry adequately serves the
economy and the consumer, in general, and meets the above stated criteria in
particular. NEDA may delegate evaluation of the petition and conduct of the public
hearing to any government agency having cognizance of the petitioner industry. The
delegated agency shall make its evaluation report and recommendations to NEDA

which retains the right and sole responsibility to determine whether to recommend
to the President to promulgate the area of investment in List C of the Negative List.
An industry or area of investment included in List C of the Negative List by
Presidential Proclamation shall remain in the said List C for two (2) years, without
prejudice to re-inclusion upon new petition, and due process.
Section 10. Strategic Industries. - Within eighteen (18) months after the
effectivity of this Act, the NEDA Board shall formulate and publish a list of industries
strategic to the development of the economy. The list shall specify, as a matter of
policy and not as a legal requirement, the desired equity participation by
Government and/or private Filipino investors in each strategic industry. Said list of
strategic industries, as well as the corresponding desired equity participation of
government and/or private Filipino investors, may be amended by NEDA to reflect
changes in economic needs and policy directions of Government. The amended list
of strategic industries shall be published concurrently with publication of the Foreign
Investment Negative List.
The term "strategic industries" shall mean industries that are characterized by all of
the following:
a) Crucial to the accelerated industrialization of the country,
b) Require massive capital investments to achieve economies of scale for efficient
operations;
c) Require highly specialized or advanced technology which necessitates technology
transfer and proven production techniques in operations;
d) Characterized by strong backward and forward linkages with most industries
existing in the country, and
e) Generate substantial foreign exchange savings through import substitution and
collateral foreign exchange earnings through export of part of the output that will
result with the establishment, expansion or development of the industry.
Section 11. Compliance with Environmental Standards. - All industrial
enterprises regardless of nationality of ownership shall comply with existing rules
and regulations to protect and conserve the environment and meet applicable
environmental standards.
Section 12. Consistent Government Action. - No agency, instrumentality or
political subdivision of the Government shall take any action on conflict with or
which will nullify the provisions of this Act, or any certificate or authority granted
hereunder.
Section 13. Implementing Rules and Regulations. - NEDA, in consultation with
BOI, SEC and other government agencies concerned, shall issue the rules and
regulations to implement this Act within one hundred and twenty (120) days after
its effectivity. A copy of such rules and regulations shall be furnished the Congress
of the Republic of the Philippines.
Section 14. Administrative Sanctions. - A person who violates any provision of
this Act or of the terms and conditions of registration or of the rules and regulations
issued pursuant thereto, or aids or abets in any manner any violation shall be
subject to a fine not exceeding One hundred thousand pesos (P100,000).
If the offense is committed by a juridical entity, it shall be subject to a fine in an
amount not exceeding of 1% of total paid-in capital but not more than Five million
pesos (P5,000,000). The president and/or officials responsible therefor shall also be
subject to a fine not exceeding Two hundred thousand pesos (P200,000).
In addition to the foregoing, any person, firm or juridical entity involved shall be
subject to forfeiture of all benefits granted under this Act.
SEC shall have the power to impose administrative sanctions as provided herein for
any violation of this Act or its implementing rules and regulations.
Section 15. Transitory Provisions. - Prior to effectivity of the implementing rules
and regulations of this Act, the provisions of Book II of Executive Order 226 and its
implementing rules and regulations shall remain in force.

During the initial transitory period of thirty-six (36) months after issuance of the
Rules and Regulations to implement this Act, the Transitory Foreign Investment
Negative List shall consist of the following:
A. List A:
1. All areas of investment in which foreign ownership is limited by mandate of
Constitution and specific laws.
B. List B:
1. Manufacture, repair, storage and/or distribution of firearms, ammunitions, lethal
weapons, military ordinance, explosives, pyrotechnics and similar materials required
by law to be licensed by and under the continuing regulation of the Department of
National Defense; unless such manufacturing or repair activity is specifically
authorized with a substantial export component, to a non-Philippine national by the
Secretary of National Defense;
2. Manufacture and distribution of dangerous drugs; all forms of gambling;
nightclubs, bars, beerhouses, dance halls; sauna and steam bathhouses, massage
clinic and other like activities regulated by law because of risks they may pose to
public health and morals;
3. Small and medium-size domestic market enterprises with paid-in equity capital or
less than the equivalent of US$500,000, unless they involve advanced technology
as determined by the Department of Science and Technology, and
4. Export enterprises which utilize raw materials from depleting natural resources,
and with paid-in equity capital of less than the equivalent US$500,000.
C. List C:
1. Import and wholesale activities not integrated with production or manufacture of
goods;
2. Services requiring a license or specific authorization, and subject to continuing
regulations by national government agencies other than BOI and SEC which at the
time of effectivity of this Act are restricted to Philippine nationals by existing
administrative regulations and practice of the regulatory agencies concerned:
Provided, That after effectivity of this Act, no other services shall be additionally
subjected to such restrictions on nationality of ownership by the corresponding
regulatory agencies, and such restrictions once removed shall not be reimposed;
and
3. Enterprises owned in the majority by a foreign licensor and/or its affiliates for the
assembly, processing or manufacture of goods for the domestic market which are
being produced by a Philippine national as of the date of effectivity of this Act under
a technology, know-how and/or brand name license from such licensor during the
term of the license agreement: Provided, That, the license is duly registered with
the Central Bank and/or the Technology Transfer Board and is operatively in force as
of the date of effectivity of this Act.
NEDA shall make the enumeration as appropriate of the areas of the investment
covered in this Transitory Foreign Investment Negative List and publish the Negative
List in full at the same time as, or prior to, the publication of the rules and
regulations to implement this Act.
The areas of investment contained in List C above shall be reserved to Philippine
nationals only during the transitory period. The inclusion of any of them in the
regular Negative List will require determination by NEDA after due public hearings
that such inclusion is warranted under the criteria set forth in Section 8 and 9
hereof.
Section 16. Repealing Clause. - Articles forty-four (44) to fifty-six (56) of Book II
of Executive Order No. 226 are hereby repealed.
All other laws or parts of laws inconsistent with the provisions of this Act are hereby
repealed or modified accordingly.