Opinion No. 14-34 RE: Retail Trade Law; Republic Act No. 8762

Republic of the Philippines

SEC Building, EDSA, Greenhills, Mandaluyong City Securities and Exchange Commission Department of Finance

OFFICE OF THE GENERAL COUNSEL

18 November 2014

Retail Trade Law; Republic Act No. 8762 SEC-OGC Opinion No. 14-34

ATTY. ERWIN S. HERRERA SEE AND HERRERA LAW FIRM

Sedeno corner Valero Streets Salcedo Village, 1227 Makati City 1100 88 Corporate Center

S:

July 4, 2014 that the sale of industrial cranes and/or water jet cutting tools in the This refers to your letter-request for confirmatory legal opinion duly received on

Philippines of your client, Draper Power Cranes Co. does not constitute retail trade pursuant to the Retail Trade Liberalization Act of 2000 (Republic Act No. 8762).

You disclosed that that the cranes and water jet cutting tools sold by your client to construction firms, mining firms and other similar businesses to be used by them in their service business are producer goods rather than consumer goods.

Republic Act No. 8762 defines "retail trade" as "any act, occupation or calling of habitually selling direct to the general public merchandise, commodities or goods for should concur: (1) The seller should be habitually engaged in selling; (2) The sale must consumption. " For a sale transaction to be considered as "retail", the following elements be direct to the general public; and (3) The object of the sale is limited to merchandise, commodities or goods for consumption.?

Pursuant thereto, Rule 1, Section 2(e) of the Implementing Rules and Regulations of Republic Act No. 8762, reiterating Section 4(c) of Republic Act No. 1180 or the

Marsman & Company, Inc. vs. First Coconut Central Company, Inc., infra. service to the general public and/or produce or manufacture of goods which are in turn sold by them; xxx" 1 Section 3 (1), Republic Act No. 8762 2 SEC Opinion dated January 15, 1996 addressed to Sycip Salazar Hernandez & Gatmaitan, citing "(c) Sales to industrial and commercial users or consumers who use the products bought by them to rende "Section 2. Sales Not Considered As Retail. - The following sales are not considered as retail: xx:

Retail Trade Nationalization Law as amended by Presidential Decree No. 714, considers sales to consumers who use the products bought by them to render service to the general public as non-retail sales.

sale of goods for consumption to the general public as end-user.4 The term "retail" is Moreover, the law covers only the sale of goods for consumption to the general public as associated with and limited to goods for personal, family, or household use, consumption directly satisfy human wants and desires and are needed for home and daily life". and utilization.5 The items sold must be "the final and end (uses) of a product which end-user. As previously opined by the Commission, Republic Act No. 8762 covers only the

vs. First Coconut Central Company, Inc., which was cited by the Commission in SEC. OGC Opinion No. 13-07,' is well founded. As further expounded by the said opinion: Your reliance in the Decision of the Supreme Court in Marsman & Company, Inc.

"...The last element refers to the subject of the retailer's activities or what he is selling, i.e., consumption goods or consumer goods. Consumer goods may be defined as "goods which are used or bought for use primarily for personal, family further use in the production of other products. In other words, consumer goods are goods which by their very nature are ready or household purposes. Such goods are not intended for resale or for consumption."

material) that are factors in the production of other goods and that satisfy wants only indirectly-called also auxillary goods. instrumental goods, intermediate goods." They are by their very "producer goods", not as " consumer goods " o "Producer goods have been defined as "goods (as tools and raw nature not sold to the public for consumption. As such, the sale of producer goods used for industry or business is classified as a wholesale transaction. Wholesaling has been defined as "selling to retailers or jobbers rather than to consumers or a sale in large equipment which will be used for 'business purposes', not for quantity to one who intends to resell." Hence, tools and personal, family or household purposes, are considered as

4 SEC-OGC Opinion No. 14-08, May 19, 2014, addressed to Aranas Law Offices; SEC Opinion dated 23 1 Ibid., citing SEC Opinion dated February 22, 2001, addressed to Atty. Remigio Noval and Atty. Ma. Georgina J. Soberano. June 2005 addressed to De Borja Medialdia Bello Guevarra & Gerodias 5 SEC-OGC Opinion No. 14-12, June 2, 2014, addressed to Reyes Esguerra Baluyut Benitez and Bongco 8 G.R. No. L-39841, June 20, 1988. 9 30 July 2013, addressed to Atty. Rosario S. Bernaldo. SEC-OGC Opinion No. 06-32, August 2, 2006, addressed to Cayetano Sebastian Ata Dado and Cruz, citing Balrnaceda VS. Union Carbide Phils., Inc. G.R. No. L-30442, 30 September 1983. Law Offices Law Offices SEC-OGC Opinion No. 14.12, June 2, 2014, addressed to Reyes Esguerra Baluyut Benitez and Bongco

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construction, mining, and similar activities does not constitute retail trade, as the sale involves producer goods, not consumer goods, to be used for industry or business by industrial and commercial users, not the general public. Thus, the sale of cranes and water jet cutting tools to firms engaged in

it will be disclosed that the facts relied upon are different, this opinion shall be rendered Commission in other cases of similar or dissimilar circumstances.11 If upon investigation, shall not be used in the nature of a standing rule binding upon the courts, or upon the facts disclosed in the query and relevant solely to the particular issues raised therein and null and void. It shall be understood that the foregoing opinion is rendered based solely on the

O CAMLOAVCORREA General Counsel

11 SEC Memorandum Circular 2003-15 (No. 7).