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MEMORANDUM

FOR

THE PEZA BOARD

THRU

The Director General

FROM

The Enterprise Regulations Department

D AT E

22 March 2013

SUBJECT

ISTEEL, INC. (ISTEEL)


Re: Request for renewal of Local Sales Authority
(Local Sales Limit exceeded for 3 consecutive years)

_______________________________________________________________
We respectfully submit herewith to the PEZA Board our report on iSteel Inc., which has
exceeded the maximum local sales limit of 50% for Filipino-owned companies for three (3)
consecutive years.
BACKGROUND ON iSTEEL
PEZA Registration
SEC Registration
Nationality
Location
Registered Activity
SCO (per R.A.)

:
:
:
:
:
:

No. 11-79, dated 11 November 2011


CS201005836, dated 22 April 2010
99.9% Filipino, 0.1% Korean
First Philippine Industrial Park (FPIP-SEZ)
Manufacture of Pre-engineered Metal Building Systems (MBS)
September 2011 (takeover of TAPCs operations)

Capital Structure
Authorized
Subscribed
Paid-up

Php 60,000,000.00
Php 60,000,000.00
Php 45,000,000.00

List of Stockholders
Name

TAPC
Ho Gil Lee
Felix G. Chung
Roehl Stephen Ramos
Rachel Follosco
Antonio P. Serrano
Carmela S. Ongsiapco
Total

Nationality

Filipino
Korean
Filipino
Filipino
Filipino
Filipino
Filipino

No. of
Shares
1,999,970
1,999,900
2,000,000
100
1
1
1
6,000,000

Amount
Subscribed (Php)
19,999,970.00
19,999,000.00
20,000,000.00
1,000.00
10.00
10.00
10.00
60,000,000.00

Employment Performance (as of 28 February 2013): 34 workers

Amount Paid-Up
(Php)

14,999,970.00
14,999,000.00
15,000,000.00
1,000.00
10.00
10.00
10.00
45,000,000.00

Financial Status Per Audited Financial Statements


Php
Net Sales
Net Loss
Property & Equipment
Total Assets
Total Current Liabilities
Capital Stock
Deposit on Subscription
Deficit

CY 2011
84,761,172
7,549,997
75,085,328
136,291,152
30,867,653
2,500,000
57,500,000
11,204,632

CY 2010
6,357,525
3,654,635
15,858,258
29,522,653
4,981,300
2,500,000
7,500,000
3,654,635

Discussion
1. ISteel was registered with PEZA on 09 November 2011, taking over the manufacture of Preengineered Metal Building Systems (MBS) operations/project of THOMAS ASIA
PACKAGING CORPORATION (TAPC), at the FPIP-SEZ.
2. TAPC, ISteels major stockholder has engaged in 100% local sales since its registration of
the aforementioned project with PEZA on 11 August 2009, under LOA Nos. 10-1446 dated
21 June 2010, and 11-1568 dated 16 June 2011. Liquidation of aforementioned LOAs are as
follows:
Local Sale
Authority No.

Local Sales
Value (Php)

Internal Revenue
Taxes Paid (Php)

Customs
Duties Paid

PEZA
Processing Fee

(Php)

(Php)

10-1446
11-1568

10,874,669.63
41,376,904.32

1,172,457.30
27,476.00

31,762.75
24,152.00

109,815.02
329,504.24

3. It is noted that ISteel likewise engaged in 100% local sales since its registration with PEZA
on 09 November 2011, under LOA No. 11-3088, dated 21 November 2011.
Period Covered
Local Sales Value (Php)
Export Sales Value (Php)
Total Sales Value (Php)
% Local Sales / Total Sales Value
Customs Duties Paid (Php)
Internal Revenue Taxes Paid (Php)
PEZA Processing Fees Paid (Php)
(*As explained by the company the duties and

November - December 2011


Php 6,318,179.88
None
Php 6,318,179.88
100 %
*Php 340.00
*Php 502.00
Php 46,474.12

taxes paid are only for the protective film which is the only
imported raw material input. VAT payments on total local sales are reported in the quarterly filing of VAT returns.)

4. For CY2012, ISteel likewise engaged in 100% local sales, as follows:

Period Covered
January - December 2012
Local Sales Value (Php)
Php 37,405,583.15
Export Sales Value (Php)
None
Total Sales Value (Php)
Php 37,405,583.15
% Local Sales / Total Sales Value
100 %
Customs Duties Paid (Php)
*Php 6,558.00
Internal Revenue Taxes Paid (Php)
*Php 23,557.00
PEZA Processing Fees Paid (Php)
Php 622,776.54
(*As explained by the company the duties and taxes paid are only for the chemicals which is the only imported
raw material input. VAT payments on total local sales are reported in the quarterly filing of VAT returns.)

5. It is noted that ISteels invoices submitted as part of the requirements for the
processing/liquidation of its local sales is at the Ground Floor, Fortune Bldg., 144 Pasig
Blvd., Bagong Ilog, Pasig City.
6. In a letter to PEZA dated 10 January 2013, Ms. Edilyn P. Vitalicio, ISteels Accounting Head,
informed the following:
(a) ISteel is not engaged in any other business operations aside from the manufacture of
pre-engineered Metal Building System at FPIP-SEZ,
(b) ISteel however, has a satellite office located at the GF Fortune Bldg., 144 Pasig Blvd.,
Bagong Ilog, Pasig City for its Sales and Admin Department which location is
declared as ISteels Head Office in its BIR registration while its FPIP-SEZ facility is
listed as branch;
(c) Since ISteels declared Head Office is in Pasig, the invoices are likewise addressed in
Pasig along with other reportorial requirements of BIR; and
(d) The company has filed its request with the BIR for the transfer of its Head Office
address to its FPIP-SEZ facility on March 2012 (copy of ISteels Verification Slip for
the Transfer of Business Registration submitted to PEZA-ERD).
7. As part of the requirements under (LOA) No. 13-ERD-LS/FP/EE-0014, dated 02 January
2013, as extended by LOA No. 13-ERD-LS/FP/EE-0237, on 16 January 2013, which
provisionally authorized ISteel to proceed with its local sales of its production of preengineered Metal Building Systems (MBS) in its FPIP-SEZ facility, ISteel submitted the
following:
(a) Proof of payment by TAPC of the Regular Corporate Income Tax for its Pre-Engineered
Metal Building Systems (MBS) operations/project in CY 2009, 2010, and 2011;
(b) Clearance/Certificate from the PEZA OIC/FPIP-SEZ Zone Manager stating that TAPC
has submitted its liquidation of its local sales under LOA No. 11-1568, dated 16 June
2011, and that TAPC has no outstanding financial accountabilities/liabilities with PEZA;
(c) Liquidation of TAPCs local sales under 11-1568 dated 16 June 2011;
(d) Inventory of ISteels Raw Materials and Finished Goods at FPIP-SEZ;
(e) Notarized Undertaking signed by ISteels President/CEO, Mr. Ho Gil Lee, dated 11
January 2013, stating the following: (a) ISteel has informed all its local suppliers of
goods and services that its VAT-zero rating privilege has been suspended effective
immediately; and (b) ISteel renders PEZA free and harmless from any and all liabilities
from any VAT claims with the BIR of any and all of ISteels local suppliers from date of
Issuance of its LOA;

8. In its letter dated 10 January 2013, ISteel requested for consideration on the status of its
present operations (100% local sales) stating that:
(a) The company is doing its best to close export sales, and at present has several export
inquiries from clients;
(b) Last June 15, 2012, another Filipino investor/stockholder joined the company, which
management believes can contribute in getting export clients for ISteel;
(c) Presently, the company has several client commitments and the cancellation of PEZA
permits would lead to payment of damages by the company and possible stop of
business operations; and
(d) Although the companys Head Office address is in Pasig, the company only sells
products manufactured in its FPIP-SEZ facility, and has not engaged in any other form of
business activity.
RECOMMENDATION
APPROVAL of the following recommendations of Management:
1. Issuance of renewal of local sales authority to ISTEEL for CY2013 under the condition that
all local sales of ISTEEL shall be subject to the regular corporate income tax and local
business taxes;
2. Suspension of the Tax and Duty Free Importation and VAT Zero-rating incentive pending
ISTEELs attainment of at least 50% export to total sales ratio;
3. Endorsement to the Bureau of Internal Revenue (BIR) for Tax Audit; and
4. Re-submission to the PEZA Board for its consideration any subsequent requests of ISTEEL
for renewal of its local sales.
For Board consideration.

LEONISA E. SUAREZ
Group Manager
Enterprise Regulations & Support Services
Recommending Approval:

MARY HARRIET O. ABORDO


Deputy Director General for Operations
For Board Consideration:

LILIA B. DE LIMA
Director General
HOA:LES/reg

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