CEBU, Philippines - The Cebu City Council is not keen on allowing Mayor Michael Rama to open a foreign letter of credit with the Land Bank of the Philippines for the purchase of a heavy equipment.
The proposed resolution of Councilor Eduardo “Edu” Rama seeking authority to allow Mayor Michael Rama to open a foreign letter of credit with the LBP was discussed during yesterday’s executive session of the city council.
With a letter of credit, the bank guarantees the seller that the payment of the goods will be received on time and for the correct amount. The bank will also ensure that the seller will not get the payment until the bank gets a confirmation that the purchased item has been shipped.
Councilor Rama tried to convince his fellow city legislators that it would be advantageous to the city if the mayor will be allowed to open a foreign letter of credit amounting to P4.424 million for the purchase of a brand new mini-payloader.
Councilor Rama explained that it would be more expensive if the supplier will be the one to open a letter of credit.
But the councilors find the transaction highly questionable.
If the city opens a letter of credit, the amount will no longer earn interest upon filing of the application.
The city will also pay one fourth of one percent out of the total amount of purchase price.
Councilor Margarita “Margot” Osmeña said it is disadvantageous to the city if they allow Rama to open a letter of credit on behalf of the winning bidder.
Marie Velle Abella of the City Legal Office, a member of the Technical Working Group of the Bids and Awards Committee (BAC), said the winning bidder for the purchase of the payloader is Macro Enterprises in Quezon City.
Max Reyes, the deputy collector for assessment of the Bureau of Customs in Cebu City, told the councilors that there is no need for the city to open a letter of credit because it is the responsibility of the winning bidder to deliver the item.
Reyes added the city can apply for an exemption from customs duties for the importation of heavy equipment with the Bureau of Import Services.
The payloader will be used for garbage collection and other engineering works. — (FREEMAN)