Definition of Cottage Industry

Section 11 of R.A. No. 3470, approved on June 16, 1962, defined cottage industry as an “economic activity in a small scale which is carried on mainly in the homes or in other places for profit and which is mainly done with the help of the members of the family.” Among the activities considered as a cottage industry is “metalcraft such as making of jewelries, knives, boloes (sic), scissors, razors, silverwares and brassworks (sic).”[45]

 

The same law required persons, corporations, partnerships, or associations that wished to avail of the benefits of the law to register with the NACIDA.[46]

 

In 1968, R.A. No. 5326 amended certain sections of R.A. No. 3470. In particular, Section 11 was amended to read:

 

SEC. 11. Definition. – The term ‘cottage industry’ as used in this Act shall mean an economic activity in a small scale carried on mainly in the homes or in other places for profit and mainly done with the help of the members of the family with capitalization not exceeding fifteen thousand pesos. The term shall also include economic activities carried on by students of public and private schools, within school premises, as a cooperative effort, under supervision of a teacher or other person approved by and acting under the supervision and control of school authorities, either as part of or in addition to ordinary vocational training, provided all profits shall accrue to the students working therein. it shall include the following: x x x (5) metal craft such as making of jewelries, knives, boloes (sic), scissors, razors, silverwares and brassworks (sic); x x x All cottage industries shall be owned and operated by Filipino citizens, or by a corporation, partnership or cooperative, at least seventy-five per cent of the capital or investment of which is owned by Filipino citizens. All members of its Board of Directors shall be Filipino citizens.

 

The word capitalization as used in this section shall mean the total current assets and fixed assets, excluding the value of the land and building leased, rented and/or used at least six months of each year. For purpose of this Act, any and all branches, agencies, outlets or divisions of a licensed cottage industry shall be collated to determine the capitalization thereof.

 

R.A. No. 3470 was further amended on October 22, 1975, by Presidential Decree (P.D.) No. 817. The first sentence of Section 11 was amended, to read:

 

 

The term “cottage industry” as used in this Act shall mean an economic activity carried on in the homes or in other places for profit, with a capitalization of not exceeding P100,000 at the time of registration.

 

 

In 1981, then President Ferdinand Marcos issued P.D. No. 1788, the Cottage Industries Development Decree of 1981, amending and consolidating R.A. Nos. 3470 and 5326, P.D. No. 817, and other related Laws, Decrees, Executive Orders, Letters of Instructions, and Acts concerning the NACIDA. Section 10 of P.D. No. 1788 states:

 

Section 10. Cottage Industry – The term “cottage industry” shall mean a modest economic activity for profit using primarily indigenous raw materials in the production of various articles of the country. Provided, however, that all cottage industries shall be owned and operated by Filipino citizens, or by corporations, partnerships, or cooperatives at least seventy-five percent (75%) of the capital investment of which shall be owned by Filipino citizens. Provided, further, that the total assets of which shall not exceed one hundred thousand pesos (P100,000.00) at the time of registration with the NACIDA. Provided, finally that the maximum total assets allowable for cottage industries for purposes of registration may be modified and/or increased accordingly by the NACIDA Board subject to the approval of the President of the Republic of the Philippines.

 

For facility of implementation, coordination and statistical gathering, cottage industries shall be classified as follows:

 

x x x x

a)      Metalcraft Industry – That sector using metals or its alloys as principal raw material component in producing articles such as brasswares, cutlery items, fabricated tools, implements and equipment and other items requiring a certain degree of craftsmanship in the making thereof including the making of jewelry items involving the use metals and/or its alloys in combination with semiprecious or artificial stones.

Executive Order (E.O.) No. 917, issued on October 15, 1983, amended the definition of cottage industry by increasing the capitalization requirement to a maximum of P250,000.00, which amount may be modified or increased accordingly, subject to the approval of the President.[47]

 

In 1986, the National Economic Development Authority (NEDA) redefined cottage, small and medium scale industries. Considered as cottage industries were enterprises, excluding agriculture, with total assets after financing of over P500,000.00 but less than P5 million.[48]

 

When Corazon Aquino became President, she issued E.O. No. 133, reorganizing the Department of Trade and Industry (DTI). Section 18 thereof provided that the NACIDA was reorganized into the CITC, and its functions, other than technology development and training, were transferred to the Bureau of Small and Medium Business Development and relevant line operating units of the DTI.

 

In 1990, Congress enacted R.A. No. 6977, the Magna Carta for Small Enterprises. The capitalization for a cottage enterprise was changed, viz.:

 

SEC. 3. Small and Medium Enterprises as Beneficiaries. – “Small and medium enterprise” shall be defined as any business activity or enterprise engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant, and equipment are situated, must have value falling under the following categories:

 

micro   :           less than P50,000

cottage            :           P50,001 – P500,000

small    :           P500,001 – P5,000,000

medium:          P5,000,001 – P20,000,000

 

In a generic sense, all enterprises with total assets of Five million pesos (P5,000,000) and below shall be called small enterprises.

 

R.A. No. 6977 was amended by R.A. No. 8289 in 1998. Amending Section 1 of R.A. No. 6977, the term cottage industry or cottage enterprise was completely eliminated:

 

SEC. 3. Small and Medium Enterprise as Beneficiaries. – “Small and Medium Enterprise” shall be defined as any business activity or enterprise engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant, and equipment are situated, must have value falling under the following categories:

 

micro   : less than P1,500,001

small    : P1,500,001 – P15,000,000

medium: P15,000,001 – P60,000,00

 

 

The above definitions shall be subject to review and adjustment by the said Council motu proprio or upon recommendation of sectoral organization(s) taking into account inflation and other economic indicators. The Council may use as variables the number of employees, equity capital and asset size.

http://sc.judiciary.gov.ph/jurisprudence/2011/march2011/171427.htm

About Erineus

Born on December 28, 1965, Surallah, South Cotabato, Southern Mindanao, Philippines.
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