Esta ley, conocida como la "Ley de Inversión en la Industria Puertorriqueña", establece la política pública del gobierno de Puerto Rico para fomentar la industria local a través de las compras gubernamentales. Deroga la ley anterior de Preferencia en las Compras Gubernamentales y crea la Junta de Inversión en la Industria Puertorriqueña. Define qué se considera un "Producto de Puerto Rico", un "Producto Ensamblado en Puerto Rico" y un "Producto Empacado en Puerto Rico", y establece parámetros de preferencia en las compras gubernamentales para estos productos y para los distribuidos por agentes establecidos en Puerto Rico. La ley asigna responsabilidades a la Compañía de Fomento Industrial y a las agencias gubernamentales para asegurar la consideración de productos y servicios locales en los procesos de adquisición. También establece sanciones por incumplimiento y procedimientos para la revisión judicial de las decisiones de la Junta.
(Approved January 8, 2004)
To create the "Puerto Rican Industry Investment Act;" establish the public policy regarding government purchases of goods and services; create the Board for Investment in Puerto Rican Industry; assign responsibilities to the Industrial Promotion Company; define the parameters for government investments in locally-produced products and services.
From the onset of the Puerto Rican industrialization project, commonly known as "Hands On," Puerto Rican products have struggled to grow and achieve a prominent place within the local economic structure. The very characteristics of the present economic model, in which local enterprises compete with enterprises formed with North American corporate capital, have made it difficult for Puerto Rican industry to place itself in a competitive position in the local market.
Since the decade of the 60s to date, various programs and legislative acts have been tried, addressed to enable Puerto Rican producers to develop and grow within the economic processes and the market dynamics, both locally and internationally. In fact, the Industrial Development Company developed a subdivision known as Puerto Rican Industries, to promote manufacturing enterprises with Puerto Rican capital, by extending the incentives and technical assistance of this public entity, but the results have
not been completely favorable. Likewise, in 1985, the Economic Development Bank for Puerto Rico was created, known as Promexport (Export Promotion Program) as a lending entity to support, among others, the development of new Puerto Rican enterprises that had no access to credit nor to financing sources. Likewise, a program known as Fomexport was created that year, today known as the Corporation for Promotion of Export (PROMOEXPORT), as a government entity to promote exports of local enterprises to international markets. However, the facts indicate that as of today, there are very few local enterprises that have succeeded in marketing their products abroad.
Later, in 1989, Act No. 42 was created, known as "Preference Procurement Policy Act of the Government of Puerto Rico," as a mechanism enabling local producers to have an effective share in the government purchase market and to stimulate the creation of jobs and local investment. However, after thirteen years of the effectiveness of this Act, it has achieved rather little considering its original objectives.
A study commissioned by this Legislature showed that of a total of the $5,200 million that the Government spent on goods and services, $75 %$ corresponds to imported goods, while $25 %$ corresponds to products manufactured on the Island. This reflects the small participation of local producers in the government purchasing market, and it is an indicator of the ineffectiveness of the present "Preferential Policy Act."
It is obvious that local industry is not having an optimum share in this important market for various reasons, among which are: lack of will power by public officials at the moment of buying goods and services; the high degree of bureaucracy in auction procedures; the lack of power and resources of the present Preference Board, attached to the General Services
Administration; and the limited control of the Industrial Development Company, which is the entity that is bound to help the Puerto Rican producers.
At this time that the Puerto Rican economy is facing difficult times, it is indispensable for the Government to avail itself of a viable structure and effective mechanisms to support the growth of Puerto Rican industry. Particularly, when it is known that local industry has the talent and the capacity to sell products to the public sector which are of the same or better quality than what is presently being imported from abroad, and that could generate thousands of jobs locally. To such effects, this Legislature deems it is necessary to approve this legislation, as a step forward to launch the growth and the bolstering of local producers, through a new public policy and new structures that will achieve the objectives described above.
Section 1.- Act No. 42, of 1989, better known as "Preference Procurement Policy Act of the Government of Puerto Rico," is hereby repealed.
Section 2.- Title A new Act is created entitled "Investment in Puerto Rican Industry Act."
Section 3.- Statement of Public Policy It shall be the public policy of the Commonwealth of Puerto Rico, to support the growth, development and strengthening of Puerto Rican industry, through all available and viable mechanisms within the constitutional, governmental and economic parameters available, in order to achieve maximum creation of jobs for the country. This Act shall have the following objectives:
(a) To guarantee the greatest possible participation of Puerto Rican producers of goods and services in government purchases of goods and services, to support the formation and expansion of local capital, enterprises, to induce the creation of more and better jobs, and to achieve the economic development of Puerto Rico.
(b) To provide the necessary structures and mechanisms so that a greater number of local producers may access the Government procurement market, whether through formal or informal auction, open market, contract or special procedure.
(c) To propitiate acceptable levels of efficiency in purchase procedures, identifying those locally produced products, whose yield, in terms of quality and generation of jobs for the country may be greater, attaining the development of strategic industries, for the short, medium and long term benefit of the Puerto Rican economy.
Section 4.- Definitions For purposes of this Act, the following words and phrases shall have the following meaning stated below:
(a) "Government of Puerto Rico" or "Government" means the Commonwealth of Puerto Rico, its departments, agencies, instrumentalities, dependencies, municipalities and public corporations.
(b) "Board" means the Puerto Rican Industry Investment Board, created by this Act.
(c) "Articles" means goods, provisions, supplies, materials, services, equipment. In the field of computers and related
products, "article" or "product" shall be classified as the integrated product, including the hardware as well as the software, if the latter us a part of the specifications established for the purchase by the department, agency, instrumentality, public corporation, municipality or dependency of the Government.
(d) "Product of Puerto Rico" is that article extracted from or produced in Puerto Rico, after an operation that, in the Board's opinion, deserves to be treated as a manufacturing process, due to its nature and complexity, the transformation of raw materials, into commercial articles, which can be carried out through the subcontracting of all or part of the manufacturing process in Puerto Rico, where investment, extent, technology involved, direct jobs it generates, location, value added in Puerto Rico is not less than thirty-five (35) percent, and any other benefit that the operation represents for the welfare of Puerto Rico. Furthermore, "products of Puerto Rico" shall be those articles produced by enterprises that maintain an average employment in Puerto Rico of one thousand $(1,000)$ persons or more, with products manufactured by said enterprise or affiliated to the same, that manufacture one or more essential components, and in sufficient quantities in Puerto Rico, the final product of which, in the Board's opinion, deserve to be considered as a "product of Puerto Rico." The term "product of Puerto Rico" also includes, all those products that are obtained through the practice of agriculture and the raising of cattle in all its branches in Puerto Rico, and all products derived from any
of the said activities, whether just harvested or otherwise processed or conserved.
(e) "Product Assembled in Puerto Rico" means an article that, without constituting a product of Puerto Rico, has been submitted to a process that, in the judgment of Board, and due to its nature, complexity, investment, technology involved, value added in Puerto Rico, location, and number of direct jobs generated in Puerto Rico, merits consideration as a product assembled in Puerto Rico.
(f) "Product Packaged in Puerto Rico" means that article that has been subject to a process in Puerto Rico of introducing a product in bulk, or non-bottled products in adequate containers, for their final distribution to clients, without taking any significant action that alters the product, which process would require the maintenance of an industrial unit, machinery and appropriate equipment in Puerto Rico.
(g) "Fuel" means the fuel used in Puerto Rico to generate electric power, such as residual and light distillate oil. Furthermore, the fuel used in the ships of the Maritime Shipping Authority, such as maritime diesel and other distillates that propel the movement of its ships. These shall not be considered for the benefits of this Act.
(h) "Purchase" is the means by which the Government acquires goods or services, whether by a formal auction, informal auction, open market, contract or special procedure.
(i) "Substantial operations in Puerto Rico" means those operations that are carried out by an enterprise in Puerto Rico which, in the
Board's judgment, and based on its nature, complexity, investment, and number of jobs generated in Puerto Rico, represent a substantial contribution to the economy of the Island. For the purpose of determining if an enterprise has substantial operations in Puerto Rico, the operations carried out in Puerto Rico by people related to said enterprise, as such term is defined in Section 1231(a)(3) of the "Puerto Rico Internal Revenue Code of 1994," Act No. 120 of October 30, 1994, as amended, shall be taken into account.
(j) "Research and development operations in Puerto Rico" means those operations carried out by an enterprise in Puerto Rico with the purpose of discovering, perfecting, developing or improving industrial or computer products or procedures which, in the Board's judgment, based on their nature, complexity, investment and technology involved, deserve the granting of incentives through the concession of the percentage of preference granted to articles manufactured in Puerto Rico under this Act. Every activity that qualifies for the credit granted under Section 41 of the "United States Internal Revenue Code," and that is performed in Puerto Rico shall constitute a research and development operation in Puerto Rico. For the purpose of determining if an enterprise conducts research and development operations in Puerto Rico, operations of this type carried out in Puerto Rico by people related to said enterprise, as such term is defined in Section 1231(a)(3) of the "Puerto Rico Internal Revenue Code of 1994," Act No. 120 of October 30, 1994, as amended, shall be taken into account.
(k) "Agent established in Puerto Rico" means a natural or a juridical person that performs activities in Puerto Rico related to the distribution and sale of articles, including, but not limited to promotion and storage, repair of products with and without warranty, and any other activity for the welfare or benefit of Puerto Rico, provided that an average is maintained of not less than five (5) persons directly employed in said activities during the years for which any preference is claimed under this Act.
Section 5.- Puerto Rican Industry Investment Board To expedite the execution of the above mentioned public policy, the Puerto Rican Industry Investment Board is hereby created, attached to the Industrial Promotion Company. It shall be composed of the Executive Director of the Industrial Development Company, who shall be its Chairperson, the General Services Administrator, the Secretary of Agriculture, or their designated representatives, and two additional members designated by the Governor of Puerto Rico, who have experience in local industry, but have no direct or indirect interest in any industry or enterprise that could be eligible for the benefits of this Act. The latter shall serve for a term of four (4) years. Should a vacancy arise, the member designated by the Governor to replace him/her shall serve for the remainder of the term of the member who ceased. The Board shall meet at least once a month, and the members who are not Government employees or officials shall be entitled to charge a per diem of one hundred (100) dollars for each day that they attend a meeting, pursuant to the applicable law and regulations. Three (3) members of the Board shall constitute a quorum, and the decisions shall be made by majority vote of those present.
Section 6 - Powers of the Board The Board shall have the following powers, among others:
(a) Draft a strategic plan based on the prevailing economic situation and taking into consideration the pressing need of the State to stimulate the growth of Puerto Rican industry and to create the greatest number of jobs possible. The Board shall annually present its Strategic Plan to the Governor, and a copy to the Legislature, with the goals achieved and the objectives established the plan;
(b) draft a promotion and marketing plan of the benefits of the new law, as well as to establish covenant collaborations between private organizations and the Investment Board;
(c) draft an electronically formatted, Internet-accessible module of the model specifications of goods, provisions, supplies, materials, equipment and services produced, assembled or packed in Puerto Rico, or those distributed in Puerto Rico by enterprises with operations in Puerto Rico or by agents established in Puerto Rico, that in their opinion, meet the necessary criteria for their use by the Government; this module shall be reviewed every six (6) months;
(d) assign investment parameters, as provided in Section 8 of this Act and ensure that this parameter that is established in this Act is based primarily on the creation or support of the source of jobs and the economic and technological development of enterprises established in Puerto Rico;
(e) initiate investigations and recommend action in any case that it deems that the general terms, conditions and instructions of the
auctions eliminate industries located in the country from the bid, even if there has not been a formal request in this sense by the interested party;
(f) approve the regulations necessary for the functioning of the Act and compliance with its purposes, which regulations shall have the strength of law and shall be subject to the legal provisions in effect;
(g) produce a statistical data bank on the progress of the act, as well as the people who benefit therefrom;
(h) review the investment parameters drafted by the Board every five (5) years and, if necessary, recommend new parameters to the Governor to be presented to the Legislature;
(i) ascertain with the Regulating Board that in the preparation and revision of the model specifications, the availability and ability of the industry in Puerto Rico to produce it, assemble it, package it and distribute it are taken into consideration.
Section 7.- Preferential Policy for Puerto Rico Government Purchases In every purchase of articles made by the Puerto Rico Government, the articles extracted, produced, assembled or packaged in Puerto Rico, or distributed by agents established in Puerto Rico, shall be acquired, provided said articles meet the specifications, terms and conditions established in the bidding notice or purchase order, and that its price, after applying the corresponding investment parameter, is the lowest.
Section 8.- Classification of Products and Services The Preference Board shall classify the articles extracted, produced, assembled or packaged in Puerto Rico, or distributed therein by enterprises with substantial operations in Puerto Rico, or by agents established in Puerto
Rico, taking into consideration, when assigning the corresponding investment parameter, among other factors, the value added in Puerto Rico, the number of jobs, the local payroll, the research and development operations in Puerto Rico, and the country of origin of the materials used; provided, that the Board shall assign the corresponding investment parameter within the following items: (1) Articles distributed by agents established in Puerto Rico, up to two (2) percent. (2) Articles packaged in Puerto Rico, up to three (3) percent. (3) Articles assembled in Puerto Rico, up to four (4) percent. (2) Articles that constitute Products of Puerto Rico, up to ten (10) percent.
It is further provided that the Board shall have discretion to grant an additional five (5) percent in extraordinary cases, and for agricultural products.
The Board shall maintain a list of said articles, duly-classified, consigning their class, origin, trade mark, form, dimensions, properties, samples, catalogs and any other information it deems convenient, to expedite their selection in the purchases of the Government.
Provided that, in all Government subdivisions, the purchasing delegate or the purchasing manager shall be bound to furnish the information to the Board concerning the auctions and purchases made under this Act, each month.
Section 9.- Responsibility of Agencies Secretaries of Department, heads of agencies and instrumentality chiefs and the mayors, shall insure that the professional and technical personnel in charge of the drafting of specifications of articles to be purchased by the
Government, and of the acquisition of goods and services, perform their work taking into consideration the availability of goods and services provided by enterprises that operate in Puerto Rico and that when establishing the bidding specifications, terms, conditions and general instructions, they do not eliminate said articles and services from the bidding. Every purchase made under the provisions of this Act shall be subject to strict supervision and follow-up pursuant to the provision of this Section, which will ensure the most faithful compliance of representations, terms and conditions for the purchase.
Section 10.- Professional Contracts In those cases that services are contracted, the contract shall contain a provision that articles extracted, produced, assembled, packaged or distributed in Puerto Rico by enterprises with operations in Puerto Rico, or distributed by agents established in Puerto Rico, when the service is rendered, be used provided that they are available.
Section 11.- Compliance of the Act Any purchase made under the provisions of this Act shall be subject to strict supervision and follow-up with regard to what has been received, that will ensure the most faithful compliance of the representations, terms and conditions of the purchase.
The Board, subject to due process of law may, revoke or repeal the benefits of the investment parameter to any person who commits or attempts to commit, on his/her own behalf or that of any other person or persons, a violation of the provisions of this Act. It may also lower the preference percentage granted, on its own initiative or at the request of an interested party, giving previous notice to such effect, when the circumstances that caused the Board to grant that percentage, change.
The Board, at it discretion, in compliance of due process of law, may impose fines and/or administrative sanctions on any person who commits or tries to commit, by himself or in the name of any other person, a violation of the provisions of this Act. In the case of the first infraction, the administrative fine shall not exceed five hundred (500) dollars per violation. In case of subsequent infraction incidents, the administrative fines shall not be less than one thousand $(1,000)$ dollars, nor more than five thousand $(5,000)$ dollars for each violation. Administrative sanctions may include, at the discretion of the Board, the return of the benefit derived by the violator, to the affected department, agency, instrumentality, public corporation, municipality or dependency of the Government, involved the revoked or reduced preference, to wit, the difference between the price truly paid by the Government and the price adjusted by the investment parameter.
Section 12.- Applicability to government entities The provisions of this Act shall be apply to all departments, agencies, instrumentalities, municipalities and dependencies of the Puerto Government. They shall also apply to the public corporations of the Commonwealth of Puerto Rico, including its subsidiaries.
Section 13.- Exceptions No bidding shall be required when inter-agency purchases of the Commonwealth of Puerto Rico are involved.
Section 14.- Review of parameters in effect The preference margins assigned under the Preference Procurement Act for purchases of the Puerto Rico Government, shall be equivalent to the investment parameters, provided by this Act. The list of preference margins or investment parameters in effect an of the date on the effective date of this Act, shall remain in full force and effect until amended or repealed by the
Board created by this Act. The assigned investment parameters shall be reviewed, pursuant to the provisions of this Act, always contemplating the intention of the Act to benefit the local producer, and not reduce the benefits that said producer presently enjoys, provided there is no change in the operations, which, change merits a reduction the preference margin assigned in the judgment of the Board. All the property, files, documents and funds belonging to the former Preference Board shall be transferred to the Board established by virtue of this Act.
Section 15.- Responsibilities of the applicant. Any person who voluntarily helps or assists, or advises or instigates the drafting or presentation, or that voluntarily drafts or presents any declaration, sworn statement, claim or false or fraudulent document to the Board (whether said falsehood or fraud was committed or not, with the knowledge or consent of the person who presents said declaration, sworn statement, claim or document to the Board), with the purpose of obtaining, or preventing another person from obtaining, the benefit of preferences established herein, regarding any product, article or service, shall be guilty of a felony and punished by a fine of not more than twenty thousand $(20,000)$ dollars, imprisonment for a fixed term of three (3) years, at the discretion of the Court. If there were aggravating circumstances, the fixed penalty thus established may be increased to a maximum of five (5) years; if extenuating circumstances are present, it may be reduced to a minimum of two (2) years. The Court, of its discretion, may impose both penalties, plus court costs.
Any person who makes and subscribes any statement or other document for presentation to the Board, which said declaration or document contains, or was authenticated through a statement the effect that it is submitted under
the penalties of perjury, which statement or document the subscriber did not believe to be true and correct regarding every pertinent fact, shall be guilty of a felony and punished with a fine no greater than four thousand $(4,000)$ dollars, or imprisonment for a fixed term of three (3) years. Should there be aggravating circumstances, the fixed penalty thus established may be increased to a maximum of five (5) years; if there are extenuating circumstances, it may be reduced to a minimum of two (2) years. The Court, in its discretion, may impose both penalties.
The Court of First Instance shall have exclusive jurisdiction in the trials of the crimes stipulated in this Section.
Section 16.- Judicial Review of Decisions of the Board Any person adversely affected by a decision of the Board under this Act may request the review of said decision before the Board and then before the Puerto Rico Court of First Instance, Superior Part of San Juan, within thirty (30) days as of the date of notice by the Board.
Section 17.- Appropriations In order to allow the Industrial Development Company of Puerto Rico to perform the new functions, authority and commissioned powers in this Act, the Legislature shall appropriate two hundred thirty thousand $(230,000)$ dollars in un-appropriated funds from the General Fund, for the Company to organize a new administrative unit with the necessary equipment and personnel.
For subsequent fiscal years, the Executive Director of the Company shall request as part of the Budget Petition before the Legislature, the needs funds for the operation of this Board.
Section 18.- Effectiveness This Act shall enter into force immediately after its approval.
I hereby certify to the Secretary of State that the following Act No. 14 (H.B. 3238) of the $6^{ ext {th }}$ Session of the $14^{ ext {th }}$ Legislature of Puerto Rico:
AN ACT to create the "Investment Puerto Rican Industry Act;" establish the public policy regarding to government purchases of goods and services; create the Board for Investment in Puerto Rican Industry; assign responsibilities to the Industrial Promotion Company; define the parameters for government investments in locally-produced products and services, has been translated from Spanish to English and that the English version is correct.
In San Juan, Puerto Rico, today $28^{ ext {th }}$ of September of 2007.
Francisco J. Domenech Director