Quoting Philippine Clients: USD or Peso, and Who Eats the FX Loss

Should I Quote in USD or Philippine Pesos?

Goods crossing the border get quoted in dollars; goods or services delivered inside the Philippines get quoted in pesos. That default covers roughly eighty percent of situations. Use the table for the rest.

That last row is the single most useful line in this guide. Do not force one currency onto a mixed contract. Break the quotation into an imported-equipment section in USD and a local-services section in PHP. Your client's finance team will thank you, and you stop absorbing a risk that was never yours.

What Is the Legal Settlement Currency in the Philippines?

The legal tender is the Philippine peso, but parties are free to agree that a contract will be priced and settled in a foreign currency — that has been the position since 1996.

An older statute that voided foreign-currency obligations was repealed by Republic Act No. 8183, which provides that monetary obligations are payable in Philippine currency unless the parties agree that settlement will be in another currency. So the belief that dollar contracts are unenforceable in the Philippines is simply out of date. Whether your particular contract should be drafted that way, and what supporting clauses it needs, is a question for Philippine counsel — always confirm against the law and official guidance as they currently stand.

Three practical caveats:

• Agreeing on dollars does not mean your client can easily pay dollars. The peso is not fully convertible. A local company buying dollars to remit abroad must present supporting trade documents to its bank, and above certain thresholds there are additional documentation and reporting requirements set by the central bank. Thresholds change, so check the latest BSP circulars. If your client's finance team finds it burdensome, they will simply pay you late.
• Invoicing and bookkeeping follow separate rules. See the invoicing section below — a dollar contract still produces a peso-denominated tax invoice.
• Name the rate and name the date. Specifying a currency without specifying a reference rate just defers the argument to payment day.

For everyday currency exchange see our guide to changing money in the Philippines; for corporate FX purchases and treasury movements see corporate FX conversion and fund flows.

How Much FX Risk Is Actually in Your Quote?

Quantify it in thirty seconds: contract value x expected currency move / gross profit = the share of your margin that FX can eat.

Take a one-million-peso contract at a fifteen percent gross margin, so ₱150,000 of gross profit. If the peso moves six percent against you between signing and collection while your costs are dollar-denominated, that six percent comes straight off the top — ₱60,000, or forty percent of your entire margin. The longer the contract and the thinner the margin, the uglier the arithmetic.

Four realities worth internalising:

• These are not rounding errors. Five to ten percent intra-year range is normal for the peso. Do not wave it away.
• Your exposure window is quotation validity plus production time plus payment terms. Most exporters only count payment terms and forget the quote sat in an inbox for a month and production took two more. Real exposure is frequently 120 to 180 days.
• Late payment extends the exposure. Overdue receivables are common in the Philippines — see chasing unpaid invoices from Philippine clients. If your FX clause only runs to the contractual due date, every day past it is on you.
• A weaker peso is not automatically bad — it depends which side you are on. If you earn pesos with offshore costs, depreciation hurts. If you buy in pesos and sell in dollars, it helps. Establish which you are before you design a clause: see what to do when the peso weakens.

My Philippine Client Insists on a Peso Quote — Now What?

A request for a peso quote is almost never a negotiating tactic. It is that their budget, their approval workflow and their accounting system only recognise pesos. So the right response is not to refuse. It is to give a peso number with the currency conditions spelled out.

Three approaches, from most risk retained to least:

1. Fixed peso price with a short validity period. Simplest, and clients love it. State on the quotation that the price is based on the exchange rate as of a named date and is valid for fifteen calendar days, after which it must be re-quoted. You are managing risk with time rather than with clause complexity. Fine for small, fast-turnaround orders.
2. Peso price plus a tolerance band. State a reference rate and a band — for example, moves within two percent either way do not change the price, and anything beyond that adjusts the contract value by the excess. This is the compromise clients accept most readily: they still get a peso figure, and you have cut off the tail risk.
3. Dollar-denominated, peso-settled. The contract value is expressed in USD and paid in pesos at a defined rate on the payment date. Their books see pesos; your exposure is reduced to how tightly you define that rate. This is the cleanest structure for cross-border work, provided the rate definition leaves no wriggle room.

One line that consistently works in negotiation: never say the price is going up because of FX risk. Say instead that you can hold a fixed peso price, but that doing so requires an FX buffer inside the unit price — and that if they accept a floating clause, the unit price comes down. Hand the choice back and clients frequently pick the floating clause themselves, because they can see that the buffer in a fixed price is money they are paying.

If the counterparty is new and wants long payment terms and a fixed peso price, run a credit check before you negotiate terms: see how to vet a Philippine customer's creditworthiness.

Five FX Clauses You Can Put Straight into the Contract

Every workable FX clause answers four questions: whose published rate, which date, how wide the tolerance, and what happens beyond it. Miss one and you have written an argument rather than a clause.

• 1. Fixed-rate clause. The contract is performed at a stated rate of USD 1 = PHP X.XX and currency movement does not adjust price. All risk sits with whoever quoted. Only sensible for short, small contracts or where you have already hedged.
• 2. Tolerance band (the workhorse). Movements within two percent of the reference rate on the reference date do not adjust price; beyond that, the contract value adjusts by the excess. It removes the administrative noise of small moves and only engages when the move is large enough to matter.
• 3. Full pass-through. Contract price equals a USD base multiplied by the rate on payment date. All risk sits with the payer. If you can get this signed, your bargaining position is strong — but expect willingness to perform to sag if the client later discovers FX cost them a lot.
• 4. Shared-adjustment clause. Any movement beyond the band is split fifty-fifty. This is the easiest version to get agreed because it reads as fair, and both sides gain an incentive to settle quickly.
• 5. Dual-currency clause. The price is stated in USD; the buyer may pay in USD or in the peso equivalent at a defined rate on the payment date. The choice sits with them, the currency definition sits with you.

Name the reference rate explicitly. In descending order of clarity: (a) the reference rate published by the Philippine central bank on the relevant date — neutral and verifiable by both sides; (b) a named commercial bank's telegraphic-transfer selling rate — closer to real purchase cost, but you must fix the bank, the rate type and the time of day; (c) 'at the prevailing bank rate' — this is not a clause, do not use it.

Three details people routinely omit: whether the reference date is invoice date, payment-instruction date or value date (cross-border wires take one to three business days, which is real money in a volatile week); whether staged payments each take their own spot rate or all take the signing-date rate; and who bears currency movement during a period of late payment. On that last one, write that adverse movement during any overdue period is for the buyer's account. That single sentence measurably improves how promptly you get paid.

However tight the clauses, still unsure the buyer can actually pay? → counterparty and supplier due diligence

Can You Hedge the Peso, and What Does It Take?

Yes, but the bar is higher than most people expect: banks writing peso forwards generally require underlying trade documentation, an existing credit line, and a ticket size worth their while. Small, irregular orders will not clear those hurdles.

Options in order of practicality:

• Natural hedging — cheapest, try this first. Match revenue currency to cost currency. If you have peso payroll, rent and taxes in the Philippines, take more peso revenue. If your entire cost base is offshore, push for dollars. It costs nothing, uses no credit line, requires no paperwork — and it is routinely skipped in favour of calling a bank.
• Onshore forwards. If you have a Philippine entity, a bank account and an approved credit line, you can book a forward. The bank will want the underlying contract, invoice or shipping documents, and the forward price embeds the interest-rate differential — hedging is not free; it shows up as a forward rate worse than spot. Divide the forward points by your gross margin to see whether it is worth it.
• Offshore NDFs. Because pesos cannot move freely offshore, the international market trades non-deliverable forwards that settle the difference in dollars. Realistic only for groups with an offshore entity and existing bank relationships.
• Contract clauses instead of financial instruments. For the great majority of small and mid-sized trade, the tolerance-band clause above is the practical hedge — zero cost, no credit line, agreed at the table. Do not arrange a forward for a ₱300,000 order.
• Shrink the window. Higher deposits, shorter payment terms, shorter quote validity. Each one directly removes days of exposure, and the combined effect usually beats a financial hedge.

For the mechanics of buying and converting FX at company level see corporate FX conversion and fund flows; if profits ultimately go home, dividend remittance and foreign-investment registration are covered in repatriating profits and dividends from the Philippines. Thresholds, documents and reporting obligations should be confirmed against current BSP rules and your own bank's practice.

Invoicing and VAT: a Dollar Contract Still Produces a Peso Invoice

Your contract may be in dollars, but a tax invoice issued in the Philippines has to present peso amounts — foreign-currency values are translated at the transaction-date rate for booking and filing. This trips up nearly every company in its first Philippine year.

• Use a translation rate your tax authority accepts, normally the official or central-bank reference rate for the transaction date. If your group books at monthly average rates, expect a year-end gap between management accounts and tax filings, and be able to explain it.
• VAT is computed on the peso amount. Domestic sales carry VAT on the translated peso value; qualifying export sales may be zero-rated — conditions in VAT zero-rating for exports, filing rhythm in VAT and percentage tax filing.
• Get the invoice format right. Philippine official receipts and invoices have strict formal requirements. If your client cannot book the document, they cannot pay you — a very common reason payments stall. See Philippine official receipts and sales invoices.
• FX gains and losses hit your P&L. Movement between revenue recognition and cash collection produces a translation gain or loss. You priced a gross margin; your accounts will show that margin net of FX.
• Claiming the cost back in China follows a different set of rules — see using Philippine invoices for reimbursement in China.

Beyond Currency: the Three Terms That Decide Whether You Get Paid

Pick the right currency and still write loose collection terms, and you will not be paid. In the Philippines, payment terms matter more than currency choice.

• Deposit. Push for thirty percent or more on a first order, and do not schedule production until it lands. A deposit does two jobs: it filters out unserious buyers and it locks part of your FX exposure early.
• Payment mechanism. For a large first order, prefer a letter of credit, or at minimum a telegraphic-transfer deposit with the balance against copy documents. Open account belongs to clients with two years of clean history. Domestically you will also meet post-dated cheques, a local habit with its own risks — see handling post-dated cheques safely.
• Late-payment terms. State the interest or penalty for overdue amounts, and state that adverse currency movement during any overdue period is for the buyer's account. You may never invoke either sentence, but they change where you sit in your client's payment queue.

For end-to-end collection routes and settlement risk see getting paid safely by a Philippine buyer; for the reverse flow see paying a Philippine supplier from China.

Six Mistakes That Keep Repeating

1. No validity period on the quotation. Three months later the client places the order against your old price, the peso has moved five percent, and now you have to decide whether to honour it. Easiest mistake to avoid: put a validity date on every quote.
2. Writing 'at the prevailing bank rate'. Which bank, buying or selling, what time, cash or telegraphic? Four undefined variables means the other side gets to interpret it.
3. Covering the contract period but not the overdue period. The client pays sixty days late and you absorb sixty days of movement. One sentence fixes this.
4. Forcing one currency on a mixed contract. A single peso total for imported equipment plus local installation means you absorbed the equipment leg's FX risk, which belonged to the buyer.
5. Ignoring wire charges and intermediary-bank deductions. Correspondent banks routinely shave tens of dollars off a transfer. Specify that all bank charges are for the payer's account, or your receipts will always fall short of your invoices.
6. Pricing off cash-exchange rates. Street money-changer cash rates are not the telegraphic rates a company actually deals at; using the wrong benchmark biases your entire price list. See our guide to exchange rates in the Philippines.

Here is a concrete first step: open the quotation template you are currently using and check whether it has a validity date and a stated FX reference. If not, add both today. It is the highest-return edit available to you.