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DTI slaps safeguard duty on cars

Newly assembled Toyota Vios sedans are seen at a stockyard of the Toyota Philippines manufacturing plant in Sta Rosa, Laguna, Aug. 11, 2014. — REUTERS/ERIK DE CASTRO

By Jenina P. Ibañez, Reporter

THE PHILIPPINES will slap provisional safeguard duties on imported cars, after an investigation by the Trade department showed the surge in imports has hurt the domestic auto manufacturing industry.

In a statement, the Department of Trade and Industry (DTI) said it will impose a provisional duty in the form of a cash bond of P70,000 per imported passenger car unit and P110,000 per light commercial vehicle unit. This will be in effect for 200 days from the issuance of an order by the Customs commissioner, and while the Tariff Commission conducts its own investigation.

“The provisional safeguard measures will provide a breathing space to the domestic industry which has been facing a surge in importation of competing brands. To clarify, importation is not being banned, and consumers will still have the options to choose, but imported vehicle models covered by the rule shall have safeguard import duties,” Trade Secretary Ramon M. Lopez said.

“With that being said, it will also facilitate the structural adjustment of the local industry to be more cost efficient and technologically advanced,” he added.

The DTI formally launched its investigation in February 2020 after the labor group Philippine Metalworkers Association (PMA) flagged a possible link between the surge in automotive imports and a decline in employment in the domestic industry.

Republic Act 8800, or the Safeguard Measures Act, authorizes the government to impose temporary tariffs after a determination that a domestic sector has been substantially harmed by a surge in imports.

The department said in a statement on Monday that delaying the imposition of the measure would cause “damage to the industry which would be difficult to repair.”

Based on its preliminary investigation, the DTI found that imported passenger cars went up by an average of 35% from 2014 to 2018. Imports exceeded domestic production by 349% in 2018 compared with 295% four years earlier.

Imports of light commercial vehicles jumped by 200% in 2018 compared with 2014. Imports exceeded domestic production by 1,364% in 2018, compared with 645% in 2015.

The Philippines does not impose tariffs on vehicle imports from Thailand and Indonesia.

The DTI said the market share of domestic passenger cars fell to a range of 22-25% during the period studied, while the market share of locally assembled light commercial vehicles contracted to 7% in 2018 from 18% in 2014.

“The domestic industry lost sales even as the market grew,” DTI said.

Mr. Lopez said safeguard duties are being imposed to protect local manufacturers and prevent car companies from leaving the Philippines.

“If we recall, the discontinuation of the production of Isuzu D-Max in July 2019 and the assembly plant closure of Honda Motors Philippines in the first quarter of 2020 affected local jobs and the Philippine economy. It may also attract vehicle manufacturers to operate in the country and create more jobs,” he said.

Meanwhile, PMA Secretary-General Rey Rasing in a phone interview on Monday said the group is hoping the DTI’s move will save jobs.

Prior to seeing the DTI safeguard rates, he had said that he hoped that there will be lower rates for companies that have been operating assembly plants in the Philippines for the long term.

“This is an incentive too,” he said in Filipino. “Those who have been investing here like Toyota, Mitsubishi, and Isuzu that have assembly plants here can be supported especially now that there is a pandemic.”

Industry groups have pushed back against safeguard duties, with the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) saying this would limit the industry’s recovery from the effects of the pandemic.

The Association of Vehicle Importers and Distributors, Inc. (AVID) called it a “disruptive” measure, noting that the group does not believe such a move would encourage investments.

DTI’s investigation was concluded at the start of the second half of 2020, but reported its results and recommendation to the Trade Secretary in December.

The case will be sent to the Tariff Commission, which will conduct its own investigation and public hearings.

Collected duties from the provisional measure will be placed in escrow. The bond could be returned to importers if the Tariff Commission recommends its dismissal, DTI Bureau of Import Services Director Luis M. Catibayan said in a press briefing last month.

Vehicle sales plunged in 2020, amid the strict lockdown and economic slowdown. CAMPI sales fell 41.6% year on year in the first 11 months of 2020, while AVID sales plummeted 42.6% in the first 10 months.

The duties will take effect 15 days after publication in newspapers on Tuesday.

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