Hyundai Asia Resources Inc. (Hari), the official importer and distributor of Hyundai cars in the country, will comply with a government suspension order after being accused of misrepresenting some of their imports to avoid paying higher taxes.
This is according to a letter sent by Trade and Industry Secretary Ramon Lopez to Congressman Dakila Cua, noting in the document that the company “has indicated its acceptance and willingness to comply” with the government’s decision.
In November last year, the Board of Investments (BOI) slapped a suspension order against one of the top car importers in the country for violating the motor vehicle development program (MVDP), even after the company filed a motion for reconsideration, the letter said.
In the meantime, this means HARI will not be able to avail of the incentives under the MVDP, which allows the import of car units under a significantly lower tariff rate.
“HARI has indicated its acceptance and willingness to comply with the said Board resolution in a meeting attended by, among others, relevant high-level officials from the Department of Trade (including BOI) and Finance (including the Bureau of Customs),” the letter read.
Violating the MVDP
Under the MVDP, imported knocked-down (KD) units are only charged with 1-percent tariff rate, pointing to a significant difference when compared to other rates that could go as high as 30 percent.
Sources say that the such perk was given because knocked-down (KD) units offer more job opportunities in the value chain, as opposed to semi-knocked down (SKD) units, which are essentially almost finished products except for a few components.
In Hyundai’s case, the company said it was importing SKD units of its Eon and H350 models but registered them instead as KD units, according to BOI officials who discussed the issue in a previous committee hearing in the House of Representatives late last year.
This helped the company save on costs, especially since their imports — which were sourced from India and Turkey — are charged with a 30 percent tariff. Moreover, the company violated the program because it didn’t have the required facilities.
Part of the requirements, according to executive orders 156 and 877-a, is that the company must have an assembly plant with four core processes, namely: welding, painting, trimming and quality testing/inspection.
Comply or get the perk cancelled
The letter, parts of which were shared with reporters, did not specify when the letter was sent to the congressman. However, it was made public days after an inquiry in the House of Representatives regarding the case of HARI’s imports.
BOI set two requirements for Hyundai to be freed from suspension.
According to the letter, the company is required to put up assembly processes of welding and painting for both models in six months. It is also required to refund the tax and duty deferential from its imports, the price of which would be determined by Bureau of Customs (BoC).
Earlier this week, media reports said that BOC cleared HARI, noting that there was no misdeclaration of imports.
A source close to the issue questioned this, telling the Inquirer that BOC could not clear the company, which it would instead charge with violation of the MVDP. BOC is already in the process of calculating how much needs to be paid.
Prior to this, BOI has pegged the amount to be refunded to P1 billion. This, however, was based on the number of units the company applied under the program, but not necessarily the number of units that actually entered the country so far. BOC is computing the actual amount, an official said.
“Failure to comply with either compliance requirements shall result in the cancellation of the certifications of registration of Hyundai Asia Resources, Inc.’s as a participant under the Motor Vehicle Development Program,” the document read.
“For purposes of the refund, HARI shall secure a BOC certification on the full settlement thereof and submit to the Board as proof compliance,” it added.