DTI finalizing report on safeguard duty on imported vehicles

The Department of Trade and Industry (DTI) is finalizing a report that would recommend whether or not to further tax imported cars to protect workers in assembly and manufacturing plants as the auto industry still reels from lackluster demand. Trade and Industry Undersecretary Ceferino Rodolfo recently told reporters that the report on the safeguard measure was now being finalized. It would then be submitted to Trade and Industry Secretary Ramon Lopez for his approval.

Safeguard measures are trade remedies imposed by the government if a surge in imports is found to have seriously injured the local industry, or at least threatened to leave a serious injury. This specific investigation, however, is different from previous probes. Unionized workers, not the car companies, are the ones complaining about the impact of imports. Through the Philippine Metalworkers Alliance (PMA), they filed a petition for a safeguard measure back in 2019. “The report on whether there is a positive finding or not on the preliminary safeguard investigations is being finalized,” Rodolfo said. He said if the report was positive, it would also include the applicable rate for the duty. A positive finding, in this context, would mean that the DTI’s Bureau of Import Services has found either a serious injury or a threat caused by imports. The investigation covered the industry’s performance from 2014 to 2018. According to Luis Catibayan, director of the bureau of import services of the DTI, said the agency would issue a public order after Lopez has decided on the recommendations.

Once the DTI decides to slap a safeguard duty, it would already be applicable but still be provisional because the DTI findings are required to be validated by a 120-day investigation by the Tariff Commission.

While the commission does its investigation, the provisional duty will be paid by the importer through a cash bond, which will then be returned if the Tariff Commission does not validate the DTI’s finding.

On the surface, any news about higher car prices might be seen against the interest of consumers, especially during a pandemic. The investigation, however, was actually launched with the interest of local workers in mind. PMA wanted the DTI to slap a safeguard measure against imported vehicles, arguing that a surge in imports have been hurting local jobs in a way that the automotive companies themselves were not.

In a global value chain, a car company that cuts its vehicle production so that it could import instead does not feel any significant loss. In the end, the group argued, multinational companies would still benefit even if they began relying more on imports. Meanwhile, a smaller vehicle production means fewer jobs for local workers.

The DTI’s next step remains to be seen especially since the pandemic has hurt everyone— companies, workers and even the consumer market.

Back in 2019, Rodolfo told reporters that there were only 153,000 brand new imported motor vehicles in 2014. But this climbed to more than a million units by 2018.

About 80 percent of the more than one million imported vehicles came from member-countries of a regional trade deal and could therefore bring their cars to the Philippines either at zero tariff or a significantly smaller tax compared to countries without a free-trade agreement (FTA).

Thailand and Indonesia alone both accounted for 70 percent of those imported vehicles during that time period, the DTI said, with Thailand shipping 428,000 units and Indonesia sending 312,000 units.

These countries have been exporting cars to the Philippines at zero tariff since 2015, thanks to an FTA among members of the Association of Southeast Asian Nations (Asean). Campi members Toyota and Mitsubishi, among others, have manufacturing hubs in the two countries.South Korea, which currently has a 5-percent tariff under an Asean-Korea FTA, accounted for 101,000 units. In total, these three countries make up around 80 percent of the vehicle imports, with the rest being divided among Japan, Germany and others countries.