BOI refutes VACC’s corruption charges on Hyundai case

The Board of Investments (BOI) moved to clear its name after being accused by a non-government organization of corruption charges over the case of Hyundai Asia Resources Inc. (HARI), wherein the latter misrepresented some of its Hyundai unit imports to avoid paying higher taxes.

In a press briefing on Monday, top government officials denied the allegations raised by the Volunteers Against Crime and Corruption (VACC), which had filed charges of plunder, estafa, and technical smuggling against BOI chair and Trade Secretary Ramon Lopez, as well as other HARI officials.

This developed after the BOI suspended HARI, the official importer and distributor of Hyundai cars in the country, in November last year for violating the motor vehicle development program (MVDP).

Under the program, the car company committed to assemble its Eon and H350 models here in the country in exchange for a significantly lower tariff rate for importing the required parts. Instead, Hyundai imported nearly completed car units.

Since then, BOI had required HARI to refund the tax and duty it avoided paying. Moreover, the government agency also mandated the company to invest within six months in the missing assembly facilities that it had committed to use in the first place.

“Baseless and frivolous accusations”

According to media reports, VACC claimed that Lopez had unjustly favored HARI, even though it was actually the BOI board, acting as a collegiate body, that moved to suspend the car company.

Trade Undersecretary Ceferino Rodolfo delivered the trade chief’s official statement, dismissing the charges of VACC for its alleged “ill intent” to tarnish the reputation of Sec. Lopez.

“The Secretary vehemently denies any and all baseless and frivolous accusations of VACC relating to the BOI Resolution dated November 2017 which are evidently hurled merely to harass and malign his good name and office,” Rodolfo said.

“He would like to assure the Filipino people including the VACC that the BOI and he as chair, are unwavering in their duty to implement the MVDP. No preference nor favor was given to HARI or to any participant,” Rodolfo added.

In alleging partiality in favor of the company, VACC cited BOI’s alleged delay in resolving HARI’s motion for reconsideration (MR) when the suspension order was first slapped in July last year. The group also cited the additional time BOI provided HARI to work on their missing assembly processes for welding and painting units.

Timeline of the violation

BOI officials clarified the timeline of the case last year. Ocular inspections of the facilities in Laguna were made three times in 2017, leading to a BOI decision to suspend HARI in July. HARI filed its MR in August, before BOI finally decided to push with the suspension in November last year.

HARI, for its part, argued that BOI had previously estimated the tax and duty deferential to be refunded at around P1 billion, covering the period of October 2016 up to July last year. When the MR was filed, HARI was allowed to keep importing under a lower tariff rate while waiting for BOI’s final decision.

“Under our procedural guidelines for the MR, the filing for an MR shall stay the execution of the resolution,” explained BOI Legal and Compliance Service director Marjorie Ramos-Samaniego.

“So since they filed, that’s the reason they were still able to import during the pendency of the MR. But obviously, when the final decision has already been made [in November], they have to refund whatever they imported during the pendency of the MR,” she added.

The Bureau of Customs is currently checking its records to see the final amount that needs to be refunded based on the actual imports that entered the country from October 2016 to November last year.

Rodolfo said that the final amount could be “lower or higher” than P1 billion, especially since what the company actually imported may be different from what it initially committed.

Lower tariff

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 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. Hyundai didn’t make use of its welding and painting facilities, according to BOI officials.