Gov’t slaps new tax on vehicle imports

Trade and Industry Secretary Ramon Lopez has decided to further tax imported cars to protect workers in assembly and manufacturing plants, a well-intentioned measure that might be overshadowed by its bad timing as it adds another burden on an already struggling industry.

The Department of Trade and Industry (DTI) said in a statement on Monday that it was imposing a provisional safeguard duty on imported vehicles, which would be in the form of a cash bond amounting to P70,000 per unit of imported passenger cars and P110,000 per unit of imported light commercial vehicles.

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 threaten to cause a serious injury.

While safeguard measures are not new, this particular case is unlike any other before it. Safeguard measures usually involved huge local companies that claim to be hurt by too many imports. This case, however, was not prompted by big local players such as Toyota, Mitsubishi or Hyundai, which are actually opposing the safeguard duty.

On the contrary, it was unionized workers who set the gears in motion for this market-moving measure, filing a petition for a safeguard measure back in 2019 through the Philippine Metalworkers Alliance (PMA).

PMA, which has some 13,000 members, said the surge in imports has been hurting local jobs in a way that the automotive companies themselves were not. In a global value chain, they argued that a car company that cuts its vehicle production so 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 less work for local workers, which could then lead to job cuts.

The DTI’s decision, in essence, not only recognized but even sided with the plight of the workers. In its statement, the DTI also cited data from the Philippine Statistics Authority showing that the jobs in the manufacturing sector of motor vehicles saw an 8-percent drop in 2018 from 90,275 workers in 2017.

“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,” he said.

“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,” he added, noting that a safeguard measure may even attract carmakers in the country and make more jobs.

Overall, the domestic industry suffered declining market shares, sales and employment as inventories accumulated, the DTI said.

The DTI said it also sustained increasing losses over the period, which affected cash flow and the ability to invest. It also has been faced with excess and increasing production capacity in countries such as Thailand, Indonesia and China.

The DTI said imports of passenger cars increased by an average of 35 percent during the period of investigation from 2014 to 2018, with imports exceeding domestic production.

Imports of light commercial vehicles, which include pick-up trucks, significantly increased during the period from 17,273 units in 2014 to 51,969 units in 2018, the DTI said.

It remains to be seen when the provisional duty will take effect, but the DTI will still have to issue a public order. The duty will be applicable while the DTI’s findings are being validated by the Tariff Commission in 120 days, as current rules require.

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.

When asked for comment, Reynaldo Rasing, secretary general of PMA, said they still had not received a copy of the decision, but they welcome it.

The Chamber of Automotive Manufacturers of the Philippines Inc., whose members account for bulk of the industry, did not comment on the issue as of press time. INQ