DTI Imposes Additional Tariffs On Imported Passenger Cars, LCVs

Imported cars may soon experience a price increase due to the Department of Trade and Industry’s (DTI) decision to slap safeguard measures on imported passenger cars and light commercial vehicles (LCV) to protect the local automotive manufacturing sector. The decision comes from the petition for safeguard measures filed by the Philippine Metalworkers Alliance when it found out that increased importation of passenger cars and light commercial vehicles is a substantial cause of serious injury to the domestic motor vehicle manufacturing industry.

DTI will implement provisional safeguard measures through the form of cash bonds amounting to P70,000/unit for imported passenger cars and P110,000/unit for imported LCVs. The provisional safeguard measures will take effect for 200 days from the issuance of an order by the Commissioner of Customs and while the case is under formal investigation by the Tariff Commission. How much of the added cost will be passed on to consumers is still unknown at this point.

“The Philippines has one of the most open markets relative to our ASEAN neighbors. While we generally do not restrict products coming into the market, we also need to ensure the level playing field for our local industry,” Trade Secretary Ramon Lopez said.

DTI’s findings show that imports of passenger cars have increased by an average of 35 percent during the period of investigation (POI) from 2014 to 2018 while the share of imports relative to production showed that imports exceeded domestic production from 295 percent in 2014 to 349 percent in 2018. Imports of LCVs which include pick-up trucks, on the other hand, significantly increased during the POI from 17,273 units in 2014 to 51,969 units in 2018. Likewise, its share of imports relative to domestic production also significantly increased from 645 percent in 2015 to 1,364 percent in 2018.

Sec. Lopez added, “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.”

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

Under Republic Act 8800, the Safeguard Measures Act, any person, whether natural or juridical, belonging to or representing a domestic industry may file with the Secretary of Trade and Industry a verified petition requesting that action be taken to remedy the serious injury to the domestic industry caused by increased imports of a like or directly substitutable product. The petitioner is the Philippine Metalworkers’ Alliance, which is a national union of automotive, iron and steel, electronics, and electrical sectors, including affiliates composed of key players in the automotive industry.

DTI adds that imported passenger cars captured more than 70 percent of the market, while imported LCVs captured 93 percent of the market in 2018. The domestic industry lost sales even as the market grew. Additionally, data from the Philippine Statistics Authority show that employment in the manufacturing sector of motor vehicles which includes the manufacture of motor vehicles, bodies, parts, and accessories decreased by 8 percent in 2018 compared to the 2017 level of 90,275 employment.

“Safeguards are imposed to protect local manufacturers and producers and to prevent other companies from leaving the country. If we recall, the discontinuation of the production of Isuzu D-Max in July 2019 and the assembly plant closure of Honda Cars 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,” Sec. Lopez said.